January 2014

Why You Should Have — And How to Keep — A Financial Notebook

Being the 21st century, you’re probably inclined to keep track of most things via an electronic device. And whether you log your financial spending via an iPad, Excel document or physical notebook is up to you. The latter may be a better option than you think.

For one thing, even with how advanced the 21st century is, it’s never certain how long your computer is going to last. Hard drives are known to crash, and flash drives are easily lost. Keeping a physical copy of your finances in a safe place ensures you’ll never be without it. Plus, on the nights you’re discussing the budget with your spouse or other family members, having a notebook on hand may be easier than hunching over a computer screen.

So, how do you go about creating one, and keeping it organized? Follow these simple steps:

1. Getting organized. Take a trip to your local office supply store and pick up a three-ring binder and some dividers. Or you can use a simple notebook and pen — whichever works for you. If you do choose a binder, label the dividers according to the information you’d like to track, like total income, spending, car repairs, etc.
2. List your goals. It’s a good idea to make the first section of your notebook a list of what your financial goals are — short-term, medium-term and long-term goals. Be as specific as possible. For example, avoid generic goals like “Save for a house.” Instead, aim to add an extra $100 to a separate “house” fund each month. By doing this, you’re easily able to see what and when you might be able to afford a particular goal.

3. Systematize your notebook. It’s up to you how you’d like to organize your financial notebook; there’s no wrong or right. To get you started, here are some ideas that you can label each page: 
  • Total income. What is your annual gross pay, and what do you net each month? Do you earn any extra cash with a side job? Marking this down will help you see the range of money you’re bringing in, which can help you budget everything else. 
  • Bills. Mortgage/rent,car payments, student loans, electricity—analyze how much you’re spending on the big bills each month. Bonus: While this helps keep your budget in line, when it comes to your utilities, you’ll also learn if that energy efficient investment was worth it. 
  • Spending. Besides bills, what else are you spending money on each month? Organize this page with your total spending, which will help you see clearly which categories you’re overspending (and which you’re saving in). For example, are you spending more than you need to grocery shopping or going out to eat too much? Spending too much on your morning cup of coffee? (According to an Accounting Principals’ Workonomix survey, the average American worker spends more than $20 a week on coffee, averaging $1,092 a year.) If you’d like, create a “spending log” with whatever specific categories you spend the most on—food, clothing, recreation, etc.—and fill it in that way. 
  • Miscellaneous funds. Need to save for the holidays? Want to put aside money for that big kitchen remodeling project you’d like to accomplish? Why not keep track of how much you need, and how much you already saved, in your financial notebook?
  • Statements. If you’d like, create a section where you can add in your personal profit/loss statements, rental profit/loss statements, even receipts and pay stubs. It’s always a good idea to keep items like this on hand in case you need to find something quickly. 
Most important, keep everything organized. According to a survey by the Consumer Reports National Research Center, 16 percent of people lost money or incurred a charge because of poorly organized paperwork. As long as you can find a system that works for you, your financial notebook will help you budget your expenses.