Friday, 4 November 2016

The Tracking Effect

Another week of work has gone by! I have to say the new job environment is tougher than my previous one. It might have to do with the fact that I'm not settled in yet. But I can feel the higher stress levels, more intense workpace and increased number of things to follow up on.

Benefit - Day/week passes faster. Con - More exhausted at the end of each day/week. Still not sure whether the benefit outweighs the con.

Anyway, I have continued to track the changes in our net worth, portfolios, passive income and spending on Google Sheet, SGXcafe and this blog. After doing this for one year, I'm noticing certain effects from doing so.
1. Reluctance to overspend

I used to be less aware of how much we were spending on travel, food, entertainment etc. We enjoyed engaging in these leisure activities and it hurts less when you don't know how bad the overspending is.

Now that I'm tracking most of our expenses, this increased level of awareness has unconsciously made me question the need for some of our high spending items. Sigh, gone are the days of blissful ignorance. Just need to find a balance between our spending and utility derived that works for us.

Especially with above average incomes, our dollar spending level is too high even though our savings rate of about 40% is okay. Goes to show how percentage spending tracking can sometimes cause you to miss the detail.

2. Observing the relative growth of portfolio components

I started taking note of the different growth rates of the cash, investment and retirement components of our portfolio only after recording the monthly ending balances over time. I know it sounds obvious but it's quite something to see how the different parts are moving.

Especially when there's stuff happening in the month such as greater investment activity, attempts to save more money, increased spending from higher stress etc. I can actually observe the impact of changes that I make in my daily/weekly/monthly actions when it comes to saving, spending and investing. Nothing quite like financial data crunching to show me what's working and what's not.

3. Noticing a pattern in passive income

The dividend income received varies with each month and spikes every 3 months and 6 months in a year. The interest income received is more stable but spikes every 6 months. In addition to the changes from year to year, this will allow me to determine how effective passive income is for expense management purposes.

4. Better understanding of your risk profile

Before I started tracking our entire net worth, market swings and threats of economic recessions or retrenchment will make me panic. I had no clear idea of how much cash buffer I had, minimal contingency plans and little understanding of the extent of risk I could take.

Once I had all the information, I had a clearer idea of my risk profile. Not just as an investor on how much losses I can handle in my portfolio. But as an employee with varying probability of retrenchment investing during bull markets and economic booms as well as bear markets and economic recessions. The more cycles I go through, the better the understanding of my risk profile.

Have a good weekend everyone!

1 comment:

  1. The cost of living is getting higher in Singapore. We soon find ourselves earning more but having less to spend.