Why I no longer track every penny I spend
When I struggled with money during the 1990s, I had no clue what I was spending each month. I made my financial decisions based on my checkbook balance: If there were a few bucks left, I’d find ways to spend the money; if my balance was close to zero (as in $10 or $20), I’d turn to my credit cards. Where did this money go? If you’d have asked me, I wouldn’t have known.
As part of my financial turnaround, I learned to track my spending. In fact, this was one of the most effective tools in getting me to change my spending habits. Every week, I’d sit down at the computer to enter my receipts into Quicken. Once or twice a month, I’d play with the graphs and reports, keeping an eye on the problem spots. By tracking every penny that I earned and spent, I became more aware of my habits.
But something’s happened lately.
Last summer, I noticed that my discipline seemed to be lacking. Instead of logging my spending every week, I’d often go two or >gasp!< three weeks without using Quicken. At first, this made me fret. “Something’s wrong with me,” I’d think. “If I don’t track my spending, I’ll lose control.”
You know what? I didn’t lose control. Even if I went an entire month without entering my info into Quicken, my spending stayed in check.
Last fall, as I was writing my book, things got even worse. Sometimes I’d go six weeks without remembering to enter data. And then 2010 rolled around. Here’s a shocker: Since doing my year-end numbers in early January, I haven’t logged my spending once. And just last week, I stopped saving every little receipt. (It’s been years since I tossed out a grocery receipt before coming home.)
Some of you may be alarmed by this. A few years ago, I would have been concerned, too. But I’ve actually found that my scofflaw attitude is liberating. Over the past few months, I’ve seen that I’m perfectly capable of practicing conscious spending without logging every penny I spend.
Although I no longer track my spending in detail, that doesn’t mean I’m ignoring my finances entirely. Hardly! I still check my statements every month to be sure there’s nothing goofy. Plus, I double-check to be sure my account balances are continuing to grow. In a way, it’s as if I’ve removed the training wheels and am now zipping around the driveway on only two wheels.
This reminds me a little of my return to credit cards. In 1998, I destroyed my credit cards because I couldn’t use them responsibly. For nearly ten years, I lived without a personal credit card. I was afraid to trust myself. But about three years ago, I decided to take a chance. I set some ground rules and signed up for a single card. Since then, I’ve not only used credit responsibly, but have actually learned that it can make life more convenient.
So maybe leaving Quicken is the next step. Maybe part of the third stage of personal finance is recognizing that my financial discipline has become ingrained, that I no longer need certain redundant systems because the internal systems are working just fine.
Or maybe I’m fooling myself.
I’d love to hear from other GRS readers. How many of you track your spending? What’s your financial situation like? Have you found that you’ve “outgrown” Quicken and Mint and similar tracking programs? Also, I’m dying to know: As my mental relationship with money matures, will I find that I’ve outgrown the need for other techniques that helped me get out of debt?
Sidenote: My wife has never kept detailed records. When I told her about this post, I asked why she’s never kept a detailed spending log, but just made broad notes in her checkbook register. She gave me a look: “I don’t need to track my money,” she told me. “I never spend more than I have.” (Plus, she pointed out that she “pays herself first” by saving nearly 30% of her paycheck for retirement before the money reaches her checkbook.)
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There are 149 comments to "Why I no longer track every penny I spend".
I think you’re going from one extreme to another. Just because you don’t need the detailed analysis of quicken does not mean you should ditch tracking your money altogether.
Perhaps use something simple like an excel sheet where you divide the money you earned into a spending plan and see how much you have left in each category (maybe as few as 5) as you spend throughout the month.
So take the training wheels off, but put up a small barrier to make sure you don’t end up in the middle of the street.
I have tried so many times to track my spending to the penny, but it never works. I’m disciplined like you, so I don’t fret. 🙂 It is interesting to see where all your money goes, though!
We have also “graduated” to a point where we no longer keep every receipt and track every penny. We were very intense about tracking during our journey of paying off $54,500 in debt and then for about a year afterward as we built up our emergency fund.
During that time, we kept track of our spending and budget on a constant basis through some homemade spreadsheets, and we held onto *every* receipt. Today, we use Mint, which tracks everything for us electronically, so we only have to hold onto receipts whenever an item is one we may wish to return.
I love our new simple system, but it was the years of financial discipline we built that makes it effective.
I think a lot has to do with personality type. While I know I would be able to keep spending in check without tracking everything, my curious side really wants to see monthly statements to see how I’ve done and how much progress I’ve made toward financial goals.
Since creating and using NeoBudget, it’s not even a pain. I import my bank statement (so I don’t have to save my receipts). It takes about 15 minutes every week or two.
Like I said, I think this has more to do with personality type. Both my wife and I like to see our progress in charts and numbers. If you’re comfortable without seeing that visual representation, then more power to you. 🙂
I’d say, doing what it takes depends on the situation you are in. If you need to make each dime count, count each dime. Once you have a more comfortable position, you can relax more. I used to track all expenses in detail for a few years as well, but nowadays I do a monthly check of my overall financial net worth (i.e. simply summing all checking, saving and investment accounts). This gives me a ballpark figure on how we’re doing and is enough to keep track of our yearly financial goals.
The basic question for this is simple: what does it cost you to keep detailed track of the expenses and what does it gain you? A detailed account keeping simply requires more time and effort. Having an emergency fund and a nest egg is supposed to bring financial peace of mind, I’d consider relaxing the detailed accounting a concrete example of having such peace.
Since we use mint and essentially all of our spending occurs via credit card, it’s tracked automatically and sorted into categories.
Every 6 months or so we look at it to take note of trends (both good and bad) and to see if anything could use an adjustment.
It’s much like how we invest: mostly hands off, only checking on occasion, and generally making small adjustments if any.
I handle finances like your wife. I don’t keep detailed spending records. Instead I pay myself first, and live on the rest. Even with my lackadaisical accounting, I manage to save 40% of my income every month and often still have money left over at the end of the month to add to my savings. I do a checkup every 6 months or so to make sure that my net worth is on track and to find areas where I can be more frugal, but that’s about it.
It’s not as important to track every penny after you’ve done it once because from that point forward you have a good sense of where the money goes (which is the true benefit of budgeting — knowledge). Things will change over time, though. You will drift over time. So it will again become important to track every penny. It’s probably easier to just stay in the habit than to drop it and then need to relearn it.
Rob
just this month i started using mint.com and i love it. i’ve always been a numbers person and financially smart. this website allows me to track my spending with little input and lets me watch my investments grow all from one page.
i’ve even managed to convince a number of my friends and my girlfriend to use it. the biggest problem i’m having now is that now i feel like i need to categorize every transaction. if i make a cash withdrawl i find myself trying to figure out where i spent each dollar.
i’m closing on my first house tomorrow and am excited/scared to see how much i’ll start spending on house related items.
I don’t track our spending anymore. By the time my husband and I paid off all our $35,000 in debt, our saving habits had become pretty much ingrained. Now we just pay ourselves first through automatic deductions at about 20%, and then we spend the rest. Without tracking our pennies we’ve saved an emergency fund and saved for our next car.
JD, I think as long as you’re paying yourself first and living off the rest (without resorting to credit cards or overdrafts) then you’re fine. Remember your own motto…do what works for you!
I let Quicken do the tracking for me. I’ve got a technique I haven’t seen anyone else discuss. I wrote it up in a post: http://theincidentaleconomist.com/budget-tracking-and-projections-with-quicken-tricks/
I’ve tried a few times to track my spending in detail, but it drove me up a wall and I’ve decided that it’s just not necessary right now since I’m debt free and make plenty to cover my expenses and certain minor luxuries.
I’m content to save for retirement via automatic paycheck deductions, and keep an emergency savings account and separate savings accounts for upcoming large expenses (sharing monthly surplus from the checking account). Those account balances should never go down except when paying for their intended target.
If I start having trouble paying normal bills out of my checking account/not saving at least a little every month, it’s usually a symptom of creeping lifestyle inflation. For me that indicates that I need to recalibrate my general attitude toward spending, rather than actually start detailed accounting. That’s always been my MO–I’m pretty good at maintaining a holistic impression of where my money is going and where I could cut back, and trying to formalize it is painful and ultimately redundant.
99% of all of my transactions occur electronically or with a credit card, so for me, tracking is nothing more than a 10 minute job once a month. At the end of the month I’ll download all the data from my bank & cc’s, import them into my software of choice, then just give everything a once-over. If everything looks good, that’s the end of it, but if I slipped in a particular category, it shows me where & how badly.
I agree that if I had to manually enter every receipt from cash purchases, I wouldn’t do it either. That’s why I try to do everything with a CC, so that all that tedious work is done for me automatically.
I’ve always been good about spending less than I make, but I did start tracking about 6 years ago. I really like charts and numbers though, so I do it more for fun. Also it’s interesting to have all the data from so many years previous. My husband and I only spend about 50% of take-home so we certainly could track less, but probably won’t stop any time soon. I am interested in calculating our personal inflation rate as that will be important in regards to early retirement.
Also, as we don’t currently have a joint account, I track in order for us to split the agreed upon expenses in the agreed upon way. Since I track anyhow, this method currently works the best for us.
So in my situation, tracking isn’t about saving money at all, as like you, JD, we’re automatically conscious of our spending choices.
I track every single penny I spend. Not because I *have* to, as I’m in a pretty comfortable position, but because I *want* to.
I want to become even more effective than I already am and cut unnecessary costs where possible so I can spend on other things I’d rather have.
I save a good chunk of money already so anything extra I want needs to come from “fun money”. Generally I don’t have a set budget for saving for that so whatever I can save extra per month is my fun money. Sometimes it’s 50 bucks, sometimes 100. However, if I weren’t keeping a close eye on my spending I know I’d use that extra money to buy useless (in the long run) stuff. I’d much rather have something…you know…something a little extra special, like a new guitar or suit.
I track every purchase I make.
Every. Single. One. Even buying a $0.50 coke from the vending machine.
For me, what’s worked is not setting myself up to have to do accounting later in the day. It makes sense that you would gradually move away from tracking your expenses since you’ve essentially given yourself homework to do.
What I do instead is to use a spending application on my iTouch. As I make the purchase, I whip my itouch out of my pocket at that moment, fire up the mini-app and log the purchase immediately. I can then dump the data out at a later point and import it elsewhere. I’m currently carrying around my purchase entries for the last year in my pocket.
Doing it this way gives me up to the minute knowledge of what I’ve purchased today, this month, this year, etc. and in what categories. No fuss, no mess.
I don’t track spending now but have many times in my life — I think it is dangerous to couch tracking your spending as a sign of financial maturity – I’ve never even come close to spending more than I have, but still think it is important to track spending at times — ok, what am I talking about, what times?
Life changes.
