Why Constantly Tracking Your Income and Spending Will Give You More Focus on Financial Success.

If your life is anything like mine, there comes a time every month when you don’t know if you can actually afford anything. When you hand the bartender your credit card, you silently pray that it doesn’t get declined. This is usually around the time when you are waiting on a paycheck, have just paid off your credit card statements in full, but still owe your landlord rent for the month. During this time you have no idea of your financial standing and are too lazy and scared to look. So you continue to stress and you continue to pray.

As I looked into ways to eliminate this monthly stress, I read a lot of articles that focused on the importance of consistency, goals and budgeting, etc. I also began reading a book called ‘The Power of Habit’ by Charles Duhigg. In this book, Duhigg explains why we have habits in our lives and how the habits we keep become the distinguishing factors between failure and success. With motivation to change my habits and a goal to become more aware of my finances, I began a daily budget tracker. On March 1st, I made a commitment to track all of my finances to the penny, every single day.  

While this task might sound daunting to some of you, I can assure you it becomes second nature in no time. There are plenty of finance tracking apps out there, but I wanted to keep it simple and use Excel as I suggest you do as well. As you will see below, I created a table with the days of the month across the x axis and a list of income and debt sources along the y axis. Laying everything out has helped me become grounded in the reality of my financial standing, which has in turn motivated me to take more action towards achieving my financial goals.

How to go about tracking: Open your spreadsheet and then open all of your banking, credit card, stock trading apps on my phone. If you do not currently have electronic access to all of your funds (assets and liabilities), I would download these and keep them on your home screen With these open, simply input the data into the appropriate rows on the spreadsheet.

You can also build out a graph as I have done below, that will pull in your inputted data and adjust accordingly. Keeping tabs on your daily spending is a cool way of learning about who you are as a person and what you value the most, by what you spend most of your money on. So many of our purchases these days are mindless because we keep our finances out of sight and out of mind. This is why when we open our bank account after a month or so, we wonder where all of our money went. This routine allows me to see where my money goes every day and how my investments are growing. Saving money is a checks and balances system if you will. Through tracking, as you learn about your losses/gains on a daily basis you will be able to clean up your spending and increase your savings. The first step to financial success is confronting reality and taking responsibility for your spending.

Below are some screenshots of exemplary tracking.

May 1 May 2 May 3 May 4
Cash (estimate) $350.00 $328.00 $317.00 $298.00
Checking 1 $800.00 $788.00 $812.00 $806.00
Venmo $45.00 $45.00 $58.00 $62.00
Savings $1,500.00 $1,500.00 $1,500.56 $1,500.56
Brokerage $1,289.00 $1,290.00 $1,311.00 $1,298.00
401k $12,785.00 $12,790.00 $12,811.00 $12,806.00
Total Assets $16,769.00 $16,741.00 $16,809.56 $16,770.56
Credit card debt -$4,876.00 -$4,800.00 -$4,811.00 -$4,750.00
Student loans -$26,000.00 -$26,000.00 -$26,000.00 -$26,000.00
Total liabilities -$30,876.00 -$30,800.00 -$30,811.00 -$30,750.00
PNW -$14,107.00 -$14,059.00 -$14,001.44 -$13,979.44

Stop Making Plans and Start Establishing your Priorities.

When I started my job last summer, I became increasingly focused on planning out my future. When you are investing upwards of 10-12 hours a day at the office, you want to know that your time and energy are taking you where you want to go. Not only is “planner” built into my position title, but I have always been a planner in general. I like to know where I’m going, what I’m doing and who will be there.

Making plans has proved beneficial for me in the past, especially while at college, when classes ran on the same schedule every week and I was regularly in touch with the same groups of people. I knew what to expect from my days, so having a plan helped me fill my extra time in the best way possible. However, as I settle into my life outside of academia, I have started to see that the same rules don’t apply. Having plans has become more of a hinderance to my productivity than a help.

When plans are too detailed and timely, it can be very stressful trying to keep up with them. Your mood changes, people change their minds and the weather is never as nice as we expect it will be. If you have a set plan for your day, last minute changes to your agenda can leave you feeling very down, stressed and under-accomplished. Which in turn can reduce your productivity, and lead to increased planning in the future. I know first hand, it’s a bad cycle.

What I have started to do instead, is become increasingly grounded in my priorities. As someone who hadn’t put serious thought into my priorities before, it was difficult to determine what they actually were. I asked myself these four questions to get started.

