Tracking Expenses to the Penny

The thought of tracking expenses to the penny always struck me as being way to strict and burdensome. I remember when I read the book ‘Your money or your life’ which talks about doing exactly that as part of its FI strategy that it wasn’t for me and even though I’d like to budget and know fairly accurately what I’m spending that it was a step to far.  I can’t really recall what specifically changed my mind or made me give it ago in May 2015 but since this date I must be honest, I haven’t looked back.

Pre FI Exposure

I have been budgeting probably since 2011 which was pretty much before I had a full time job. I tracked my incomings and regular bills but I never tracked my actual expenses when it come to what I called disposable income (money left after standard bills) or exactly what I spent on food or fuel. I simply recorded the direct debits so I could see if anything increased on a monthly basis. I would know that I roughly spend £100 on fuel for example and £120 for food and that with my regular direct debits/static bills that I would have £200 disposable income left or £50 a week to spend on daily activities/outings and spends through out the month which could include a book or a game etc.

As I knew I would have £50 a week on average, I would loosely spend accordingly. It was easy to know if I was spending more or less as I had no real savings so all I had to do was look in my wallet and at my bank balance and I’d know if I had overspent or not. During this time, I used my credit cards now and then for big purchases but always tried to pay back the balance over a couple of months. The largest balance I ever had was £2200 from the time I went window shopping at Comet and bought a £2000 TV :o.

To the Penny

As I mentioned in the intro, I decided to start tracking all my expenses down to the penny in May 2015 as part of trying everything I could to help move FI closer to being a reality. To be honest and even to my own surprise, I found this rather easy and not burdensome at all. I actually enjoyed doing it! I liked keeping my receipts and working out what category to put things into.

I still use my monthly budget which is simply an evolved version of my older budget spreadsheet that provides me a rough idea of how much I expect to spend in categories such as Food and Fuel which aren’t completely static but now on my expenses spreadsheet I record exactly what I spend for each which allow me to see if my budgets are realistic or not as an average cost per month.

Continue reading “Tracking Expenses to the Penny”

What Financial Independence means to me

When it comes to the basics of what Financial Independence (FI) is and all the different types of FI from full FIRE (Financial Independence Retire Early) to just plain old Financial Independence, I think there is ample resources elsewhere that defines this and explains things such as the Safe withdrawal rate, savings rates, and precisely at what point one becomes FI. I expect most people that frequent this site will likely already understand FI in general so this post will mostly be about what FI means to me personally and why it’s such a big goal of mine to obtain it.

Despite the above, just to clarify. I define FI as simply having enough money from passive income such as a stocks/bond portfolio that will provide a person with all his expenses taken care of in perpetuity without the need to ever work again if one chooses not too.

What FI is not

Being FI is for me not about being rich or well off in the sense of driving a Mercedes Benz, going to the finest restaurants with 6 holidays a year, shopping in New York at Christmas and going to Paris every other weekend. When I am FI, it will look on the surface very ordinary for an outside observer, I will look very average and maybe even below average as my car will remain simple and functional,  my wardrobe will consist of mostly items from Sainsbury’s or Tesco. I will go on maybe 1 holiday a year with a few weekends away in the UK at times – I will essentially be very much the same as I am now outwardly except for a few major differences that are harder to see. If I choose not to work or switch to part time, my neighbors might even feel I have fallen on hard times with me not doing the usual 9 to 5 every day. They would not suspect even for a moment, that in actuality I have hundreds of thousands in investments, own my home and with a fair wind will never need to work again for an income. I am glad about this, I don’t want to attract unneeded attention as discussed.

So to summarise for me – FI will give me the ability to live a mostly normal life activity/possession wise without the need to work which in turn will give countless sustained life benefits that are harder to see from an outside observer.

FI is an enabler

For me, FI is not the end goal or life mission as it were. It is simply a goal, a challenging long term goal and on reaching that goal the result – a sustained state of affairs and circumstances that will persist for the rest of your life. It is these enablers and circumstances that make this such a juicy, awesome goal to achieve. It is a goal that once reached will bear fruit that can be enjoyed each and every day. Not only however will this bring benefits at the point it’s reached, the journey towards FI itself provides similar enablers and plenty of fruit to gorge on along the way. 

I am now going to discuss the FI enablers that stand out for me at various stages along the journey towards FI.

Enabler 1 – The possibility of FI

I think that before I come to some of the main enablers that stand out for me along the journey is firstly what many might not appreciate as much when creating articles like this which is – the mere awareness of FI and realisation that it is possible to achieve. Knowing that you are on a path towards hopefully never needing to worry about money, or even never even needing to work again as you could retire years before the norm is quite frankly liberating. Knowing you won’t HAVE to work until you’re 70 even if it results in worsening a medical condition you have is priceless. 

Enabler 2 – Freedom from Debt 

Continue reading “What Financial Independence means to me”