Whenever I have moved, when my husband and I first started living together, when I first got a job out of college — any of these lifestyle changes are when I think it is important to really track every penny. I recently moved overseas and tracked for several months until I had a good sense of where I was, and I’m sure next time I move or if/when I have kids I’ll start tracking again!
When I was in university, tracking my spending was a must because my budget was so tight. Then I was paying off student debt, so I still watched my money closely.
Now that things are comfortable, I no longer track my spending (and I haven’t for about seven years now). I “pay myself first” by automatically putting a percentage of each paycheque into RRSPs and a long-term savings account.
As for the rest, I don’t worry about it. After years of knowing my expenses, I can go through the whole month of usual expenses like groceries and buying lunch and breakfast each and every day (for a total of $12.10, yes I know I can eat cheaper if I make it at home…) plus buying a few extra items here and there, going out for dinner a number of times, and I just know that I am still within my range of what I allow myself to spend that month. I have never gone over.
I think once you have done a pattern of buying for long enough, it becomes automatic to you. As my salary has increased, it has become easier and easier to stay within the parameters I had set long ago.
Maybe if you have so much income that you can’t possibly spend it all every month you could stop tracking your spending. However, this reminds me of Weight Watchers in that the people who always have to re-start the plan are the ones who stopped counting calories over time because they thought they knew how much they generally ate. We all forget about “binges” now and then that really add up.
I track my spending down to the penny because it is extremely useful when trying to figure out how much to put aside for car repairs, insurance, etc.
I keep truck of every.cent.spent for more than 10 years now.
I like it. No, I love it.
As a student it helped me not overspend.
As a first-time worker it helped me set goals and actually reach them.
As a mother and wife it helped us to not get afraid of the 30-year loan over our head and build the house of our dreams, travel and -wishfully- educate our children as we decide.
I keep a very elaborate and , over the years, refined excel spreadsheet.
It has everything: monthly statements, everyday statements, credit card spendings, links from one to another, automatic summaries, automatic calculations…you name it…it’s there!
Since, computer science is my university degree, it was a piece of cake to actually create the perfect (for my needs) spreadsheet.
My husband thinks it’s a bit…too much…
But I still need it and like it because I want to know what I spend and what is left to spend every day.
If I were an overspender with a will to change this tool would have helped me do it.
So, I highly recommend to keep track of your spendings if you are an average paid person with some dreams to fulfill.
Mint is a great lightweight solution. Once you get it set up you can just coast and have it email you about unexpected spending or high incoming bills. We switched last year when our son was born, and it was a good thing. We went 3 months without updating once, and mint just kept on chugging without us. We picked up where we left off instead of having to deal with the backlog of transactions that quicken produces. I still haven’t found a great way to purposefully save (pay self first, that is) in the budget section, though.
I still do all my Quicken data entry for checks and credit cards. But, when it comes to cash, I only track the bills going out or in and not the change. So, if something costs $1.20 and I give $2 dollars, it costs $2. If I give a single dollar and have the change, it only costs $1. What my cash tracking tells me is what is in my wallet. That is what I thought you meant by the title of the post.
I think that reaching the stage of “not tracking everything in painful detail” is natural for someone who feels they are responsible enough not to have to do it anymore.
The key is “for someone who feels they are responsible”. Feeling responsible and being responsible are two different things. I believe that it is mandatory to maintain some form of self check that is more than just looking at your checking account balance.
Personally I use Mint.com and I think it’s perfect. It tracks everything in painful detail so that I don’t have to. I “check in” with mint every so often to make sure everything is still on track. I no longer need to force myself to hand track everything in order to keep my spending in check but I think it’s mandatory that there is a way for a person to “check in” on their finances in a way that will provide that level of detail so that they can really know they’re still doing well instead of just assuming they’re doing well.
It also allows a way to help figure out how to do “better” since hopefully backsliding to “bad” is no long a problem.
just my 2 cents.
We were never really irresponsible with money, just not as wise with our resources as we could have been, but I’ve always tracked all of our expenses, even when we spent every cent we made. I don’t think I will ever stop tracking financial details because that is how I am; I like keeping lists, budgets, charting progress, etc. It doesn’t take me that much time and I actually enjoy doing it.
I use Quicken ‘Online’ which saves me the effort of entering each recipt manually. Quicken Online pulls all the transactions from the online bank account I’ve linked it to. At 24 I think I am doing pretty good, have paid off my car loan and have hefty emergency funds in addition to a few CDs.
Lately my eating-out expenditures have been reaching skies so I am trying to take hold of them. I check my Quicken account couple of times a week and think that keeps me on the track.
Tracking spending is one of the two things I really like about my credit cards. As long as I use them for as much as possible (I might spend $40 in cash a month) I know exactly where my money is going. If you pay it off every month, a credit card may be the best way to go when you are at this stage of personal finances.
Nice to read this post.
This Jan. I simplified my budget from 12 major categories (each with 10 to 25 sub-headings) to a single sheet with 15 categories.
I record and do the math all by hand and have done the more complicated one every two weeks, in multiple color inks (red, green, & black)since 2000. It took me about 1-2 hours each Sunday to tote items up, check the math, plan a bit, do bills etc.
Now this year I have to force myself not to record every penny (oh, I keep all my receipts in big box just in case) in every category (e.g., Light bulb went into Household:Non-Food:Glass). I just record the full amounts in the new collapsed categories (So light bulb now = Household Spending: Food and Non-food consumables).
I was worried about losing control but now after a few months, am content with the tracking. I have not overspent and my record keeping (all by hand!) is now simplified.
I can always go back to the old way if I need too.
I would caution you not to give up tracking entirely. Having an accurate picture of what my budget is makes life changes a million times easier (it’s hard to know what you can live on if you don’t know what you are spending). If you have (or want to have) a change in income it’s essential to know what you spend. Also it can be imputus for change (as when you looked at your restaurant spending). Perhaps you just don’t need to keep as detailed a record. Broad spending categories can still be helpful.
I’m like Luke. I’ve never really had a problem managing my money, but I’m so curious that I’ve been tracking all my spending and income since I started college, about 10 years ago. I use Quicken because I can see all the cool graphs and things. I’m not really worried about being more efficient or running through all my money; I just like seeing where it goes.
Like Chickybeth (@15) I thought about diets and weight maintenance.
But I think that after you’ve lost the weight or debt you’re trying to lose, you don’t have to keep counting calories or tracking your spending. Instead, after a diet you keep your new, healthy habits up and you weigh yourself periodically to make sure it’s all still working. With money, you keep your new, GRS habits up and you check your finances periodically to make sure it’s all still working.
When we were obscenely in debt, and for a while after, I tracked every penny; but I stopped that a dozen years ago. However, I still do a monthly net worth statement as a check step. If that statement doesn’t look like what we want it to, we make some changes and get back on course.
I do track every dollar (not penny, hehe) that I spend and I don’t find it to be much of a chore.
Though, I’ve also started to use Mint to track all of my non-cash accounts and it works wonders! I can see myself “graduating” from tracking expenses in Excel to checking Mint once a week to make sure that nothing out of the ordinary happened.
I’m not overly detailed with my tracking. I make ALL purchases with a credit card, and I just keep a spreadsheet where I categorize each purchase. I don’t break down each item, just put the total in a broad category. Mainly, I just wanted to get an idea of how much I spend on groceries and at restaurants. I found that even though I thought I was being conservative, there was a lot of room to cut back.
Really enjoying the discussion here as I’m only just starting to get into the habit of tracking every penny (student, soon-to-be-graduate).
Is there anything like Mint that would work for UK account numbers? I’m currently just using a spreadsheet in Excel but would love it if I could have graphs and trends easy to see in an already pre-defined programme/website.
I have a biweekly tracking system in Excel, though sometimes it falls behind my a month or so. It has very broad categories. Visa, cash, phone, internet/tv, electricity, gas, home insurance, personal insurance. The Visa and cash are to calculate a 6 month rolling average, make sure we’re not lifestyle inflating. The others are to make sure that we actually got the bill and paid it.
I also track housing costs on a separate sheet. Since that money isn’t from our general cash flow, but instead coming in large chunks from an ING account (which is funded each paycheck), a monthly tracking system makes less sense there.
I’m a natural saver and I couldn’t make myself track every penny if my life depended on it. I know approximately how much money is in my bank account at any given time, and will check it every so often to see if I’m correct. I also keep a decent size cushion of cash in that account for the just-in-case scenario. With all of that said I still enjoy using mint.com, since it provides me with instant graphs, monthly comparisons, etc.
I do not think you should be worrying about falling into old habits. You enjoy having a stable, healthy financial life too much. Just make sure to check your bank statements, and perhaps spend a few minutes every month on mint.com or quicken and you should be fine.
I’ve never been successful at tracking every penny. I tried Mint and like it, but only looked at it once or twice.
I’ve always been a detailed planner about getting to financial goals. No consumer debt and mortgage debt will be retired this year. I used to charge everything to one credit card but am in the process of moving back to cash and debit cards because the large bill at the end of the month feels like it is hanging over my head.
I do try to automate as much finance as possible – both savings and bills.
I’ve been using Mint for a bit over a year now and it works very well for me. My wife and I use credit cards primarily, but we simply use them for ease rather than for “credit”. We use them exactly as if they were a charge/debit card, and are very conscious of how much we have in our accounts because we check Mint once or twice a week. We have set up a budget for our major expenses such as gas and groceries, and include our average monthly bills. We then can instantly see how much we’ll be saving that month and usually just leave it, or sometimes give ourselves a special “treat yourselves” budget category and allow ourselves to spend a bit more that month.
The only debt we have is our mortgage, and other than when I paid for our honeymoon, when we put our downpayment on the house, and once or twice other times when we spent a lot on one-time things like appliances, I don’t think my net worth has ever decreased month over month.
Totally agree with Michiel (#5).
I used to keep a fairly tight budget although I still didn’t track every expense.
Now, I just don’t care. I save a high percentage of my earnings and I remember what I spend my money on.
Interesting post. I keep meaning to start using Quicken but had been putting it off. Now I think it makes sense to move away from detailed tracking.
I’m starting to think that Money’s power (and its utility as a tool) lies in its ability to help you buy time. If you save more you can retire earlier. If you spend on car maintenance instead of a new car, you can use the savings to go on vacation. It seems that if you believe that money’s power lies in its ability to give you back your time – then spending a lot of time tracking many, many often small expenditures doesn’t make sense, you’re giving back some of the benefit of the tool. The cost/benefit of tracking (in detail) doesn’t pan out once you reach a certain stage, especially if you have simplified your financial life.
The quick run through seems to be sufficient to avoid bank errors and major math errors.
