Spending journals pay off

Studies show people who track their expenses are better off

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Spending journals pay offI’ve been yacking on for years now about how important it is to track your spending. The devil is in the details and paying attention to those details can mean the difference between having money and being mired in debt.

I’ve resisted the urge to create an app to make money management easier since I know that making it easier means not paying as close attention. That’s counter to everything I believe about money management: it doesn’t have to be hard, but it does have to be done consistently.

I even went so far as to create the “anti-app”: The Gail Way. It reflects the way I manage my money: manually looking at the numbers at least twice every month makes me account (and holds me accountable) for where my money has gone. I think shortcuts are just ways to ignore what’s really going on. My way takes more time, but there’s no foolin’ it.

A writer for Psychology Today says research is finally being done on this and that individuals who manage and track their expenses report more money in savings and investments, carry lower credit card balances and have fewer maxed-out credit cards.

“All of these relations were significant even after controlling for important variables. That is, our preliminary results suggest that money management is the strongest predictor of wealth accumulation and debt reduction, even when holding age, personality, and materialism constant,” says the author, Grant Donnelly, a grad student at San Francisco State University.

I’ve always paid close attention to my money, keeping track in a spending journal and reposting entries manually into my cashflow budget. I was digging through an old box of “memories” when I came upon a small calendar book from 1982. There it was: the money I was bringing in, and where it was going. Thirty years later, the system is still working. Looking at my money as I spend it, and then again at the end of the month when I compile it into my budget, makes me very aware of what I’m doing with it.  That awareness keeps me honest.  And when I do slip off the rails, I can see it quickly and correct for it.

Donnelly goes on to say that, “as individuals manage their money they report more life satisfaction, partly, it seems, because they feel more financially secure from their diligent money management.”

A completely self-sufficient system: you track your money and then you get to feel good about tracking your money.

Back to the January Money Fit calendar »

7 comments on “Spending journals pay off

  1. Agree 100% with Gail . Tracking all income & spending is essential to help you achieve your financial goals . Here is a great quiz to help you and your partner focus on changes needed in your finances. http://bit.ly/lO1UVA

    Reply

    • Just did the quiz and scored 24! Woohoo! That made me feel great.

      3 months ago I would have had an average mark. But I have been reading MoneySense and books on retirement and investing. All that is paying off. I guess at 45 it's never too late to improve on your personal finances knowledge.

      Cheers
      Stephane

      Reply

  2. Love you to death Gail and love your show.

    However, I disagree. Having a nice app that makes the management of my money gives me more time to focus on where I should improve so that every dollar has a proper job.

    My wife and I have been using the YNAB method and software for 3 months now and it has made our finances 1000% better.

    Just my 2 cents.
    Stephan

    Reply

    • I agree with Stephan, using YNAB, has helped me become in control with my finances and is currently helping me plan for the upcoming school year!

      Reply

  3. Monitoring of expenses is really an effective tool to cut down those mixed out credit card expenses. Once you know where your expenses are going, you avoid the problems in overspending.

    – Blake

    Reply

  4. Coincidentally I started doing this this month April 1st.

    I just use a spreadsheet

    Date, Description of how the money was spend, Credit card, Cash (I put the amount in the appropriate column.

    It is very effective at keeping track of your money, no surprises. If you have a desk job like me its pretty simple my Spreadsheet is in Google documents so I can access it at work or at home.

    Reply

  5. Gail – you are a goddess!

    There is an app called Mint and I have it on my iPhone. I registered online and it syncs all your bank accounts to track your spending right at your finger tips! This is the first month I have really paid attention to my spending habits and I have never been more shocked! I spend WAY too much versus what I am bringing in! It is a great app to have! If you use cash – you can manually add it to the app!
    http://www.mint.com

    Reply

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