Project FIRE 40 – Where does the money go? – How to easily get to a grip on your personal finances.

In Project FIRE 40 – This the third step in my plan, working out my Baseline – Knowing where I am now and tracking where my money goes.

What get’s measured gets done.

How many people could say what their net wealth is right now? How many people could say with certainty where their money goes?

I could answer the net wealth and debt question pretty quickly. I’ve had a forecast since 2012 when I moved to Bermuda. Without a credit history, I couldn’t get a credit card and I had to budget for future large expenses. So I created a forecast spreadsheet, which is great for any static snapshot and it has gone through multiple iterations, but it doesn’t track well historically.

I knew I needed something better and was generally disappointed with what I found.

The leader of the pack is a limping Quicken. It seemed to meet my needs with the least trade-off. I tried to download it, I couldn’t, it won’t even allow someone outside of the US and Canada to buy it.

I then tried to revamp my spreadsheet. I am a spreadsheet champion, I create complex models for the companies I consult to. Even still, I quickly realised that either I needed to simplify my finances or get a proper tool. I am never going to reach PF40 without it.

I then went through a series of frustrating searches with clearly affiliate motivated reviews.

What would we think of a business who did not keep accounts?

It amazes me how laissez faire our attitude is to our personal finances.

After testing numerous dated software options and newer apps, I narrowed it down to only a few that met my needs.

I decided on Moneyhub over Money Dashboard as it had more of the integrations I wanted (including investment funds) and it is designed for Financial Advisers to support you, so perhaps a bit more rounded in my view. Both look great and certainly make it easier than downloading and uploading transactions.

Then I stopped and set principles:

I probably should have done this first.

  • I need to measure what I am doing
    • Almost everyone who has built and retained wealth have tracked the numbers
    • I need to put all transactions in (even if manually)
  • Every Pound, Rand and Dollar needed a job
    • Budget with specificity. Unexpected is more expected than we claim. Tyres for cars and house maintenance can all be anticipated.

With my principles set, I followed a six step process to go “live”.

  • Step 1 – Link Accounts that can be auto-updated.
  • Step 2 – Add assets – Add assets that can’t be linked.
  • Step 3 – Categorise (less worried about backwards), from 1 April I will be disciplined.
  • Step 4 – Start a budget. This will take 1-2 months to settle.
  • Step 5 – Review. Set monthly review against budget and growth. I’ve chosen the first Tuesday of every month at a minimum to begin with.
  • Step 6 – Set goals – when I set my gateways (step 5 below), I’ll set targets, with one key focus gateway at a time.

This is ongoing and will need to be tweaked and I’ll probably still maintain my spreadsheet in parallel for the moment as it’s better for projections.

And that’s it, with this, I’ll be able to track where my money goes and give even Pound, Rand and Dollar a job.

For those wanting to join me on the journey:

Step 1 – Foundation– Working out my why and checking my understanding –full immersion listen to FI and learn then stop. From now onwards only Just In Time learning.

Step 2 – Set principles – principles allow better decisions to be made, as they have a reference to evaluate criteria against

Step 3 – Working out my Baseline– Knowing where I am now

Step 4 –Reduce and optimise expenses with Budgeting – Key to FIRE is avoiding and reversing the second application of Parkinson’s law.

Step 5 – Calculating my Number & Setting Gateways – To allow focus and direction

Step 6 – Enhance Income routes – Allowing for financial leverage

Step 7 – Invest Strategically – Allowing for wealth accumulation

This experiment both excites and intrigues me, both the journey and the potential outcome.

*I am a UK tax resident, although this is likely to shift to South Africa later this year. Which is why I need both a UK and SA option.

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