My wife and I still track every penny in Quicken, just as we have for 13 years. We are very stable financially (and otherwise): we are selling the house we have lived in the past 11 years (our first house) and moving into the house we expect to have for the next 20 years (with a 15 yr mortgage and putting almost 60% down on it). Our retirement accounts are sufficiently funded. We live well below our means and donate over 20% of our gross income annually. We have never had revolving credit card debt and owe nothing on either car. Our credit scores are around 800.
All of this to say, we will continue to track every penny for the foreseeable future. Not because we need the help staying on budget, but because it provides information and accountability. If I want to know how much we can spend on something special, the data is there. If I want to know how much costs in a particular area have increased over the years, the data is there. If I need a year-end report of our charitable donations or dividends from investments to verify I have all of the pertinent tax documents, that data is there.
Like many, I too track every purchase I make (though the vast majority of my transactions are electronic), I just don’t use any complex system with detailed itemization. A simple set of Excel sheets is enough to get a quick and broad weekly/monthly/yearly picture and check for errors. It’s just like keeping a brief diary (… and in a sense it IS a diary, as how you spend your money often correlates with what you value and how you live your life).
But, at the same time, I’m a saver. I’ve never been in serious debt (had an auto loan once, but paid off quickly, in 7 or 8 months or so). My husband and I have good emergency fund. And like Kris, both of us save 1/3 of our before-tax paychecks for retirement, and then save much of the after-tax paychecks.
So it doesn’t seem like tracking your spending and maturity of your relationship with money are necessarily mutually exclusive. You can do both.
I don’t track my spending. I save 30% off the top and pay our bills with the rest. Whatever is left off is my guilty pleasures !!!!!!!!!
Yeah:)
The way I see it, tracking every penny you spend is so easy that I don’t see a reason not to do it. I never actually spend cash on anything, so there’s a record of every transaction written somewhere else (at the financial institution for example). Mint pulls all those records into a single place for me, so the only “effort” involved in tracking every penny is to log in and correct the automatic categorization if you need to.
DH and I have our weekly cash allowances that we only track as lump sums, but beyond that, we categorize everything as it is imported by Quicken from our accounts.
I agree with JD, that at a certain point, it’s OK to take the tracking back to a less-intense level. Coasting, I call it.
Unlike Kris and JD, however, our financial picture is always changing — we have kids who keep growing and changing and needing different stuff that can affect the financial picture. Meanwhile, we’re in financial flux while I look for my next job and we decide whether to start a small business.
So, it’s good to have the data on hand for whether we’re spending our money in a way that makes the most sense, and whether we’re spending our savings too quickly. It also gives us hard numbers to look at when we talk about scaling back or investing in a particular area.
I MUST track my expenses and I do it daily. It’s the only thing between me and closets full of stuff again. If I can see what I’m doing with my money in full on a computer screen, it prevents me from turning a blind eye to problem spending. I also need to track expenses because I believe I still have fat to cut and an Excel visual helps me to do that. I don’t use any type of ‘prepackaged’ software program at this time because I find most of them are too elaborate. I don’t want to have to click through multiple sheets to get to my info – I want it all on one screen. I made the most basic and unelaborate Excel spreadsheet to fit my own personal need and it works just find for me.
If I could get to the point where I am saving off the top 20 or 30% of spending (whatever my aim is) and able to live off the rest without tracking, then I also would not track spending other than maybe a monthly summation to make sure all the bills were paid. I still track spending because I find it interesting trying to tweak budget to get maximum safety and enjoyment from our money. Once I get to that equilibrium, would rather make a comic or work out or do multiple other things than endlessly refine ways to put dollars into different buckets. So that is another motivation to get this balance right.
I don’t think there is a “wrong” or “right” answer to how much should one track spending, as individuals differ in what works best for them.
i’ve got data of cash expenses for two years 2008 and 2009. will run the numbers and look to a meaning to see if i’ve improved my cash spending
This is an interesting topic. I definitely do not track every dollar of spending. I have a spending plan that adds up monthly expenses and I change it when my income or expenses change. It’s extremely high tech — I write it out by hand in a legal pad. From that plan I come up with a fixed amount, in addition to 401k withholding, that I will save every month. I make that savings payment automatic. The basic idea is that the checking account balance should stay roughly even. If it goes up or down materially, I adjust the savings amount.
This may sound horrible to people who like to track every penny, but it seems to work for me.
I also agree with Luke. It’s a personality thing. I have been debt free other than my mortgage for over 3 years, yet track every penny. I’m so fascinated by the information that I can even tell you to the penny how much I have in my change jar! ($88.33 until I find my next penny) LOL
Quicken is my chosen addiction, although I also track things in Mint and on Bank of America’s online portfolio. They have limitations that are frustrating though, so Quicken is it for me.
JD,
There seems to be a law of diminishing returns with tracking spending. I went through the same patterns as you. I used MS Money for a few years. I still track spending, but more on a macro level than a micro level. I have a monthly budget, and keep a running total of amounts spent across each budget category. That seems to keep me on track month-to-month. I think at the beginning, you get big dividends from tracking each penny because it enforces a new discipline we never had. Once we get into the habit of being conscious of our spending, then we don’t need the rigor of detailed tracking to keep us in line.
I do have a very big gap in my financial tracking and that is with my investments. I don’t keep track of my trading record, which feels like a big gap to me.
I have to admit that I, too, had great fun looking at the numbers as I tracked them. I’m a graph and charts kind of guy, so it was cool to be able to look at the data in different ways every few weeks.
Plus, a few of you have made good points. Maybe what I need to do is find a tracking method that matches my current lifestyle. Maybe that’s Mint. Or maybe it’s Quicken, but without so much detail. I don’t know.
Intuit did give me a copy of the new version of Quicken for Mac, so I could always give that a try, yes?
I’ll have to cogitate on what I’m going to do…
JD,
I always have saved receipts in a shoebox. Amazingly, at least two or three times a year I would need to dig into that shoe box to find one — something had gone wrong with a product and I needed to return it.
I look at every grocery receipt liike a hawk and am amazed at the number of mistakes I find, almost all of them in the store’s favor. It takes very little time and attention to do this, and if the folks in back of me on line express irritation, I count that as another benefit.
I never ever even bothered to balance my checkbook. My (first) wife was always worried that we would overdraw, and had no faith when I assured her that I kept a running mental account and always knew how much we had in checking, within a hundred dollars.
She insisted that we at least balance the checkbook, and the one month she did it we overdrew for the first time.
She wasn’t much good in any other way either.
Your wife is absolutely ‘on the money’ about paying herself first. A person who can bank 20-30% at the beginning of the month will end up rich.
But we can actually ‘pay’ every one of our sub-accounts in the same way: so and so much for housing, for food, for entertainment and travel, for education savings.
My current wife and I have these informal understandings, and we have a monthly meeting, or perhaps better, a ‘money date’ to keep ourselves aligned and on target.
Works for us.
Just to add to the growing body of wisdom on this post, here’s our approach. It’s not perfect, but as many have said here, it works for us.
1) determine detailed monthly budget based on review of several month’s data on expenses/income
2) set up Mint budget based off the monthly budget in #1, including feature that allows you to see where spending is going on a daily basis
3) each week, we take out a small amount of discretionary cash to spend that week (manicure, lottery tickets, mid-week bottle of wine, whatever). If we don’t spend it, we use it for a nice dinner on the weekend.
4) all the rest of our spending is on a credit card that gets paid off automatically every month. Use Mint to track this spending to make sure we’re able to pay all bills and still save 15%.
5) update detailed monthly budget as needed with change in income/spending. Adjust mint/spending accordingly.
This way, we track 90% of our spending and know exactly where we’re spending. The other 10% we don’t worry about.
When I started working as a tax accountant out of college, and actually started making money, I began tracking every penny on an Excel spreadsheet I created. It was very cool and in depth, but honestly, it became tedious. If I went for a week without tracking my spending, it would take almost 30 minutes to catch up. And it would take even more time if I missed 2 weeks or *gasp* a month. Plus, it always takes the financial institutions 2 or 3 days or more to post it so that I could verify that the transactions when through.
I got married within the last year, and adding my wife’s accounts made it even more difficult. We are both very financially responsible, and neither of us had any debt when we got married, but together we had around 25 different accounts between banks, online banks, credit unions, credit cards, investment, and retirement. We didn’t have a ton of money, but we had money everywhere. It was too much to keep track of on a spreadsheet.
Now we’re using Mint.com and the fact that it keeps track of everything for you is great. There are some things I wish it could do, but as far as keeping an eye on everything and showing me the big picture, it’s awesome.
We’ve closed some unnecessary duplicate accounts, and we still need to close more and wrangle all our money, but I’m so glad I’m not tracking every penny on my own anymore. I found that instead of bringing me piece of mind, it was just more trouble than it was worth.
I track every single penny that I spend, I have mounds of receipts and I record each transaction in my checkbook register.
This is because I have a very limited income and very little discretionary income right now. As I build a larger cushion into my checking account balance, I think I will allow myself to be less vigilant about keeping every receipt.
Whenever my financial situation has changed — new job, going back to school, etc. — I’ve tracked my spending carefully. But only for a few months, until I get the hang of how much money I’m going to need for different things. Then I stop tracking it, because it drives me nuts. What I do that works for me is to pay rent/bills, then put money into savings, and then use cash for everything else (groceries, beer, going out, etc). I don’t pay close attention to cash spending, although I do have a good sense of how much of it I should have left at different times of the month. No cash left? No spending. Fortunately, this almost never happens. This has really simplified things for me.
J.D. – Remember your own philosophy! Do what works FOR YOU. Currently, what you are doing works for you! If it stops working, then yeah, you should probably go back to tracking everything. That worked for you before, but maybe you don’t need it right now, and that’s okay as long as you’re in control of your finances and feeling good about how you handle them.
A couple people have already related this to dieting, and I can’t help thinking of the analogies. In a great book about how people have been able to lose & keep off weight, (“Thin for Life”) the author looks at research and the various techniques people use to maintain a lower weight once they’ve lost.
Some count every calorie and others use broader markers, like occasionally weighing in and having a “high” point, or eating similarly sized meals all the time.
It seems like the keys are (1) finding something you can live with that doesn’t drive you nuts (2)eating consciously (just like you are spending consciously) and (3) not letting things slide too far…it’s so easy to fall back into old habits, money- and eating-wise!
JD – I think as long as you don’t notice your good habits slipping, then not tracking every penny is perfectly fine. I like your allegory of the bike and training wheels.
I’m coming close to being debt-free, and I tried tracking every penny, but I could never keep it up for any length of time. I guess what works for some won’t work for others. I check my online banking on a daily basis so I always have a good idea where my money is going. During the past couple of years I’ve gotten smarter with money and don’t really worry that I’ll spend myself into the hole. I think like you say, good habits become ingrained eventually.
really interesting post. I see where you’re coming from, you’ve done so well now… proven over time that you’ve accepted a lifestyle change (w/respect to handling money) and it’s ingrained.
