In this weeks edition of Monday Morning Quarter-Buck, Financial Planner Kerrie Beene, CFP® discussed building wealth by keeping your spending “in control.” We all have busy lives and often do the “next thing” that is needed without realizing how much that is actually costing us.
In a recent conversation with a friend, we were laughing about how little we made when we first started our careers. What we lived off of and how did we do that? As our careers have grown and our lives have gotten busier, we focus on what’s important to us at that moment. This has a name - “life style creep.”
Often we are asked, “will I be able to retire with “x” dollars in the bank?” That answer to that question often is based around your desired lifestyle in retirement, in other words, how much do you spend?
Have you experienced life style creep? Here are some tips to help you take control.
By: Kerrie Beene, CFP®
Not sure everyone would admit it, but I bet there have been times when you were paying for something and you had to stand there and wonder if the transaction would go through?? Or when you go shopping and you plan to spend around $200 on your purchase but then once the swiping begins you have no idea how much you have spent but surely it is only like $205 so you should be fine, right? And then you are wrong and you spent $450! This is mindlessly spending.
Another way we mindlessly spend is by just ignoring what we spend our money on and how much money we actually have in our account. With modern technology, most people just login to their bank and check their balance. This gets the job done and can be somewhat managed. However, it is better when we have more control and some idea of how much we spend on each category. It is still really good to know where your money is being spent.
As a financial nerd, I have tried every way to budget, track expenses, and maintain sanity when it comes to our family spending. I have tried online programs like mint.com, YNAB, Dave Ramsey’s budget tools, extreme spreadsheets, and I could go on and on. I have made my husband try all sorts of ways to budget and track our spending. I also have spent time periods where I didn’t budget and didn’t track my spending but this way gives me too much anxiety and makes me feel like I do not have control over our money. And sometimes, being in control is just knowing your true account balance and what you have spent your money on, even if you are broke, at least you are in control. I do still use mint.com for an overall picture, but here are 3 ways that give me a sense of “control.”
Balancing my Checking Account - with current technology, the majority of us do not balance our checkbook. Heck, some of us may not even know how to balance a checkbook. However, I have found that the task of logging on and balancing my account gives me reassurance that I know what is going on with the money. Also, if you are married and the one who keeps up with the financial stuff, a simple text or conversation updating your spouse every day or two keeps everyone on the same page.
The habit of balancing is something I do normally once per day or every other day. It really doesn’t take much time when you do it this often. When I get busy and miss 3 or 4 days, that is when I feel out of control. I may not be out of control, but this is how I feel. And often the way we feel, affects how we spend.
Track Expenses - the second thing that I do that is a little more time consuming is track expenses. This can be done manually with an excel sheet, plain ole pencil and paper, or you can use an online tool like mint.com that does it for you. Either way, taking just a few extra minutes each time you balance or even once a week, shows you where the money is going. This gives a sense of control, even if you did not create a budget ahead of time, at least you know where the money is going and who you should be mad it.
Have 2 Checking Accounts - the 3rd thing that makes No. 1 and No. 2 go smoothly, is have at least 2 checking accounts. The 2 accounts we use are one for bills and one for living expenses. This makes it easy to keep up with bills vs. living expenses. By making sure the bill account has all the money needed for monthly bills we do not have to worry about spending more than we should on living expenses… plus there is no mental math to do when we are busy and login to our accounts. Mental math has to be done when you have one account and the bills come out but at a later time so you have to figure out what can’t be touched. No one wants to do mental math.
These are three things I have done for years and have helped us stay on track during our busy everyday lives. If you are interested in getting help with any of these 3 things or interested in our Busting Bad Budget Habits class, reach out to us at rootedpg.com or feel free to email me at firstname.lastname@example.org