Podcast Summary: "The Expense Audit" | ChooseFI Episode 586

Release Date: February 16, 2026
Hosts: Jonathan & Brad

Overview

This episode of ChooseFI is dedicated to the foundational concept of the "expense audit"—a systematic, judgment-free process for uncovering where your money really goes. Jonathan and Brad break down why this is a key starting point for the journey toward Financial Independence (FI), ways to categorize and analyze expenses, and how even small savings can supercharge your path to FI. The duo also provides tactical advice for conducting your own expense audit, including frameworks, tools, and the broader community initiative they're launching to make this an actionable challenge.

Key Discussion Points & Insights

1. Why Start with an Expense Audit?

• Not Just a Budget:
  The expense audit is distinct from budgeting. Before making changes or cuts, you must first understand how much your life actually costs.

  "We're going to talk about a four-step framework. We're going to talk about money leaks...and why it matters—why start here." (A, 00:00)

• Slippery Slope of Lifestyle Creep:
  Even intentional spenders may drift into unnecessary expenses over time—subscriptions, unused trials, and general "money leaks."

  "It's amazing how...even if you've been intentional and aware...it's easy to drift on this one and usually to your detriment." (A, 06:13)

• Annual Practice:
  Auditing should be done at least annually. Expenses naturally accumulate or morph, and regular review re-centers your FI trajectory.

  "I think this is absolutely critical. I think it’s something that ideally you should do once a year, even if you’ve been on the path to FI for a long time. Maybe even, frankly, especially if you’ve been on the path to FI for a long time." (B, 06:47)

2. The Financial Independence Equation

• FI is fundamentally expanding the gap between income and expenses.
• For every $100/month cut, your FI number reduces by $30,000 and your long-term wealth can swing by $90,000 over 20 years.

  "For every hundred dollars per month you can cut from your budget, it reduces your FI number by $30,000." (B, 11:43) "So that $100 per month is a $90,000 swing in your financial life." (B, 12:24)

3. Practical Steps for Conducting an Expense Audit

A. Tools & Community

• Options: DIY spreadsheet, Brad’s template (notoriously complex!), or a new user-friendly tool within the ChooseFI community app/challenge.

  "Option two, Brad created his old spreadsheet. Please don’t use my spreadsheet...the third option...is what I've created for the community as well—Inside the community app..." (A, 17:34)

• Data will be anonymized and aggregated for community insight (per-person, per-region costs, etc.).

B. Categorization Framework

• Main Categories:
  • Housing (mortgage/rent, taxes, insurance, repairs)
  • Utilities
  • Transportation (car payments, insurance, gas, repairs, public transit, Uber/Lyft, etc.)
  • Food/Groceries (groceries, dining out, takeout, “night outs” can be separated)
  • Health and Medical (insurance premiums, out-of-pocket, FSA/HSA used this year, prescriptions)
  • Insurance (health, car, property, life, umbrella, disability, long-term care)
  • Children/Pets
  • Gifts & Holidays
  • Debt Payments (mortgage [split principal/interest vs. escrow], student loans, credit card repayment)
  • Miscellaneous (streaming, subscriptions, hobbies, home goods, etc.)
• Line Items Not to Include:
  • Savings/investments are NOT expenses.
  • HSA contributions saved for the future (not spent this year).
  • Taxes: debate between including projected tax liability (Jonathan: no for projections, yes for annual retrospective adjustment; Brad: useful as an awareness-raising line).

C. Finding & Projecting Expenses

• Go beyond monthly statements—look back over several months to smooth out "lumpy" annual/biannual expenses or subscribe-and-save irregularities.

  “Life is lumpy. As we’ve said...there are expenses that only hit once or twice a year...get as close as you can.” (B, 33:30)

• Use annual overrides in your tool to average less frequent, large expenses for monthly analysis.

D. Required vs. Optional, and Value Matrix

• Each category/line item can be tagged as "must-have" or "want-to-have."
• Introduce a "value matrix": Map expenses into four quadrants—high joy/essential, high joy/non-essential, low joy/essential, low joy/non-essential (eliminate).

