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Fixed & Flexible
A simple approach to track your spending
One of my clients in the Pacific Northwest recently shared that they’re enjoying a new hobby…
It’s called pétanque.
How about you?
What’s something new or interesting you’ve been trying out lately?
I’ve written about budgeting in the past, and while I much prefer to call it “tracking your spending” (because who likes budgeting, right?) or your “spending plan” it should be as simple and easy as possible.
Otherwise, you’re not going to do it.
A question I often ask people when we’re first discussing their financial planning and possibly working together is,
“How much, on average, do you spend in a month?”
This is often answered with things like:
We haven’t really looked at that in a while
The last time we did a financial plan was…
Or some version of “I/we have no clue!”
And that’s OK.
Most people don’t know.
But I would encourage you figure it out.
Many of my clients know what they spend, almost to the penny.
And I don’t think that’s entirely healthy either.
But once you have a handle on your spending, you’re better equipped to deal with life’s inevitable surprises.
You also know how much you should keep in a safe, liquid savings account. Hopefully one that’s earning a competitive interest rate
And you’ll be better prepared for what your expenses might be or how they might change in the future as you tackle financial goals like college, retirement, charitable giving, or anything else that’s important to you.
As I mentioned above, I’ve written - and spoken - about tracking your spending before:
Your Most Important Money Number (podcast episode)
10 Reasons to Use Mint.com (from way back in 2008)
And whether or not it comes through in my prior attempts, a simple, effective approach is best.
Just like with your financial plan.
Here’s one simple approach I like and have recommended previously.
There’s the 50/30/20 approach to budgeting.
You can use envelopes.
Dave Ramsey has his own system (and software).
Perhaps zero-based budgeting is more your style.
There is no right or wrong way. There’s only the “best” way that works for you.
With this in mind, I’d like to introduce a super simple approach that eliminates the need to have dozens upon dozens of spending categories while reducing the time and energy you need to set this up.
And keep it going.
Remember, knowledge is power and when it comes to your personal finances, knowing just how much your life costs can be quite empowering indeed.
The Fixed & Flexible System
For an overview of this approach, read this first:
And don’t let the title of that article discourage you.
Even if you’re on your own, this system is equally effective. And still simple.
As the article above explains, you only need 3 categories of expenses:
Sure, you can still choose to categorize your spending by things like groceries, utilities, dining out, etc.
But the 3 expenses categories are all you need.
And we’re trying to keep this simple, right?
They’re pretty self-explanatory, but read the article above for more details.
And let me know if you have any questions or would like to discuss how best to setup and track your spending.
Let’s say you’re still with me, and you too like the “fixed and flex system".
Well, clearly if your total expenses are greater than your income, you’ve got some decisions to make.
And a “slash and burn” attack on your spending isn’t your only option.
You could also explore ways to earn more money.
And I’m not implying your should “side hustle” yourself to death.
How about simply asking for a raise at work?
But what if you’re “fixed” and “non-monthly” expenses are so high, relative to your income, that you have very little room for “flex” expenses?
Well, maybe you need to revisit your housing or other fixed costs including car payments, memberships or subscriptions.
Or again, look for opportunities to earn more money.
As much as I’d like to tell you that tracking and getting a handle on your spending is some magical personal finance fix, it’s not.
But I believe and my experience - both personally and working with clients over the years - tells me that nothing good will come from being ignorant of this important piece of your finances.
Let me know what you think about “Fixed & Flexible” or your preferred approach to tracking your spending.
Any particular software or spreadsheet setup that you’re partial to?
Just hit reply.
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Links & Things
Check out Charlie, an online-only checking/banking solution for those of you 62 and older. It pays 3% interest on all balances and is FDIC insured.
Not sure if Charlie is your cup o’ tea, but it looks like an interesting solution and seems more appealing than many of the big name banks with tons of branches, little-to-no interest on your deposits, and nickel and dime fees a plenty.
We’ve personally used Ally for our primary checking account for several years. And it’s worked well and we don’t miss the local bank branch experience at all.
Where do you do your banking and why?
Hit reply and let me know if you’re happy with your bank.
I’m glad you’re here. And I’m grateful to have you as a reader.
If you have any questions or an idea for a future email letter, blog post, or YouTube video, I'd love your input.
Or if you just want to say hi 👋
Simply hit reply - I read (and genuinely appreciate) each and every message you send.
Until next Wednesday,