I was having breakfast with a coworker recently and they were mentioning that they wanted to get better at savings. I gave them the advice that I had read in numerous books, heard on numerous podcasts, but personally fought and fought for ages though it has now become my top advice for beginning to save money. I truthfully had no good reason to not follow this advice, but figured that since I had no debt to pay off and my bank account was growing that I did not need to do it. I read Your Money or Your Life and resisted, I listened to financially independent podcast guests that encouraged it and resisted. Finally, after hearing and reading the advice over and over I relented, and am very glad I did. That advice is to track your spending.
When people are first introduced to the world of FIRE and begin to believe that they can achieve it, the first question is always, “Where do I start?”. They have usually read/heard about reducing expenses, savings rates, net worth calculations, tax strategies, retirement accounts, investing, paying off debt, and numerous other concepts/strategies that can make beginning seem quite overwhelming. I believe you need to start by tracking your spending, even before looking to reduce your expenses. This is because you cannot change what you do not know. If you do not track your spending currently, I challenge you to go to the comments section and write down a guess of how much money you spend in a week, and then come back next week and reply to your comment and see how close you were in your estimation. The most important part here though, and in tracking in general, is to not judge yourself, just keep getting better!!!
As I mentioned above, tracking is so important because you cannot change what you do not know. You can tell yourself you are going to cut back on expenses, and even take steps that you believe are achieving this, but if you do not know how much you are spending, how will you know if you are actually saving? You can make easy changes like cutting out your daily latte, but how will you know if you inadvertently replace that expense elsewhere?
Tracking my spending, and watching the number get smaller as I figure out more ways to cut expenses, has become one of my biggest motivators to stay the course and makes me sad that I waited as long as I did to start. Frugality is a journey and as with any journey at times motivation can wane, but looking back at how far I have come helps keep me motivated.
When I started my fitness journey my personal trainer designed three day a week plans as I told him that was all the time I had/was willing to commit. Even with this, in the beginning there were a lot of weeks that I would only workout once or twice if the week got “busy”. Once I started noticing changes in my body, becoming leaner, muscle definition, etc. I started finding time to go three days a week, even though my schedule hadn’t changed. Tracking your expenses to me is very similar. When you first start it can be hard to make big changes to your lifestyle/spending, but as you begin to see your weekly expenses falling it excites you to find other ways to save. It gives you motivation to pause before you call that uber/lyft, or buy that new outfit, etc.
The picture above is the way I personally track my spending. While I do not budget in the strictest sense, my business provides a per diem for our food and lodging each week. The advice I was given when I started on the road over ten years ago was to live on my per diem and bank my salary and man do I wish that I had tracked my spending when I started out. As you can see, I have all of my recurring expenses broken down into their weekly amounts (total cost divided by 52) along with categories for my variable weekly expenses (lodging, food, and miscellaneous). This spreadsheet works great for me as I list my per diem amount at the top of each week and then have the numbers below automatically subtracted to show me how I am doing at any point in the week. I personally use Numbers for this so I can access this spreadsheet from my laptop, iPhone, or iPad which makes tracking immensely easier as I do not have to save receipts, but can enter them on my phone.
The other great thing about tracking your expenses is it makes it easy to identify areas where you can potentially save money/cut costs. Looking at my spreadsheet I know that if I ever needed to cut back on expenses I could easily cut out my ancestry membership and it not harm my happiness. Tracking also keeps me on the lookout for cost saving opportunities. Just last week I was looking at my spreadsheet and noticed that my car insurance was my third largest recurring weekly expense. I decided to go online and shop around for quotes and based on that was able to switch companies and save over $150 a year, or $3.05 a week, as can be seen above.
The joy of tracking, and the joy of frugal living in general, is that it looks different for everyone. You don’t have to use a spreadsheet like mine, but I highly encourage you to find a system to track your expenses. You can find many templates online, find them in books like Your Money or Your Life, or design your own that fulfills your needs. Any questions please ask, I am here to help!!
