Where's your money at?

Congratulations! You are a contestant on the epic Canadian game show "The Amazing Hike."  Over the course of two weeks you and a randomly selected teammate must hike across a rugged and heavily forested region of northern Ontario.  Each team will be given basic supplies and then air dropped at a random location approximately two-hundred kilometers from the final destination point.  If you make it to this point before all of the other teams you will win a huge cash prize! There's only one catch...


Your teammate

On the second day, he mistakes your only map of the region for a scrap of paper and uses it to light a fire.  You had already managed to figure out that you were dropped somewhere roughly south-west of the destination point, but the image of the map and its relevant landmarks quickly fades from your mind.  You frantically try to create a rough sketch in your small logbook.  Only three landmarks in a 200 km region and one of them is a tree you drew to fill up the white space.  Yikes...

In effect, this is pretty much the challenge that a lot of us set up for ourselves during our financial journey.  We have a rough idea of where we started and where we'd like to go, but not a lot of the information we need to get there.  If we don't really know where we are along the way, then naturally we stray off the path and take a far more lengthy (if not infinite) and exhausting route instead.  Rocks, fallen trees, rabid moose death-squads - they could all alter our direction away from our desired path for a very long time before we would even notice!

Once upon a time, knowing how we spent our money required meticulous record keeping and involved a tiny pocketbook equipped with a tiny pencil.  Every day we bought things we would have to spend literally tens of minutes in order to record and tally it all by category.  Consequently, this behaviour was not widely adopted.

Then, something happened.  The banks decided to start tracking all of our purchases for us!  The only caveat was that we had to use this little piece of plastic that they handed out in order to make our purchases.  The card was free, was more secure than cash, and some gave us money back when we used them.  Finally, a lucky break!  However, it was slightly annoying to remember to use the plastic all the time and it could take tens of minutes to compile a full month's worth of expenditure data from the always available website.  Consequently, this behaviour was not widely adopted.

So,
Do you know where your money's at? 

If not, you are burning your own map!  The banks do all the work for us so there's really no excuse anymore.  So in light of how easy it is to do these days, why don`t more people (myself included up until about a year ago) track how they spend their money?  I`m sure there are many reasons of which the following are just a few.

1) Facing our problems is psychologically unpleasant
2) We already have, or expect to have, enough money so we don't think we need to care 
3) Since online banking is a relatively recent development, it is not widely known how quick and  easy it is to track our expenses

While understandable, inaction due to Reason #1 clearly does not work out in the long run.  Most people would agree that ignoring problems isn`t wise and only makes them worse.  Reason #2 is hard to justify no matter how you slice it, but is probably one of the major causes of this negligence.  If we don't have the money now, but behave as if we will, then we are going to wake up one day with a VERY nasty financial hangover that will take a long time to recover from.  Alternatively, if we believe that we have enough money so that we don't need to track how we spend it, then it is very likely that we are being unnecessarily wasteful.  In a world (and even country), with no shortage of life or death problems to fix, isn't it kind of bad form to use more than is necessary to maintain our lifestyles just because we don't want to do some book-keeping?  However, my sincere hope, and the major intent behind this post, is that Reason #3 is the chief culprit!  Full disclaimer, up until only a year ago Reasons #2 and #3 were firmly in control of my own behaviour!

So, I wish to elaborate a bit more on my experiences with tracking my own expenses over the last year.  I hate to disappoint any financial voyeurs out there but I will not be giving a full run down of my own expenditures in this post, but maybe in the future!  Anyhow, what I have been doing is tallying up my expenses at the end of each month.  Through online banking I can view a pdf file of all of my purchases made via debit and credit cards (i.e. all of them).  There is a small description which says where the money was spent and even a heading that tries (but sometimes fails) to categorize the expense (e.g. groceries).  I use a calculator and add up all of the expenses in each of my own categories and then enter it into an Excel spreadsheet.  I compute the average over all months that I have recorded to get a better sense for my typical long-term spending behaviour in each category.  All told, this activity takes only 10-20 minutes per month!

The benefits have already been huge and unexpectedly philosophical.  For example, I discovered that the combined amount I spent on eating out and going to the bars was significantly larger than what I spent on rent!  When I tallied up what it would cost for a year of this I was pretty shocked.  Fun IS fun, but the number of zeros was pretty alarming.  While I was still living within my means, I realized that the percent of my means that I was dedicating to certain activities in my life did not reflect how much I really enjoyed them.  I found this to be pretty fricking disturbing as my actions were not actually in line with my priorities!  I mean what the hell?  I know what I want...don't I?

Tracking my expenses has made me more mindful of how my choices and my priorities align with one another.  The inconsistency mentioned above has now been attended to and I seem to think more frequently about what I really value in life.  Additionally, I spend my money more efficiently with no real negative effect on my happiness.  So, here's a challenge!  If you don't already, try tracking your expenses at the end of each month using online banking or whatever method you prefer.  Start out with some simple categories like rent, utilities, transportation, clothes/outerwear, groceries, eating out, going out, and any other regular expenses you incur.  Don't worry if you're not totally accurate.  Trends will begin to take shape after a couple of months and you might be surprised by what you find!

If you already track your expenses, that's awesome!  In the process of writing this post, I've come up with a second challenge that I'm going to try to undertake in the new year.  Maybe you care to join me?  What might you learn about yourself if you took an inventory of how you spend your time?  It would be more complicated than tracking expenses but I think it would totally pay off!  I wonder, will I find out that I spend more time watching TV than playing my beloved guitar?  Or perhaps that despite my desire to be fit, 85% of my waking hours are spent completely stationary!  Do I spend as much time as I think I do, or would like to, on the people that I value the most?  To be completely honest, Reason #1 is currently trying to convince me that it's a bad idea to commit to this in writing.  But we've already established that Reason #1 totally sucks and prevents you from finding new ways to be badass!  So, here goes nothing! 

Where your priorities at?*




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*I'll try to write a post on this challenge after a couple of months! 


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