Why you should track your spending (and why Quicken sucks)

Last year wasn't good for me. Depression and anxiety reigned supreme. By objective standards, my life was pretty good. But subjectively, life sucked. Going into 2020, I decided I needed to make some changes. I'm pleased to report that the first five weeks of the year have gone swimmingly. Life is grand.

I've made three specific changes that I believe have contributed to this improvement:

  • I've rented office space outside the house. My office is for work only. I do not allow myself to play games (or engage in other shenanigans) at the office. Zero tolerance.
  • I've begun getting up early. I tend to be an early riser anyhow, but early for me means about six o'clock. This year, I'm generally rising at 4:00 or 4:30, which means I'm at the office by five.
  • I've curtailed my drinking. In fact, I didn't touch a drop of alcohol during January. I've had a few drinks in February, and it's been interesting to see how it affects me, both in the moment and then for days after.

Taken together, these three changes have mitigated my mental health problems and made me more productive. I love it. Over the next six weeks, I plan to integrate two additional changes into my life: I'm going to begin exercising regularly and I'm going to cut back on videogames. I expect this to provide an additional boost to my well-being.

There's been an unexpected benefit to my quest to become a better version of me. January was -- by far -- my best month with money in years.

My January 2020 Spending

As you know, I track every penny I spend. I've been doing this since 1993 (with occasional breaks). It's a valuable practice.

Earlier this decade -- after my divorce but before my RV trip -- my monthly spending averaged about $4000. After returning from our cross-country adventure, that number spiked. From 2016 to 2018, I was spending closer to $6000 per month. This led me to push for austerity measures last year, measures that worked. My 2019 spending averaged $4221.27 per month.

In January, I spent $3212.24. This is a fist-pumpingly fine number, one that I'm proud of. But I'm even prouder of how I achieved those cuts. My top financial goal for this year is to spend less on food. I did that. And because I didn't drink, I spent nothing on alcohol.

Because I was curious, I decided to explore my spending over the past few years. I think you might find it interesting too. Here's a snapshot:

My monthly spending

This spreadsheet shows monthly spending in select categories during the past five years. This spreadsheet does not show all of my spending. The 2016 numbers are for December only (because that's when I resumed tracking after our RV trip). The numbers for last year are only for the first half of the year. And, obviously, the numbers for this year are only for January.

Some thoughts:

  • Generally speaking, my vehicle costs are low. They were high in 2017 and 2018 because my 2004 Mini Cooper needed repairs. They were high last year because I spent $1900 to buy a 1993 Toyota pickup.
  • My entertainment spending is dominated by three specific expenses: my Portland Timbers season tickets, our subscription to Broadway in Portland, and my iTunes movie and TV purchases. The theater tickets are a one-time expense each February. The Timbers tickets (which I may not renew this year) are a one-time expense each August. I continue to work to keep my iTunes purchases under control.
  • I spend more on our pets than I thought. A lot more. I love our dog and three cats, but wow! I paid $142 to support them last month, and there were no vet expenses in January. Much of this spending is for pet-sitting when I travel.
  • Look at my food spending! Holy cats! I've been pushing hard to reduce this over the past five years, and January was a shining example of what I can get this down to if I try. Kim and I didn't feel deprived. We just made smarter choices.
  • Finally, when I'm not drinking, my spending on sin -- which includes alcohol, occasional tobacco, and legal pot -- falls off a cliff. Obvious, but also wow.

I know I'll spend more in February than I did in January. Our theater tickets renew and that's a $1500 expense, for instance. Still, I expect that I'll continue this trend toward reduced spending, and I'm glad. It makes me happy. It's yet another way that 2020 is off to a better start than 2019.

Continue reading...
More about...Budgeting, Apps

How to budget: A pain-free guide to building a budget that works

"A budget is telling your money where to go instead of wondering where it went." — John C. Maxwell

I've had more one-on-one money coaching meetings during the past year than my previous twelve years writing about money combined. I used to claim that I'd never do money coaching. Apparently, I was wrong.