  • What do you spend the most time doing already and why?
  • What do you do the most in your off time and why?
  • What is the majority of your Instagram/Facebook/Youtube feed filled with and why?
  • If you were on your deathbed, what would you want the most and why?

While my mind was all over the place at first, after a few weeks of journaling and observing my behaviors and thoughts, I came up with my answers. These were undoubtedly my priorities, whether I had realized it before or not. The most important part of my answers was the ‘why?’ Becoming very clear about your priorities and having concrete reasons as to why they are what they are, is crucial for living an honest and productive life. Yes, it may be scary to admit that you truly can’t plan out your day, year or life, but if you commit to operating based on your priorities, you can never really lose.

As you learn to say no to opportunities that don’t align with your priorities, you will naturally gravitate towards those that do. You will be able to make decisions more confidently and will be less thrown off when things come up unexpectedly. We can’t predict what will happen in life, but we can decide how to react when things do happen. If we are always mindful of our priorities, then we can best decide how to react to situations in order to live out our goals.

Minimalism: A lifestyle for us all

Do you remember the apartment I mentioned in my last article? The one I moved in to, to pay $200 dollars less a month for rent? Well since signing in September, my monthly payment isn’t the only thing that has decreased significantly.

Back in August, at the peak of our desperation to find an apartment, my roommate urgently called me from an open house showing. I could hear the smile in her voice on the other end of the phone. “I think this is our place. It’s small, don’t get me wrong. The rooms are tiny. But the location is perfect and rent is unbeatable!” Before I had a chance to respond, my phone started buzzing in my ear as pictures of the place popped up on my screen. I put her on speaker and zoomed in on the images. The place looked livable from what I was seeing, but pictures had previously deceived us. I decided to leave work early and head over to catch the tail end of the showing.

She wasn’t lying, the apartment was very small. Standing with the realtor in the kitchen, the most spacious room in the entire place, I brought up the questions he didn’t want to answer. “So what exactly are the dimensions of these rooms? I need to make sure my bed will fit.” He lead the way to the smallest bedroom without a closet, folded open the crooked, shutter style doors and let me walk in. “The room you are in now is 7×7 feet.” I pulled out my phone and Googled the dimensions of a queen size bed. “Okay, it looks like it will just barely fit. Queen beds measure about 5×6.” We both giggle sighed and shrugged our shoulders.

When I made the decision to live in this apartment, I knew I was going to have to get rid of over half of my belongings. I knew I did not have room for all of the clothes, furniture, decorations and other STUFF I had been living with for years. What I didn’t understand at the time was that the terms of this commitment would change my life for the better. Now even though I only have a bed in my room, a wardrobe consisting of only the clothes I feel good in and a fridge with only the food I will eat within three days, I am more satisfied than before.

Over the holiday break, I watched the documentary Minimalism on Netflix. It was amazing hearing neuroscientists and other striving minimalists describe what I have been experiencing for months. One minimalist explained, “every possession serves a purpose that brings me joy…when I look around I have to justify to myself, does this add value to my life, and if it doesn’t I have to be willing to let go.” Letting go of things that do not have utility can be difficult, especially if we have an emotional attachment for whatever reason. Speaking from experience however, the letting go is the hardest part. Living life with less has not only helped me save money, but has allowed me to shift my focus toward my relationships and my personal goals.

So this year I challenge you to first watch the documentary, and then begin taking small steps to become more of a minimalist. No, you do not need to move into a smaller space to start living this lifestyle. I do however, encourage you to choose quality over quantity. Let go of anything in your life that isn’t serving you right now and begin valuing and caring for those things that do. Needing less will not only make you richer in the bank, but richer at heart.

Mind Over Money

When I graduated in the spring of 2015, I thought I had it all figured out. I had some money saved, a job lined up and an apartment to move in to. College had been a blast, but I felt mature and ready begin my life as a real adult. I was going to succeed and it was going to be a breeze.  

Now, a year and a half later, I sit here writing my first post for my brother’s finance blog. See, I used to think this blog was dumb. I didn’t understand what BeatingBreakEven really meant and always thought my brother was wasting his time talking about money so much. But after switching jobs in June for a salary raise and signing a new lease, for rent that was $200 dollars less a month, I realize I am exactly where he was. I am broke, have no concrete plans for my future and am extremely unsure of myself.

