We would like to share with you our experience after one month using Controlato. Put down your expectations if you are hoping for a deep analysis from a professional economist. We are actually computer science people, not economists, which means we know about our issues and not so much about the domain of finance. We are a regular family trying to learn domestic economy in practice. We chose to do it together with you, sharing what we have done for ourselves. We learn a little bit every month, looking for opportunities to improve Controlato according to the information we have, the decisions we want to make, and your suggestions.
The first lesson we’ve learned by carefully monitoring our expenses last month was how limitless we became. We may be fortunate for not going out of cash every month and that made us believe money is not a problem when we want to buy things. Of course, there are a lot of things we cannot afford, so we’re talking about those that fit in our current life style. We noticed, at the end of the month, some things we’ve bought were abandoned somewhere in the house or are spoiled in the fridge. Even living within the budget, we were losing many saving opportunities. So, we decided to create a mechanism to show when we cross limits, then we can judge whether it’s time to avoid or postpone some expenses.
The mechanism is simple: instead of defining a limit to the entire budget, we thought it would be more interesting to give some meaning to the limit. Since we already have been using categories to classify expenses, we decided to associate the limit with them. So, we added the following parameters:
- Allocated budget: because it’s necessary to spend money in some categories every month; and
- Budget limit: because eventualities may happen sometimes and we could exceed the allocated budget, but we should never exceed the budget limit.
We sat together for an hour and defined an allocated budget and a budget limit for each category. During this exercise, we agreed that the sum of all allocated budgets should be lower or equal to our monthly income minus the amount we want to save. For example: if our monthly income is 4k euros and we want to save 1k euros, then the sum of allocated budgets should be up to 3k euros. We also agreed that the budget limits should be 30% more than the allocated budget. 30% is just a random number we thought appropriate for us, but we should monitor it to check whether it can be decreased. We actually need more data to make this decision. So, we are going to rethink about this budget limit after six months of use.
The second lesson we’ve learned was every little expense matters. Some products are nice and they become irresistible when they are also cheap. We fall into this trap dozen times during the month, believing such prices are irrelevant to the budget. However, their sum causes a serious economical damage on our lives. With Controlato, we’ve got to rethink every time we open the wallet, judging whether a product is needed or it’s going to be neglected after a while.
The third lesson is the one no personal finance book will teach you: there are some expenses that we pay but we aren’t aware of. In this particular month, for the first time actually, we noticed our bank charges us 51 euros/year for our bank accounts. This amount was not foreseen, and maybe we can find ways to reduce it by talking to our manager. At least we will be ready for it next year. Not sure if it’s worth saying that we earned 0.34 cents of interests in 2012.
The last important lesson we would like to share is: it doesn’t matter if we register every single expense in Controlato. We need to have a picture of the current situation instead of waiting for the end of the month. Spending decisions depend on this picture, otherwise if we spend by impulse at the beginning of the month, we probably won´t be able to go to the cinema at the end of the month, which is an annoying restriction. We think a solution for this would be to send a daily email to the members of the family, summarizing how good or bad their finances are so far.
For the moment, only the mechanism to help with the first lesson was put in place. We are still thinking what to do about the other lessons. Controlato is a living thing, so we don’t want to freeze requirements without enough thinking. We want to deliver something that starts being useful in the first place and that implies on simplicity.