What I Learned from Track Every Dollar for 6 Months

I have always read about money management and negotiation for salaries. I’ve always wanted to become good at managing my own money but never seem to be able to apply the practices in these self-help books to my life. It will usually be a flash of excitement, then I will give up fairly quickly.

Last September, I started reading Vicki Robin’s book on “Your Money or Your Life” and it has made some gradual but significant changes in my life. One of the habits that stuck with me after reading this book was to track every single dollar coming in and out of my life.

Here are things I have learned after tracking every single dollar for 6 months.

  1. I stopped eating out & going to coffee shops.
  2. I stopped feeling guilty about spending money.
  3. I projected how many more years I need to work.

Photo by Louis Hansel @shotsoflouis on Unsplash
  1. I stopped eating out & going to coffee shops:

If I had a dollar every time I swear to not eat out anymore, I’d be financially independent just from that. I could never stop myself from habitually eating out. It is especially hard when you are hungry after a long day of working, and there is one thing on your mind, food. I was spoiled growing up eating whatever I wanted, and I kept that going well into my adulthood. So when I am hungry, my default is whatever my brain wants now, I must do everything I can to make that happen.

I realized that each time I eat out, I am spending approximately 2 hours of my salary ($30). That is 25% of my daily hard work to be just one restaurant meal. 

After starting to track my expenses, somehow I was able to limited going out to eat at a restaurant to only 2-3 times a month. In the past 2 months, I only went out once (but that might have been the Coronavirus. . . ).

Tips I have learned:

Evaluate your restaurant spending after the restaurant visit. When I do this, sometimes I consider the spending worthwhile and sometimes I don’t. It is intriguing to find out after a day or two whether I found that restaurant outing was worth the money.

The times that are worth it:

  1. It’s a friend I am not super close to and I don’t want to be weird and invite them home for a meal.
  2. I went to a new restaurant that I’ve been meaning to try.

In those cases, I put a little “+” sign next to the expense, and write out the reason.

The times that are NOT worth it:

  1. I have had stomach issue afterwards because of certain allergies the restaurant cannot accommodate.
  2. The restaurant is not great: service is slow, or food is mediocre.
  3. I was super hungry and just wanted something instantaneously.

In those cases, I add a “-” and also note down the reason. This helps me to see what are some of the reasons why I want to go to a restaurant, and when I regretted going. It has helped me cut down on the times I go to restaurants.

Side note of getting super hungry and making bad decision, I have also started making food that can be frozen for a later date, like dumplings and buns. They have saved many nights where temptations were high, and Mr. CodeJunkie all of a sudden whips out the freezer drawer and finds my favorite food (Chinese food!) and gently guiding me from the being hangry and wanting to eat out.

Photo by Andy Lyon on Unsplash
  • Coffee:

I love coffee, especially specialty coffee, lavender flavor with almond milk. It usually costs $4-$6 (yes I know, I can’t believe I paid for this). I also love the social aspect of sitting in a coffee shop, listening to the low murmuring of people, and strike up a conversation with the stranger sitting next to you. I write blogposts in coffee shops because I feel that’s the place when inspiration comes. Sometimes I get a little peckish so I will order a beautifully made macaron, or a cupcake. These all add to my coffee shop bills. 

I realized that I could make coffee at home, and also add as much almond milk and lavender syrup as I want. I can also put it in a fancy cup, and stare out of the window while typing on my MacBook, pretending I am solving world hunger.

I stopped going to coffee shops altogether.  Truth to be told, I don’t think I am making that many more friends by going to coffee shops. I stopped drinking coffee altogether since last year, and have found tea to be more suited for my body.

Exceptions would be when Mr. CodeJunkie and I visit new places, I usually find hipster coffee shops for him to enjoy a cup of black coffee, and me, probably some sweet treats. Those coffee shops usually comes pretty neat neighborhoods to wander in as well.

Photo by JESHOOTS.COM on Unsplash

2. I stopped feeling guilty about spending money on travel

My relationship with money mostly looks like when an ostrich facing unpleasant but life-threatening danger: by burying my head in the sand. On the one hand, I want to be the millennial that purchases experiences rather than physical things. I want to travel around the world and see everything. On the other hand, I feel guilty when I spend money on traveling, from flights to expensive hotels and fancy restaurants. I would be spending money during vacation without a budget (no guardrails!), but when I come back from vacation, I am scared to look at my credit card bills. I told myself, this is a “one-time-a-year” expense.

Vickie’s book encouraged me to look into the fundamental reason I want to travel. Is it for the social praise? I’ve definitely done some of those before: like visiting the Eiffel Tower. None of those things actually added much value to my experience. Rather, I just wanted to have an iconic photo and be able to put it on Instagram.

The book led me to question if those types of travel are the things I actually enjoy, and would want to keep doing. It also begs these fundamental questions.

