I'm 28 and I've saved over 240,000 here's what I've learned about money from tracking my net worth for the past 2 years
Get the Full StoryDavid McNew Getty Images for CoachellaThe Money Wizard, who goes by "Sean," is a 28-year-old blogger and financial analyst saving and investing his way toward early retirement.
Sean grew his net worth by more than 100,000 in two years, and he tracked the progress on his blog.
He says he's learned a few shocking lessons about money so far, like the fact that real wealth comes from learning how to save without a budget , and then investing that money into wealth-building assets.
They say you learn something about yourself when you keep a journal.
If that's true, then I think just graduated to a PhD in Me Studies. Because for the past two years, I've kept a very detailed and very public online diary.
It's a unique type of diary though. In it, you won't find any juicy gossip about high school crushes or family drama. Instead, you'll find a topic that might be even more juicy: raw, unfiltered talk about every detail of my personal finances.
You see, for the past two years I've publicly posted all the deets behind every penny I saved and every dollar I spent. And then, every month, I take an often uncomfortable look at the impact those decisions had on my net worth.
The end goal? Total financial independence in my 30s. So far, I'm 242,000 of the way there.
Each month of the journal tells a story.
November 2016: A 6,000 plunge to my net worth. Apparently, buying a new car isn't the best move for your wallet.
April 2017: A 3,500 boost to my savings, mostly thanks to a long-awaited promotion.
November 2017: A wild stock market rally, and a 9,000 ! increase in my wealth.
April 2018: Buried in the depths of a kitchen remodel, with the 6,000 credit card bill to prove it.
And while it sure is fun to look back on those monthly breakdowns, when I zoom out from the details, some larger lessons enter focus. The whole experiment has left me with four shocking revelations I'd have never expected:1. Forget about budgeting simply tracking your spending will make you richer
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Ahh… a budget… doesn't just the sight of the word make you shudder?
I get it. When I first tried budgeting, I felt an immense amount of pressure to build the perfect budget. It's no wonder, especially when every financial planner under the sun jumps out of their seat to share the same advice.
“Step 1 – build a budget!” they'll shout, before putting the squeeze on about how you must determine exactly how much money goes towards each arbitrary bucket.
Want to know a secret?
Since I started tracking my net worth two years ago, I increased my savings by 105,935 — and I never once used a budget.
Instead, I took a much more stress-free approach. I simply tracked my spending. That's it.
By just tracking my spending instead of imprisoning myself with a budget, I felt the pressure relax. A stressful topic turned into casual monitoring, and then, something amazing happened.
I found that tracking my spending put a spotlight on my problem areas. Before I knew it, I was getting into the game. I couldn't help but look for ways to improve my money habits, and soon enough, I found myself looking for ways to spend less and save more at every opportunity. The budgeting took care of itself.
Today, there's even all sorts of fancy apps which can automatically track your spending for you. Personal capital and Mint are two of my favorites.
And best of all? Your new budget will have been created naturally over time and based on your own small adjustments, instead of being rushed together in the stuffy office of an adviser, overambitious goals and all.
The result? You'll find that sticking to your naturally created budget is a breeze. And that tailwind will propel your wealth to new heights.
2. Your money can work harder than you can
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Let me tell you: You haven't lived until you've come back from vacation, only to realize that despite your best efforts at racking up expensive restaurant tabs and otherwise living the high life, your net worth still increased a few thousand dollars during the month.
How is this possible? It's simple. Your money can work a whole lot harder than you can.
While you're constrained to an eight-hour workday if you're really ambitious, maybe a little more your money has no such limitations. Through the miracle of investment and compound interest, your money has no problem working away on your behalf, day and night.
And the money which your money earns, goes on to earn even more money.
Think about this for a moment. We can't even come up with an analogy to describe the effort your dollars are capable of. The closest comparison would be if you never had to sleep, and you could take breaks during your current job by working a second job. And that second job took breaks by working a third job. And so on.
Career-inception aside, this simple fact highlights an important distinction. Bust your chops in the office all you want, but your extra hours are child's play compared to what your money can do, and that big raise and potential promotion are just a distraction. The real needle-moving wealth building comes from learning how to save, and then investing that money into wealth building assets. Even options as simple as Vanguard or Betterment are fantastic starts to putting your money to work.
And that's what we should all be working for. Because no matter how hard saving money might feel, I can promise you it's a whole lot easier than working as hard as your investments do.
3. Investments aren't the only thing that compound
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Albert Einstein is mistakenly attributed to calling compound interest "the most powerful force in the universe," and if that doesn't prove the cult-like love for the effect, I don't know what will.
And yes, as we've just discussed, compound interest can make you incredibly rich. But there's another, far less mentioned, effect of compounding that might be just as powerful.
I call it compound spending. And if I hadn't tracked my spending every month like a crazy person, I'd have never realized its power.
I first noticed it when I spotted an almost cyclical, wave-like trend in my monthly spending reports. Some months I spent almost nothing, and other months, a little bit of spending inevitably compounded into a whole lot of spending.
The peaks and troughs were impossible to ignore, and I realized a fascinating trend. My most successfully frugal months were not the months where I displayed some amazing amount of willpower, or found some incredibly creative way to save.
Instead, the common trend in the months where I spent the least amount of money: I simply avoided tipping that first domino. I avoided that first purchase which would have started a chain of future purchases.
You certainly know this effect, even if you've never given it a name:
• "Just one drink" with friend cascades into four or five. Followed by a midnight taco trip, an expensive Uber home, and a pricey brunch to eat off last night's hangover.
• A "50 off one item" coupon turns into a shopping spree, complete with four new outfits and a lengthy receipt.
• I know I've fallen victim to an AMAZING deal on plane tickets, which compounds into pricey hotels, rental cars, and vacation spending.
So, what's the best way to control your spending?
Realize the sticker price is a lie. The sticker price of any purchase is just the first domino in a chain of spending.
So, stop that spending before it starts. Rip that weed out by the root, before it has a chance to grow out of control.
See the rest of the story at Business InsiderSee Also:I've saved enough at age 28 that I'll be a multimillionaire by retirement, and I used Warren Buffett's favorite investing strategy to do itThe best and worst states for paying off student debt, ranked34 US cities where people can barely afford homesSEE ALSO: I grew my net worth by over 100,000 in 2 years. Here are 4 steps you can take today to do the same.
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