How Expensive Are You?

Knowing how much you spend is your first step to financial freedom

Key Takeaways:

• Tracking your expenses is the first step to building wealth—everything else depends on it.

• Your spending habits aren’t just numbers; they reveal your priorities and financial future.

• Retirement planning starts with understanding how much it costs to live your life.

When I launched Money Changes Everything, I knew I wanted to write about investing—a lot. I find that many personal finance writers (especially women) focus too much on spending, saving, and debt. These things matter, but they miss the big picture of wealth building.

But then I realized I can’t start talking about investing if I don’t know how expensive you are. And you can’t change your outlook on money if you don’t know how expensive you are. In other words, how much does it cost to live your life?

I originally planned to post this in January, right at the top of the year, but truthfully, I couldn’t get my shit together to launch in December¹. So here we are. But maybe late February is a better time to do this exercise. You might still be riding the high of your New Year’s resolutions—or already failing at them. You’ve blown past the stress of returning to work after the holidays but are still enjoying the wide openness of a whole year ahead. Or maybe you’re just rotting in bed because it’s cold out. That’s okay, too.

Well, get out of bed, sweetie. We’re going to do an exercise.

Figure Out How Expensive You Are

We’re going to look at your spending over the last three months. And I don’t want to hear any excuses: “But it was the holidays, and it was an abnormal spending month.” Literally every single client I’ve ever worked with has said something similar.

“Last month wasn’t typical because we put the Airbnb on our credit card for the group.”
“We had a larger expense month because it was back-to-school.”
“My dog ate my Drunk Elephant serum, and the vet bill was insane.”

Doesn’t matter. It’s still money out the door. You might say, “We’re way off budget.”

A budget is a lie you tell yourself. Some call it aspirational—I call it bullshit.

What’s more harmful than creating an aspirational, completely irrational budget is guessing how much it costs to live your life. I’m going to assume most of you bury your head in the sand when it comes to knowing what you actually spend. As long as the credit card bill gets paid, you’re okay, right? Or maybe there’s a level of debt you’re comfortable with?

But here’s the truth: one of the best tools for building real wealth is understanding where your money is going. Once we have that information, we can turn on the magic money-making machine of automated investing in a diversified stock market portfolio².

We can keep buying lottery tickets or hoping a rich relative will leave us a bequest, but at the end of the day, most of us are going to have to build wealth the really hard way: saving it from the money we make³.

Clients ask me all the time: “Am I spending too much?” The answer, of course, is: If you have to ask, yes. But again, I don’t care how much you spend—I care how much you save and invest. We’re going to reverse-engineer a wealth-building investment strategy.

The Three-Step Process

1. Figure out how expensive you are (we’re starting today).

2. Come up with slightly unrealistic savings goals and live on less (that’s next week’s post).

3. Set up an automated wealth-building strategy and enjoy success (that’s the one after that).

Spending is personal⁴, and it defines who we are. My hope is that your spending aligns with your goals and that buying things or covering unexpected costs doesn’t drive you (or your partner) crazy. There’s nothing worse for a marriage than money stress.

Stop Lying to Yourself

The exercise is simple, even if the emotional journey might not be: we’re going to figure out how much it costs to live your life.

Look at your spending over the past three months. And no, you don’t get to skip December because “it was the holidays,” or January because “I paid for a year of Pilates,” or February because “my dog got sick.” Unexpected expenses happen—that’s just life. At the end of the day, it’s money leaving your bank account. “But AJ, I paid $5,000 as a one-time daycare deposit!” Okay, fine, if you’re going to be really stubborn and obnoxious about this, you can create a category called “One-time annual expenses” and add that to your total to then divide by 12 for your monthly number.

Do the Dirty Work: Track Your Expenses

Time to dig in. Look at all the late-night takeout orders, the $250 bathing suit you’ll only wear once, and the $400 flight you had to book because you slept through the first one. You need to understand where the money is going.

Use an app, a spreadsheet, or even a notepad—whatever works for you. I recommend an app because, frankly, you shouldn’t trust yourself when it comes to spending.

