Tom Lewis - 1/22/2014 10:12:40 AM
Thanks for sharing this really important concept. Someone convinced me to track every expense when I first went out on my own. Even though that only lasted a few years, it left me with a habit of being attuned to the cost of everything and the rate of outflow (some in my family might say too much so!). I see many fully formed adults who never got this, and most of them seem to flirt (or worse) with insolvency every time a "rough patch" comes along.

Another thing I found very helpful, much more recently, was to break monthly budget categories down into fixed (e.g. mortgage pmt), essentially fixed (e.g. $400/mo. "groceries &gas") and discretionary (e.g. vacations), expressed in a spreadsheet monthly, quarterly and annually. This data, along sides assumptions about income, really cleared things up and actually helped me spend more than I would have. This was because it enabled me to see how little a one time, several $K vacation, which doesn't have to recur if one's financial situation deteriorates, moves the needle on our financial security, versus, say, a big car payment every month all the time or a bad latte habit. It's the luxuries and indulgences you let become necessities that make it hard to live within one's means and accumulate a buffer over time.

Keep up this good and important work, Dennis.