Editor’s note: The following post is written by contributor Josh Collar who blogs about escaping the rat race over at White Collar Freedom
I have a secret little folder on my computer.
No, not that kind.
I mean, inside it, lies years of semi-nude photos – of myself.
No, not that kind either.
Inside that folder lies many sub folders labelled with a date and my weight at that time. My first folder was labelled (20th February 2009 – 58 kg).
You see, about 6 years ago, I was a scrawny little kid and I wanted to pack on some weight – some lean muscle mass. So I read all I could about fitness, diet and weight training. In the beginning, I was really slightly obsessed with bodybuilding and would spend any free time watching motivational videos (umm, you know the kind with sweaty men in ridiculously small singlets?).
Looking back, I finally understand why my parents would give me that strange look every time they caught me watching those videos. They were concerned, and I don’t blame them.
I just wanted a change pretty badly.
Yesterday, I created a folder – (10th April 2015 – 80 kg). Although I have not reached my personal goal yet, I don’t think anyone could call me scrawny either.
In between 2009 and 2015, I had about 75 sub folders created, all meticulously labelled with a date and weight. In fact, every month I would take a photo of my progress and file it digitally.
In short, I tracked and measured my progress – and that has allowed me to progress beyond what I expected.
Today, I’m using that very same tool to build my way to financial freedom.
Are you tracking the dollars that go into and out of your life?
Every time someone complains to me about their state of finances, the first question I ask them is this, “Do you track and record your expenses?” or “Do you know where your dollars are going?”
Most of the time, they will shrug and say, “No”.
And there…right there you have it, the main problem with their finances is the fact that they’re not keeping track of their dollars.
I used to downplay this as well…
Here’s the hard truth, it’s not magic and it’s certainly not rocket science. No, it does not disappear, you’re just in denial. Face the fact that as long as you’re not tracking your expenses, you are giving yourself a chance to be irresponsible with your money.
The only person who stole the cookie from the cookie jar is…yup, yourself.
I make excuses too
When I first started tracking my expenses, I found 101 excuses not to do it.
It’s a hassle, it’s too much work, I do not have time…bla bla bla.
Here’s the thing, if you were running a business, you’d do your accounting. You’d want to know what’s bringing in the money and you’d also want to know what is costing you the most.
Think of yourself as a business.
And everything in life gets uncomfortable before it becomes a habit. Even smokers find it uncomfortable when they took their first puff. After a while, it became a habit.
That’s how habits are formed.
Our job, is to form good ones.
Image courtesy of FreeDigitalPhotos.net/sackhorn38
It sheds light on your weaknesses
It is almost impossible to overspend when you are tracking your finances.
Why?
Because it is like a spotlight, shining down on your weaknesses, your gaps, and the areas in your finances that are in really bad shape. That, makes you embarrass and it will steer you in the right direction.
It keeps you from sliding backwards
Here’s the thing about tracking your finances. It prevents you from backsliding.
When you have built a positive trend line, it stops you from doing something silly as it will nullify your progress. Like an anchor that you can fall back on, it’s a reminder that you’re making positive steps to change your situation. Success builds on success.
And trust me, as long as you’re consistently measuring your progress, it’s very difficult to backslide.
I’ll end by saying this,
You can’t change what you don’t measure.
As a Data Driven Geek myself, I operate with the same philosophy in every aspect of life. I always tell people that they “Can’t Optimize What They Don’t Measure”.
They say “that where your focus goes your energy flows”.
Great Article Josh!
– GYFG
Yes, that’s the technical truth about measurement. But there’s also a psychological attachment involved in the process of tracking our expenses. It’s not only because we need the data…
To drift off into a spiritual perspective (from a neutral point of view), do you know why churches always reinforce the fact that you need to attend Sunday service and meetings? It is because, when you fail to participate in the same cause, you stop believing…
Likewise, in our finances, when we fail to participate in the process, we drift away from our objectives and we will never achieve the kind of independence or freedom that we’re seeking.
