Why you should write down every expense

By Trent Hamm,?Guest blogger / June 23, 2013

A worker counts US dollar bills inside a money changer in Manila in April. Hamm argues that the act of writing down what you spend can make you more mindful, and critical, of your finances.

Romeo Ranoco/Reuters/File

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Megan wrote in recently with a long story that I?ll use in a future Reader Mailbag, but in a paragraph that didn?t have to do with her story, she asked a seemingly simple question.

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The Simple Dollar is a blog for those of us who need both cents and sense: people fighting debt and bad spending habits while building a financially secure future and still affording a latte or two. Our busy lives are crazy enough without having to compare five hundred mutual funds ? we just want simple ways to manage our finances and save a little money.

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What made you shift from not paying attention to what you spent to worrying about spending a nickel extra on toilet paper?

It would be easy to answer this with a broad answer of saying that it had to do with the realization of my responsibilities as a parent and with changes in my personal values and beliefs.

Looking back, though, I think it had to do with something much more ?real? and practical than that.

For several months ? just shy of a year, actually ? I made a habit of writing down every penny that I spent. If I spent a quarter on a piece of gum, I wrote it down.

I kept track of this in my pocket notebook. It wasn?t really hard. I just had to make a routine of jotting down every single expenditure in that notebook. If I didn?t have time immediately, I jammed a receipt in there and wrote it down.

What I found is that as I was writing down each expense in that notebook, I became really critical of that expense.

I?d write down $100 spent at the grocery store and I?d think to myself, ?Really? I blew $100 at the store. Why?? Then I?d find myself studying the receipt and questioning a lot of the items on there. ?Did I really need that item?? ?Couldn?t I have just bought the generic??

Over a period of time, I began to really question everything I spent money on. It became a very natural thing to look for a lower-cost alternative.

I wanted badly to reach a point where I wasn?t shaking my head at myself whenever I wrote down an entry in that notebook.

Eventually, I reached that point, more or less. I went weeks without writing down anything that made me uncomfortable or made me want to seek out a lower-cost alternative. It was at that point that I put the habit aside.

That period of time reshaped the way I think about spending. Every little dime matters and, as you?re spending money or considering it, it?s worth thinking about whether or not there?s a better way to go about this purchase. Do I really need to buy this item? Is there a cheaper alternative that?s just as good?

Forcing yourself to go through every single expense is a real eye-opener. It?s not just a matter of buying the slightly more expensive toilet paper. It?s about dozens ? even hundreds ? of those types of decisions we make each week, and they really add up, on the order of hundreds of dollars per month.

Try it. Get yourself a little pocket notebook and a pen and take it with you everywhere. Write down every single little thing you spend money on. As you?re actually writing it down, think about whether that was a good use of your money. Was there a better way to do it that achieves the same or similar results with less expense? Did I really need to buy that item or service?

The amount of waste will probably shock you.

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