I was serious enough once about personal accounting that I built my own web app because I thought the standard double-entry system wasn't really suited to the task. After I got the basic system tweaked to my satisfaction, I used it for several months.
I started to take it to the next level, but had the curious realization that I cared more for the process of developing the app than I did for actually tracking my finances. Eventually I gave it up, and went out and got a better job where I'm more fulfilled professionally and way better paid. I learned then that working on the app was substituting for professional fulfillment and vowed never to let that happen again.
Tracking cash inflows and outflows is an essential business skill. But a business is a machine, and people are not. Personal productivity does not respond well to wringing unit economics out of daily activities. If your goal is to turn yourself into a machine, by all means use a mechanistic approach. But we are meant to build machines, not to be them.
Don't know why people are downvoting you, your comment was grey when I read it. I see nothing that makes your comment invalid and I think it contributes to the conversation.
Perhaps it's not the popular opinion, but in a lot of cases I agree with you. Watching over every penny meticulously can become a much too consuming habit that produces little net positive result. It's easy (at least for me) to get caught up in trying to never waste money, and it's really not worth it.
I guess people are downvoting him because of his assurance that instead of managing finances one simply has to earn more.
For most people earning more is not feasible, at least not while having some personal live, family matters and depends also on their education, upbringing and people they know.
Some people work a fuckton of hours for a measly pay, and so they can't get to earn more, because they have no time to improve themselves or even to go to interviews.
For these kind of people, that is the majority, some time of personal accounting will be easy and will bear lots of fruits, while they wouldn't be able to improve their jobs in the near future.
I didn't read it as "one simply has to earn more".
He's saying it's better to work on things that will lead to one earning more money, rather spending time monitoring how much one is spending. The first leads to an improved state, the second is just for ensuring one's state does not worsen. With one your increasing your 'cap', with the other you're just maximizing given a 'cap' (cap meaning the amount of money you can work with).
Its not an either or proposition though. It's frankly ridiculous to propose that I could give up actively managing my finances and use that extra time (an hour a week maybe) to significantly increase my income.
The post in question currently stands at 31 points. One quick downvote and all up from there. You are right that for most people earning more isn't feasible. But I wasn't speaking for everybody. Specifically for the upwardly mobile. If you aren't in the position to increase your income then you by definition aren't upwardly mobile.
It's a mix of different issues going on in that comment:
- Some kind of perfectionistic NIH accounting system is probably not what people have in mind when they talk about this personal finance accounting being useful
- The project details seemed to overcome the initial scope
- Rather than addressing the need for a more elegant framework for personal accounting, OP decided to just make more money, and for all we know has discarded personal financial accounting
- We know not what kind of blind spots this may have created (for real: You are absolutely discarding a level of granularity and the freedom to find a way to make use of it)
- While we can trust that OP will probably be fine, we are left to wonder if it's really so great to tell people not to do this kind of accounting when you kind of turned it into a hyperbolic mess when you implemented it yourself.
The project wasn't perfectionistic, I specifically designed it to be as easy to add and look at what I was spending as possible. Instead of putting spending into accounts, I used simple categories. I had a dashboard view that gave me exactly the window into my finances I was looking for.
It was good enough for my purposes. But I kept running into situations that called for extended customization. Sure I could have extended the app to account for temporary changes in how I wanted to do things. But it just kinda stopped making sense after awhile. It made me look into how I managed my finances before I ever did accounting more closely.
What I found was that I never really got into the sort of mindless spending habits that kill most people. Accounting was, in essence, a unnecessary addition to an app that was already working just fine. It didn't buy me much when I was doing it, and I didn't miss it when it went away. My life just isn't that complicated.
Similarly, I've never needed productivity software other than, on very rare occasions when I'm super busy, a pad of paper and a pen. And I was a GTD zealot 8 years ago.
My advice in my original comment was tailored towards people who plan on being upwardly mobile. If that's what you want to do, then personal finance is a waste of time. Ramit Sethi's advice is the best, chase big wins, automate your finances, and don't stress out over small repeated expenses.
If you've hit a career plateau and don't see yourself making more money anytime soon, then by all means make the most of what you have. But c'mon, this is Hacker News. We can all be upwardly mobile here if we want to be.
The foundation isn't the issue. You can write an intuitive interface around a double-entry accounting system, but you must keep to the fundamentals of money flowing through the system.
Then don't work on an app for budgeting, just budget.
You seem to think keeping a budget is some onerous, never ending task. In reality, probably spending about half an hour per paycheck is fine, once you have a system in place.
And it certainly does not require a ton of technology, either. People budgeted just fine long before personal computers (lookup "envelope budgeting").
You are conflating two unrelated things. Spending a lot of time writing a budget app may have been a mistake. But you don't have to write your own app in order to budget.
