This is a continuation of our series on personal management. As you probably know, rainy day and winter may come. No matter the odd, you can avoid it. One way to do thing is to learn how to keep money diary. This is the starting point in building a last-longing wealth. Detailed records will give you a more accurate reading on finances and spending. This article will show you how to keep money diary irrespective of your current situation.
As you probably know already, our bank account statement appears misleading without proper recording. A lot passes through our hands without us realizing how much we have at our disposal. This makes it difficult to re-order our finances and ultimately our lives. The consequences are nights of frustrating dreams. This unfortunately is also a striving against the wind, as you simply cannot keep track of all the expenses in your head.
Knowing how much you are spending, rather than relying on overly simplistic formulas or vague estimates, is the best way to estimate how much you are likely to spend in retirement and how much you need to save now.
I have been keeping a detailed money diary for some years now. So, I can tell you how much this has helped my expenditure. When I started, I kept money diary in tiny pocket notes. Today, I use the Google Sheet. Whichever tool you decide to use, just find a way to start.
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1.0 How To Keep Money Diary
1.1 Just Get Started Today.
Getting started is the hardest part because you may keep thinking it is too much bother, Also, other people, not knowing any better, may poke fun at you for what you do. But consider this: If we expect the government to accurately account for all income and expenses, why won’t we do it with our money?
1.2 Do Not Get Discouraged If You Slip.
Despite your best intentions, you may simply forget to write down what you spent one day. This occurs to me some times too. Although your goal is to write down everything, you will gain valuable insights even if you leave some things out. Any time you slip, pick up yourself and continue the process.
1.3 Add a Category to Everything
As you keep your diary, assign a category to everything. You can decide what that category is. For example, you may classify a meal at a restaurant as “dining out” or “entertainment,” and a quick lunch-hour bite at a fast-food joint during the workday as “food” or “lunch out.”
In addition, split expenditures into as many categories as needed even if all the money is spent in one place. The important thing is to avoid lumping too many expenses into a “miscellaneous” category. That does not tell you anything or help you discover where your money goes. In fact, it may be a red flag, and a big one, if you find that a big chunk of your money is being spent for “miscellaneous.”
1.4 Review Your Money Diary Weekly
If you can, review your money diary weekly. Track your expenses. This will help you to understand where your money is going. Also, it can give you an insight into how to adjust your budget. You will also learn what you can do to increase the amount you pay yourself first.
2.0 Create a Budget
Once you start keeping a money diary, the next step is to create a budget. You will not be able to track your expenses successfully without one. Please note that a budget doesn’t control you. You control it. It is a guide you set up to make sure your money is doing what you are telling it to do.
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3.0 Ways to Track Your Expenses
As I mentioned above, I use Google Sheet to keep my money diary. However, there are different ways and methods you can use. You will find below 4 ways that I have identified
- Pencil and Paper: You may want to dismiss this old school method but I will say don’t. It still works and plenty of people still do stick to a paper budget. The biggest benefit here is that physically writing things down requires an active brain. Active brains are really quite helpful when you are dealing with money.
- Envelope System: This expense tracking method is set up a “pay cash in person” method. At the start of the month, for example, you put cash in envelopes labeled with budget lines. Groceries, entertainment and eating. Take your “groceries” envelope with you when you head to the grocery store. When the envelope is empty, your spending stops. Your money is essentially tracking itself.
- Computer Spreadsheets: Because you probably spend a fair amount of time on your computer, this might work for you. You can use Microsoft Excel or Google Sheet.
- Budgeting Apps: As you are probably glued to your phone all day, this might be your best option. There are several expenses tracking and budget app you can download on your phone.
4.0 Some Budget Apps You Can Use
As I stated above, there are several budget apps you can use. If you decide to use an app, we advise that you review them very before you decide on which to use. You will find some budget apps that you can try
EveryDollar: EveryDollar helps you to create a budget so that you can achieve your money goal. It syncs across devices. So, whether you are budgeting from your desktop or phone, your budget is always up to date.
Mint: The free Mint app from Intuit is an effective hands-down, all-in-one resource for creating a budget, tracking your spending, and getting smart about your money. Also, the app can send you payment reminders or warn you if you are approaching budget limits.
Wally: Wally helps you to get insights on your spending, set goals, and increase your savings. This apps helps you manage your finances no matter where you go or spend.
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You can also share this with your your friends and family. Above all, remember to start keeping your money diary from today.