The Pros And Cons Of a Spending Log

As I’ve been writing The Book Currently Known As Plenty, I’ve read a shelf full of other personal finance literature. One tip which surfaces frequently is to keep a spending log. I understand the appeal — after all, 168 Hours really pushes the idea of keeping a time log — but I have to admit I’m not entirely sold. I suppose it might be interesting, but I also suspect that many of us have a better handle on where our money goes than our time.

For example, few of us know how much time we devote to anything unless we bill (or get paid) by the hour. With money, on the other hand, we have to account for our income with our taxes and our spending when we pay our bills. Indeed, if you pay for many of the smaller expenses of life with a credit card, then you pretty much have an accounting in front of you every month. Now, people may ignore the bills, or ignore that the money coming in is much less than the money going out (as this particularly perilous money makeover from the LA Times shows) but it’s hard not to have some sense of this. At least I think it is (but I’d love to hear if you think I’m wrong!).

I also know that the point of this exercise is often to show how much money we all “waste” on things like lattes or eating out, but I’m not convinced these are necessarily wasteful expenditures when done right. If I’m meeting a friend for coffee or lunch, I’m nurturing social ties, which is one of the best things you can do to boost overall happiness. Small, repeated pleasures contribute more than occasional big ones to overall well-being. If coffee is your favorite small pleasure, then you should definitely try to get into a situation where you’re spending $100 less per month on housing, and enjoying a latte every day.

But I know that spending logs have their devotees (witness the popularity of Mint and Bundle). I’ve also been learning that a surprising number of people are putting cash in envelopes every month to allocate to certain categories. If you’re a fan of these methods of accountability, I’d love to hear why you’ve chosen them, and how they work for you.


10 thoughts on “The Pros And Cons Of a Spending Log

  1. I get paid biweekly, and my husband monthly, so we pay for our everyday expenses from my check. Every other Friday, we go to the ATM and take out $260 – $50 each for “allowance” and the remainder for groceries. Our allowance money is used for lunch, coffee, and other small purchases. Neither one of us is much of a spender, so any books/music/clothing purchases come out of the general fund. We agreed on this because I like to have cash in my wallet, and my husband always used his debit card even for small purchases when he was single. When we first got married, it annoyed me that he would buy coffee frequently, and it annoyed him that I like to go out to lunch during the week (often by myself with a novel). These aren’t really different as unnecessary expenses, but we all have our preferences…Having our own cash and agreeing that we won’t take out any additional cash until the next payday makes life easier.

    The grocery money is, indeed, in an envelope. We have enough flexibility in our budget that we can spend a little extra (via debit card) on groceries sometimes, especially if we’re unexpectedly having guests over or have purchased larger-than-usual amounts of cleaning supplies/paper goods/alcohol. But using the cash means we have to think about how much we’re spending on groceries and make a conscious decision to go over our food budget. We make a menu for the week and grocery list every Saturday and go food shopping together.

    We consider eating in restaurants to be part of our entertainment, so it’s not in the same pot of money. For restaurants, movies or other regular entertainment and gas, we have a more-or-less set amount for each 2-week period. When my husband sits down to pay the bills, he calculates that amount plus a $200 buffer in our checking account that can’t be used for other purposes. Anything left that isn’t needed for bills goes to savings. This system has worked really well for us for the last couple of years. We’ve accumulated a nice savings account and paid for vacations and some work travel that wasn’t eligible for reimbursement (we’re academics, so have limited dept. budgets to cover conference and research trips).

    1. @Lisa- sounds like you have a good system. We all have little things we consider necessities that other people consider the stupidest-thing-ever to blow money on. But it is definitely important to both buy into the idea that you won’t go over a limit. I think that’s where many people get in trouble.

  2. When we were saving for our first house, we kept a spending log…. not a budget, just a log. We each got a small ‘allowance’ that was free to spend without having to log it. Anything else had to be written down into categories, no matter how small.

    It was a HUGE benefit in saving money. There were so many times I just didn’t buy something small, knowing I would have to log it when I got home. On a joint income of about $25,000 we managed to save $14,000 in one year. Those little things really add up.

    1. @LaRita – I can see that (though wow, $14k saved on $25k??) When I was having people keep time logs, the frequency of Facebook checks would inevitably fall by the end of the week. I think people just didn’t want to have to own up to it, which is one reason to not do it! I imagine it’s the same thing with spending.

  3. I keep a spending log and have since mid-2006. It’s an Excel spreadsheet that ultimately is Income minus Expenses. I based it on the 60% Solution from MSN Money (Google it if you’re interested), but it’s customized for what I actually spend and save. It helps me know how much money I can (or should) spend every month. I use my gross pay and take out taxes, 401k contribution, other savings, fixed expenses (rent, student loan payments, food) and then know how much I have for “fun” and “irregular expenses” (which for me includes car repairs, car insurance, toiletries and cleaning supplies, etc). I have one tab for each month and then a separate tab that I call the “scratch pad” – which is where the expenses from shopping, eating out, paying tolls, etc. get added up.

