Better personal finances

There's an article over at Zen Habits about money hacks, complete with a sample spreadsheet to track your personal finances.

I have occationally been asked how I manage to track my personal finances, and the truth is that I have a speadsheet that is a simplified version of the accounting at work, and plan ahead the same way I do at work. And a few personal touches that I can't use at work. So here's some of my own Personal Finances hacks:

1. Pick the right bank.

I did the math. In my previous bank, I earned some NOK 1000 a year in interest and spent NOK 2000 in fees. The only benefit was that the people at my local branch knew who I was. And my local branch is 1800 km away.

The last drop came when my alternator died on vacation in Finland. I had my car pulled in to the nearest Toyota, and by accident they charged me €1500 instead of €150 for the job. They immediately corrected it, but the bank decided to charge me for the difference between buying and selling price of the €1500, even though it was obvious that it was a typing mistake. The difference was about €100.

I switched bank immediately upon my return to Norway, but my old bank still managed to send me a credit card and charged fees for it without me applying for it and after I had specifically told them that I cancelled all my cards with them.

My new bank, Skandiabanken only charges the NOK 250/year for my debit card and gives me a much higher interest rate. They don't have a branch office anywhere, it's online only, but it works well. I now actually make money on putting them in the bank, which is great encouragement to keep it that way.

2. Accumulator account vs bank card account

This principle is similar to using cash. I have my salary run into one account, and then I have my debit card on a different account. At the beginning of the month, I reset my debit card to my monthly allowance, so any money not spent one month actually means saving them.

It also means that I need to keep an approximate number in my head. As the number closes in on zero, I spend less and less, because I have to go back online to find the exact balance again and again, and I don't want to be stuck at the check-out not able to pay.

3. Weekly deposit box

Granted, you have your plastic card, but occationally you give in and get some cash out for those locations that can't take your card. At the end of the week, get into the habit of putting any coins (and for those living in the US, anything below $10) from you wallet into a piggybank. Anything you take back out of the piggybank, you have to see as a "cash withdrawal" and transfer the same amount from your debit account to your accumulator account.

4. Purpose accounts

Everyone knows of the "savings account" hack - that is, having an account for savings. But I have more than that. I also have:

A self insurance account which pays my insurance bills and makes sure I have some money in hand if there should be an emergency.

A charity account to pay those charities. And I'm not just talking about registered charities, but anything I may consider charitable. The account is not meant as a ceiling to spending on charity, but rather a minimum. This money can not be touched for any other pupose than charity.

A baby account, more specifically one dedicated to our son. He gets his own allowance every month, and occationally big expences related to him go out of this as well. The idea of the baby account is to insure that we can afford all the baby utilities, etc. Government allowance to the child also go straight into this account. As a side effect, this account grows in size, which means he'll have a great deal of money when he's ready to leave home.

Set up an account for your 3-4 top most priorities.

5. Find a better way

There are often cheaper ways of doing things, and they are usually more ecological and healthier. For example: Live closer to work and walk or bicycle to get there. Reusable wool or cotton diapers, not one-time diapers. Make these yourself. Turn off the TV and read a book instead. For that matter, even radio has better programming than TV. Use the library. Do your home accounting.

6. Enjoy your graphs.

In my spreadsheet, I have one column for each month and one line for each type of expense. I also have one sheet per account. This gives me nice graphs that show me just how much the car costs us, and how the different accounts are growing. I also put in expected expenses for the rest of the year, which allows me to plan ahead and stop me from buying a tool I don't need, because I know there's a major expense in three months. It is also encouraging to watch the graphs grow.

Personal finances might not be directly computer related, but it certainly is numbers. And we love numbers.