Note: This was a guest post I wrote for Coupon Cravings. I love Coupon Cravings, and considering that my Money Book is my favorite financial tool, it was great to be able to write for Erin’s site! See the full post on Coupon Cravings here.
Meet the Money Book
The single best way to change your relationship with money and your outlook on your financial future lies in one cheap little notebook.
Hear it here, hear it forever: The key to financial freedom is in basic record-keeping.
What is a Money Book?
A money book is a pocket sized journal you take everywhere. It is the place where you record everything you spend and everything you earn. Every week takes up two pages in the book, and you can set up your pages to look like this:
On the left hand page you list each day with a spot for earning and expenses, and a total at the bottom of the page for earned and spent.
On the right hand page you list:
- Week’s Net Loss/Profit
- Year’s Net Loss/Profit
- Net Worth
How To Use A Money Book:
1. Every day, write down everything you buy. Every single expense. Anything that you pay for in cash, anything you pay for with a credit card. $2 coffee? Write it down. $5,000 Gucci hand bag? Write it down. Every single expense needs to get written down. And you must note what you spent the money on! i.e. do not write $5,000. do write $5,000 Gucci handbag.
2. Then write down what you earn. For people with consistent incomes, this would mean dividing your annual salary after taxes by 52 weeks in the year. For freelancers or those without one solid number, write down what you earn as it comes in. Make sure to also write down any other amount coming into your bank account (do not forget cash gifts, tax refunds, interest earned on savings,etc).
3. Once a week, tally up what you earned and spent that week to determine the Week’s Net Loss/Profit. Add that weekly number to your ongoing annual tally of Year’s Net Loss/Profit. Then add that number into the overarching Net Worth number.
You can interpret this Net Worth number however you like. Some people like to include their investments and property, but some prefer simply referencing liquid cash or available savings in this number. Think about what is best for you.
If you have never kept a money book before, and are new at record keeping, you may not be able to calculate your Net Worth overnight. I would encourage you to simply start with a Net Worth of 0 as of the date you began your money book until you can figure out a good estimate. Then you can retroactively add that in.
4. Once a month, transfer these numbers into a simple running list of expenses and income either on your computer (I recommend many simply pre-made budgets in Excel) or on paper. The idea is that at the end of the year you will have an itemized list of exactly how much you spent in what categories all year.
What are the Biggest Benefits of Keeping A Money Book?
The reasons are endless. Although I had dabbled in expense and income record-keeping for years, it wasn’t until I went on one 8 month trip around the world (during which I had to seriously count pennies) that I become converted to the idea of writing down every single expense. At the end of that trip, I felt that I had finally taken control of my life. The liberation in knowing exactly how much you need to live well is astounding. Some of the other benefits of keeping a money book:
- You have a year by year account of what your money is spent on. This is one of the best motivators I know of lowering a given spending category.
- You also have a year by year account of your salary in simple black and white combined with the grand total that you “earn” outside of your salary (gifts, interest, windfalls, product returns, rebates, etc). No more digging through bank statements to figure out if Granny is still giving out $20 at Christmas.
- At the end of the year, doing taxes are a breeze.
If there is one thing you do this year to improve your financial situation, let it be this: get a money book. The key to financial freedom is in the record keeping. I promise;)
This looks like a great idea. Do you also write down bills paid (mortgage, phone, whatever)?
This is a Great way to solve those little laps in our memory… thanks
You said everything you purchase into the book so I am assuming your mortgage and utilities and all?
Yes Wendi – You want to put every single expense in there. That’s the beauty of the process – you know EXACTLY where your money is going;)
How would you do a grocery store trip? Divide into categories or right down each item?
I’ve just started the money book….and excited!!!
Cindy, I listed my grocery store trip like this: Publix, Walgreens, CVS….just matched my receipts to each day.
Way to go Dana!
Yes – you want to put all your expenses – mortgage included;) Absolutely everything that goes out, and everything that comes in;)
hi, claire. i just want to t.y. for doing this for us all. i am a bit lost, though. you suggested following you on twitter. i don’t care for that route and was wondering if this is a “have-to”? i also don’t really know how to do it {ashamed}. can i just follow advice on your courses and go to walgreens, etc., which i do anyway.????
i really need to get serious about this as i have lost a big chunk of my income. i am trying to live as frugally as possible. i spend HOURS signing up for free stuff. roselealaufenberg@yahoo.com
where do you find this “money book”???
