I consider myself to be a smart bloke. How is it, then, that I am not good at predicting how much money I should have left over at the end of the month?
It seems that no matter how frugal I feel I am, I did not save as much as I thought I would. I've thought about this one for a few years and think I have it within reach. It's not that I don't have enough money but I'm just not serious with myself about how I spend it.
To illuminate the issue I created three reports.
· Total Inflows versus Outflows by Category
· Inflows versus Outflows except for Retirement
· Inflows versus Outflows sans Taxes and Retirement and Housing
The first report will tell me what I have left over at the end of the month to manually deposit into a savings account. I have a goal amount each month and I'm just not making it.
The second report really allows me to see the huge tax burden (that's the name they give it, not me) I face. This report also removes the psychological 'happy' feelings of having some non expense items on an expense report, which allows me to say while that number is large, some of it is actually going to savings.
Report number three is the one that allows me to, in a healthy and positive way, get hold of all of my discretionary spending and tighten down the screws on those categories I wish to make sacrifices in
I know what you may be thinking. It is possible to reduce housing and tax expenditures. You could re-finance, get a better tax adviser, lie to the IRS, etc. Sure - but my point here is that the (possibly) easiest thing you can control is your discretionary spending. You are also pointing out to me that the majority of my outflow is in housing and taxes. You are absolutely correct! I can't help you, however, in this economy deal with you having bought too big of a house. Also, for us starting out on this financial journey, looking at these three reports may be the first time we realized that taxes/housing are such a huge component of our outflow.
I'll admit - I'm already pretty cheap. I could spend less on groceries but not much. Using these three reports I've clearly seen that my problem is larger electronics purchases throughout the year during moment's of weakness.
Today I vowed no extraneous pending that hasn't already been planned (vacation expenditures in my case) between now and mid May. With this, I will hopefully be able to make good on savings outside of retirement funds for a down payment on a house.