Keeping a Financial Diary

Before you practice the basics of effective financial management, you need to know the components of your spending. For that, you need a diary.

The first step in keeping your finances in order is keeping a financial diary. For you to easily ensure that your economic position in the future is secure, one of the things you will need to do is make sure that you manage how you spend your money properly. There are things that you can do on your own to control your spending.  One of the easiest of these is to simply keep a log of how you spend your money.This is a cheap but effective way for you to keep your personal finance in order.

open diary with calculator
Effective financial management requires a diary.

How to figure out if you are living beyond your means

Keeping such a financial diary is not very hard, but it can give you a lot of insight regarding whether you are spending money properly or not. The key  is to enter all the purchases you have made every day. When doing this, you need to keep in mind that even the most minor purchases need to be recorded in the diary to give you an accurate idea of how your cash flow is. Once you do this for a few days (such as after a week) you can then go through your diary to find out more about how you spend money.

Deciphering your spending habits

When you do this, you will realize that most of the minor things you spend money on tend to cost you more in the long run. For instance, you could be the kind of person who has a soda every day after lunch. On the surface, this does not look like a major way of wasting money. However, when you record the amount of money you spend on sodas after a few days, you will quickly find out that it does add up. The fact that you don’t necessarily need to drink a soda every day makes it even worse, since it means that you will essentially be throwing money down the drain.

The diary is very important since it acts as a better pointer as to what you need to do in order to control the spending. This is just the first step of controlling your spending. The next big and important step is to create a budget. A budget enables you to plan and predict what you can and cannot afford, big or small. Businesses, big and small use it, and there is no reason that you can’t also.

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