My financial statements

Ever since I started recording my daily expenses from the start of January 2008 till now, I think I have a clearer picture of where my money goes to. You will grow whatever you focus upon, I believe.

For the first time in my life too, I recorded my cashflow statement, income statement and my balance sheet on a monthly basis. Now I know exactly how much money I take in per month and exactly how much is spent and on what, and how my different portfolios do. Doing a stock take of one's current situation is the first step towards control over one's financial situation.

For one thing, I'm happy that I saved a huge chunk of my cashflow. Unlike others, because of the nature of my job, my income statement is different from my cashflow as I take my pay after I have done my work. Ask any self-employed person - they will tell you that cashflow is everything, not income. So because of my special employment circumstances, I experienced first hand what it is like to be a holding company - though I'm the boss, accountant, manager and worker all in one person. Back to the topic sentence - how much did I save from my cashflow? For every $100 earned, I saved $75 and spent $25. This means that my free cashflow (cash that can be used to spend on anything I want after subtracting food, household expenses and other essentials) is slightly more than 75% of my net monthly cash flow in.

This is a either a fluke month or I'm a mighty saver. I need more information before I can determine that. I did have an extraordinary gain this month and a few extraordinary expenses (on books). Here's the break down of my expenses in percentage to the total amount spent.

Food - 23%
Transport - 11%
Entertainment/books/social functions - 19%
Clothing - 12%
Household expenses - 28%
Others - 7%

I will track this data monthly and then quarterly for perhaps a year? Then I will have a very very accurate picture of my expenses. It's interesting that once I started reading up on fundamental analysis, I see myself more like a holding company. It's just a very interesting way to view myself. From my past flawed memory, I forecast that my expenses will drop even more as I get busier into the year and have less time. Either case, if I carry on with this insane amount of savings, I will accumulate a vast amount of free cash available for me to do anything.

Since I have more cash than I would like to have in my savings account, I'd transfer some over to my POEMS money market fund to get a higher interest while waiting for the opportunity to put more into the market. I have around 8-9 months of expenses (based on Jan's expenses) in my savings, which I think provides sufficient liquidity for me. Anyway, I should consider MMF as cash too, since they are equally liquid (though it's more risky than depositing in banks). I wish to consider dividend yielding stocks as cash too...but that will have to wait. I need to read up more before I jump in. Snake bitten investors are like that, haha!

Microsoft is buying over Yahoo at a premium of over 60% current price. Dow should be rallying strongly later. Perhaps we will have a good chinese new year week next week after all. Have a great weekend!