The Ultimate Guide To Starting A Money Diary Successfully | INVESTEDMOM
Are you wondering what your daily expenses truly look like? Or maybe you want to create a budget that helps you achieve your savings goals. Financial literacy is essential for everyone, especially those who are trying to grasp a better understanding of their expenses. In this case, tracking expenses using a money diary is hugely beneficial.
A money diary is a simple yet powerful tool that helps individuals track their money spent, thoroughly analyze their financial habits, and plan to make positive changes as they take control of their finances. There are many different ways to keep track of your money and budget, but a money diary is a top choice. To help you track your spending habits and develop better money management skills, we have gathered everything there is to know to help you successfully start your money diary.
What is a Money Diary?
Life gets busy, and our daily activities make it hard for us to track everything we spend money on. We might follow the best budgeting tips, but we must work on effectively creating better spending habits. For those who constantly wonder where their money goes, a money diary is a powerful tool that helps individuals track their spending habits over a desired period. This journal holds individuals responsible for writing down all of their expenses.
In this diary, individuals write down various details about their expenses, including the price of an item, the date that the expense occurred, and the category of the expense. These categories differ for everyone but include groceries, transportation, fast food, and entertainment.
These journals come in various formats, and individuals can choose whatever format is accessible for them to follow to achieve their financial goals. Let's explore some formats for starting the journal to track your finances.
Calendar
A simple and easy-to-follow format is the calendar-type format. Individuals choose whether they want to track their expenses weekly, daily, or monthly.
Budget Tracker
A budget tracker is a template with designated spots for expenses, prices, dates, and notes. The templates may differ, and there are plenty of them available online. Individuals can find the template that best works for them to track the expenses they make.
Simple Journal/Notebook
Individuals don't necessarily need to follow a particular template and might prefer to start journaling in a simple notebook. Even though there isn't a specific format, a journal serves the same purpose as a templated format. It even gives individuals the flexibility to lay out their expenses however they want.
Why is a Money Diary Helpful?
As previously mentioned, life gets busy, and individuals lose track of their budget and wonder where their money goes. In this case, a journal to track expenses is a powerful way to take control of an individual's finances. Let's explore the different ways in which maintaining a diary with expenses is helpful.
True Understanding of Expenses
Tracking everyday expenses, whether by a week or month, allows individuals to see where their money goes. Individuals might believe they don't spend much money, but it is challenging to track the expenses without writing them down. At the end of the week or month, individuals spend more than they think they do, which makes it challenging to stay on target with their budget. Instead of estimating the amount spent, tracking the expenses depicts the actual amount spent.
Building a Budget
A lot of individuals live paycheck to paycheck without a budget. They spend freely only to find themselves anxiously waiting until they get paid again and their account running low on funds. For those who don't have a budget, tracking expenses allows them to quickly identify where they can make changes in their life to manage their finances better.
Identify Problem Areas
As individuals track their expenses in a money diary, they quickly identify any problem areas. Suppose an individual spends money on coffee daily. Once they follow their expenses and realize how much they spend at the end of the month, individuals might consider making coffee at home to save money.
Accountability
A money diary holds individuals accountable for their spending habits. It is easy to forget what they spend, but individuals are responsible for their expenses when they track them in a journal.
Save Money
Once individuals realize where their money goes, they can make changes that allow them to place more money into their savings accounts. Rather than living paycheck to paycheck without contributing money into a savings account, saving money becomes possible as individuals take an active role in their finances.
Improve Spending Habits
One of the best changes individuals make when starting a money diary is the ability to understand precisely where their money goes. Once they identify this, they can develop goals to better their spending habits and create financial stability.
Who Should Start a Money Diary?
A money diary is beneficial for anyone looking to understand their finances better. Whether they want to develop better financial literacy or they want to better their spending habits, anyone can benefit from tracking their expenses. A money diary would help individuals save money to make a big purchase, including a car or a home. Additionally, individuals quickly identify their spending habits and can cut back the money spent on unnecessary items when they track their expenses.
How Do You Start a Money Diary?
