If you are working in corporate America, then you probably have to adhere to a strict budget. If you are like me you have to not only adhere to a budget but actually set budgets for others to live by. In our working lives we all have a boss that we answer to and it is that accountability that often forces us to track our spending very closely. In fact most of us plan and track our spending much better while at work then we do in our personal lives. I’ve had coworkers that can keep every receipt for reimbursement, track every mile traveled to claim mileage, run detailed weekly reports to ensure they hit their monthly budget, chase employees around to cut a few hours of labor, but never even glance at their personal bank statements or review their 401k investments to see what their personal money is doing, so what gives?
There are a couple factors that I believe explain this. First is the human desire to avoid pain and seek pleasure. We are incentivized to take good care of the company’s finances because we don’t want to get in trouble or look incapable and we often have monetary rewards in the form of bonuses or advancement opportunities for a job well done. Secondly we have bosses that hold us accountable and watch over us to ensure our success. So why don’t we place the same value on our personal finances? Well first we don’t have anyone holding us accountable and it is easy to allow ourselves to overspend. To solve this we assign students an accountability partner to hold each other accountable for their personal spending, I highly recommend you find someone in your life that can do the same. Secondly we don’t see the immediate reward for a job well done. This is where tracking spending and investing comes in. I recommend setting up a simple excel spreadsheet to track your expenses, investments, and overall net worth. This document will allow you to see where you are wasting money and set goals for savings. It will also help you to see the immediate rewards of putting more money into savings and once again allow you to see your progress. For added incentive run a couple scenarios in a retirement calculator to see what your current investments will be worth in 20-30 years. This should help to make a shift in your mindset, that by hitting your personal budget and savings goals, that you are effectively giving yourself a raise and promotion.
I believe that by using the same motivation and incentives in our personal lives that propel us to succeed at our jobs, that we can reward ourselves with wealth and freedom. Many in the FIRE (Financial Independence/Retire Early) community have Facebook groups you can join to be a part of a community of like minded people who can both help to hold you accountable and share ideas on how to speed up your progress towards financial goals. So give yourself a raise and start saving more today.
Thanks for reading.
FIRE University is not a licensed financial planner or accountant, please consult a professional before making and financial decisions.