If you’re serious about becoming financially resilient, you need to alter significantly your circle of acquaintances. And that would be on top of other small or big changes you should make around your habits, or about your mindset. This specific enlargement of your social circle is targeting a very special partner. His name is The Spreadsheet, and he’s thinking in formulas. He may be square (or rectangular) about a few things, but his impact on your spending and income generation habits will be tremendous.
Complex World, Complex Tools
Being financially resilient is a serious project. It may take years to get there, and, once there, it will require constant discipline to maintain that status. The world we live in is complex, fragile and unpredictable (as its latest black swan event, the Covid-19 clusterfuck, showed us so clearly). This world requires not only special skills to navigate, but also special tools. And one of the most underrated, yet probably the most important one, is the good ol’ spreadsheet.
The spreadsheet is the place where you should keep all your balances, budgets, scenarios or other tracking activities. You may keep all these in different places, that’s true, and I’m not going to downplay your preferences. You may want specific apps for specific activities, one for balances, one for budgeting, and so on. By all means, do as you please.
But be aware that the more time you spend across different apps, the less time you’ll have to live. Even more, spreadsheets (and by that I understand both Excel and Google Sheets) are extremely mature and popular. Maturity makes for a solid piece of software (less risk of losing your data), while popularity makes for a lot of tutorials, formulas, templates floating around. If you bump into a problem, it’s very plausible that someone else had that problem before, and there’s some Internet advice about how to solve it.
Automate, Visualize, Predict
These are the 3 most important features of using a spreadsheet application.
Automation means you’re cleverly using built-in formulas for pretty much every calculation that can be done: from simple columns or rows additions and subtractions, up to more complex scenarios and cross-sheet references. If it’s something that is happening more than once, you should automate it. Let the sheet pull out the totals, you focus on other stuff.
The second most important thing is visualization. Learn as much as you can about charting. It’s a fantastic way to make you aware, to understand where you stand, exactly, at any given moment. It might be a simple line chart about your monthly budget, a pie-chart about your long-term investments, a group of scenarios about the potential of a new asset, or just some yearly recap of your spending, make it visual, please.
And then, use these automations and visualizations to try and predict. These predictions are related to both investment and lifestyle. You may try and predict the behavior of a certain asset – for instance, how it will perform in the next 3-5 years (or months) and then adjust your exposure to that accordingly – or you may try to predict how will your lifestyle look like, from a financial point of view, once you reach location independence. These predictions will also enforce your ability to think in scenarios, which is one of the most important mindset changes required by financial resilience.
Keep. It. Simple. Stupid.
Please. Don’t spend precious brain cycles on learning endlessly the next shiny app (unless a significant part of your revenue comes from that, as in this is your profession, or unless you’re really sure you can make something better than a spreadsheet, in which case you’ll be a legend, my friend). Focus on your daily habits, on your mindset, remove the clutter, use the tools to simplify your life, not to make it more complicated.
It’s already complicated enough.