Seven Powerful Steps That You Can Use To Save $14,341 in The Next 6 Months

The following guest post if from Neal Frankle of  You can read more about Neal’s inspiring story immediately following this post.

If you’re lucky enough to be a huge, multi-gazillion dollar company like AIG, you can afford to make a few tiny financial mistakes. Lose a few hundred billion here or there. No problem – the government will pick up the tab.

But if you’re a small fry like me, you have to use your own initiative.

Unlike the fat cats, we live with this simple equation; Income – Expenses = Security.

Right now, your ability to increase income might be limited but I can all but guarantee that you have opportunities galore to slash your expenses. And if your financial security is threatened, its time to take action.

There are a number of wonderful blog posts that will help you save money. Those dollars add up quickly and it’s critical that you implement as many of those tips as possible. As Benjamin Franklin once said, “Watch the pennies and the dollars take care of themselves.” While I love those tips, if you take the steps I’ve outlined below you may save lots of time and lots more money than you can imagine.

Don’t track your daily expenses at first

This may sound counter-intuitive but if you’re not already tracking your daily expenses, don’t start now. (If you do track your daily expenses…don’t stop)

Why shouldn’t you track your daily expenses first? Because if you haven’t been doing this religiously for several years, you’re probably like most people I know. They start tracking every expense for a few days or weeks but then they stop. I understand why that happens. It’s a pain in the neck to track every little expense. Let me share a much better approach.

Let the bank track your monthly spending for you

In fact, you don’t even have to ask to them to do it because they already have.

Let’s back up a bit.

At the end of the day, it really doesn’t matter if you spend your money on doughnuts or diapers. All that matters is that when you subtract total expenses from total income, the result is a positive number.

Your first goal is to determine what you spend on average every month. Lucky for you the bank sends you this information in your monthly checking account statement. It’s the number under “Total Withdrawals”. You want that one number. You don’t care about the details….at least not now.

Think about it. That “Total Withdrawals” number includes cash withdrawals, credit card payments….everything. It’s the total of what you spent last month.

(Just make sure you use one checking account to pay all your bills and you’ll have all the information at your fingertips. If you use more than one account to pay bills, you live off credit cards, or you earn and spend cash, the process is more complicated.)

That one number on your monthly checking account statement tells you what you spent.

Create a spreadsheet

Get out your checking account statements for each of the last 12 months. List the “Total Withdrawals” number on a spreadsheet. Then calculate a 12 month moving average to determine what you spend on average. The reason this is so important is that some months are more expensive than others. You want to calculate a 12 month average in order to really know what you spend. Update the spreadsheet every month and recalculate your 12 month average spending. The first time you do this exercise it will take you 45 minutes at most. From then on, it will take you 5 minutes each month to update the information. Is it worth it?

Trust me. This exercise is far more powerful than trying to track your every expense. Even if you do track your daily expenses, this is an important exercise. The results will shock you I promise… fact your average expenses are probably 25% higher than what you think you spend.

You know what? Let’s have some fun. Before you calculate your average monthly spending, jot down what you think you spend on average. Now, go ahead and do this exercise. Let me know what your results are. Do you spend 25% more on average than you thought? Told you.

When people list their every expense, they ingeniously find ways to leave certain expenses out. “Oh…you mean I have to add in the home mortgage?” “Oh, you want me to add in groceries?” “Property tax?” “The trip to New Jersey?”

It’s just too easy to fool yourself if you don’t calculate your average monthly spending using this method. Do this exercise and keep doing it until I tell you to stop – and I never will.

Have “The Conversation”

Once I did this exercise I showed the results to my wife. Because I’m the man and therefore always wrong, I came prepared with the facts. When we both examined the facts, there was no arguing or blaming. In fact, once she saw the numbers she became a savings zealot. We both looked for ways to cut. It became a mindset and believe it or not, it was kind of fun.

The absolute beauty of this approach is that its simple, quick, 100% accurate and there is no arguing against the facts. It’s formidable.

