Kuta Beach

Kuta Beach

Saturday, 13 March 2010

Spending Rate Falling

About a month ago, I started keeping a spreadsheet that detailed every bit of spending I did. I did this because I was worried that I may be overspending. Here is a sample of the spreadsheet. I made it using Google.

This spreadsheet has a column (column D) that tells me my rate of spending in dollar per month. The formula in this column simply takes the cumulative amount I've spent so far and then divides it by the number of months I've had the spreadsheet. This is useful because it allows me to measure my performance when it comes to reducing my spending. Recently I have been trying to reduce my spending, and it seems as if I am successful because my rate of spending has been going down. It is now at about $600 per month and I am aiming to get it down to $500 per month. Obviously as you have more data, your rate of spending will smoothen. The chart below clearly shows massive volatility (expected from a small sample size) at the beginning but as it smoothens there is clearly a downward trend.

Tracking your spending like this is useful because it allows you to look back on your spending and to see which areas can be addressed. As you can see on the spreadsheet, I have an essential that I cannot cut, namely buying petrol for my car. I cannot think of any way I can reduce costs there. I give about $150 per month to my parents. This is sort of an optional payment I make to my parents to keep them happy so that they let me live with them in their home. By living with my parents, I save a lot of money because I don't pay the market rate for rent or home loan interest. Paying $150 per month I think is a small price to pay for saving so much. I currently give $63 per month to World Vision, which in hindsight seems like a lot, but I would not feel too comfortable reducing this. If you look at the spreadsheet, it is clear that I love to eat out, and this is clearly an area where I can cut a lot of fat because eating out is not a necessity. In fact, eating out really makes no sense at all, and I don't know what I was thinking when I was spending all that money to restaurants.

I have tried to reduce spending on food. The spreadsheet shows that I go to McDonald's and buy value meals. When I go to pubs with work friends I always get the cheapest and smallest beer, which mostly happen to be the Carlton Draughts (plus Carlton and United Breweries is owned by Fosters Group, a company I'm sure I have quite a bit of equity exposure to). People often look down on me if I eat McDonald's, often saying that it is unhealthy, but I often buy those meals approved by the National Heart Foundation. They would often scoff and say that this certification process is corrupt, but seriously, do they think they know better than the National Heart Foundation? And why criticize McDonald's for being unhealthy then even commonsense would tell you that a McChicken, salads, and water is definitely healthy? I hypothesize that there is just some serious status snobbery going on under the cover of health concerns. McDonald's is like a victim of racism. Food snobs like to put the company down for no real good reason. McDonald's serves healthy food if you choose it, it is cheap, and it is served quickly, so what is the problem? I went to McDonald's once with three other work friends and purchased for myself the Seared Chicken Wrap with Chilli Sauce as well as a bottle of water, all for $5.95. This meal approved by the National Heart Foundation. My friends then started mocking me, saying that I was "deluding myself." How am I deluding myself for trying to be healthy? Furthermore, they had ordered meals with Coke (high in refined sugars) and french fries (high in salt), so clearly they were eating unhealthy and yet they criticize me for not being healthy!

I have gotten into a habit of eating out at restaurants with friends. This has happened so much so that my friends and I have gotten to expect it. When it comes to saving money, the worst enemy is an expensive habit. Eating out, regular lattes, smoking, home loans, car loans, children and so forth can suck you dry without you even knowing it because it just creeps in to your lifestyle to the extent that you think it's normal. You have to really attack the non-necessities. I understand that a necessity is difficult to define and I acknowledge that we humans can be weak when it comes to saving money. The best thing to do is to admit weakness and improve. The worst thing you can do is to try to rationalize your frivolous spending. We humans are all weak but it is better to acknowledge our shortcoming but still try to attain perfection rather than try to justify to ourselves why we should fail. What matters most is not whether you run or walk but rather if you're heading in the right direction.

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