Are you left with more month than paycheck? Are you trying to stick to a budget, but can’t understand where all your discretionary income is going? Do you always end up searching the couch cushion and car seats for extra change to make everyday purchases?
My husband and I had all of these problems and more.
We are middle-aged newlyweds. When we got married a year and a half ago, we pooled everything together, including our finances. Fortunately, neither of us had a huge amount of debt, but we had debt nonetheless. About six months into the marriage, we went on a money diet.
We vowed to pay off our few debts and start saving for a house. But first, we had to learn where our money was going. We sat down and did a budget. That part was easy. Rent, electric, water, Internet, phone, cell phone, cable TV, car payment, food, gas, tobacco, medical bills — all the basics. We had that covered with no problem.
According to the budget, we should have had quite a bit of money left over to put into savings or use toward paying down our debt. But we didn’t. Where was the money going? It’s one thing to write down everything on paper and another, to actually understand what your money is doing.
I had recently gone on a diet to lose a few, extra stubborn pounds. I read something about keeping a record of everything I ate. Hmm, I wondered if that would work with our finances?
So, we decided to make a money journal. We wrote down every single penny that we spent for two weeks. I gave my husband a little black notebook to keep track of his daily expenses while I kept the main money journal at home. At the end of each day, we put everything from his little black book into the main one and totaled up the day’s spending.
We found out where our money was going and what it was doing.
What we found out surprised us. In our case, our money was like a naughty teenager, always sneaking around and going to places it shouldn’t have. Keeping a money journal made us very much aware of our spending habits and helped us to change what needed to be changed. Thanks to the money journal, we’ve paid off our car, several other bills and are on our way to saving for our first house together.
Creating a money journal is not difficult and will only take a few extra minutes of your time. You don’t have to keep receipts or try to keep track in your head. Get a small notebook, one that you can keep in your pocket or purse and jot down what you spend. Be honest and write down every penny. Also write down what you spend the money on. In this way, you can see where your money is really going.
You need to do this for at least two weeks. In the first week, you will be very conscious of what you are buying. Allowing a second week lets you relax back into old spending habits.
The money journal will make you aware of your spending habits. Habits are funny little things we don’t tend to notice. It can help you stop taking advantage of your pocket change. Believe it or not those dimes, quarters and stray dollars can add up. Let’s say you only waste $10 a month in change. Multiply that by 12 months and you have $120. To some, $120 doesn’t seem like enough to worry about, but consider that you could pay an electric bill or buy a tank of gas or apply it toward the principal on your mortgage.
A money journal can help you set goals and stick to your financial resolutions. It will help you focus. In today’s harried world, it’s hard to attain focus on anything for any amount of time. If you are serious about taking control of your finances and getting out of debt, a money journal, when used as the valuable tool it is, will shine a light on the rocky road of financial recovery.
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