I have been tracking my net worth monthly, thanks to inspiration from J Money at budgetsaresexy.com.
I manage to increase my net worth by about $1K-$2K every month, mainly from 401(k) contributions, including company matching. This is a great start, but since I am interested in early retirement, I want to increase this amount significantly.
Over the last few months, I have focused on decreasing my monthly expenses in every way possible. I recently moved, which significantly decreased my rent, I worked on decreasing my grocery store bill, I use the library instead of buying books on my Kindle, and I have stopped buying clothes as a form of entertainment. Still, I only managed to increase my monthly savings by a couple hundred dollars. What was I missing??
This past week, I decided to categorize every purchase I had made in the year 2016 and see where all my money was going (side note: Yes, I love spreadsheets. This activity was fun for me. Yes, you probably think I’m crazy.) A few of my categories: rent, utilities, car costs, medical costs, food, clothing, travel, charity, books, sports tickets, and self-care (treats like massages, pedicures, etc.) Food and medical were both high, which I had expected. Books and sports tickets had decreased from the year before, clothing had drastically decreased, and nothing really stood out to me. Travel was high due to several international trips, which I had been saving for over the past few years.
Then I scrolled down to this category: Personal Development: $5,024.52. Holy $hit! I don’t remember seeing any of that in my monthly expenses!
And then I remembered… I had been charging my “personal development” costs to my savings budget. Oh, no. My rationale behind this had been that these courses were investments in myself, so it was ok to spend my investing money on them. I do firmly believe that these courses will pay off, both in personal happiness and in money earned (that’s a whole post for another day), but no wonder I hadn’t been putting in money to my investment accounts!
Rich Dad Investing Class (about $5k, some paid last year)
Geneen Roth’s Women Food and God Retreat- $2k including travel
IPEC coaching certification- haven’t paid yet, but $9k to come
Obviously this is a significant amount of money. Especially since I am expecting to spend $9k more before the end of the year. In order to make my IPEC payments, I need to put every penny possible towards these, so I will continue to use my savings budget for the rest of the year for personal development.
Next year, however, things are going to change. Personal development costs will come out of monthly expenses- that may mean that I can’t sign up for everything I want to, but I think after this year I need to cut back anyway. Next year I also expect to be making back some money on these investments. While personal development is an investment, early retirement is a big priority for me, and I need to follow through with my financial investments to show that.
The lesson? Sometimes the issue is staring right at you, and you still can’t see it. My obsessive expense tracking helped me find the issue, but I could have found it more easily by taking a deep breath and a step back from my spreadsheets.
What obstacles have you been in denial about? How did you narrow down the problem?