6 Reasons Why Keeping A Money Journal Is A Powerful Way To Start Saving

Show of hands — who here has ever checked their bank account at the end of the month and wondered aloud, “Where did all of my money go?” Yep, you are not alone. According to a 2019 Bankrate poll, two-fifths of people said that their main financial priority was just keeping their heads above water on living expenses, rather than saving money. And without one, it’s super easy to spend money mindlessly — a $13 cocktail here, a $25 pair of earrings there. It can all add up and, eventually, get in the way of your bigger goals and dreams, like saving for the future.

Fortunately, there’s a pretty easy way to start tracking what you earn, spend, and save: Keeping a money journal. It can be the first step to taking back control of your finances. All you need is a place to jot a few things down and a few minutes each week to do so, and you’ll be on the way to saving smart, ASAP. We partnered with Charles Schwab and leading personal financial guru and CFP^® Carrie Schwab-Pomerantz. Here’s how to get going, and make sure to visit Schwab-Pomerantz's column, Ask Carrie, for this and answers to other money questions you may have.

1. Pick the Format That Works for You

If the term “money journal” conjures images of the lock-and-key diary you kept hidden under your bed in the third grade, know that you aren’t beholden to a traditional pen-and-paper format, says Schwab-Pomerantz. Sure, if an actual physical journal feels good to you, go for it. But you may also want to experiment with digital options like an app or a spreadsheet. Whatever you choose, it needs to be a system you’ll want to use on a daily (or weekly) basis.

2. Take a Financial Snapshot

A map is only a useful guide if you know where you are. The same goes for a money journal. Your savings are just one part of your financial sitch, so take some time to write out exactly where all your money goes each month. “Make a budget by category, separating out your essentials from your nice-to-haves,” says Schwab-Pomerantz. “This should include your personal everyday expenses plus things like household expenses, car maintenance, tuition, student loan payments, pets, medical costs — everything you spend money on in the course of a month. And don't forget to adjust expenses that only come up once or twice a year, such as property taxes or insurance premiums.”

3. Figure Out Your Savings Goals and Strategy

With a complete budget, you can now plot out your savings strategy based on your goals. Do some soul-searching: What do you want in life? You may find that you have multiple goals, both short-term and long-term. Perhaps you need to replace that hand-me-down futon with a sleek new sofa, but you also want to start saving to buy a condo in 10 years. You can definitely do both, but you have to prioritize. If your butt is about to fall through that futon, you’ll probably want to set aside more money each month for that purchase (rather than the dream home) so that you can more quickly buy a real sofa. As you think about your surplus savings strategy, you’ll also want to decide how it relates to your needs, wants, and wishes, says Schwab-Pomerantz. “You can think of it as figuring out which financial goals are most important to you. Ideally, you should make saving a line item on your monthly budget, so that saving itself is one of your essentials,” she explains.

4. Keep Your Money Journal Up to Date

This may sound like a real no-brainer, but bear with us: A money journal only works if you use it. You pick the cadence. Daily updates mean you’re less likely to forget something, while weekly updates give you more freedom. Whichever you choose, just be consistent. Regularly enter your earnings, spending, and savings, in addition to noting any big changes in your financial picture. (Did you receive a huge tax refund you weren’t expecting? Pay off one of your student loans? Put it in your money journal!) Now, how empowering is it to see exactly where your paycheck goes each week?

5. Reassess Your Spending and Goals

After a few weeks of keeping a money journal, you’ll likely begin to notice patterns in your cash flow. Now’s the time to start organizing your financial life by asking yourself some thoughtful questions based on this data, says Schwab-Pomerantz. “Are you happy with the way you spend? Does it reflect your priorities? What changes do you need to make to save more to meet your goals?” Small spending tweaks could amp up your savings big time.

6. Widen Your Snapshot

Once you’ve gotten the hang of the whole money journal thing, take a longer-term view, says Schwab-Pomerantz. “Project your budget and income out for an entire year, making sure you include savings. If you're in the red, cut back in other places. Make a personal commitment to check in with your actual spending at least once a month for the next year.” With a well-maintained money journal, not only will you never have to wonder again where all your money went, but you’ll also set yourself on the path toward saving for whatever bright future you’ve dreamt up.

This article is sponsored by Charles Schwab. Make sure to visit Ask Carrie for any and all money advice you might need. The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.