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52 weeks of saving: Keep a ‘spend’ journal
Are you consistently breaking your budget? You might just need to take some time to write things down.
Budgeting experts say keeping a “spend” journal will force you to carefully consider whether you want to make a purchase.
“If you’ve ever tried to lose weight using a program using food journaling, then you know the value of writing things down,” says Leah Ingram, founder of the blog Suddenly Frugal.
“Doing so keeps you accountable for everything that goes in your mouth … or, in the instance of tracking spending, for everything that comes out of your wallet.”
It will also help you identify areas where you may be wasting dollars.
How do I know this? Each week, one of Bankrate’s personal finance reporters is reporting on a new way to save and chronicling the savings journey. This week, I put this theory to the test so I could share my experience with you. Read on to see what happened.
Try it for a week
“Most people truly do not know where their money is being spent and the volume,” says Michael McCall, director of Michigan State University’s Eli Broad College of Business, who specializes in consumer behavior.
While we consider big expenses, like rent, or large purchases, like car repairs, we don’t often consider how much smaller items, like that daily Starbucks Frappuccino or sushi lunch, cost us.
“Tracking spending allows you to get a clear picture of how your money is actually spent and more importantly, how little spends often add up,” McCall says.
Taking notes after every transaction can admittedly be a bit cumbersome, so it’s OK to implement this strategy for a week’s time. Just be sure to calculate the monthly or annual toll any recurring purchases are taking on your budget.
“Over a week’s time, it might not seem like a lot of money, but then multiply the number you get at the end of the week … by 52 weeks,” Ingram says. “I’m sure it will be a surprising amount.”
The challenge: Giving it a whirl
When it comes to trying out this technique … well, I’m actually a bit embarrassed to share the results.
Let me preface by saying that I’m fortunate enough not to have a lot of monthly expenses. I live at home with my parents, so I’m not currently paying rent or a utility bill.
Those extra dollars help me fund my martial arts hobby. I kickbox and grapple. I also compete in a few tournaments a year. When I am training for a tournament, I try to eat pretty clean. To do so, sometimes I’ll buy a big salad chock-full of protein at the local Just Salads. Other times, I’ll hit up this great organic buffet by my office to get some salmon, brown rice and vegetables for lunch and even an early dinner.
This habit, I came to find, isn’t exactly cheap. During the last workweek of February, I spent $67.67 on lunch.
All in all, my proclivity to go out for lunch each workday is set to cost me around $3,518.84 a year.
Changing our habits
Given this amount of money is enough to pay off my auto loan or, say, fund a flight to Europe, I think I’ll be packing a lunch more often.
I will also be investing in a water bottle. I noticed after delving into my weekly spending that I’m prone to picking up a giant Gatorade or big bottle of water around four times a week before I go to the gym to train. Costing around $2.66 per bottle, that habit runs me around $10.64 per week, or $553.28 a year.
That’s a total of $4,072.12 annually as an unwitting financial consequence of my martial arts training. While I won’t be giving the sport up anytime soon, I’ll certainly be making a few adjustments to make sure more of that money ends up in my bank account … and not my stomach.
Once you understand where you are overspending, you’ll be able to make smarter spending cuts. Just make sure to redirect those funds wisely:
- Pay down an existing debt.
- Invest or set up a savings account with a financial institution that doesn’t hold your primary checking account.
- Arrange to have a small amount of your paycheck — as little as $25 — directly deposited into a designated emergency savings fund.