Where to Begin...

 For me this all starts with education and a budget. But Mike, if your journey is about values then why start with a budget. Great question. A budget helps see where my spending does not align with my values. A budget gives me a great deal of insight into my habits that I may not have otherwise noticed. So let’s begin by cracking open those bank statements and credit card statements and looking where our money is going. 

I personally like to bucket my spending. I record it in an numbers (excel) document by bucket. When I started I was very specific, a bucket for groceries, a bucket for fuel, a bucket for rent, one for insurance, one for dining out, one for entertainment, phone, day care, taxes, and investing. As I got better at budgeting and controlling my spending, I reduced the specificity in my budget. Now that I have fairly good control over my spending I use larger buckets. I use staples for things like fuel, groceries, phone, and haircuts. Discretionary spending for entertainment and dining out. Then I still have rent, day care, investment, insurance, and taxes. I do not have a credit card bill or student loan debt so it is not in my budget, but if you have these things they must be accounted for. 

For my base budget I total up my expenditures over a couple of months to see what my average cost of living is. In my expense category I have my both my Roth IRA and my brokerage as an expense. My TSP comes straight out of my pay so I do not need to account for it in my budget unless I am outspending my income, then I may be forced to reevaluate my system. I do the same for my income. I subtract expenses from income to give myself an idea of how well I am doing and how much I have left to invest toward reaching financial independence. From my base budget I then set caps on my monthly spending. If you like James Clear’s Atomic Habits, try his system of being 1% better (1% less spending) or maybe you need more of a jolt because you are in a dire situation where you are out spending your income. Either way, evaluate where you can reduce spending and endeavor to do so. Systems will help. 

A place I reduced expenses was haircuts. Believe it or not haircuts are expensive. I know there are undoubtedly women out there saying I have no idea. In either case, if a hair cut costs between $15 and $25 and I require two a month that is $30 to $50 a month or $360 a year. If I invest $35 into a good set of Wahl’s hair clippers I can reduce that to one haircut a month and save at a minimum $120 a year. If you are one of those men who rock the crew cut then your total bill for the year can be $35, the price of the clippers. Another simple way to reduce spending is to take a long hard look at entertainment and dining out. It was my experience that a lot of money was disappearing in this section right here. You could simply start by reducing one meal out a month from your normal experience or set a cap on money you can spend on this a month.

Another way to significantly reduce your cost of living is to get rid of debt. I personally like the Dave Ramsey debt snowball method. It builds momentum and is amazing for anyone’s financial situation. I you have not read it, I wholeheartedly recommend The Total Money Makeover by Dave Ramsey as well as The Richest Man in Babylon by George S. Clason. Both are seminal texts in my opinion on any journey towards financial freedom. I would also recommend Atomic Habits by James Clear. This book is the book that provides me with the motivation I need when things get tough. Finally, another book for after you have paid off all your debt except your mortgage, or whenever you are ready to begin investing your money is The Little Book of Common Sense Investing by John Bogle.

After spending such a long time budgeting I tend to view things in terms of opportunity cost which of course is the loss of potential gain from other alternatives when one alternative is chosen. It is also to note, as you can see from the old budget I have posted above, there is a difference between being efficient and frugal and deprivation. My goal is not deprivation but rather efficiency, but understanding opportunity cost  and a 24 hour moratorium on any discretionary spending have been extremely helpful in my journey.

I hope you have enjoyed this post and it has been of some value to you. If there is something specific you would like me to write about please leave a comment. Also if there is something I can do to make these posts better also please leave me a comment. Else wise, I hope to see you again soon and please don’t forget to subscribe so you don’t miss any of my futures postings about my financial independence journey.