How do you know how much you’re going to need in the future, whether it’s for retirement or early retirement? It’s simple but not as simple. What are your expenses going to be? What income and/or cash flow will you have? Two simple questions but not that easy to answer. Plus, who can predict what their expenses will truly be? One key to financial independence success is to know your expenses.

Recently, I had to help my mom, who is retired and only lives on social security benefits, to figure out whether or not she had enough money to pay for her upcoming expenses. These expenses were those big annual or semi-annual expenses such as home insurance, car insurance, and property taxes. Since these don’t come often, it’s easy to forget you have these. Plus, these expenses are going to hit all in a 2 month period. That’s asking a lot for someone who is retired and just lives on social security. Now, she is trying to adjust her spending so that she does have enough when it comes time to pay.

Simply put, income minus expenses is what you’re left with to survive with. So, it is very important to know what your expenses are at any given time in your life. If your expenses are more than your income, you’ll have to borrow money from somewhere. That could possibly mean a loan, credit card debt, borrowing from a 401K, or other means of getting access to money you will have to pay back.

Once you’ve identified all your expenses, now it’s time to get control of them. What are the expenses you absolutely need and can’t live without, expenses that will make life easier but can live without, and the expenses that are nice to have but just not necessary. Do you have multiple streaming services; are you eating out too often; do you have to buy name brand; can you take the red-eye flight; do you have to drive the latest car? These are just a sample of questions to ask yourself for every expense you have or will have.

Keeping track of your expenses is necessary to know how much you’re going to need. Whether it’s monthly recurring expenses such as cell phone bill, internet, and utilities to larger expenses that happen once or twice a year, determine what those costs are. Your expenses will be different at every stage in life. As you get closer to retirement, know your expenses. This is absolutely critical so that you do not have to struggle paying for your expenses. If you are interested in following my journey and their journey, follow them on Instagram and email subscribe to get alerts of latest posts or follow me on Facebook, Instagram, and Pinterest.