By: Geoff Stam, Director Default Management and Financial Literacy, Office of the Chancellor

Previously we have discussed the concept of paying ourselves first to be sure we have the savings in place to reach our financial goals. How do we make sure to do so, but still have the money to cover our necessary expenses? Where do you find extra money to put away for a rainy day, pay down outstanding debt, go on that special vacation, or buy that item you have been wanting? Recognizing and understanding our monetary behavior is of utmost importance when it comes to achieving financial success. Using a spending diary can be one of the most effective tools, (in conjunction with a budget), to clearly identify those behaviors and help reach financial objectives.

The purpose of a spending diary is to track every penny of income and identify where it is being spent. Yes, this includes money going to savings! Remember, “Pay Yourself” is considered a must-pay expense in the fixed expenses portion of your working budget. By tracking your expenditures down to the penny, you will have a clear picture of where your money is going, or at least where it went last month. With this view in mind, it is easier to identify opportunities to reduce some expenses or potentially cut some out altogether. Putting this in practice for 3 to 4 months should give you a very good idea of what your spending habits are, where the “little” items add up, and what potential changes to spending might need to be made.

It is important to make sure that L.I.F.E. (Listed Expenses, Impulse buying, Forgotten Bills, Emergencies) is covered. Tracking spending down to the penny can help make that happen.

1- For each listed expense, was enough money allocated for the budgeting period?

2- What are the impulse buys that affected the budget, potentially leaving it in the negative with no money for savings? The budget was in balance the last 2 month but out of balance this period; what occurred that may have been unplanned?

3- Are there any bills that have been forgotten since they only happen periodically or on an irregular cycle?

4- Is the emergency fund (savings) growing adequately to cover issues that may happen along the way?

After 3 to 4 months of tracking where the money is going, a good visual tool has been created that can provide some ideas of where to make some changes. Sometimes it is simply cutting back on some of the “little things” such as buying a specialty coffee or going out to lunch. Other times it may be recognizing a need to modify the grocery shopping behavior by using more coupons or store-brands to reduce costs. Just remember, some simple savings here and there will usually add up to a much larger number over the course of a year! And if part of the goals are to make it to the end of each pay period breaking even or with a small amount left over, those small savings can add up to a very significant amount as time goes on. The small steps will lead to bigger leaps as time goes on.

Once you have fully implemented the spending diary as part of your budgeting tools, you will be able to:

1- Create a budget that most closely fits your spending needs and habits but still reflects your goals.

2- Identify expenses that could be reduced or done away with.

3- Make sure that L.I.F.E. is covered.

4- Finally, retrain the brain to stick to the financial goals that have been established.

A final thought for this article is to find a method of recording your spending diary (and budget, for that matter), that is comfortable to how you normally do things whether it is manually or in an electronic format. Do not reinvent the wheel to create the spending diary tool. There are many websites available that can provide free worksheets that can be used for this purpose, both manually and electronically. Just do an internet search on “budget worksheets” or on “spending diary” to find a few. Yes, there is an “App” for that for just about any “smart device.” Just search the app store that you use for “budgeting” or “spending diary” or “expense tracking” apps. Some are free, others may charge up to $4.99 for the app. Find one that fits how you want to do things and be sure to put it to good use!

Please feel free to contact me if you have any questions or suggestions that have worked for you. If there is a specific topic you would like to hear about, please let me know. I am based at the Keiser University Jacksonville Campus and can be reached at (904) 296-3440 extension 139,