But I also think this isn’t much off from an addicition. Food Addicts, Alchoholics and Drug addicts have to religiously keep themselves in check. Meetings, not unlike the entering your receipts and analyzing the graphs.
It’s when you’ve declared yourself “cured” or “in charge” when you get into trouble. Some, like your wife, pulls cash out to save prior so not to be tempted. We all have are tricks.
I just wanted to make you aware that while you very well may be a (financially) changed person… you might not.
It’s good to check in at pre-determined times for a financial check up every once in a while.
Congrats on doing the hard stuff already.
Cheers
I got tired of trying to use Quicken and similar apps. Most of them are too bloated with features you never use, and I don’t want everything automated.
My wife and I keep an extremely simple budget/spending spreadsheet on Google Spreadsheets. Every morning we plug in our income and expenses from the previous day, round to the nearst dollar. It doesn’t matter if it’s cash, debit or credit card… just plug it in the correct category. It takes less than a minute per day.
Once a month I update all our asset and liability balances. It’s so easy it’s ridiculous, and allows us to see our financial picture at any time. It’s about 99% accurate, which is good enough – true to JD’s philosophy “the perfect is the enemy of the good” 🙂
I’ve had a very similar experience as JD. This has been the number one factor in getting control on my spending and overall financial health.
Here’s a little analogy for you:
A couple years ago I tracked my calories everyday for 5 months straight. Then I went on a cruise with my family to Europe and didn’t have internet connection. I kept tabs on what I was eating mentally and used the cruise’s fitness room. I did fine. When I got back I decided that I could do it in my head and didn’t have to keep track of every calorie so I stopped tracking. This backfired. By August my idea of what a portion had increased and I got way off track. I now track everyday.
I think this is the main concern with no longer counting your pennies with one major difference: you CAN eyeball your account at different points in the month and know how you’re doing. Especially if you pay yourself first and your obligations are met, what’s to say you can’t treat the rest of your balance like a discretionary fund? You have a consistent paycheck with your multiple accounts so it’s not like you have any other fluctuations in or out. If you’re low it’s because you spent too much. If it’s high it’s because you’ve been conservative.
It makes perfect sense to me. Good for you!
I also like the charts, trends and budget tools of quicken but the really nice part of tracking all your expenses is come tax time it makes it a lot easier to search for deductions or to verify all the forms you get or need to create.
However I also know that even if I didn’t track it all I would still spend less than I earn because I don’t use the tracking to control my spending. So for you it might be that way now that the reason for using the tools are changing and you just need to find that new reason.
I think not only are you on the third stage, but you actually addressed this in your book (an excellent read!) on who doesn’t need to budget. The same logic applies here.
You don’t need to track every penny if:
etc.
p.s. We don’t track our spending except that it is tracked because we don’t use cash other than DH’s allowance, which he tracks himself. So every month we review the credit card bills and the checkbook. If things look out of whack, we don’t eat out for a while or we live off our pantry an extra week.
I’ve been using the same software (Microsoft Money 2003) to track my spending and savings since college. I enjoy doing it.
I believe that, while your point is well intended, you are missing some valuable points too. I went off of Quicken from Aug-November 2009 and my spending habits changed only slightly. However, much more significant is that tracking spending helps you monitor what comes out of your accounts and gets charged to your credit cards. When I went back on to Quicken in January 2010, the first day I ran the automatic updates, I found 2 transactions that charged me a total of $100 for which were not legit expenditures. One was a charge that was not supposed to happen (long story and not relevant to my comments), and the other charge was supposed to have a refund to zero it out, but the refund never took place. My lack of tracking caused me to forget that I was entitled to that refund. I got on the phone and remediated these charges immediately. So regular monitoring is a necessary internal control for anybody who cares to be a responsible steward over their hard-earned money.
I’m good as long as I save 20% of my take home. Beyond that, it’s loose budget categories, with an “allowance” for frivolous spending.
Congratulations! Forming a good habit is probably one of the most important things you could have ever done. You are able to subconciously keep your spending in check, and that frees up tons of time for you to grow your savings.
There is absolutely nothing wrong with not logging your spending if you have your frugal spending habits built in. Congratulations on your new found time.
I’m like Paul, I wanted something simple like a spreadsheet that I could constantly update without any hassles. At first, I created a Google spreadsheet to track spending, then after fiddling with it for months I eventually built an interactive website from it. This way I know how I’m doing day to day and I have an easy way to log expenses as they happen. Everyday I can look at it and know how I’m doing budget-wise which informs my attitude about spending money that day. Now I just need to build an Iphone app and I’ll be totally set!
I’ve stopped tracking every expense, too.
As you know from my reader story, I became obsessed with saving and spending as little as possible. I found out that tracking every expense only gave me fuel to obsess over: did we really need that pizza or that chocolate bar?
I do it in a much more broader way now. The savings go into their various accounts first, of course, and then we have a budget for our entertainment that we keep track of.
For food, we withdraw cash with our monthly budget (we stopped doing it weekly) and spend that. It’s fairly easy to see how much of the money is left and if there should be more at this point of the month, and be more careful if that’s the case.
I’m not sure it’s what works best yet. But our overly detailed budget caused us to withdraw money every paycheque (causing ATM-related fees, and preventing interest), then sort them into envelopes, and that ended up being more trouble than it was worth.
I think having several accounts, if they didn’t have fees involved, would work rather well. Instead, we keep track of the entertainment, we withdraw cash for food, and we use the account for the rest. It has worked for us so far, and although sometimes I wish I knew where every single penny goes, I’m trying to learn to let it go.
I used to track more diligently – now I do it 1-2x monthly. I do it to track my lifestyle costs over time as I want to retire early and be able to live on the different streams of income I have projected. by tracking the lifestyle costs, I have an idea of when the ‘crossover’ line is reached.
However, I am also like your spouse in that I automatically save ~50-75% of what I earn. My husband’s salary pays for most of the basic needs – plus he saves ~20% of his income. Mine income is extra and variable, so the goal is 50-75% gets invested.
What is amazing about tracking your spending and your net worth is how it can motivate you to save even more – especially if you have a goal in mind. My husband is really bit by this bug and tracks our net worth daily. When we reach a certain level, he told me we’re going out for a very nice dinner. Watching the net worth numbers and anticipating that nice dinner just makes one pour more effort towards that goal.
As some of the previous posters said, internalizing the habit is a great accomplishment, however, I would hasten to add that checking, although not as frequently as before, will help keep your habit honed. It’s like weight loss, if you don’t keep monitoring, the pounds can creep back on and make it that much more difficult to get back to where you were.
I’m pretty laid back with keeping track of my finances. Everything goes into Quicken automatically thanks to my Bank so there is no need to sit down and manually enter things in. I still save every receipt but rather than throwing them in to a show box, I scan them with Neat Receipts. This way if I ever need them for whatever reason, I can quickly search for it and pull up a copy of it. No shoe box needed.http://www.russellheimlich.com/blog/neat-receipts-keeps-me-on-top-of-my-receipts/
I’m still using Quicken but have cut back a lot. I used to spend way too much time playing around with it, entering receipts and reconciling every few days. Now I have it set up to download my transactions and I can quickly run through and reconcile with my receipts. I do this twice a month now and pay bills online at the same time.
Honestly, we probably don’t need to use Quicken at all. We run all our spending through a credit card, so just by looking at that balance we pretty well know if we’re on track month-by-month. I do like having one place I can look at our “big picture” though and review the data every quarter. Since I’m a CPA and see the value of going over numbers with clients, I figure it is worth it for our personal finances too.
I’ve never tracked my spending in that much detail. I prefer more of a macro approach, dividing my income up into categories before it ever gets spent. Tracking is only neccessary to make sure you are not going over budget. For all the recurring expenses and big ticket stuff, thats easy to do. All the small things like going to the movies comes out of an account different that the one used to pay my needs. So there is no need to track every penny.
Entering all those receipts sounds like a lot of work, and it sounds like there’s not much payoff from it anymore since you’ve learned to spend responsibly.
Of course you’re not going to waste a ton of energy for no return! If you’re spending with a CC it would be pretty easy to let mint do the work for you, otherwise, as long as your savings is growing and you have no debt, you can pretty much assume you’re doing ok, right?
I don’t keep track of what I spend anymore and a lot of that has to do with our gaining financial affluence. But that wasn’t always the case – when we had debt and a more limited budget I did write down spending to figure out where the money went. It was great. I realized things like a soft drink costs 75 cents in the work vending machine, but I could bring them from home for about 20 cents a drink. OF course there were much bigger savings realized from this practice, too – like the time I bought a car and realized how much sales tax, fees, registration, and insurance was just money out the door that I’d never recover even with the sale of the car. But the important thing is I learned to value everything I bought.
Now I know the inherit value of things. I might be at a ball game and a soft drink is $3 – that’s crazy, my mind says, but…I’m trapped at a game and I’m thirsty. I’ll probably opt for a $2 bottle of water or find a water fountain. I may be overspending but I still know the value of what I’m buying.
In my mind I still go over what I need when I’m out shopping. Do I really need this new tennis racquet? Mine has scratches and chips all over it. But fundamentally it’s sound and not damaged – I’ll skip the new one. What about tennis shoes? My old ones are worn down and I did slip and almost fall on the court the other day nearly twisting my ankle. Yeah, I probably should get some.
That’s part of being disciplined when you are in debt or on a budget…so you can splurge a little when you get financially stable. And in your mind you know when that point is without having to track it.
I’ll share another story. When I was growing up my dad was very miserly. We had the things we needed, decent clothes, shoes, nice small home, but not many frills. But in his early 50s he abruptly changed. He wasn’t blowing money, but he was spending it carefully on fun things like trips and time with my mom and his grown children. He had 2 friends get sick – one had a heart attack and died in his early 50s and the other developed MS and declined quickly. I think this scared my father and he realized he needed to live a little and his means were such that he could.
So don’t become so confined by discipline that you can’t enjoy the fruits of that discipline.
Well, it depends on the type of purchase. When I go through the grocery store I tend to buy the same things every week and don’t really need to keep track of spending as it doesn’t change all that much.
But when it comes to discretionary spending, the best thing (I found) is to set a mental amount for every week and then round numbers in your head. If it’s $20 a week for eating out, you know that one pizza pretty much covers that. So it gives you a benchmark. But it could be different for different people.
Personally, I always pay myself first and make sure I have a certain amount of money set aside for retirement, savings, etc. before looking at the discretionary stuff. I also made a point of cutting down as much as I could on daily bills (i.e. getting rid of the landline) to give myself a little more leeway.
Rather than a positive accounting method (adding up every penny spent) I have a negative accounting method ($X for this purpose can be spent this week/month). It works just fine and I occasionally revisit the budget numbers. But I don’t have the attention span to track spending for very long.
