Keeping a spending journal is one of the most important financial decisions that you’ll ever make. So why don’t more people keep track of what they’re spending? Chances are if you’re not keeping a spending journal right now you’ve either never heard of it or you aren’t aware of the benefits. What could it possible do for your financial situation to simply write down how much you’re spending? If you’re wondering about this, here are three reasons why you need to start keeping a spending journal as soon as possible.
Benefit #1: Overcoming Denial
When you start writing down everything that you’re spending you’ll be 100% aware of what you’re spending and how much spending you’re doing. Over spending is MUCH harder to do when you’re being consistently reminded of how you’re spending your money. For example, many people start keeping track of their spending and find that they’re spending hundreds of dollars a month eating out. When this happens and you become aware of how your spending is matching up with your exact values, you’ll be compelled to make changes in your spending habits.
Benefit #2: Coming Up With a Plan
The second benefit of keeping a spending journal is getting enough clarity about your financial situation so that you can come up with a plan for how to control your spending. For example, in the four bucket financial system, you spend according to four categories: living expenses, investing, giving and setting money aside for purchases or emergencies. Your living expenses represent 70% or less of your spending while the other three categories represent 10% or more each. In order to put this plan together, you need clarity about how you’re already spending your money and where you need to make your adjustments.
Benefit #3: A Great Sense of Control
Much of the financial stress that people experience comes from feeling that they are out of control. This feeling diminishes quite a bit once you get a clear picture of what’s happening in your financial life. Even if things aren’t going well, having clarity will help you quite a bit because you’ll no longer be wondering what is happening. Fear comes from uncertainty and uncertainty can be cleared up almost immediately by keeping a written record of what you’re spending and why you’re spending it.
So now that you’re aware of what the benefits are of keeping a spending journal, why not start your spending journal right now? You can begin by saving all of the receipts from your purchases and writing down what you spent today. It will take only fifteen minutes and by getting into this habit, you’ll build a stronger awareness of what your financial habits are and have a much better grasp on coming up with a plan for changing them and taking control.