• I think Tiller is the best.

• Empower’s budgeting tool is a close second.

You’ll connect your credit cards and bank accounts and categorize every dollar⁵: groceries, rent/mortgage, dining out, subscriptions, transportation, “emergency” purchases (that somehow happen monthly), and yes, that $179 impulse buy on but-synching leggings from Instagram (we both know you’re not returning them). The categories don’t really matter all that much, but my advice is to keep it simple.

When you’ve categorized everything for the last three months, add it all up and divide by three. That’s your average monthly spending. This number might terrify you, but that’s okay—it’s the truth, and the truth is what we need to move forward.

So now you have your number. I’ll level with you: I’ll share mine. I’m expensive. Now, I have a husband who shares some of these expenses (he has his own credit card bills, too!), but personally, I want to know the big number—what if my income suddenly stopped? I would not want to have to change my lifestyle.

So my number is $21,000. What’s yours?

Alright, let’s hear ‘em, your judgements. I asked ChatGPT to judge my spending habits and it roasted me.

$701 a month on golf and $1,476 on travel? Are you secretly a retired CEO? Did I miss the part where you’re 65 and financially set for life?⁶

$1,155 on personal care? Oh, so this is why rich people always look ‘effortlessly’ put together. It must be exhausting being this high-maintenance.

$356 on Ubers AND $17 on MTA? Oh, you tried to be relatable, but one subway ride a month isn’t fooling anyone.

$307 on gifts? I hope your friends appreciate the fact that you spend more on their birthdays than I do on my annual survival budget.

Get yours out. I’ll wait. Now go fix your own shit, she said with love and empathy.

I recommend you do this exercise at least once a year to understand how you’re trending. So now we have the number.

Is that number lower than your annual take-home pay? It should be. That’s it, that’s the secret . Spending less than you make is one of my Money Commandments.

Choose Your Own Adventure

I want you to have a gap between your income and spending—ideally, at least 20% of your income. But it may take time to get there. Where do you fall?

• If you spend less than you take home, congrats! Let’s invest the rest. Stay tuned for next week’s post.

• If you spend a little more than you take home, you have some trimming to do. Are there things you regret spending on? Trim 10% next month and redirect that into savings.

• If you spend way more than you take home, you’ve got work to do. It’s going to be hard. This will take some behavioral changes or perhaps a career change. This is not my area of expertise, but here are my favorite books about changing your relationship with spending money:

  • Your Money or Your Life⁷ – Vicki Robin & Joe Dominguez

  • Dollars and Sense – Dan Ariely & Jeff Kreisler

  • Happy Money: The Science of Smarter Spending – Elizabeth Dunn & Michael Norton

  • 101 Simple Ways to Lower Your Living Expenses

Let’s do this. Because the best time to track your expenses was yesterday. The second-best time? Right now.

Parting shot: If you don’t know where your money goes, you’ll never know where you’re headed.

The best $20 bucks I spent this week: $10.49 on McDonald’s 4-piece chicken nuggets, a large fry, and a diet coke after we had to cut our golf round short because of the wind. I like to live that High/Low lifestyle.

1. Shoutout to my wonderful husband, who graciously gave me permission and space to launch a month later. “No one wants to read during the holidays,” he said.

2. If you understand and believe in these four words, you're on the right path to riches.

3. In my opinion, the most culturally important spending reckoning is Carrie Bradshaw on Sex and the City. She needs money for her down payment and can’t possibly afford it. She wonders where all her money went, and her slightly sharper friend explains that she spends a large percentage of her income on shoes.

4. Check out The Purse’s “Home Economics” series for a look at what people actually spend.

5. By the way, this is called “bookkeeping,” and you can see how important it would be for a business to track all of its income and expenses. Treat your personal money like a business, and let’s see if you’re profitable. 😉

6. Uh, you kinda hit the nail on the head. Like and follow for how to build and finance the life you want.

7. Just a reminder that you won’t ever see an Amazon link for a book in this newsletter. Bookshop.org is the place to buy your books. Your purchases are funneled to local independent bookstores, even when you order online.