Data mining isn't just for smart phone and internet companies. I've been mining my own financial data for years to extract a variety of valuable information about my personal finances and spending habits. This data has been extremely helpful in assisting me to make our financial situation much more efficient. But building this data has taken time and I've utilized several methods to mine my most effective data.
Dredging home costs
Ever since we bought our first home, I've been interested in the rent versus buy debate. I'm typically more a fan of renting than buying for a multitude of reasons; however, I decided to accumulate as much financial data regarding the home buying, selling, and ownership processes as possible.
From tracking expenses related to utility costs, home repairs, and maintenance to mortgage costs, property taxes, and now as condo owners, association fees, I've been able to learn much about what it takes to own and maintain a home. I've track these costs to the penny over time so that we know exactly what it costs us to own a home. This data has been valuable in decisions we make regarding updates, when to sell, how much we've made/lost when we sell, and what type of living situation is right for us after we've sold.
Building a utility mine
I started tracking our utility costs when we bought our first home nearly five years ago. In the process, I learned a multitude of valuable things. First off, by watching our consumption, I learned how much we were using in things like natural gas, water, and electricity. I could see how much we were spending in these areas as well, and I could watch for rate hikes.
Such information helped me look for ways to cut costs by shutting off appliances, closing off unused portions of our home, and plugging leaks around windows and doors. It notified me of a costly water leak. And it showed me how those sneaky increases by the cable company every few months can start to add up. I used these tidbits of data to cut our utility costs by about 30 percent while we were in our home.
Strip mining expenses
But I track more than just home and utility prices. I track all our spending. While I don't break down all our expenses categories to the extent I do our home costs and utilities, having an idea of where our money goes helps me strip away the layers of financial confusion regarding how and where we spend.
In the process, I can build a better and more exact budget because I have a good idea of where our money goes.
Gleaning gems of data
There are several major gems that I can pull from my efforts at data collection. First off, being able to look back at expenses over the years can illustrate how those costs have changed over the year. In the process, this allows me to determine the personal inflation rate for our family, which is more useful to us than the government reported numbers.
Second, I can gauge our financial progress -- or lack thereof -- over a period of months or even years. In this way, I can see how much our expenses are compared to our income and determine whether we're getting ahead or falling behind and where potential changes might be made.
And third, when tough times do hit, I know exactly where we can cut back and in what amounts to save a little extra cash. In this way, we're better informed regarding our finances and more easily able to adjust them when necessary.
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The author is not a licensed financial professional. The information provided in this article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion.
- Personal Budgeting
- Banking & Budgeting