I just bought a mini pocket journal from Books a Million. It’s small enough to keep in my purse.
Great tip. The Calm One and I do a running tally on the fridge, but it’s so easy to forget by the time you get home. This might work better for us. Thanks!
.-= jubilee´s last blog ..Monday (A)Musings – The Amateur Salon Edition Part Deux =-.
The Calm One!! LOL
Great tip! found you from Wearethatfamily…going to get my money book and get started. This tip is an answer to prayer! Blessings!
Absolutely LIberty – start your book today!
If you itemize on your taxes sometimes it is beneficial to take the slaes tax deduction, if you have all your receipts available, Tax time will be easier. Saving your reciepts for everything you buy really adds up!
I just bought a small expandable file folder to hold my reciepts for the year,
using the monthly tabs for the dividers. Now all my reciepts will be in the same place. Great for returns and refunds!!
Hello! This is a great idea! I love your site! I have always been frugal but I still spend to much total money. I tend to forget how fast the cheap stuff adds up! I have just talked to the hyper one and he is on board. We will be starting our book on Mon. I am going to get us matching notebooks.
I also signed up for your coupon ecourse and have encouraged my readers to do the same. I have never couponed before but you and Budget Saving Mom have convinced me that I need to start now.
Is there a way to get coupons that came out in past papers? I am just starting to stockpile and I see a lot of deals I could use now that require coupons from the beginning of March.
I appreciate any help you have to offer and will continue my readers to come visit your site!
Oh, my comment luv didn’t show, my site is http://angiesfreebies.com
Thanks!!
.-= Angie´s last blog ..FREE NAVIGATING YOUR HEALTH FOR DUMMIES =-.
Claire
As a recent retiree the Money Book sounds like a great idea. Where or do you enter coupons you use , as this is substantial for me.
I started doing this three years ago, not quite the same format but dividing monthly spending into categories. I have a huge credit card debt to pay down. This book has helped me immensely and I know where EVERY CENT goes, and EVERY CENT that comes in. Honey, if I find a penny on the street (have found several, once a dime) I mark it down as “income”. At the end of every month I calculate total income, total outgo, if in the red, i analyze it and see where I overspen, now when I say, “I can’t afford it” or “yes, I can do that” I really mean it and it is a wonderful lesson in self-control. I have categories of expenditures such as grocery, supplies (non grocery consumables), hobbies, credit card balances, gifts, paper and publications, loans, savings, donations, computer, posage, medical stuff, you name it, I’ve got a category. any big expenditures I notate as to the source and reason but I know what the .64 is in the “eat out” column — sr. coffee at McD’s! Also at the end of the month I calculate whether I spent over or under in the categories for my budget. I set up the budget after keeping track for a year, looking at average amounts spent and set up a realistic budget. Right now, bare bones, keeping current on everything, I need to earn $38.00 more dollars average than I have coming in, so I try to do that online, vendor sales, rummage sales, rebates, etc. I also am a poll worker which helps during election years (Believe me you earn your money–a solid 16 hour shift! Anyway, I could go on and on how much my “money book” has helped. I don’t take it with me but note any cash expenditures, income, etc., and keep all my receipts so I can record at end of the day. Also I have one credit card I use for practically ALL expenditures, a good rewards program so about every other month I get a $25 gas card. I put all my utilities, etc. on it and pay it off every month so I have no interest. The other balances are from when I helped out my kids at various times. I stopped all that but still owe the money. Sorry this is so long but I tell you guys, it really works to see exactly what your financial is in. I also figure up ALL the money I have on hand at the end of the month, coins, state quarters, quarter collection, rummage money, balance in bank, cash on hand and that helps me analyze what I need to do.
I suggest Mint.com to make track of where all the money is going a whole lot easier. Anytime you swipe your debit or credit card, it records it in the register. All you have to do is check it periodicly to move things into categories you prefer. For any cash payments or purchases, you will need to input these manually.
I have been doing this since January 1, 1990. I maintain the position that unless I keep perfect records and eliminate nothing at all, it will not be useful so I enter every penny in and every penny out every day using an old Quicken program.
The benefits far exceed the obvious.
Preparing taxes is effortless because I can obtain totals for every category of spending within moments of pressing a key on my keyboard.
To determine what I paid for anything, I can search and have an instant answer.
To see where I purchased an item years later, the information is immediately accessible.
I don’t find this to be inconvenient at all. I collect receipts for everything and, at the end of every day, I enter them into Quicken.
LOVE IT!