phil wrote:I keep track of expenses on durable goods such as cars and computers in a bookkeeping way, which basically means the following:
- on purchasing an item, add the item's resale price to your net worth
- each month (or whatever period you keep track off), include the loss of value of the item in your expenses.
I love phil's suggestion. It really depends why you're tracking expenses of course: making sure there's enough cash in the bank at the end of the month vs modeling your expected expenses for your retirement require different approaches (there's a reason companies publish separate income & cash flow statements after all).
I've been frustrated with swinging monthly expense levels depending on when I pay a yearly bill or make a purchase, so like a good accountant following the
Matching Principle, I recently geeked out like phil was recommending with an inventory of all my clothing, estimated frequency of use, expected life (& maintenance cost) given my repair skills and set up a depreciation schedule for it to get an idea of how much I am currently paying per wear. All works out to something like 2$ a week. Fine, good, approaching what I spend on library fines, but it also had a surprising benefit beyond just tracking cost reduction targets: I make and justify more rational decisions in expensive up-front purchases. The usable life and frequency of use of a thing makes a huge difference on cost if you depreciate it out whereas it's usually too easy otherwise, at least for me, to fall prey to deciding on sticker price alone.
Expensive boots costing $300 dollars work out to cost way less than cheap running shoes that wear out fast and resist repair, and don't even mention dress shoes you wear three times a year. Yeah we all know this but it can be a helpful exercise to get the numbers that prove it. Shame to say but I have bought three pairs of running shoes in the past two years but no boots! Bookkeeping says: shown you have not wisdom in minimizing outflows and outsourcing troubles.
True, 12 out of 12 of the last authors* I read managed to do fascinating things and contribute new work to the world without probably ever having on hand a full itemization of socks, but it's a guilty systemizing satisfaction to me anyway to model the heck out of something with way more tools than anybody'd expect.
I will be releasing my full 10-K at the end of the quarter.
* no 'Minimalists' were included in this list