How tracking investments instead of expenses changed my life!

In this post, I write about how I went from tracking expenses to tracking systematic investments and how it changed the way I look at money and has taken me to financial independence within a decade of regular employment starting from a net worth of minus three lakhs (I was in debt).

This post was first published in Sep. 2015. After seeing a couple of threads on the subject at Asan Ideas for Wealth (FB group), I thought of reviving it.

A few months ago, I had requested readers to suggest topics to blog on. (still, need to work on several suggestions there!)  In that post, Anand said,

how about covering the other half of income-savings-investments? ie Tracking and wrangling with Expenses? I am keen to understand how an expert like you would log and manage expenses.

I went from writing expenses (in a 100 page bound book !) by date – then throwing it away to logging all expenses categorised ( eg: groceries, tax, utilities etc) and I noticed wastages and was able to cut down wastages…


What struck me about his comment was the phrase, “other half of income-savings-investments”. Tracking and managing expenses is a deeply personal topic and I think it is best for me to state, ‘what I do’ and let you critique it.

I have the account notebooks maintained by my great grandfather (would crumble into bits if I try to open it), my grandfather, and of course, my parents – using which I was able to write about, Inflation in India: Some Real Numbers.

My parents managed the expenses and tracked them until Jan. 2006. When my dad fell ill, I started to use his notebook along with my wife to track expenses. We used the so-called envelope system like my parents. We used plastic dabbas instead of envelopes because they tore often when we repeatedly checked if they were empty or not!

In the envelope system, each type of monthly expense – milk, vegetables, salary for paid help etc. – would be placed in an individual container at the start of the month. The idea is that the basic and mandatory monthly expenses are accounted for, at the start of the month itself.  Only the amount in the container should be (theoretically speaking!) used for a particular expense. Each month we would try and keep some dabbas in different places in the house to see if that would prove lucky and reduce our expenses. No such luck.

In 2007, I switched from a notebook to a graphing software called Microcal Origin. I had never used Excel at that time.  I still maintain that file, but do not write all entries.

Soon when I started making retirement and goal planning calculators, my emphasis shifted from “how are we spending?” to “how much are we investing?”. That was a bit of a watershed moment for us.  The goal each month was to invest as much as possible. Initially, I was not able to invest as much the calculators told me to.

Somewhere along the line, I realised that as long we invested enough, it did not matter how much we spent (without borrowing). That is when I decided to give up the envelope system.

The key,  in my opinion, is to track investments. Not expenses and not definitely not returns (at least for the first few years). So I created columns in Excel where the monthly investment target for retirement and other long-term goal were listed for the current year. I decided to increase this investment amount by say, 8-10% each year.

Later on I developed it into a monthly tracker (download link below) which everyone could use. Here is a screenshot to illustrate my point.

Financial-tracker-goal-sheet-1024x534

I tried to beat the target as much as possible that it irritated my wife. At times we did not have enough to meet monthly expenses because I would have invested a large chunk of my salary as soon as I got it.  Yes, ‘pay yourself first’, expenses  = income – investments, and all that sort of thing. It worked wonders to my net worth.

Unfortunately, I was a little too obsessed about investing. For close to 6  years, I was able to invest like clockwork. Thankfully, much of that was during the sideway market after 2008.

Unfortunately, soon I witnessed the perils of unexpected recurring expensesMy mom broke her hip (read about my experience with cashless mediclaim)  and required an attendant. This sent my cash flow for a toss. My investment schedule was severely affected and it took me quite a while to recover. Fortunately, the markets started to move up around that time and all that “capital in the market” paid off big time. By December last year, I was able to catch up with my investment schedule.

My point is, first I was obsessed with tracking expenses. I got over that but instead became obsessed about investing each month. I soon realised that life can make investing regularly difficult at times. Now I am a lot more relaxed. As long as I meet my target for the year, I am fine. Don’t need to do it each month.

Systematic investing with a little luck from the market has taken me to financial independence:

  • The rise and fall of my retirement corpus

Older versions of above Post:

If you are a young earner, I suggest you do not track your expenses or spending habits (get rid of those budgeting apps). Instead, focus on your long-term goals and how much you need to invest for each of them. Set your targets and do your best to meet it at least on yearly basis. If you do it on a monthly basis, you can engage in some guilt-free spending faster!

