MMM #6: tracking expenses + quit vs. grit
How can we track expenses better? When should we quit vs. use grit?
I'm going overseas next month and taking some time off to relax. I'll still be posting regularly for the next couple of weeks — super excited to share the budgeting video and more with you this year!
In this issue of Mindful Money Mondays:
- 💸 Wealth: 3 tips for tracking expenses
- 🧠 Mindset: When to quit, vs. use grit?
💸 Wealth: 3 tips for tracking expenses
Tracking expenses is so valuable because it gives us honest feedback about where our money is going. Is our spending in alignment with what we need and value, or are there opportunities for change?
From 5+ years of experimenting and budgeting to consistently save around 50% of my income, I've learnt the hard way: use tools you know, and weave it into the routine you already have.
- When you want to create a quick reminder, what do you instinctively use? Is it pen and paper? Notes? Voice memos? Whatever is quickest for you, use that.
- How can you make this as low-maintenance as possible? For me, I needed a system that I could check in on weekly, without snowballing into a big chore. This meant using an app to automatically track spending across different bank accounts, so I could focus on categorizing and reviewing.
- What's your routine like? When would you feel most excited to do this? Some people like to batch-review their expenses on the weekend over brunch. Others might prefer doing it daily. Whatever it is, make sure you check it at least every two weeks, so you can catch any surprises early.
🧠 Mindset: When to quit, when to use grit?
A study in behavioural economics has shown that retail traders (individual investors like me and you) tend to quit early when they're gaining profit and stick around when they're in the losses.
Probability-wise, we're making it more likely for us to lose. Why might this be?
- Uncertainty is scary. We'd rather take our certain gains. It's also less painful to experience a loss from something we're familiar with.
- When we quit something, we only see what we chose. We don't get to see what could've happened instead. The lack of feedback makes it harder to improve our quitting skills.
- Reminder: we shape the future with our actions. We can always change the direction we're headed towards.
- Sunk-cost fallacy - when we're in the losses, we can get into a cycle where: we don't want to waste effort we've already spent → we stick around, putting in more effort → repeat.
- Recently, I went through this when I was debating whether I should sell my barely used bike while preparing to move overseas.
- At first, I was reluctant to sell the bike. It felt like I was giving up on a hobby. I hated feeling like I wasted money, since I hadn't used the bike much.
- I started to think about shipping the bike overseas - the equivalent of investing more effort.
- In the end, I was okay selling the bike because I reminded myself that
- I couldn't meet the criteria to commit to this hobby yet, for various reasons, and that's okay!
- I could always get another bike, and justifying it by saying “cyclists change their bikes too” 😅
1 Question for You:
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Until next week,