This simple spreadsheet will detect lifestyle creep (before it’s too late)

This simple spreadsheet will detect lifestyle creep (before it’s too late)

This is the third installment on lifestyle creep: What is lifestyle creep (Part 1) and a behavioral hack to avoid it (Part 2).

Hi I’m Khe. I’m 38 years old, worked in finance for nearly two decades and never made a budget. Not once! And TBH I think it may be too late. I’m lucky to be financially comfortable at this point in my life (and my 20 year commitment to dollar cost averaging has paid off 🤘). I don’t think, nor do I want to track every Kind bar or Uber I take. But, as a solopreneur with highly variable cash flows – and by highly, I mean they’re negative most of the time. Yet every time I pay off my credit cards or have an unexpected expense, a deep pit (or more accurately, fears of being broke) ravages my stomach ruining my day. More importantly, if you don’t know how much you spend, lifestyle creep is bound to reset your spending, at levels that will calcify with time. I needed to create a simple, yet customizable tool to give me my a lens on my basic spending information.

Death by a thousand cuts

Any entrepreneur knows that the early days of a new venture can wreck havoc on your psyche. I spoke to “Money coach” Ashely Feinstein-Gerstley about this on the Rad Awakenings podcast. We commiserated about how entrepreneurs tend to move small amounts of money between bank accounts to avoid really knowing the true cost of their ventures:

It’s such a powerful feeling to say: I need to put 20k in my business account in order to survive the next six months rather than every week having to slowly transfer X dollars. Because then you feel like you’re failing, when you actually knew it was going to be 20k. And now you’re actually investing in your business.

First principles

I realized that I would never survive entrepreneurship if I had to go through his painstaking process every couple weeks and created the spreadsheet with the following goals in mind. It had to satisfy the following requirements:

  • Be easy to update
  • Be customized to my unique situation as solopreneur
  • Give enough information to see trends (without needing to tag specific transactions)

A DIY spreadsheet is all it takes

Here’s a Google sheet that you can customize to suit your needs. Here’s how to use it:

How it works

The goal of the spreadsheet is monthly forecasting and tracking of expenses (both cash and credit) and income. Each month you’ll project these items and then the following month you can compare your projections vs. the actual amount. This will give you a delta, which will help you understand where your expectations may be unrealistic/misguided.

Step 1: Make your own copy

Go to File → Make a copy so that you can edit and save it accordingly.

Step 2: Customize the columns

The spreadsheet has two types of inputs: forecasts and actuals.

  • Forecasts: For me this serves as a forecasting tool, my attempt to “model” my expenses and income.
  • Actuals: I then compare the forecast to the actual amounts, after the fact.

If you have a full time job, you’re income amounts will unlikely change month-over-month.

All of the inputting happens on the Inputs Tab. I provided the flexibility for two credit cards and three types of cash expenses (Rent, Investments, and Misc). Feel free to customize the following fields (Rent, Investments, and anything with Misc).

Step 3: Input your data each month

Let’s assume you’re forecasting the month of July. This would be a two-step process:

a) Input the forecasts:
Some time before the month of July, enter your projected expenses and income.

b) Input the actuals
At the end of July, look at your credit card statements to update the actual amounts. Inputting actual cash spend is a bit trickier, I’ll just do a quick filter of my banking transactions across cash withdrawals and checks. Notice that there are no projections for income (for simplicity and the fact that income for most people is stable).

Step 4: View your monthly summary

This is where the magic happens. Head over to the Monthly Tab to compare your projections and actuals. This tab will also give your net cash flow for each month. Note that this uses cash flow accounting (vs. accrual), so a big expense (like kids’ tuition) wouldn’t be smoothed.

This tool is far from perfect but applying the Pareto Principle should serve as a good starting point to track your cash flow and more importantly, catch any discrepancies and deviations before it’s too late. Hit up our Facebook group to continue to conversation!

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