Why I Plan to Track My Spending During 2017

One of my goals for the coming year is to track all of my earning and spending. I've had a few folks ask me why I want to do this. “Aren't you financially independent?” they ask. “If that's the case, then why do you care what you spend?”

Simple.

Financial independence isn't some magic place where you no longer have to worry about money. Reaching FI doesn't give you a license to spend on whatever you want, consuming every luxury in the world. Financial independence only means you have enough saved (and invested) to support your current standard of living for the rest of your life — given some reasonable assumptions.

Using my roadmap to financial freedom, financial abundance is the state of never having to worry about money again. At this point, you've saved so much money you can do whatever you want without worrying about the financial consequences. I'm not there yet…and I probably never will be.

Here's the thing about financial independence: You can lose it.

Say, for instance, you've amassed a net worth of about $1,500,000 (which happens to be close to the size my own nest egg) and you spend $36,000 per year (which is what I consider my typical spend rate). In this case, you have indeed achieve financial independence. With the parameters and assumptions we typically use here at Money Boss, a nest egg of $1.5 million ought to support annual spending of around $60,000.

But say you were to move from Omaha to someplace more expensive — someplace like San Francisco. And say that in addition to a jump in cost of living, you also experienced increased pressure to spend when you're hanging out with your new friends. If you suddenly found your annual budget was $100,000 (or more!), that net worth of $1.5 million no longer puts you in the category of financial independence. You were FI in Nebraska, but you're not FI in northern California.

Sure, you probably still have Financial Security with $100,000 in spending on $1.5 million of net worth. Your savings and investments will likely cover basic needs. But because you've changed your lifestyle, you're no longer truly financially independent.

Now, I haven't moved cross country to a more expensive city. I still live in Portland (which is plenty costly). I still walk most of the time. I'm still fairly frugal. But in the five years since I last logged my money moves, a lot of things have changed in my life.

  • I moved out of my cheap apartment and bought a condo. I paid for the place outright, but between utilities, maintenance, and HOA, it costs a lot to live here!
  • I swapped a low-rent neighborhood with lots of cheap places to shop and eat for a fancier area where restaurants are more expensive and all of the supermarkets feature boutique organic food.
  • I went from being a newly-divorced middle-aged man to dating somebody long-term. Expectations are different in a relationship than they are for single guys!
  • Kim and I got a puppy. And two kittens. These critters take money to maintain.

Plus, just like everyone, I have a tendency to give in to lifestyle inflation. If I'm not scrupulous, little luxuries turn into big ones.

Since returning from our cross-country RV trip, I've been tempted to spend more than in the recent past. Maybe it's because we intentionally did not buy things on the road. I don't know. Whatever the case, I've been updating my wardrobe, acquiring new gadgets, and rationalizing more books. In the grand scheme of things, I can afford this stuff. But that's not really the point. I'm a little worried my lifestyle has grown too large.

If you put all of this together, you have a situation where I no longer know how much I'm spending, and that makes me uncomfortable. I say I spend roughly $36,000 per year, and that's been true in the past, but what am I actually spending? That's what I aim to discover.

To that end, I'm going to track my money in 2017. In fact, I'm going to start this project as soon as I figure out which tool to use. I want to get a current baseline before I start trying to make corrections.

My short-term challenge is to figure out how to track my spending. In the olden days, when the world was young, I used Quicken. Quicken isn't perfect, but it's familiar. I like its reporting features and I like that it forces me to manually enter data. That's important because when I enter transactions by hand, I'm more aware of just where my money is going. (To me, tools that automatically record transactions aren't helpful. They make it too easy to gloss over possible problems.)

I plan to give Mint and Personal Capital a try, but I suspect I'll settle on something like Quicken. Or a customized spreadsheet.

Ultimately, I hope to accomplish two things with this project.

  • I want to get a clear idea of what I'm actually spending — even if it's shocking. I can't make adjustments if I don't know what I need to adjust.
  • I want to encourage Money Boss readers to track their spending too, even if it's only for a month (or three). I want you to find your problem spots so that you can correct them.

As soon as I publish this article, I'm going to get started. I'll unearth my disused Mint and Personal Capital accounts. If I have to set up new ones, I'll document the process. Plus, after all of these years, I'll finally give YNAB a spin. I'll use all of these tools during December. At the end of the month, I'll write about my experience and share which tool I've chosen to manage my money during 2017.