In the past few months I have been thinking a lot about my life and who I want to be. I’ve thought about what to do next in my career, thought about what city I want to move to and thought about how to save more money. I’ve also spent a lot of time contemplating my inner motives, my deepest fears and my varying levels of self esteem. In this process of psychological discovery, I have begun to understand just how powerful our minds really are. They can be our biggest tool for success and the biggest obstacle.

I have started to experience first hand how becoming more aware of my thoughts and psychology can really help me achieve my goals. I mean don’t they say that you can achieve anything you put your mind to? Mastering your mind will not only make you a happier person, but will keep you on track to reaching your long term goals. Since many of my goals are financially based at the moment, I went through last month’s credit card statement to recount my recent purchases. Besides food, almost everything I bought was unnecessary. Nails, makeup, new shoes, drinks at the bar, etc. Practically everything on there were things I bought to feel better about myself. For many of us millennials, our credit card statements are a long list of our deepest insecurities resurfacing as impulsive spending habits. It’s actually pretty scary. Working through my insecurities and understanding the motives behind my purchases has started to help me say no to a lot of things I normally would have swiped for without thinking twice.

If we want to change our spending habits, we first have to change our thoughts. Seems simple and intuitive on the surface, but our minds are really unexplored territory for many young adults. We millennials do not spend enough time understanding our needs, wants and desires and instead, act on impulse as a way to band aid our immediate emotional challenges. We are impulsive because we do not take enough time to think and we spend because we don’t want to feel. We really need to learn how to understand our thoughts and be okay with our emotions, so we can make healthy, logical financial decisions.

FOUR Financial Lessons from the Homeless

New York is one of the biggest financial capitals of the world. Finance is everywhere in this city, whether in the billion dollar hedge funds that are making million dollar deals or the restaurant owners calculating bar tabs, brunch receipts or tenants saving for the unruly rent they owe their landlords at the start of each month. 

One lesson I have learned from observing the homeless on my street, is that being a pure minimalist has its benefits. These people carry with them only what they need and nothing more. It would be inefficient to carry around dead, excess weight. We as millennials need to understand why excess is bad and recognize how our spending habits are based on desire instead of necessity. If we all became more aware of the things that we buy and their ability to clutter our lives, we might start to realize that material goods do not help us meet our goals or delay the process.

The second lesson we can learn from the homeless is how we can market ourselves well to attract the attention of others. I regularly encounter homeless individuals on the subways and in the streets. They are holding signs that tell their story or are yelling at passengers about their specific misfortunes. Many of them have had a lot of practice doing this, so they know what works and what doesn’t. They are forced to put their best foot forward and try and try again to sell the bystanders on a few dollars of investment into them. They are essentially pitching themselves to an audience of investors, like you see startups do on Shark Tank. When you want money for an investment or business, or are trying to land the perfect job, you need to market yourself to your best ability. This means looking the part and connecting with the given audience on a personal and real level. The homeless live it everyday. Their survival depends on it.  Since yours doesn’t, if you were to apply the same sincerity and passion into improving your current state, you would likely get very far.

The third lesson is utilizing the resources around you to the best of your best ability. I was in the train station one time and a homeless man was cleaning all of his clothes in the bathroom sink. Since the station is a public facility, this was free to him. He was being resourceful. I also see many homeless people using public places for shelter or the public library for entertainment to pass the time and read or subway seats as beds. We as millennials also have boundless resources around us that will cost us little to no money to utilize things such as books, mentors, the internet, newspapers, other people in our field willing to help us if only we just ask. Many of us do not use these resources to our advantage as we should.

The fourth lesson is that homeless people ask for what they want. If asking doesn’t work with one person, they try and try again. They are relentless because they need to survive. They will badger so many people and most of the time it works. I know because I see so many people fall prey to their tactics and reach into their pockets to grab money. Its human nature to feel empathetic towards other people and want to help them out. Ask for what you want and if you get denied ask someone else.

The final lesson to consider is that homeless people use a cash based accounting model. These days everyone is in debt. Debt is a tool, but most of the time people, especially people our age, abuse this tool. Homeless people collect cash, use that cash and simply go and try to get more when they run out. They don’t just put their purchases on a credit card. People need to realize that we should only spend what we have available. Try carrying around a specific amount of cash each day, spending only what you need and nothing more. Don’t always be putting the little things in life on a credit card because it creates bad habits that are hard to stop.

