Have you ever taken $20 out of an ATM and wondered later where it went? Start keeping a daily spending diary to keep track of where your money goes. Try it out for one week and you'll be amazed at how much you spend on the small purchases like coffee, eating out and entertainment. Here's how to do it:
1. Take a blank piece of paper and create a column for each day of the week, Monday through Friday.
2. Put the piece of paper in your wallet or purse - somewhere where you can have it with you at all times.
3. Make a note of every single penny that you spend in order to have a complete picture of how you're spending your money by the end of the week.
At the end of the week quickly order the items that you spent money on throughout the week into the following categories: Food, transportation, entertainment, clothing, housing and other. Next add up your expenses in each category. Here's an example of one day:
Monday
Coffee - $2.75
Lunch - $7.85
Food: $10.60
Bus fare - $3.00
Transportation: $3.00
Magazine - $2.50
Entertainment: $2.50
TOTAL: $16.10
Next, find out what percentage of your money you spend on each category by dividing the total for each category by the overall total. Following the example above, I spent 66% on food ($10.60/$16.10).
Once you have completed your calculations look carefully through your analysis. Does anything surprise you? Are you spending more money than you thought on small items? Just think, if you spend $3 on coffee every day, that's $21 a week or $1,092 a year! Identify the areas that surprise you and look for opportunities to cut back on your spending.
Keeping a daily spending diary is an easy way to take control over your spending and to identify some less than desirable spending habits. Also as an added bonus, by keeping a daily spending diary, you're already halfway there in creating your own personal budget.
TIP: Use your daily spending diary as a savings tool. After one week you should be able to easily identify some areas to cut back on your spending. The money you save will bring you one step closer to your goals of opening a business, saving for your children's education, purchasing a home or taking a dream vacation.
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