I’ll look closer if spending is out of line to see where the extra money is going, but I don’t feel the need to account for every penny. If $40 went to lunch this week I don’t need to know exactly where I went and what I ate, just that $8/day is okay with me.
I use Mint.com and Thrive.com (why both? I dont know, I just wanted to compare the two). I used to check it weekly to see where I was at, but now I only check it monthly.
I don’t track every penny either. I created an “automated budget”.
In a nutshell, this entails a spreadsheet that’s my basis for my spending plan that I created (and update) once a year, and my monthly bank statment. If I see a big dip in money in the bank, I dig deeper into my credit card statements, etc…
I’ve never tracked my spending, and I’ve never been in debt either even though I’ve used credit cards since about a few months after I left grad school. Maybe I’ve always earned more than average; but I’ve saved half of my graduate assistantship when I was in grad school. Spent half of what I saved on a trip to Hawaii, though.
What I’ve done all my life is to appreciate the value of what I am about to buy relative to 1) my net income 2) the cost of necessities 3) what else the same amount of money can buy. Now, obviously the amounts of money add up, so I kept in mind roughly and really subconsciously what I’ve already spent. Just with this tactic, I’ve always ended up with some extra amount each month, so after a few months I had a little extra in savings I could use.
It’s really what you are used to. My parents taught me the value of money pretty early i.e. they were never shy of telling that a particular toy I wanted was costing half of what my mom earned in a day or that a particular party dress was too expensive and not worth the money.
Interestingly, none of my friends track every penny, yet they all live below their means.
Like many others, we only spend what’s left over after saving (and in our case, chartiable giving).
However, I still track (nearly) all of our expenses once a month using a simple spreadsheet; it only takes a couple of hours. (I don’t to to the extreme of tracking every penny, though; I round all purchases to the nearest dollar.) I’ve been doing this for more than 15 years, and I don’t see any good reason to stop.
But as our income has increased over time, I have changed the way I analyze our expenses. At first, I paid attention to almost all expense categories, especially when we were saving for our house. Now, however, there are only half a dozen categories that I track closely compared to our annual budget. These are discretionary expenses such as clothing, entertainment, travel and house-related spending (eg furniture). If we look like we’re going to overspend in one category, we will have to decide what to cut back in another category (or make a conscious decision to dip into savings).
As well, since our cash spending is quite low, I no longer ask my wife to track her cash purchases (although I still do out of habit). Her spending goes into a separate category called … cash purchases. Since she hates spending money (one of the many reasons I love her so much!) I’m not too worried about not accounting for this tiny fraction of our household spending.
For us, it’s about making sure we “spend our money with purpose,” and focusing on our larger discretionary expenses helps us do this. This works for us because we’re both quite disciplined when it comes to spending on the “small stuff” as well.
JS
As your buddy Dave Ramsey says, the purpose of tracking is so that “every dollar has a name”. You can do that on auto-pilot without a financial software program, but what if you want to make a big purchase, buy a business or you have a life change (like a new child in the family?). Perhaps knowing the details of your spending pattern can help you evaluate the impact of these kinds of changes when they occur.
That’s one of the things I really like about mvelopes. You can set your spending plan and forecast how much you expect to spend in each category and it will automatically bring in your bank transactions to be placed in their proper envelope. Even if you do this classing once every week or two weeks, you ultimately can confirm whether you are still on track and make appropriate changes for the future.
My wife and I track everything that we spend and we have been doing this for several years now. We actually use a customized set of spreadsheets that tracks everything by category and summarizes all of our monthly data.
It works well for us and has basically become second nature to us. We both find it to be very valuable for us to assess how we are doing and to meet our financial goals. We recently went from a 2-income family to a 1-income family and the tracking has been very important in establish new spending habits.
-TW
Tracking every penny was the best thing I ever learned to do. I faithfully wrote down every penny I spent for 3 years.
After seeing my spending patterns written down, I’ve developed new habits. There’s a daily amount (an allowance that’s different on weekends) that I could spend, but I rarely do. On days that I want to buy something over the limit, the extra is there, with no guilt.
Even though I’m not as particular about writing down the details, I’m still tracking.
I find it so ironic that those who really NEED to track every penny they spend often avoid or refuse to acknowledge the value in it – and the folks who have been there and done that and are ready to let it go have such a hard time with it. We tracked every penny we spent for years as we were saving toward a major life goal (starting a mobile business and moving to the islands) but now we are like you, neglecting Quicken terribly. We had a long discussion on this exact subject the other day when we sat down to enter cash receipts in to Quicken and realized we didn’t have them all. DO we care anymore? Even though we are living in a much higher cost of living location we still live below our means so we aren’t in danger of overspending. But the most important thing that we have learned is how to make sure that our values dictate our spending. We still keep track of our overall totals but don’t stress over balancing Quicken to the penny.
I have student loan debt (over $32,000) and have made major mistakes with my money over the years. Tracking my spending is one way I keep myself accountable now that I am working. In one month I had spent almost $400 in groceries AND $400 on going out to to eat/drink!!! What?!! I had no clue it was so out of control until I tried tracking.
I’m digging my way out of debt so it’s the most helpful tool to help me be aware of my spending habits. Plus..I realized with a fraction of what I was spending I could 1) have an unlimited yoga pass 2) eat healthfully at home 3) still have money still left over to put on debt
🙂
I have been tracking my expenses since I opened my first bank account in 1994: first on excel, then MS money then quicken and finally switched to Mint! I have finally achieved me goal: tracking all my expenses WITHOUT keeping receipts and NEVER keying manually a number in some application. Simplicity and financial peace of mind at the same time.
I used to not even know how much i spent a month. I knew it was less than I made. I knew it could be lower. But until I figured out some things I wanted to DO with my money, I never tracked. How would you know if you could contribute more to retirement, or how much house you could really afford? Since I’ve been tracking I’ve made many more plans, cut down on some things, and bought things that I am much happier with. Accounting for your habits is key to improving them.
I agree with some of the other commenters that I actually like tracking my spending. I like tracking my progress towards goals and I enjoy tweaking the numbers to help me get there faster. I think I would actually miss it if I stopped, but I don’t think I would worry too much about overspending. I would just miss playing with the numbers, I think. 🙂
Financially we are debt free, on track to pay our mortgage off in 10 years and by the end of this year will have $40,000 in savings – and we’re 25 years old with two little boys living on my husbands income.
We don’t religiously track our spending, but we know how much we can spend. Savings comes out of our budget automatically at each pay check and we know how much we can spend on everything else.
I do log the grocery spending on my iphone – as soon as I get in the car I open my notes and add the total to my current monthly list. I have a set amount to spend per month, not per week, so I do need to keep track of the total each trip.
Cash would probably be easier for keeping track but we use online banking and it’s a hassle to get to an ATM to pull out cash so that is why I keep a running tally on it.
For me the biggest risk is not in me increasing my spending, it is with others that automagically increase their rates.
I auto pay a decent number of bills: cell phone, cable/internet, etc., and if I don’t pay attention I find them magically increasing by a few dollars here and then a few dollars here and I never know to switch to a new provider.
JD – You probably don’t need to track your spending now, not because you have so much extra money, but because your relationship with money and spending has changed. You don’t need to trick yourself into saving, you save because you believe in it and enjoy it. And you have enough of a financial buffer that you don’t need to worry about making an occasional mistake. That is indeed financial maturity.
I don’t expect you to backslide, either. You might choose to track certain items out of curiosity, or to challenge yourself to spend less in one area, just for fun. We set a goal to see how cheaply we can feed our family of 6 with healthy interesting foods, not because we need to, but because we believe in it. I track every expense for our investment real estate, because I’m learning how to plan well and make a profit more likely (and it’s tax deductible, which you should always keep track of!).
Some frugal habits become so ingrained you can never go back. After spending several hundred dollars on college books for my kids, I rolled my eyes at the cost of grapes and bought bananas.
This was an entertaining post, J.D. I always love when you tell us about Kris’ reaction to something you’ve said or done! btw will there be a garden update soon?
I guess my tracking is the simplest possible thing … I pay all my bills, including savings, the day the direct deposit hits. Then I use my debit card for everything else I do, noting each transaction in the register, including when I get cash back at POS.
If I use cash, it’s always and only for food on the go (or, okay, my semiannual trip to the car wash), so I don’t bother tracking those receipts.
I’m going to get a rewards credit card soon and use that instead of my debit card, paying off biweekly, but I will use the same system of writing every transaction in a register since in essence the money will be coming right out of my checking account. I’ll just start the register with a balance equivalent to the money available in checking and carry on from there.
My financial behavior has changed over time pretty much in sync with how close to disaster I’ve been.
When I was single, I didn’t keep track of it at all. I used mainly cash; the bank was just for holding cash I didn’t want in my pocket.
Once I got married, I tracked every penny for a while, then stopped.
Every time I have changed jobs I’ve gone back to tracking for a time.
When we bought a house, I tracked for a long time (almost a year!).
Now I’m at the point where 1) One month of CRAZY spending isn’t going to ruin us. We could probably even have a wild 3 months and be just fine. 2) Our lifestyle is pretty stable. We’re saving, paying off debt and living comfortably — the difference between $.15 and $.25 for a ramen doesn’t matter anymore.
I let Mint track me, then check in a few times a month, more for identity theft awareness than anything. If any spending seems out of line, I make a mental note and reduce spending in that area for the next month. It’s very low maintenance, and lets me enjoy more time with my family and home.
Funny but when I first saw the title of the post I was happy, as if JD had given me permission to stop tracking my expenses, something that I have been doing for the last three years and was beginning to slacken on it to the extent that some undesired habits were creeping back in. Other than that, I am making good money and spending way less than I make. I have no debt and no mortgage yet (saving for a penthouse down payment in Vancouver). After reading the comments, I am reminded that I need to keep tracking every penny because it works for me and it makes me really happy.
My biggest challenges arise from expenses on entertainment, hair/ beauty products. Actually makeup is now under the ‘vanity’ category after having been alarmed that it was costing me hundreds every month just to keep my lips glossy! Just try picking up a couple of Diors, YSL’s, Chanels etc every month and you’ll see what I’m talking about. It took a while for me to figure out that I don’t use up a whole tube every month but I love variety. So, I made a decision at the beginning of the year to assign a fixed amount to either hair or vanity each month. For clarification, I (and many other black women with my type of hair) tend to spend a little more on hair than our Caucasian sisters. Some of this hair was created with extraordinarily tough texture. Anyway this post has helped me to re-focus and keep on tracking every coin. I use a basic excel sheet that was created for my personal purposes and that works well, together with my blackberry as a reminder.
