Tracking Finances Though Benign Neglect «
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Amazingly, I’m not broke.

I don’t spend a lot of time thinking about my personal finances, mostly I adopt a policy of benign neglect and it’s allowed me to save up enough to work for myself exclusively. Instead of designing a precise system that accounts for every wayward penny (which is pretty much what my inner nerd cries out for) I’ve designed good habits and trained my intuition to create a low-key monitoring system that keeps expenses down.

The most important thing is that whenever I feel like I’m spending more money than I want or don’t have a good feel for where and how much I’m spending, I start a spreadsheet. Here’s an old example (with a few numbers fudged for privacy and example purposes):

Category
Category is whatever’s useful: when I worked in an office, I had a ‘Lunch’ category for when I bought lunch instead of bringing my own. Learned the expense of that fast. Sometimes I have a generic ‘spoiling myself’ or ‘entertaining in’ and ‘entertaining out’ categories. You have to invent your own.
Amount
Both positive (income) and negative (expenses), making it easy to select the column to see the sum at the bottom of the window. Usually I use the menu item Data -> Filter to create a filter on category to make it easy to add up these subtotals.
Essential
Similar to ‘Amount’, this is for the bare necessities: rent, groceries, medicine, schoolbooks. When I enter some groceries, that might be Amount -$72.18 but Essential -$51.52 because I bought some wine and candy. It’s a lot harder to reduce this category, but it helps for exposing optional purchases.
Notes
Reminders to myself about what this was or if I could’ve done it differently. The goal of the spreadsheet is to train my intuition into sync with reality, like remembering that movie tickets and popcorn for two cost $29.50 now, not $12 when I first started going on dates.

So when do I feel like making a spreadsheet?

Mostly by not using credit or debit cards; aside from the former’s fees and debt eating me alive, I use cash so I can see it go. If I’m at the cash machine more than once a month or wanting to withdraw more than usual, that’s my cue to stop and look at the spreadsheet a bit to figure out where I’m overspending. When I’m at the bookstore on the 8th with a stack of books under my arm and I look in my wallet to see that I’d have $20 left after buying them, I’ll tuck the cash back in my wallet and look at the library card that’s in there instead. It’s much easier to physically look at my budget in my pocket than to stop and try to recall the current numbers.

I don’t think I’ve ever run one of these spreadsheets for more than 10 weeks or so – I find out where I’m spending money, I make changes, and I track again when things feel off. I’ve done it I think four times in the last 8 years, mostly after I move. I put all my receipts in my wallet and trained myself to fill in the spreadsheet anytime I hit reload in my feed reader – which usually means once a day in the evenings, but of course you can tie to any daily event.

As I’m building a feel for my expenses, I’ll also try to lower them. The best thing is to look at monthly bills. For rent, search Craigslist for places your size and in your neighborhood with a max price of what you’re paying now (and min price of $5 to avoid the unethical marketers who enter $1 or $2), then subscribe to the RSS feed in the lower-right corner. After a few days or weeks you’ll have a feel for what your budget can get you and know if you should renew your lease or even think about breaking it.

All you can do for utility bills is reduce use, get better about turning off unused lights, turn the thermostat down and wear all those nice long-sleeved shirts. That’s the blessing and curse of regulation.

Reducing other bills, well, there’s a pain-in-the-ass way to lower them. Call every single one and say “I’m concerned about my bill. I think I’m overspending. I’m considering other companies. Can you do anything to reduce my bill?” It’s an awkward conversation, but a lot of times a loss prevention department will give you a big reduction in price to keep you on. Works especially well on phone and cable companies.

It’s really easy to procrastinate on this one, no one likes to feel demanding or chintzy, but that attitude only helps them. I get over it by asking every time I’m annoyed at poor service, outages, or friends bragging about the deals they’ve gotten. Anytime my internet connection is being particularly Comcastic, I would say something like “How are you going to compensate me for this?” or “I just got a flyer from [the other guy] offering $x/month” (and not mention this is only the first Y months). In the last few years my internet connection has been on some kind of teaser or discount rate roughly half the time.

In short, I’ve avoided designing a complicated, explicit system in favor of an implicit system based on habit. I’m writing this out because a friend asked, but I think the worst thing he could do is adopt it. The particular habits don’t matter, design habits for your particulars. I share mine to explain the thought process and give some food for thought, anyone care to share their own?


Comments

  1. Since 2007 I’ve been keeping 100% accurate, up-to-date accounts for all of my personal, savings and joint accounts.

    I couldn’t do it any other way – the control freak in me needs to know exactly what is going on, and so I usually reconcile everything once or twice a week.

    One habit I have developed: the love of big numbers – I like watching savings accounts grow, I like hitting saving targets, I like eeking out as much cash as I can from my pay packet to tuck away in savings.

    And now I’m applying all this to going self-employed and starting my own business.

  2. I have a system similar to your own. I did a spreadsheet for a while but I find myself slacking off whenever I get into a steady rhythm.

    Most of the time, I just try not to purchase “extras” that I don’t need. I rarely go out to eat or to movies or things of that nature, I don’t have cable or satellite as I rarely watch TV, I eat a lot of cheap meals, etc.

    This is mostly just survival tactics learned over the course of the last 10 years. Ever since I was young, I was trained by my parents how to live life on my own without requiring assistance from family members. I’m still paying down my debts incurred from being an idiot between 18 and 20, but I believe that’s only around $10k now.

    I do the best that I can to support my 2 children, myself, and whomever I have living with me at the time. But I don’t allow many extras yet because I know that hard times are ALWAYS around the corner. Served me well so far.

  3. Yesterday, I almost wrote a big essay on my whole financial regimen. That exercise showed that I’ve done a pretty good job internalizing the anal record keeping & financial tracking I used to use a Palm Pilot and Excel spreadsheet to do. All that became unwieldy, so I got Quicken and followed my internalized habits.

    One habit that I’ve kept external, however, is that I like to put some of my finances in inconvenient-to-reach accounts. You can’t access funds you put into ING Direct for two weeks after the deposit and, even then, it takes a couple days to get money from ING Direct to your easy-to-reach checking account.

    I also keep some savings in a good psuedo-CD interest-bearing account at a geographically inconvenience credit union.

    If it takes time and effort to get the money, I’m going to try finding an easier way to get the money. In some cases, just waiting for my next paycheck can actually be more convenient.

  4. I use to do the spreadsheet. Lately, I’ve just used mint.com which pulls in all my credit and debit card transactions. Granted I do credit cards for all my purchases and pay it off each month.

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