If you have any suggestions for tools to try, I'd love to hear them!

More about...Administration

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Sharon
Sharon
3 years ago

We are tracking our spending with a simple spreadsheet and I also use Spencer app for logging cash transactions. We mostly use credit cards does purchases so it’s easy to sit down with our credit card bills once or twice a month to log our spending. I agree that tracking makes you more aware of transactions in our case how much we eat out.

Ben
Ben
3 years ago

Good for you, JD. You make a good point about the downsides of the likes of Mint, Personal Capital, etc. I track every penny I spend and have tried those tools in the past. I found that it was too easy to link up my accounts but then never really spend much time analyzing the data they gather and think about what it means. Plus I have found their reporting tools are inherently limited. Even though some would consider it old-fashioned, for me an Excel spreadsheet is the best way to track spending. Over time I have developed ways of… Read more »

Liz@ChiefMomOfficer
3 years ago

I’m with you – I’ve tried Mint & Personal Capital but I just keep going back to Excel. I prefer it because I have to pay close attention to it, and I like the reports I can built using charts/graphs/pivot tables. I can immediately break things down into whatever categories and subcategories I want, and I find it much easier to use than the other tools. Entering manually helps me keep things in check and make adjustments quickly.

Sandy
Sandy
3 years ago

I use countabout.com. I enter all my own transactions, and that version is around $10 per year to hold the data in the cloud. I can use it in my browser on a laptop, and it has an app. Has some decent reporting, too. For me, it’s easier than a spreadsheet, but less cumbersome than something like Mint since I like to enter my own data.

Binky
Binky
3 years ago

I’ve used Goodbudget (free) which is a basic envelope budgeting / manual transaction recording app. I only use it once a year for a month, just to keep an eye on personal inflation. I just use this data to create a rough mental model of expected week 1,2,3,4 spend. When I check my bank balance I can spot if something has gone awry. I’ve found the option of using an app on a mobile device eases the data entry aspects enough to make the whole thing easily bearable for a month or so. I’ve heard lots of good things about… Read more »

The Green Swan
The Green Swan
3 years ago

That’s a great goal for 2017 JD. There’s really no alternative to manually tracking expenses. I use personal capital to aggregate all my accounts and transactions and that makes it easy for me to then log directly into my customized excel spreadsheet.

Even in FI it’s important to know your expenses are still inbound!

Matt @ Optimize Your Life
Matt @ Optimize Your Life
3 years ago

This is a good call. I feel like even if things feel like they are on track we should be doubling back and making sure every once in a while. This is something I try to do with time tracking, as well. I will track my time for a week, make adjustments, and then not track for a long time before doubling back and repeating the process at some point many months later. For tracking my spending I use Mint and YNAB. Mint is great for looking at spending patterns over time and seeing broad patterns. YNAB is better for… Read more »

Kevin
Kevin
3 years ago

If you’re on a Mac try Banktivity. I was a long time Quicken guy but about 15 months ago switched to a Mac and Quicken got terrible reveiws on that platform. iBank (as it was called) was highly recommended and shortly after changed names to Banktivity. It has 95% of the functionality of Quicken. Some investment transactions don’t work quite right but after using it a month or so I figured out the workarounds.

Kathryn
Kathryn
3 years ago

I believe that there’s even more motivation to track spending once you have a higher net worth and are closer to (or at in your case) financial independence. Through years of hard work, we’ve realized that watching what we spend makes a huge difference over the years. About a year and a half ago, I was on the same mission to find the perfect finance software for me and thought, like you, that Quicken would be the one and only. I found it to be too cumbersome (no to mention buggy) now that I’m used to using fresh, updated software… Read more »

Keith
Keith
3 years ago

Use YNAB. It’s so straightforward and easy to use on a day to day basis. They recently added new reports that make spending tracking a breeze.

JC Webber III
JC Webber III
3 years ago

I second that recommendation for YNAB. It’s been a real eye-opener.

Rose Rushbrooke
Rose Rushbrooke
3 years ago

YNAB, YNAB, YNAB. Saved our asses. From bankruptcy to recently buying a house.

Sandi Kay
Sandi Kay
3 years ago

I’ve used ClearCheckbook.com for tracking expenses over individual, joint, and investment accounts. It works well if you’re willing to do the classic accounting-style double-entry bookkeeping.