As I meet with folks, certain common themes stand out.

For one, most folks have no idea how much they're actually earning and spending. Their finances are like a black box. They get paid, put the money in the bank, then spend it until it's gone. Almost nobody actively tracks what they earn and spend. "Do I have money in my checking account? I can buy something!"

Because people don't track what they spend, it's tough for them to plan what they spend. Frequently, I suggest that the people I meet with make a budget. Because budgets have been demonized for so long, there's a lot of resistance to this idea. That's too bad. Budgets don't have to be a bother. When used correctly, they're an excellent way to take control of your money.

If you pick a budget that fits the way you live, it can help you meet your goals more quickly. The key? Don’t think of a budget as a constraint. Real Life is a constraint; a budget helps you break free so that you can spend on what’s important to you, on the things that bring you joy.

Why Budgets Fail

A lot of people get frustrated with budgeting because it never seems to work. They never reach their spending targets. Or emergencies break the budget. Or it seems like so much work for so little reward. I hear you. I've been there. But if you follow a few rules (or maybe "guidelines", if you prefer), budgeting can be less stressful and more useful.

Based on my own experience — and based on comments of GRS readers like you — I believe there are a handful of reasons most budgets fail. You may encounter trouble with your budget if:

  • It's too complicated. People have a tendency to make budgets more complex than they need to be. A simple budget is usually more useful.
  • It doesn't reflect your values. A budget should help you achieve your goals, so make it personal. If you try to use somebody else's budget, you're going to have a tough time.
  • It doesn't reflect reality. When you build a budget, base it on your actual income and behavior — not on some imaginary ideal you.
  • It seems like a chore. Don't let your system bog you down. Your goal is to have a budget that works, so keep looking until you find one that works for you.

To summarize: To minimize the risk of failure, a budget should be simple and easy to use while reflecting both current realities and your future goals.

That's all rather esoteric, though. What does a simple, easy budget look like? There are a lot of approaches that work. While some people do manage to make detailed budgets work, I've found that "budget frameworks" are more effective for me and the people I coach.

Today, we're going to take a deep dive into the world of budgeting. Based on my thirteen years of reading and writing about money, here are my thoughts on how to budget effectively.

Continue reading...
More about...Budgeting

Struggling with money anxiety and finding balance

On Saturday evening, I had a chance to chat with my friends Wally and Jodie. You might remember them from a reader case study from last August. They're the couple that wants to get their finances in order but they're worried because they're starting with less than zero.

When we chatted in August, Wally and Jodie had over $35,000 in debt. They had variable incomes, but somehow seemed to spend exactly what they earned -- about $3000 per month after taxes. Worst of all, they were behind on some payments.

Now, eight months later, their situation has improved.

Continue reading...
More about...Psychology, Budgeting

By the numbers: My spending for March 2019

March was a mixed month in my financial world. I ended March with a slightly higher net worth (up 0.6%) but my spending was the highest it's been this year: $5989.10. Yet, that spending was mostly mindful. I wasn't frittering away money on silly things.

If I wasn't buying dumb stuff, then where did my money go? A few worthwhile places:

  • I spent $653.31 on the yard and garden. Specifically, Kim and I tore out a big cedar tree in the corner of the yard, then converted that space to a small orchard. I use the word "orchard" loosely here. We planted three fruit trees, four blueberries, four grape vines, and a bunch of strawberries. I hope to write about this more in the near future.
  • I spent $625.72 on health and fitness. In the middle of the month, I had quite a scare. Out of nowhere, I had chest pains, so I visited the local hospital ER. My co-pays and prescriptions are reflected in March's spending -- and there's more to come. (We're about to have a l-o-n-g article on the $6800 hospital bill I received in the mail yesterday. That'll happen in April or May.) Meanwhile, Kim had knee surgery at the end of the month. I paid for some of her stuff out of my pocket.
  • I spent $579.36 on gifts in March, which is very very unusual.
  • I paid the $450 annual fee on my Chase Sapphire Reserve credit card. (Yes, I know this seems like a lot. But remember the card comes with a $300 travel credit, which means my effective annual fee is $150. I believe I receive $150 in value from the card's other benefits.)

