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Know Your Spending

First item in my Top 10 list is “Know your Spending.”  As we’ll see, financial planners aren’t people with whom only the wealthy engage.  All classes of people can use make smarter financial decisions.  This first spot of the Top 10 may not apply to the top 5% income earners.  It’s about knowing how much you spend.  It’s absolutely shocking to me how few people know how much they spend.  Knowing how much money comes in is easy, most of us see it in our paystub.  Knowing our spending takes work.  We’re subject to “it’s only $10 a month-itis” but those things add up.  On the surface, the money I spend on Netflix seems negligible.  But, what if I also have Hulu, Disney Plus, Apple TV, and Max?  Now you’re looking at over $70 a month.  Some of you may not worry about that, and that’s fine, but are getting $70 a month worth of value from those subscriptions?  How much other nickel and dime services are you paying each month because “it’s only $10?”  Now there’s a service for which you can pay that will tell you how much you’re spending in subscription fees!  Take a month and track where your money is going, and you’ll undoubtedly have an eye-opening experience. 

Financial planners call “Know your spending” cash flow.  The dirty term of cash flow is a Budget.  For whatever reason we seem to be averse to budgeting.  I can say this with certainty: people with money woes don’t budget.  Some things are outside our control, maybe we lost our job or a severe illness came about.  I’m not talking about those unforeseen events.  I’m talking about the preventable ones.  We used to use cigarettes as an example of an outrageous cost.  You spend a lot to smoke and die early.  Once people stopped smoking so much Starbucks became a target.  Remember when $5 coffee was absurd?  Now it’s acceptable and many people get coffee daily or multiple times a day.  It’s not just coffee, it’s restaurants in general.   

How often do you eat at a restaurant?  According to the Bureau of Labor and Statistics the average American Household spent $3600 in 2022 eating in restaurants.  This number seems unbelievably low to me, at least in Seattle where I live.  $3600 equates to $69 per week.  If my little family of three goes out once per week or even orders pizza once a week we’ve already blown through that number.  Growing up solidly middle class we rarely ate out.  Going out to dinner was saved for special occasions.  It was expensive to eat out back then. It seemingly got cheaper over the years likely due to minimum wage staying stagnant for so long and food production becoming more efficient.  With minimum wage laws changing in many places plus the massive increase in food costs over the past few years, it’s expensive to go out to eat again. 

Let’s say you want to dine on the cheap.  A Big Mac Meal at McDonalds is roughly $11 where I am.  Factor in tax and a family of 3 will pay close to $40 to eat one meal at McDonalds.  Plus, there is no nutritional value in that food.  It’s that way everywhere too, not just Mickey D’s.  For comparison sake, you can buy 2 pounds of ground beef, buns, accoutrements, a 12 pack of coke, and a bag of fries for roughly the same.  You have to cook it yourself, but you would have enough for at lease 8 servings instead of 3.  Or, you could buy a steak, some Russet potatoes and a large head of broccoli or bag of salad and eat much healthier for that same amount.  In the case of fast food, your wallet gets skinnier while your gut grows!  The smoking comparison is relevant again! 

What if you want to eat fancier at a sit-down restaurant?  Here in Seattle it’s getting harder to do.  Most menu items are at least $15.  Soda is another $3-$5, and if you want to drink alcohol…don’t get me started!  Alcohol has skyrocketed.  Remember Pulp Fiction?  “$5 for a shake? Well, it's a shake. It's milk and ice cream. It's five dollars. And they don't put bourbon in it or nothing?”  $5 is what you pay for a small Dairy Queen shake now.  A nicer restaurant you’re looking at $8-$12?  We just paid $20 for a shake at Universal Studios.  Granted, it was a tourist trap.  Add bourbon?  I’m hard pressed to find an alcoholic drink for under $12.  So using some reasonable estimates, a family of three going out at a mid level restaurant like a Cheesecake Factory, Mom and dad each get a drink and the kid gets a shake with their meals it’s going to look something like this:

$12 cocktail

$15 glass of shitty wine

$10 milkshake

$40 2 adult entrees (probably higher)

$9  Kid’s menu entrée (if you’re lucky)

That’s $86 plus tax and tip.  You just spent over $100 to eat at Cheesecake Factory.  That may be a bargain compared to the $40 you just spent at McDonalds.  You can substitute Olive Garden, Chilis, or Applebees and it all comes out similarly.  This is all fine if you are aware of it, but if you are doing this once or twice per week (which a lot of families do) it really adds up.  One meal out per week plus a daily coffee plus Mom and Dad splurging for lunch once a week looks like this:

$100 a week restaurant

$50 a week for daily coffee for 2

$50 a week for eating out during lunch (mom and dad $10 a day each)

You’ve just spent $10,400 on preventable expenses.  Packing a lunch, making your own coffee, and cooking at home will save you thousands.  A generous grocery budget of $750 a month is only $9k for the year. 

