Why Keeping a Spending Diary is So Important

Most financial experts agree that keeping a spending diary is of the utmost importance in helping yourself to get out of debt.

It’s also one of the easiest first steps to take and is the building block for creating healthy habits with your finances. In this day of online eCommerce, debit and credit cards, mobile payment systems, and automatic recurring subscriptions, it can be difficult to get a firm grasp on just how much you are actually spending in an average month. Diaries are great tools to help you catalogue the events of your day, and a spending diary allows you to do the very same thing for your financial life.

Start by getting a small notebook that you can carry with you wherever you go. You might wonder if it’s really necessary to take this with you on the go. You might think you will remember your purchases to record at a later time. The truth is, with the hectic pace of most people’s lives, those purchases will quickly be forgotten if they are not immediately recorded. Having a diary that can travel with you removes this problem from the equation.

First, take your diary and sit down at the computer with your credit card statement and record any recurring charges you have already set up. Gym memberships, insurance and car payments, newspaper subscriptions, streaming services, cable, internet, and utility bills should all be recorded on the day they come out each month. But more than these automatic payments, you also will want to record every single transaction you make every day, whether it is with cash or a card, whether in a brick-and-mortar store or your favorite online shopping destination. 

After a solid month of committing every transaction to your spending diary, you can then easily sit down and tally up your total spending.

Next, you can take those individual transactions and group them according to categories like groceries, rent, entertainment, clothing, and the ever-dangerous, miscellaneous. Now you have a much clearer picture of how much money is going out every month and where exactly it is going to. Having your spending clearly defined will help you to make choices about where you can more easily cut back or make changes in lifestyle that will help you to start working your way out from under the burden of debt.

Additional Resources:

How to Create A Budget That Works

9 Reasons Why You Overspend

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