Using a spending diary; how to spend less and save money

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The idea of keeping a spending diary may not set your pulse racing, but it can be a great way of pinpointing where money’s slipping through your fingers. Using a spending diary – writing down how much you spend, what you spend it on and when, is a great way of spending less and saving money.

Using a spending diary

Congratulations! By reading this article you’re taking the first step to getting and using your spending diary.  But a spending diary will only work its magic if you keep it for long enough to get a realistic pattern of your spending. Don’t start your diary for a week and abandon it. Keep it for an absolute minimum of a month – three months is better!

SAVVY TIP: Don’t view it as a test that you’ve got to pass or fail. Many of us spend money on things we shouldn’t/can’t afford/wish we hadn’t. But by keeping a diary, you’ll actually be able to see where all your money is going.

How to keep a spending diary

1. Write down absolutely everything you spend. Make sure that you include purchases such as newspapers and bottles of water and treats such as chocolate bars and magazines. Individually they probably cost less than a pound, but they could add up to £20 – £50 or more over the course of a month.

2. Make it easy. Decide how you’ll keep your spending diary so it fits in with your lifestyle. It needs to be as convenient as possible. It doesn’t matter whether you use your mobile phone or a notebook.

3. Write down when you spend your cash. It may sound like a detail too far, but it will help you to find out whether you tend to spend more money in the evenings when you’re out with your friends or at the weekend when you hit the shops.

4. Include one-off costs. Don’t forget birthdays, weekend breaks and day trips. Don’t worry about things like insurance policies you only renew once a year. You’ll be able to make a note of that in your budget (which shows the bigger picture of your finances).

SAVVY TIP: Don’t underestimate how good you will feel once you have a clearer idea of what you’re spending your money on. If you’ve never kept a spending diary before, you probably won’t think it will make much of a difference, but believe me, it will.

How a spending diary helps

Once you’ve kept your diary for a week or so, you’ll probably notice that you start spending less. It’s one of those curious psychological tricks. If we don’t know exactly how much we spend, it’s easy to spend more. The moment you write it down and start to add it up, your spending begins to fall.

SAVVY TIP: Don’t worry if the results of your spending diary come as a bit of a shock. The worst thing to do is to think that your spending habits are beyond salvation. Believe me, they’re not. If you’re willing to make some changes, you can really turn around what might seem like quite a bad financial situation into a much healthier one.

What could you do with the money you’re spending?

If you need an incentive to keep up your spending diary, add up how much you spend on things you don’t actually need (shoes, magazines, ready meals, cosmetics etc) and work out what that money would buy you.

SAVVY TIP: Think of what you could do with the money you save, such as pay off your debts, start a savings account, or go on holiday. It’s always good to have a goal in mind. If you cut back your spending  by £50 a month you’d have at £3,000 after 5 years. How good would that make you feel?

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Ten things you need to know about your credit rating

How to pay off your debts double quick

Understanding direct debits, standing orders and continuous payment authorities

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