Something unexpected happens when you write down what you do.
I did a food diary once. Ok, I’ve done them a few times, but the first time was the one that surprised me the most. It wasn’t just what I ate that surprised me, but also how my diet changed immediately simply because I was recording it. The same thing happened when I tracked how much time I spent on Facebook. And when I tracked my spending. The changes were small, but they made a difference.
And the thing is, you don’t need to track all of your spending to get started. I think that’s a great thing to do, don’t get me wrong, but if you’ve been putting it off because it feels like too much, there’s a simpler way to get started.
We’ll start with the surprises I discovered, then I’ll explain this simpler approach.
Surprise #1: The whats
I guess the first surprise was sort of expected, but still…. We all think we know what we’re eating, spending, and looking at online. The thing is, we’re usually wrong. We want to believe something, so we convince ourselves it’s true, or at least close to true.
My eating, spending, and Facebook habits were worse than I’d realized. D’oh! Well, at least now I knew.
Surprise #2: Avoiding the thing to avoid the writing down of the thing
The part I hadn’t seen coming was how I’d avoid doing something just so I could avoid writing it down. I wouldn’t reach for that cookie, because I didn’t want to have to put it in my food journal. I wouldn’t click over to Facebook because I didn’t want to log the time. I’d pass on buying the doohickey so I wouldn’t have to note it down.
In hindsight this makes perfect sense, but I hadn’t seen it coming. Just the act of keeping track of these things changed my behavior. This was true of my food journal, which I knew my nutritionist would be reading, and of my spending log, which was only going to be seen by me. Why did it matter? I knew it shouldn’t, but writing each thing down made it real in a way that simply thinking about it did not.
Writing it down turned it into a hard fact, something undeniable. I had to admit the truth at this point. When the truth felt good, there was no problem. When the truth felt bad, there was an internal conflict. It was easier to avoid the thing than to convince myself that my values were completely wrong. Sometimes the easy way out is a bad way to go. In this case, it’s perfect!
Surprise #3: A little awareness saves a lot of money
I wouldn’t think that making such tiny changes would have an impact, but it did. My diet changed, my spending improved, and I’m spending less time on Facebook and more time doing other things that I had felt I didn’t have enough time for. Have I reached my ideal goal for each thing? Not entirely. It’s a process. But I have seen significant improvement and I’m happy with that.
Instead of tracking everything, try tracking one thing. It can be anything, really, but for obvious reasons let’s focus on spending. Is there an area that you suspect your spending is a bit high, but you’re not quite sure? If I asked, how much money do you spend on books/clothes/snacks/entertainment could you give a fairly accurate answer? Choose one area and track every penny you spend in just that area for 1 month.
Why 1 month? Because it’s enough time to see a bit of a pattern, but not so long that it’s overwhelming. This shouldn’t take you more than 2-3 minutes per day.
Keep it simple
There are a lot of ways to track this stuff, but don’t get fancy. That just distracts from what you’re actually doing. Use a pen and paper that you always carry with you, or a notepad app on your phone, which is the e-version of a pen and paper. Simple.
Every time you purchase something in your category, write down these four things:
1) The date
2) The amount
3) The purchase
4) Any relevant notes – (optional)
So your log might look something like this:
Like I said with surprise #2, there’s a good chance that you’ll make some small changes in your purchasing decisions just by writing everything down. You’ll be more aware of everything, and you might not want to have to record something. But there’s another step I’d like you to take.
At the end of each day, glance at your log for the day. Add it up and write down the total (writing the total will help you add up all the days later on.) Ask yourself, does the total surprise you? Don’t feel bad if it does, just acknowledge it at this point.
Now, at the end of each week, do the same thing. Just take a quick glance again and note the total, and notice how you feel about it.
At the end of the month it’s time to really take a look at what you wrote down. Set aside an hour for this. You might spend less time on it, but you don’t want to feel rushed.
