This post is 988 words a 5-minute read.
I don't care how much money you make, the day you stop tracking your expenses is the day you become broke.
The moment you start to believe "I make so much money that I don't have to keep track of what I'm spending my money on" is the beginning of your end. Unless you Jeff Bezos or someone with more money than countries. But even Bezos has financial planners, advisors, and accountants that keep track of his billions.
Even Ramit Sethi, Mr. Live Your Rich Life Himself, warns of the danger of people making more money and then getting lulled into passivity with their finances. Some of us believe that once we make a certain amount of income (typically $100,000), we don't have to worry about how we spend.
You have to view this not as something you only do for a short period but as a lifestyle. Much like being healthy, you never stop paying attention to what you are putting in your body. You may switch up your approach, stop counting macros, or stop reading food labels. For a lifetime of good health, you will always be aware of what you eat.
Just like brushing your teeth or taking a shower. Tracking your expenses is a core part of your financial hygiene.
Now Depending on who you are, you may have a heavy-handed approach to tracking or a laid-back approach. You may even switch between the two or land somewhere in between. The key is to find the approach that fits you for that current stage of life. And have a willingness to change it as life evolves.
Now it's important to note. There are two ways to track expenses:
Passive Tracking - knowing what's happening with your money but not doing anything with that information.
Active Tracking - using your spending information to create a plan for your money.
The perforation of various money-tracking apps such as Monarch Money (my favorite), Rocket Money, Simplifi by Quicken, YNAB, EveryDollar, etc. That has made it extremely easy to connect your bank to an app that will categorize your spending and show you some pretty graphs. It's easy to believe that you're doing something good just by linking your accounts when in reality you have done nothing
For years, I did the same thing when I first used Mint 😢.
Rest in Peace to the OG.
I had Mint for years and thought I was doing something great with my finances being automatically categorized in Mint. In reality, it was pointless because I was not making any changes. I just had information. I was still using my credit cards and sitting on heaps of debt.
It took me going old school, using a checkbook registry to document every transaction I made. To realize just how I had been playing myself. It reintroduced the pain of spending money because I could finally see the number on my account go down for every dollar I spent. Then it forced me to realize just all the nonsense I was spending my money on.
This is why I suggest that most people start by using some form of paper and pencil. It can even be the notes app on your phone. You could also use apps like Monefy or Sqwad. They do not offer any form of bank linking. It forces you to get back to a manual process so you can see how and when you spend your money.
Or you can do the Ramit Method. Using his Conscious Spending Plan Excel document and allocating your money ahead of time into various bank accounts so you don't have to think when you spend money. Here's what that would look like:
One account for your mortgage/rent
One account for all other bills
One account for savings goals
One account for free spending (this is the account you use for whatever you want. When this account is empty you can't spend anymore)
All these options force you to be an active participant in your finances.
The key is not allowing yourself to get lulled into a false sense of security. Remain present and in charge of your money.
Thanks for reading
Remember Generosity>greed
God Bless You
✌🏾
Recommended Reads
A new podcast I am loving is called 50Fires. It is by Carl Richards, a recovering Financial Planner and Advisor, who although could help other people with their finances. Had a difficult time talking about money with his wife and children. It has quickly become one of my most anticipated podcast to listen to every week.
Nick Maggiulli writes in Millionaires Don’t Use Astrology, Billionaires Do, explains why the behaviors that lead to astronomical success are the exact same behaviors that lead to catastrophic failures.
Kyla Scanlon does a masterful job explaining some of the issues with our current social and economic climate in Why We Don't Trust Each Other Anymore. It is a wonderful read. It is long but well worth it.
Morgan House in The Dumber Side of Smart People discusses why really smart people do some of the dumbest things. Key takeaway, it is far too easy for us to believe our own bullshit and ignore everyone who is not as "smart" or credentialled as we are.
Kattie Gatti Tassin, The Naked Financial Hypocrisy of Tradwife Influencer. This article is exactly why you should never EVER compare your life on to anyone on the internet. Whatever lifestyle you see glamorized on your 5-7" screen is nothing but a veneer to sell something (typically a course) to you.
Nick Magguilli in Can the Typical Person Become a Millionaire. Obliterates the idea that just about anyone can become a millionaire without making HARD or ATYPICAL choices. There are few articles that cause a shift in the way I speak about money and this article did that.