Where/How to start being a Mustachian?

[redeyedtreefr0g]

I've read the MMM blog since finding it while poking around the interwebs looking for winter biking information, probably. I loved his entertaining and fun writing style, and went to the beginning to get caught up, but I admit that my eyes gloss over on a lot of what he says.

For instance- I know absolutely nothing, zero, zilch, about retirement. I don't even really know that much about employment benefits, except that when I tried to get new glasses once, it was a disaster.

I know I have to become more frugal, but how do you do that? I feel like we should have more money than we do, but I don't know how to find out where it is going. Do you save every single receipt and enter it into a spreadsheet? Do you get detailed billing statements?

I'm sure restaurant eating is our biggest expense. Every time we go out, I'm appalled at how much the food costs, but somehow I haven't really put up a strong objection. We live sort of rent-free with friends, but there is no set cooking arrangement, groceries aren't bought for household meals and if they are key ingredients get eaten before the meal can be made, dishes never get done regularly (unless I'm the only one doing them, perhaps) so pots and pans aren't always clean to use. It's just a very weird and frustrating situation, and I know going out to dinner is a major stress-relieving tactic for my husband.

Anyway, how do you identify where the money goes so that you can start make changes?

[Guitarist]

Understanding early retirement at it's simplest:

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

http://earlyretirementextreme.com/what-is-your-number.html

That will give you an idea of how much you need to save.

I save every receipt and enter them into MS Money. There are other options. I also use excel to create my own spreadsheets for retirement and playing with numbers.
As for eating more at home, learn to cook. Offer to cook for the house if they buy the ingredients. It may encourage them not to eat them before you can use them in a dish!
But you do need to track to understand where your money is leaking to. Just telling yourself, "Oh, about this much goes here, and that much goes there..." Doesn't tell you what you need to know. Tracking your expenses and setting goals based on those numbers is a good way to start.

[Grigory]

If you want a detailed how-to guide, Dave Ramsey's Total Money Makeover is a pretty good book. It's far from perfect, as MMM himself pointed out, but it'll teach you the basics and give you clear and concise instructions. If you don't want to bother with the book, subscribe to a bunch of personal finance blogs and go through their archives to learn all there is to know about saving and making money. Aside from MMM (of course), my favorite blogs are Get Rich Slowly, The Simple Dollar and Early Retirement Extreme. Good luck! :)

[dahlink]

Welcome to the MMM community,

  I am no guru myself.  But over the last 5 years I noticed several trends that were helping me save money.  Also, I am in the military (navy) and if you actually look for and listen to the financial advice from fellow shipmates and financial advisors...it is a real leg up.  I'm 29 with 80k+ net worth.  It's not crazy huge or anythings but I dont have any debt.  With my recent changes to my budget I will probably double that money in 2 years because I now am on the road to mustachianmentarianism...

Sounds like you need to be able to get realistic depiction of your finances.  At first I managed things through my bank, then a couple years ago I found a site called mint.com. This has been mentioned here by MMM and others as an easy to use financial tool that allows you to link all of your financial instituions to one account.  Whatever the method, you need to be able to look at your worth.  Then you can also look at how much money is coming vs. how much is going out a month.  I would say that the first step is to start generating positive cashflow if you are not currently.  Of course with debt that can be a trick problem.  It is easy for many get in a state constant borrowing, etc. 

  If you have debt problems, you have to get rid of the debt somehow.  Depending on the level and type of debt will of course determine how you have to deal with it.  I had a friend who was buried by medical debt through no fault of her own except bad genetic lottery.  It made sense for her to declare bankruptcy.  IMHO if you can afford to pay the debt or the debt is your fault, your probably going to have to pay it back vs. declaring bankruptcy.

  In order to pay down debt, you have to make sacrifices.  There are many amenities common now that truly are not essential.  Also, many things can be done more efficiently and for less money.  Just read through MMMs  posts and a lot of the forum posts.  You don't have to try them all at once, just try some that seam feasible and give a good bang for your buck.

Now you can take those savings and attack that debt or, even better, if you don't have debt, you can "stache" it and bam! Your growing your own money mustache =)

Then your problem will be how can I save even more money of my income, and where do I stash it (investments).  This is my current problem...the whole, where to invest.  I am not completely convinced on that answer although there is great advice on the forums.  I have found that I CAN make more money by increasing the % of my income that I can save.  Usually, I after enough research and help from my fellow Mustachians the % of money I save is higher than any % from stocks, bonds, certificate deposits...etc.

I hope this has been informative to some degree and I'd like to encourage you to pursue your financial freedom. 