First, what’s the overall total? Is it what you expected? Less? More? Why is it different? Did you spend a lot on a particular day? Did you spend more on weekends or weekdays? Was your spending even throughout the month?
Look at the subcategories. Did you spend more in one area or another? If you tracked books, maybe you spent more money at used bookstores and less online than you’d expected. If it’s food, maybe you spent more on coffee and less on dinners than you’d thought.
What does this mean?
Every month is different, but to get an idea of how you’re spending could add up over a year, take your total and multiply it by 12. If you spent $200 on clothes, how do you feel about spending $2400 per year on clothes? If you spent $30 on apps, how do you feel about spending $360 per year on apps? If you spent $130 on coffee and pastries on the way to work (as based on the example chart above,) how do you feel about spending $1560 in a year on coffee and pastries?
And if you’re looking to build up your savings, a great way to do that is by cutting back on spending a bit. You don’t need to go extreme. Start small. Do you think you can cut back on some of your spending in this category that you tracked?
If your answers to those questions are that you feel good about those amounts, then great! Track a different category next and see if you find some room to trim the spending there. (Note: If you’re trying to pay off debt, make an effort to cut back in every category, even if it’s a small amount.)
If your answers are that you don’t feel good about it at all, you’re spending way more than you thought, and you’re wondering how it happened, then the next step is to consciously make some changes. Try different ways of changing your spending until you find what works for you. Keep tracking your spending so you know what’s working and what isn’t.
To continue with the example above, if you feel that you spend too much money eating out, try cutting out all stops for coffee on the way to work. Eat breakfast at home, or use the coffee machine at the office. If that doesn’t feel like the right move, try cutting back to only 3 days a week. If that works but it’s not enough of a savings, try bringing your lunch to work 2 days a week.
You don’t need to change everything at once. Choose one approach and just see what happens. Compare your new spending log to your old one and appreciate the improvement!
Are we millionaires yet?
Like I said in the title, this is a great way to get started. You won’t get rich overnight. And I’d be cautious about anyone who promises overnight riches with 5 minutes of daily work. But this will work over time.
Once this works for you in one category, you’ll probably be excited to try tracking more of your spending. Choose another category or, if you’re ambitious, track all of your spending! The more you do, the bigger the results you’ll get.
What to do with the extra dough
As you cut back on your spending, sometimes intentionally and sometimes accidentally, you’ll need to do something with that money. Look at your tracking notes to see how much you’re saving, and make sure you don’t randomly spend that money on other things. It’s time to put it to work for you!
You need to decide what to do with that money. What are your goals? Make careful choices to use it for paying off debt, building a travel fund, adding to your retirement savings, or whatever else you’re aiming for. If you keep putting that newfound savings into a savings account for, say, a car, then before you know it, you’ll have the cash you need and car payments will be a thing of the past! Maybe you’ll even split it: put some money towards one goal and some money towards another. Now that you have some extra money each month, you have all sorts of options!
Your homework for today
You’re reading this because you want to see some improvement in your money situation. There’s no time like the present! This will only cost you about 5 minutes a day (2-3 minutes each day to track what you spend, and 1 hour each month to review it.) So what have you got to lose? Try it for one month and see the results! I dare you to try and prove me wrong 😉
Your homework is simple. Step 1: Choose one category right now that you will track for the next month. It can be anything you spend money on that that isn’t a fixed monthly price (your rent isn’t the most useful thing to track, since you already know what that is.) Pick anything! Clothes, music, groceries, hobby crafts, sports equipment, meals out, entertainment, or anything else.
Step 2: Commit to tracking your spending for 1 month.
Step 3: Decide how you’ll keep track. Personally, I like using a pen and paper. You can also download a notepad app, which is a plain text app. Or you can use my tracking spreadsheet. Enter your email in the box below and I’ll send it to you today.
Now go get started! There’s nothing to lose and lots to gain. Remember, you won’t get rich over night, but these small steps will add up to big success!