We all have room to go when it comes to learning about money and how to manage it. The stress and anxiety caused by trying to understand your finances can not only be overwhelming but paralyzing. It can stop you from taking action at all.
When the world of personal finance and budgeting can seem overwhelming, you can use this simple solution – a money journal. This is a simple tool that you can use to document your finances in a way that you can understand. You don’t need to be an Excel wizard or buy a ton of pre-made spreadsheets to get started.
Recently, digital planning has become all the rage, but there is still magic in being able to hold something in your hands. A money journal is a place where you can be free to express all of your ideas surrounding the money you have now, the money you’ll earn, and even how you’ll choose to spend your money.
Money management is not about hoarding money to see how much you’ll accumulate but about creating a system that allows you to have all of the security, joy, and peace that money can provide.
A money journal should be inspiring. Whether you feel that you are succeeding with money or not right now, you should feel free to dream in your journal. This can serve as a starting point that will move you closer to your dreams.
Table of Contents
Understanding Financial Goals
A great place to begin with a money journal is your financial goals. These are the targets that you set with money that will help you have a more enriching life. Big or small, they are a great way to help you move in a positive direction with money.
Financial goals can help you break bad habits, begin new ones, and overall grow your financial portfolio and net worth.
When determining financial goals, the first thing that you should consider is the time frame. Having goals for the short-term, medium-term, and long-term will help you understand your priorities and the things that are important to you.
I talk more about short-, medium-, and long-term financial goals here.
Goal setting is a crucial part of personal finance and it is the key to keeping you motivated when life gets hard, messy, and expensive. You will have guaranteed success with your financial goals if you can remain accountable.
If you want to build any kind of wealth, you need to set clear financial goals. These simple and clear goals make great content for your money journal.
Setting clear financial goals will allow you to remain consistent and build the habits that create wealth.
In the United States, teachers do not receive high salaries; however, they are consistently in the top professions of millionaires because they have developed wealth-building habits.
One of my financial goals for 2024 is to max out my Roth IRA (or TFSA if you live in Canada).
This year, the maximum contribution limit is 7000 dollars. While it may be a challenge to find $7000 extra dollars to contribute, it is extremely important to me to prioritize retirement, especially while I am in my 20s.
I know that making the small sacrifices now will pay off well in the future and it will give me peace of mind because I have prepared.
In order to reach this goal, I have scheduled automatic contributions to my Roth IRA. Every pay period a certain amount of money will be sent to my Roth IRA. Doing this will ensure that I will reach my goal by the end of the year and allow me to concentrate on my other financial goals.
The Power of Journaling for Financial Success
Journaling is an outlet where you can reflect and document your thoughts. You can reflect on your past and the decisions that got you to where you are now.
Living in the moment, it is difficult to get a big-picture perspective of the life that you are living. You miss the patterns and habits that lead you to the present. To grow as a human, it is important and necessary to review the choices that you have made and learn from these decisions.
Journaling can be extremely beneficial for your mental and emotional well-being. If you do not create an outlet for yourself to express your feelings, then they are likely to stay in your head and take up mental space. This can lead to an increase in stress, discontentment, and overall unhappiness.
Journaling is a great form of self-care and it will improve your quality of life. To make life easier to navigate, you must get to know yourself and understand your triggers and pain points. Many of the problems we cause for ourselves can be avoided if we take extra time to journal.
Journaling, specifically in a money journal, aligns you with achieving your financial goals.
In your money journal, you will not only include your financial goals, but the reasons why they are a goal in the first place. You can expand upon why these goals are important to you and even more so on why they are the goals that were important to set at this moment.
Over time, you will have documented your journey exploring your finances and all of the highs and lows that accompany it. Building a catalog of strategies and resources that helped you in your journey can help you be an asset to your future self and somebody else.
A money journal can be your blueprint to finding security with your finances as well as the foundation that you use to help your community.
Key Components of a Money Journal
The best money journals are the ones that are pretty and simple to understand. To get the ultimate benefit out of using a money journal, you must dedicate a journal to only your finances.
This is meant to be your dedicated financial space where you can brainstorm, document, and reflect on your finances. I wouldn’t use this journal as a catch-all for your journaling because it can make it more difficult to find the things that you have written.
A money journal is a great place to begin tracking your income and expenses. The first step to building a high-quality budget is to get a good understanding of what you spend your money on and how much you spend.
You would be surprised at the number of people who severely underestimate what they spend on groceries, household goods, or even eating out. The best way to get an accurate picture of your habits is to spend time documenting them.
