Spreadsheet In-Depth: The Monthly Overview

One of the more important sheets in our Excel workbook is the Monthly Overview. This is used to take details of income, cash flow and savings from several other sheets in order to produce a few crucial figures each month, to help us track where we are financially.

Monthly is also the right frequency to motivate us about where we might end up in the future, and to hold us accountable to the longer-term. We are able to think through how everyday decisions/events over the weeks have led to the end-of-month result. With yearly figures, this immediacy just isn’t there (any more than monthly is too much hassle).

Figures changed for privacy

Historic statistics

The first row tracks our investment portfolio total, mirrored from the savings sheet.

The next few rows are dedicated to how much we actually save in each month. This is a computed as a combination of direct savings from our current account and pension contributions. Derived from this (and our income sheet) are the two savings rates: gross savings and net savings. The gross figure looks at savings as a proportion of total pre-tax compensation, whereas the net figure takes after-tax income.

I think the gross one is more honest in the sense that it cannot be so easily “gamed” via sacrificing take-home income to pension contributions. However, blindly maximising this rate also has its problems, since we do not want to contribute disproportionate amounts to pensions at our age.

We also track the absolute amount of cash-equivalent savings, to see our “emergency savings”, most of which can be withdrawn at short notice. Lastly, the asset allocation is calculated from the savings sheet and is presented in a single cell for brevity.

Future-looking statistics

The final bit is a simple percentage tracking how far we are from financial independence. This is a straightforward calculation from the monthly portfolio totals, and there is actually a fair bit more nuance to this (pension vs. non-pension pots, non-constant expenditure in retirement, etc.) But it serves its purpose well as a rough yardstick and motivator.

That’s it! We used to have many more rows here tracking all sorts of things (one of these was the square-feet equivalent of monthly savings in our local property market!) But in the end I believe it’s better to keep things simple.

Do you have a monthly overview sheet? What do you track?

The Inflation-Proof Asset

We live in an era of historically low inflation rates. The chart below shows the periods of eye-watering inflation that have occurred within living memory — during these times the price of goods shot upwards and bank balances everywhere cowered in real terms. Shillings may have disappeared in 1971, but it was in the next decade that the purchasing power of cash was truly decimated. Was this a feature of a past politics and economy? Or will we see a 21st century comeback of these conditions?

Source: Office for National Statistics

One defence against inflation is Index-Linked Gilts, which yield returns linked to RPI (shown above). Alternatively, we could try to identify equity sectors that held up well in past inflationary environments. Or we could look to more exotic (read: dangerous) investments.

But I can give you one “investment” that will never lose against an inflation metric: the basket of goods used to calculate it. We simply buy the stuff, stick it in the larder and add a new asset class to our spreadsheet! We won’t tell Marie Kondo. Of course, it won’t actually be practical to store certain perishables, and we’ll likely find that a Government employee has fiddled with the basket composition by quarter-end, but I think the idea is worth entertaining for a second.

Photo by Alex Block on Unsplash

Assuming that we could buy and store goods today to be consumed over the next few decades, there is one large issue still outstanding: the money used to buy a can of beans in 2020 could instead have been invested in productive assets and would have likely waxed over time until it could buy several of the cans decades later. Because over history the beast of inflation has time and time again been slain by the power of productive capitalism. And this is what makes this strategy unappealing to implement to any great extent.

But there are a couple of scenarios where I think one can make a case for this sort of thinking:

  1. Jane has no idea what will happen to property prices over her retirement. She is currently a private renter, but has enough capital to become a cash buyer if it makes sense. She is ambivalent to the possible lifestyle advantages of being a homeowner, and the idea of house-as-investment does not seem fully convincing. But what Jane really values is peace of mind, and by purchasing a house now, she removes the future risk of price changes in the property/rental market. When she goes to sleep in her new home, she knows that every day she wakes, she will still own it, regardless of any economic turmoil. It’s hers.
  2. Joe is always replacing low-quality tools that wear out or break. Plastic casings and under-specified fastenings buckle under his expectations of how they should perform for him. This attrition is largely mitigated by fact that these tools are all great bargains when bought. But one day, Joe decides to stem this steady cashflow by splashing out on a set of very high-quality, durable tools that are built for a lifetime. He doesn’t know which route would have worked out better financially in the long-term. But now he owns a collection of physical tools instead of numbers in a bank account that promise a possible future conversion to real usable things.

What do you think? Have you tempered your asset allocation with an old-fashioned dose of physical stuff?