It feels so good to be writing again! The past few weeks have been super hectic and stressful, to the point that I was already suffering from an upset stomach and experiencing mild anxiety attacks. But I survived and I've learned that no matter how I try to avoid stress and stressful situations, they are part and parcel of life so I must find a way to effectively manage and deal with them. Another thing I discovered was that I do not succumb to stress eating, in fact I do just the opposite and have to force myself to eat in stressful situations. All the more reason to manage my stress, otherwise I'll end up starving myself to death.
But at least it's over and while I can't scream freedom just yet because something equally challenging is looming ahead, I know that the worst is behind me and that I survived the trenches. Whew.
Moving on, I'd like to talk about how my expense tracking has been going. Tracking expenses is one of the basic tenets of personal finance, because how can you manage your money if you don't know where it's going. I've even advised several people who were battling debt to do just that to get a handle on their spending. However, despite its many benefits, I've never tracked our expenses, instead, I used an envelope system type of app where I would punch in our monthly budget and then deduct the expenses as they happened throughout the month. We usually stay within budget so I was never concerned enough to start tracking our expenses.
That all changed when I read "Your Money or Your Life" and one of the key concepts there was to track every centavo spent vis-a-vis the monthly income and when I did that, I was shocked to discover that we had a deficit in my first month of tracking. Apparently, we had all sorts of little expenses (i.e. gifts, books, clothing etc) that didn't amount to much individually but ended up being quite a pretty penny when added up. So far in the 3 months that I've been tracking expenses, the only time that my income surpassed our expenses was in December. Pathetic, but hey, things can only go up from here right?:p
I use a freebie notebook and a blue pen in tracking my expenses. Then I adopted a simple In and Out method and write down every single thing I spend on, as well as how much I bring in. The first few days of tracking might have been mostly guesstimate, but once I developed the habit, I automatically whip out my spiral notebook and jot down my expense within a few minutes of the money leaving my wallet.
The immediate goal is to keep our expenses below our income (duh!). Next is to achieve a Starter Budget as suggested in Money After Graduation.
The good news about our budget is that we usually hit the 35% housing budget recommendation under the Starter Budget and are well below the 15% transportation because we fully paid off our car loan more than 5 years ago. But our Other category is way above the recommended 25%. This is where those little, unseen purchases rear their ugly heads and the place where our budget needs the most work on.
I highly recommend tracking your expenses because it promotes intentional spending. Right now, because I know that I'll be listing down every expense, I think twice about buying something and reflect on how such purchase will affect our monthly summary. This has saved me from impulse purchases and has forced me to slow down on buying furniture for our condo, meaning that we'll have to make do with our hand me down couch and live with a mattress on the floor for a few more months.
It will probably take a good year or two before we achieve a Starter Budget, and even longer for the Wealth Budget, but every day leading to that creates wealth building habits and those habits are what differentiate the financially free from those enslaved to debt.
Happy weekend everyone!