Today I make a vow to post more regularly, and in doing so I thought it would be appropriate to post about a topic as fundamental as it is crutial for well managing your finances – both personal and for your organisation – your expenses.
Since my studies, I remember the classification of what is spent between fixed and variable expenses, with the first being every spenditure that you know is going to happen and can either calculate or estimate, and the latter everything else. While for some this taxonomy can be very helpful, I confess my own experience controlling expenses was for a long time marked by a lack of the desire to spend too long classifying and analysing, but rather knowing the big picture of what I am spending on to make sure I am in a sustainable financial path.
Back then – and I do recommend this as a first step – I only needed to know: 1- how much came into my account as income; and 2- how much was left at the end of each month, to be able to know quite precisely how much I was spending each month.
More recently, as I started my entrepreneurial journey and wanted to dedicate myself more, I decided that more detail was needed and started classifying each expense in broad groups such as rent, eating out, transport and so on, and my conclusion has been that this gives me much more visibility and control over my financial life.
Most of us can’t easily influence how much we earn on a given day, week or month, as this depends of longer term factors such as your job and career progression, so knowing and strategically deciding where your money goes might just be the most important component of healthy financial behaviour.
Throughout my adult life, I have always aimed at spending less than I earn, and this enables you to build a security buffer for tough times, as well as adjust for longer or shorter time-frames considering special situations such as in-between jobs or having a child.
While avoiding to make the text too long, I cannot fail to quickly report on the status of my investment challenge: the FinTech investments have started, but doing all of the investments at once proved to be very impractical, so I will have to report on the individual investments I take – starting next week – as I build my first portfolio through the company.
Thanks for reading so far, cheers and please leave a comment!
PS: I control my own finances on a simple spreadsheet, but I keep an eye out for tools which might help you and me manage finance better, my most recent discovery for people in Germany like myself was the comparison website Kritische Anleger.