{"id":737,"date":"2011-05-04T08:07:37","date_gmt":"2011-05-04T12:07:37","guid":{"rendered":"https:\/\/blog.bradpine.com\/?p=737"},"modified":"2019-06-12T11:33:17","modified_gmt":"2019-06-12T15:33:17","slug":"making-sense-of-your-spending-is-a-key-part-to-financial-peace","status":"publish","type":"post","link":"https:\/\/blog.bradpine.com\/2011\/05\/04\/making-sense-of-your-spending-is-a-key-part-to-financial-peace\/","title":{"rendered":"Making Sense of Your Spending is a Key Part to Financial Peace"},"content":{"rendered":"

\"\"<\/a>Think of how much you earn, whether it be from a salary, IRA distributions, or another source. Have a number? Great. Now, think of how much you spend.\u00a0<\/span><\/span><\/p>\n

It\u2019s a lot harder, isn\u2019t it? Most people can easily tell you their earnings but draw a blank on their total expenditures.\u00a0 This can be problematic when it comes to financial planning, as spending is, in a lot of ways, much more important than earning. Spending at a sustainable level, meaning having enough to cover your expenses, make your 401(k) or IRA contributions, and attend to other long-term needs is vital to your overall financial health.\u00a0<\/span><\/span><\/p>\n

We could probably all agree that knowing your spending is important, but why is it so hard to do? One reason is that we like to avoid pain, and thinking about spending can be painful in the short term. Even though we know it\u2019s necessary over the long run, it can be hard to push through what can be an awfully powerful aversion!\u00a0<\/span><\/span><\/p>\n

There\u2019s another reason for the difficulty in tracking expenses. To get to the root of it, let\u2019s try another exercise: How much do you spend on your mortgage? Easy, wasn\u2019t it? It\u2019s easier because we have a natural tendency to divide our spending into what behavioral economists call \u201cmental accounts\u201d. In other words, we naturally split expenses into smaller categories, such as the mortgage or our insurance, many of which, like earnings, are fairly predictable. The result is that it\u2019s much easier to estimate each category then the total across categories.\u00a0<\/span><\/span><\/p>\n

When it comes to tracking your spending, you should take advantage of this natural tendency to categorize. Take a few moments to think about what you spend money on and jot down the amounts. The list probably includes categories like housing, household bills, insurance, entertainment, etc. I\u2019ve attached an Excel budgeting spreadsheet<\/a> to this article, which might help you in the process. You may also find that your categories look very different! That\u2019s perfectly okay: part of making expense tracking work is to use categories that are easy to remember and which feel natural to you.\u00a0<\/span><\/span><\/p>\n

Now, some categories might be difficult to compute, and the amounts in others might include a bit of wishful thinking. Thus, I also recommend that you take the time to track your actual expenses. There are as many ways to do this as there are people. Some prefer to look back through their banking and credit card statements once a week or so, while others prefer to keep a running list of their expenses on a Smartphone or piece of paper. Whatever your strategy, I encourage you to try this out, as you might be shocked to find out what you\u2019re spending your money on!<\/span><\/span><\/p>\n

Once you\u2019ve gotten all this information down, it\u2019s time to take a good hard look at the big picture. Are you spending more than you\u2019re earning? Are you able to contribute to savings? Are there any categories that seem out of whack? When you\u2019re asking these questions, think about your larger and long-term goals in addition to the everyday. If your passion is travel, you may want to cut down on some expenses so you can fund trips to exotic places. If you\u2019re very busy and want to pay for a part time personal assistant, you may need to cut down in another area. The point is that there is a balance to be struck between the immediate pleasures of, say, that daily latte and the longer term satisfaction of exciting adventures or more time with your kids.\u00a0<\/span><\/span><\/p>\n

After you\u2019ve made some decisions, it might take time to readjust to a new spending pattern. I find that putting bill payments and savings contributions on automatic pilot can be incredibly useful. Not only do automated payments and savings deductions free up your mental energy for managing your discretionary spending, but it can help make it easier to achieve your goals. For example, if a set amount of money is being saved for travel every month without your doing anything, you\u2019ll be more likely to stick to the plan!\u00a0<\/span><\/span><\/p>\n

Of course, it can be difficult to adjust to keeping track of your spending and setting harder limits, but keep in mind that the results, whether travel, more free time, or a more secure future, are immeasurable. I often relate this process to quitting smoking: Like smoking, avoiding thinking about your finances in the short term may be more pleasurable, but it is setting you up for problems 20 years down the road. By quitting (or, in this case, planning ahead), you can help protect the health of the person you\u2019ll become in 20, 30, 40 years. In other words, you need to think about that person, rather than the person looking at you in the mirror today. But taking control over your expenses and planning ahead will not only help you to secure a healthier future: it can set you up for more fulfillment and happiness along the way by helping you to lead the life you really want to live. And isn\u2019t that what it\u2019s all about? <\/span><\/span><\/p>\n

If you are seeking detailed\u00a0information about rolling over your 401(k) or about managing your IRA, I highly suggest downloading my free eBook, \u201c10 Tips You Need to Know About Your IRA Rollover\u201d. <\/a>This short book is packed with critical information that will help you make the right decisions about your retirement savings.
\n<\/object><\/p>\n","protected":false},"excerpt":{"rendered":"