Amanda V
Amanda V
3 years ago

I am interested on seeing how you categorize your expenses. I feel like only using 3 categories of needs, wants and savings is not enough, but mint’s default categories is overkill. Right now I consider anything that you would typically buy in a grocery store (ie TP, toothpaste) groceries. And coffee shops are considered eating out. Most of our wants and some needs are lumped into a category called shopping that includes things that are not repetitive purchase items (ie clothing, electronics, entertainment).

Good luck!

El Nerdo Nerdez
El Nerdo Nerdez
3 years ago

If the balanced money formula worked for you once, why not use it again instead of tracking every last maddening penny for life? I’m not saying don’t count it, btw– I’m saying count once, as Elizabeth Warren recommends, then parcel out your needs & wants budget (& maybe throw in something for additional savings for peace of mind though technically you no longer need it.) Isn’t it a whole lot simpler to work with ratios, and some sort of “envelope” system, or even separate accounts? (Needs account, play account.) Inspecting every receipt and tracking every last penny is the pits,… Read more »

Nerdo again
Nerdo again
3 years ago
Reply to  J.D. Roth

Oh yeah, understand the pleasure. I’m actually tracking nutrients these days– everything I eat is weighed and measured and accounted for, obsessively. This is because I’m actively budgeting my macros for a body recomposition project (lol), so that’s what has my attention right now. The money is on autopilot now. I couldn’t do both obsessions at once– I can handle one big change at a time. By the BMF I didn’t mean to do 50/30/20, but just think in terms of what you’d do if the market temporarily crashed (similar to the BMF unemployment scenario = “needs”), what you want… Read more »

Lake Livin'
Lake Livin'
3 years ago
Reply to  Nerdo again

Nerdo, I track my macros, too!! I love it. I’ve doing it about 16 months and that, along with switching from Group Ex classes to heavy lifting (about a month after starting macros) has COMPLETELY changed my body. I looked fine before and was in good shape, but I am lean and ripped now. I just turned 40 and I’m like “still got it!” ,

El Nerdo Nerdez
El Nerdo Nerdez
3 years ago
Reply to  Lake Livin'

Hey, congrats!

Yeah I’ve dropped 32 lbs since August. First on calorie restriction and later on keto.

Keto is really working out for me and I plan to keep either that or low-carb for the long term. Just works with my meso-endo type.

Anwyay, like with diet, I believe macros are also the key for money management. Only instead of proteins fats and carbs you watch your needs wants and savings.

I used to have too-high obligations and it was constant torture. Downsizing to under-50% needs made savings and fun soooooo possible.

joe
joe
3 years ago

i use moneywiz (available as apps for iMac,iphone etc.)

i would love to know what categories you use to track daily things

Valerie
Valerie
3 years ago

I find YNAB far superior to other software. Mint and quicken are clunky and spreadsheets too labor intensive. With YNAB app it is very easy to input expenses on your phone (or through the website). Much better than the others.

Mustard Seed Money
Mustard Seed Money
3 years ago

I am a huge fan of using Personal Capital to track all of my expenses. I previously used Mint but found that I liked the Personal Capital interface better especially for investments.

I tried a free trial of YNAB and for whatever reason it didn’t seem nearly as intuitive as it have been. Or it could have just been me because clearly tons of people love it.

Congrats on jumping back on the track spending bandwagon. I look forward to hearing about your financial journey.

Fervent Finance
Fervent Finance
3 years ago

I was always against tracking my expenses since I wasn’t much of a spender anyways (in my mind). 2016 was the first year where I tracked my expenses thoroughly, and by just doing that I am so much more aware of where I spend a lot of money. Therefore, subconsciously I’m spending less I feel like. I will always track my expenses from now on.

Dividend Growth Investor
Dividend Growth Investor
3 years ago

I think that you are more financially independent than others, because a portfolio of $1.5M can easily generate $36,000 in annual dividend income at an yield of 2.40%, even if you just own index funds. I personally would get a kick out of reading your monthly income reports, alongside with your monthly expense reports. I do not track expenses, because frugal living has been a second nature for me for years. When I do gather the data to test my frugality assumptions, it usually confirms the fact that my spending is not out of control, and it is within a… Read more »

chacha1
chacha1
3 years ago

I have a written spending plan that is basically “these expenses hit at these times and will be paid with these paychecks.” And I have an operational credit card. Since you don’t have paychecks per se I don’t know exactly how you “budget;” in your situation I think I would have create a pay schedule for myself using two accounts. I imagine it’s hard to budget if you don’t have a set amount you plan to spend each month, and don’t schedule times when that money will be available to you. The credit card tracks my spending categories automagically and… Read more »

Kristy
Kristy
3 years ago

I’m a spreadsheet nerd and fell in love with Tiller. I ditched creating my own manual tracking methods in favor of theirs – they import your transactions, allow you to set categories, have a summary page for your account balances, and allow you to see spending trends. I prefer it over Mint, Excel, YNAB, and EveryDollar.

