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.
Chloe (Naturally Frugal) says
Last month I decided to keep track of every purchase I made, and it worked out really well. I knew that most of my extra spending was on things like coffee, small snacks, and things like that. However, it was a great way to see other ways I spend my money and helped me think twice or three times about whether or not I really needed a coffee in the morning or if I could go without.
I don’t stick to a specific budget either because I won’t spend all my money in my checking account. There are certain amounts of money I set aside for my IRA, personal savings, investments, and vacation funds. Whatever is left over at the end of the month I put into my savings. Sounds like you guys have a great system, similar to mine in that their isn’t a specific budget for every single thing, but a budget for some things.
Kiwi Chick says
I am still at the stage of needing to track it all. Once I feel comfortable that I am handling money wisely (which I never used to do) I will cut back on the detail. Until then it is better for me to make myself accountable for every cent.
Alissa says
Hey Frugal Babe,
We use a zero-based budget, combined with an electronic envelope system. So yes, every cent is accounted for and budgeted. For now, it’s the only way we can ensure that all of our financial needs are being met while continuing to pay down debt. Once we are debt-free we will be able to loosen up a bit, but for now we don’t really have a choice. I look forward to the day when we won’t have to track every penny. :) Good for you guys for making such great progress.
Regina W says
We like to keep track of our spending as much, but as easily, as possible. So we’ve hooked all of our credit, bank, loan, and investment accounts into our account at mint.com. It updates several times every day, though there’s usually a 2-3 day delay on transactions and allows us to set up individual budgets for just about everything, including the once or twice a year expenses like car insurance and Christmas time. All of those mini-budgets are consolidated into our monthly and yearly budget to show our complete “desired” budget. The only problem with using mint.com is that it doesn’t easily track our cash purchases, so we use our credit cards even on small purchases so that we have an easy record of it (so we have to have good self-control when it comes to using credit cards). We love it and how it visually presents how we spend our money. It made setting up our budget easy and makes adjusting our budget (like when we had our daughter) easy, too. That’s how we do our money managing.
djc says
I use a combination – I have my paycheck split to several accounts for medium term goals and FSA, then I also use You Need A Budget Pro. It helps tremendously to have a clear handle on what is spoken for in the checking account for twice yearly insurance payments and the like, and it lets me see graphs and bar charts of what our month to month spending has been. It really helped me focus on paying off the last of my credit card debt a couple of years ago. I also use an interest bearing checking account. One nice feature of You Need a Budget is that it encourages you to live one month behind your income, so for example, what you earn in August isn’t budgeted and spent until September. That way you can budget to the penny and not have to estimate or anticipate earnings.
jennifer888 @ Negotiation Board says
We don’t keep track, even though we should! I know of several resources to use, so I don’t have an excuse. One of my favorite’s is at Mint.com where you can use their spending tracking software for FREE!