Include everyone in your family in this conversation.

Once you and your partner are on the same page, have the same conversation with the kids. Of course, depending on the age of your children, you will present the information differently. Just assure them that the family is fine. Explain what you are doing and why.

My wife and I explained to our kids that we were cutting expenses and the reasons for it. We explained that the family is safe and fine and that everything was going to be ok and that they should not worry. We found that the kids actually relaxed once we had the conversation. They had known something was off but they didn’t know what. As a result of hearing a straight explanation of what was going on, they realized that their worst fears were unfounded. I encourage you to have these conversations with your children too.

This will create a new focus at home. Rather than being resentful about all the items you can’t buy, you’ll be delighted about the money you’ll be saving. Have a monthly meeting with the entire family to discuss your progress.

It may not be enough

If after a few months you see that you need more fire power to slash expenses , now is the time to start tracking daily expenses. Use programs like YNAB, Quickbooks or Quicken. Why wait to do this daily tracking? Because the process I outlined above is the best way to put the spending/income equation in context. It gives everyone the big picture view of your situation and it helps you get everyone to buy-in to the solution. If you don’t have the big picture buy-in, it will be very tough to achieve your goal.

And this exercise is going to take you 5 minutes a month. It’s a very easy way to get into the habit of following your expenses. If you won’t even spend 5 minutes a month on this, what makes you think you’ll spend all the time to track each and every expense?

Be flexible

Sometimes a $5 coffee at Starbucks will save you thousands of therapy bills. Just because you’re cutting expenses doesn’t mean you have live poor. Find ways to really enjoy your life and if that means having a $5 coffee once in awhile or splurging for a dinner out, then do it. Life’s too short to live in deprivation. Just relax your rules moderately and mindfully.

These steps helped me save over $14,000 in the last 6 months alone. Do you think it would help you? Have you ever calculated your average monthly spending? What did you learn and how did it change your spending?

About the author: Neal Frankle found himself in a financially fragile situation at the age of 17. Both his parents passed away while he was still in high school, leaving behind a small insurance settlement. Neal sought out a financial advisor to help him invest his nest egg so that it would help put him through college. Instead, the advisor charted a self-serving course and was on the verge of burning through the money when Neal realized what was happened and fired him just in time to avoid losing everything.

The experience had a deep impact on Neal and formed in him a lifelong desire to help people learn to make smart financial decisions. Today, with more than twenty-five years of experience in the financial services industry, Neal is an author and avid blogger. Subscribe to his blog at


  1. Great tips, thanks. I use the spreadsheet method along with envelopes with money alocated to each part of my budget (with the exception of large things such as mortgage). I have been using this method for a while, and it seems to work. I am currently trying to shift £2000 of debt and it is slowly starting to go. Thanks again.

  2. “When we both examined the facts, there was no arguing or blaming. In fact, once she saw the numbers she became a savings zealot.”

    That was my experience exactly. It’s hard to argue with the numbers. (And why would anyone want to anyway?)

    While I’m the personal finance writer, my wife is quite likely more hardcore about frugal living than I am.

    Great post Neal. 🙂

  3. I like this post. I hadn’t heard of this way of looking at expenses before, but I like it. I’ve done the monthly tracking, but never a larger picture like this. I think I’ll give it look this weekend.


  4. i REALLY REALLY liked this post…

    there are SO MANY TIMES that i let the news or popular media convince me that OHMYGOSH…WE ARE IN A RECESSION…& YOU JUST SPENT *HOW MUCH* AT STARBUCKS??!?!?!…& i’m left trying to justify my decision to buy a $5 coffee for my husband & i (instead of going on a $30 dinner date). and we DON’T track our daily expenses–we’ve got general guidelines set in place for each month & both of us are acutely aware if we’ve gone over.

    this really was refreshing… THANKS!

  5. Thanks for all the warm & fuzzies folks. I believe, as you do, that the budget is the engine that runs the train of financial success.

    I applaud each of you for taking action and for sharing your experiences.

