Jump Start January: Week 1 Day 2

Today we’re going to do an activity that should take five minutes or less – but don’t underestimate its power just because it seems quick and easy. This one could save you a lot of money.

The task today is to start a spending diary. It’s completely up to you how you decide to do this, but ideally it should be done via something that you keep with you all the time. Why? Because it needs to be used there and then as you’re spending, so that you don’t forget to add all your purchases onto the list.

Make a note of everything: snacks, coffees, stamps, charity donations, milk and other groceries, pub and cinema visits, magazines, online and in-app purchases, contactless payments and so on.

It doesn’t matter what you use for your notes, as long as you get into the habit and are consistent about keeping it updated. So for example that could be:

• Sheet of A4 folded into bag or wallet
• Small notebook
• Notes app on a smartphone
• Budgeting app on smartphone
• App or file on tablet, if you always keep one with you
• Back of an envelope in your pocket

Completely up to you. The timing is up to you as well: commit to keeping the diary for a week or for the rest of the month.

Bank and credit card statements give you the big picture of things like bills, subscriptions, major purchases and withdrawals of cash. All useful information, agreed – but only a spending diary can give you the full picture of where all your money is really going.

For example, you take out £100 cash at the start of the week and have £5 left in your wallet and purse at the end of it. Without a spending diary, you will almost certainly struggle to remember everything it was spent on, and exactly how much you spent.

Your spending diary helps you in two ways. One is maths, and the other is ‘money magic’ (bear with me).

The maths bit: With money, cold hard facts are far more useful to you than vague memories and general impressions. Looking at the data gives you opportunities to find areas of overspending, which in turn allows you to fine tune your budget and hopefully change things for the better.

But don’t worry about any of that for the time being, just concentrate on keeping the diary and rest assured that we’ll eventually review it at the end of the month.

The ‘magic’ bit: Okay, I don’t believe in magic per se, and indulging in magical thinking when it comes to personal finance is never going to be an effective substitute for being practical (planning, recording, monitoring, earning more, spending less etc). However, keeping a spending diary does seem to have an additional positive effect on your finances – most of us subconsciously begin to think more sensibly before we spend when we’re consciously keeping a record of it.

How long are you going to keep your spending diary for? What method are you going to use to keep a note of your spending?