There’s a lot of advice on the internet about how to save money. You could cut the cord or stop drinking lattes. You might sign up for one of those fancy new apps that rounds up each transaction and shuffles the extra change over to your savings account.
The problem is that I have no idea if these are good ideas for you. There’s a saying that we shouldn’t forget that personal finance is personal. What might seem like an unnecessary expense to me could be something that’s very important to you.
The information that’s out there is only helpful in finding your own personal efficiency. But that hard work is creating it. Like a custom suit or dress, your own personal efficiency is personal to you.
When you figure out what’s unimportant and not contributing to your happiness, be ruthless in cutting it out. For me that’s cable TV, cars and owning a fancy home. They just aren’t priorities right now. But good luck convincing me to drop a house cleaner, U.S. Open tickets or trips to the Caribbean. Those are expensive and (in my mind) worth every penny.
The important part is making conscious decisions with your money and creating an efficiency that works for you.
You can’t do this unless you know what you’re spending.
You can’t know what you’re spending unless you track it.
Therefore, the first step is to figure out how to track your spending. You can sign up for an account with Mint and let it do it automatically. Or, you can use a service like YNAB which will require a little more work on your part.
If you’re not ready to commit to either of those, you can simply look back at your expenses over the last month. The reality is that you probably have a lot less transactions than you think. In less than an hour you can tally up everything into rough categories to see where the money is going.
How many monthly subscriptions do you have for services that you aren’t using?
How many bills are $20-$30 higher each month than they probably should be?
Are you comfortable with the amount of money you spent on food? Alcohol?
Once you take the time to add everything up, it’s actually pretty easy to start making a few cuts. Certain transactions will jump out at you as wasteful based on your own personal criteria.
This is an important point. You won’t see these transactions and think “oh wow, I really don’t want to stop spending money on that”.
Instead, you’ll see these transactions and say, “What the heck was I thinking?! I don’t even watch Hulu. How long has that been going on?”
Efficiency is a beautiful thing. They say that when our thoughts and actions don’t line up, it creates cognitive dissonance. There’s a nagging feeling that you carry around with you that you should be doing something different.
When you’ve created your own personal efficiency, you never have these thoughts. You spend money consciously and without concern because it’s exactly what you intended. When you’ve decided that those incoming dollars have a specific purpose, you won’t think twice when they go out the door to fulfill that purpose.
Joshua Holt is a former private equity M&A lawyer and the creator of Biglaw Investor. Josh couldn’t find a place where lawyers were talking about money, so he created it himself. He spends 10 minutes a month on Empower keeping track of his money. He’s also maxing out tax-advantaged accounts like 529 Plans to minimize his taxable income.