YMOYL Chapter 2, Part 2: Keeping Your Daily Money Log

What gets measured gets controlled.

Those five words explain everything. They explain why The Daily Money Log is YMOYL's most powerful tool, and why recording your spending--every cent of your spending--is a critical step toward taking back your power over money.

But if it's such a critical step, why then do many readers refuse to take it? After all, it's ridiculously easy to come up with a long list of objections:

Tracking every penny just seems like too much of a pain in the ass...
Only total losers track their money like this...
I'll feel bad seeing how much money I spend...
My money log might reveal something embarrassing about my spending...
I'll feel dumb keeping track of my spending to this level of detail...
I'm just not that preoccupied with money...
I'm admitting weakness (or incompetence) if I do this...
I'll have to face the fact that I've been a failure with money...

...and so on.

These objections, and the fact that they're so easy to make, are why I'm deeply interested to learn from readers what internal resistance you experienced when you read this part of YMOYL.

So let me ask you: What were your initial thoughts about keeping a daily money log? Were those thoughts negative or positive? Did you catch your ego spouting any of the objections above? What helped you get over yourself and get past your objections?

I've got a hunch that your thoughts may give other readers the encouragement they need to examine and overcome their resistance too.

Our experience(s) with the daily money log: This is the second time we've kept a daily money log. When we read YMOYL for the first time in 2002, we tracked our spending for an entire year. And it was one of the most enlightening and financially empowering experiences of our lives.

But it's not like we became instant money buddhas the day we started keeping track. We had our own psychological resistance to work through, and honestly, the daily money log at first seemed kind of silly to us. Worse, during our first few weeks we often devolved into conversations like this:

"And how much did YOU spend today, darling?"
"I spent nine dollars and twenty-nine cents. Aaaaaaannnnnd you?"
"I spent two hundred four dollars and sixteen cents. [pause] Darling."
[Stunned silence, followed by passive-aggressive annoyed stare.]

My memory gets hazy at times, so I might be exaggerating a little. But I doubt it. Clearly, we struggled with our own baggage and objections too.

The mechanics of the daily money log: There's obviously lots of ways to keep a daily money log, but we opted for the simplest solution. We just kept a sheet of legal paper on our kitchen table, and each day we'd (separately) write down what we spent. At the end of the month I totalled everything up, and then we'd start a new month on a new sheet of paper.

At first we kept track in kind of a half-assed way. Our hearts were (sort of) in the right place, but it took a little while for our data collecting habits to follow. We'd occasionally "forget" to record our spending, and then misremember it (in our favor, naturally) when we got around to writing it down. We still have our daily money log from back then--every single page of it--and you can clearly see our records were erratic during our first few weeks.

But we were simply building a new habit. It just took us a little while to fully groove this new daily pattern--and to stop feeling slightly silly about it.

After a few stumbles (and passive-aggressive stares) during our first few weeks, Laura and I got better at this new habit. We were soon keeping far better records of our spending, and taking a fraction of the time to do it. Soon enough, it became a simple 30-second exercise: the minute either of us walked in the door, we'd walk over to our daily money log, jot down our spending, and get on with our day. Simple. Within three weeks we were doing it without baggage and without a second thought.

After a few months, we started noticing some surprising side benefits: for one thing, we'd taken a quantum leap in our ability to collectively discuss and decide financial matters. This process of keeping track actually taught us how to collaborate on our money challenges.

So let's back up for a second and take another look at the list of objections above. And let me make a confession.  It was easy for me to come up with all of those objections, because those objections used to be my objections.  Every single one of them.  And it was the process of keeping our daily money log that ended up curing me of them.

It was all exactly backwards from what I expected. I thought the daily money log would cause these fears and concerns. It turns out that it annihilated them. All that baggage and embarrassment we thought we'd feel turned out to exist only in our minds.

A few final thoughts:
Why is keeping track of every penny so important? Two quotes from YMOYL explain why. First:

Because it's the best way to become conscious of how money actually comes and goes in your life as opposed to how you think it comes and goes.

We'll get deeper into this idea in Chapter 3. And then:

People who have achieved a high net worth relative to income know how much they are spending on clothes, travel, housing, transportation, etc., and those who don't achieve high net worth relative to income have no idea how much they spend.

This is your life energy we're talking about here. Give it the attention it deserves.

"Every penny? That's ridiculous. I'm sorry, I'm not gonna do that." Yes, once again, that's your ego talking. And once again it's shielding you from the truth.

What's your ego afraid of? Is it afraid that you'll know more about your spending? And are you telling me your financial affairs can't survive a little scrutiny? Don't let your ego sidetrack you from the most financially empowering tool in this entire book.

What's the proper length of time to keep a daily money log? It depends, but I'd say at least six months. Clearly, you'll need multiple months of data to be able to look through various large expenses (like your auto insurance bill, annual professional dues or whatever) that aren't monthly in nature.

We didn't start our 2002 money log with a specific timeframe in mind. But after six months or so we really had our arms around our spending, and after a full year we made the decision to shut it down. While the book gives examples of readers who tracked their spending for many years, you clearly do not have to do this forever.