Madison
Madison
3 years ago

Another vote for YNAB. It was tough at first to adjust to a more envelope-system type of budgeting, but it ultimately changed my perspective on spending – I have far more focus on value spending now.

Chris @ Keep Thrifty
Chris @ Keep Thrifty
3 years ago

Awesome to hear JD – I’m a big proponent of tracking expenses and am strongly on the “manual” tracking bandwagon. Because I hadn’t found a tool that I liked and wanted something more accessible on-the-go than a spreadsheet, I developed my own web-based tool (Thrifty) that works on computers, tablets and phones. I use Thrifty to track income, taxes, and expenses but it can be used to track any subset of those if some don’t apply. Right now, it’s free (and has no ads) as I’m using it primarily for personal use but I’ve made it available for others as… Read more »

Debi
Debi
3 years ago

I started tracking monthly spending in 2010 using a customized spreadsheet. This works for me because I get to pick how broad or narrow the categories are (sit down restaurants separate from fast food) and I don’t mind doing the manual entry. I started logging expenses so that I could determine baselines for spending needs as we approach retirement. We’re nearly there and because I have the 6 years of spending habits tracked I’m confident in what our income needs will be, adjusting for additional travel expenses, as we enter retirement. Pet peeve: TV commercials touting a “magic number” for… Read more »

Anthony
Anthony
3 years ago

J.D., have you considered EveryDollar? I’ve used it before and although I typically use my own spreadsheet I’ve found that the layout and look of ED to be easy on the eyes and very straightforward and well-organized. The first time through it’ll take a little bit of time to try to get it setup the way you want, but after that it gives you the opportunity the create the new month’s budget using the previous month as guide.

Anyway, I hope you have a Happy Thanksgiving, a very Merry Christmas and a Happy New Year! Happy spend-tracking!

Matt
Matt
3 years ago

This will mark my first full year of tracking expenses after a couple starts and stops in the past, and I’m pretty excited to see how it all breaks down. I’m still young and in the accumulation phase so I know things can change down the line but manually recording everything (I use YNAB also) helps satisfy the need to be “active” when it comes to my finances. I don’t know if I could handle the temptation to check an automatically updated net worth every day (like with Mint or PC) so keeping it simply budgeting and tracking helps remind… Read more »

Chris
Chris
3 years ago

Hey JD…I have a couple questions…first how did your trip go? Did I miss your overview on that?
I live out in White Salmon..would love to say hello some time if you are ever out this way? Do you like to hike? Email me if you would like.

Sagar Nandwani
Sagar Nandwani
3 years ago

We tracked every expenses for the first few years we were trying to get out of debt and really start saving. Then we tracked certain categories every few months. We automated our investing and set up checking accounts for certain items for a number of years, and that worked well. This year, because we are taking a year off, we are back to tracking every single expense. It’s been great. We use an app on our phone and computer to put in each transaction. It has given me so much good info! As we start to think about what the… Read more »

Lake Livin'
Lake Livin'
3 years ago

Another vote for just maintaining your own manual spreadsheet. I have mine just how I like it. I spending weekly and net worth monthly. I also use it to track insurance, graphs, etc.

HeadedWest
HeadedWest
3 years ago

This is a very timely post for my wife and I. Living and working in Texas, we have accumulated over 25X our annual spending in savings and investments. So, what’s next? We are now buying a home in Seattle that is twice as expensive as our current Houston residence. Basically, we have de-FI’ed ourselves, if that’s even a term. We think that working extra to live where you want is totally worth it, but it does highlight the need to keep your eye on the financial ball, so to speak. Anyone who might want to make a similar change later… Read more »

ZJ Thorne
ZJ Thorne
3 years ago

For me, Mint is adequate. Shows enough data to keep me on track, but I think you like more granular information and don’t think it will serve you well. It’s fascinating that lifestyle creep can happen at any point in our financial journeys.

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