How to Structure Personal Spending Data
The Personal Finance
The daily struggle that people face to contain or control their financial expenses is notorious. In this text we intend to help you, based on a simple methodology, to identify problems or even generate possibilities in search of better performance in personal expenses.
We are not going to talk about investments, or digital currencies, things like that, or the business situation. We will talk about Good Practices in Controlling Personal Spending.
And what’s different about what we’re going to talk about? The differential of our narrative is that it is practical, as it is based on only two pillars: the handling of numbers and a New Concept, a concept that we idealized and that you will be surprised by the ease of understanding.
Let’s make it clear that the cost control rules are well defined in the business environment, and they are based on Scientific Theories. However, in order to migrate these rules to personal life, a very important factor has emerged that influences a lot, it is The Emotional Factor, and that makes all the difference!
As you begin to put the guidelines in this text into practice, you will realize a meaning beyond the numbers, and that will give you structure to make conscious personal decisions.
The Master Spending Table
They are absolutely essential core data for the purposes of this idea. It corresponds to a set of structures and terms that will contextualize the methodology.
📌 1st EXPENSES CATEGORY — The main aspect of these expenses is that they are mostly recurring in nature, and therefore they can be mentioned here as recurring expenses, or maintenance expenses, or simply expenses.
- 1 Groceries
Groceries are all edible or non-edible items purchased to process or use at home. These expenses are usually made with purchases in supermarkets and street markets. Cooking gas, coal, cleaning alcohol, vehicle fuel, etc. are part of the group. - 2 Food
Expenses in restaurants, snack bars, bars, ice cream parlors, in short, everything that falls under the ready-delivery category will be considered as food. - 3 Health
This category includes expenses with health insurance, doctors, hospitals, vaccines, pharmacy, physiotherapy, gym, hygiene procedures such as haircuts, shaving, nails, etc. - 4 Home
Corresponds to expenses with rental of residence, condominium fee, garage rent, property tax, etc. If the person keeps his private vehicle at his home, the expense like washing belongs to this category. Transportation expenses such as taxi, UBER, public transport, property insurance, are grouped in this class. Expenses with domestic servants are also part of this class. - 5 Electricity Supply Services
Expenses related to the consumption of electricity. - 6 Gas Bill
Expenses related to the mains gas supply - 7 Water Supply Services
Expenses related to the consumption of water from the public supply network. Expenses for mineral water are not included here, these, if any, will belong to the grocery category. - 8 Schools
Expenses with private school, colleges and professionalizing courses of own initiative. Spending on books and school supplies will fall under this category if they are related to didactic demands, that is, geared to the student’s context. - 9 Entertainment
They correspond to expenses such as club fees, TV subscriptions, internet, cinema, etc. If you pay parking to go to the movies, that parking cost will be an entertainment cost.
📌 2nd EXPENSES CATEGORY — The main aspect of these expenses is that they are mostly non-recurring, and therefore they can be mentioned here as investment expenses, improvements, or simply investments.
- A — Clothing Purchase
Shopping for clothes, shoes, jewelry, costume jewelry, etc. - B — Home Furniture
Home decoration items such as cabinets, tables, wardrobes, bed, etc. The reform or improvement of the residence falls under this class of expenses. - C — Household Items
This category includes home appliances, kitchen appliances such as stove, if there is also cooking gas hull or mineral water cylinder, etc. - D — Goods and Services
Expenses with goods and services, purchases of things such as passenger vehicles, real estate (house, land), boats, planes, etc. are considered. Also part of this class are expenses for parts, materials and services arising from repairs to things such as passenger vehicles. This class includes credit card annuities and official annuities (class entities, professional councils). - E — Beauty Expenses
This category includes aesthetic, invasive or non-invasive procedures, such as the placement of toxins, plastic surgery, massage therapy, tanning, etc.
📌 FUNCTIONAL ELEMENTS — In addition to these categories, it is necessary to list other elements necessary to complete the set of financial data that will make sense for our methodology. These are the functional elements: Income, Funds, Debt, Credit and Cash.
- Income
It is all money resulting from remuneration, such as salary, pro-labore, pension, retirement, rent money received, income from a savings account. - Funds
Funds are sums of money obtained in some way other than income which are available by deliberation to use them (for example, the amount will fall into the current account). They are derived from lottery prizes, division of inheritance (in cash), labor compensation, donation received, profit from the sale of a property or good, money accumulated in the form of capitalization, savings account, money from financial investments. Not to be confused with the term investment fund, which may even be used as funds using this methodology as long as it is something deliberate by the person. - Debt
The word debt has a well-known meaning, but for our methodology debt is just the result of an account, but it also has to do with the meaning of the word itself. - Credit
Credit is an imaginary currency that is intentionally used on the assumption of not having funds. As it is imaginary, its amount is only known when it is spent, that is, it is a function of the personal context.