As for entertainment, I find that having a new boyfriend is making me want to shop for a ‘cute little top’ each time we have to go out. Hopefully, this will stabilize soon. In the meantime, I will continue to track the expenses because I love it. Thanks, JD for this wonderful insight.
We tracked our spending for a while but it really just caused stress, so we changed our plan.
We have a set amount of cash that we take out every Sunday. We use that for food, gas, entertainment, copays, etc., and we don’t track it. When the money is gone, it’s gone. Last week, we ran out on Friday. Many weeks, we’ve had $20 or $40 left over when Sunday came around.
I keep a simple spreadsheet that has paychecks, these cash withdrawals, bills, and anything else that we spend money on to keep track of the overall monthly picture.
We’ve been doing this since December and despite a surgery, an out-of-state wedding, spending Christmas across the country, and some car troubles, we have been able to save an extra $2,000 AND sent an extra $1500 to my husband’s car loan on two teacher salaries. It’s working well!
Such an interesting post JD. I think the key here is that you need a GAUGE to keep you honest.
My parallel issue is not with spending, but with something very similar: EATING!
When I wanted lose 15 lbs a year ago I joined Weight Watchers. WW is basically a calorie counting program that requires you to record everything that you eat and stay within a certain budget. I had almost instant success with the program, but after several months I started slacking on my record keeping because, honestly, I HATED having to record and think about every single thing I ate.
In my case the gauge was the scale. If the numbers start to rise, you’ve got to start tracking again. If they stay stable, you don’t! (Unfortunately, my numbers DID start to rise.)
The key is to have a guage to check in with every so often. That way you have a warning flag to let you know if things may tip out of control.
I’m always quite facinated by the parallels between weight control and financial control. I think the difference here is that you’ve genuinely come to a place where you no longer feel fulfilled by all the Stuff you used to spend your money on. I haven’t yet learned to not feel fulfilled by all the delicious food I want to eat!
I love to track my spending. I use Excel and I update my file several times a week. It helps me to to keep my focus on my goal.
I have no debt but I am a student with a very low income so every penny matters in my case. But I understand that in a situation where someone is a little more comfortable with his spending (and with money in general) it is no longer necessary to do that.
Honestly, I think you’d be going down the wrong path to stop using Quicken and leave your tracking behind. What successful business out there stops keeping their books because they are profitable? The only way you are able to really know where your money went and if there are differing trends is if you track your $$. Maybe you just need to look at it less often? Maybe you need to find a less labor-intensive way to track. I personally use very little cash, so I don’t bother tracking my cash spending. Instead, I spend a few hours on quicken once every 3 months and download all my transactions for all my credit cards, checking accounts, and investments. Then I just look at the roll-up reports of data to make sure everything is on track. If I see something I don’t like, I can drill down to the specific transaction. As life changes, spending habits change along with it. It is so good to be able to validate that trends are intentional and purposeful trends.
J.D. I’m worried about you. Your cash flow has clearly increased (partially because you have no debt, and partially because of the success of your website). I would caution you not to let your lifestyle inflate with your increased cash flow. You may be saving a lot of money right now, but how much are you spending? Is it safe to assume that your book, and website will make you rich? Maybe, but if you spend your early profits, and the well runs dry, then you are back to making money like the rest of us do.
What I’m basically saying is that there are warning signs in your posts from the last month. Lifestyle inflation is a particularly sneaky disease, and if you aren’t tracking your spending, you may not realize how much it is costing you until it is too late. For a good example, look at the Mortgage industry. People who used to make $200K/yr are struggling to make $40K in this lack-luster lending environment. If they didn’t have enough savings from their feast times, they may be making some of those 8 deadly sins in these famine times.
i didn’t have a credit card till i was 40. 39 for a checking account and then only for automatic withdraws for investment. always paid the card off every month, never bounced a check. this is no brag just fact. i’m 58 retired no mortgage no bills except tax, utilities, insurance, ect… i did not do this out of mindfulness or as a budgeting plan. it was because when i got out of the navy seabees 36 years ago i knew our country/society was misguided. you can’t drop out. you must participate but you can minimize your damages. i do this out of contempt. ps i’m not a curmudgeon or a cheapskate.
for me as with every other habit it has been a question of increasing awareness… good money habits have just naturally flowed… best of everything 🙂
@jeffeb3 (#101)
That’s a great insight, and I agree: I need to watch out for lifestyle inflation. I’ve thought about this a lot lately. While my income has increased, it hasn’t increased so much that I should start throwing wild parties and buying everything in sight. And that may be the best argument to continue tracking my spending.
Right now, I’m not worried about my spending. Obviously I don’t have the details to back it up, but from what I can tell, my day-to-day spending is as modest as it has been over the past few years. The real difference is that Kris and I are saving for (and budgeting for) Big Things, such as trips and furniture.
Again, all of the comment here have made me realize that maybe what I need is to find a different system (such as Mint) instead of giving up on tracking entirely. I mean, tracking my spending really helped me, right? I’m sure it could help prevent “backsliding”, too.
Great food for thought over the next month or two. And jeffeb3, I’m absolutely going to keep watch for lifestyle inflation…
JD– I completely disagree with jeffeb3. I am not worried about you AT ALL.
I do think you’re worried about it, and I think you’re feeling some of that survivor guilt you talked about in an earlier post when you were just getting to the third stage of personal finance. It’s fine to keep tabs on yourself, but I think I trust you right now more than you trust you. You’re trying to find balance between living and saving and aren’t comfortable with it yet.
You spent a long time not being secure with money and you’re not really sure what to do when you have that security. You may have figured that you can afford that third teaspoon of hot chocolate, but you feel like you went a little too far being a first adopter for the I-Pad that you’re not really enjoying as much as you’d thought. (Hopefully that just means lesson learned about being a first adopter, but I think it’s got you worried that you’ll go back to your earlier bad habits.) You’re still not sure about when it’s ok to spend money to save time (e.g. yard cleanup, potato salad) or enjoy life (traveling) and when it isn’t. It may take some time to find balance.
There are many many ways to keep spending under control and tracking every penny is only one. And it’s one that works when your income is much closer to your spending. Remember that you don’t have to optimize your spending anymore, you just have to satisfice. You can spend/save a set amount and be unsure of where some of it is going– that’s ok. You can make adjustments over longer intervals because without debt you have the flexibility to do so.
When you’re out of debt and you’re funding all of the important things first (and your money is making money for you), you don’t have to worry so much about the details. To me that is the best part of the third stage of personal finance. It is what my goal was back when I was a starving graduate student– to have enough money that I didn’t have to keep track of prices at the grocery store anymore. That I could just not worry about money.
Maybe that’s too much armchair psychology though…
For the past five years, I have tracked every penny that goes through my hands via Quicken. I believe this has allowed me to save over 40% of my gross income before taxes for retirement and investments, to have no debt outside my home mortgage, to pay cash for a brand new Prius. In five years, my liquid net worth has increased over 7 times to $350K.
To force this discipline, the first thing I do when I log into my personal computer is to put my receipts and spending into Quicken before I do anything else. I review my actual spending compared to my budget at least twice a week. I get a high at the end of the month, when I see that my actual spend is better than my budget and that my liquid net worth continues to increase because of this discipline.
It only takes a little work every day, but the disciple of tracking every penny serves as a foundation for developing and maintaining a lifestyle of being frugal so that I can have the freedom to do what I want within 10 years.
I use mint.com to track my expenses, but I don’t do it daily. I gather all receipts and cash purchases I wrote down and reconcile everything once a week (give or take). It keeps me from feeling fanatic about tracking and keeping up with expenses without letting it all fall by the wayside. Maybe there will come a time when I don’t feel I have to do this, but if not, that’s OK.
I use Quicken religiously, started last year. None of that receipt entry stuff (or rarely), I use plastic and just download the accounts and categorize, takes a few minutes every week or two. Two earned incomes with 2 passive incomes, and a bunch of accounts, but it’s pretty straight forward. When you use the reconcile feature to lock in the old transactions, it’s easier to fix mistakes on the spot.
I am transitioning to Quickbooks later this year, even though I will miss the stock tracking capability, I still feel it is a stronger accounting suite that I can rely on in the future (face it, Quicken has weird bugs sometimes).
Plus, my bookkeeper is better versed in it, and once the business grows, I will just offload most of the work to her – that way I can just look at statements whenever I need to with everything else on autopilot, for the most part.
Definitely agree that once you get in the habit of spending less than you earn, it’s pretty easy, but I would not give up the accounting thing, I want to see every penny put to work.
Great post! I think that tracking my spending has been a personal finance godsend for me. I just started doing it a couple of months ago and while it is tedious (your comment about years of grocery receipts made me chuckle … it was like a visit from the ghost of personal finance future), I have found it extraordinarily useful. But of course I’m new to all of this. It wasn’t too long ago that I spent every dime I made and used credit cards when that ran out. I hope to get to the near nirvana state of ingrained fiscal responsibility … but I need the disciplined ritual of carefully tracking my spending on a daily basis (it’s part of the reason I was inspired to start my own silly little blog – http://www.debtmarch.wordpress.com – just another level of accountability that forces me to think about how and where I spend my money. forces me to thinking about how . I freak out now if I miss a day or two … I’ve got my neat little Excel spreadsheet and I track spending by category (new sheet every pay period). Now I’m still paying off debt … so until that’s done I won’t even consider not tracking spending/keeping those receipts on a daily basis.
I only track every penny when I feel myself slipping and can’t figure out what’s going wrong. I’m going to start doing like bon (#17) says and start tracking every time I have a big lifestyle change–before I start slipping. At least I do re-do my budget every time something changes (mortgage goes up; salary changes, etc.).
I do save all my receipts, though. I have one envelope for each month, and I toss the receipts for one year ago when a new month starts. It has been very handy for me to know where all my receipts are. (Receipts for large purchases go with the manuals for those purchases and thus do not get tossed after only one year.)
And I balance my checkbook and credit card statements every month.
And I update my general savings categories (on a spreadsheet, not in literally different savings accounts) every month and update my net worth calculation every month. Also I make graphs. They make me happy. I mean they help me to always know where I am.
I basically track every penny. When I get home from work weekdays, I end up pulling out any receipts from my wallet and entering them into Gnucash. I’ve made a routine of doing it right after I check my email. I doubt I spend more than 5 minutes per day on this. I usually enter my utility bills and other non-daily occurrences on the weekend. I’ll admit, I feel a little silly making an entry for a “transfer” from my wallet to my piggy bank for 6 cents (that got in change from lunch), but I just stick to it.
JD – I agree with jeffeb3 – I’ve been reading your blog for some time now, and there seems to be a shift in your habits. However, if you have a general idea of how much you are spending every month, and that amount isn’t changing, then I think that it is okay to do a monthly check rather than a daily balance.
