There is no place or time in the education system for learning how to manage money. Nobody gives us this crucial education besides our families, so we have to take things into our own hands (as my family is not rich, I can tell they also don’t know how to manage money). So, it was time to get my hands dirty and learn how to manage money. Today, I will take you to the first step.
Forget about the stock market, accounting system, funds, bonds, or all the other mechanisms; I didn’t even know how I spent my money. I set aside some money every month to fool myself into thinking I would be safe in the future. I was delusional in thinking that my monthly amount would make me rich one day. I had no plans; even the amount I put aside was arbitrary.
My monthly savings was based on how I lived with the rest of the money. I followed some general convention that told me to save X% amount of my salary every month. Although I never found these constructive, I obeyed.
I didn’t know where to put that money; I kept it in a checking account (not even savings). I still don’t know how to invest money, BUT I know where I spend my money and how much I want to save and invest every month.
One of my friends recommended that I should get last year’s bank statements and go back line by line, categorize them, and look where I spent the money. I reserved some time on a rainy Sunday in Berlin and did exactly that. Luckily, my bank already uses categories and automatically assigns transactions to these categories, so I didn’t have to do everything. However, I still scanned line by line to ensure all categorizations were correct.
So, here is my spreadsheet, which I update every month. Of course, the numbers are not there because I will ask you to clone the sheet and adjust it to your needs: change categories, add new sub-categories, or do whatever you need. You’ll see that it’s simple—it should be. This first step won’t cover all the details, but it’s good enough to make the invisible visible.
My bank statements didn’t tell the whole story; as Germany still goes full gas on cash payments, I had to spend a lot of money cash. Yet, I was able to catch some details, such as the money I spent on subscriptions. Each looked small: 5-10 EUR per month—a coffee price, so to speak (remarkable marketing strategy). Yet I had many of them, and they reached a thousand euros when combined yearly.
At any given moment, you should be able to tell how much money you have and how much you spend on what. That awareness is the real deal. Once you know what you spend your money on, you can start thinking about all the rest. Learning that information requires collecting data. My recommendation now is to go back to your bank history and fill out the spreadsheet. If you rarely use cash, then you should be fine. Then, look for common patterns on which you spend your money.
Without looking retrospectively, it’s impossible to plan a future. Only looking at the past teaches us a lesson. In routine life, there are subtle and invisible differences we recognize only in retrospect. So, you might be rigorous with your spending today, but without a holistic look, you won’t catch the patterns. When you change some of those patterns, they will change your life, too. What did I change? I canceled my subscriptions (many of them), which I was using rarely. Also, I realized that owning a car costs a lot of money. I don’t have a car anymore (I was thinking of buying one again, but after looking at the costs and my rare usage, I realized it isn’t worth the money), and lastly, I reduced the amount of money I spend on impulse purchases on Amazon.
After this, I started keeping and planning a budget. Now, I have a budget that I track weekly. My next step is learning more about investing. Both budgeting and investing are our future mediation topics. As nobody teaches these topics, it takes time and energy to learn. I’ll share when I get there.
Meanwhile, I’m sure some of you already figured out those things more than I did. Do you have any recommendations for me on how to learn about investing? If so, just reply to this email.
Somethings I Found Great
No Wrong Doors by Will Larson: Don’t use the phrase “It’s not my responsibility.” Rather, take a step and show the right door to the people.
Master Your Attention: Schopenhauer’s Strategy Against Clickbait by FS.Blog: Although I don’t use social media, I realized that my attention span is very low. It’s always good to get some reminders of what I can try.
F1 Canadian Grand Prix 2024: Pure entertainment (once you know the details of F1)
Recently, I published on my blog
New notes on my Zettelkasten
P.S. I keep this website bookmarked and use it at the beginning of some meetings to break the ice.