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Make Data your Friend

Data is arguably one of the fastest growing industry in the world right now. This survey of senior Fortune 1000 businesses indicates that the Chief Data Officer (CDO) role is on the rise, with 54% of participants naming a CDO in 2016 compared to a meagre 12% back in 2012. Corporates are hungry to capture as much data as possible to enable them squeeze out value at every opportunity.

 

Think of an ecommerce website like Amazon. They’ll want to capture all sorts of data about their customers to enable them customise customer experience, which they hope will lead to customers spending more on their website. Here’s some examples of stuff they’ll want to capture along with a possible reason why:

 

Data Reason
Country you’re logging on from To ensure they can display the correct language
Device you’re logging on from To ensure they have an optimal version of their website for the most popular devices
Purchase history So they can offer suggestions based on previous purchases

 

Analysts churn through reams of this type of data, and actions are taken based on their insights. Improvements are measureable and the ultimate goal is to increase the bottom line. And given the industry boom, it must work!

 

So why not capture your own personal data, and make informed data driven decisions to help bring you closer to reaching your goals?

 

Think of the activity tracker revolution. How many people do you know that walk up the stairs now instead of taking the lift, just so they can ‘get their steps up’. Or go to bed a little bit earlier, because they have seen how little they were actually sleeping.

 

People who wear them are becoming aware of their real level of activity, or lack thereof, by looking at their historic activity data. Note the phrase ‘real level of activity’, because we humans have the happy knack of tricking ourselves into believing we’re doing much more than we really are!

 

Combine this with data captured using a calorie counting app like MyFitnessPal, and you have a very clear picture of the number of calories you’re taking in, the number of calories you’re burning, and the difference between the two. This should enable you make data driven informed decisions to, say, shift those few extra pounds (ie: need to reduce my daily average calorie intake by x, or need to increase my daily average burned calories by y).

 

The same concept is applicable to anyone saving for FI. In order to optimise your spending, you first need to clearly understand it. Similar to activity, we have a happy knack of underestimating the amount of money we spend if we don’t track it, and are often shocked when checking our account balance only to find out the coffers are nearly empty.

 

The best way to combat this is to note and track every single purchase. After all, the data doesn’t lie! Just the process of logging purchases forces us to give them more careful consideration. I take a 3 step approach – capture, analyse, take action.

 

Capture Data

The tool I use for this is an app called Spending Tracker, which is available to download on both Apple and Android devices. The beauty of it is its simplicity. All you need to do is set up some categories to categorise your income and expenses, and log each transaction against these categories.

 

To log a transaction, just hit the big ‘Expense’ or ‘Income’ button, select a category, and enter the amount and an optional note. You’ll be amazed how quickly this becomes second nature. It integrates with Dropbox so if you use that feature all your entries are backed up to the cloud.

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Sample screenshot I found online.

 

Analyse Data

The app itself has in built reports that track expenses by category, and that track cashflows over time which is a great way to visually track income against expenses. You can also export your data to csv if you want to run your own analysis or build custom reports.

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Sample expenses screenshot I found online.

Sample cashflow screenshot I found online.

Sample cashflow screenshot I found online.

In my first month tracking expenses, three stood out like a sore thumb.

 

  1. Travel: Tube to and from work every day.
  2. Eating Out: Purchased lunch at work every day.
  3. Coffee: At least one per day.

 

 

Take Action

By a country mile, the most important part of this process is to listen to what the data is telling you and then make some changes! Looking at the three above:

 

  1. Made a conscious effort to cycle to work on a more frequent basis. It didn’t take long until this became a daily habit, and I dread the thought of being crammed into a tube twice a day now.
  2. And   3. You can read all about here!

 

At the end of every month I analyse my spending, identify areas for improvement, and carry just one of these forward to the following month. I find that if I try to carry them all forward, I’m less likely to keep any of them up. If I take just one, it’s more manageable and increases the chances of maintaining the improvement, essentially making it the new norm. Like cycling to work instead of tubing. It’s all about taking baby steps after all!

 

I’ll leave you with a quote from W. Edwards Deming (statistician, professor, author, lecturer, and consultant).

 

“In God we trust. All others must bring data.”

The Fire Place

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