Spending habits are out of control

Hey Bob - you're certainly not alone. You've transitioned from one quite rigid situation that you knew well to a new, more free situation with which you're not familiar. Give yourself some grace while you figure it out - and by coming to ChooseFI, you're definitely in the right place!

It struck me hearing your story how similar it is to a young woman I know. She has just moved out of home and this is her first full month of independence, suddenly responsible for her own money and bills. She is also a student, working a part time job, so doesn't have much money.

Of course, that didn't matter when she was living in the family home, as her fixed expenses were zero. But now, she has rent, power, food, transit, cellphone, internet etc all to pay for herself…. and she did not adjust her financial behaviour at all, despite her new situation.

As a result she ended up massively overspending on discretionaries and almost ended up not being able to pay her bills. So I'm helping her figure it out. Together, we're setting up a more regimented system using the YNAB app - an approach that would probably work well for you, as a former member of a very regimented life.

In short, try to replicate your previous situation, either using categories in a budget app or using a separate bank account.

Put aside money for all your monthly bills and non-monthly true expenses and savings amounts first, then you can spend what's left. Make it very clear cut, very black and white for yourself. You didn't have a choice about it before - don't give yourself a choice about it now.

It might seem harsh to go back to that way of operating - and for all I know, it's why you left the military and you can't face more of that. But on the other hand, once you set it up, it's out of sight, out of mind, and all you have to think about is how to spend your discretionary money - which is pretty nice.

I'm a big believer in trying to use the way your brain works and work with that to achieve your goals. If you can apply the regimented mindset you learned in the military to your finances, you will do great!

And if you want to leave everything regimented behind, do some self reflection and figure out how your mind works - then look for a solution that works with that, not against it.

Best of luck!

For me tracking every cent I spend is important since that way I can see how much I spend on what. This allows me to ask myself "Am I really getting value out of this purchase?"

I work hard for my money so I don't want to waste it. I think it's easy to have spending be a bit out of control because we live in this playground of luxury all around us. It's really easy to spend money.

What it really comes down to for me is FREEDOM. I want the freedom of FI more than I want the short term pleasure that comes from spending money. So I track my savings rate and I see my progress. That is what really excites me. So I spend my money on buying investments.

Sounds like your previous situation was great! You had a lot of money saved and you could still spend. Now that situation has changed and you have to adapt.

Other thing that helps me is perspective. I've lived in some countries where there are really poor people. So I think on what they live on and ask myself if I really need to make whatever purchase. I also think of my grandparents who grew up during the great depression and how little they spent and how they would look at frivolous purchases. The truth is that a lot of the stuff I buy I don't actually need.

Those are things that work for me.

You mentioned that while in service your savings were set aside automatically. That strategy is called “pay yourself first” and is a very FI-friendly strategy. You save first then spend what is left. Most people outside the FI community do the opposite—spend first then save what is left.

You can set up a “pay yourself first” system for yourself. If your paycheck isn’t already deposited directly into a bank by payroll, see if you can set that up. Then open a taxable brokerage account (Fidelity, Schwab and Vanguard are popular). Set up recurring transfers from your bank to your taxable account each pay period then set up automatic investments to automatically invest the money transferred from your bank.

If you do that and feel you’ve established a healthy savings rate , you can then feel free to spend what is left.

Something you can try to break the habit of carefree spending generally is to check in with yourself about the opportunity cost of a purchase. Opportunity cost in this context is the opportunity you miss out on when you spend money. If you spend your money on A, that money is not available to spend on B. You miss out on B. If I get takeaway tonight, that $N isn’t available to be invested and I miss out on the compounding growth that $N would have gotten me.