I used to have a coffee habit – I know, shocking, considering I live in Seattle! I used to have a fancy coffee drink once a day, sometimes twice a day. I was never spending fewer than $5 per day on coffee.
It’s a misconception that all financial advisors know how to set up and analyze a budget.
Most financial advisors don’t even WANT clients who would need to worry about budgeting! And, they aren’t so hot at it themselves . . . just because someone works in the financial industry doesn’t mean their own financial house is in order. Think of the doctor telling a patient to quit smoking when secretly, the doctor also smokes!
The only reason I uncovered (and became conscious of) my habit was that one of my clients wanted to get set up on Quicken, so I went to her house and helped her. I thought, as we reviewed her expenses, that maybe I should do this too, just to see what’s what . . . so I went home and set myself up on Quicken too (this was way before Mint was around).
As you get it set up, you have to categorize everything so that it starts to learn that a charge from, say, Shell Oil is categorized as Auto Fuel. My Starbucks charges were being classified as Eating Out, which wasn’t the way I saw my Starbucks purchases (I don’t know WHAT I thought they were really!), so I created a Coffee category—which I recommend you do on Mint if you get more than 5 incidences of a specific expense every month. As it was, I had 30-31 incidents of Starbuck purchases!
I was shocked. You’re probably thinking, about $5 per visit, that’s around $150 per month, right? But sometimes I went twice a day, and sometimes I got a pastry . . . so it was MORE than $150 per month. As soon as I was confronted with the cold, hard facts of my spending, I realized that I had SO MANY other things that I’d rather purchase with that money.
I think I talked about it for a month. I’d say to my friends and family, “Did you know that I was spending over $150 per month at Starbucks?!?” And they would say, “Well, yeah, you love Starbucks, so I’m not surprised.” My mom even pointed out how I could psychically intuit where the closest Starbucks was . . . we took a trip together in Vancouver B.C. and I insisted I needed Starbucks. This was before smart phones, so I just went with my gut, telling her “Turn here . . . . take a right up ahead . . . turn here . . . “ I had found a Starbucks in about 15 minutes (and they are not as plentiful in Canada as they are in Washington State).
The point is, accept that you have blind spots about your spending habits. If you’ve taken the first step and have started tracking your spending, the NEXT step is analysis. It may be clear where you might be spending ineffectively, but sometimes, it may not be obvious and you’ll need an objective third party to review them. So find that resource for yourself (I am happy to help) and get even more strategic about your finances!
And yes. I broke the habit…you can read about that here.
P.S. I think the first step to getting better with your spending is to align it with your goals and values. You might want to check out my free workbook that helps you do just that!