The common response, oh I don’t have time to cook. With 10 minutes of planning, a trip to the grocery store and a crockpot you can easily prepare meals for less time and money and make them healthier.  It kills me to see people waiting in line for Starbucks breakfast.  You do realize they unwrap all that shit from a plastic bag and cook it in a microwave, right?  Are you telling me that you can’t microwave a breakfast burrito or some oatmeal and make yourself some drip coffee in the amount of time you spend waiting in line to order and then waiting for that order to arrive?  It’s crazy, no just lazy!

I’ve picked on restaurants.  Obviously cooking at home can help out a lot.  Here are some other ideas you can employ going forward to help: 

  1. After looking at how much you are taking home, figure out your fixed costs: savings, rent, mortgage, debt service, utilities, car, etc. Subtract the former from the latter and this is the amount you can spend on your “Wants”.  Hopefully this isn’t a negative number already!

  2. Evaluate your wants.  Are you getting $10k per year of joy out of restaurants?  Are you getting $1400 of value out of your cable bill?  What if you cooked at home, cut out an hour of TV per day and went on a walk or bike ride?

  3. Using a credit card and paying it off every month makes it easy to track your spending.  You can get credit card rewards and a handy year end statement showing all the categories of your spending.  Beware, it’s really easy to overspend and put yourself into a jam!

  4. If you are an over-spender, use the envelope method.  Literally put cash in different envelopes for different monthly wants.  Once that envelope is empty, that’s it.  Eat hot dogs and top ramen until next payday.  This is how I prevented myself from going ape-shit in the bars during my 20’s.  Once I was out of cash I was done drinking.

  5. Consolidate debt.  If debt service is the problem, look to wipe it out with a home equity line of credit.  Credit cards charge close to 20% in annual interest.  You can get a HELOC for 8-9% right now according to  If you have $20k in credit card debt you will save about $130 per month taking that deal or you could pay the same and knock out the debt 1 year earlier.  Be careful of tapping into home equity though.  Don’t do it more than once.  It’s not an unlimited source of funds.  There are other groups out there who offer to consolidate your debt.  Do a little research and see if you can get a lower interest rate somewhere. is a good starting point for comparing rates.

  6. Get creative: Find a roommate, get a second job, donate plasma if you are really in a tough spot.  Throughout my life I’ve done all these things at one point.

  7. Learn how to say “No”.  People don’t need to know your financial situation, but you can say “no” to spending money.  Instead of going out to the bar, buy a 12 pack and have friends come over.  I have a well-to-do buddy whose kids are now in their 20’s.  They bring dates to family celebrations so now instead of 4, there’s 6 people going to a restaurant.  The kids and their significant others went to WSU so of course they like to drink.  The bill was becoming crazy.  My buddy put the kibosh on ordering alcohol at family dinners.  It easily adds $200 or more to the tab.

I have an aversion to spending $20 on a cocktail or $11 at McDonalds.  The value isn’t there.  You’ll hear me come back to “value” time and time again.  My wife finds value in a $30 glass of wine; I find anger.  One of my favorite stories is from a buddy who used to be an engineer on a private yacht.  The yacht was complete with a helicopter pad, crew, everything--the type you see at the Monte Carlo Grand Prix.  The owner wanted the staff to have the Wall Street Journal available every morning.  On a yacht you can’t deliver a newspaper, and at the time technology wasn’t like it is today.  They had to set up a satellite feed and download the newspaper each day.  The cost was something like $100 per week for this service.  The owner refused saying that was too expensive, not worth it.  Now, I’m sure whoever this was could afford it.  Fuel alone for the boat and helicopter was much more than $100.  In fact, I imagine by the time this guy even thought about going to spend time on his yacht, he’d already spent more than that on the boat.  Even the rich look at the value proposition.  While not being forced to budget, they’re already employing most of what I’ve talked about.  Even if you’re flush with cash you’ll need to get an idea of your spending so that you can tackle my next subject in the Top 10, Set Goals.

Hopefully my previous tips help.  Saving anything extra helps with many of the Top 10 items to come: Retirement, Create Options, and Save for a Rainy Day.   Knowing your spending and getting control of it is the first step to financial freedom.  For the high wage earner most of what I talked about in this post may not be applicable.  Many people make plenty of money and don’t need to worry about an extra meal out once in a while.  By the same token, I know plenty of well-to-do people who will park 3 blocks away to save $5 or wait 20 minutes in line for gas to save $0.10 per gallon at Costco.  I don’t go to these extremes anymore, but I used to. 

Everyone deep down has a “value conscience”.  If you drop a penny on the ground and it's busy, will you pick it up? What about a dime, quarter, etc.? At what level do you pick it up? I bet everyone picks up a $5 bill. Start asking if it’s worth it.  Regardless of income, cut back on luxury items if you aren't getting the value.  I think coffee and restaurants can be key areas of focus.  It only gets worse if you have a tight budget and some calamity happens.

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