Starting a Household Ledger – With Pen and Paper

By Staff

My wife and I recently stumbled across a brilliant idea, and have decided to adopt it July 1st. And what better time? Many businesses close the books on their fiscal year June 30th, and July 1st begins a new fiscal period. That’s the approach we are taking in our house as well. So what’s the big idea? We plan to write down all income and expenses in a ledger book…with a pen.

That’s right; every single transaction, from the monthly electrical bill to the Sunday afternoon run for an ice cream cone, everything goes down in writing. We got the idea from fellow blog reader, and frequent Frugal Dad commenter, Mrs. White, who blogs at The Legacy of Home.

*Our ledger is a little smaller than this one, but what can I say, this one looks more impressive!

Why A Household Ledger Account?

Here lately, we’ve recognized that we are a little detached from our household spending. We have all utilities and recurring bills going directly to our credit card. Occasionally, we use the credit card for other types of spending if we are low on “walking around money” – my description of cash.

This makes things pretty convenient. We get one credit card bill at the end of the month and pay it off. The problem is, we rarely know exactly what that bill represents. I’m not prepared to go to an all-cash basis because to be quite honest, it is a bit of a headache scheduling all the various household bills (electric, water, cable, etc, etc) online and/or writing checks.

However, we will begin recording all of our household transactions in a ledger, with my wife taking the lead on reconciling the household ledger book.

Where Did this Idea Come From?

Household ledgers are very old-fashioned, which is why I like them so much. It’s my opinion that the further we get away from common-sense financial practices (in other words, the more “sophisticated” we become), the more financial problems we have as a society.

We’ve discussed before the transactional pain associated with spending cash, something very few of us do these days thanks to online payments, and credit and debit cards. Before these tools were invented, people had to fork over cash, and it hurt. Imagine the difference in swiping a credit card for a $99 bill and handing over five 20-dollar bills and receiving a single one-dollar bill back. That latter transaction stings, and it should.

I’ve seen various examples of a household ledger account, but it seems the original use can be traced back to Puritan households, such as the one of Jonathan and Sarah Edwards. Jonathan Edwards was a Puritan minister whose wife kept meticulous records of their household spending in her ledger. In those times, the husband earned the wages, and the prudent housewife recorded all the money that came in, and all the money that went out.

Sure, it’s a bit old-fashioned, and these days I encourage couples to work together to reconcile their finances, but the concept itself is inspiring. My wife is a stay-home mom, and while we do have regular discussions on our household finances, I handle most of the “mechanics” – reconciling bank accounts, scheduling investment transactions, making the credit card payment, etc. Handling this ledger book will give her “more ownership over the household finances” (her words).

Hang on to those Receipts!

Here’s how we plan to organize the ledger. Beginning July 1st, all expenditures will be recorded in the ledger book from receipts collected throughout the day – doesn’t matter if an item was charged using a credit card, a check, or cash.

Credit card transactions will be coded with a “cc” to indicate they were charged to the credit card. When the credit card statement arrives the bill will be paid, but not recorded in the ledger. Instead, all of the charges marked “cc” will have a check mark in the “reconciled column” indicating they have been paid for.

Spending History Could Prove Helpful

Besides being a great exercise for improved money management, I like the idea of having something of spending journal to look back on months down the line. We can compare increases (and hopefully a few decreases) year over year, and even month to month, in various spending categories.

We can easily calculate our total average household monthly expenses which helps in planning how big our emergency fund should be. We will also have a consolidated view of past expenditures, which is great when trying to figure out if you paid the kids’ yearbook money for the year (was that a check, or did I pay cash?). It’s easy to look back at past spending and scan for “Yearbook” in the “for” section of the ledger, regardless of how it was paid.

I’ll report back at the end of July to let you know how the ledger is coming along. I’m looking forward to getting a better handle on how we are using our financial resources, and learning how we can be better stewards of those resources.