I do not track my account penny to penny, but when my monthly expenses goes beyond my average level, I usually reduce my spending significantly the next month to balance it out. I also pay myself first, somewhere between 30-40%.
“You only need enough money so you don’t need to spend too much time worrying about money.”
Unlike many of these comments, I think you’re finally getting it.
Making buying decisions should only be fractionally dependent of your account balance. In the good sense. In the bad sense, your balance dictates all your buying decisions.
I.e. having the money doesn’t mean that it must be spent. To me, the best thing in earning a decent living is the freedom from penny-counting. It doesn’t matter if the delicious orange juice is three times as expensive as the cheap stuff. I can afford it, and it’s just pennies, and I don’t count them. Because I can afford not to. That’s the freedom.
Now, this doesn’t translate to big things. Affording something is very not affording everything. Ask yourself: “how much extra cash one needs to have in order to buy a $100k car?”
If you answer “$100k”, you are beyond all hope. Or, your penis is several sigmas below average 🙂 One gets around just fine with a $10k investment, the rest is just financially irrational (but maybe ego-stroking). Hell, if you’re hardcore, you’ll get around just fine with a $1000 car… If I had $1M extra, _THEN_ I could consider a $100k car.
Man is a creature of habit. You’ve been watching your expenses for so that that you sort of picked up a sixth sense of where your money is going.
I don’t understand the implication that if you aren’t tracking every penny then you don’t know where you are financially and/or you are likely to overspend. As I said I don’t track every purchase. I just make sure they all fit in the larger picture. And I still track my finances, just not every purchase. I have assets spreadsheets and amortization schedules on all debts. Just because I can’t tell you exactly how much I spent at Panda Express last week means precisely what?
If you start at a young age (say in college) with a discipline that you won’t spend more than you have than it easily becomes a habit that you can maintain without having to keep formal records of every penny you spend.
It helps if you make a habit of always paying off your credit card in full every month and not buying anything (except a house) until you have saved up for it.
I look at my bank statement each month to make sure I’m still on track. If I find I’ve spent a bit more one month I just back off making any unusual or special purchases for a month or two so that I stay on track.
I have tracked every penny I’ve spent in the past 5 years. I actually sort of enjoy playing with numbers, so I don’t consider it a hassle. I can’t imagine not tracking my spending, even though I’m fairly sure I could maintain the same level of spending without tracking it. I’m good at sticking to my budget, and it’s kind of motivating to look at my numbers and see how well I’m doing.
One of the greatest things about having a budget and tracking my spending is that it helps me determine whether I can afford something. When I bought a new car, my budget spreadsheet helped me figure out how much of a car payment I could handle. I recently refinanced my mortgage to 15 years, but first I checked to make sure I could comfortably fit the higher payment into my budget. It gives me peace of mind to be able to plan for changing expenses.
You have attained THE WAY of finance. When the shoe fits it is forgotten. You don’t need to track because your spending.
Cutting Up An Ox
Prince Wen Hui’s cook
Was cutting up an ox.
Out went a hand,
Down went a shoulder,
He planted a foot,
He pressed with a knee
The ox fell apart
With a whisper,
The bright cleaver murmured
Like a gentle wind.
Rhythm! Timing!
Like a sacred dance,
Like “The Mulberry Grove”
Like ancient harmonies!
“Good work!” the Prince exclaimed,
“Your method is faultless!”
“Method?” said the cook
Laying aside his cleaver,
“What I follow is Tao
Beyond all methods!
“When I first began
To cut up oxen
I would see before me
The whole ox
All in one mass.
“After three years
I no longer saw this mass.
I saw the distinctions.
“But now, I see nothing
With the eye. My whole being
Apprehends.
My senses are idle. The spirit
Free to work without plan
Follows its own instinct
Guided by natural line,
By the secret opening,
The hidden space,
My cleaver finds its own way.
I cut through no joint, chop no bone.
“A great cook needs a new chopper
Once a year – he cuts.
A poor cook needs a new one
Every month – he hacks!
“I have used this same cleaver
Nineteen years.
It has cut up
A thousand oxen.
Its edge is as keen
As if newly sharpened.
“There are spaces in the joints;
The blade is thin and keen:
When this thinness
Finds that space
There is all the room you need!
It goes like a breeze!
Hence I have this cleaver
Nineteen years
As if newly sharpened!
“True, there are sometimes
Tough joints. I feel them coming,
I slow down, I watch closely,
Hold back, barely move the blade,
And whump! the part falls away
Landing like a clod of earth.
“Then I withdraw the blade,
I stand still
And let the joy of the work
Sink in.
I clean the blade
And put it away.”
Prince Wen Hui said,
“This is it! My cook has shown me
How I ought to live
My own life!”
~ Zhuangzi (translated by Thomas Merton)
I find tracking very helpful at this point as I’m trying to pay off debt and have fairly limited budgets for “entertainment” or “dining out”.
I probably don’t have to track things like rent and fixed bills, but that introduces fairly minimal overhead in exchange for a more accurate picture of my bank account, so I find it a minor inconvenience.
Quicken tracks my spending so I don’t need to.
When gas prices went up, I tried to cut back on driving. Quicken showed me I wasn’t spending anymore than I had in the past on gas. Hurray!
When the stock market dropped like a rock, my question was always, “what does it mean to me and my family.” Quicken (and ESPlanner) allowed me to see the real impact, and not get caught up in the hysteria. I rode out the great recession and and now I am in good shape, because I had the insight I needed.
I am financially independent (including no debt)and doing what I want to do, and can’t imagine how that would have been possible without tracking using something easy to track with (needs to be easy for you of course).
http://hubpages.com/hub/Quicken-Is-A-Great-Project-Management-Tool (project management, but how to easily manager your personal finances as an example)
When I exercise lot I feel good and then think I no longer need to exercise. Losing the discipline just makes it harder to get back in the routine.
Success is doing certain things right everyday. For some of us, this is one of those core certain things.
Bruce
I was as deep in debt as it gets. It took me a long time to get out. I never once tracked my spending.
Its a waste of time if you ask me, unless of course you need this reassurance.
If you eliminate all unnecessary spending, and make it a habit, there’s no need to track anything.
When I was digging myself out of credit card debt I tracked every penny so that I could get the most paid off each month that I could. If I found that I spent less on food in a month or didn’t spend quite all my money, I’d send that extra money to pay off my credit card too.
These days I don’t really need that level of detail to make my financial life work fine. I’m back in graduate school, so I don’t really have as much time to spend money, plus I’m around a bunch of people who make exactly the same ‘salary’ I do, so there is much less push for keeping up with the Joneses. I’ve started working on paying off my student loans, which are in deferment right now. Just last month I decided that any “extra” money left at the end of the month would get sent to pay those loans off, much like what I did with my credit cards. By paying myself first (rent, bills, food, savings, in that order), I’m comfortable with how much spending money I have. So if I don’t spend it all, there isn’t a need to keep it around as I already have sub-savings accounts for long term unforeseen expenses.
It’s bizarre to no longer have to worry about where every penny is going, but it’s also gratifying to see that I’ve learned some new habits.
I have experienced the same thing over the past 2-3 years. Now I have only two budget items:
1. Savings (Retirement/Investing/Emergency)
2. Bills
…anything left is spending money for entertainment, dining, etc. I think once you are at a level of frugality where you have a habit of savings and not spending haphazardly you don’t need to track every penny. What do I care if I spent $50 more on dining this month than last month? The end result is that I saved enough to build my wealth and keep my assets!
I agree with Trina’s comment “You probably don’t need to track your spending now, not because you have so much extra money, but because your relationship with money and spending has changed.”.
I track every penny. Since I freelance, it makes it a lot easier at Tax Time to find all my expenses for entering on the tax form, since it’s all in one spot.
I think any freelancer or person who gets a 1099-R SHOULD track every penny.
Didn’t work for me. This month I fell off the track-spending wagon and lo! Diddled away almost twice my budget!!
Okay, okay: one of those spending sprees was an emergency bill: dental work. And I did need a new vacuum cleaner after the beloved Panasonic fell apart like the Minister’s One-Hoss Shay. But the fancy decorative pillows from Pier One? The glorious take-out sushi and four-pack of extravagantly overpriced delicious beer? The concert that I wouldn’t have gone to if a choir member hadn’t sent out a blanket invitation to everyone? The $140 worth of hoses for the pool cleaner that could’ve been put off until next month? Not. so. much.
Got to admit: sometimes entering every darn penny in Excel (I did abandon Quicken…) is a nuisance. But it sure does help to keep the spending under control. If I’d been paying attention, I would have deferred two of those purchases (the extravagant pillows and the pricey pool hoses) and, by using emergency savings instead of cash flow to cover the crown, come in right on budget. Guess I haven’t grown up enough to get rid of the training wheels yet! 😉
I’ve never tracked what I spent. When it was just me I was able to keep a tally of my bank account in my head . I’m usually a saver with occasional big purchases so it’s never been a problem. I wouldn’t have the discipline to do a tracking system.
My husband is a tracker and loves his Quicken. Historically, he’s done some riskier things with his money, so I think that he likes the sense of security of knowing exactly where everything goes.
Now I kind of want an Ipad:
http://www.youtube.com/watch?v=Q9NP-AeKX40
Kitty #1 would go crazy. Maybe a little too expensive for a cat-toy though… we should stick with the $15 laser pointer.
I still track every penny, in Quicken, almost daily. At this point, my transactions are mostly electronic and it’s almost too easy not to do so.
But the primary reason is for cash flow sanity. I have 8 accounts at ING for different consumption smoothing (deposit 26x per year for 2 car insurance bills per year) and vacation savings, emergency fund, etc.
We also just welcomed a baby boy to our household. I need to know if my checking account has enough cash sitting there to pay the auto-triggered mortgage and other payments, while still zipping dollars to 8 different savings goals 2x per month each.
If it sounds complicated, it is. And if I could get a much larger base checking account balance, I could pay less attention.
The Quicken calendar is what I use the most to spot places where I am heading into the red in the future, and I either curtail spending/savings or transfer savings money back to checking to make sure my balance is covered.
For the stuff that is not checking acct-based, like my 401k and IRA, I run down the prices of all my securities on the weekend, but I don’t pay attention during the week.
Seeing that Net Worth number most every day in Quicken keeps me motivated. We are about to break 6 figures for the first time in the next few months!
I continue to track my spending in one master excel spreadsheet for a variety of reasons.
1. Taxes. I can quickly generate a list and totalize at the end of the year for all my deductions.
2. General cost of goods and services. I need a new dental crown? Hmm…how much did I pay last time, etc.
3. Reimbursement for business expenses. Again can quickly generate a list to invoice and track.
4. Cost of Living. We move around quite a bit so it lets us track how expensive it is to live in various cities/countries.
