Friday, August 2, 2013

Is Data the “Oil” of the 21st Century?

Tracking and analyzing data is supposedly becoming the new hot thing these days.  In fact, while watching the IPO of Tableau Software the other day, I heard “data” referred to as the “oil of the 21st century”.

Whether this will indeed be the case or not, is yet to be proven.  However, if it is, I could be in good shape when it comes to our family’s personal finances.  You see, I’ve been tracking and growing a slew of data related to our family’s personal finances for years.  And through this data collecting, I long ago came to the conclusion that it can be quite valuable.  Here is how and where it has helped us in our pursuit of responsible money management.

Inflation data
I’ve been tracking my expenses for almost two decades now and it has helped me to determine all kinds of important trends when it comes to how and where I spend my money.  One key area in which I utilize this data involves inflation.

For example, I use the store receipts that I save from our weekly grocery store outings to determine short-term inflation trends for things like the meat or dairy products we buy.  This way I can make more informed decisions when it comes to things like how to handle soaring beef prices or what sorts of cheeses to buy.  I can also use expense tracking to help me gauge long-term inflation when it comes to health and auto insurance, gas prices or just overall personal inflation in general. 

My tracking doesn’t involve anything fancy, just noting each expense as it occurs on a spreadsheet, what the expense was, and then running monthly and annual expense totals.  From this data I’ve been able to gauge our long-term personal inflation rate over the years at about 3 percent.  More recently (the past year), it’s been closer to 5 percent, much higher than the recent government reported inflation statistics of closer to 2 percent.

Asset decisions
Knowing where my money is and what it is doing -- or not doing -- for me, is data that is critical to helping me make informed decisions regarding my assets and asset allocation.  By tracking my asset performance -- things like how my retirement fund is performing or what my savings bonds are earning -- I can make better decisions as to whether to let that money stay put or move it somewhere else.

For example, with government reported inflation low, I recently cashed in some of my old savings bonds from when I was a kid (I-series bond rates are partially based upon inflation) to put to work in other areas.  I’ve also been able to utilize my tracking data to make decisions regarding things like putting more money toward paying off a higher interest mortgage rather than sticking it in a savings account earning hardly anything.

Cost cutting and budget reallocation
I’ve used spreadsheets to track data related to all kinds of functions and aspects of our daily life.  From vacation, regular expenses, our budget, and utilities, to baby costs, our home-related costs, income streams, relocating, and doing a vehicle gas cost analysis, such information has paid off in numerous ways.

By using our utility data tracking in our previous home, we managed to cut nearly 30 percent from our overall utility costs, taking them from over $300 a month down to about $200.  We used our vehicle gas-cost analysis to decide whether to keep driving our old vehicle or buy a newer, more fuel-efficient one.  We used our baby budget and expense tracker to decide where and how to spend on a second baby.  I’ve used my income tracking to determine whether certain income streams are worthwhile.

So when it comes to data, not only do I have a ton of it, but I find it extremely helpful in finding ways to cut our costs and keep them that way.  Data can be valuable, but it’s only valuable if you know how to use it and use it wisely.

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