    I love my system! I keep tabs on percentages and try to always save 30% of my gross income between various savings (incl. retirement) accounts.

  4. It seems like a lot of lists. If you want to loose weight, (which I do) they tell you write down what you are eating. If you want to save money or have tighter profit margins, you are supposed to write down every latte. If you want to be perfect about time you are supposed to write that down. At a certain point, I want to just live not make lists about how I want to live, so I think this list making and writing it down does work, but just isn’t very much fun.
    There has got to be a better, bigger-picture way that does not involvesay cutting carbs — or lattes with carbs, entirely right?

  5. We use the envelope system, though over the years the envelopes have become virtual. We have a list of what money goes where, and separate accounts for home/school taxes; regular bills that get paid less often than once a month (car insurance, water bill etc); and savings. We keep monthly bills and grocery money in the checking account. We also each get a weekly allowance for gas, haircuts, lunches with friends etc.
    We have many monthly bills taken from our credit cards, and then take the “cash” out of the envelope so we get the cash back bonuses. (We use that money exclusively for date nights)

    I find that the envelopes have kept us in check with spending and we have kept each list of how much we have allotted for each category since we’ve gotten married, and it’s interesting to look back on.

    In our house I am in charge of the financial present, and my husband takes care of our financial future (retirement, college funds, etc) Periodically we talk about how things are going in each of our areas and keep each other updated on any changes that need to be made. We have never kept an actual spending log though.

  6. We use a hybrid of online payments, credit/debit card and cash envelopes. The online payments are for things that we just pay in full every time they are due. For example, our mortgage, insurance, electric and water bills are paid using online payments because they just have to be paid.

    The credit/debit card comes into play for things like gas. If the car needs gas, it gets gas and we just fill up. Other expenses go on the credit card that we don’t have overspending issues with. We have yet to find an effective way to overspend on gas, but it’s also variable enough month to month that there’s no sure way of tracking it to even the nearest dollar. Since it’s a derivative of something we need to live in suburbia (for better or worse) and get to work, we make a best guess in our budget and see how we did.

    Pretty much every other spending category goes into cash. This includes the “adult allowance” for my wife and myself, groceries, home goods (Target/Home Depot/etc), family entertainment, alcohol and take out food.

    Groceries are something that might fall into the previous category of “we’ll pay it” for some people, but we found that we were throwing out old/unused food and were also spending significantly more than the national average, so we realized we were overspending there and the cash helps to keep that in check — in addition to making meal plans, sticking to them, and also making sure to utilize the food we have in the house to make dinners — sometimes the meal plan is made standing in front of the freezer and looking at what’s in there to make it through the week.

    The thing I like about using cash is that it’s essentially a self-documenting and maintaining spending log. When you’re out of it, you’re out. It’s also trivially easy to know how much is remaining, as well. I think of it akin to calorie counting when you have a weight problem.

    I’ll echo Lisa’s comments regarding the significant contribution to marital harmony with the cash allowance. If one person makes a lot of small purchases on things like coffee and other small pleasures, then this cash allowance allows them to do that, guilt free. It lets the other person save up for bigger ticket items. Before we started having the adult allowance, it seemed that the person who spent on small things was always “winning” while the person who was saying “I want to save $50 a month for 6 months to buy an XBox” was “losing” because that money was spent on coffee and small indulgences. Now we both “win”.

    When you are single, you have only one person to answer to, and you can do pretty much whatever you want to. When you add someone else to the equation, then you really have to communicate about how you will do things, and everyone will do things differently. The most important thing that must happen is that communication must take place between both people and they must agree to the terms and conditions of the budget. It’s also critically important that money matters are discussed often in a calm and rational tone. Arguments about money don’t count. I find that a monthly budget meeting is good for us, and we will have periodic email discussions about spending as we progress through the month. I can tell you that we haven’t had an argument about money in years now, since we discuss it so frequently and know where we are going. Any spark of resentment, jealousy or disagreement is gone through every month so it never has months or years to fester and poison the marriage.

    1. @Jason- it sounds like you guys have a good system. We used to have completely separate accounts when we first got married but then mostly pooled them when we had kids. We don’t have a limit, but we’re also both naturally pretty cheap, so it seriously never comes up.

  7. Seems like a lot of folks do have really good systems. B/c my husband and I are small business owners it is easier to be frugal b/c you know what you take from the business income you have to pay income tax on and also you are taking it from your own business. This has made me more frugal than ever before in my life and I am pretty frugal.
    Also when you are self-employed you have a better idea of how much it “costs” to earn money so it is harder to blow it.
    I did just join weight watchers and it is interesting how it is a similar system.. realizing that one half hour walk is only the same as points for your a.m. latte… things like that it helps you see where your “points” resources are going and to spend them on what you care about not blow them….

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