Keeping a Log will Expose your Financial Leaking Holes

It is a mystery how we can spend so much money, yet not know what we are spending it on. We know the obvious items, gas, grocery shopping, phone and utility bills etc. But what about those ‘hidden’ items that we spend on, yet are almost not aware of them?  These are like leaks or holes in your budget that must be exposed and patched once and for all.

Using a log to find the holes

One way to find what hidden items are sucking your money away, is to keep a log. This is a basic journal of what you are spending on, for at least 2 weeks and up to 1 month (you can increase this more if you desire.)

Begin to write down almost everything you buy, how much it is costing you, and optionally a date too. Don’t include big fixed items and bills, since those are automated and you have to pay them anyway (insurance, rent,  etc.)

Here is a sample:

-Pack of cigarettes: $7.50 , Jan 16
-Movie night, including drink and popcorn: $22.95, Jan 17
-Taxi and Clubbing: $45, Jan 17
-New Computer accessories : $35, Jan 19
-Pizza and drinks : $18 , Jan 19
-Pack of cigarettes: $7.50 , Jan 19
-Movie Rental: $7.49, Jan 20
-Online purchase: $32.50, Jan 21
-Wings and drinks at a local bar : $28 , Jan 23
-Movie night, including drink and popcorn: $22.95, Jan 23

Looking at the above hypothetical log, you can easily find that you are spending close to $250 in less than a week, most of it on things that you probably don’t need or are not aware you are spending this much money on.  If you went to the bar to watch a game and spent $28, do you really need to go to the movies and spend another $22.95? certainly not good for either your health or wealth.

Having a visual and clear numeric log of what you are spending your money on, and how often, will most likely change your spending habits. It is all about psychology (one of the 5 principles of our budgeting education), where seeing something is much easier than to just have it out there in the background. In other words, when spending money on something, you want your senses to be fully aware of it, most importantly your eyes and hands.  Otherwise, you are spending like a drunk person, and that is never a good thing!

If interested, you can go an extra step and input your log purchases into Microsoft Excel, letting it plot it on a graph. If seeing your purchases represented by  numbers wasn’t enough to make you start cutting on certain unnecessary purchases, a graph will surely have a more deterring impact.

After all, a picture is worthy a thousand words, right?