Starting a money diary is easy and only requires a few simple materials. Once the materials are gathered, it is easy to begin tracking expenses and making positive financial changes.
Gather the Supplies
Individuals must first track their expenses using pen and paper or download an app to help them with the tracking. Both options work great, and it is more of a personal preference on which one they would instead begin with.
Decide On a Format
Individuals must then decide whether to track their expenses in their diary daily, weekly, or monthly. It might be best to begin monitoring daily, and once they identify their spending issues, they can go longer between tracking expenses. Individuals must remember that they already have formats to follow when they download apps. Still, plenty of printable templates online are available to help them on their financial journey. Finally, tracking their expenses is just as feasible if individuals prefer to make their templates or use a plain notebook.
Identify the Fixed Numbers
Fixed numbers are those that individuals spend every month and are the same amount each time. These numbers stay the same, and tracking them helps get an overall understanding of finances. Let's explore examples of fixed numbers that individuals will include in their journals.
Income
All income will likely stay the same, so this fixed number helps individuals track the money coming into their accounts.
Recurring bills
Recurring bills, such as phone bills, likely stay the same every month. Including these in their money diaries helps individuals quickly glance at their fixed numbers each month.
Identify All Expenses
Individuals must begin categorizing their expenses to organize their journals better. This organization makes analyzing and developing solutions much more accessible.
Daily Spendings
Daily spending includes things like coffee, online shopping, or food that individuals purchase daily. Categorizing the expenses helps individuals quickly glance at their journals and determine the changes they are willing to make for their financial betterment.
Weekly Spendings
Every week, individuals spend on things like groceries and gas. These weekly spending items should also be included and categorized in the journal to make planning much more manageable.
Tally Up the Totals
What makes a money diary successful is that individuals tally up the totals each day, week, or month, depending on how often they decide to track their expenses. These totals are essential in helping individuals see where their money is going. Once they realize how much money is going in and compare it to how much is going out, they can accurately develop a plan that helps them improve their finances.
Decide Where to Cut Back On
Once the diary is created and individuals have organized it based on categories, they must determine where to cut back to save more money. For example, if individuals spend too much buying their coffee, an alternative could be making their coffee at home. Simultaneously, individuals who spend too much on snacks or lunches can make their own at home to save money.
Another effective strategy for reaching their financial goals is for individuals to determine their wants and compare them to their needs. For example, individuals who shop online might find that they shop for things they want rather than things they need. Identifying this can help them reduce their online shopping, increasing their savings.
Cut back on bills
Cutting back on bills is tricky, but it is possible. Individuals analyze their journals and determine which streaming subscriptions, for example, they want versus which ones they need. If an individual has three streaming subscriptions, they could keep one subscription and cut back on the other two to maximize their savings potential.
Final Thoughts
Reaching financial literacy is intimidating for individuals, especially those just starting their journey. Fortunately, they don't have to do this alone. Invested Mom has plenty of resources to help get individuals started to take ownership of their finances and reach the financial stability they crave. Gaining control of their finances not only helps individuals achieve their financial goals but also helps them gain valuable insights into their financial behaviors. In turn, they identify areas for improvement within their finances.
With effort and discipline, individuals gain incredible benefits, including saving money, paying off debt, or reaching financial independence. Sign up for Invested Mom's course today and learn how to effectively implement a money diary to help track expenses and master other financial tools to set the foundation for better budgeting and saving.
Meet the Author:
Inge was born and raised in Cape Town, South Africa, and moved to Canada in 2010 looking for a better life. She always had an entrepreneurial spirit and started her first side hustle when she was 9 years old – selling fudge at school during lunch breaks.
It wasn’t until much later that she realized that saving isn’t enough to get ahead. She was always very interested in real estate, but saving up for a down payment was grueling and slow, and the demands of life kept getting in the way.
She started investing in herself and upgrading her skills while learning how to invest. She quickly became debt free and compounded her money at a staggering rate.
It wasn’t until she became a coach that she realized how significant an impact she can make in people’s lives by sharing her journey, learnings, and processes.
So here she is, advocating for everyone who is invested and wants to build their wealth, especially the mommas!