2 min read
Last night I met up with a reader to talk personal finance at a local juicery. As we got to talking, I shared with her that I only track two financial metrics each month:
1. My net worth (using Personal Capital)
2. My monthly spending (using Excel and my Monthly Spending App)
In regards to my monthly spending, she asked something along the lines of:
“What is your philosophy on spending?”
I explained that I have a simple method of keeping my monthly expenses fairly low without meticulously tracking every dollar I spend as I spend it. I classify each of my expenses as:
“Steady”: Expenses that are pretty steady from month to month.
“Wobbly”: Expenses that wobble quite a bit from month to month.
For example, here’s how I would classify each of my expense categories from last month:
The Steady expenses: My rent payment and car payment don’t change at all from month to month. My utility, phone, and internet bills fluctuate only a little each month. These expenses are fairly steady.
The wobbly expenses: My food expenses – grocery, dining out, coffee – vary quite a bit from one month to the next. Same with my other random expenses like FinCon plane tickets, kayaking, clothing purchases, gas, miscellaneous expenses, etc. These expenses wobble up and down each month.
Here’s what my total spending looked like last month by category:
The way that I keep my monthly spending in check is by keeping my “steady” expenses low. Each month I know that I will spend around $1,100 on rent, car, utilities, phone, and internet combined. And I’m okay with this number.
My “wobbly” expenses, on the other hand, can wobble from $800 up to $1,400 depending on the month. I don’t track these expenses closely because I know that even if I dramatically overspend on them, my total monthly spending will only be around $2,500.
I keep my “steady” expenses low so that I can spend freely on my “wobbly” expenses without fearing that I’ll overspend.
Interestingly, I find that my “wobbly” expenses are often the ones that bring the most joy. Last month these expenses included dining out at Chipotle with friends, traveling to Michigan to go hiking and kayaking, buying FinCon plane tickets, and getting coffee at local coffee shops. I spent far more than I usually do on these “wobbly” categories, but it didn’t kill me financially because my “steady” expenses held steady at a low $1,100.
My advice for anyone who wants to keep their monthly spending low without fretting about overspending: get your “steady” monthly expenses to be as low as possible so that you have room to spend more freely on “wobbly” monthly expenses, which are often the ones that bring the most joy.
Zach is the author behind Four Pillar Freedom, a blog that teaches you how to build wealth and gain freedom in life.
Zach's favorite free financial tool he's been using since 2015 to manage his net worth is Personal Capital. Each month he uses their free Investment Checkup tool and Retirement Planner to track his investments and ensure that he's on the fast track to financial freedom.
His favorite investment platform is M1 Finance, a site that allows him to build a custom portfolio of stocks for free, has no trading or maintenance fees, and even allows him to set up automated target-allocated investments.
His favorite way to save money each month on his recurring bills is by using Trim, a free financial app that negotiates lower cable, internet, and phone bills with any provider on your behalf.
His favorite micro-investing app is Acorns, a free financial app that takes just 5 minutes to set up and allows you to invest your spare change in a diversified portfolio.
His favorite place to find new personal finance articles to read is Collecting Wisdom, a site that collects the best personal finance articles floating around the web on a daily basis.
Full Disclosure: Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities, please see my Terms & Conditions page for a full disclaimer.