Your money log doesn't have to contain the detail that the book suggests. On page 70, our intrepid authors give an example of a typical day's money log. I'll confess: Laura and I never went into that much detail. We would simply list the spending for the day with a one or two word explanation, like "food," "gas," "mortgage," "cable bill" or whatever. Again, what we did was rarely more than a 30 second exercise. It was enough.

What if I can't get my significant other on board? This is a tough question, and quite frankly I don't know the answer. Laura and I were fortunate: we both wanted to take back our power over our money, and we were both seeking alternatives to consumerism and "making a dying." Readers, any advice on how to manage a daily money log with spouses who aren't on the same financial page?

Appendix/Side Thoughts:
1) Stop picking on my ego! I hope by now most readers can see what I'm really doing with my repeated references to battling our egos. It's a rhetorical device, and I'm using it for the sole purpose of scaring off the readers who aren't ready to take ownership of their financial lives. I want those readers to go away. That way, I can focus on the readers who are here to make real changes.

2) Applying "what get measured gets controlled" beyond YMOYL: Note that the what gets measured gets controlled concept has applications far beyond money. You can apply it to practically every area of life.

Some examples. Take the calories you consume in your diet. Carefully measure and record them and you'll consume fewer. What about the calories you burn while exercising? Measure them, and you'll burn more.

Your weight. Your blood pressure. Your cholesterol level. Your fitness. The number of pushups and situps you can do. All of these things improve when you actively measure them. It's like Shrodinger's cat:* the mere act of observation significantly impacts the results.

Next week: YMOYL Chapter 3: Where Is It All Going?

* Readers, try to ignore the inconvenient fact that Shrodinger's cat dies half the time. I probably should have picked a better analogy.


Ryn said...

I started tracking my spending years ago, when money was very tight for me and I needed to know exactly what my necessary expenses were. I've kept it up, because I like the information it provides. As a result, I didn't experience any resistance when I read through this section. Tracking expenses seems like a normal part of managing my finances, and I'm a little surprised that the authors expect a lot of resistance.

However, I do have to admit that at this point I don't track every penny. I got tired of picking up change, forgetting to record it, and throwing off my balance. Now, for cash transactions, I round up to the nearest dollar, record that, and throw the change in a jar. When the jar gets full, I empty it, and use the money for something I want. This incidental savings method works better for me than spending time every month trying to figure out where the extra 8 cents came from this time.

Diane said...

I've been doing this for years. I think I started when I decided to buy a house - to see how much money I really had at the end of the day/week/month. So, I've been doing it maybe12 years now...

At any rate, I continue to do it because it's like getting a raise. The simple fact of tracking my spending means more consciousness about how it is spent, and more money in my pocket. Plus I am a total numbers geek and I like comparing year-to-year across categories.

Rebecca said...

This is my favorite money-managing strategy! Just knowing that I was going to have to write down my purchases has helped me cut down on unnecessary shopping trips.

One of my tricks for making it even easier is to round every purchase up to the next dollar; that way it's easier to add, and I end up building a bit more cushion in my checking account.

Owlhaven said...

This makes a lot of sense. I started running (in part to lose weight) but didn't lose one pound til I also started counting calories. Accountability is powerful.

Daniel said...

Great comments so far, and in I'm particularly glad readers of this series don't share my personal past baggage about keeping track.

What's amazing to me how something so small and private can drive such accountability. I mean, it's not like you have to publish this on the internet or shout it out loud in your community's town hall. It's a private act of keeping track.

But just the simple act of writing it down in front of *yourself* is sufficient to make a enormous difference in your results. Incredible. One of the most powerful--and deceivingly simple--financial tools ever.


Brittany said...

Put me in the "Tracking every penny just seems like too much of a pain in the ass... " category. Not because of the ego... Because I'm really freakin' lazy. Er-- busy. Uh, both?

It's just too much hassle to record every expense when it happens. This is the same problem I have with tracking calories. I want to. I really want to. I start. I try. But it takes so much dang time I could spend doing something more useful, like cooking healthy food or biking, which to me is more worthwhile than laying in bed logging calories on my computer.

When it came to getting a handle on my finances when I got my first (very poorly paying) big-girl job, my solution was to put everything on my credit card and pay it off in full each month. (I have a toxic aversion to debt, so I wasn't worried about this getting out of control.) This had a few advantages: first, I could pull my statement and sort my spending into categories at the end of the month to make sure I was stay in budget (and that my planned budget was accurate). Second, with my online account tools, I could see at a glance any time of day with minimal effort the exact total amount of money I'd spent so far that month. "Oh, that figure is getting high; I should cut back." was much more useful than "Oh, I have money left in my wallet or checking account, so I'm still okay even though I don't really know how much has been spent."

...all without ever having to write down a single purchase. =) Efficiency is intelligent laziness.

Now, with a better paying job, no more student debt, and a good handle on spending, I've gone even lazier--I have half of my salary put in my checking account and half put directly in my savings. Now, I figure if I'm only spending half, it doesn't really matter what that half is spent on, so I still don't need to track. Win-win.