[Parizade]

Hi Red,

One very simple thing that helped me was moving my banking to Wells Fargo. As long as you are using their checks, debit card, or credit card they track all of your expenses in something called My Money Map. They automatically categorize all expenditures by location (if you bought it from a gas station, it's an auto expense even if it was coffee and a candy bar) so it's not perfect.

It is a simple way to start though if you are feeling overwhelmed. As you feel more confident you can add categories and move things around to be more accurate. Be prepared to be shocked, however. Once you see it there in black and white, the $500 a month you spend on Starbucks feels like a punch in the gut.

Another good beginner website is Pocket you Dollars http://www.pocketyourdollars.com/
She does all the coupon research for you and tells you how to use them to best advantage. After you've been following her for awhile your mindset shifts from "oh look, a sale on pork chops" to "heh, the grocery store down the street has name brand pork chops on sale too, plus I have a manufacturers coupon they will double for me."

Pretty soon frugal becomes like an addictive game, how much can I save this month? You'll feel that shift when it happens.

[MacGyverIt]

then a couple years ago I found a site called mint.com. This has been mentioned here by MMM and others as an easy to use financial tool that allows you to link all of your financial instituions to one account. 

If you have debt problems, you have to get rid of the debt somehow. 

In order to pay down debt, you have to make sacrifices.  There are many amenities common now that truly are not essential.  Also, many things can be done more efficiently and for less money. 

Dahlink this is great and truly summarizes the basics -

1. track your spending (mint.com is free, I use it as well)
2. identify WANT (cable, eating out) versus NEED (electricity, water, rent/mortgage) and eliminate the wants to increase your 'stache
3. destroy your debt (I would start from highest interest rate and work your way down, ask the debt holder for a lower interest rate or transfer balances to lower rate cards, etc. so you can pay it off sooner)
4. start building your 'stache (any number of ways mentioned in the Investment Alley section and in MMM's blog postings)

[Mrs MM]

Great question!  I also highly recommend Mint for beginners.  Actually, we just recently got a Mint account and I LOVE it.  It tracks everything automatically -- no work at all!  I am kind of addicted, actually. 

MMM wrote an article on it here: http://www.mrmoneymustache.com/2011/12/12/watching-your-stash-with-mint/

I would say that knowing how you spend your money, as others suggested, is the very first step.  Then, analyze your spending, determine your goals, and figure out where to go from there.

[palvar]

My wife and I use an iPhone app called AceBudget.   You can set budgets for yourself and easily enter every expenditure into it.  I tried tracking spending before, but I've never kept up with it until I used the app.

[WageSlave]

I'm surprised that no one has yet mentioned the book Your Money or Your Life by Vicki Robin.  It gives detailed step-by-step instructions for reaching "FI" (financial independence).  I assume most people who are serious about FI/MMM/ERE have read the book.

But at a minimum, as others have said, you have to track your income and spending.  You can do this the old school way with pencil and paper (I bet you can still buy those accounting ledgers at office supply stores) or using any of the dozens of available free software packages (including simple spreadsheets).  You then categorize all your expenses.  After a few months of this, you'll get a decent picture of where your money is going, and after a year of doing this, you'll understand your financial situation in great and intuitive detail.

Like you said, you have a gut feeling you spend too much eating out, but if you track this, you'll know exactly.  And then you can look and say, "Wow, we spent XXX eating out last month, was that really worth it to me?"

[Dee]

You can also just start without tracking anything, too, if you're the kind of person who's going to procrastinate on tracking and then use that as an excuse not to get started at all. I am speaking from personal experience here. I have done very little official tracking of anything but I do feel I've started on the mustachian journey nonetheless. I first started by getting rid of credit card debt. Now I'm using "pay myself first" as my biggest building block. I keep a careful eye on my bank statements and I buy fewer things in the "wants" categories but I don't have any graphs, charts or spending jars or pre-definied spending categories or anything of the sort.

Which is not to deny that I would likely have bigger savings (and certainly more measurable savings) if I'd opted to track everything. But I was unlikely to do that and instead of deciding that I wouldn't do anything until I was willing to suck it up and start tracking my spending, I am better off for having started nonetheless.

[catalana]

Agree with all of the comments to say track your spending.  Whatever tool you use (heck, even a cheap notebook will do the job) it is a valuable exercise.

Dee speaks words of wisdom about paying yourself first.  I do this, and it was one of my first steps towards mustachianism.  Long before I tracked my spending, I had got into the habit of regular saving.  The "pay yourself first" bit (for me) means putting money into savings as soon as you are paid - don't wait until the end of the month!

There is nothing like having a chunk of money that has taken you a year or more to save up.  Like everything else in life, the harder it has been to achieve, the more you will value it.  So if you are not already doing it, get started with a regular saving habit!