  “You need a way to categorize these because not everything’s going to come with us to this next chapter in our life. But we do not want to cut things that are bringing a lot of joy.” (A, 63:13)

Notable & Memorable Quotes

• On Lifestyle Creep:

  "Lifestyle creep. It’s lifestyle creep for a reason. It doesn’t happen overnight—it’s a process."
  —Jonathan (A), 08:23

• On Reexamining Subscriptions:

  "How many free trials?... That’s juice. We’ll come back to that later...Every single person heard that and just now felt like something was sitting on their shoulder..."
  —Jonathan (A), 08:23

• On Expense Leaks:

  "He said it's like clearing out the junk drawer. It's not a one and done exercise, which means it's entropy, right? Like, things have a way of falling into disorder. That's just the way life works."
  —Brad (B), 07:18

• On Subscription Autopilot:

  "Because we all have the convenience of having all our bills on autopilot...in the absence of an audit...it's more critical than ever that you review the line items periodically that are hitting your bank account."
  —Jonathan (A), 09:14

• On Value Alignment:

  “We’re designing a life that we're excited about living. We're just cutting ruthlessly, in Brad's words, the things that don't…drive enough value from to keep going.”
  —Jonathan (A), 63:48

• On the Value Matrix:

  “So first, we go through, we create that monster list. Then…let’s throw them on a value matrix...high joy/essential, high joy/non-essential, low joy/essential, low joy/non-essential (eliminate).”
  —Jonathan (A), 62:28

• On Scarcity & Motivation:

  "If you were making $2 million a year, you wouldn't be listening to this podcast. ... Most people have to make decisions based on scarcity and based on...finite resources. This is the essence of every decision in life."
  —Brad (B), 64:19

Segment Timestamps

• 00:00 – 06:47: Why audit expenses? Lifestyle creep, money leaks, and the risks of financial autopilot.
• 06:47 – 13:00: Annual expense reviews; the magnitude of small monthly cuts for FI.
• 13:00 – 20:59: Calculating your "FI number." Tools: spreadsheets, community app, options for tracking.
• 20:59 – 33:30: How to build your audit: categories, per-person costs, tracking patterns, inflation.
• 33:30 – 38:33: Health insurance, employer deductions, tax liability (projection vs. "true up").
• 38:33 – 45:47: How to handle taxes in your audit; what counts as an expense.
• 45:47 – 53:10: Debt categorization—mortgage, car loans, credit card debt (and double counting pitfalls).
• 53:10 – 58:00: Execution: How to start your own expense audit—what data to use, how to review variable vs. fixed costs, how many months to average.
• 58:00 – 66:44: Applying the value matrix, quitting unused or low-value expenses, mindset about financial independence being about joy (not deprivation), and teasers for future episodes.

Action Steps/How-To Summary

1. Commit to the Audit:
   Join the community challenge, use your own tracker, or download a template.

2. Gather Your Data:
   Pull several months of statements from checking, credit cards, anywhere money flows out (flag annual/irregular expenses for monthly averaging).

3. Categorize Expenses:
   Use broad categories, but don’t overcomplicate. Housing, utilities, food, transportation, health, insurance, children/pets, gifts, debt, miscellaneous.

4. Apply the Value Matrix:
   For each non-essential line item, rank by joy/essential status. Cut ruthlessly where value is low.

5. Tag Expenses:
   Required (must-have) vs. want-to-have. Note per-person cost where useful.

6. Project & Adjust:
   Lump/annualize irregular expenses with overrides. Don’t fudge by skipping months where lumpy expenses don’t appear.

7. Review & Reaudit Annually:
   Track your numbers year over year for inflation, lifestyle changes, and ongoing optimization.

8. Engage with the Community:
   Submit insights, compare anonymized data, and crowdsource ways to optimize or eradicate common "money leaks."

Conclusion & Looking Ahead

The expense audit is the essential foundational move to reclaim control and accelerate your journey to financial independence. This episode not only explains the ‘why’ and ‘how’ but spotlights the power of small continuous improvements—“the aggregation of marginal gains.” Future episodes will tackle what to do with these findings: how to ruthlessly eliminate low-value expenses, optimize essentials, and manage/interrogate debt.

Upcoming:

• Next week: Interview with Andy Hill (Marriage, Kids & Money)
• Following up: Community findings from expense audits, deeper dives into leak-finding and optimization, and evolving your FI plan from a strong foundation.

"Take action this week, whatever it looks like for you...The fire is spreading, my friends. We'll see you next time as we continue to go down the road less traveled."
—Jonathan (A), 66:44

(Note: Timestamps reference the episode's MM:SS runtime. Speaker "A" = Jonathan, "B" = Brad.)