Readers: I received a message from a reader in the United Kingdom, which I found to be very inspiring. He graciously accepted my request to share his story with you. — Len
Last November my washing machine died. Because I make decent money – the equivalent of about $45,000 US dollars – that should have been a trivial event. However, it turned out to be much more important to me because, after looking at my bank account, I realized I had no money to replace it.
The exquisite humiliation of being 32 years-old and having to go to my parents to ask for money to replace my washing machine broke something inside me. I love my folks, and I know they love me, but they shouldn’t have to support me — and I resolved to never be in that uncomfortable position again.
So I started looking for budget and expense planners and found this blog. I spent almost six hours on Len Penzo dot Com, til’ the wee hours, reading about finance, about personal responsibility, about how I should be able to live on $45,000 a year, and the 10 commandments of personal finance.
Mostly though, I kept thinking about the post on running your household like a business.
You see, at work, I’m a pedantic list-maker when it comes to the expense accounts and the department’s monthly budget. I know where every penny goes, I know where every penny in my department is earned and spent, and my books have had an ‘approved’ stamp from our auditors every single year that I’ve been running the logistics department.
Somehow, though, the idea of being a household CEO had never crossed my mind — but it’s turned out to be great advice.
For more than three months now I’ve been tracking every penny I spend. I’ve roped my parents (who do love me, even when I exasperate them) into doing a monthly audit of my expenses, which I email to them on the first day of every month, and I’ve adjusted my want/need scale in a rather brutal fashion.
The change has been so completely and utterly breathtaking, that I wanted to share my results with you.
Treating my household like a business has changed my life. In January, I managed to reduce my monthly spending from more than $2600 to less than $2200. I also started putting the first money into my emergency fund and I also started putting money into other replenishment funds so that I could have cash in advance for clothing, birthday presents, home repairs, and other things. By the end of January my credit card was fully paid off.
Over the last three months I’ve managed to reduce my monthly expenditures by about $600 dollars, and I’ve now reached a comfortable minimum balance where I can pay my bills with money to spare in my checking account. I’ve also managed to put the first $625 into my short term emergency fund; I hope to have that filled by the next paycheck and then move on to the next fund.
And perhaps most importantly: I no longer worry or wonder about my finances. I’ve gone from having no idea where my money was going, to now knowing where every last penny is being spent — and I’m continuing down the path to personal financial responsibility!
My entire life has completely changed. The change in the way I track my money means that I’m now eating healthier (it’s cheaper), I actually feel happier, I’m objectively wealthier and I’ve gone from dreading checking my bank account to an almost impatient need to do it every morning as I have my breakfast.
It’s amazing how much better I sleep these days.
I’ve still got a long way to go. But every month I now know how much money I have, how much I need for living expenses, and how much I have left over for discretionary spending. For example, I know that my hands-down all-time favorite singer, Kerry Ellis, is doing a free concert in London this weekend and, happily, I can afford the train ticket to go see her.
If reaching for my notepad to track every penny I spend sometimes amuses and exasperates my friends and colleagues, I can live with that. But for someone who never had any financial discipline, I think it’s a necessary step.
And if I can do it, I know you can too.
Photo Credit: jim212jim