Recently I got an email from a long-time reader, asking me if we still keep track of our monthly expenses. I guess the answer is both yes and no. We do pay close attention to what we are spending, and I check our bank balances and credit card transactions on a daily basis. But we no longer keep track of every penny, nor do we break our spending down by category anymore.
We paid off the last of our non-mortgage debt in 2007. Our income has slowly increased over the years without an increase in our living expenses (actually, as we paid off debt, our expenses went down). And neither of us liked keeping every receipt for every purchase. It was interesting to keep track of our expenses, and it did provide some motivation for keeping our spending down. But we’re pretty far along on our frugal journey at this point. Frugality is second nature around our house, and we never spend money mindlessly. We ponder our purchases, buy used whenever possible, and avoid buying much of the time. We use homemade cloth diapers, prepare pretty much all of our food from scratch, ride our bikes instead of driving, read books from the library, and we don’t even have a TV anymore. Our cars are nearly 20 years old (no payments, and very inexpensive insurance and registration fees), and everything we wear comes from thrift stores. We’re spending so much time trying to turn our little plot of land into a mini farm that we don’t have time to go out and spend money (we have spent money on things like fruit trees and berry bushes, but we planned for those expenses).
So we stopped keeping track of every penny spend quite a while ago. Instead, we use a pay-ourselves-first approach that we like better. Our only debt is our mortgage. That means that each month our bills amount to current living expenses plus the mortgage. In addition to that, we’ve created “bills” for several savings accounts. Some are automated, some are not, but they are all priorities. We have our son’s 529 plan, our HSA, our IRAs, and our emergency fund. We also pay an additional amount towards our mortgage principal each month (it varies, but we try to make sure that each month we pay a little more than we did the month before). Once we pay all of those “bills” we can use whatever is left over for current living expenses. If there is a higher-than-usual amount left over, we tend to stash it in one of our savings accounts – we don’t spend it just because it’s there, but that’s probably a result of being frugal for so long that the habits are ingrained.
This is what works for us. It guarantees that we keep making progress with our savings goals, but it also allows us some flexibility with how we spend our money. Now that our checking account is paying more interest than our on-line savings accounts, we’ll be keeping more money in checking. This means that we’ll have to do a little more keeping track, since money that is in our checking account will technically count as savings, and thus be untouchable for day to day expenses. I do like having our savings in a separate place (out of sight, out of mind), but the extra interest in the checking account is enticing, and we’ll make it work.
What about you? Do you prefer to keep track of every penny? (my mother started doing that in the early 70s, and still does to this day, even though she and my dad don’t need to anymore) Do you use the pay yourself first method? Do you have a budget at all? Have you started keeping more careful track of your money since the economy headed south last year? I’m curious to hear what other frugalites (and not-so-frugalites!) do.