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How we started saving money after a shocking discovery

Jul 9, 2018

Here at the Family, we have been saving money steadily since 2007. We didn’t really plan to do it, but a shocking discovery made us realise we were on the wrong path.

Back then, we were living in a basement flat, which was nice and cosy and didn’t cost too much. We didn’t spend too much time at home, though. We were out pretty much every evening, going to cinema, theatre, fancy restaurants, museums, and in general enjoying the city.

We had good jobs, reasonable salaries, and no kids. London was the perfect place to spend our hard earned money, and we were truly having a great time. We weren’t paying too much attention to how much we were spending, although we felt we were earning enough to cover those costs, and that was enough.

A friend’s credit card gets hacked

One day H. had lunch with a friend, who told her that her credit card had been cloned. Someone had managed to steal a few thousand pounds from her account.

That evening, over dinner, H. told me about the credit card story. “You know, if it happened to me, I don’t think I would realise it” she joked, referring to the fact we never checked our transactions.

She was right: we used to receive our monthly bank statements, but rarely (read: never) checked them. We may have spotted large, unusual transactions, but what if someone was stealing small amounts? Maybe just a few pounds per month? We just wouldn’t have noticed it.

So that evening, almost as a little experiment, H. took out a couple of those bank statements and started checking the transactions.

We make a shocking discovery

H. didn’t spot anything unusual or strange in her list of transactions. In fact, she could recognise all of them – they were from the restaurants, cinemas, books, gifts, and all of our activities. Nothing strange there.

What she did notice though, was that her outgoings were higher then her salary. Convinced it was just a blip, she checked more statements, going back six months, and noticed that in every single one of the previous months, she had spent more than she had earned.

Surprised, I too checked my bank statements. Sadly, it was the same story.

Without realising it, we had been spending more than what we were earning. Like, 30% more. For months.

We were depleting our savings

Our spending pattern as a whole was crazy, and was slowly but surely bringing down our savings. The reason we hadn’t spotted it earlier (for example, by going into overdraft!) was that our yearly bonuses would top them up regularly and hide the problem.

We also realised that during the course of the month we had no way to determine how our total expenses were growing. Waiting until the end of the month to receive a statement and then discover we had spent too much was obviously not a solution.

“The only way would be to track our expenses”, I said.

H. wasn’t sold on the idea. To her, tracking expenses was akin to being ‘cheap’. Or poor. Anyway, she was against it.

“We don’t have to spend less“, I said. “How about we track them so we simply notice when we go above our salaries?”, I asked.

This resonated with her, and we decided to give it a try.

We began tracking our expenses

The following day I created a simple template and printed two copies of it, one for each of us. It had 4 columns, to record the following:

  1. Date
  2. Item bought
  3. Item Cost
  4. Cumulative amount spent

We kept the printout in our kitchen. We didn’t make other changes to our lives. We continued going out and buying stuff as much as before. The only change was that now, at the end of the day, we would write down the costs.

It was almost like a little game, and as we were simply tracking our expenses, there were no negative feelings. No judgements. No reductions or savings to be made. No feelings of being ‘cheap’.

The task was super easy. We kind of enjoyed watching our monthly spend unfold before our eyes. H., who was the one originally against it, became extremely good at this new routine, often reminding me to track my expenses when I forgot!

Saving money is easier than we thought

It didn’t take too long to start noticing a different behaviour in ourselves. Keeping track of the way we were spending money was making us pay more attention to our costs, and in particular at their timing.

We didn’t want to spend more than our salary. That was our limit. If the total spend of the month was growing too close to that limit, we would simply ask ourselves whether dinner at that particular restaurant couldn’t wait just a few days. We didn’t have to renounce to anything, we just had to delay it for a few days.

This allowed us to stay within our limits from the very beginning. Soon after, with a couple of months of expense tracked, we started seeing some patterns emerge. For example, I am a stationery junkie (I could spend hours at Muji or Paperchase..), and realised I was spending quite a bit on notebooks, pens, and the likes. At that point, a few adjustments here and there allowed us not only to breakeven, but to start saving money too.

I’m so glad we had that conversation in 2007, as there is no doubt that our simple way of tracking expenses has really contributed massively to the growth of our net worth.

What did kickstart your savings habit?

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