Tuesday, July 08, 2008

Personal finance

On the advice of HH, I had started on this detailed tracking of my expenses and cash inflow at the start of this year. At first, the process seems very 'xiong', because everytime I spent a cent (including buying drinks/food and snacks), I'll record it on my handphone. Towards the end of the day, I'll record it on my excel spreadsheet. The spreadsheet have all the details broken down into food items, transportation, entertainment, bills, clothings and so on.

The idea here is to figure out where am I in this struggle to reach financial independence. If I do not know how much I spent nor how much I earned, it's hard to figure out where I stand. Most people (including me, in the past) will use a sort of mental accounting, like I spend roughly $5 on food everyday, or I spend roughly $80 per month on transport etc etc. After tracking my expenses for close to 7 months now, I have an excellent idea on what my spending patterns and percentages are.

Didn't some wise person say: What you track, you'll improve? Yes, I agree fully. There's even a graph showing how much I spend vs how much I earn for the months I tracked so far.

Whenever I see that the blue graph is catching up on the red graph, I'll work harder to increase my cash flow in and to decrease my cash flow out. I think it works nicely so far.

I've been tracking my total portfolio too. Total portfolio is what I define as the summation of all the money in my bank accounts, Poems MMF, SG stocks (at market value), HK stocks (at market value), Insurance (inclusive of bonus declared) and CPF. The only item I did not include is the money in my wallet and the coins in my coin pouch.

It's rather satisfying to see that, like the graph above, my 'coins' are stacking up slowly but steadily. Perhaps, like what many had shared with me, that upon marriage, my coin stack will drop one time and upon having a family with children, my coin stack will drop another time.

A few things came out of this exercise:

1. I knew how much my spending is, without resorting to agaration and guesswork. I even even how many % of my money is spent, itemised.

2. For the first time, I am no longer so hazy about my net worth in monetary sense. It gives a superb sense of satisfaction, knowing that I had accumulated a certain amount of money after working hard for this long. I said that because I know many friends who did not know their net worth. Most did not have healthy savings despite working for so long. My take is, if you do not know where you stand now, you do not know how much more to go.

3. This observation is quite a surprise for me. As I had to tally up my books for recording at the end of each month, there is a pressure to try to raise my cash inflow and lower my cash expenses to make the books look good. For example, I can kid myself that I'm spending less this month by doing somethings to push the actual spending till next month.

Suddenly, it came upon me that perhaps, that's what companies do too. They have to report every quarterly, so it's all too human to jiggle their books a little to make it look nicer, like what I do. Knowing this, I no longer treat quarterly earnings as sacred. Not even annual results in fact. Perhaps that is what old ben is trying to say - look at the earnings over a long period of time, not in one year and certainly not in 3 months.

4. This method of tracking expenses is insane. I realised that. It's painful and not many had the discipline to do it too. Even my financial advisor is surprised that out of many people he met, I'm the only one who tracked my finances like that.


PanzerGrenadier said...

Hi La Papillon

I just started doing the detailed tracking last month and am amazed at how much I actually spent vs. what I thought I spent....hahahha....

As Dave Ramsey in "Total Money Makeover" mentioned, Mr Murphy - or unexpected expenditures have a way of creeping up on us.

What you are doing is to know how much money flows in/out of your life. "Your Money or Your Life" by Joe Dominguez and Vicki Robin talk about it... Very important to track as the psychological impact is to minimise expenses and maximise income to see net worth building up!

Keep it up and kudos!

la papillion said...

Hi PG,

Haha, so you felt the same too - that what we thought we spend is actually an underestimation? Haha :)

I started this january, and was immensely interested book your money or your life's summary. Hence, very interested in getting the book :)

Thks for sharing with your experiences :)

Anonymous said...

Hi Panzer and LP,

seems like everyone is suddenly into Personal Finance. I was actually tracking my detailed spending like what LP is doing since last year but after a year or so I stop because my gf says that it is 'too much'. I do not need to micro manage to such an extent. All was well until the past few months when I keep exceeding my budget. Hence, I'm starting all over again.

I wonder if our library has the book - "our Money or Your Life". Seem to be a very interesting book.


LS said...


Try this website..pretty help ..been using this since 2007

la papillion said...

Hi derek,

Haha, we can't run away from money, so it's only naturally that one day we all have to wake up from the fact that money is one of the most important issues in life.

I don't think it's too much. In fact, I found it very helpful especially if one wants to know exactly the amount in and out. It can add in an extra psychological boost, like what PG said, to control one's cash flow. I treat myself as a business entity.

According to PG, the book can be found in national library, though it can be hard to 'find it'. I'm thinking of getting it really, haha

la papillion said...

Hi investing,

Thks for sharing :) I feel a little uneasy putting my expenses into the server. Worried about privacy issues. Nevertheless will check it out.

Musicwhiz said...

Hi LP,

I did up my books during just one month - April 2008, and realized that I had no problems spending below my income. Of course, the thing to do is to live WAY below your means, not just below. So I guess I got to work on that. Problem is to not give myself too much stress and be able to indulge in some of the pleasures of life like good food and entertainment. There is a fine line between saving for a rainy day and compromising on some of life's pleasures. As long as I do not over-spend, I do allow myself the occasional expensive meal and the movie with popcorn.

