Where Did Your Dollars Go?

This article first appeared in Alpha Efficiency Magazine: Issue 4: Reviewing, subscribe and buy here

For decades marketing agencies have tracked our behavior, thoughts, and habits, learning as much as they can about us in order to sell to us more effectively. But no longer is this data collection reserved for marketers; it is now hitting the early adopter curve with people that take great interest in preserving their health, finances, and peace of mind.

Insights gathered from self-tracking can help you identify poor habits and teach you how to counteract them, armed with smart facts and actionable data. Did I mention that self-quantification is the most important aspect of Reviewing?

Self Quantification Has Proven To Be More Difficult Than I Imagined

As a part of my new years’ resolution in 2014, I’ve made a decision to self-quantify. One of the first things I wanted to tackle was my finances. Let me tell you the story of how I’ve started doing it and the pain points I’ve experienced.

Populating data – collected either in Evernote or Drafts – into spreadsheets was a very tedious process that took out a lot of energy out of me. Receiving digital statements from my bank helped in this process, but manipulating the spreadsheets, putting in the data and creating pie charts proved to be too time-consuming and I found it was steering me away from my original goals.

In the beginning, I had a simple setup: Numbers, plus some spreadsheet formulae. I’ve been fascinated with spreadsheets lately and I have plans on expanding my knowledge of them; however, this setup didn’t turn out to work very well for me. There were numerous difficulties that have proven that self-quantification, when done manually, is a tough challenge.

The rewards of self-quantification are directly proportional to the data you gather; this means that the more data you have, the more conclusions you can pull out. So as you keep the data momentum going, you will gain better insights into your own behavior. So far I’ve been focused on pulling the data from my debit card reports and my cash expenses. Cash expenses tend to be incredibly messy; if you don’t note them immediately, they slip.

For the whole of January I’ve spent a tremendous amount of time collecting and assessing my spending data; however, my habit slipped away a few times and I found it very hard to catch up a backlog of my own behavior for lapses longer than 4-5 days. The amount of friction was immense and kept me completely off track for assessing other areas of my new year resolution (quantifying diet, health, sleep tracking).

There were numerous difficulties that have proven that self-quantification, when done manually, is a tough challenge.

The Biggest Problem Of Self-Quantification

Developing a habit of tracking something burns incredible amounts of willpower, made harder by the fact that you’re not immediately gratified when doing it. There is no positive feedback loop, no connection between reward and action; it is incredibly vague and at times it can feel like it’s not worth it.

I’ve Pulled the Plug; It Was Time to Automate

Noticing that collating my spending data was becoming unsustainable, the next step was to see if there was a more simple way to get it all into a single location. There were numerous reasons why I was reluctant to do this, however, I am glad I “pulled the plug” for numerous reasons.

Instead of being focused on gathering data and applying spreadsheet formulae, I’ve immediately moved into the role of somebody who pulls the analytics of personal spending and comes to concrete conclusions on his behavior pattern. A lot of other things follow financial tracking; even if you don’t monitor your time, you can immediately identify how you spend your money including your time and your nutrition habits.

In January I’ve identified that my nutrition is 90% comprised of fast food chains such as Subway, so I made a conscious decision towards the end of the month to stop eating in those places. It paid immediate dividends in terms of health and wealth. Eating out was convenient, but finding another solution kept my wallet fat and my belly lean.

The Reasons Why I Was on the Fence of Automating Finance

The financial information being stacked in one place is certainly not something that we need to take lightly, however, all of our data is equally exposed to the danger of being scrapped, one way or another. Before pulling the plug on the manual collection, I weighed up the benefits, costs, and risks of all the services I was considering and decided to go with it.

Three Services That Made Financial Tracking Simple

The trio that helped me salvage the mess of the personal finance is Mint, Simple and Credit Karma.

Mint

Mint is your personal finance manager. This is what I’ve been trying to accomplish for the whole month of January with spreadsheets and despite being successful, I absolutely knew that I wouldn’t be able to sustain it. Mint has powerful pie charts that drill down into the major sections and provides you with accurate insights on spending. The danger of Mint is having all banking information in one place; however, they only have read access to your accounts and can’t make any sort of payments. So even if someone broke into my Mint, they wouldn’t be able to do much with the information gathered. If somebody really wants to snoop around and waste time monitoring my spending activity I’m not overly concerned.

Simple

Simple was a no-brainer, as it is a quite amazing banking platform. It tries to do some of the things that come with Mint, however, it has a full-blown checking account with a debit card attached. There are no cons with Simple; you can utilize it any way you want. The best thing about it is the chat support that is located within the app itself, which is easily accessible on your phone with a passcode. Passcode seems kinda weak, but I am confident in my phone security. There are also major advantages of having a Simple debit card. You can always shut it off temporarily straight from your app, change the PIN when you want as well. Another very convenient feature is ATM finder, which helps you find the machines that won’t charge you withdrawal fees. You tap the button and all of the locations are revealed to you on the map.

Credit Karma

The service I was the most reluctant to use was Credit Karma, as it required my SSN upon registration. I expressed this concern to a friend who recommended me this free service, and he directed me to the link where they expressively state that they do not hold your SSN within their database. Here is a statement on their website:

I’m a little nervous about entering my Social Security Number.
In order to retrieve your first credit score, we must use your social security number. We only use your SSN for this first score retrieval, and we do not store it in our database. After this one-time use, we will not need your SSN again and it will not be stored on any of our systems.

After reading this I felt a bit safer and my reluctance disappeared. However, there is a good and big reason on why credit monitoring is a smart idea. Monitoring your credit is one of the most unintuitive things in the US system for me. There are three credit monitoring companies and each and every one of them is obligated to give you one report per year. Instead of you going through this chore, you can outsource this monitoring to a single service.

Insights Gathered

Being assured that all my data is collected, organized and mostly sorted out is a quantum leap in comparison to me saving data manually into Spreadsheets and pivoting them around. Even though it has been a nice learning experience and a lesson in mindfulness, in the end, it was an experience with heavy friction. Once the friction was removed, self-quantified finance became very simple.

When I managed to liberate myself from tedious data collection, there was plenty of spare time that has been used in creating new insights. And those insights had a lot to say about my past choices and made a tremendous impact on my new behavior patterns.

We all lie to ourselves at some point, telling ourselves that we spent less money than we actually did.

There is Truth In Numbers

We all lie to ourselves at some point, telling ourselves that we spent less money than we actually did. Before self-quantification, I was frequently fishing in the dark and reassuring myself that I had sufficient funds. However, when I started budgeting, my spending impulses abated. My decisions were based on more calculation and in each and every moment I could pull up my smartphone and immediately know how much is it safe to spend?.

The Effects of Insights

These insights started changing my decision-making process. When you have 100$ in your pocket, but you know that a gym bill is coming next week, you realize that you actually don’t have 100$, but $60. You are empowered with more accurate information that lets you think past your impulses.

Having extremely accurate spending analytics changed my decision-making process and motivated me to focus more extensively on the changes I need to make in order to increase my wealth and health.

Implementing the Change

Reviewing my finances didn’t prompt me to be frugal or to save more money than I planned, but it did prompt me to reconsider how realistic my expectations and commitments were. Planning your expenses, income, and investments is as important a part of your life as running a task manager; perhaps more so.

All you need to get started is install one of the apps that helps you track your spending; check your stats and decisions will reveal themselves to you. Before long, your awareness of your own spending behavior patterns will have increased and you’ll be on the road to better financial decisions.