Money To Live

February 25, 2009

Reader Question: Tracking Spending

Filed under: Uncategorized — by moneytolive @ 2:16 pm

Anita left this comment:

I don’t keep track of my spending. I used to — I was very diligent, recording every item I spent money on, and then periodically adding it up in categories to see what I was spending it on and what I could save on. Although the information was interesting and sometimes very useful, at some point I decided that it was finicky and that I would rather spend my time doing something else. So I stopped keeping records and now I just spend as I please, as long as I stay within my means. What are your Money To Live thoughts on record keeping (and to what level of detail) or not?

Definitely keep receipts and records of anything related to taxes or a major purchase. For anything else, the Money To Live philosophy is that as long as you spend within your means and are comfortable with your savings plan, track your spending in as much or as little detail as you like.

Tax form filing caddy

All of my tax related documents are filed in a pink plastic file caddy. There is a tab for each year, going back to 2002. The front tab is labeled “current,” and anything related to taxes goes right there: pay stubs, W-2 forms, 1099 forms, etc. If all of your income is documented on W-2s, you may not need to keep pay stubs.

Since my taxes are still relatively simple, it is easy to keep each year’s filings together. Homeowners, and parents may have a lot more paperwork with their taxes. Whenever I have too much paperwork to fit in my pink file caddy, I will probably get a small file caddy for each year.

The IRS says to keep copies of your filed tax returns for 3-7 years, depending on your situation. If filing a fraudulent return, the IRS suggests keeping records indefinitely.

Receipts, contracts, and warranties for large purchases should be kept for as long as you still have the item or the warranty is valid. From my past experience buying a car and then disputing the price, I am very glad I kept all of the documents from my car purchase. I keep cell phone and utility contracts for as long as I have the service.

After tax and employment forms, receipts, and warrants, it is a personal preference as to keep track of other receipts. I know people who document every penny they spend. I know one person who did not even read the bills that came across her desk (she just paid them all, and one time missed a $400 erroneous charge on her credit card statement).

A great thing about using credit cards and debit cards is that all expenses are automatically tracked. Most financial institutions make it easy to download transaction data (date, amount, vendor) directly to a spreadsheet or software tracking program.

I find cash spending laborious to track because it requires writing down all expenses as they occur and then transferring the data onto the computer. And then, do I really want to know how many Snickers bars I bought at the office vending machine last month?

Once, as an experiment, I tried to use only cash, so I took my credit card and debit card out of my wallet. On my first plastic-free trip to the grocery store, I realized I did not have any cash with me and returned home without buying anything.


February 18, 2009

Big life changes

Filed under: Uncategorized — by moneytolive @ 5:00 am

Recently, there have been some big changes in my life, with significant financial implications. I am right in the middle of the changes and do not want to write about this publicly yet.

Stay tuned – I will share the news with you in the next few weeks.

February 11, 2009

Changes in Spending Habits

Filed under: Uncategorized — by moneytolive @ 5:00 am

On a short trip back to NJ, a friend asked how my spending habits have changed since getting a new job, which pays much better than my former grad student salary.

  1. I save a lot more money in absolute terms, but not much more as a percentage of my income; now I save 25-30% of my pretax income, while before I saved 20-25%.
  2. I have a more expensive apartment in absolute terms, but less as a percentage of my income; now I spend 18% of my income on rent, while before I paid 40-50%. Most financial experts would say I spent too much of my income on housing before. I am a real homebody and like to live in a place that feels like home. No matter what I did after grad school, I was nearly guaranteed to make more money. It was a temporary situation to spend such a large percentage of my income on housing, and I incurred no debt in the process.
  3. I pay for cabs and garage parking with much less angst. For example, while in NYC recently, I spent $20 on cab fare in order to spend an extra hour with some friends who I rarely see. The extra transportation expenses total $20-50/month.
  4. I am a member of a fancy gym that charges $130/month. Though it seems expensive, I do not consider it an extravagance because I would easily spend that in a month on yoga classes, and there is a good yoga studio in the gym.
  5. This is a real big deal for me – I got a cleaning lady. She came and spent 6 hours on my 1000 sq foot apartment for $100. She’ll come back once a month for $80.
    I love what some friends say about their cleaning: “we outsource our cleaning to no one.” That is what I was doing before hiring Myra.
  6. I spend more money on clothes, and my threshold for “expensive clothing” is higher. I used to mostly buy clothes on sale with prices under $20 or so. Now, I am comfortable spending $50 on one piece of clothing.

February 4, 2009

To spend or not to spend

Filed under: Uncategorized — by moneytolive @ 5:00 am

A Finland ad campaign urges people to spend money: “Don’t feed the recession” by saving your own money – spend it to spur on the economy.

It is a paradox that more personal shopping could end the recession sooner, but in large part, the recession is due to high consumer debt that was used to pay for such shopping.

Shopping is down, which can be seen in the number of retailers filing or considering bankruptcy. If enough stores close, entire malls may end up closing, which may significantly change the suburban landscape across the country.

Malls are to suburban America what the downtown church square is to Europe. A relatively safe place to go and spend an afternoon. People of all ages congregate there, and you can typically count on finding some form of amusement and a meal or snack.
New York City has Central Park, and Washington, DC has the National Mall. Outside large cities, though, there are not many shared public spaces in the United States.

It was a big deal for me when I was old enough to go to the mall with friends and not my parents. If malls start closing, where will the teenagers go?

While I don’t think it would be bad to have fewer malls, I wonder where people will go. While everyone is pinching pennies, there may be more entertaining at home and attending local events (an outing to the farmers’ market, anyone?).

As a capitalist country, for-profit institutions fulfill many of our civic needs – shopping malls provide a public space to congregate; McDonald’s provides clean, ubiquitous bathrooms. Thankfully, McDonald’s isn’t going to be closing any time soon.

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