Flickr image "What's in my bag" by Hilliary Stein

Financial freedom is about having enough to spend. There are too many stuff out there that we can spend our monies. If you follow economics, you will understand that there are unlimited wants but limited resources. Thus, it’s too easy in a place like Singapore with numerous shopping malls and retail outlets for you to live beyond your means.

So how do you allow yourself to spend without worrying about going beyond your means?

Track your expenses daily

After reading “Your Money or Your Life” by Vicki Robbins and Joe Dominguez, I started to track every single expense that I incurred on a daily basis.

I have been doing this for close to a year now and I realise the interesting impact of being aware where my money is flowing. For one, I know how much of my income is spent every month and consequently how much I save each month.

This has been very powerful in allowing me to know if I’m truly practicing what I preach here at fivecentstencents, i.e. to live within your means. So long as we manage to save every month, we’ll growing our investible net worth. That’s part of the battle won, the other part is to grow that investible net-worth safely by beating inflation and fixed deposit rates (my investment benchmarks).

Spending because you’re saving

The paradox of being so meticulous in tracking my expenditure is that I now know for sure if that cup of cappucino or piece of cheesecake at Coffee Bean or McDonalds’ Cafe is something I can afford to spend.

Previously, I erred on the side of caution and deprived myself of some of the small luxuries in life. This was because I was worried that too many small luxuries will reduce my savings and tip my lifestyle expenditure beyond my means.

Because I now track my spending, I know very clearly if I’m saving or not for the month. This literally influences my behaviour as I’ll tend to curtail discretionary spending if I’m spending more than necessary for the month and the targetted savings level is being compromised.

Thus, by tracking my expenses carefully, it has allowed me to worry less during the weekend and enjoy my cup of cappucino with the spouse and daughter because I know I’ll still meet my savings target after that expenditure.

How do you spend money without worrying?

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