Jump Start Jan: Personal Finance Week: Day 3

One of the most useful building blocks of healthy money management is the process of monitoring your outgoings. That’s why today’s simple and easy activity is to start a spending diary.

This will only take you a few moments to get going. All you have to do is make a note of everything that you spend, above and beyond your regular bills, and keep that going for at least seven days. If you really want some interesting insights into your own spending behaviour, carry out the process for a month – you might be very surprised by the amount you spend on certain categories of purchases.

Ideally, make your spending diary something that you can keep with you throughout the day. That way it’s much harder to forget to note everything down.

Make it as high tech or low tech as you like. For example, you could use:

• The back of an envelope
• A small notebook
• A smartphone Notes-style page
• A smartphone or tablet budgeting app
• A Filofax expenses form
• A page in any personal organiser

Just use whatever you have to hand, you don’t need to buy anything especially for the purpose.

Write down anything and everything, including lunches, groceries, nights out, bus fares, petrol costs, entertainment, gifts, clothing, postage, charity donations and whatever else you’re spending your money on. In seven days you can review the spending diary and add up any totals.

Spending diaries can help in three main ways:

• They show how much you actually spend, rather than how much you think you spend (some of us underestimate our spending more than others…)
• They give you ideas for areas where you might be able to cut back
• They help you to monitor and modify your spending behaviours as you go along – you may feel more accountable each time you spend

What’s happening here?

I’m using a very plain and simple notes page on my phone. The reason I’m not doing anything more complicated than that is because the budget here is pretty strict for January, and there will be a few days where I’m hoping not to spend anything at all. Very few plans for going out as I seem to have picked up Beau’s head cold, and if I do get anything in the sales it will probably be nearly all via vouchers or store credit.

However, you never know what might turn up, and there may well be an emergency purchase or two to be made. It might be interesting to find out how much contingency spending I need to build into budgets for future months.

How are you going to keep your spending diary?