Keeping track of your finances is an important habit you have to build in order to preserve and improve your financial wellbeing. Without tracking, you can’t really identify problems and corrective actions.
I was living with the idea of “spend what you have carefully and tomorrow will be fine”, but it was a part of my life that was full of stress of not having enough money till the end of the month.
It wasn’t until I started tracking my spending against my income that I was able to control my month better and later on, to identify areas to improve, save, and invest.
To keep track of your money and finances in a notebook you need a system covering 4 main points, basic information to log, identified list of main categories, and 2 sized notebooks.
Benefits of tracking your money for your wellbeing
Tracking your weekly or monthly spending has 4 main benefits to your wellbeing, mainly they are affecting your financial wellbeing, but also, they play a significant role in improving the rest of your wellbeing dimensions:
1- Improve saving
When you track your spending habits on a monthly basis, you can identify couple of spending trends that you can eliminate and therefor saving more.
Remember that saving is your first defensive mechanism against debt or financial crises, and it’s within your control. That’s why you want to leverage it as much as you can
2- Improve spending
Believe it or not, but when you track the things you spend money on, you can make couple of switches to other healthier or more wellbeing friendly things that can either bring more value to you, or bring value and save you money, like targeting offers or special deals.
3- Improve investing
Spending is a one-way street, and when you see that the majority of your money is going away from you, you may decide to spend some on investments which can bring your money back with benefits.
Because investing is a partial spending, meaning you have to spend first in order to make money, then it can be one of those switches you make in your spending and not necessary an added one.
4- Improve the other 5 Wellbeing dimensions
This happens as a result of your improved saving or spending, that you now can:
- Have or switch to healthier meals
- Afford a private fitness coach
- Pay for the courses you needed
- Donate money to support a beloved one or your community
Physical VS Digital tools
There are 2 main tools you can track your spending, a physical one and a digital one.
The physical tool of tracking money is good if you:
- Prefer writing things down with your hand
- Don’t know how to use technology or making spreadsheets
- Can use technology but afraid that your information gets hacked or stolen
The digital tool is good if you:
- Prefer using technology to document, track, and store your information
- Have solid cybersecurity knowledge and capable of protecting your information
Both tools are good to use because it’s not about your tool, it’s more about the system you’re using in tracking your spending and expenses.
The only advantages I’d say that the digital tools have over the physical ones are accessibility and storage.
Digital tools are more accessible anytime anywhere because you almost always have your phone that can have the same file or application, you’re using in tracking
The physical tools are harder to have everywhere cause you can forget to take your notebook with you and sometimes you can’t take it with you to a certain party or wedding, etc.
Digital tools provide easier way of storing your information over the internet and for long time
Physical tools require printing and dedicating a space to archive or store them. When storing for long time, they can be slightly damaged, and you’ll need to print them again.
What you need to track your money in a notebook
Before you go ahead and buy a notebook, you have to come up with a system first. Tools without system are useless and you’ll fall off the wagon again
The system that you want to build is one that can identify why you’re doing this, what you’re trying to achieve, things to log and things not to log, and most important, how you’ll evaluate it.
That’s why I recommend having the following points identified in your system
Answer the following questions
Why you’re doing this?
Why you’re bothering yourself tracking every dime you spend?
What will happen if you don’t do this?
Identifying the purpose will plant this project deeper so it’s harder to quit and will keep your motivation going.
What are you trying to accomplish in the next month, 3 months, 6 months, 12 months?
I advise you to have multiple or staged goals as above. Why? Because in the first month, your goal is going to be “to track your money for 4 weeks straight”. This helps with growing the habit
After that, it’s your choice. Your 3 months goal could be to “identify bad spending to remove” or “ to identify switches to make” etc.
You can include saving goals or investment goals, and I suggest that those typically can be in the long term like 6 and 12 months.
What are you going to measure? Is it just your expenses or expenses and income?
The general role is you’ll need to measure both to determine the effectiveness of your spending throughout that period.
If you’re having multiple income sources, then you may want to track specific sources against specific spending.
For example, you have incomes from Youtube, blog, day job, and selling personal staff to your friends. Your expenses are made on Youtube, blog, personal life
Now it’s a matching game and it’s different according to people. Some will choose to measure Youtube income against Youtube expenses.
Some will choose to measure Youtube income against personal life expenses cause they’re living out of that and measure the day job income against Youtube cause it’s what paying for the programs they’re using.
How frequent are you going to measure those?
It can be weekly, monthly, quarterly, annually, or as frequent as you decide.
If you’re starting, then I advise you to do it weekly for a month then monthly for 6 months and then decide if you want to keep it on a monthly basis or space it even further.
How you’re rating the impact of your spending?
What are the outcomes based on that rating?
This is about giving a number to each spending category or subcategory to rate its impact.
You can have 3 points rating system:
- 1 = being good and the outcome is to keep doing it
- 2 = being switchable and the outcome is to either switch to better or cheaper item or to use in investing
- 3 = being bad and the outcome is to stop buying for that item.
I like having that on my system so that when I’m evaluating my spending at the end of the month, and after giving those ratings to my spending, I can tell which category that needs improvement or follow up the next month.
2- Information to look for
Now that you have your system ready, it’s time to design the notebook you’ll use by identifying needed information. This helps also when looking for an already made notebook
The information you’re looking can vary according to your need and in my opinion the basic ones are, date, day, month, item you’re paying for, amount paid, type of payment (card or cash, coupon, etc.), total money spent that day
Additional information you can have is to have a sum of each of your payment method, like X times paid cash, X times paid with cards, etc. This helps you see your main method of payment and think about it.
Another additional information is to have a space for money gained, if you’re having it throughout the month.
3- Identified categories
Here you identify in advance the categories you’re most likely to spend on and if needed, you can create a subcategory if it helps you make better decisions.
Main categories you can set right now in your expense tracking notebook are:
- Housing: rent, or debt or fixes in your house
- Transportation: gasoline, tickets, bus, taxi, etc.
- Food: Groceries, lunches, food delivery, etc.
- Utilities: tools you buy, electricity, water, etc.
- Medical: drugs, hospitals, etc.
- Personal Spending: clothes, jewelry , haircuts, etc.
- Entertainment: traveling, cinema, books, etc.
- Miscellaneous: anything that you can’t identify in the above categories can be captured here till you figure it out or create another category if more similar items started to be listed.
This list isn’t cut in stone. You can change it, add to it, or create subcategories. From a beginner perspective, you can start with these today.
4- Two sized notebooks
Now that you created your system and designed your tool, it’s time to have the actual notebook that you’ll use.
My recommendation is to have 2 sized notebooks. One is going to be the main one you document in; this is the larger one to accommodate your inputs.
The other one is a smaller one that you can carry around with you to take notes of spending made while away from the main one. This is the pocket sized one.