A credit card is not currency, it is a plastic card, but credit card transactions fall into one of our expense categories. It is important to point out that the credit card annuity instalments, paid monthly, fall under the 2nd category of expenses such as goods.
A loan acquired from a financial institution is generally used as a source of money to pay for a purchase. And later this loan is returned in instalments. So, in our methodology, what counts is the payment of the instalments, which must be assigned to the expense categories for which the loan money was allocated. The same will apply to the overdraft including the interest generated in the use of the overdraft will fall as cash for the good or thing acquired with its use. - Cash
Cash is the amount available in real time, it is the moral counterpart against expenses. The credit does not belong to the cashier. If a person has an amount of funds, proceeds from a sale, for example, and kept in a bank and intends to spend them, then that amount will form his cash. It corresponds to what comes in and goes out right after.
The Good Dogma
Within this focus that we are presenting, a small dogma must be established. This dogma of ours will have as commandments a set of questions.
✅ THE WHY — Why the expense. Note that an expense does not have duality, so try to fit it into the expense category, that is, into the 1st category, or into the 2nd category.
✅ WHAT — You must answer about the object of the expenditure, in the form of groceries, food, health, housing, electricity, water, schools, entertainment, purchase of clothing, purchase of furniture, purchase of goods, beauty expenses.
✅ WHEN — You must answer about the date the expense occurred. Day, month and year.
✅ FOR WHAT — You must answer about the reason for the expense, that is, if it results from Survival, or if it results from Quality of Life.
These two classes correspond to our second pillar. The consequence of these definitions is that now an affinity law will appear between the second pillar and the concepts of the expenditure master data, as shown in the graphic scheme below. This diagrammatic scheme contemplates where there is more affinity between the elements of the expense category and the definitions of the “perceptual” class.
✅ HOW MUCH — You must answer about the amount spent translated into numbers. At this point, it is very important to emphasize that this is mandatory in our methodology, as it represents the first pillar.
✅ HOW — You must answer about how spending takes place in the context of moving money. That is, if it was PAID, TO BE PAID, FUTURE and TO BE DEFINED.
The Evolution
Evolution is something that is always sought in the processes of life. But when it comes to spending, once the spending chain is created for whatever reasons it shouldn’t evolve. Spending follows the silence of time. Therefore, the only way to perceive its evolution is through the “lens” of reason. For this it is necessary to make use of the determinism of numbers, numbers are witnesses of the truth.
Some considerations are important to obtain valuable benefits.
When should the calculator be activated?
— Always in the current month. Making calculations late is not bad, but it will not be a good time to react.
What will be on the calculator?
— Always all data for the current month. Let’s assume that we are on 04/15, then all expenses and payments that occurred from 04/01 to 04/15 fall into the calculator, as well as what was earned in that period.
Can we include expenses still due in the current month?
— Yes, it is even recommended, as long as it is done consciously (not by mistake). In that case, it’s a good idea to include what’s going to fall into the cash, whether it’s revenue or funds.
Focusing only on the current month will not leave the subject without reference?
— No, because in the evolutionary chain, of the methodology, the important thing will be just “winning the dispute” with the previous month and this will be visible, in the calculation, when it points or not to the debt of the month in calculation.
Possibilities
Once the calculation steps are completed, there will be two possibilities: result having debt and result not having debt value. So we have two messages to preach.
✅If the calculations do not result in debt, then let’s say that there was creation of possibilities and gain of knowledge of the facts to deal with the following month.
✅ If the calculations result in debt, then let’s say that there was an evolution in expenses. In this case, the clairvoyance of lack of control arises, that is, the situation requires control. To carry out this control, you will use the data crossing tool.
In this text, you saw a simple methodology without conventional concepts or definitions, but which, in essence, has everything to do with your domestic routine. First you need to write down the amounts spent, for that, save the bakery, supermarket, cinema, parking notes, etc. Calculator calculations can be done on the computer in an Excel spreadsheet, or even on a blackboard. Calculations should preferably be weekly and close at the end of the month.
It will be very advantageous to use this methodology for discussions at home about expenses, remember that the numbers are witnesses of the truth.
