Why I don’t track either my income or expenses on the road to FIRE – and the 7 ½ lazy rules I (sorta) follow instead

I’m a few posts in and I haven’t actually talked about money yet. Given that I was inspired to start this blog due to the FIRE and personal finance communities that feels like something of an omission. So I feel like I’ve got to stand tall and get on with it or otherwise I’m going to get booted out of the community (is there a special ceremony like when Mr Banks gets fired in Mary Poppins? Not sure that they cleared that one with HR),

Not sure that a spoonful of sugar will have helped THAT medicine go down. Ammirite!?!?!? Don’t leave me hanging good buddy.

Why I SHOULD track my finances

Anyhoo. The main reason that I haven’t done a finance post is because I feel a bit of a fraud. Firstly I don’t actually track my finances so I can’t putout monthly summaries like Weenie, or Dr Fire, or JMoney and the rest. It’s not that I have a problem sharing it, I just don’t do it. I mean I suppose I could go to my various statement and work out what the headlines numbers are but I never have – at least not in a systematic way. Does that mean I’m even allowed to be part of the community? Knowing what’s coming in and going out seems to be like a basic rule for someone who is meant to be good with their finance. And the community’s not just tracking it for chips and giggles there are excellent reasons why we all should.

If you don’t know what your income and outgoings are then how do you know that you’re living within your means? Without those numbers it’s too easy to fail the Mr Micawber test right?

Even if you have a good handle on your income (and most of us do ‘cos that’s just the salary that plops into our bank account every month) then you really need to know what’s going out. If you don’t then how can you work out where you are wasting money. Or where you can get better deals.

And you need toknow all of that so that you can work out how much you can save. That’s the central tenet of FIRE right? Raise income, lowerexpenses and build your stash so that you can reach FI. Unless youare saving then it going to be rather tricky to build a FU fund, or aretirement fund, or a FIRE fund.

I can see all of that but I still don’t track my money.

Why I DON’T track my finances

Now all of that raises the natural question of why. Given that you know that it full of FIRE-y goodness why don’t you track you finances Caveman? (and also why are you referring to yourself in the third person? You know that’s weird right? Yes Caveman does know that, but is it any weirder than talking to yourself on your own blog? No, fair point.)

So I would love to tell you that there is a profound reason behind why I do it, but there isn’t. I don’t do it for the reason that most people in the don’t do it: I find it a bit boring and I am more than a bit lazy.

There. I said it. Pretty poor show huh? It’s like eating your 5-a-day, or walking 10,000 steps, or calling your mum. I know that it’s the right thing to do but somehow I never get round to it. [Hi mum! I’ll call you Sunday. Promise! Love you xx]

But Caveman, you interject, you’re putting yourself out there as a member of the FIRE community. Is this really it? You kinda lamely trailing off to say that you can’t be bothered to track your finances isn’t really that inspiring.

So you are completely right to pull me up on that. And I am being a little disingenuous because while all of the above it true, it’s not all I do. What I do instead is follow my rules. They give me 91% [made up number] of the benefits of tracking my finances while taking away 93% of the pain. [another made up number- but if I say those numbers with confidence you’re gonna believe me right?]

The 7 ½ rules I follow to get to FI

So let get to it. If I don’t do budgets, what are my rules?

1. Set up direct debits or standing orders. I do this for everything that I can. Council tax, water, gas, broadband, electricity, Oyster card, mobile phone, insurances, Sky, subscriptions, TV licence, road tax, charity donations, school meals, music/swimming/dance/whatever lessons, credit cards (paid off in full every month obvs). Everything
   1. 5  Importantly make sure that these DDs/standing orders include mortgage overpayments and ISAs
2. Get the full match on my pension from my employer (if I put in 5% they put in 10% – I don’t know how that compares to others but I’ll take it)
3. Compare renewal prices. When renewal times come along go to MoneySupermarket or Compare the Market or similar price comparison websites (no affiliation) and check out alternative prices. Having said that I can’t remember the last time I changed suppliers. Most of the time I call up my existing provider, tell them what prices I’ve found, and where, and they tend to match it without any fuss.
4. Give ourselves “pocket money” (again by standing order). This goes into a separate current account and I can do whatever I want with it. Going large on a birthday or Christmas present? Fancy a latte, or a takeaway? Want to get a DVD? Can’t live without that wallet on Amazon? Beers with mates? No problem? It comes out of this account. The only rule is that when it’s gone it’s gone (at least until next month).
5. Run stuff into the ground before replacing it. My car is over a decade old. I’ve just replaced my phone handset after four years (my contact is sim-only). And, man alive, do I hate shopping for clothes…
6. Except for a house never borrow money to buy stuff, save instead
7. Holiday/one offs from my bonus. We treat my bonus as a genuine bonus (and I know how lucky I am to get one) so when it comes in we top up the emergency fund if needed, put a third of it against the mortgage, then holidays and (planned) work around the house and garden all fit into what’s left.

Um. That’s it. To be honest they are more rules of thumb than hard rules but they are what I do.

So why does having rules instead of tracking finances work for me?

The single most important motivating factor behind all of this is my laziness. I can’t tell you how important it is to being successful (well, actually, I can. But that’s a post for another time). But this automates almost everything that I can automate so I don’t have to think about it. Or more precisely we think once about what we want in life then I forget about it (except at renewal time). Awe-Some.

Secondly the amount that goes out of the current account doesn’t change every month. I know that I will have almost everything that I and my family will need every month and I know that the monthly balance on my current account it stable so I can afford it. I just don’t need to think about it very much.

Thirdly I can do what I like with my pocket money account. We can indulge whims if we want without guilt (the use of the term “pocket money” is deliberate to give ourselves licence to be frivolous if we want). Actually at the moment my pocket money account is running a significant surplus while my wife is much more likely to use hers every month. But that’s fine, we don’t have to account for our pocket money to each other. In fact unless we happen to mention it to each other we won’t even know.

Finally, it’s kinda working. It may not be as efficient as it could be but it’s getting me there and it also stops me from getting obsessed by it at the expense of getting obsessed by becoming happier – which of course is the real goal.

I’m going to stop there as this post has gone on a bit, but I realise that I should probably explain at some point why I think this is “kinda working” and how this links to my goals (as far as I have them). I’ll try to make that the next post…unless I do the one on laziness…or I get out the rant on morning routines that I’ve got building…or I do something else entirely…

Thoughts?

Am I mad not to track my income and expenses? Do my rules seem at all sensible? Is there anything that that confuses you or you want to know more about? 

I’m sure I must have forgotten something so please test me!