60 | It’s Just Not That Simple

The advice is simple - spend less than you make.

But it's just not that simple.

Time and time again we get confused and that relationship becomes harder to keep tabs on than we ever imagined.

All the "one time" things make it tricky, because we don't want to count the car repair or the vacation or the medical bill in our "normal spending".

If we've built up some amount of cash on hand, it's tricky to tell if the dollars spent came out of our paycheck or our savings account.

If we use debt, it's tricky because in spirit we've "spent" the full amount of the loan, but the monthly payments make it seem like we've spent much less.

If we use a credit card, the moment we've swiped the card the dollars are spent, but the statement 30 or 45 days later makes it seem like the swipe wasn't the real decision to spend.

If we receive a gift and spend it, it's tricky because there's a chance that we've increased our baseline spending expectation without the promise of a repeat gift.

The trouble is that even a simple financial household with one or two of these nuances makes it difficult for most folks to know how much they spend.

Because we assume that everyone knows how much they spend (they don't!), spending advice quickly gets reduced to categorizing transactions and the level of engagement for non-CPA- and non-engineer-types plummets to zero.

Instead, start with figuring out how much you spend.

That's it. Nothing else.

That alone will put you ahead of most of the population.

There's too much emotion tied to the categories, particularly if you're leaning into the exercise for the first time.

When we reduce it to the numbers, we temporarily take the emotion and personal preferences out of the "quality" of the spending that is or isn't happening.

Even the least financially savvy person knows that you can't spend more than you make forever, but too many spending conversations get stuck debating the merits of individual categories that we lose track of the bigger picture.

The reality is that if you don't know how much you spend, then you don't have a prayer of determining how much is enough.

Don't worry about the categories until you know how much.