Birth of the Money Micromanager – Part 1
In 2013 our family situation changed drastically when my husband and I moved internationally for his job. It took some time before I was able to find work which brought our household finances to the dinner table on more than one occasion. Well, necessity breeds ingenuity and the internet was no help so I created an accounts register using Excel®. Since we wanted to know where our money was going I created a dashboard to collate all incoming and outgoing funds by month. To tally how much money we had (or didn’t have), I eventually added worksheets designed to track balances for our liquid accounts, debts, retirement, and net worth. Come four years later and I am still using fundamentally the same workbook.
The Money Micromanager
I call the latest iteration of the workbook the Money Micromanager. This isn’t to say that we obsess over our finances or actively manage our investment portfolios. On the contrary, we control our spending in lieu of a budget and we review our investments with a personal financial counselor once annually. I simply thought the name aptly described what the workbook is to us: a comprehensive financial management tool.
We have made lots of mistakes with our money over the years from frivolous spending to delaying investing and everything in between. But in 2013, when we began to take control of our finances we gained a new perspective. At the end of 2013, taking only the value of our liquid accounts, investments, and debt, we were about $45,000 in debt. Including our properties, we estimated our net worth around $275,000. Simply seeing our assets quantified motivated us to do better. So we started to get serious about retirement.
We Maxed Our Retirement Contributions
We began contributing as much as we could to our 401ks and IRAs, even the maximum in some cases. This is not possible for everyone, and we were very surprised that it was for us. [The limits change periodically but as of this writing they are $18,000 and $5,500, respectively, per person.] In fact, one of the few reasons I did seek employment when we moved in an impossible market was so that I could contribute to a 401k. Because I took months of leave without pay after having our first child, I wasn’t able to contribute the maximum every year simply because I went weeks without earning anything. On the upside, my employer offered matching contributions when I was contributing. Since I’m presently not working, I cannot contribute to a 401k but my husband is still maxing his every year.
This year, we made our maximum contributions to our IRAs in January. Now the deed is done and we can put away $458.33 per person per month for next year. In the meantime, it will accrue interest in a high yield savings account.
We Payed Down Debt
We also began making larger payments on our debt, two mortgages. Because we knew we were going to sell my husband’s property, we made the equivalent of 13 payments a year (take the monthly payment, divide it by 12, add that value to the monthly payment) just to get the principal down some and pay less interest. Since my husband is looking at his first retirement in 2018 and we are uncertain of what we will do for income after that, we decided to try to pay off our other mortgage by then. Some digging on the internet and figuring with another Excel® worksheet and I was able to determine the monthly payment required to make that happen. We are on track to meet that goal come the end of 2018.
We Stuck With It
When we realized how much money was going towards these goals, we were a little apprehensive. We hit a couple bumps in the road but we have become accustomed to our process. By the end of 2014, using the same methodology of calculating as at the end of 2013, we had improved our financial position by more than $95,000. Because my property lost some market value, we did not have as significant a gain in our net worth but that’s just the nature of the beast. Every year since then we have seen better and better numbers, more than doubling our net worth at the end of 2016 as compared to 2013. We also learned that, based on our current financial position, there is a 95% chance we will not outlive our retirement. And we’re not done working yet. All this because we got started.
How Things Have Changed
When I first started using this workbook, it was really cumbersome. We kept every single receipt for every single expense until I could balance the books because I was literally counting every single penny. I also didn’t use formulas at first so I had to enter everything in the dashboard by hand. Now, however, I use formulas where ever I can and I only track cash once.
Using one workbook to track all our financial information has made two things easier: tax time, and our annual meeting with the personal financial counselor. I can gather my itemized deductions as quickly as launching Excel® and I archive the workbook in that year’s tax folder which will be handy should we ever be audited. Also, now when we meet with the personal financial counselor and they ask about the balance of our emergency fund, net worth, average monthly expenses, etc., I can answer with accuracy.
But the biggest change is how we approach our finances. The monthly dashboard where our expenses are automatically populated by month is cool, but it’s only part of our financial picture. Seeing the end of month changes to our retirement accounts and net worth show us that we are on the right track to truly do what we want most when we retire.
What is Most Important
I have always thought I was too young to think about retirement. Well, at some point you have to age-out of that kind of thinking. Retirement is not some fantasy land where kittens wear cute little knitted hats and chase laser dots all day, nor is it only for octogenarians. You are never too young to start investing in your retirement but you can be too old. There is no time like now to get started. Had we gotten started the first time each of us had thought about it, we wouldn’t have to contribute the maximum to our retirement accounts now to assure our future.
Know Your Financial Worth
Nothing is truly one-size fits all and this may not be the tool for you. But we love it and put loads of blood, sweat, and tears into it. So if you are looking for a comprehensive, hands-on tool to track your financial assets, take a look at what we put together.
Download the blank workbook here to get started.
Learn how to use the workbook by reading this.
Please feel free to email me, contact me on social media, or comment on this post if you have any questions!