Yeah, when I hear "spend the time you spend on your budget to make more money instead", I can't imagine how I would meaningfully translate my one or two hours a month of relaxing low-energy financial planning into making more money, or why I would want to try.
Having spent a bunch of time with GnuCash, YNAB, and budgetsimple, I've given up trying to have a formal budget. Instead, my wife and I just spend 20 minutes every 2 weeks looking at our accounts and talking about any big expenses that we have coming up.
I don't know that you're asking for it, but I'll share my approach. I use GNUCash for transaction recording, and I have two levels of budgeting:
Level 1: next 30 days. I have a couple dozen recurring transactions, generated 90 days out. If, based on the current balance plus expenses 30 days out, my checking account is projected to go negative, I do something about it. Otherwise, I think about shifting some money into higher interest savings, since I don't need it in checking. And if savings exceeds my emergency fund definition, additional Roth IRA contributions may be in order. The end result is that reducing float in checking can end up with a pretty high return.
Frequency: Once a month.
Level 2: Annual Budget. At a high level, I use a simple spreadsheet to budget all income for the year into savings and expenses. It's complexity has grown over the past six years to calculate things like income taxes, so I can compare job offers in other locations and states. I also use it to verify my very high retirement savings rates are viable. Because more savings contributions -> less taxes -> more contributions etc., a spreadsheet lets me "solve" for maximal savings. It also lets me target expensive areas, like rent, or dropping cable, phone plans, etc.
Frequency: Once a year.
I can see being more lackadaisical about personal accounting on 30k/year, but when you make 15k/yr you need a budget and you need to track your expenses to survive. I think this is just something that varies from person to person, but it's nice to know that you spent X amount on groceries per week versus Y amount on gas so you can pinpoint what is hitting you most during times of dire financial stress to optimize.
When I made that much, I didn't bother with a budget or accounting either, I knew to the nearest $5 how much I had in my pocket and my bank account at all times. Writing down that which I already carefully tracked in my head wouldn't have accomplished anything.
What you're missing is that at that level, what you can get through spending money is going to be vastly dwarfed by what you can get through ingenuity. My response to a bigger electric bill in the winter wasn't to save money on food, it was to shut my heat off, build an enclosure around my desk and heat it with a small space heater.
It's awesome that worked for you. I'm not that smart so for me, budgeting and tracking my expenses by category helped me become comfortable enough to spend more time on freelancing and job seeking. I won't say your way doesn't work, because you are a testament that it does, but I don't think I could have taken this approach and gotten to where I am now.
You were effectively budgeting in your head. Good for you. Can everyone match your skill? Who knows. I guess no. I cannot budget this well. It is not that I do not know my level of cash, it is just that I cannot accurately estimate my spending rate and I almost always spend too much for the month.
So because you are smart enough to do this in your head you think people who do the exact same thing as you just writing it down instead of doing it in their head are wasting their time? That's pretty silly.
The vast majority of people can improve their prospective in life. At the very least they can be more efficient so they can spend more time with their kids; That way the kids have a better life than their parents.
Though, to be fair, I think they should do both. Budgeting/finance is an incredibly important skill for all but the richest levels of society.
Quality of life seems to increase monotonically in the states. The relative social status does not, on average. Considering happiness seems more based on the latter, this seems to be intractable.
You're comparing life as a bootstrapper to a paid job more than life with accounting support of some sort to without.
Further, there's no reason you can't do both. I don't account for my personal finances in any way, but I don't spend a lot on silly things. I do however use an app (http://streaksapp.com) to push me. Without that, I'd be more inclined to take the easier or lazier options. We can account for our time and progress even if we don't do it for finances.
I take the mechanistic approach to my personal finances, and treat them like business finances basically. It's a resource to be used, not a status symbol to be hoarded. Life has been wonderful as a result!
You may have noticed that the article suggests using a tool, `hledger`, rather than creating your own accountancy software. Infact, based on your comment that you found the standard system isn't suited for the task, it's possible that your disdain for personal accounting comes from a lack of understanding of how to do it correctly.
Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen.
Overspending is very easy for the average person. I know someone making 80,000/yr who has basically no assets and are living paycheck to paycheck and always complaining how poor she is. If you are living paycheck to paycheck on $50k you tend to live paycheck to paycheck on $100k. Adding additional income does not help these people - also see The Two Income Trap.
Finding out where your money is going is good for everyone. Budgeting (even if informality) is good for everyone. Finding out where your money really goes is really eye opening for many. Realizing that a reduction in income probably requires a reduction in spending/lifestyle. Realizing you aren't "entitled" to the things you want by virtue of birth, you have to have the money to afford them. This may seem obvious to some but in the world of advertising and media it isn't to many.
