Den of the Cyphered Wolf

Saturday, May 13, 2017

If I Were A Rich Man: Playing With The Money: Recap

So I'm super broke right now and what pisses me off more than anything is that I do have a framework that I like to use to organize money that is more or less useless because I don't have money. I can't help but remember a joke I read somewhere that about how selling people a complicated piggy bank doesn't solve their problems.

Well I have a complicated piggy bank that's not solving my problems.  But when my system works it works. So back in 2014ish I was super unhappy and I asked myself why does my life suck. I was making more money than usual but things in my life didn't seem to be getting better.  I determined that while I was making more money I didn't feel comfortable spending it and that was causing me to forgo simple changes in my life that would make things easier and more efficient.

I wanted a way that I could isolate money that I had to spend on living expenses and financial obligations from money I could use on other things.

The most obvious solution to this problem was the envelope system.

The envelope system is great if you mostly use cash but I don't, for a lot of reasons.

  • Businesses strongly their employees and contractors to use direct deposit.
  • Banks leave verifiable records making it easier to track expenses.
  • E-commerce accounts also keep receipts also making it easier to track expenses rather than if you paid for things by cash.
  • Physical mediums of exchange are slow. If money is in a bank it's easier to move it where I need it.
  • There is less lag time between when I acquire or spend money and when I have verifiable proof and data that I've acquired or spent money. 
  • When I like to think about complicated problems for some reason I find being at a computer helps and it's harder to do that when you have to thumb through paper bills.
  • Using debit and credit cards often offer certain protections.
  • There is generally no point in mugging me. Please take my wallet. 

So I decided to try to create a digital envelope system by opening up multiple bank accounts for specific purposes.

The main ones were

  • Income: An account to receive money from direct deposit and also link any digital services that I may need to withdraw money from such as Amazon Payments, or Paypal
  • Revolving Pot: If I ever transfer money from the income account I don't like that money going into that account twice.  Instead, any money that I over budget goes into a revolving pot. This means looking at the income account I have an easier time actually reducing my income. 
  • Necessary Expenses: This is money that I have to spend or at least budget for or else bad stuff happens. Things like basic living expenses and bills.
  • Improvements: Things that aren't strictly necessary but open up possibility space, or make me more efficient. Basically, stuff that makes my life better.
  • Luxuries: This is money I don't have to spend but choose to spend.

Eventually,  there were some sub-categories in those that were large or important enough to make me decide to split things up and give them their own categories. 
  • Debt Payments from Necessary Expenses: They are such a large part of the money I HAVE to spend that it made sense to give them their own category.
  • Reoccurring Luxuries  From Luxuries: These were services with recurring billing that while not strictly necessary I had mentally committed to using each month. Things like newspaper services, Netflix etc. 
  • Family Stuff from Luxuries: I've gotten into too many fights over not giving somebody a gift or a card that it just helps if I consider that money already gone.
  • Blog Seed From Improvements: I did the same thing for my blog but I still needed a place to store seed money while it was still in personal rather than business accounts. 
  • Travel from Luxuries: I don't travel much but when I do I want to keep all the expenses contained.
  • General Savings

The original plan also entailed trying to have dedicated savings accounts for other long-term purposes but I never really got enough money to implement that. In theory, once I got comfortable with the budgeted money I would open up another checking account to make that purpose practical.

  • General Emergency
  • Education
  • Investing: Business ventures, Real Estate Purchasing, Stock Purchasing etc
  • Moving
  • Taxes
  • Rainy Day Cushion: Nothing more than a security blanket.
  • Retirement
  • Long-term Travel: The only place out of the country I've ever been has been Canada and even then only as a child.  
  • Long-term Improvements: Home maintenance, electronic replacement etc..
  • Summer: I was substitute teaching at the time and I wanted a savings account so I wouldn't be broke over the summer.
  • Long Term Family Projects: Family Events, Loans
  • Career Services: Traveling for interviews and industry events, gaining certifications etc.

When I'm stressed out I don't sleep. I was pretty stressed out in 2014.

I dealt with this by trying to make a list of everything I wanted. On a practical level, this meant writing down everything I could see myself spending money on.

The combination of that and the categorizing made me acutely aware of when I spent money on stupid stuff. I understood what I was spending money on and why (I hate biological imperatives. They make me stupid.) I was spending money on it.

At first, I tracked expenses with a table I made in Evernote but Evernote tables don't really have a good way to do formulas and I was getting tired of finding errors so I eventually I started using an excel spreadsheet each month.

After a while, I finally pinched in for Quicken which made the categorizing even easier and allowed for pie graphs to allow me to better visualize my financial behavior over time and alter it.

Quicken had other benefits. (Note: I am using the 2015 version)

  • Because of how I organized it I could categorize credit card and debt based transactions which I couldn't before.
  • I could also keep track of interest on credit cards and other financial fees allowing me to see just how much money I'm paying because I don't have money.
  • It allowed for subcategories which are useful in better understanding how I spend money and even understanding which physical locations I spend money at. (I now have concrete data on which restaurants I like most based on how much I spent at them over the past year.)
  • It made keeping track of not only how much I spent on recurring payments but exactly when they needed to be paid easier. 
  • It helped me keep track of money that wasn't part of the original bank accounts. (Now I can keep track of cash purchases so I don't have to try so hard to avoid cash.
  • It allows me to digitally attach receipts and documents to transactions so I don't have to just rely on my memory.
  • I can revisit and search transactions from times in the past.
  • I can study and compare spending behaviors between months or even years. 
  • I can isolate specific accounts and make sure I'm using them the way I want.
  • I can keep track of my student loans.
  • I can import data into TurboTax.

And all of this would be well and good if the problem I had wasn't a lack of revenue. I don't spend that much money but still, it's money I don't have.

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