  • What are other things you enjoy during your travel?
  • Can you get them without spending that much money?
  • What is the fundamental value of traveling?
  • Does destination change this value?
  • Can your destination be closer, have less expensive food options, a different time of the year, and still achieve the same result?

If we remove the social praise aspect from travel, what is left for me is to see the endless possibilities of  ways to living. I have met people who believe in things that I might consider completely outrageous or impossible and they teach me that there is never one way to live your life. Because of that, I changed my travel destinations to different and less touristy places in the world. I started appreciate local hikes and greeneries. 

I also made a more conscious effort to not bring my phone (or put it on airplane mode with downloaded maps) when I am traveling, or even just going on hikes. I find that I am able to focus on the present better instead of using the energy to think about the best places to take an insta-worthy photo, or whether I should wear makeup to look more photogenic.

Photo by Markus Winkler on Unsplash

3. I projected how many more years I have to work

Being able to account for every single dollar coming in and going out of my life, I started building mathematical projections. I built one within google sheet but there are numerous sources online that helps you do this. If you want to learn more about my spreadsheet, let me know and I am happy to share a cleaned-up version of it.

When my total monthly expenses (blue) equals to my monthly investment earnings (orange), I can stop working. The investment “earnings” are calculated by using my total investment divided by 25, which is the 4% rule. Surprisingly, I met that in April this year (by accident). I have to continuously meet this in order to retire. But this also shows you, the less you spend, the faster you will get to your retirement (if nothing else changes).

I realized I am closer to become financially independent than I thought. This has helped clear my mind on what I should prioritize in my life.

Overall it was a success for 6 months, to be able to tell you exactly where I spent my money. Here’s a summary of it if anyone is interested.

What are your biggest expense after mortgage? Do you track your money? What’s your best way to save money?

Your Money or Your Life by Vicki Robin

  • How much I’d Recommend: 10/10
  • Date finished: 12/31/19
  • Your Money or Your Life: recommend borrowing from your local library – everyone should read it as soon as possible.

If you don’t like reading all that much, here’s an easier route. Listen to this almost-TED talk given by one of my favorite Financial Independent “accidental-financial-advisor” Mr. Money Mustache. 

Everyone is bad at finances, until they spend the time and put in the hours to learn it. It’s not very hard to learn, you just have to be vigilant about your spending, and put every extra penny you find into an index fund. Ok Vicki does a way better job explaining this in her book.

Some of my friends are not ready to read this book. Others have already sworn by blood that they shall live consciously about their spending. So maybe when you are reading this blog, you are not ready yet. That’s totally ok. Once you are ready, if you are in the future, you can check out this book.

The reason I highly recommend this book yet still encourages you to borrow it from the library is to avoid the paradox of paying for a book that’s suppose to ask you to save money. Otherwise, I’d say, everyone should have a copy and read it like the bible because YOU ARE SELLING YOUR LIFE for money, every single minute that you work. 

Some people may say, well I love my work. I became a doctor because I love saving peoples’ lives or whatever. Of course, these altruistic values are absolutely admirable. But you’d be an EVEN better doctor when you don’t need that money (and you know for a fact you don’t need it). 

Your Money or Your Life details the entire course of resetting your relationship with money in 9 steps. Personally, I feel the last few chapters kind of blended in together. Here are my simpler version of the steps; let’s see how many steps I can make after drinking Mr. CodeJunkie’s homemade ginger mead.

Step 1: make peace with the past

Emotionally: acknowledging everyone probably has made financial mistakes in the past.

Financially: Figure out how much you have earned in your entire life. Use social security website to log in / register to find out what was reported if you are usually a w-2’er. You will find shockingly you’ve earned so much, and saved so little.

Step 2: figure out your actual hourly wages

Take your take home salary (after tax and deductions), minus all the work related expenses (gas, wardrobe, gifts for coworkers, eating out with coworkers), and use this net amount, divide by the hours spent related to work to calculate your ACTUAL hourly rate, including:

  • actual working hours
  • commute
  • hours to unwind and decompress at home
  • hours feeling tired because of work
  • hours working out to combat stress at work
  • hours taking for vacation to relax from work

This will shock you. This is why Vicki is explaining that you are exchanging your life energy for money.

Step 3: set up expense tracking for EVERY SINGLE PENNY

You can do this pretty easily these days with online apps if you mostly use credit cards / debit cards. Most people recommend Personal Capital. I find it more user friendly than Mint, but since I am an accountant, I still use my own fancy google sheet for my expenses. You can find my learnings from tracking my expenses here.

Step 4: Invest all your extra money in a low cost index fund.

Here’s a few to start. Pick one, stick to it, and don’t sell until retirement. Ok this isn’t exactly what the book was recommending, but a summary of many many financial independent podcasts, years of reading Mr. Money Mustache. Or you can always just open a Betterment account, here’s why.

  • VTI – vanguard total market
  • FSKAX – Fidelity total market
  • SWTSX – Schwab total market