My first steps to investing: tracking expenses

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The beginning

A few years ago I started to think about how to make my money work for me rather than working for my money. Back then, I didn't really know about crypto so I started looking into more traditional ways of investment. During my studies I stumbled upon one of the golden rules of investing:

Always pay yourself first

It really got me thinking.

Up until that moment, I was just living my life the way I thought I should and saving whatever I had left by the end of the month and, while there are some perks about living like that, it just wasn't bringing me closer to my goal.

With that in mind, I decided that I wanted to maximize the amount I would direct to investments. There was one problem, however: I had no idea in what areas of my expenses there were room for optimization, which takes us to the next session of this post:

Identifying your consumer profile

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One of my career mentors likes to say that the best way to really get to know someone is by looking at their schedule and credit card bills. What he meant by that is that the way we spend our time and our money tells a lot about who we are and how we see the world. Just looking at those things can reveal a lot about ourselves. This is an interesting exercise even if you are not thinking about investments.

I, then, decided to try and identify exactly where my money was going and, later, check if I could make better use of part of the money. The best way I know to accomplish that is to simply track every expense I have in a period of time and then analyze the resulting data.

There are a lot of ways to go about that and there are even some apps that will automate most of the process for you. Being a project manager, I like to have some freedom to play around with data and run my own analysis so I designed a simple and yet effective spreadsheet to help me with the task.

My expense tracker

I call it an expense tracker because that was its primary function but then I improved it a bit and started logging receipts too, so I'd get a monthly balance of what I earned and spent. It's a very simple spreadsheet where I mainly enter every expense or receipt, the date, the category (Rent, Food, Groceries, etc), and, of course, the value.

That alone would allow me to do a lot of data analysis but, to make things easier, I also created a Dashboard with a quick report of my monthly balance.

After two months I assumed I had enough data to work with.

Adjusting for my goals

With the data available, I could start to make some adjustments that I thought would be a better fit for my investment goals. One thing that was very important during this phase was total honesty with myself. It's important to set goals that you can actually achieve and therefore I knew that I didn't want to be too radical because I don't want to live that kind of life.

However, I was still able to identify some easy adjustments that I was willing to make and that could have a big impact on my finances. Eating out, for example, is something I cut back because I realized I was spending way too much.

Closing thoughts

I believe that our relationship with money is something very personal and because of that this piece of advice may not apply or be helpful to everyone, but it's something that really helped me get started on the world of investments so I thought I'd share.

Tracking my expenses allowed me to increase by almost 50% the amount of money that I direct to investments every month. Again, this number will be very different for each person but I just wanted to highlight how this simple habit made a big difference in my life.

I hope you enjoyed and see you next time!

P.S: By the way, if you are interested, you can check out the spreadsheet I use on this link:

https://docs.google.com/spreadsheets/d/1xayWm5NzBPuoMLiKmO8b9j6HWBSqJE4YxxpqgAKtcPo/edit?usp=sharing

Feel free to make a copy and adjust it for your needs if you like and let me know if you need any help!

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