There’s a reason financial independence is difficult to attain, and part of that reason is that you have to keep records. That simple thing is the number one reason people fail to attain their financial goals. That so many of us are so easily defeated is both tragic and puzzling. If you can’t do the simplest financial task there is, how do you ever expect to get wealthy? If you want to be rich, then you have to develop the habits that will get you there.
One of the first steps in building wealth is learning to track your expenses. A simple spreadsheet will get you started but, let me be clear on this, you have to track every penny of your spending. Track every dollar, dime, quarter and penny that moves through your hand, no matter how small the transaction.
It’s All About The Process
Believe it or not, there are people who are professional free throw shooters. They can stand at the line and sink basket after basket for hours on end. Ask them how they do it and they’ll tell you that the key is perfecting the process of shooting a free throw and the results will take care of themselves. Becoming wealthy is exactly the same in that regard. Put in place your processes of accounting and frugality and the results will take care of themselves.
Tracking your spending is the critical first step in your journey to financial freedom. Just the very act of observing and recording each purchase will change your spending habits. You’ll discover that you’ll start thinking about your spending spreadsheet every time you make a purchase. Knowing you have to document an expense also means you’ll think about it instead of making small, impulsive purchases. One of the first really big learning milestones will be noticing just how many impulse purchases you make in a day. Take for example buying a soda at the gym that costs a dollar. That may not seem like much but small purchases can add up to big money over time. Spending that dollar for a soda every day may end up costing you more per month than most club memberships.
Numbers Don’t Lie
Writer Justin Malik tracked every penny he spent for six years, and the numbers provided some surprises. He learned that a small apartment wasn’t much more expensive than communal living space when all the expenses are factored in. He also learned that pets can be thrifty if managed properly. So, the numbers told him that a small apartment with a cat could be a frugal choice after all, and allowed him to avoid the stresses of shared space. That’s why you have to track every penny and don’t lie to your spreadsheet. What you’ll learn about your spending habits will be unique to you.
Living by Your Numbers
Tracking your spending is a critical first step to financial freedom, because it forces you to live by hard numbers. You may want to go with your friends to that hot concert in town but the numbers will dictate whether you can afford it. Whether the question is movie tickets, new shoes, clothing, a new car or vacation, the numbers will influence the answer. They will keep your financial status constantly current in your mind. With disciplined daily tracking of your expenses, you’ll never have this vague idea in the back of your mind that a few bucks here or there don’t matter. You’ll know the last time you went out for beers after work you ended up spending $45.17, including tip, and you only have $237.00 to last until payday. Maybe it’s okay to go if payday is tomorrow and maybe pass if it’s next week.
If you want to be wealthy, you have to learn to live life by the numbers, and to know those numbers you have to start keeping records, good records. It’s that simple and there are no shortcuts.