Think of how much you earn, whether it be from a salary, IRA distributions, or another source. Have a number? Great. Now, think of how much you spend.\u00a0 It\u2019s a lot harder, isn\u2019t it? Most people can easily tell you their earnings but draw a blank on their total expenditures.\u00a0 This can be problematic when […]<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false}}},"categories":[74],"tags":[55,19,47,81,45,1141,77,20,76,12,11,44,14,30,27,15,46,26,31,79,78,75,80,82,10],"jetpack_publicize_connections":[],"aioseo_notices":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p2p1nA-bT","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":846,"url":"https:\/\/blog.bradpine.com\/2011\/06\/01\/powerful-steps-for-any-investor-from-ira-rollovers-to-financial-planning\/","url_meta":{"origin":737,"position":0},"title":"Powerful Steps for Any Investor: From IRA Rollovers to Financial Planning","author":"Bradford Pine","date":"June 1, 2011","format":false,"excerpt":"Congratulations! By reading this article you\u2019re taking an important step in your financial life, one that your future self will probably thank you for in twenty years. In helping clients, I\u2019ve found that there are many unique issues that people face every day, but there are also a lot of\u2026","rel":"","context":"In "Individual Investors"","block_context":{"text":"Individual Investors","link":"https:\/\/blog.bradpine.com\/category\/individual-investors\/"},"img":{"alt_text":"","src":"https:\/\/i0.wp.com\/blog.bradpine.com\/wp-content\/uploads\/2011\/06\/Powerful-steps.jpg?resize=350%2C200&ssl=1","width":350,"height":200},"classes":[]},{"id":678,"url":"https:\/\/blog.bradpine.com\/2011\/03\/16\/theres-still-time-to-contribute-to-an-ira-for-2010\/","url_meta":{"origin":737,"position":1},"title":"There’s Still Time to Contribute to an IRA for 2010","author":"Bradford Pine","date":"March 16, 2011","format":false,"excerpt":"\ufeff There's still time to make a regular IRA contribution for 2010! You have until your tax return due date (not including extensions) to contribute up to $5,000 for 2010 ($6,000 if you were age 50 by December 31, 2010). Normally, your tax return must be filed by April 15.\u2026","rel":"","context":"In "Retirement Planning"","block_context":{"text":"Retirement Planning","link":"https:\/\/blog.bradpine.com\/category\/retirement-planning\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":262,"url":"https:\/\/blog.bradpine.com\/2010\/09\/01\/262\/","url_meta":{"origin":737,"position":2},"title":"Are You Ready to Retire?","author":"Bradford Pine","date":"September 1, 2010","format":false,"excerpt":"Ask anyone if they\u2019re ready for retirement, particularly after a difficult day, and you will likely hear an immediate \u201cYes!\u201d But when it comes time to seriously consider the issue, the question of readiness becomes much more difficult. How much should I draw from my IRA or 401(k)? At what\u2026","rel":"","context":"In "Retirement Planning"","block_context":{"text":"Retirement Planning","link":"https:\/\/blog.bradpine.com\/category\/retirement-planning\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1928,"url":"https:\/\/blog.bradpine.com\/2012\/05\/31\/the-biggest-risk-facing-your-retirement-procrastination\/","url_meta":{"origin":737,"position":3},"title":"The Biggest Risk Facing Your Retirement: Procrastination","author":"Bradford Pine","date":"May 31, 2012","format":false,"excerpt":"There are many risks that we all face when it comes to retirement. Economic crises, the risk of outliving your savings, and healthcare emergencies are all major concerns. We don\u2019t have control over them however we try to plan around them. \u00a0The single biggest risk you face as a saver\u2026","rel":"","context":"In "Retirement Planning"","block_context":{"text":"Retirement Planning","link":"https:\/\/blog.bradpine.com\/category\/retirement-planning\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":93,"url":"https:\/\/blog.bradpine.com\/2010\/05\/10\/dusting-off-your-retirement-accounts\/","url_meta":{"origin":737,"position":4},"title":"Dusting Off Your Retirement Accounts","author":"Bradford Pine","date":"May 10, 2010","format":false,"excerpt":"Spring cleaning should apply not only to your house but to your retirement accounts. Whether you\u2019ve maintained 401(k) accounts at old employers or have already opened a Rollover Individual Retirement Account (IRA), keeping an eye on where your accounts are held and what you\u2019re invested in can help you to\u2026","rel":"","context":"In "Retirement Planning"","block_context":{"text":"Retirement Planning","link":"https:\/\/blog.bradpine.com\/category\/retirement-planning\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":467,"url":"https:\/\/blog.bradpine.com\/2010\/11\/30\/estate-planning-a-key-part-of-any-financial-strategy\/","url_meta":{"origin":737,"position":5},"title":"Estate Planning: A Key Part of Any Financial Strategy","author":"Bradford Pine","date":"November 30, 2010","format":false,"excerpt":"I sometimes hear from clients that estate planning sounds like something that only the very rich need to think about. This couldn\u2019t be further from the truth. In reality, an estate plan is, at its most basic, a critical part of ensuring that your wishes are carried out should you\u2026","rel":"","context":"In "Estate Planning"","block_context":{"text":"Estate Planning","link":"https:\/\/blog.bradpine.com\/category\/estate-planning\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts\/737"}],"collection":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/comments?post=737"}],"version-history":[{"count":2,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts\/737\/revisions"}],"predecessor-version":[{"id":2739,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/posts\/737\/revisions\/2739"}],"wp:attachment":[{"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/media?parent=737"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/categories?post=737"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.bradpine.com\/wp-json\/wp\/v2\/tags?post=737"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}