You can use this monthly financial tracker for this purpose. This is based on the version that I use, but only much neater! If anyone wants to build an app based on this, do let me know.

Download the monthly financial tracker

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8 thoughts on “How tracking investments instead of expenses changed my life!

  1. Pattu Sir, Thank you for all that you are doing to enhance financial literacy. I have attended one of your Bangalore workshops as well.

    I was over the past few months, looking for a way to track and consolidate expenses (bank accounts, credit card, spouse accounts etc) and was averse in doing it manually.

    Having lived abroad and used an website called mint.com, I started to look for some thing similar and Google led me to perfios.com. With this website, I am able to consolidate my personal finances (Expenses, Assets, Liabilities) in one place with minimal manual intervention.

    While I have broad idea on my expenses, I am now able to understand expenses in detail (expense by various categories) and thus plan more accurately for my future needs.

    Please do have an look at them. They offer one month free subscription and offer 2 plans which will cater to most of us.

    PS – I am in no way associated with Perfios. Just a satisfied user !!!

  2. It’s a point well made sir, as always :).

    However, I would like to add one thing (from my perspective). I have been tracking expenses AND investments for over 12 years now (before 12 years I didn’t have any investments to track :)).

    Tracking expenses has helped me maintain financial discipline. Again, it is different for different people. But, I feel, that especially for the young earners who can be prone to overspending and racking up debt, it is important to know where your money is going. As you mature in your personal finance journey, that discipline will (or should) come automatically.

    I used to use Microsoft Money, then I switched to Quicken when Money was discontinued, and I continue to use Quicken. It takes a lot of time and effort, but I am yet to find a good enough online platform that lets me do everything (investment tracking, expense tracking, budgeting).

    Just wanted to share my experience. Thank you again 🙂

  3. I use kmymoney for tracking expenses, accounts etc. (I am a Linux user), and it has all my MFs, stock holdings, bank accounts and credit card details stored locally as a file. It doesn’t store the historical NAV, but I can update to the latest values with one click.

  4. I think excess of everything is bad.. Tracking Expenses and Investments is good but over-doing both of them is not good.

    Maybe for a financially aware person like you – it didnt make much sense as your expenses were very much in control… But just look at the credit card statement of any of the young earner and you’ll see how much money they splurge which they later regret… Its a time proven fact that – Money saved is Money earned…

    Just like a person keeps a track of his business expenses, a person should also keep a track of personal expenses. Moreover, tracking expenses helps you track your over-spend and wasteful spend areas..

    So, I think for a financially aware person like you – it may not have made much sense but for people who are not as financially aware as you are – it makes a lot of sense to have an expense tracker…

    For people above the age of 35 whose expenses have stabilised – it may not make much sense but for people below 35 years of age – I think it makes a lot of sense to maintain an expense tracker…

    PS: It was interesting to read your viewpoints and thanks for creating a healthy discussion around this topic…

  5. Hey,

    I am a web and app developer. I am looking to collaborate with people such as yourself on interesting projects that will be both enjoyable, as well as profitable (passively of course).

    You mentioned building an app. I would like to speak to you further about building an app that only solves this purpose but other things covered by so many of the articles you write.

    Looking forward to speaking to you further.

  6. Hello Pattu sir,
    I am a long time admirer of your website and posts. In past I have tried to track my expenses but gave up after sometime. Now, I am abroad from last 3-4 years and with no proper advice on NRI investment(specially US based), use RD as the only source. After paying off my home loans, I am focused on saving x amount every month and sending to India. This tracking of investment has led to a stress free life for me. With your article, it seems that my approach is right.
    Thanks
    Pravs P

  7. Thanks pattu sir for reposting this article. It was very helpful and answered the queries which lot of members were asking on AIFW on tracking expenses. However, budgeting your expenses for a month would still be required so that one should not end up with insufficient before then end of the month. So,what should be the approach for budgeting? Should it be done after investment with remaining amount or it should be done first then invest the amount first leaving monthly expenses budget in your account.

  8. I cannot reconcile two statements: “goal was to invest as much as possible” and “we invested enough, didn’t matter how much we spent”. How much is “enough” for “as much as possible”?

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