Monday, 12 October 2015

Tracking Expenditure

I talked about requiring about $4,800 per month to cover my expenditure. Of this, about $600 is for variable expenses. The rest (i.e. insurance, parents' allowances, my endowment plans, and bills) are fixed, and for now, I have no interest in changing them. So the remaining expenditures that I can change are:
- Transport - $100
- Food - $300
- Miscellaneous - $200

The above are just rough estimates (amount I think that are spent).

So this month, I am going to track down what I spend.

Why track expenditure?

There are a few reasons why I want to track my expenditure. They are:

  • to determine whether my estimate of my variable expenditure is accurate ($600) 
  • to determine the different category in which my expenditure goes to
and it is only with this information that I can determine:
  • what expenditures to cut to be effective (often the largest item)
  • how much expenditure to cut

How to track expenditure?

I read the Cheerfulegg blog. So much of this post is inspired from the blog, with some modifications to match my personal spending habits. You can read more about ways to budget and track expenditures from the blog here, here and here.

For me, except for food purchases at hawker centres/ kopitiam (which has to be paid by cash), all other expenditure are mainly paid by credit card. So the easiest way is to track ATM withdrawals, and classify them as hawker food. All the rest will be tracked via the credit card statements.

To ensure that I tabulated all my expenditures correctly, I will be using the following formula:

As long as both methods give the same monthly expenditure value, I'm on the right track.

The Plan

For this month (Oct 2015), I'm going to follow life as normal (not cutting any expenditure), and see what the result is. From there, I will be implementing the "cost- cutting" measures, and see if it works.

I know that for me, expenditure is not a major hurdle, as I don't spend a lot. It will be investment and making more money (from current and new businesses) that will make me richer. However, getting income from investments and businesses take time. So while I take time to work on these three categories which will be giving me a greater impact towards financial freedom, I can spend 2 hours per month on tracking my expenses and working to cut them down  (this 2 hours can be easily allocated from the mindless TV watching, anyway). In this way, I could also build a larger pile for future investment.

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