Delphic Maxim 72: Govern your expenses
I’ve set myself the challenge of responding to each Delphic Maxim for 15 minutes a day.
72. Govern your expenses
At the start of 2018, I made a series of news years resolutions. Which isn’t particularly exciting, most people do that sort of thing, but I attached KPIs and target dates and actions and made the whole process really detailed and involved. Kind of like setting SMART goals — urgh, the corporate thing affects something as frivolous as new years resolutions. But that process made it easier for me to land a few of those resolutions throughout the year, and one of them was to set myself a budget.
There’s a lot of press out there about irresponsible millennials and the way we burn money on things like smashed avocado and holidays, and don’t spend our money on things that are ‘more appropriate’ according to baby boomer media operators, like the property market (which is now tanking in Sydney). Let me just point out from the get go that money is as ephemeral as everything else in life: you can’t spend it when you’re dead, and you should be prepared to spend some of it to actually enjoy your life, not hoard it and live like a miser.
Actually, that kind of reflects some of the Aristotelian Virtues, like magnificence and liberality: spend when you need to, because nice things are nice. HOWEVER, temperance is also a virtue, and spending recklessly isn’t something that the ancients would ever have advocated. The point, as always, is to strike a happy medium, to create a rewarding and fulfilling life, and that necessarily involves some fun, but also some responsibility and personal growth.
Nassim Taleb hates the idea of debt. He says it involves being enslaved to someone else — a bank, for example. While you have debt, you aren’t free. It was actually this position of his that motivated me to set the budget goal in my new years resolutions (each year). Most millennials have debt in one form or another, a credit card or personal loan. Maybe a car on finance. Maybe a home loan. Realistically, we can’t all necessarily up and live like Taleb — he made millions as a stock broker, and while it’s true we could probably learn to do that (or take up a positive black swan-exposed career), it’s a risk to which many of us are averse.
That leaves us with managing our budgets, or governing our expenses. Income is one thing — and you can grow it by changing jobs, or getting a promotion, or getting a side hustle, but the real bang for your budget buck comes from watching how you spend money. For the first month of 2018, I recorded everything that I spent. All the direct debits, all the senseless shopping, all the groceries, bills, everything. It’s really fascinating to see what you spend money on: my biggest discretionary category was booze, which is both bad for my health and also bad for my budget.
So I chose a reasonable amount to spend per fortnight, set up some complicated spreadsheets (which I revise each year to add more funky formulae), and I started tracking all my spending, and getting some visibility over my finances.
It made a huge, huge difference. Instead of feeling like I had no control and was just swinging through one fortnight to the next, I could see where my cash was going, how much I had, how I could save more, and what my finances would look like at the end of the year.
Does that mean I’ve fully governed my expenses? No. I am still a reckless millennial. But I know I’m in control, which is a nice step up from chaos. And it gives me a goal to work towards, and some discipline in my life. That definitely a good thing — and it bleeds into other areas of life too (like health, exercise, diet, and so on).
This is a really practical maxim (or at least, the fiscal interpretation of it is), especially for young people. Don’t restrict yourself — governing is about allowing freedom, after all. But make sure you are in control.