That said, another method I use to ensure that I do not overspend is to use "forced savings". I will transfer part of my salary to an account which I DO NOT TOUCH, even before I spend it. The rest I keep in my savings account which I maintain at a minimum level (enough to cover a month's expenses plus a bit more). So as long as the balance in the stash account is growing, and I have enough to use in my expenditure account, this means that technically I am saving every month ! This has worked well for me for the last 3 years and I now have opportunity fund as well as emergency fund in my stash, which I recently deployed by purchasing more Pacific Andes.


la papillion said...

Hi mw,

Thks for sharing your experiences with me :)

My salary comes in every week, and it varies every month, hence I have to do more to even out the good months and bad months. With that in mind, I'm always trying to balance my good months' spending with the thought that in bad months, my income is below average, so I have to thrift a little more.

I'll feel uncomfortable if my savings is less than 50% of my income for that month. So far, my monthly saving rate is around 70-80%. I also do the same as you: As long as I get a sizeable amount of money in my savings account, I'll do a transfer over to POEMS mmf fund, leaving around 2-2.5 months expenses in my savings account. THAT is a great way to prevent one from bursting one's coffer - pay yourself first!

FML said...

i used to be lazy in the past. but fortunately, i eventually got started late last year using excel spreadsheet

it was kinda hard initially but i managed to got thru it. it boils down to one thing, discipline. it's good training for my discipline

also, i have a overall view of my finance at-a-glance - I had a summary sheet that summaries month-by-month the various accounts & expenses.

and tracking my finance really makes me think twice before I forking monies for purchases.

la papillion said...

Hi finding mr lazy,

Haha, it seems like my post hit the right buttons, bringing a lot of responses about similar experiences in doing this very xiong task!

Good job! Me thinks it boils down to discipline too. If we take care of the 'downside' by controlling our expenses, it'll go a long way to increase our net worth :)

Collin said...

Nice post there.

Shall start tracking my monthly expenses as well. Anyone willing to share his spreadsheet? Not really good in doing up the charts and it can be automated right?

LS said...

I have no idea why my nick is investing but i am actually LS .

PanzerGrenadier said...

@La Papillion

I am impressed you save more than 50% of your income! That is commendable! I used to be able to do that when I was single. Now a bit challenging with wife + kid and the trappings of married life. Am aiming for 30-40% :-)

@ Musicwhiz

Tracking spending can potentially be a lifelong habit because our lifestyles do change and so does spending patterns. That is what I realised as I transited from single > married no child > married with 1.0 x child.

I actually enjoy tracking (call me a masochistic accountant) and filling up my spreadsheet daily as it keeps me accountable to my own goal of living BELOW my means and to save for retirement and my daughter's college fund.


Not keen to upload my personal financial info there too..hahah

Our interest in personal finance should only be natural since our niche is investments, savings and making our money work for us. To be overly relaxed about our own personal finances is to NOT practice what we preach...hahahh.

Be well and prosper guys!

Just curious, seems like thefinance.sg are all gentlemen?

la papillion said...

Hi PG,

I realised that my savings rate of 70-80% cannot be sustained when I get married. At least I hope to save 50% monthly. If I can't save that much, then I'll 'top up' by earning more, haha!

I checked out the site provided by 'investing' - it's actually quite alright. At least it automates some of the more mundane things, and with the slick graphics, it adds a little more excitement to seeing the total income gaining over total expenditure. Maybe you can try signing up, if don't like it, can always ignore it.

(Currently updating manually on spreadsheet and the site - testing it for some months before i switch over)

PG, you know what? I also secretly enjoy tracking my books. It adds an extra kick to see how each month tallies :)

la papillion said...

Hi collin,

It can't be automated unless you put in a macro by programming it. I separated my expense per month into different worksheets, then reference the 'cash in' and 'cash out' values from each of the worksheets (hence, each of the months) to the graph. Once they are referenced, any updates to the cash in and cash out values will automatically be updated onto the graph.

Give me your email, I'll send you my spreadsheet. But it's hard to explain how I did it, maybe I can give you an example in it.

Hope it'll help :)

la papillion said...

Hi investing,

Haha, I know who you are :)

Cheng said...

Hi LP,

I faithfully recorded down all my expenses during JC days for a few months. Sad to say, I gave up haha...
Now only recording my partnership portfolio with mummy. :D


la papillion said...

Hi cheng,

You should keep the habit :) It's been beneficial to me, and to others as well, so it might benefit you too. It's good to be able to see how your personal balance sheet and cash flow statement grow from strength to strength :)

Anonymous said...

I track my expenses daily with Gnucash.

It can also track and price my investments and calculate my net worth. There are many useful reports. My favourite is the expense pie chart, which shows me a graphical view of what I blew my money on in the month.

la papillion said...

Hi nirvani,

Wow, gnucash is a cool accounting software with double entry :) Looks cool.

Sounds good, I'll look around. Thks for the intro!

nhyone said...

Is it necessary to break down the expenses so finely?

I operate from a single bank a/c -- all ins and outs come from it, ultimately -- and I just categorize the transactions. (Sometimes a transaction has to be spilt up.)

This is a lot less work. :)

la papillion said...

Hi nhyone,

It's really up to you to decide how much details you want to see. For me, I want to see exactly how much of my expenses is spent on food, household bills, transport etc, so as to facilitate my planning in the future.

If you have no such needs then it's not worth the extra effort. But to me, it's not much effort anyway :)


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