How to Achieve Financial Freedom: Track Your Recurring Expenses
I’ve always had this thing with money. It’s not that I grew up without it (I didn’t) or that I feel like it’s the ultimate goal in life (I don’t). But it’s something that I’m always aware of.
For a long time, I was aware of it in a negative light. I knew immediately if I had less of it than my friends did, or if I had more. I would feel envy or guilt accordingly, beating myself up over not being able to afford something that I wanted, or when I spent more than I should on an item.
It was difficult to find that perfect balance that would make me feel financially normal in comparison to others. Probably because “normal” doesn’t exist.
Years later, I’ve flipped that mindset to be less focused on comparison and more focused on optimization.
This mindset requires a plan. In the past, when I was stuck in that comparison mindset, I was aimlessly spending and saving, not really understanding how a different choice here and there could affect my total wealth. (Yes, we’re using the term wealth around here - it’s not just the number in your checking account that matters. Wealth encompasses investments and property as well as earnings.) Now, I’ve embraced my role as Queen of Excel Sheets and created a pretty locked-in system that has allowed me to take a major leap toward financial freedom.
First Step: Track Recurring Expenses
I am always aware of how much money I have in each of my accounts, how much of it is invested, how much of it is saved. I can tell you my student loan debt down to the dollar on any given day, and I am hyperaware of my budget, which dictates what I am willing to splurge on and what requires saving.
A large part of this awareness is due to going beyond your basic budget apps (though I do love Mint!) and creating an Excel spreadsheet that I can use to track my recurring expenses.
Spoiler alert: I’m giving you access to that spreadsheet through this link for free! Seriously, go download it now. It’ll change your life.
Tracking your recurring expenses is an essential first step toward achieving financial freedom because it gives you a good baseline for how much you’re regularly spending every month. Sure, this step doesn’t take into account your random Culver’s treat or a spontaneous trip to the bookstore, but I don’t believe in budgeting every cent anyway. I believe in looking at your large, recurring expenses (which often encompass the necessities), and divvying them up between paychecks.
How to Track Recurring Expenses
The template that I mentioned above lets you categorize your recurring expenses like rent or a mortgage, utilities, student loan payments, credit card payments, gym memberships, investment contributions, and savings contributions so that you can spread them out over your paychecks in a way that keeps your bank account relatively balanced throughout the month. No one likes getting hit with an unexpected overdraft fees.
For example: I get paid on the 15th and final days of the month. My mortgage payment is due on the first of every month. Because it’s my largest expense hands-down, I try not to allocate too many other expenses to that “end-of-the-month” paycheck. I don’t want to put myself in the hole at the beginning of the next month, and spend the next two weeks pining away for my next paycheck. That’s no way to live! Instead, I used my tracker to allocate my mortgage, a student loan payment, and a contribution to my savings account to my “end-of-the-month” paycheck and divvy up other expenses like cable, my security system payment, and blogging expenses to my second paycheck and the income my side hustle brings in.
Like I said earlier, this tracker doesn’t have to just be used for your bills. I use it to make sure that I’m putting part of each paycheck into my savings account. The tracker holds me accountable, so that I know I’m saving an impactful amount of money each month. In the past, I’d throw some money in my savings account whenever I thought of it, only to withdraw it a few weeks later when my checking account ran out of money. This tracker has saved me from guilty moments like that, and I’ve even instituted a “no-withdrawal” policy for my savings account this year. If I follow the plan that I set with my tracker, I won’t need to touch that savings and it can finally grow the way that I intended.
Once you’ve filled in your tracker with your major expenses (and shifted things around so that they’re equally allocated between paychecks), you’ll be able to see how much you have left over from each paycheck during the month. That number gives me a good guideline for how much I have to work with until the next paycheck. It’s my “flexible” money. It’s the money that I could choose to spend on clothes, or on a dinner and drinks with friends. Since I’ve already allocated the rest of my paycheck toward necessities, savings, and investments, I don’t have to feel guilty about spending this flexible money however I want.
Now, don’t be fooled - this isn’t an endorsement for living paycheck to paycheck. In fact, it’s the exact opposite. If you use the tracker correctly and include savings and investment contributions into your monthly plan, you’ll be able to get a better hold on your finances, start consistently working toward a wealthy future, and spend your flexible money guilt free. That’s the definition of financial freedom.
Honestly, this shift in mindset from comparison to optimization has changed the way I look at money. I see it now through the lens of freedom and opportunity instead of guilt and fear. I was so sick of feeling like I never had enough, or that I’d overdraft at any minute. Once I took the time to sit down and lay out my recurring expenses in a tracker, I understood that I there were opportunities for optimization. The extra $100 that I was unthinkingly spending at Target every month could actually go toward my student loans and help me pay them off years earlier. If I cancelled my subscription box service I could have extra cash each month to put in my savings account.
Working toward these goals and having a genuine understanding of where my money goes every month has reduced a lot of my anxiety, and given me a new outlook on money. Give this first step toward financial freedom a try and let me know how it goes. I have a feeling it will be just as life-changing for you!