 

Take Control of Your Financial Future By Paying Yourself First

One of my most memorable lessons from my childhood was when I learned the importance of “paying yourself first.” Many of my peers and friends have complained about their money problems; bills weigh on their mind and they become stressed living paycheck to paycheck. While it is important to stay cognizant of costs and expenditures, too many people make paying their bills their number one priority.This leaves them treading water just to keep their nose out of the water. This is definitely not detrimental, but it will not leave you on top or help you reach your more long term financial goals. I’m here to tell you why it is more important to pay yourself first before paying any bills.

The common routine for many millennials is to set aside money every month for costs, such as rent, transportation, etc. and then treat the leftover money as free spending to blow. Instead, I am suggesting that you first set aside an amount, “personal bill” and then using the rest to supplement bills and other costs. Creating this kind of system will change your mindset about your money. First and foremost you will be saving and secondly, you will be more calculated and thoughtful about how you spend your earrnings. Putting your money in a personal account will prevent you from spending carelessy.

An easy way to start this spending transformation is to go to the bank and open up an account specifically for your savings goal, whether it be a car a house, business or your future. These accounts can be set up so a percentage of your weekly paycheck is directly deposited. This can also be accomplished by setting up a a pre-tax or Roth 401K account. With these types of programs, some of your “extra” money will go directly towards yoru retirement fund that you will be able to acess around the age of 65. As I’ve written about in previous blog posts, a 401k adds a percentage of your paycheck and in many situations your employer will also match your contribution up to as high as 5%.

By focusing on long term financial goals and redesigning your spending/ saving schedule, you can really improve your financial standing. Having a personal account can also bring more security and allow you agency to act on larger investment opportunities that could present themselves in the future. With this mindset, budgeting becomes a crucial component to your life. You should always be adding your savings or “profit” into your weekly and monthly budgets. You want your personal account to be a guaranteed resource you can draw on, so maintenance and continual deposits are crucial. Your other finances will naturally accommodate and adjust for this extra profit and you will in-turn become more intune and financially savvy.

A further benefit to “paying yourself first” is the secondary psychological effects from having saved money. It can be a great feeling to know that you are now controlling your own financial security and this can in-turn guide even more smart choices for how to save and invest money that comes your way in the future.

Why You Need To Look Into Tax-Free Spending Accounts Now

 If you are currently employed, you should at least take a look and see if your employer can offer you  these spending accounts and you could save more money for yourself and give less to Sam.

Flexible Spending Accounts

“Approximately thirty-five million Americans are covered by a flexible spending account (FSA).* FSAs are employer-based programs that allow consumers to set aside tax-free dollars to purchase medical products and services – from bandaids to smoking cessation programs and tens of thousands of products and services in between (FSAStore.com)”.

This is yet another program offered by your employer so you can make them work for you. Sites like FSAstore.com let users purchase everyday items such as glasses, contacts, thermometers, bandaids, sunscreen etc. basically all out-of pocket health care costs with tax-free money.

Your employer will front you up to $2,550 from your annual salary in the beginning of your plan year. The amount can be up to $2,550, but the one trick here is that you have to use all that money you set aside by the end of the year or else it will be returned to the employer. So, you have to hedge your bet that you will use the allotted money within the year time period. (FSA Calculator)

If you normally buy the many products approved for flexible spending accounts, then this is a great program and can save you lots of money (up to $1009.80). Depending on your employer, they may offer you one of two options:

  1. You may receive a “grace period” where you can get up to 2.5 extra months to use the money in your flexible spending account, or
  2. You may be allowed to carry over up to $500 per year to use in the following year (healthcare.gov).

Commuter Benefits Accounts

If you are a millennial living in the city, flexible spending accounts also have good commuter benefits. I know that many New York companies have transportation reimbursement program where they will reimburse you for public transportation (this also applies to all major cities). This can be a great way to use tax-free money for your daily commute. This year, New York City increased subway fare. Even more reason to save as much as $550 (39.6% tax bracket and 116.5/month for MTA subway pass) using your commuter benefit options with your employer. Look into Wageworks.com for more information.

If you haven’t heard of a these spending accounts and are interested in saving money on things you would end up purchasing anyways I strongly recommend you look into a tax-free.

Sources:

https://www.healthcare.gov/flexible-spending-accounts/

https://www.fsastore.com

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