Cultivating frugality

This is the one in a series of (at least) 30 posts I’m going to write this month as part of what Wesley Zhao and I have dubbed No-Blog-Sloth November Challenge. One post will appear here a day from now until the end of November.

A big problem I’ve had ever since high school is spending money. Sophomore year of high school I started a company selling BlackBerry and iPhone apps. This was right at the beginning of the app craze and I made several thousand dollars doing it. By senior year all of that money was gone, and I couldn’t really point to any large purchases that had sucked it away. I had literally spent it all on gas, food, and other consumables for which I have nothing to show. 

Working that hard and having it all go down the drain on things which don’t really drastically improve your quality of life is a really bad feeling. 

When I got to college I had the same issue. It was so easy to go to Wawa and blow $10 on a sandwhich and a drink that I was constantly running out of money on my debit card. So I finally decided I had to do something about it.

After reading Titan: The Life of John D. Rockefeller by Ron Chernow I decided to track my expenses. Chernow says that throughout his life Rockefeller kept meticulous records of his finances, and not only did that help him save money through the years, it also gave him a good sense of where his money was going. This helped him make better business decisions, because it allowed him to see clearly where his money was going in his business. 

How does tracking your expenses lead to spending less? Well, as Sebastian Marshall always says, “what gets measured, gets improved.” Or something like that. But I really do see a difference.

I’ve struggled with consistency over the time that I’ve been doing it, but in general I carry around a small black notebook in my back pocket every day. Right after I buy anything, I take a second and jot down the price and the item. I also keep a running total of the amount spent for the day. This has the added benefit of improving my mental addition skills.

Looking back I can tell you that on August 22nd I spent $9.29 all on food. On October 4th I spent $8.69 at Chipotle. On November 2nd I spent $12.75 on coffee, food and ATM fees. 

Doing this every day has been a really eye opening experience into showing me where my money is going, and where I can get the best value for what I’m buying. For example I know that I will never again go to a Penn dining hall and buy sushi. A few days ago I bought sushi and a drink for lunch it totaled to $9.98. If I went to a great food cart near the gym I could have gotten the same amount of higher quality food for $3.50. 

Compounded over months or years, small decisions like that end up addding to a lot of money. And building up even a small amount of savings allows you to make decisions that you otherwise probably couldn’t which can in turn bring a lot of value to your life. So my theory is that if I can make a decision that will cost less, but won’t significantly affect my present quality of life I will make that decision.

Until tomorrow. You should follow me on Twitter or check out my project DomainPolish.


4 Nov 2011, 1:51pm | 8 comments

  • Alice

    Do you find that phsyically writing it down (vs recording on your phone/digitally or whatever) helps with this?

  • Dan Shipper

    Personally I write it physically because I want to get better at mental math so it forces me to add by hand or in my head. I think you could be just as successful with it on a digital device though. Good luck!

  • Jarrett Coggin

    One of the best things I’ve found for getting better at tracking my expenses is to do two things: Automate everything you can (saving, bills, etc.) and when keeping your ledger in your head, round up to whole numbers.Once you have everything automated (using the highest amounts for bills in the last year), keeping a mental ledger is much easier. You don’t have to be exactly right with the mental ledger, but you just have to round up on your purchases, which will make you believe you have less in the bank than you actually do. I’d also suggest checking your balance out 1-2 times a week at first, and eventually you can get to the point where you check it once a month and still be fairly accurate.

  • Luciano Cheng

    So i’ve been a power user of mint.com for years, and it’s shocking the amount of transparency it gives you into your finances. I was able to save a couple of thousand dollars in a year just by just noticing how much I spend at Starbucks in a month.To make it work, the one thing you have to do is discipline yourself to use a card as much as possible: The automation makes it easy to track … and hard to lie to yourself.After that I typically assume cash is half food, half cabs, and that works out to be about right.

  • Dan Shipper

    Agree with the automation comment Jarrett. I don’t pay all my own bills yet 🙂 but when I do I’m definitely going to go that route.Luciano, I’m interested by your use of mint. Most of the people I know say that they look at it once when they start using it and then don’t really check it again after that. We should definitely chat again some time soon.

  • Jarrett Coggin

    Dan,The deal with Mint is you have to be willing to face yourself in a mirror, and Mint is a very clear mirror. If you use it on a regular basis (at least once a month), it can be very powerful. The more you put into setting it up and configuring goals, the more you will use it because you’ll be excited about the progress you are making. Without it, I would not have paid my credit cards off in 8 months, build up an emergency fund in 3 months, or create a budget that I almost never exceed (and when I do, it’s because something unexpected happened). Mint is very powerful, but you have to be willing to face the music if you don’t meet the goals you set.

  • Dan Shipper

    Gotcha. I definitely have been at the point where I don't want to check my debit balance because I know that I'm not going to like what I see. Not sure when the change happened, but because I'm tracking everything and I know I'm consistently spending under my budget I don't dread seeing how much I have left. I think John D. Rockefeller said something to the effect of "I'd rather be my own tyrant than let money be my tyrant" (completely paraphrased). Maybe I'll set myself up on Mint – the big issue for me has been I've been too lazy to find and enter in all my account details. 

  • http://www.dharagohil.com Dhara

    One of the best advice I ever found was this:
    Instead of spending first and saving whatever remains, save first and spend the rest.
    🙂

 

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