How a spending journal can help you take control of your personal finances

Figuring out where your money went will help plan for where it should be going.

According to Michigan State University Extension, a spending plan is a way to show how money will be used for a given time period, usually a month. Typically we spend our hard-earned money on either our needs or wants. According to Dollar Works 2, an evidence-based personal financial education program, these expenses can fall into one of two categories, fixed or variable. A fixed expense does not differ much month to month. For example: rent/house payment, car payments and loan installments. A variable expense does not stay the same month-to-month, such as utilities, food, gasoline and clothing. The best way to establish a solid personal financial plan is by taking into account both past and future expenses. However, it can be difficult to plan for the future unless we can document what we have done in the past.

Although there is no right or wrong way to manage your personal finances, having an active and continuous strategy can help ensure that your finances are better tomorrow than they are today. A good start is by understanding where your money is being spent. One method you can use is to save receipts and add them up on a weekly or monthly basis.

Another method is to continually write down what you just purchased in a small notebook or using an app on your phone. This method works best for me. I use a small notebook that I draw some columns in that I keep the glove box of my car. When I go into a store, I put it in my pocket and right after I purchase something I write down the date, purchase amount, purchase description and how I paid for it (cash, check, debit or credit). My spouse carries one in her purse also. We get together and compare notes, and make changes to our upcoming monthly budget.

By using this method we were able to see where our money is going. We are now able to identify where smaller amounts of money that were not showing up on our budget radar, but were still being spent. Furthermore, after adding up all of the small amounts, we had a good size sum of money that could be used elsewhere. I am not saying that buying something small is bad, but that it should still be accounted for. By establishing where our money was going, we agreed to make adjustments that are helping us reach our financial goals. 

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