For years, I balked at tracking my spending in any way. We were saving, investing, and living below our means so I didn’t see a purpose. Moreover, money had been a stressful topic as I grew up, and I had developed an aversion to discussing finances. My spouse tracked his spending to the penny, even asking for a receipt from the hot dog vendor so he could record the $1.50. I refused to do this.
Developing Proficiency
A couple years ago, about 10 years into our marriage, I wanted to estimate how much we could save toward our house renovation, and I developed a budget for tracking our spending on some main categories. Specifically, I wanted to estimate our saving rate by month and year. Our budget wasn’t a traditional budget, in that I didn’t specify detailed amounts for categories like the phone bill. Rather, I had a budget that looked more like a spend plan, with income in the rows on top, and large standard expenses, such as the monthly mortgage payment, in the rows below, along with most of our other spending lumped together. Because we have generally been very focused spenders and savers, this method worked well for us. After our main expenses, we constrained all other spending as much as possible to maximize saving or paying off one main item. In our early years, we paid off $46,000 in a line of credit on the condo and saved $40,000 toward my graduate program by limiting all other spending.
My goal was to accurately grasp how much we were saving, and the first year, my budget/spend plan was a solid “C” performance. I updated my spreadsheet monthly, and found I often hadn’t accounted for some common expense (e.g., property tax that was due in October). The next year, I did much better. Using the past year’s data, my forecasted savings tracked within 2% of my actual savings. I gave myself an “A-” for my second year budget. I was pleased with my improvement.
The next year, I was confident enough in my method, that I completed a 7-year forecast, that included a two options for paying off the new line of credit we would take out on the house to pay for the house project. We are within budget for phase one of our house project, and my savings estimate for 2019 is working well for our bi-weekly finance check-ins.
Two Keys for Proficiency
There are two keys to becoming proficient at anything. The first is you must clearly grasp the area you wish to master. In my case, I wasn’t developing proficiency in budgeting, nor in helping to constrain our behavior. I was already decent with the former, and a master at the latter. I was focus area was mastery in estimating how much money we needed to save before we started a project, and how quickly we could save that money. Much of the struggle with personal financial behavior comes from a lack of focus on a the particular area for improvement. Without a purpose, it is hard to become proficient in any area.
The second key to becoming proficient in consistency. Nearly anything worth mastering, will take considerable time. Without a clear purpose, it is extremely difficult to be consistent over the long haul. In my case, it took 18 months of solid work for me to become proficient in my focus area. I wasn’t interested in perfection each month, and I didn’t expect to have a great forecast for spending and saving in the first year. I wasn’t surprised or discouraged that my first attempt missed the mark on a several levels.
Consistency leads to proficiency, not the other way around. Financial success is the result of showing up day after day, month after month, year after year. If you want to become proficient in any aspect of financial behavior, you will need to commit to consistency over perfection. The beauty of consistency is that it provides margin for growth. If you are confident that despite a mistake on a given day, month, or year, you will continue your focus and consistency, you can try new approaches and make revisions. Focusing on consistency rather than perfection will always lead to proficiency.
Hat tip to Kendra Hennesy with the Mother Like a Boss podcast for emphasizing the concept of consistency leading to proficiency when discussing routines. You can listen here: “Sticking to routines when your life is unpredictable”
Photo by Sebastian Engler on Unsplash