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Reflection — An Honest Take 8 min

Honest Take — Before You Begin

Honest Take — Module 1: Know Your Numbers — Income, Spending, Savings Rate #

I want to start by saying what's strange about this module, which is that it's the easiest to describe and the hardest to actually do, and the curriculum will not be honest if it pretends otherwise.

Here is the entire intellectual content: track six months of expenses, categorize them, divide. That's it. That's the module. A bright eight-year-old could understand what's being asked. The fact that adult professionals routinely fail to do it — that you, almost certainly, have been earning for years without doing it once — is not because the task is hard. It is because the task is exposing. The first month you do it, you will see something uncomfortable. Most people stop there. So the work of Module 1 is not learning what to do. It's getting through the first month without quitting.

The Robin & Dominguez book is older than I am as a model. Some of the lifestyle politics is dated; the section on stocks-for-cash-flow is borderline wrong by current standards (you'll get the better version in M2). What's not dated is Step 1 — computing your real hourly wage, the gross-income-minus-work-related-costs-minus-recovery-time number — and you will resist this step more than any of the others. You will resist it because it produces a number lower than your nominal hourly wage by 25-40%, and that number, once you have it, attaches itself to every purchase you make for the rest of your life. The expensive lunch isn't its sticker price. It's N hours of your life. Once you've computed the conversion factor, you can never not see it. People resist Step 1 because they correctly intuit that it changes them. Do it anyway.

If you're the cross-border archetype — invoicing in one currency, living in another — this module will be mildly painful in a way generic personal-finance writing won't address. Almost every expense-tracking app assumes a single-currency life. You'll either run two parallel ledgers or use a manual spreadsheet, and the spreadsheet is the right call. Don't fight this. Multi-currency household accounting is uncommon enough that you'll be building tooling for yourself, and that's fine — you build tools for a living. Treat it as one more. And a specific flag, because it's where engineers most often misallocate effort: you will be tempted to build a perfect tracking system before you start tracking. To research the optimal categorization, the best app, the right schema. This is procrastination dressed as engineering. The categorization that works is the one you actually maintain for six months. Pick five to seven categories that feel obviously right, accept that some transactions will be slightly miscategorized, optimize for the rolling-three-month signal not the perfect single-transaction labels. Plain-text accounting stacks like Beancount are excellent and you should not set one up in Module 1. Set it up months from now, if the underlying habit has stuck — not as a substitute for the habit forming.

A word on the income side, because expense-tracking advice quietly assumes a salary and yours may not be one. If you're the contractor or founder archetype, your income is lumpy and multi-stream, and the savings-rate computation needs the same rolling-three-month treatment as the expense side — a month with a milestone payment is not your income any more than a month without one is. Track the streams separately (they differ in tax treatment and volatility, which M8 will need), compute the rate against the rolling average, and resist concluding anything from any single month in either direction.

One more thing about Robin & Dominguez. The book has a moralizing thread about consumption that hasn't aged perfectly — an undercurrent that spending is suspect, that frugality is virtue, that the goal of wealth is exit from work. If you've read Sandel or Perkins (Die With Zero, waiting for you in M11), you have the equipment to push back. Frugality is a tool, not a virtue. The point is not to spend less. The point is to spend with intent. Some of your spending is buying you a life you actually want; some of it is buying you a life you've inherited from advertising and habit. The point of Module 1 is to learn which is which. The point is not to converge on Vicki Robin's idea of enough. It is to converge on yours — which is M11's question, and it can't be asked honestly until this module's data exists.

Conclusion #

Module 1 installs the measurement infrastructure. The infrastructure is trivial. The discipline of using it for six months without flinching at the first uncomfortable observation is not. Most people fail here. Engineers especially fail here, because we'd rather build the tracking system than read what it tells us. Don't. Read what it tells you.

Predictions #

  • You'll resist Step 1 (real hourly wage) more than any other step. Do it on Day 1, before you can rationalize it away. The number will be 25-40% below your nominal hourly wage. You'll think the calculation is wrong; it isn't.
  • You'll be tempted to make 20+ categories. Resist; pick 5-7. The cardinality discussion is identical to the one you'd have about a star schema and you already know the answer.
  • The first computation of your savings rate will feel either too good (denial — "this can't be right, I must be missing expenses") or too bad (panic — "I've wasted ten years"). Both reactions are wrong. The second computation a month later is the trustworthy one.
  • You'll discover one expense category whose total surprises you. Not in a small way — in a "wait, that much?" way. Most people discover it about food delivery, subscriptions, or some category of recurring small purchase. Don't fix it in Module 1; just observe it. M11 is when you decide what it's for.
  • You'll be tempted to start optimizing before you've finished measuring. The whole point of measuring for six months is that the first month is unrepresentative; if you optimize after a month you'll over-correct. Wait.
  • If you share a household, you'll be tempted to present the savings-rate number to your partner as a fait accompli. Don't. The money conversation in a household (M10) is a curriculum of its own; don't preempt it with arithmetic.
  • If you're tracking across currencies, it will feel like a tax for the first three weeks. By week six it'll feel automatic. The resistance is to the setup, not the steady state.