When you’re just getting started in tracking your spending, you may have a hard time coming to terms with how you’ve been spending. You may also have a hard time deciding where you should start in reigning in your spending. Enter some random term I may have just coined – Financial Whaling.
I have never heard it called this before, but financial whaling is basically taking your largest expenditure or spending category and targeting it to bring that som’ bitch down. It’s like the hacking technique also known as whaling in the sense that you are targeting the “big fish” specifically, opposed to dropping a net and getting whatever you want. I think financial whaling is more effective that throwing out a net and hoping to cut down a bunch of areas of spending for a couple of reasons.
- When you’re focused on one big category, you are able to better track your spending from a beginner’s perspective. We are always talking about starting out here on this site, so if you’re here it’s because you’re a beginner (or you enjoy my funny writing style and down to earth personality) and when you’re just getting started, it’s better to be able to focus on one thing at first instead of getting overwhelmed and dropping out of the race.
- After you get good at bringing down one category and learn new tricks and bring new tools into your financial belt of many things, you can very easily transfer your financial whaling skills to your other categories and spending habits.
Where to Start
In order to get started, you need to have some means of tracking your spending. Most banks offer services like that or you could get started with Personal Capital or Mint. Both of these sites/services are free and help you track your finances. You could always track them in a notebook as well, but it’s not automatic and therefore less likely to be done daily. Do yourself a favor and be realistic about what you’re going to do. That should be standard for someone who is serious about improving their finances.
Step 1 – Identify Your Target
Look over your finances and see what your biggest spending category is. Is it your rent? Your car payment? Your mortgage payment? If you’re like me, it’s going to be your mortgage payment.
In the example above, you can see that the largest spending category by amount is the Credit Card/Loan Payment (with the associated outgoing transfers). Carrying a balance beyond one month on your credit cards isn’t a good idea, feller. So stop that shit ASAP. If this is you and you’re stuck paying a ton of money each month due to your debt, you’re understandably stuck with those payments until they are gone. You’re definitely whaling down the debt, but you can’t exactly change it until they’re gone.
So lets keep digging, looking for something that will allow us to cut it down and adjust it completely.
As you can see above, the average spend for a car payment over the last 3 months is $0. Yeah, buddy! That’s a finance feller right there! This is my average spend on my auto payment since I got rid of my Range Rover and VW and instead started driving a 2000 Toyota Camry that I bought outright for $1,000. The Gasoline cost is definitely off, because I don’t use this account to pay for gasoline. I instead use the card that gives me cash back on gasoline purchases which nets me a nice chunk of change after a year.
The gasoline cost is definitely a whale for me right now, but since I am commuting almost 30 miles for work at this time, one way, I can’t really help the fact that I am spending that on gasoline right now. My gasoline expense each month is about $144 each month. Ouch. Or as a true Minnesotan would say, Ooofta. But that’s okay, because I am actively searching for a way out of spending so much. Working from home is an option at my current job that I will be working my way into and that will allow me to drive 3/5 days instead of all five days each week. That will cut my gas bill down to about $86 monthly. Not great, but not that bad. I could also consider moving to a new company nearby that would have me drive less, or start riding a bike or a boosted board like YouTube badass Casey Neistat. Although Minnesota and the Twin Cities in general isn’t very well set up for public transportation.
The last category that I would like to show is what I used to spend on my food.
As you can see from the pie chart above (mmm pie), the largest spending category for me is food. This, fellers, this type of spending is what whaling is all about. You can’t adjust where you live or work within a month, but you CAN adjust how much you’re spending to feed yourself in one month. Or should I say what you’re spending to have someone else feed you. Not literally, hopefully. That would be weird. But when you go out and have waiters bring your food from the chefs in back, you’re spending more money than you really need to.
Okay, we have identified our targets. Next step.
Step 2 – ‘Poon it!
So now that we have identified our Food & Dining spending as the category we most desire to cut down, we need to dig a little deeper into where that money is going.
|Food & Dining||$71.46|
Okay, how are my grocery bills that high? I don’t even cook that often!
Ahh, yes, the full service counter at those grocery stores are included in the grocery category. How would a credit card company know the difference between $20 spent at Hy-Vee in the grocery section or at the Chinese food stand? They wouldn’t.
So essentially what I am seeing here is that I am spending almost $200 a month on fast food and restaurants, as well as an additional $40+ on coffee shops! Which, if I am being honest, is actually a better budgeting job on coffee shops than it used to be.
So what I can tell from this information is that I am eating out way too often, still buying food at the grocery stores, and still ending up getting fast food (Chipotle and Smash Burger). So now to ‘poon these expenditures, we need to change the way we are eating out and change what we’re spending so dang much on. Chipotle costs add up quick, as do Smash Burger costs. That extra guac probably costs me $100 a year. Or more. I used to go to Chipotle 3-4 times a week, which was better than the years I was going 2 times per day.
So clearly, my ‘poon (harpoon, if you needed to know that) is stuck in my belly right now. On to step 3!
Step 3 – Reel ’em In!
So to really get this expensive food habit reeled in, I need to start making my own food more often and eat out less. And what that comes down to is a little bit of planning and a little bit of forethought paired with a lot of consistency and commitment to the plan long term. One thing that has helped me a lot with this aspect of my finances is something that has also helped me a lot with my general health overall; intermittent fasting. Since I am only eating 1-2 meals a day and only eating between 2 and 9 PM it’s really easy to make food for that.
This blog isn’t about health and fitness though, so I won’t dwell too much on my eating habits. But what one could do is go all out for their dinner cooking and make enough extra to bring to work with them for lunch tomorrow. You could also start making your own coffee instead of going out for coffee. As for restaurants and fast food, you will really see that come down if you’re making a big dinner and bringing that for lunch.
The idea behind reeling in the whale is dependent on what the whale is for you personally, so I am not going to be writing about that too much here, but just understand that once you have the whale, it will be easier for you to understand the problem and combat it individually from that point, opposed to just tossing a net and seeing what you can get.
What You Can Do Today
I will always be recommending signing up for Personal Capital and Mint. It makes tracking your finances easy and until you are tracking your finances like a hawk you are going to be up the creek without a paddle for your spending habits. It’s basically impossible, unless you can bring your little notebook around and track your spending that way, nerd. I am not getting paid for giving that advice either, so you can trust that I recommend these services because they have worked for me.
You can also be mindful of your spending and ask yourself if you really need something before spending money on it. We’ve talked about that in this post.
Fellers, you have any tricks to reduce your spending? Whats your biggest expense category now? How much does one item you get often cost you each trip to the store? How much does that end up costing you per year? Are you also addicted to Chipotle?