The criticism of personal finance or "frugality" here and in general comes in where people become obsessed with not spending money in the long term+. When every choice is optimized for spending less and one cannot enjoy anything with becoming guilty they are spending money. They put too much effort into pinching every penny and lose sight of the bigger picture. It's easy to hate on these people. This group is the loudest, unfortunately.
Personal finance should be all about optimizing money for maximum enjoyment and financial stability. Realizing money is a scarce resource and optimizing it, which can include working on obtaining more depending on your situation. Budgeting in for the things you enjoy, within your means, and saying "no" to more things that won't bring you long term happiness. Realizing the difference between needs and wants. It's trivial to do this for many, and it is natural, but difficult for many as well. I think personal finance is just as much psychology as it is math.
+ Being obsessed with not spending money (OK, not obsessed but making it a priority) can be good in the short term for several month in some cases. Examples are taking a break from consumption or working to pay off high interest debt. Of course one should consider all their options in this situation - including, say, adding additional income short term if possible.
> Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen.
I think the main issue is having other mouths depend on you. I react favorably to his position because my personal finance strategy is having soft/fuzzy (as in "fuzzy set") targets, never spend more than I earn and set automatic transfers to a retirement account that look like expenses when I see the bottom number on my bank statement. But I see how that balance becomes disconnected from one's resolve and voluntary actions as your finances begin representing an entire (even if small) community.
> Overspending is very easy for the average person.
This is what I don't wholly get: doesn't the average person read the bottom number on their bank statement?
I mean, cutting back on expenses is painful, but it's not a matter of tracking pennies anymore. If you have a negative balance you're spending too much money, and most of your choices regarding that are personal to the point of being existential -- what should I sacrifice, my yoga classes or my kid's GameNetwork subscription?
You are forgetting about the easy access to credit. Most people not only live at their means but way over it because of credit card debt. I can't find the link but there was a survey recently where over 50% of respondents said they'd be hard pressed to come up with $500 for an emergency.
The thing about credit too - it can by manipulated to make someone feel like they can afford something when they really can't. If you stretch a car loan out for 8-10 years and only look at $200/month it looks like you can afford it, you don't think "I will be in car debt for the rest of my life." Repeat this a few times because each time it also appears affordable. Now you have no savings and are living paycheck to paycheck and can't get out of the debt cycle. You have some unexpected expense (furnace goes) and suddenly you are in massive financial trouble. This can sneak up on you if you aren't careful.
> Hacker news readers often live in a bubble that is well insulated from the outside world. A world where everyone is very smart and money and opportunities are a dime a dozen.
I was speaking specifically for that audience and not for the broader one. Of course my way of dealing with money only works for people like me. I refer specifically to the "upwardly mobile", which is generally taken to mean those who make more than the average and are still capable of climbing the social ladder.
When you are climbing the social ladder, you develop skills that make you more useful to people. When you learn accounting, you are learning a skill that will keep you from shooting yourself in the foot financially. It will not make you much more useful to others except in that regard. Sure you can get a job accounting, or use it to help run a business, but the benefits are too limited to justify doing it yourself. Hire somebody and use the time saved to learn something more useful.
I never intended to say that people should not have a handle on their spending. Accounting / budgeting is one mindset that will give you such a handle but not the only one.
The problem IMHO is that your advice seems very black and white to me. It sounds like you are saying either don't track anything at all and rely entirely on career path for your financial security, or go full-on into a time consuming accounting mode where every penny is measured and fretted on.
Tracking personal finance doesn't have to be terribly difficult. A simple spreadsheet with expenses and income often suffices. Maybe some simple divisions so that you know that x % of the paycheck will pay the mortgage and y % will be used for the insurance. Nothing too fancy or time consuming. Just enough to reveal patterns, and make sure you have enough "flex" in your bank account for things like personal emergencies.
Although I know you are saying your advice is for the upwardly mobile only, my impression is that a lot of people are very bad with their finances -- that includes even some of the "upwardly mobile". Maybe you're good with your personal finance and have no need to track, but I personally think the general rule should be that most people should do some rudimentary tracking.
Counting your pennies will not make your pennies grow. Only increasing your income will increase your income. This may seem like a radical idea at first, but look around you and you will find everyone understands this fundamental truth.
Teenagers take summer jobs to earn extra pocket money. Housewives run home-based businesses on eBay / Amazon / Etsy to supplement the household income. People with full time jobs work part-time jobs before or after their main gig. Some people buy property and get rental income out of it. Those who are an authority on a given subject write books and earn royalty on book sales. The ultra-wealthy get dividend income from their stock market investments. None of these people belong in the HN bubble.
Read any number of HN discussions on side-projects and you will see a wealth of ideas being put into action:
