First things first, I’m not the genius who came up with this. Credit goes to Jacob Lund Fisker whose book I’ve mentioned about before elsewhere on my blog. I highly recommend this book and if you wish to get your hands on a copy, you can get on Amazon (paperback or kindle).

Full disclaimer: Buying the book through those links earn me a tiny commission which will be a nice gesture. It’s always good to know that someone out there appreciates my writing.

Anyway, as part of the ReLive project, I decided to track my spending as detailed in Fisker’s blog post but with a few modifications of my own. The awesome thing about this tracker is that it merely tracks your spending for a sample period of time (caveats detailed below) and provides you with a fairly good estimate of how much you’ll need for retirement.

First of all, a screenshot.

Screenshot of my spending tracker.

Screenshot of my spending tracker.

Using the tracker

In the spending tracker, you only really need the first five columns from the left. So here’s a description of what each column does and how to use a formula to automate its calculation.

‘Day’ – Shows which day we’re on.
‘Exp’ – Total expenditure for the day. This is the only column that I manually key in.
‘Cumulative Exp’ – Shows us the total expenditure from day 1 up till this date.
‘Avg. Daily Exp’ – Shows us the average expenditure per day.
‘Est. Annual Exp’ – Shows us an estimate of how much we’re spending in a year.

You’ll notice that other than the ‘Exp’ column, the rest of the columns can easily be calculated via a formula such that all you have to do each day is key in the value for the ‘Exp’ column (the Yellow heading in the screenshot) and copy the formula ala MS Excel so that the rest of the cells fill up automatically.

[For those who really want it easy, here’s a link to a copy of my spreadsheet that you can use as a template. Please save a copy and don’t edit it directly otherwise everyone will know how much you’ve been spending.]

As for the last three columns, those are just estimates of how much you’ll need to generate an income necessary to cover your estimated annual expenditure. The conservative figure is the largest because it assumes you only get a return of 3% per year on your portfolio. The conventional assumes 4% per annum and the ‘aggressive’ assumes 5%. Some may say that 5% is hardly aggressive but that’s another debate for another time.

Notes and thoughts

I think this tracker has quite a few things going for it.

First, it’s hassle-free. All I have to do is collect all the receipts for the day and total the figure each day. I can key in the figure from my phone and it hardly takes me 15 seconds so it’s really fuss-free.

Second, even though the column says ‘expenditure’, I really use it to track cash flows. For example, if I put $10 into my EZ-link card (a stored prepaid card mainly used for travel here in Singapore) but I take a trip that costs $2, I still key it in as $10 in my tracker. The reason for this is quite simple. I want to make sure that the sum I need is enough for day-to-day purposes and while I only spent $2 in the example above, I needed to put $10 in my card in order to use that two bucks. And when it comes to day-to-day living, you’ll find that what really matters is cash flow.

Third, this tracker gets more accurate over the long run. Because the estimated annual expenditure depends on average daily figures,  outlier days will surely impact the estimates to a great extent. Think of one-off medical expenses that don’t even occur once a year or that season parking charge that only comes once a month. Add to that certain seasonal factors like the Christmas season which traditionally sees larger than usual expenditures as compared to other months. Right now, I have about 30 days worth of data and it seems that my average daily expenditure comes up to $50/day.

Four, having a system like this helps you work towards a goal. For example, if I believe my data, then all I have to do is work towards a portfolio of $582,832 and that will be enough for me to either retire completely or enable me to take on another job that might pay me less but enable me to pursue a more fulfilling life. In other words, that sum would be a true financially free figure. All you have to do is make sure that your new lifestyle doesn’t change that figure too much.

One criticism would be that the tracking isn’t granular enough. In other words, this tracker doesn’t help you target what you could be spending less on in order to hit the sum. I acknowledge that but I think that this is also a strength of the tracker because (a) if your target sum seems huge and unattainable then it’s probably also going to be pretty obvious where you should be cutting back spending on. This tracker is meant to give you a figure based on your current lifestyle. In other words, a sum that you can rely on without having to change a single thing. (B) Being broad means that it’s easy to use and it’s perfect for lazy people. I’ve seen too many systems that are complicated and in the end, not many people use it because it’s such a pain to do so.

If you’re that sort of person that loves tracking where every penny goes to, by all means, please continue to do so. You’d probably already have your own system in place anyway. What I’m using is really a system that’s simple and easy to use. I’d know because I’m a really lazy person and yet I’ve managed to use this for 31 straight days already.

Do try it out and leave me a comment to let me know how it’s going for you.

 

 

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