Baby Steps

How is the expense tracking going? I find that a summary of the day’s expenditures and a weekly tally are useful snapshots. A months worth of data would be ideal to get a pretty accurate view of your spending habits. More than that is great but be aware there is a point at which it becomes procrastination. I should know- I am the Queen of Procrastination!


Have you started to notice any patterns? Any surprises?


I always thought I was pretty good but I spent a lot more money on “non-essentials” than I realized. There is nothing like having those numbers jump off the page and mock your foolishness.


In my defense, I was working in a posh neighbourhood at the time so temptations abounded. It was my first job out of school so any money (however meager) was like manna from heaven. It also didn’t help knowing a lot of people in retail who offered up their tantalizing employee discounts. Coincidentally, it was during this period that I purchased my first Gucci bag/brief case…Hmmm…


I was an angel compared to people who worked around me. They would regularly spend about $25 on food and coffee in a day. It may not sound like much but when you only make about $35K per year- that is a significant amount of after tax dollars going to something that was really more of a luxury than a necessity. $25 a day translates to $125 a week or $6500 a year.


I repeat, $6500 a year!!!

That would basically max out your RRSP contribution ($35,000 x 18%) and then some!!! Never mind your RRSP, that works out to 18.57% of your gross (GROSS) income. Let’s say you spent half that, $12.50 a day on food and beverages. That still works out to almost 10% of your gross income.


Think about that for a second- feel nauseous yet?


Many years ago I saw David Bach on Oprah (which is basically akin to being anointed by the money gods!) plugging his book Automatic Millionaire. Enticing title, non? I actually saw him give a talk sponsored by one of the major banks- let’s just say I was glad it was free. During the entire broadcast, as Oprah whipped the audience into a frenzy, Bach talked about the “Latte Factor”- i.e. how forgoing the $5 Grande Tazo Chai Tea Latte with soy milk everyday and investing that $5 will make you rich.


Let me think about this for a second…saving your money and investing it will make you rich. Really?


I nickname it the “Duh Factor.” (Please don’t sue me!!)


Let me save you $20. Read the book at the library if you must have a couple hours (I read fast and I am a personal finance book junkie) or let me just give you the Reader’s Digest version of it now. Cut out superfluous expenses (only you can decide what is and is not discretionary- be honest and look at your wants versus needs) and invest wisely. It’s simple but not easy. Now put that $20 into your savings account earmarked for investing!


I don’t mean to be trite (okay, maybe just a little). I am well aware of the temptations. Let’s face it, there is a lot of pressure and stress this time of the year that makes common sense an even more fleeting awareness than usual. There are a lot of sales in advance of the holiday season- the markdowns are bigger AND have come earlier than in years past. I have been sucked into the “Friends and Family” promotions. In my defense, I picked up gifts and items for work that I will use next summer. Buying out of season can be a life saver- not as fun perhaps but ultimately satisfying when you get it for 67% off the regular price.


What I try to ask myself this- do I really love it, do I really NEED it and the killer, “How many hours would I have to work (after taxes) before I can pay for this?” Mine is an entry level salary (sad considering how old I am) so this one REALLY (REALLY) hurts.


I don’t mean to Oprah-sophize but think about what you are doing. Try asking yourself these questions- ultimately the goal is conscious spending. 

It’s not rocket science. Excuses are things you put in the path of your goals- nothing more, nothing less. If you are truly okay with your financial circumstances, that is fantastic because very few people feel that way- epecially now.

The equation is simple, if you spend less money than you make, you are golden. That is saving. If you make more, you will likely spend more and it will be tempting to do so. That’s why you see those profiles in the newspapers where people making very healthy six-figure incomes are deeply in debt. Let the Jones’ do what they will- it doesn’t take that much to rein it in and get back in the black.

Spend less than you take home and you are well on your way to financial success- however you define it…

The important thing is to start today.


~ by angryegg on December 4, 2008.

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