How To Keep A Spending Diary

Keeping track of your daily spending can make a huge difference to your finances. We explain how.

Updated on 13 December 2010.

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Monitoring your daily, weekly and monthly expenditures by noting them down in a small notebook or diary can greatly improve your attitude towards spending. It is simple to do and doesn't require much time or effort, but can really help you see where your money goes each month.

Why keep a spending diary?

Get to know your spending habits

Knowledge is power, and when you know what you are spending, you will have more control over your finances. By increasing your awareness of what goes out of your account, you will increase your sense of control over what can and can't slip through your fingers.

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By reviewing what your money has been spent on, you will see where you could have cut back on 'luxuries', and if money could have been better spent. It is a step towards learning to manage your money better.

Improve your attitude towards money

You may find that you feel less stressed about your finances when you know exactly what they are doing. It is easy to become exasperated when your money seems to fly out of your account without you even having seen it, but by pinning your purchases down and making yourself aware of them, you will see where your money has gone and be able to improve your spending habits.

Many people only have a general impression of what goes in and out of their account each month, and this impression is often vastly distorted from reality. By spending a small amount of time and thought on monitoring your spending, your money will go further in the long-run and you'll feel more on top of things.

Keeping a spending diary will confront you with reality, and thereby make you apply more scruples to your spending. It will also help you in setting a realistic budget.

How should I keep a spending diary?

First things first - invest in a small notebook that will fit in your pocket or handbag, and a pen. Keep the notebook on you at all times and note down everything you spend.

Be meticulous, honest, and clear

The more meticulous you are about it, the better. It's easy to miss out on small spends such as a 2 coffee in the morning, but these smaller expenditures often make a larger dent on income over time.

Keep the diary clear. Divide it into columns such as the date, the amount, what you bought, the method of payment used, and so on. Make sure it is readable and organised.

Ensure that you always record the pence included in a transaction, not just the pounds. For example, if you spend 2.49 every day on a coffee you may be tempted to note it down as just 2. Over 4 weeks this would come to 56, but at its true price of 2.49 it would come to 69.72 - a difference of 13.72.

It may help to retain your receipts, to show you exactly how much you have spent on purchases, and to build up a record of expenditures. If you are more technologically-inclined, it may be worthwhile entering your spending diary into an Excel spreadsheet, and using it to tot up total expenditures over days, weeks, and months. Alternatively try an online spending diary such as

Review your spending over a period of time

Try keeping a spending diary for a week at first, then try a month. Review what you have indulged on and why. You may realise that you are succumbing to an expensive trend of eating out every time you've had a bad day, or buying new clothes to make yourself feel better. Once you've indentified these trends it's easier to deal with them.

At the end of the month, total up everything you spent and what you spent it on. You may be surprised at the results, but you'll have a clear and honest picture of where your money goes.

Re-evaluate your spending

Taking the time to write down a purchase rather than conveniently forgetting about how much you have spent can make you think twice about making impulse purchases. If what you have bought and how much it cost is clearly noted down, it can make it appear more 'real' - especially if you have made the purchase with plastic instead of cash.

Re-evaluate what you spend your income on, and make changes if necessary. It may be a good idea to try allocating an amount of cash from the cash machine at the beginning of each week, and don't use your card again during the week.

Consider: you may spend 3 a day on lunch, for example. Over a 5-day work week for 4 weeks, that's already 60. By reducing your daily lunch allowance to 2 instead of 3, you'll be spending 40 per 4-weeks instead - a saving of 20. This might not sound like much but over a 52-week year that's a saving of 260.

Ultimately you have to find what works for you when keeping your spending diary, and what will encourage you to keep it up. When you find a way of monitoring your finances that fits into your lifestyle, you will soon reap the benefits of wiser spending.

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