I don't consider any of that spending frivolous although I recognize that some of it isn't necessary. (Do we need an orchard? Do I need to give gifts?)

Continue reading...
More about...Budgeting

Financial advice from my father (when I was nineteen)

Dad at work in his shop"Who was there for your father when he died?" Kim asked me a few moments ago. She's interested in becoming a death doula, so she's reading a book about end-of-life care.

"It's odd you should ask that today," I said after I told her the story of my father's six-year battle with cancer.

"Why?" she asked.

"Today is the equivalent day in my life as the day when Dad died in his," I said. "It's ten days until I turn fifty. Dad died ten days before his fiftieth birthday. So, it's a somber day for me. I'll be thinking of him all day."

Actually, I've been thinking of Dad all week.

It started when I published Naomi Veak's story about how she learned to stop feeling hopeless about money. In that article, Veak shared a letter her mother sent her when she was nineteen years old. Veak was a poor kid at a rich school, and she was struggling to figure out finances. Her mother offered some words of wisdom.

I had the exact same thing happen to me at the exact same age at the exact same college. I was a poor boy at this rich school. During my sophomore year at Willamette University, when I was nineteen, my father wrote me a letter filled with financial advice.

Today seems like a good day to share it with you folks.

Continue reading...
More about...Relationships, Budgeting

By the numbers: My spending for February 2019

One of my goals in 2019 is to get back to basics. I feel like I've succumbed to lifestyle inflation, so I'm taking the time to track my money in detail (using my fave tool: Quicken 2007 for Mac) in an attempt to identify problem areas. When I find money leaks, I need to decide whether to eliminate them or accept them.

While I'm skeptical that sharing my monthly spending report has any real value -- and it invites unnecessary judgment (I'm already judging myself!) -- popular opinion from GRS readers seems to be: Do it!

You folks like looking at my struggles with money haha.

Continue reading...
More about...Budgeting

By the numbers: My spending for January 2019

You know how sometimes you let chores and errands and obligations pile up until there's nothing left but to ignore what you want to do and take time to actually do what needs to be done? Yeah, well that's what the past week has been like for me.

I've spent most of my waking hours cleaning and repairing the house, driving around Portland to take care of troublesome tasks, and calling companies (and government agencies) to close accounts and/or clarify questions. This includes six hours I devoted to replacing the kitchen faucet. Ugh.

J.D. vs. the Kitchen Sink

Continue reading...
More about...Budgeting

My financial plans for 2019

Earlier this week, I lamented the fact that my net worth plunged by more than 15% in 2018. Although much of this was due to accounting quirks (buying back this website and remodeling the house, neither of which get tracked by my personal net worth) and larger economic forces (the stock market declined by 6.2% last year), some of the problem is that I've allowed myself to succumb to lifestyle inflation. I've been spending more than I used to.

As a result, I've resolved to make some changes.

I've already trimmed nearly $500 of recurring monthly costs. (This number will increase to nearly $750 once a couple of contracts end.) But that's just the beginning. Over the past month, Kim and I have discussed other steps I can take to cut costs. It's time for me to get back to basics.

Back to Budgeting

Because I track every penny I spend, I have a pretty clear idea of where my financial weaknesses are. When Quicken shows that I spent $4675.56 dining out last year, that's clearly an issue. (And that doesn't even count what Kim spent!) When it shows that I spent $2820.39 on iTunes downloads, that's clearly an issue too.

Analyzing my spending summary for 2018 allowed me to find several ways to curb my spending.