This is a great exercise for people who have trouble saving for their bills or those who don’t know where their money is going.
Once you spend a few months documenting where your money is going, now is the time to reflect. Some questions that you can ask yourself are:
- How accurate were you in predicting your spending?
- Were there any surprises that you found in your spending?
- Am I content with where I spent my money?
- If a close friend spent exactly as I did, how would I advise them about their finances?
- Does my spending reflect the priorities in my life?
After you have thoroughly reflected on your spending, you should have a good idea of the areas in your finances that you would like to improve. Feel free to start small with your goals, the most important part is that you create goals.
See the beginner roadmap below:
- Do you feel secure? If so, move on to the next question.
- Security is super important. If this is your concern, you might consider the following goals.
- Setting aside money for your bills and not touching it.
- Getting a new job with better compensation.
- Moving in with family for cheaper expenses.
- Security is super important. If this is your concern, you might consider the following goals.
- Are you prepared for a small unexpected expense? If so, move on to the next question. If so, move on to the next question.
- Save enough to be one month ahead on your bills.
- Sell the things that you do not use or want.
- Cut out frivolous spending.
- If you lost your job tomorrow, how long would your finances last? If this is not a concern, move on to the next question.
- Build a 3-6 month emergency fund.
- Develop skills for a side hustle.
- Move to a more affordable area to reduce the burden on your finances.
- Where do you choose to store your money? If this is not a concern, move on to the next question.
- Open a High Yield Savings Account.
- Read a book on personal finance.
- Explore new budgeting methods. (If you want to budget digitally, I recommend testing out YNAB with the free trial.)
- Have you considered retirement? If so, move on to the next question.
- Research the best retirement accounts for your income level.
- Use a retirement calculator and consider what you would want your retirement to look like.
- Are your finances automated?
- Divide your direct deposit between your bank accounts.
- Set up automatic transfers from your checking to savings accounts.
- Evaluate your retirement accounts at your job and make sure that you are at least getting the match.
- Are there any large purchases that you plan to make in the next 3 years?
- Create a plan to start contributing to your down payment
- Improve your credit to ensure you receive the best interest rate possible.
- Learn the best practices for making a large purchase.
Tips and Tricks for Effective Money Journaling
The only way to see results in anything you do is to do it consistently. Using a money journal will feel clunky and unnatural at first, especially if it isn’t something that you are used to.
If you want to receive any of the benefits of using a money journal, you will need to check in consistently over a longer period of time. If you are on a biweekly pay cycle, you will traditionally receive two paychecks a month.
Sure you’ll be able to make some progress with these, but they probably aren’t going to move the needle. Those who consistently make the small contributions find success with their finances. It will become easier as you build a routine and your money will grow faster as you take the time to learn and create a strategy.
A great way to stay motivated in your financial journey is to be creative. You can do this by finding new ways to represent your progress as with savings challenges and debt trackers. You can also learn new ways to display your finances in excel.
On YouTube, you’ll find hundreds of people with different ways of budgeting their money. We all have to do the work to stay motivated and keeping your money interesting will help you remain engaged.
Another thing that you can do to make your money journal as effective as possible is finding accountability. Your money journal serves as one source of accountability; however, the more you have the better.
You can share your aspirations with your friends and family and offer to hold each other accountable.
If having accountability scares you, that is an indication that it is even more necessary in your life. You may not meet any of the goals that you set, but you are guaranteed to improve if you put in the work. A money journal will do you no good if you choose failure from the start.
Find people that you trust to cheer you on and support you when you fall short in your finance journey.
Overcoming Challenges in Money Journaling
In any new endeavor you do, you will have challenges. It is very common to make mistakes when you are doing something new and we must embrace this part of the journey.
If you are new to money, you have probably never read a personal finance book in your life. That is totally okay because you are a beginner. Be fair to yourself in your judgement and encourage yourself when you face challenges.
Some common challenges you may face in doing a money journal are:
- Lack of motivation
- Becoming overwhelmed
- Lack of self belief
- Reframing your thoughts about money
Final Thoughts
Investing in a money journal is a great way to invest in yourself and your future. You have the opportunity to improve your financial health, reduce stress, and take control of your finances with a money journal. Mastering personal finance can be extremely simple; however, it will take effort on your end.
Now that you’ve learned about money journals and all of the benefits that they can bring to your life, it’s time to take action! Share your first money journal prompt with us in the comments!
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