I, Mr.C, have a confession to make. I’ve been woefully under-estimating the SippingCoconuts’ household expenses by a large margin. Okay, maybe it’s less under-estimating and more self delusion as the costs haven’t changed. It’s just that after tracking and tabulating it all up, the total amount just takes my breath away. Basically, I’ve been living on fantasy island and need a ride out.
Sighhh…. #truthhurts
This has been a self-inflicted wound as I used to be very fastidious with tracking expenses but over the years the practice slipped and eventually it became a guesstimate which, in the case of personal budgeting, has a tendency to undershoot for some reason?
Wishful thinking…perhaps.
Escaping Fantasy Island
Step 1: Awareness
The first step to escape is Awareness. It’s that simple.
Track.your.expenses.down.to.the.cent.Every.single.cent.
Use an app, use excel, use pen and paper, whatever. Like me, you might be surprised at the total that comes up. Once you know where you’re at, at least then you might be able to figure out how to get to your destination.
Step 2: Acceptance
I have to accept that my current lifestyle isn’t getting me towards FIRE as soon as I want it to. This means taking a good honest look at where you are, and what needs to change. Because if you’re not making changes then you’re going to get the exact same results and numbers month after month. It is easy to fall into the trap of tracking expenses, then subconsciously justifying why things can’t change.
Step 3: Action
Now, you only have to take Action.
SC’s Escape Plan
After a few months of closely tracking our numbers, we realised that we’re spending more than acceptable in areas of housing, transport, and insurance.
Awareness checked!
For Acceptance, I needed a bit of help from Ms.K to see that we needed to cut down on housing, because the loan installments were being paid out of CPF and I was only considering the interest portion as an expense. That was technically true but I finally realised admitted to myself that the cash flow from our portfolio needed to be higher just to service the loan installments so consequently the investment portfolio had to be larger too. See why acceptance is so hard? My mind was aware of this all along, but I somehow justified this and ignored the implications on our FIRE plan.
Accepting that we needed to cut down on transport and insurance was easier. We did buy a car after all and the internet is filled with tons of articles on how term insurance is more suitable than whole life policies for pure risk coverage.
Acceptance checked.
To me, once you’ve accepted the situation as it is, taking action is almost natural. We’ve started saving on our insurance by a whopping 33% per annum and putting the wheels into motion for the rest.
Action checked.
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