Money Progress

Everyone knows that saving money tends to be a bit less glamorous than spending it.  When you spend money, you know what you’re getting.  There is a certainty to it and a concrete object or service that you receive in return.  What do you get for saving money? Well, you get to keep what you already had!  You keep a few extra green pieces of paper in your pocket or you get to watch a black and white number that represents your savings account increase slowly over time.

Doesn’t that sound exciting???!

I didn’t think so.

Ok so how can I feel good about saving money instead of spending it, you might ask.  Maybe you’re going to tell me that I should have a goal that I am saving up for.  I should save up money for a few months to buy that computer I’m wanting instead of just putting it on my credit card today.

Well, that is a good step, and sound advice, but I don’t think it is enough.  All you are doing in that case is saving money now just to spend shortly thereafter.  Sure, the purpose of money is to trade it for useful things, but holding on to it for a longer period of time has some pretty great rewards.  The question is, how can we try and motivate ourselves to save for this payoff that is far in the future?

I think one answer to the question is this, monitor your progress.  It is a simple concept, but I think a very powerful one.  If you do not keep track of your progress, you can start to question the purpose of saving.  If you log into your bank account online and just see a few numbers that represent your money, it doesn’t have much meaning.  You probably don’t care all that much when this number goes up or down.  If you don’t really keep track of all your money, you don’t know if you are making good decisions or bad ones.

This chart is how I became interested in tracking my financial progress.  I hardly knew what ”net worth” was, but I stumbled upon it as I was using Yodlee MoneyCenter.  It was tracking the total balance of all my bank, investment, and credit accounts for me over time.  Since then I now check it all the time.  I probably look at it too much, but I do think it is a very good tool for monitoring your finances.  This particular chart is far from perfect, and it has some inaccuracies, but it clearly let me know how I was doing.

It feels really good to see that line go up.  I know if I save more money each month, I will do even better.  I can see when I spend too much money and do not make much progress.  If I never charted my finances, I don’t think I would care nearly as much about them and my savings would suffer as a result.  I would spend money without knowing how it impacts my total financial position.

Tracking your net worth is the first step, but I think there are even better ways to track your financial progress.  For some financial situations it wouldn’t make sense to track your net worth, but it would be beneficial to track your spending in a similar fashion.  Learning about these methods and even creating new ones will be a central theme on Money Progress.  If you are as interested in tracking your finances and making progress as I am, feel free to subscribe to my blog here or in the top right of the page to get updates when I post more.

Update!

This post was included in the 169th Festival of Frugality at Remodeling This Life!  Go check it out!

I haven’t mentioned this yet, but I am working two jobs at the moment.  I have my standard full time position and I also recently started doing some work on the side for hourly pay.  Unfortunately my full time job that is supposed to be just forty hours a week has been the one consuming my free time recently, to the neglect of both my second job and the other things I would like to do with my time (such as writing here.)

This has gotten me thinking again about the “cost” of working for income.  The balance between making money and the time it takes to do so is one of the classic battles in modern life.  Growing up I’ve always thought that I valued free time over money.  One of my goals was to be able to get a well paying job that wasn’t too demanding on me and that allowed me to have a lot of time left over for myself.  I thought I only desired a certain amount of money to be happy and that my real happiness would come from spending time doing the things I liked rather than working.

I’m not sure if my viewpoint has changed or not since I have started working.  By starting the second job I am certainly sacrificing more of my time for money.  At the same time, my average hourly pay actually increases the more I work the second job since it pays more per hour (not counting benefits.)  One caveat is that I have not spent too much time examining the tax implications of the increased income, which is something that I need to do.  As my income increases, a higher overall percentage of it will be taxed, which may actually lower my average hourly pay (especially considering I have to pay self employment taxes on my new income.)

Money isn’t the only reason that I decided to pick up the second job.  It is in a field that I’m very interested in at the moment and it also puts me one step closer to having a more independent income.  Another consideration is job security.  The management at my primary company is not very open and I really have no good way to judge how safe my full time job really is.  It could be just fine and I could be here for many years, but I also wouldn’t be surprised if they decided to let me go tomorrow.  Having a second income to fall back on makes me feel much better when I see news about layoffs every day.

This post is meandering off course but I am going to continue and see where it leads me.  I just mentioned that job security is something I consider worth sacrificing some of my time for.  “Job security” is actually very nebulous though and what it really means is having an income stream, or money that comes in every month for me to live on.  The reason this is important is because without this income stream, I could only live for a limited amount of time before I would run out of money.  I’ve been saving my money in an effort to extend this amount of time and right now I think I could live for at least a year without any major changes or dipping into retirement funds.

Most people’s goal is to eventually extend that period of time that they could live without a job until the day they die, a.k.a. retirement.  What this means is that I am sacrificing my free time now in an effort to create more free time in the future.  This may seem like common sense and nothing new, but this is something that we should probably all spend a bit of time thinking about rather than just doing as others do.  Instead working more now to save for retirement, perhaps I should be balanced and enjoy more free time now.

Anyways, I will stop rambling on and attempt to summarize.  It seems like what I really need to do is to come up with some solid financial goals that I want to work towards.  I need to really think about why I trade my time for money and what I want to get out of it.  One of my goals will probably be to better combine the time I spend working with the time I spend doing the things I enjoy.  If these are one and the same then that is a huge problem solved!  This post offers more questions than answers but I will make it a point to come back and try to answer these questions for myself.

Update!

This post has been featured in the 196th Carnival of Personal Finance at Green Panda Treehouse!  New visitors may be interested in reading my recent post on how to feel good about saving money.  It highlights one of the main themes of this site which is tracking your financial progress.  If you are interested in further updates, please subscribe here!

I’ve been included in my very first blog carnival!  I really appreciate the inclusion and would like to thank FMF over at Free Money Finance for his hard work.  Here is a link to the Carnival!

If you found this site from the carnival it’s great to have you here!  You might notice that there isn’t much to read yet, but feel free to subscribe on the right so you’ll know when I add more!