Ditch financial practices that no longer serve you

When I started working, I kept a budget in an Excel spreadsheet.

I tracked everything down to the penny.

It was borderline insane.

But I was in my twenties, I had very little responsibility, few expenses, and plenty of free time. Tracking expenses in a spreadsheet for a super nerd like me was trivial. And my finances benefited from it (I had enough time to start my first blog!).

I can’t imagine doing that today.

I don’t have enough time for that (more accurately, I have higher priorities that I’d prefer to spend my time).

And for many people, they didn’t have enough time or patience for it either. It made more sense to download a budgeting app like Mint to do the work for you.

If I tried to budget to the penny in a spreadsheet today, I’d quit after a day. If I forced myself to do it, I might make it a month before something “got in the way” and I abandoned it.

When it comes to your finances, don’t beat yourself up by trying to mold yourself to existing systems or practices. You need to mold those systems to fit your intuition.

For some, this post is going to be obvious. For others, it’ll be permission to voluntarily give up that painful financial practice before you give it up out of frustration.

Let’s find a better way that matches your nature.

Table of Contents

1. Start with the basics and build up
2. You see the dot, now draw the arrow
3. Evolve your system as you do
4. It’s ok to ditch a financial practice

The best place to be is at zero – you can build a system that fits you, rather than fitting yourself into a system.

Start with the basics and build up

With any system, you want to start with the most basic system and then build as you run into pain points.

We all know that we need to spend less than we earn. It’s math.

Why do people fall into debt? They spend more than they earn, an idea we all understand. We’re not morons.

But why we spend more than we earn is different for each person. Maybe it’s medical debt? Or it’s peer pressure in keeping up with the spending habits of your friends? Or it’s just sliding down a slippery slope of ever creeping expenses.

It’s always a bigger issue than your financial system but the only way you can become aware of it is if your systems tell you.

You need to budget. And track your net worth.

If you aren’t doing both, you’re flying blind. That’s when you can easily spend more than you earn without realizing it – which is truly a tragedy. (if you’re in debt because of, say, medical expenses, it’s a bad situation but at least it wasn’t an unforced error)

For budgeting, you can be crazy like I was and track every penny in a spreadsheet or you can use a budgeting app. Maybe you like the idea of using a budget printable worksheet instead. Which one are you likely to stick with? That’s the one for you. Test a few apps to see which one resonates with you.

Don’t force yourself into a system that goes against your nature! There is no “best way to budget,” only the best way for you because you’ll stick with it. Don’t let best be the enemy of good enough – pick something good enough.

The same goes for tracking your net worth. I track mine in a spreadsheet each month and it has taught me a lot. You can do the same or use a net worth tracking app. Again, find the one that works well for you – it may require you to test a few of them.

And you don’t have to track absolutely everything. If you get your bank accounts and your investment accounts, that’s 99% of what matters. Don’t get caught up wondering if you should put in the value of your car or home – it isn’t actionable and serves only as a distraction.

You see the dot, now draw the arrow

Establishing a budget and tracking your net worth gives you your present state.

You are the dot. Now it’s time to draw the arrow.

The arrow is where you want to go financially. It’s your savings, your investments, and your financial plan.

If you don’t struggle with budgeting, you may struggle with planning for the future. The future can be a very nebulous concept. You might know where you want to be next year but it’s hard to chart out where you’ll be in five years, let alone forty.

If I told my 20-year-old self what my 40-year-old self is doing, he wouldn’t believe me. Now try doing the reverse and it’s no wonder it’s nearly impossible.

But you aren’t trying to predict the future, you’re deciding what you want it to be and figuring out how to get there. It’s not guessing where you’ll be in 20 years, it’s in deciding where you want to be and creating a plan to get there.

If you are stuck, consider using a retirement planning tool to help. ProjectionLab is a good option if you like running scenarios and are comfortable with massaging your data. NewRetirement may be better if you prefer to answer questions and see your options.

And much like a business plan, the value is in building the plan and forcing yourself to make decisions and think about your future in real terms. Do you want to buy a house in five years? Do you want to start a family? Do you want to move to another city, state, or country?

There are no right or wrong decisions. They’re just decisions. And you can change your mind at any time.

Getting married is not “right” or better than remaining single. Owning a home is not better than renting one. Having kids is not better than not having kids. Don’t force yourself into something society makes you think is better, go in the direction of what feels right. It’s your life.

Once you make these decisions, which can change as you age, create a plan to reach it. We now have plenty of tools where you plan different scenarios and chart out what is possible.

Evolve your system as you do

When I was twenty-something, I had the time and mental energy to track all of my expenses manually. As a forty-something, that would be impossible. With all the demands on my time, sitting down to track expenses manually would never happen.

As I aged and my responsibilities grew, I adjusted how we do things. I no longer maintain a daily budget but I do keep track of income and expenses through tracking our net worth. We’re also of the age where our investments have a greater impact on our finances than our day to day activities. That is common when you’ve been investing for over twenty years.

Rather than force myself to budget, it was OK for me to abandon it in favor of keeping an eye on our net worth.

The strategies that worked when you’re younger may not suit you when you’re older. This applies everywhere in life, not just finances, and you must evolve them as you mature.

We evolved how we pay off our credit cards. We pay all the balances in full each month automatically. It’s an automation that ensures we are never late and we never have to remember to pay them. The linked checking account has overdraft protection so it’s never overdrawn. I get transaction notifications on our credit cards so I know what is being charged, I don’t review our statements for fraud.

All of our bills are similarly automatically paid. We make regular contributions to our retirement accounts so our retirement is secured.

We’ve removed as many manual steps as possible because manual steps can only be forgotten. A computer won’t forget a contribution. I will.

It’s ok to ditch a financial practice

Were you doing something diligently for years and now realize it’s not serving you?

I remember my transition away from budgeting. I was using the tools, synching up the data, checking it regularly, and then work got a little busy and I wasn’t on top of it. Over time, I was still doing it, just not regularly. It started to pile up a little bit but it was OK because the tools handled most of the work.

And I was still doing the alternative – tracking our net worth.

Eventually, I decided to go into Plaid and disconnect the different account links. I became OK with it because I realized that budgeting like that wasn’t serving its purpose anymore. It was just a chore.

What’s the difference between a chore I should abandon and a chore that I should “push through” and endure? I had to take an honest look at whether it was helping my finances.

If you are unaware of your spending, budgeting will tell you.

I budgeting enough to know and that knowledge wasn’t going to change my behavior. For example, I know that I was spending very little on clothing and a lot more on dining out. I wasn’t learning anything new.

I also had no debt (beyond a mortgage) and so I wasn’t looking to change our behavior to find additional savings. For us, budgeting was an accounting practice that wasn’t improving our finances anymore. I was comfortable putting it on hold to see if abandoning it was going to have a material impact (it did not).

If you’re looking at certain practices and wondering if you can give them up, tell yourself you’re giving it up temporarily. See if it has an impact. If it does, go back. If it doesn’t, let it go.

Try to build and mold your financial systems to work with your tendencies and is a net positive, instead of trying to force change on yourself to fit your financial systems.

Your financial system should fit like a tailored suit (or whatever your preferred outfit). As you age and your body changes, adjust the suit so it continues to fit your needs.

As you adjust your financial practices, bring on new practices to replace the ones that are obsolete.

Today, instead of budgeting, I’m spending more time in financial planning and playing with retirement calculators and retirement planning tools.

I’m no longer looking at my spending for the month but I’m planning for my spending in the future!

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