Keeping a spending diary was a big eye-opener for my husband and myself.  Yes, it’s a huge pain in the arse to write down every penny you’re spending but it’s a vital step in seeing where money is going and also is an invaluable tool when setting up a budget.

I wasn’t too keen on the idea of keeping a spending diary when we were deciding it was time to get serious about getting out of debt.  I actually refused to do it at first because, as I told my husband, “You’re just going to use it as a way to criticize and judge every penny I spend” and there was no way I was signing up for that kind of misery.

So we made a deal.  There could be absolutely no judging or being critical about what was being spent.  The spending diary was a “fact finding” mission only.  But, just to be sure my husband wasn’t tempted to peek and say something negative to me, I kept my spending diary (just a cheap little notebook) with me at all times and never left it laying where he could easily pick it up and look at it (I love him but he’s just as prone to temptation as the next person!).

We decided to track our spending for a month because my husband and I are both paid monthly.  You don’t have to do it for a month if you don’t want to – even a week will help – but I think doing it for a month is much better because it gives a better overall picture of spending.

What did we find out in that month?  The biggest shock was our food and restaurant expenditures.  It was, by far, our largest spending category – almost $800 on restaurants alone!  And it wasn’t from going out every weekend to nice restaurants with white tablecloths and cloth napkins.  It was from being lazy and not wanting to cook 3 or 4 nights a week and going out to grab a bite instead or picking something up on the way home; or not feeling like packing a lunch and running out for lunch instead.

We also had a lot of what we labeled as “miscellaneous” spending – things that didn’t fit into our categories of: groceries, restaurants, Montana (not the state – our dog’s name; yes she got her own category.  She has to eat too); clothing; toiletries (toothpaste, shampoo, haircuts, etc.), entertainment (didn’t include restaurants but did include going to see movies, bowling, and class fees for crafts classes I take), cleaning supplies, and gifts (Christmas, birthday, wedding, anniversary and any other presents along with cards and wrapping paper).

We created a miscellaneous category because it’s hard to categorize some things like batteries, light bulbs, photo developing, ink and paper for our printer, parts to fix the leaky sink, potting soil, charcoal for the grill, a donation to a charity, a magazine, gym fee etc.  We thought about having a household category but decided against it because not everything I just mentioned fit into a household category so we still needed the miscellaneous category and because we wanted to have as few categories as possible so keeping track of a budget later on wouldn’t be so cumbersome.

We didn’t track our gasoline expense, mortgage, insurance, utilities, or credit card payments in the “spending diary” notebooks we used.  Those bills we were either paying online, paying with a debit card, or writing out a check so we already had a history of exactly how much we were spending on each of those things.

We also didn’t create a budget before our “spending diary” tracking.  We wanted to see where our money was going because it felt like it was flying out of our pockets.  I remember looking in my wallet a lot of times and wondering where all my money had gone.  That meant we spent like normal during our tracking period kinda.  After the month was up and my husband and I sat down to see how much we had spent and what we had spent it on we both admitted there were things we didn’t buy because we didn’t want to have to write it down (and no it wasn’t because we wanted to buy porn! – at least I didn’t).  For example, I love to buy books and magazines because I really enjoy reading.  But I never realized how much I was spending on them.  Once I started writing it down I started to become alarmed at how much money I was forking over for that reading material and by the end of the month I was already willingly cutting myself back.

My husband’s only shock from his spending journal was the amount of money he fed the vending machines at work for bottled water, soda, chips and candy bars. Hitting the vending machine for a beverage and snack a couple times a day doesn’t seem harmless (it’s just some quarters and dollar bills, right?) but added up over the course of a month it came to close to $100 for my husband and all he had to show for it was a few extra pounds on the scale.

Once we had our month’s worth of spending in front of us in black and white it was easy to see why we always had more month than money and why our credit cards got a major workout.

We were to the point of knowing how much debt we had and how much money we were spending.  The next step we did in starting to get out of debt was set up a budget.  That will be the next post in my “How To Get Out Of Debt Series.”

So do yourself a favor and keep a spending diary.  We wrote our spending in small notebooks we got 2 for a $1, but you can use whatever you want whether it’s a notebook, plain paper, your PDA, or the back of napkins.  How you keep track of the spending information isn’t important; doing it is.

Remember, you will only need to do this one time, whether it’s for a week, 2 weeks, or a month.  Then you’ll be ready to set up your budget.

Don’t wait any longer.  Start today!