My number one tip for managing your money?
Keep a spending diary.
If money is super tight, or you’re just not sure where you cash disappears – write it all down.
Every quick coffee, sandwich, magazine, tiny treat, pester present or donation. Big bills, small purchases – bung it down.
Seriously, a spending diary can change your life when it comes to money management.
Now I’ve kept a spending diary at different times – on my year out, as a student, then over the last few years, when we’ve been living on less after moving to the country.
Previous post: 10 tips for keeping a spending diary
In theory, a spending diary should only take a few minutes a day. Daily updates keep it manageable and there’s less chance of forgetting small cash purchases.
But then real life intervenes.
In practice, some weeks I’ll update very frequently. Some weeks I’m rushed off my feet, get behind and end up spending ages ploughing through piles of receipts and bank statements. Personally, I use an Excel spreadsheet, because I love Excel (sad but true). It makes it easy to add and delete lines and tot up totals. It’s not perfect, because I always mean to categorise expenses and never get round to it.
But I still find it worthwhile, and here are 12 reasons why I find my spending diary so useful:
1. Shows where I’m spending
If you’ve ever wondered where all the money from the cash machine went, or why your bank balance isn’t bigger at the end of the month – a spending diary will help. It shines a light on the black hole of forgotten spending. You can see how all the small purchases add up. Knowledge is power, people.
2. Inspires changes
There’s nothing like adding another sandwich meal deal to remind me I need to make more packed lunches! Once I see my spending in black and white, it forces me think about how to spend less.
3. Stops some spending
Just knowing I’ll need to record something on my spending diary can make me hesitate at the till. Do I really need a magazine? Do I want to confess my chocolate habit to Excel? Reminds me of the Nigella quote about why she lost weight after she broke her leg – she didn’t mind asking people to get her a big slice of cake, but was embarrassed to ask them to fetch a second or third piece.
4. Encourages me to cut down after high-spend months
I’ve got my spending diary set up so I can see total spending each month. It’s easy to see if spending suddenly spiked – so I can resolve to cut back a bit the next month. June was a prime example of a month when seeing a higher total encouraged me to spend less.
Previous post on cutting our credit card bill
5. Keeps track of our interest earnings
I have a whole load of current accounts, trying to earn extra interest on our emergency savings (See more on where to stash your emergency cash).
Filling in my spending diary reminds me to transfer interest payments to our main current account. My TSB current account for example only pays interest if I use online banking every so often, so it’s worth doing. Adding a lower interest payment, if a rate has been cut, will also prompt me to look for a better account or consider investing instead.
6. Encourages me to switch suppliers
I also note down monthly payments for household bills, so it’s easier to see if say the phone bill is higher than normal or a company has chosen to whack up our direct debit. I can then investigate why, and check comparison sites for better deals elsewhere.
7. Prompts me to cancel subscriptions
I check bank and credit card statements against my spending diary. This helps pick up extra purchases I forgot to record at the time, like internet shopping without a paper receipt. It also means I spot subscriptions, and query if we genuinely need or want them. We recently zapped Apple Music and WeightWatchers subscriptions, because they just weren’t worth the money to us.
8 Reminds me to chase invoices
Ah, the joys of freelancing, chasing payment for work done.
I have an income page, where I add a line every time I send out an invoice. When the money actually appears in my account, I add the payment in the income column, and the date paid. Seeing blank spaces in the income column reminds me to chase companies who haven’t paid up. I also refer to my spending diary when filling in my tax return, tracking down allowable expenses to set against my income.
9. Helps organise household admin
Past spending diaries are a mine of information. Is it time for the boiler to be serviced? When did the chimney sweep last come? How much did the gas safety certificate cost last year? What should I budget for a car service? How much higher is the insurance renewal quote than last year? My spending diary helps me track when and how much I should allow for less frequent tasks and once-a-year expenses. It’s super easy to search my spreadsheets, so I can check what needs doing when and negotiate on the cost.
10. Makes up for senior moments
If you’re feeling forgetful, a spending diary can help plug the gaps. I can look back to see yes, I did buy a birthday present and look I even paid for the stamps to post it. My spending diary can solve arguments about when we saw Star Wars, or which child spent their pocket money.
11. Tracks voucher savings
Believe it or not, I make a note where we spend less – a column that captures for example the 10% off code, free delivery or value of the tickets bought with vouchers. In itself, each saving might not be worth much. But tracking the small savings means I can see the big difference they make together.
12. Shocks me out of spending on auto-pilot
Why bother with a spending diary, when there are apps that will do it all for me, and categorise my spending? Precisely because apps make it too easy. Looking at big totals for categories like groceries, travel and eating out lets me gloss over the individual purchases, and that’s the level that needs to change. Sometimes apps put stuff in the wrong categories, making it easier for me to think – “no, surely that total isn’t so high, I’m sure it’s fine really”.
In contrast, writing it all down makes me think about each time I’ve spent something. So I’ll keep plugging away with my spreadsheets while it helps us make the most of our money!
Now – over to you. What do you think of spending diaries? Do you keep one? Useful tool or waste of time? Do say in the comments, I’d love to hear!