Measurement is a form of positive reinforcement. It reinforces the fact that we are committed to change – to make a difference.
I totally love this one Josh! I think, I should start tracking AGAIN my expenses. I used to track my income and expenses before, but sadly I forgot it after a few weeks, consistency really plays a big part for this.
Clarisse, you know what? When I first started to track my expenses, I gave up after 3 months.
I felt that there was no real purpose in doing it. After that, I realized that my expenses spiraled out of control again and realized that I thought about money lesser.
Then I came to the conclusion that it’s not about the data, but simply, the ACT of doing it is a subconscious commitment to achieving those goals that we set for ourselves.
Cheers,
Josh
If you love data like I do, Beeminder has a killer tracking method. Just yesterday, it kept me on track for several things (work productivity, weight, and listing on eBay) that I had put on the backburner a bit. It’s fantastically nasty.
Cool, will check it out Chris. Thanks for suggesting 🙂
I use Money Target app. Very smart and clear http://apple.co/1arolrS and now it’s free!
Josh,
Good read. I apply the “Think of it like a business” mindset to various aspects of life. It really cuts out the superfluous and forces a person to think from a higher level. Thinking of one’s own finances as a business is the best way to get outsized results.
Keep up the quality writing,
– Ryan from GRB
Thanks for the kind words Ryan. It’s funny that if we were running a business, we’d keep and literally scan receipts and invoices. We need to track our revenues, cost of goods sold, expenses, etc.
But when it concerns personal finance, ‘accounting’ seems like a totally foreign word.
Cheers,
Josh
This is excellent. I’ve found that if you’re not tracking every penny, it really can only get you so far with your money management. When you know where your money is going, it gives you the ability to make small changes to your budget to adapt to unexpected expenses / changes.
To make a confession, I’m currently addicted to “tweaking the knobs” in our budget and finding the best ways to utilize every dollar that we bring in. Once it became a habit for me, I can’t imagine managing my money without closely tracking it.
Great post!
Tell me about it. It’s addictive, isn’t it?
This is SO true! I finally started tracking my family’s spending about six months ago, and it was a real eye-opener.
It’s like an X-ray, shining down on problem areas. Sometimes, 80% of our expenses are caused by 20% of big ticket items.
Agreed! I use Mint to track my expenses, but I need to fine tune it a bit. When there is an expense for Target, it really doesn’t show if I’m just buying groceries, or a bunch of clothes and jewelry that I don’t really need. Another perk to being on top of your expenses, is that you’ll quickly notice if something is out of place, whether an error on a bill, or identity theft.
Yup, totally agreed!
This is exactly how I feel about calculating our net worth. We’d never make any progress on our financial goals if we never ran the numbers and figured out where we were and where the numbers were going- and why! In order to make any positive progress, you have to know where you stand.
You can’t change what you don’t measure – sums it up. 🙂
Josh, I’ve been tracking my expenses for about 10 years, which is not-so-coincidentally when I met my wife. I’m the planner and she’s the tracker. She has a spreadsheet for everything, Quicken for finances, apps for weight and fitness, she is our household data geek. At first I resisted, since I’d previously done reasonably well with my ballparking it, but resistance was futile. Now I’m the one entering the transactions and noticing things like we’re spending 5% more on groceries than we did 2 years ago. It definitely helps to be connected to the details and make the necessary adjustments before they become big issues.
Gary, yea..thanks for sharing that. Well, I won’t lie…it’s a painful process but you need to go through it to reap its benefits. Likewise, we can’t be fit without working out.
It just doesn’t work that way. The silver lining, however, is that this painful process becomes a habit before we know it and most of the time it happens so naturally without even having to think about it.
Cheers,
Josh
Loved the article, I agree with you fully. I’m pretty obsessive about tracking my spending habits, it’s like I can’t NOT do it anymore. I found that this app helps a lot with doing it on the go. It’s called Driller.
https://play.google.com/store/apps/details?id=com.aheadstudios.spending3