To Get Better at Managing Your Money You Need a Journal, Not a Budget

If you are among the more than 70 percent of Americans who are stressed about finances, you'll no doubt receive the same advice for managing your money. Track your spending, set a budget, pay down high-interest debt, and learn to live within your means.

This advice is common because it is sensible. Sorry, no expert out there will tell you to ignore your bank balance and splurge as much as you like. However, as you may have discovered, for a lot of folks it's also woefully inadequate.

Some of that might be due to how the economy runs. When incomes are flat and prices sky high, even the best spreadsheet can only help you so much, but there's another reason it's so hard to manage your money successfully.

As much as you think financial success is about dollars and cents, experts insist many people's money problems are actually about emotions, not math. To solve those issues you need a journal, not a budget.

Your 'money scripts' run deep.

Most people like to think they make decisions about how to spend and invest logically. However, work by Nobel Prize-winner Daniel Kahneman and others suggests that a large percentage of money decisions are actually based on feelings.

If you're like most people, then you make purchases to buck yourself up when you're feeling down, sell investments out of panic when you should hold them, and go into debt out of fear of being judged. A budget can help you spot when you're making these kinds of unhealthy decisions, but it can't help you understand their deeper causes.

According to psychologists those roots often go deep. Research by financial psychologist Brad Klontz and his collaborators has shown that people often operate with one of four unconscious "money scripts" tied to their childhood experiences with money:

• Money avoidance. Those following this script believe that money is bad, or they don't deserve money. Often, they avoid spending, even when an investment now would lead to greater financial health later on.
• Money worship. If you subscribe to this script, you believe more money is the answer to all your problems. In a New York Times article, Klontz said, "This is the money belief pattern that afflicts the majority of Americans."
• Money status. These folks believe money is the best measure of status and are often at risk for overspending or overly risky money behavior.
• Money vigilance. Those with this script are secretive, watchful, and constantly worried about their finances. That might sound useful, but it also tends to strip all the pleasure out of financial progress.

Making smarter money decisions often depends on understanding these deeply held beliefs and the faulty decisions they lead to.

Why a money journal is the best way to manage money

A budget is a useful tool to track what you're spending, but it won't tell you why you're spending. For that, financial psychologist Nathan Astle has a suggestion. "Transforming your money behavior isn't about having more self-discipline; it's about using practical tools to process your emotional responses," he wrote recently on Psychology Today.

To do that, try keeping a money journal. "Start by tracking what you spend and how you feel before and after that spending. Over time, you'll see patterns emerge," Astle suggested.

For instance, you might notice that every time you are super stressed out after a hard day at work you do some unnecessary online shopping. Once you understand that pattern, you are better positioned to disrupt it. Perhaps, you could replace online browsing with another stress-busting activity or force yourself to wait a day before making any purchase.

To go even deeper into the roots of your financial struggles, Astle recommended another kind of journaling, a money timeline. (Here's a free template from the Financial Therapy Clinical Institute.)

In this exercise you divide your life into stages, like childhood, adolescence, and early adulthood. Then, you reflect on your key financial memories for each one and how they made you feel then and now. Finally, you review what you have written to identify your underlying beliefs about money like:

• Money corrupts people.
• I can't trust myself with money.
• I'm bad with money.
• I deserve good things.
• My money is a reflection of me.
• Good people shouldn't care about money.

Discover why you spend, not just what you spend

Traditional budgets are great if they work for you. (Though don't feel terrible if they don't. They have plenty of detractors, including financial guru Suze Orman.) If just being aware of your finances isn't leading you to make smarter financial decisions, perhaps you need another tool.

Your problems managing your money probably are less about information and more about emotions. To understand those, you need words and reflection not facts and figures. In more severe cases seeking out professional help may be best, but a great place to start is following Astle's advice and keeping a money journal.

This post originally appeared on Inc.com. Books and authors mentioned have affiliate links, meaning I receive a small commission if you click and go on to buy them.