Backstory

So, Singaporean guys have to serve 2 years in the military when they hit 17. You get paid just under S$500 per month in a city where the cheapest room for rent goes for about S$700. It was during this time in my life that I decided to start tracking where my money was going each month.

I came up with a pretty simple template that I’ve been using ever since. It’s followed me through 2 years of the aforementioned military service, then through a period where I worked odd jobs in order to amass money for travel and investing.

When 2020 came around, I graduated into a pretty uncertain economy where nobody was hiring. However, I got a ton of value out of being able to project my monthly expenses to a high degree of certainty. Years of tracking meant that I knew what the forward burndown rate on my savings would be, over what could have very well been 2 years of unemployment. I had the benefit of living alone at that time, so that made calculations pretty straightforward.

How it works

The end goal here is really predictability over your monthly expenses. Predictability liberates you to make long-term plans, like when you want to retire, when you can afford big-ticket expenses, or in my case, how many more months of runway I had left given the same lifestyle. There are many expense-tracking apps out there, but I prefer the simplicity and flexibility of using my own Google Sheets model.

Additionally, when you record your expenses every day, you get realtime feedback about whether you’re spending too much on any given day or week. This lets you make immediate decisions regarding how much you want to spend in the rest of the month, if you’re targeting a certain budget.

Start with regular, daily expenses

It starts with just 3 columns, for the date, description, and dollar amount of each and every expense. I personally like to add one new sheet per month.

If you want realtime calculations, there’s no shortcut around manually adding these rows into your spreadsheet each day. Over time, I’ve found that this habit stops feeling like a chore, but it does take some getting used to at first.

Breaking down large, irregular purchases

But what if you’re making a large purchase like a laptop? That throws off your monthly budget. Remember, while the immediately-obvious benefit of any expense tracker is retroactive visibility over your existing spend, what’s actually useful to you is leveraging this visibility to adjust your lifestyle on an agile, day to day basis. If you know you can afford something this month, you’re free to splurge. If not, then go after the easy savings. Large purchases nullify this visibility --> adjustment --> predictability workflow.

In the business world, companies use an accounting concept called amortisation to break down large costs. The idea is that you can split a large purchase into smaller chunks in order to fairly represent the “cost” of something over the long-term timespan you’re using it through.

In my case, I’m not really “amortising” my purchases in the business sense of the word, but I do want to split up the large ones so that I can get a sense of how much I’m paying for each week of utility. In the example below, I’ve split up some annual recurring expenses into their per-week equivalents.

Add them up

What I like to do is to create a reporting sheet where I sum up every week’s regular expenses with the amortised expenses, so I can see at one glance how much I’ve spent so far in the Total column, as well as how much I can spend for the rest of the week in the Left column, which is calculated based on an arbitrary monthly budget I set in the cell with blue font.

Conclusion

Is this useful or just kinda overkill? Well, as long as spend predictability enables me to make long-term plans, I don’t see myself quitting this expense-tracking habit anytime soon 😬