Managing your money is crucial for your success at saving, but what does it mean?
Do a search for ‘spending diary’, or ‘what I spent this week’. I would argue that out of the 790,000,000 or so results your search engine will turn up, you’ll get a lot of figures, but very few helpful diaries.
Why do I question the usefulness of many of these diaries?
Their purpose is primarily to satisfy curiosity, not help people with budgeting & saving questions. People are endlessly curious about other people’s money, and how they spend it.
Even diaries from the UK, our nearest neighbour, can be too socially & geographically different to give any useful comparative data to someone in Ireland. Our taxation systems, and even housing crises, are still very different.
Fundamentally, these diaries are not YOUR spending diary. They lack all context, and the specifics about your spending that will help you save.
There are several spreadsheets and spending diaries you can fill in online, and I recommend any of them, in as much as you have to start somewhere. The one thing most of these diaries miss are areas for more detailed information.
A diary entry for two weeks ago says you spent €12 on lunch. Do you remember what it was? Why you spent that much? ‘€12’ is also a suspiciously round figure. Was it really €11.59, or €12.20? These amounts are trivial, but not if it means that your calculations are out by 41¢, for example. If this happens every week, €21.32 has disappeared on you in the space of a year.
What if your entry was detailed? You’d know you spent €11.59 exactly, where you spent it, and what you bought. You’ve automatically ‘found’ potentially €21.32 this year. This is the beauty of accuracy.
Reasons for Spending:
The next level of detail involves what, and why. You rarely spend this much on lunch, so why was today different? Meeting a friend, forgot your lunch? Or maybe it was a particularly stressful day, and you really needed something to treat yourself. By remembering what you purchased, you can evaluate whether it was worth it.
Meeting a friend isn’t a bad reason to spend a little more. If work is horrible, make sure that the treat that gets you through the day is worth it, and not an expensive, tasteless distraction. And if the reason is that you just forgot your lunch? There’s always the next day to do something different.
When your spending diary includes details of suppliers, whether it’s shops or utility companies, you can begin to track who’s giving you better value. Fundamentally, the money is yours, and you deserve maximum reward when you spend it.
Equally, there are plenty of times when spending has an emotional trigger. It could be an event you’re not particularly looking forward to, and you overspend to compensate. You might find yourself needing an inexpensive pick-me-up purchase when you’ve had a particularly hard day at work.
Tracking your spending in this detail isn’t to make you feel bad, or guilty every time you make a purchase. Understanding how you spend money, and feeling control over your choices will enable you to spend smarter. This all leads to more money for your savings.
I’m asking you to do one thing, essentially: become a nerd about your own money. You earned it, you have a right to control where it goes.