5. A bit of a travel diary. That last trip to Iceland…how much did it cost us for food, etc.
I used to track my spending, but now I don’t. While I found it to be very helpful before, I don’t need it now as I don’t spend that much.
I’ll probably start tracking where my money goes later this year as I’m planning to start some freelancing projects.
I guess it’s all about doing what works for you.
It’s like your credit-score, just because you don’t track it anymore doesn’t mean you’ll always be okay.
Right now, you’re cushioned/coasting by a fatty-layer of good habits and savings that doesn’t leave you borderline.
Note that the other half of tracking your spending is projecting your spending. With current tracking data, you can accurately project your finances into at least a year into the future against things such as the financial-meltdown, big expenditures, taxes, etc.
Practice what you preach, just as you don’t leave your investments in your 401K/mutual-funds alone, you shouldn’t leave your personal finances alone just because you’re coasting so well.
J.D., if you aren’t keeping track of your spending, how can you be sure that the transactions posting to your bank account are correct? I am less worried about spending appropriately then I am about fraudulent transactions or even simple bank errors. Balancing my bank account regularly (which requires tracking my spending) is the only way I know of keeping tabs on this, assuming you aren’t operating on cash only.
I haven’t had a chance to read all the comments, but I second one astute commenter’s take that “you count every penny when every penny counts.” My budget is TIGHT; therefore, if I don’t track it’s very easy for something to be amiss.
I’m a real tracking fiend, though, and I find that for me, tracking has a positive effect on a lot of things. I no longer track my calories, but I do whenever I begin to feel as though my eating has taken a turn for the unhealthy. I’m an avid runner and run with a Garmin GPS system that keeps a history of all my runs (pace, distance, time). I log my workouts at a workout site. For me, doing this stuff keeps me honest, and I like the satisfaction of watching my own progress.
I think in many cases the ‘to track or not to track’ question is about personality as much as circumstance.
I have tracked every penny I’ve spent since I was 16 meaning I’ve been tracking for 5 and a half years.
I have to say I’ve been a conscious spender from this age and in reality don’t ‘need’ to track. I enjoy all activities to do with my finances (I know I’m quite sad) but it gives me a sense of control.
I really doubt I’ll ever stop because it’s become such a habit. I even consider how I never did it before 16. I just squandered money up until then.
We had ugly debt. Hideous debt. Back taxes, credit cards, home eq loan. Not because of outrageous spending or extravagant lifestyle, but because of failed business, health care crisis, and a move to another state that went very badly. We ended up carrying 2 mortgages for 15 months, not the 6 months we had planned on.
I developed a plan to track every penny of spending – aiming to simultaneously build an emergency fund while paying down debt. Very difficult, but it can be done. The tracking nearly drove me insane, I became obsessive about it. I had anxiety attacks, I wanted the problem gone overnight, I sat in front of my spread sheets and charts feeling sick over every nickel that went out the door.
To save my sanity, husband and I set up an auto savings and auto payment system that accomplished it all without my having to micromanage. We use MINT to track our expenses. We use ING for auto savings. We use our online banking to take care of nearly all of our bills and debt. We live frugally, purchasing only the necessities and mostly second hand.
Amazing – by letting go, I am now able to see that we are actually making great strides. In 19 months we paid off $18,000 in credit card debt, and $18,500 in back taxes, and several thousand on the home eq loan. We built our Efund from 1 month up to 4 months.
With our debt and savings on autopilot, and our spending a non issue, we’re comfortable sticking to Mint for the big picture now. At this time, it’s better for my health!
You are somewhere that I think a lot of people want to be at right now in your financial life. I can relate to your story. When I moved into my current home two years ago my finances were just coming out of ruin. It was necessary for me to understand exactly where my money was going. I now though seem to track everything from snacks at work to gallons of gas purchased for my scooter instead of for my jeep. Trouble is now two years later I find myself digging through a pile of old receipts. We’re moving in a month and I have a room filled with every financial decision I have made during our time here. Though it is important to know, I don’t think it is AS important to record it all.
Enjoy the blog btw!
For years, I’ve kept track of every expenditure when I get paid, and now that I’m married our household income. If we expect a windfall, I make a budget for that prior to receiving it. I don’t think I would characterize it as a budget, because I do not pre-determine what I’m permitted to spend for certain categories. What has been immensely helpful is that I now on an annual and quarterly basis determine how we did for the year. Seeing that I overspent on a particular check is not as helpful, as realizing that I’m saving a dismal percentage of our income for the year. We had so many bills and other obligations -savings kept coming in last. Now I’ve automated our savings -I’ve limited the pie that I have to work with for paying bills. Also the quarterly snapshot allows me to see where our budget is bleeding and set strict limits in certain problem categories. I do not believe there is a right or wrong way to do this -personal finance is about evolving -people who are building an emergency fund and those who have a year of expenses saved and no debt may not need to go through the same steps. I personally like pie charts and seeing where our hard earned dollars are going.
I want to stop “needing” to log every little thing, but I feel uneasy when I skip it for several weeks.
The funny thing is that we were frugal before I started tracking, while I was tracking, and now that we’re not tracking very often. It hasn’t changed our spending at all since we have always been prioritzers anyway…I could probably let it go if I really tried.
It’s just become a minor addiction…oops.
Wow, great post, and it gives me hope for what I am doing currently. From i gather by reading your post, it seems like by learning about money and how to handle it you slowly changed your overall spending habits and now seem to be in complete control of your finances. I teach young adults about credit and credit cards and my hope is that if they learn about these topics now, they wont end up in debt in 5 years when they are on their own. This post gives me just a little bit more hope that we can change peoples behavior for the better with education!
I think you know the answer JD. It’s because you’re making a huge some of money now from your blog, and probably got a good injection in income from your book.
Of course you’re not going to track your spending and saving as closely as when you were making less.
This is your biggest challenge, writing as if you are still getting by day today to relate with your readers, even though you’re probably reaching, or have breached the highest income tax bracket now.
Best,
Sam
The newest version of Quicken helps automate the process of tracking expenses quite nicely, even without you intervention. I personally use any electronic means to make my purchases and Quicken auto categorizes each transaction based on rules and history when downloaded. The newest version also provides a nice dashboard for a quick view of your monthly spending.
Tracking spending is a means to an end. That end is to maximize disposable income. Now that you have a better sense of you income and expenses, you should now focus on saving the maximum amount of money you can per day or pay period. For example if you net 300 bucks a month, aim to save $10 a day. If you do this, by default you will have maximized income, minimized expenses and only had to track one transaction.
Chris Jackson MBA
I’m inclined to agree with all the readers who are cautioning you not to swing too far on this pendulum. It seems like it’s probably time to scale back your tracking to fewer categories and less frequent check-ins. Which, you know, congratulations!
I’m still struggling with our cash flow, and find that I stay on track MUCH better when I can keep my expenses tracking up to date and pay close attention to it. Clearly you’ve internalized these things to a point where you have more flexibility and that’s great.
dustin post number 3. save those receipts. period.
last august i got audited by the IRS for the tax return of two years previous- a random audit. they went through every. single. receipt.
six hours later. i wouldn’t wish that on anyone. i came home from the audit with 2000 in my pocket.
I don’t track my spending. I did that when I set my budget. That’s why I have a budget, so I don’t have to track my spending. I have two credit cards. I use one for fixed expenses and bills that are auto-paid (cell phone, car insurance, utilities, cable/internet, and gas). I also allow $25/ week for groceries on the card. If the bill is significantly over at check out, I only charge $25 and the rest of the grocery bill gets swiped with my “anything” credit card. But this rarely happens because if I need to get more stuff I’ll make a second trip later in the week, and that one gets swiped with the “anything” card.There’s not much to budget there, I get all of my itemizations emailed to me so I can do a quick scan to make sure there aren’t any additional and unauthorized charges (and only if the bill amount is off-base, which is rare).
My other credit card is my “anything” card. I don’t use cash, except when absolutely required and to pay both cards in full at the end of the month, so I use this credit card for anything that’s not charged on the first credit card. I have a monthly allowance so I don’t track my expenses. No need to, this money is for whatever I want and I don’t have to justify anything as long as it stays within the allowance. I like having the two cards. It separates my expenses, I get cash-back on both cards, and it’s easier to stay under 30% of the limit of each card if the expenses are split up.
I only pay 3 bills/ month (escrow-which includes mortgage taxes & insurance, cc1 & cc2)and I only pay bills twice a month. I pay my anything CC with the first paycheck of the month, and my fixed expenses CC and Escrow payment with the second paycheck of the month.
I should mention I get retirement taken out of my paycheck (to get the employer match), and contribute $1000/ year to my Roth IRA (not much, but it’s decent for being a mid-twenties single homeowner making under $30k/year GROSS). I also immediately pay my savings account a fixed amount the minute my paycheck gets deposited.
I’m satisfied with my budget, but of course I hope to one day be able to max out my retirement vehicles yearly, save more, and spend more (on frivolity) . I don’t need to make a lot of money, but I’m hoping with a combination of earning a little bit more at work, moderate investment returns, paying off my mortgage, and no longer needing to fund a full emergency fund, I’ll be able to meet those goals within 10 years. Then I’m praying that the budget will be a self-oiling machine from then on. Direct deposit paycheck into checking and savings > bills auto paid from CC > CC auto paid from checking. All I need to do is oversee the operations and DONE.
Also wanted to add that tracking is not the same as “reviewing”.Tracking implies checking all along. Reviewing is what I do when my credit card bill posts each month and it takes 10 seconds to scan the itemization. Sometimes I’ll login on line if I made several purchases in a day just to make sure they posted correctly. I’m all about the macro approach. It makes me feel like I’m free to spend money, without actually spending any additional money. The only time I track individual expenses closely is when I’m gathering data to create a budget. Once I determine what the right numbers are for my current lifestyle and goals, they get locked in and put in safe place, out of the way.
I hate tracking and have never done it on a consistent basis. I’m still a saver and have a healthy bank account.
Instead of tracking, I pay myself first: 15% to my 401k, 10% to slush fund/emergency fund/target funds (such as home improvement projects). I work hard to keep a check on lifestyle inflation.
I track every penny on an Excel sheet because I have to–my boyfriend and I split 50/50 on bills and item by item on shopping trips, but I pay initially because he’s a student and pays me back when he can. Tracking hasn’t altered my behavior, though…I think if I didn’t have to I wouldn’t bother because we’re frugal by nature. The only reason I would is if I had a big “want” in mind, like a vacation or new toy, and wanted to budget accordingly.
I prefer to track larger trends such as saving rates and total monthly expenditures (credit card + fixed expenses + variable expenses + cash purchases from a set amount of cash). If either trend seems out of whack, either positively nor negatively, I investigate further. Tracking pennies is a time consuming chore and isn’t always necessary on an on-going basis for personal finance.