Warning: This is not a pharmacy specific post. Some of my very gracious readers (Hi Mom!) have asked me to share a bit more about myself, my life and what else I do. This post is a little glimpse into something my family has been working on. If this sort of thing annoys you – feel free to ignore. Want more of this kind of thing? Let me know.
A couple months ago my wife and I started practicing ESP in order to save money and get a better handle on our budget and spending. Now, I know what you are thinking: What? ESP? Extrasensory perception? Has Jason gone mad? All that time spent in the organic chemistry lab in college has finally caught up with him!
Relax. For us, ESP stands for Every Single Penny. We decided it was time to look at our personal spending the way any good financial analyst would look at her business spending. You cannot begin to address a problem without good data. I know this from my work as a pharmacy manager. If you want to run a financially successful pharmacy you have to keep a close eye on every single penny. Recording EVERY SINGLE PENNY that is spent is a first step in the process.
Simply put – we determined that we would keep a careful record of every single expense that came out of our take-home pay, and put it into appropriate categories. I suppose we could have taken it a step further and evaluated all the deductions we experience even BEFORE it becomes “take home” pay (taxes, medical, 401K). But for now we were content to just focus on what we actually take home.
This post is simply about what I have learned from this process having done it for nearly 3 months now. Maybe it will appear very elementary to some of my readers. Maybe you are naturally talented at managing and spending money carefully. I’m not. And so this process has been a good first step for someone like me.
LESSON 1: Keeping track of every single penny is hard. It sounds simple. And I thought it would be. I went and bought myself and my wife a little spiral notebook to simply jot down every expense in. But then reality sank in. Sometimes I didn’t have the little book with me. Sometimes I was in a hurry. Sometimes we make purchases for which SOME of the expense falls into 1 category and another part falls into a different category.
And the hardest part of all? Just trying to remember to do it. For 43 years I have bought stuff and not written it down. Now all of a sudden I needed to keep track of every little thing. EVERY little thing. As I’m sitting here in McDonald’s right now, typing this message, I am just remembering that I bought a coffee for $1.06 and need to record it. See? It is not as easy as it sounds.
Solution? After about a month of struggling with my silly little notebook I found an app for my phone that helped A LOT! It is simply called “Expense Manager.” It is very simple. It is free. It allows us to create our own categories and sub-categories. I always (virtually) have my phone on me. So does my wife. So this didn’t require carrying anything extra. I suppose if the app crashes I’m in trouble for that month. But so far, so good.
LESSON 2: Categorizing expenses isn’t easy. At least it wasn’t easy for me. In order for us to review our spending at the end of a month we have to put every expense into a category. Specifically, every expense must go into some sub-category that falls under the umbrella of a bigger “general” category. For example, we have a general category called “Automobile.” But every expense related to our vehicles must be filed into a sub-category beneath that such as: fuel, maintenance, lease payment, AAA membership, Parking fee, Registration, Excise Tax, etc.
Getting all these categories setup for us took a couple hours. In fact, they are still a work in progress. But it was this hard work that makes the system useful.
Do you want to see what our home expense categories look like? I’ll share them with you. I created a document onto which my wife and I would each enter our total expenses for each category at the end of a month. I then add it all up.
Yours will obviously look different. But maybe this model will help you develop one of your own a bit faster than I did. This document basically mirrors what we have set up in our “expense manager” phone app. Additionally, at the beginning of the document I added a section to add up our take-home income from various sources. This puts everything in one place.
LESSON 3: Totaling the expenses and evaluating them isn’t enjoyable. We knew it wouldn’t be. At the beginning of each month we totaled up each of our expenses in each category from the previous month and put them together. We also added up our income for the month. The result was that we could now see some problems that were somewhat hidden before. My wife takes care of paying most of our regular bills. So her list of “expenses” is longer and frankly more work to maintain. Sorry hun.
The hard truth is that this little process takes some time. Depending on your use of technology and your overall organization, it might not be as hard for you as it was for me.
CONCLUSION: ESP helps – but it won’t save you any money without effort. Just knowing where you are spending money doesn’t change anything. But it DOES give you the BEST data to start with. We have already begun making changes in certain expense categories. We lowered our cable bill. We’re planning for when our lease runs out on our car in a few months. We’re even talking about solar panels. When you see all your expenses in a snapshot, you can identify what is a “luxury” and what is a necessity. For example, going out to eat is a luxury. It almost always costs more. Hobbies, entertainment, vacations can be much more expensive than you realize.
Good stewardship, from our perspective, means living within your means. That isn’t popular, and it isn’t easy. Sometimes it is MUCH easier to see how OTHER people spend too much than it is to see your own spending problems. ESP forces you to look into the mirror of your own financial habits. Sometimes the reflection is painful, but it is the right place to start.
Photo Credit: FLICKR.
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Last modified: April 17, 2023