  • I'm going to cut back on groceries. To start, I'll give HelloFresh a trial run. Kim and I enjoyed a free two-week taste of this meal-delivery service last spring. We liked it. It seemed a little expensive but not outrageous. (Here's my HelloFresh review.) Because my grocery spending continues to be higher than I'd like -- primarily due to impulse spending in the grocery store (beer! juice! fancy cheese!) -- we're going to use HelloFresh for three months to see whether this actually cuts costs. If not, fine. We'll try something else.
  • I'm going to build barriers between me and "frictionless spending". Big companies like Apple and Amazon make it easy to achieve instant gratification with one-click shopping. I'm a sucker for this kind of stuff. I spend far, far too much on the iTunes store, for instance. Back when I was trying to get out of debt, I deliberately avoided bookstores and comic book shops because I knew they'd tempt me to spend. Similarly, I'm now going to deliberately avoid browsing online stores. If I have a need and want to order from Amazon, great. If Kim and I decide we want to rent the latest Marvel movie from Apple, great. But I'm not going to kill time by browsing.
  • I'm going to move from tracking my finances casually to tracking them seriously. For the past two years, I've used two tools to manage my money. I use Personal Capital to keep tabs on my accounts, to get a sort of overview of my financial situation. And I use an antiquated desktop program (Quicken 2007 for Mac) to manually enter my earning and spending. These habits won't change. What will change is how carefully I use the tools. I'll monitor Personal Capital daily. I'll be much more accurate about how I enter expenses in Quicken.

These are the big changes I've already begun to implement. There are plenty of smaller things I hope to do, as well.

Continue reading...
More about...Budgeting

My 2018 year in review

Across the web, I see other financial bloggers sharing their year-end financial summaries. Some folks had good years. Financial Samurai's net worth increased by 6.5% in 2018. Others had mediocre years. Fritz at The Retirement Manifesto saw his net worth decline by 2.1% thanks to a volatile stock market.

Me? Well, I'm embarrassed to share how my year went financially. It sucked. No, seriously. It was terrible.

My net worth declined by 15.2% in 2018 -- nearly $250,000!

Here's a graph of the monthly changes to my net worth during the past two years:

My monthly net worth over time

What happened? Did I buy a Lamborghini? Did I spend a ton during my recent three-week trip to Europe? Have Kim and I been binging on cocaine and chocolate? Nope. While there's no doubt that my habits contributed to my loss of wealth, there are larger forces at play here.

Let's take a closer look.

Continue reading...
More about...Budgeting

How would you spend $100,000?

What happens when a half dozen money nerds spend 48 hours together in Clearwater, Florida? Do they romp on the beach? Swim in the ocean? Cook dinner together? Drink copious quantities of alcohol? Stay up until three in the morning, laughing and telling stories? Yes. Yes, they do all of these things.

But they also spend a lot of time talking about money. A lot of time talking about money. (That's what makes them money nerds!)

For the past few days, I've been hanging out with some of my favorite fellow money nerds, including Mr. Money Mustache, Paula Pant (from Afford Anything), Joel (from FI 180), Marla (featured on this Mad Fientist podcast), Ben (who wrote this MMM article about how he gets his cars for free), and the effervescent Heather, who has no blog connections at all — but might someday.

Our little group has discussed many financial-related matters this week, some serious and some silly. One particular topic has occupied a great deal of our mindspace.

Joel and Ben, trying to decide how to spend $100,000

Four Questions About Money

I'm not sure how it came up, but during a conversation between Ben and Paula, he asked what she'd do if she were given $100,000 with no strings attached. She said that she'd buy another rental property. (Paula is building a burgeoning real-estate empire.) Paula asked Ben how he would spend a $100,000 windfall. He didn't know.

Paula and Ben then dove deeper. They tried to attach conditions to this theoretical $100,000 to see how that altered their answers.

Continue reading...
More about...Spending Wisely, Budgeting