Now if I could only find a similarly lazy-effective solution for calorie-counting...

Lauren said...

Non-cooperative spouse: he's our only earner, I make the budget, I run the household account, he has an allowance. I'm more likely to overspend than he is, so he buys in as a control on me and this works for us even if I don't know where his allowance goes.

I record spending at the end of the month. Except I don't, because the backlog is overwhelming. Now and again is definitely not cutting it, so these other method suggestions are of interest.

Anonymous said...

I've been doing this for about 7 years. I started when I decided to try any pay off my personal loan at the highest possible monthly payment to get rid of it ASAP. I needed to be really careful with my money to make this possible, and it turned out to be a habit wiht lots of extra benefits so I have kept doing it. I have a notebook in my bag where I write down everything I spend. Knowing I will have to write 'chocolate cake, £1' will often stop me buying the cake as I just don't want to have to own up to it in writing! I also cycle more as I don't like writing down bus fares!

Then for each month starting each payday I have an excel spreadsheet where I divide up my salary into standard outgoings i.e. house/bills/a fixed amount for savings and disposable income. Then I divide my disposable income into separate 'pots': food, travel, home, leisure, gifts and personal pocket money (clothes, toiletries). Each month I decide how much of my disposable income goes into each budget 'pot.' So its flexible -more goes into the gifts budget around Christmas, for example. More goes into the travel budget at the moment as my bike needs fixing up! I find this works really well.
I have also just decided that Wednesday is 'No Spendsday' and it's working well to have one day a week free from shopping of any kind. I find I think more about what I spend the rest of the week.

My partner has now gone part time and the spreadsheets really helped us work out what we would have to spend for various options for him reducing his days.

Letseat said...

I also use an Excel spreadsheet and have been doing this for over 10 years. What made it manageable for me was breaking types of spending out by the method of payment.

So groceries and gas go on the credit card, eating out and entertainment are paid for in cash, regular bills (utilities, etc.) are paid online through my checking account. And I use the debit card for everything else.

This makes it fairly easy to break into categories each month. I don't need to know that I spent $20 in movies one month but $20 in a restaurant the next. I just care that each month $20 is going to either eating out or entertainment.

I do track each bill which is helpful to see that AT&T raises its rates each month, while Comcast has stayed fairly consistent...

Todd H said...

Schrodinger's cat analogy is the wrong analogy. That particular thought experiment is about disentangling quantum states through observation. The effect you're describing - subjects improve or modify an aspect of their behavior being experimentally measured simply in response to the fact that they know they are being studied - is called the Hawthorne effect its actual existence is a matter of some dispute. Overall though, the root "Drucker-ism" that what get's measured get's managed/changed is true enough!

Juli said...

One point of resistance for me was that, in the past, I have tried to use an app to track my daily spending, just after I made each purchase, but something about being reminded of the total amount I had spent for the month thus far (each time I opened the app to record a new purchase) actually INCREASED my spending. I'm not sure what psychological trigger was at work, but my bank records show that when I tracked my spending immediately after purchases --and kept seeing how much in total I had spent thus far -- I was more likely to make the kind of frivolous purchases that I normally wouldn't have made. o.O

At Dan's recommendation, I took this instead to a pen-and-paper system, printing out a PDF calendar for the month* and simply tracking my day to day spending, NOT at the moment I made the purchase, but generally at the end of the day, or even the next day, if I forgot in the evening. He had suggested that the mindfulness of REVIEWING your purchases was part of the process, and I do feel like the process has been more thoughtful and less punitive this way. After a month of tracking purchases after the fact, with pen and paper, I did NOT see an increase in unusual/frivolous purchases, and I have some great data to work with.

And I will admit that, personally, I am choosing to track my spending by rounding to the nearest dollar, rather than tracking per penny. (I expect a virtual smackdown for this might be forthcoming. :P ) However, I find that (for me) this is in alignment with the goal of mindfulness in the process. I look back on the day, review where my money was spent, and note a dollar amount. If I were to be precise to the penny, I would need to be tracking purchases as they were made or reviewing receipts, and I could be less likely to stay on track with those extra steps. I may get to that stage of the process in the future, if I desire more precise information, but currently, thinking consciously about my general cash flow has been very helpful.

The data I have gleaned from (finally) successfully tracking one month's NORMAL expenses is very valuable for me. I am glad that I overcame the resistance I initially felt, and carried out this exercise.

* I got my printable calendar from: http://www.calendarlabs.com/pdf-calendar.php
I have no affiliation with them; I just really like how easy it is to download printable calendars there.
Maybe this link will bring someone else one excuse closer to tracking their monthly spending. :)

Daniel said...

Thanks for the links Juli!

No virtual smackdown from me. :) Better to track spending rounded to the nearest dollar than to not track spending at all. ;)

I guess the point is that this is your "life force" here: it should get exactly the level of scrutiny and conscious awareness that you choose and that it deserves.