  6. Some excellent points! I started tracking my expenses over a year ago, and I still shock my wife when I tell what we spent on what at the end of the month. Having the cold hard facts helps bring in the spending.

  7. Good thoughts! I especially like the comparison one – it’s cheaper to go to Starbucks than therapy. It’s also cheaper to have a weekly $10 with my partner than a big night out once a month, and we get more joy (probably) out of the small ones.

    And it’s nice to know we’re not the only math dorks utilizing excel to its max for our budget!

  8. Molly, MATH DORK! I love it. I also love your point. I also have more fun spending less and deepening my relationships.

    John, what has been the result of the tracking over the last year?

  9. My wife and I started a budget on day 1 when we got married. It was difficult initially because we had so many extra ‘things’ to buy just starting out. Now being six months later, it is now second nature to us.

    We have been using Microsoft Money (2005) and I’ve also been keeping a spreadsheet to keep track of our monthly spending.

    It’s OK to reward yourselves once in a while!

    Stupidly Yours,


  10. I didn’t mention it in my comment above, but is absolutely fantastic for tracking monthly spending.

    We used to use excel (I’m an accountant by trade–of course I used excel), but are now completely sold on mint.

    Essentially you just categorize each of the places where you shop, and then they will automatically tally up your spending by category ongoingly.

  11. Really enjoyed the post! My only beef is that I really do think that making a commitment to tracking every penny you spend for 30-days straight is one of the best ways to get someone new on the right track. I understand your point about not getting overwhelmed, but sometimes I even go the other way. I tell them not to worry about budgeting or categories or anything else for that matter initially. Just concentrate on taking not of each purchase you make and creating a summary at the end of the day.
    Even that being said, you presented the information in an easy-to-read and easy-to-apply format. I thought it was excellent!

  12. Look after the pennies – simple but true.

    When I started on the frugal path a lot of people said to me that it wasn’t worth saving a penny here or there. Wow, how wrong! Those pennies are the start of a change in mindset and quickly turn into saving dollars (or pounds in my case).

    Knowledge is power and knowing where the money is spent is the start of gaining control.

  13. Matt, if getting on the same page with the wife on day one is “stupid” – sign me up! Nice foresight!

    Mike, I use Quickbooks. I will look at Mint. Do you think its better than Quickbooks?

  14. Math dork alert….We’ve been tracking our expenses closer for about 6 months now – our system is very similar since we use our credit card for nearly everything. After seeing our spending balloon around the holidays last year, I thought the new year was a perfect chance to get things off on the right foot for 2009.

    We set a balance goal to shoot for each month and then divided it up between the various categories – groceries, eating out, household, personal items, etc. My wife has also found this helpful since she now can break that total down and figure out a weekly goal to shoot for when she runs to the grocery store or Target or wherever.

  15. What I’m learning from you all is that various methods can work. I don’t believe there is only one right way to track. What is important is the focus.

    I like the approach I wrote about – especially for newcomers – because it offers no way to hide from the truth. Once they come true believers, it doesn’t matter how we do it, as long as the method we use is complete and as long as we do it.

  16. This was a great article! There are more and more people that are beginning to understand that just because your neighbor has a new car and a 60″ flat screen doesn’t mean that everyone does.

    ObviousInvestor – I’m currently using but have tried as well and found it be comparable. I know that spreadsheets have been around since the dark ages and that MS $ and Quick/books/en came along after that. For the web 2.0 generation sites like wesabe and mint are and others are giving us a huge opportunity to view our nasty debt/income ratio due to student loans but they give us a nice iphone/mobile interface to view it in.

  17. Whatever approach can persuade you to pay attention to your money and not lie to yourself will help. Personally, looking at what happened over the last month does not help me one iota in determining my current behavior and in setting and meeting goals. But I’m long past the point in money awareness that I think this post is intended for. If paying attention to the “big picture” gets someone to begin to be more aware, be honest with themselves and make plans based on their reality, then I’m all for it.