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
I take it you are not living in the States. Equivalent of $45,000 tells me that. In my old country, you can live like a king with kind of money let alone buying a washing machine.
I love stories like this one. I did the same thing when I first found this site, I read for hours. Maybe the next step will be to start your own blog, so we can read all about your continued success on your finances. 😄
I’m not sure blogging about money is something I can do better than Len, or for that matter something I’m as passionate about as he is. 😄
As they say in Great Britain, “Lovely”.
Or…well done mate.
Thank you both.
Good for you Steven! Len’s blog gave me a big kick in the butt too, so I understand where you are coming from. Keep that pedal to metal!
I am new to reading Len’s blog but every post seems like a kick in the butt for someone.
I am in a big hole of debt and looking for a way out and Len helps mark the way.
Well now … I’m starting to almost feel guilty about all these butt-kicking articles I’ve apparently been posting here.
(Hey … I said almost.) 😉
Great job! Tracking every penny spent is the first step to becoming financially independent. I’m glad you woke up with the whole washing machine episode. 😄 Keep at it!
There always seems to be a “wake-up moment” for everyone who takes control of their finances. Mine was buying a red sports car I couldn’t afford.
It’s amazing how comforting it is to have some money put away. Your worries seem to melt away as you realize you are prepared for life’s setbacks and opportunities. I tell this to everyone who will listen, but most people aren’t willing to change. They just keep hitting up their parents.
Agreed. It’s amazing how much better I sleep knowing I’m putting money away for rainy days.
Thanks for this article Len. I’ve just come out of a massive gambling problem so i’ve got some way to go. Reading articles like this will only help me sort things out sooner.
Reading about being my own CEO is one thing. Actually seeing it through this man’s experience makes it more powerful.
I am responsible for the monies spent.
That was the same realisation I had, that I could come up with a million reasons why I wasn’t responsible, but no excuses.
That’s a great and inspiring story. Steven, you have definitely taken the right path (one which I sometimes have a hard time staying on). I get a sense of focus and dedication from what you have written. It sounds to me like your a lot further along than you give yourself credit for, Congrats!
March has been a rough month, with birthdays, events that I can’t reasonably ignore and graduations that I wasn’t willing to miss, but I’m in a place now where I can afford to do these things. So it’s all good
Steven: Bravo! I know that looking at the hard numbers, on paper, is a wake up call for many folks when they decide to take their spending responsibility seriously. It is quite a reality check.
Good job. In a few years you will be surprised at the progress you have made. Keep up the good work!
Congratulations! I’m happy for you. Learning to manage your money is going to benefit you all around. Good on you.
Good basic advice everybody should learn.
I think it’s great of you to share your financial wake up call so that it can help others who are struggling. I had my wake up call when I went to an Uncle of mine for a loan and he flat out said “no” – and I am so glad that he said no. From that day on I made a commitment to myself that if I have flip a million hamburgers or whatever way to make money that I would never ever be in that predicament ever again.