My expense adventures :)

A few days back a Lady who sits near me was filing her Expense Reports. And that was enough for me to show off my iPhones apps for managing my expenses. The lady liked what I did and she wanted to know more. And before I knew it, I realised that that the lady in question has a Admin assistant. And before I realised it, she asked her admin to fix up an appointment with me on how I use my expense app. And not long after I had an appointment request on my calendar for a 1 hour session on the subject :(( As if taking a 1 hour session on how to use an app wasn’t enough I realised that the lady with the admin assistant is a Director in the company :((

So here I am trying to figure what am I going to tell a Director about managing your expenses? And as a test case I am going to bug you guys before I torture the poor lady ;) The funny part about my experiences with managing my expenses is that I haven’t been all that great with it. In fact when I was in Coke I had foregone a fortune in unclaimed ERs :(( Despite the fact that my income had increased substantially from my pre-MBA days, my bank balance was quite negligible. And the funny thing was that I had no clue where the money was going.

So I created this beautiful excel template to record my expenses. The thought was that if you know what you spend you have a better chance of managing the same. I would use it as planned for a few months and then somehow with the passage of time the number of unrecorded entries would increase. There was a pattern to this behaviour. Usually I would rake up a lot of transactions over a weekend or a holiday and because I was away from my computer I would misplace a few bills or forget to record it. The 80-20 rule worked against me in this case as these weekend expense would be major in nature and they would often get missed out from my expense sheets.

Whenever you grapple with a problem long enough, the solution comes towards you. And in my case it appeared in form of my first Nokia Smartphone. I had gotten an app that could help me record expenses. The most useful aspect was that now you could record the expenses as soon as you incur them. And with time I got reasonably good with it. But as my savings increased I developed this itch to do something with it. And that’s when I started my doomed investments. Because my investments weren’t part of my expense tracking mechanism, it soon became a black hole for all my savings.

And during this period I shifted to an iPhone and the expense apps I tried weren’t a match to what I could do with my Nokia phone. In hindsight, I think I was too comfortable with what I did with my Nokia. And while I looked for replacement capabilities in the iPhone I was a bit resistant to looking for the new things that the iPhone was capable of. After some looking around I settled on an amazing app called CashTrails. This app finally enabled me to port my expense recording setup on to the iPhone. But the other aspects of my financials were still out of bounds from this setup.

And it was during this period that I had an interesting discussion with my Finance Geek friend Paggu Jain. He too does a good job of tracking these details. While I was more into recording the expense transactions, he had a setup for managing his cashflows. As he explained the fundamental concepts behind what he did I realized I can implement the same in my app with a tweaks. And I did it and I had a comprehensive cash flow tracking setup, that could even give me a snapshot of my assets including the cash in my wallet.

The funny thing with doing something good is that each time you solve a problem, ten more crop up. The setup I had created was beautifully simple in its architecture but exceptionally tricky to execute. The accuracy of the whole setup depended on my recording my transactions accurately. And there were a few very interesting challenges:

• All transactions had to be recorded and categorized in the correct way. So if paid with cash I need to record it as cash and not under credit card and record transactions like ATM withdrawals which I wouldn’t have done in the previous scheme of things.
• Exchange rate issues. If transfer money from one currency to another, there would be transaction fees that would make it different from the Fx rate that the system automatically generates.
• If you go out with a group and you paid the bill while your friends paid you their share in cash then recording the transactions in such a way to ensure consistency with your actual credit card dues and the cash in your wallet can become a bit tedious.
• Separating your transactions into various buckets like personal & official can get tricky esp when you may have situations where the transactions may overlap e.g. Because of some delays you paid your official credit card from your personal account.

Paggu Jain’s approach to such things is not to sweat on that last detail. Rightly I parked solving these issues for the future, but as I did more of the recordings I realized that there were unexplored capabilities within the app that could solve most of the issues stated above. And best part is that once the thing is setup it doesn’t take all that long. For eg in the month of December (A heavy expense month) I averaged about 4 transactions a day. And recording the transactions take about 15 seconds on an average and that’s a total of a minute a day.

The visibility that has come out of the effort has given me and Anju a very good idea of what we can and can’t afford. I guess some of these things positively enabled us to face some of the challenges we did in the last two years. And a key lesson I learnt from my entrepreneurial friends is that those who manage their cash flows have a much greater chance of success than those who don’t. And in that spirit, a significant achievement of this new year has been to get my wife to use the CashTrails app :D