Before we get started on burn rates, check out this article in today’s The New York Times. Roger Lowenstein, a favorite financial writer of mine, articulates the many emotions and decisions confronting investors today.
He says that although we are facing serious challenges getting our collective financial house in order, investors who bet against the engine of corporate growth by abstaining from ownership in common stocks are likely to miss out on one of the best performing asset classes of the next decade.
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Now, back to getting our personal financial house in order . . .
After you make a personal commitment to keep track of your monthly burn rate, the next step is to figure out an easy way to accomplish this. This is important, because if it becomes a laborious, time intensive activity, chances are you are not going stick with it throughout the year. A simple approach that works for me is that, instead of using cash for purchases and transactions, I always use a credit card or write a check.
The reason why this works for me is because it is amazingly easy to download your credit card expenses or checks to an excel spreadsheet, which can then be uploaded to a financial planning software, such as Quicken or mint.com, unless of course, you want those programs to capture this data automatically.
Once in a while I use cash for purchases, but then am faced with the onerous task of keeping track of the receipts, and then manually entering these little slips of paper into excel or a financial software tracking system.
Transferring credit card transactions and on-line bank check registers to an excel spreadsheet takes 15 minutes a month at the most. More importantly, you have begun the essential task of keeping track of your burn rate and have taken a “giant” leap on your journey to financial freedom.
In the past I have used Quicken to categorize my expenses, but even that became a little cumbersome. Instead, I created my own program in excel to do this for me. The upside is that it extremely easy to operate. The downside is that it doesn’t produce the wide array of charts and reports that software programs create, which can be useful at times.
In the August 25thblog, Lou mentioned that his family uses clearcheckbook.com to record transactions. I haven’t checked it out, but will, and report back. Do you have a system that works for you? Send in a comment, and we will send you the latest edition of The New Coffeehouse Investor.