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By Carmel Fisher, Managing Director
10 February, 2017
Seven or eight years into married life, my husband sat me down to discuss our spending. More than twenty years later I remember the conversation and the overnight change in my money attitude — although my actual spending took a little longer to change.
Over a wet weekend he entered all our year's expenditure into a spreadsheet, categorising it broadly — house, his, mine — and breaking it into subsets such as personal grooming, restaurants and travel.
I could not believe how big some of the categories were, and how disproportionate our spending was. Some discretionary "luxury" items enjoyed a much bigger allocation than essentials like our mortgage.
It was with some nostalgia that I read a financial column entitled Where does it all go? The author questioned how our money gets frittered away, from a society and a personal point of view.
Think about what society looked like in the 1950s. For the most part we had food, houses, jobs, children and friends. Fast forward to today and things look remarkably similar in many ways.
Except, incomes have increased four-fold since 1950 and spending has increased accordingly.
As our incomes have grown, we could have chosen to spend the extra money wisely. We could have put more of our money into savings and real assets not financed by borrowing.
To stop the spiral, the author suggested everyone would benefit from "the ridiculously simple technique of recording where all your money goes for a few months".
He explained how:
This process might seem a bit dull and penny-pinching; that's why my husband chose a wet weekend. But I can vouch for it. You can only become financially independent when you know what your required level of spending is.
Knowing how we spend our money allows us to change bad habits and develop better ones.
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