What is a money diary?
A money diary is a personal finance tool that is used to keep track of your income, expenses and, everything in-between in a simple an organized manner. It can be used in conjunction with a budget and or financial plan to help individuals reach their set financial goal and objectives. By keeping a money diary, you can track your expenses and income and see how they balance out at the end of a specific period.
Money diaries are individually suited to each person and are usually written as a financial journal. Some individuals prefer a visual image of their goals and may include images to help keep them on track and accountable for their goal. Money diaries also provide a different perspective on an individual’s finances than just seeing the balance in their account.
Who should use a money diary?
Anyone can use a money diary. A money diary is not meant for a particular group of individuals or businesses. Whether you are a teen just learning about financial responsibility or a retiree keeping track of your spending, a money diary can help.
If saving money is big on your agenda then a money diary is the perfect fit for you as it will allow you to see your expenses and aid in eliminating unnecessary spending. The biggest benefit of a money diary is that it helps you identify your financial goals and the things that you can exclude from your budget.
When to use a money diary?
Anytime is a good time to use a money diary. However, it can be most beneficial to use a money diary when you have set financial goals and aspirations. As you move closer towards your financial goal you will need a way to measure your progress. Keeping track of how much you have spent, how much you have saved, and how much you want to save, keeps you accountable.
If you are using a budget then you know that balancing your spending and expenses to match your income is essential. This is when a money diary is extremely helpful. Money diaries can be used monthly or yearly to document what you spend and why you are spending that money. At the end of whichever period you chose you can go through your money diary and write down how you went about meeting your financial goals.
How to use a money diary
Even though a money diary is just a log of your monetary transactions, it is a great way to take charge of your spending. Creating a money diary can be a pretty overwhelming task. However, there are some guidelines that make the process go a lot smoother.
The first step to using a money diary is to set a goal of what you want to achieve. Then you should do the necessary research on ways for you to achieve your goal. Your research may tell you that you should have a financial plan and a budget in place before documenting information in your money diary.
Second, create a chart to track your progress. You can either use an Excel spreadsheet, or download an excel sheet to get you started. There are also downloadable digital money diaries and online diaries that you can use.
Some online money diaries allow you to track your money, create, edit and monitor your financial goals from the online interface. The online diary is a great way to stay on track of your financial goals. It allows you to create savings and spending categories, view your budget and expense tracking history and export data. Most online money diaries does a great job of tracking your spending in a simple and easy to understand manner.
Third, keep the contents of your money diary simple. Most individuals believe that they have to record every single purchase that they make. However, people usually lead a busy life and documenting every daily transaction can be tiring and time consuming. You don’t need to keep detailed records of your daily spending. The simplest form of journaling will work just fine.
Always remember to try keeping a simple check-in chart where you note whether you’re saving, spending, or paying off your debts. This is important for your overall calculations. If you find yourself falling back into bad habits with your money diary, it’s always a good idea to start fresh.
What are the benefits of using a money diary
- As an individual you may ask yourself is it really necessary to have a money diary when you already have a budget. It is crucial to understand that money diaries are one of the most effective ways to help you improve your financial health and improve your ability to achieve goals. It can help you cut back on spending, which in turns help you to save money by not buying things you do not need.
- Money diaries can be a great tool for setting financial goals and they help in maintaining a stable budget.
- More often than not, money diaries help you to achieve your goals sooner.
- One of the most important benefits of using a money diary is that they teach you how to budget.
- When you are consistently keeping track of your money, it teaches you how to organize your money. This is vital to managing your money effectively.
- If you’ve never created a budget before, money diaries are a great way to practice budgeting.
- If you’re new to managing your money, a money diary can be an eye opener for you. You can see where your money is going, where you can cut back, and what areas you can potentially save some money.
Are there cons to a money diary
- Not everyone is interested in keeping a detailed record of their money spending.
- Money diaries can be tough to stick to. You can get so caught up in the planning and tracking that you forget to spend or make a purchase.
- Money diaries can make an individual feel self-conscious about their financial situation as they look back on their spending.
When it comes to money diaries as you can see in this blog the pros definitely outweigh the cons. Creating a money diary is a necessary step to ensuring you reach your financial goals. Without the proper documentation of your expenses, saving, and, overall finances you may not be aware of close or far away you are to achieving your goal. Taking the time to create a money diary and sticking to it can be one of the best decisions you can make towards financial stability and financial goals.