Frugal Framnett

One idea I keep coming back to is that of tracking and measuring. Now, many computers come with Quicken, MS-Money, and even my OS of choice Slackware Linux and my windows manager choice of KDE comes with a personal finance manager (I even had In-Charge for OS/2 when I ran that system). However, I have never much cared for any of the available choices and most often the software was at least a waste of storage and at worst money flushed down the drain when the idea is to wisely manage the money..

I recall purchasing Managing Your Money some years ago and noted this to a colleague. He asked why not use spreadsheet software for this purpose, after all, these pieces of software are nothing but spreadsheets without cells. Well Vince, whereever you are and whatever you are doing you were correct it has come down to me putting together a system of spreadsheets.

In this topic I hope to give spreadsheet tips and pointers allowing you to become a Spreadsheet Samurai! I can hear the countless and nameless samurai whose bones are long turned into dust rolling and cussing at their class being associated with geekly pursuits such as computers and money.

• Most people talk of setting, recording, and tracking goals. I do that with this post.

1. Retiring Debt
   1. A loan against my 401(k) plan

   This loan will be paid off at the end of this month. I plan to put that to use to:

   2. Pay off the loan on our 2002 model impala car

   We have roughly one and a half years to go on the loan but with the retirement of our 401(K) loan we can double our payment on the Impala and get it off the books. Additional savings will kick in by dropping comprehensive coverage on the vehicle. We have two vehicles I am okay with dropping comp on one of them or looking into a way to just insure against a total loss or major damage.

   3. This is not a complete set of loans just a few we can pick off easily and in the near future. When those two are paid off I will revisit this situation. I hope to be in that happy state by October of 2008. However, by that time I have the feeling our home loan and taxes will be be taking up a fair amount of resources.
   4. Paying off our credit card bills every month.

   So far from this summer we have been doing that but we need to keep those bills small enough.

2. Saving at least a little bit every month.

It is not going to be a lot but at least a little bit, we will place the savings into a remote account (i.e. one not so easily transferred back into checking) so it will be harder to spend and if we can get used to going without the amount we are saving we can increase a little bit more every so often.

3. Tracking our spending.

As I have discussed here before what you can not measure you can not improve. To improve our spending habits we need to find out what they are. To accomplish this I will take every receipt we have and enter it into a spreadsheet I have set up for this purpose. Right now, expenditures are my priority. I expect, it will not be 100% on (e.g. pop machines do not issue receipts) but we should know with a fair amount of certainty where our money is going.

4. Developing other income streams.

I do not want to talk too much about this one.

In my last post I report the payback period for a photo-voltaic roofing system is in excess of 15 years. Well, I was revisiting my analysis in preparation of presenting it here and lo & behold I notice I bonked!

In my analysis I misunderstood one key piece of data and based the analysis on that. I am in the middle of reanalyzing the data and it appears I the bonk led to me to overstate the payback period by twice! It appears the actual payback period would be under ten years.

I will continue to work on the analysis and present it when it is complete. Still, this realization comes too late for us our roof is on and is conventional. Perhaps this will be our first remodel job?

Is an interesting exercise. In order for Lorie and I to go with a roof mounted photo-voltaic system we must be reasonably certain the extra expenditure will pay itself back in a reasonable period of time. I am looking for less than ten years, and my understanding is industry looks for a payback period of five years or less.My first cut at trying to determine payback period was to do some web searching and see what others reported. However, this search proved to be disappointing. Most sites do not go into specifics about the electricity actually generated, savings realized and the like. One site based on a photo-voltaic electrified home in Wisconsin was non-responsive to an e-mail query. Then I determined I would have to get analytical myself. What information would I need? Here is a summary:

1. Projected electrical usage
2. Surface area of exposed roof
3. Insolation hours
4. I Bonked!
5. Power generation capability of the material
6. Cost of the material
7. Electric rates

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To elaborate a little more on metrics.

What you can not measure you can not improve or at least be sure of your direction. Imagine you are in a strange woods on a gray day and all you know is to go east to reach a road you know. Unless you a have a compass (or something else to orient you such as the sun) you will walk in circles (even with the sun you have to pay attention).

Same too with your balance sheets. If you do not how much is going and where it is going you can not sit down and decide if the money is flowing to your priorities.

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In my previous post I discussed the need to measure input vs. output dollars. How do you do it?

Clerk-work! You need to record your expenses either in a notebook or on your computer. Of course, we usually choose on the computer now-a-days since we have computers. However, the next choice is to choose the software used to track your money.

Most people buy a computer and something like Quicken or MS Money is bundled and away you go. However, with those packages occasionally the need to upgrade happens and usually this means parting with $ and that defeats the purpose of what we are trying to accomplish.

There are a number of open source & freeware personal finance packages available over the internet. I have tried to work a couple of them and they seem to be clumsy and awkward. What is a frugal person to do?

We use Open Office’s Calc spreadsheet (free for the download). Spreadsheets may lack many of the whiz-bang features of a Quicken or a Excel, but I say start simple and work your way up. In addition, I use frugal Slackware Linux (cheap if not free) as my computer’s operating system so most paid for personal finance packages do not work on our computer.

In any event my most important functions are to: allocate money to budgets and to track expenses. Both of which are easily accomplished using a spreadsheet.

So, if all the functions in your money manage bewilder you, just use a spreadsheet (Excel, or even the Works spreadsheet is more than enough) to help track your budgets & expenditures. By the time those buttons and functions start to make sense you most likely will know how to do it with your spreadsheet!

Metrics as in measurements.

Most everyone has a number of financial metrics well in hand. Paycheck, savings accounts, and accounts we owe on. If someone owes us money most are good at keeping track of that. In addition, we are pretty good at knowing what banks of money we have or at least the banks in which we store our wealth are good at letting us know.

However, you may notice your banks of money do not grow. They may stay even or they may even shrink, especially when considered with accounts to which you owe money to.

So, we usually have a good idea on income. We usually have a good idea of our stores. The missing key is having good measurement of our sinks and our cash outflows.

I had a similar problem. I was gaining weight. I tried to cut back on food here and food there, but it did not seem to ever be enough. Problem was, I was not tracking my caloric intake and as is usually the case the intake was greater than the output.

Now, when I started to track my caloric intake I started to lose weight. Notice, I have not yet mentioned caloric output. To be sure, when I started tracking my caloric intake I was more active (I am more physically active during the winter) but even during the summer weight was coming off.

The key with weight management is balancing input calories with output calories. So too with financial management – balancing the income with the expenditures is key.

How much do you spend? Be honest, I bet you do not know do you? ‘Ts okay, we do not have a very firm grasp on that either. In only one budget category do I have a handle on our expenses (other than utility bills) and that is gasoline.

In this category I hope to encourage the sharing of ideas to help us track and measure our expenditures