Being mindful of how you spend your money is important to making sure you’re on the right financial path. If you don’t keep track of where and how you’re spending your money, it could result in overdrawn fees, a negative checking account or returned item fees. Creating a financial journal is a great way to start awareness about your current financial situation and can help you visualize where your money is being spent. Here are some tips on how to start a financial journal of your own.
What is a Financial Journal?
A financial journal is simply a written record of how you spend your money and why. The idea is to keep track of the money you have coming in and find out where it’s going. Once you’re able to see your entire financial picture, it’s easier to think of ways to improve your financial situation. This journal should also be used to jot down ideas for how to cut expenses or how to create more income.
Starting a financial journal may seem like a daunting task, but it doesn’t have to be. There’s no right or wrong way to do it, it’s all about what’s right for you.
You can go the old-fashioned route and write in a notebook or you can type your journal on your smart phone. Write your journal on something that’s easy to carry around.
Create an income page, an expenses page and a future goals page. This will help you see your current financial picture.
Each month, write down what money is coming in on your income page as well as writing down every expense you have on your expenses page. Add each page up and see where you stand. Are your expenses greater than your income? If so, review each expense and find where you can make cuts. Maybe you can bring your lunch from home rather than eat out every day. Use your future goals page to jot down things you want to accomplish like paying off all credit card debt within the next three years or saving enough for a down payment on a house within the next five years. Seeing your goals written out will motivate you and help you establish a plan to reach your goals.
Take a look at your spending habits and see if you notice patterns or certain triggers that cause you to spend. Maybe you splurge at the shoe store when you’re having a stressful work week. Maybe you spend more at the grocery store when you take your kids with you. Being aware of your spending triggers can help you make adjustments to your routine.
Create separate journal entries for different financial events like planning for a vacation or setting up a savings plan for your retirement. This will help you focus on one financial goal at a time. If you need help figuring out how much it will take for you to retire comfortably, use our Retirement Nestegg Calculator. Take your journal with you. You never know when an idea or inspiration will strike so carry your journal with you throughout the day.
Remember, there’s no right or wrong way to start a financial journal, as long as it works for you. The main purpose is to make you aware of your financial situation so you can make improvements. Another great way to capture your entire financial picture is with My Financial Partner, our free online personal financial management tool. You can track spending, set financial goals and establish realistic budgets. It works just like a financial journal and is another great opportunity to improve your financial health.