Two weeks ago, we asked you about investing in a local business. A local pizza place/microbrewery is looking for investors to help open a new location. While I’m intrigued, I also know that we must proceed with extreme caution. This is something that the Mrs. and I know almost nothing about. However, we received great responses. Here are some of our favorites.
Dave from New York Budget made a couple really good points that resonated with me:
- …my investment in the business (should) constitute 5% or less of my net worth (unless I was an expert at investing in small businesses)
- …I (should) care about the community that I live in and believe the business will help
If we move forward, our investment will be very small. Dave threw out 5%, but I’m thinking less than 2%.
The Silver Maple Leaf knows his stuff. All of this information was really good, but these 3 points stood out:
- Do I understand the business?
- Does the business possess an attractive intrinsic value and/or durable competitive advantage?
- Does the business have solid management that acts with integrity and honesty?
I like thinking about numbers, but I’d argue that these subjective points are just as important. Maybe even more.
I like the way A Brunette our of Debt thinks:
I feel way happier handing my money to a small business owner – who I know will use it to feed his family, give his kids dance lessons, or music lessons – instead of to a Target cashier, knowing that money helps to fund a $20 million salary to their CEO.
Reader Wayne may have had the most important question of all:
Is free beer involved?
Mrs. PoP knocked it out of the park with her comment. If she lived near me, I’d hire her to help assess this venture. I don’t even know where to begin, so I’ll just link to what she had to say.
Same goes for reader Silvercreek Farmer.
Anyway, our meeting with the owner is this Saturday. So much to think about. We’ll keep you updated.
Now, on to this week’s question; how do you keep track of your spending? Our challenge for April is to keep track of all spending. So far, we’ve just used a plain old paper notebook. We log any purchases as soon as we get home. This seems a bit archaic though. We both have smartphones, so perhaps there is a better way. Readers?
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Extreme caution indeed!! I would have nearly zero ability to determine if what I was hearing was happy PR fluff or if the business was actually solid. I guess if you keep the investment limited to something you’d be comfortable writing down to zero, then it could be a good speculative venture. Would you be asked to put up capital in the future??
I have a great spreadsheet I created that tracks all our balances by account, every cash inflow/outflow as well as a P&L statement (by category) that also calculates my savings %, net worth, net worth change, etc.
It sounds complicated, but since all our cash comes into or out of one single checking account, and nearly 100% of our normal spending is on a credit card, it’s a matter of logging that activity in this sheet. The daily checking account reconciliation takes 2 minutes, and when I get the credit card statement it takes about 5 minutes to log all the individual transactions.
The only level of detail I don’t have is individual items purchased on a credit card transaction. So if we go to Wal-Mart and spend $100, I have it down as one generic Wal-Mart purchase, not 40 individual items.
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Yes, I won’t invest unless I’m very, very confident. We shall see. I wonder if they’ll try to soften me up with beer? I hope so!
I really like Mint. It’s far more powerful than people give it credit for. It’s got lots of options for customization, entering cash purchases, splitting up purchases (if, for example, you put a whole dinner for four on your card and accept cash), and so forth.
That said, nothing wrong at all with the old-fashioned way — just that you’ll have to copy it over to a computer eventually
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I need to give Mint another try. I admit to abandoning it lately for Personal Capital, but PC does nothing for budgets. Thanks for the tip!
I like Learnvest to track budgeting. The only downside is that I prefer to do most of the foldering of transactions on the app on my phone, but only the website allows transactions to be split. So my Target run for a variety of items requires me to go to the computer. Other than that, it has been very easy to use.
Never heard of that one, but it looks very promising. Thank you for the tip!
Because we follow Dave Ramsey’s envelope system, we use the Goodbudget app, which works for both iPhone and Android, so my husband and I can both log in. We build our budget for the month and fill the digital envelopes, and then for each purchase, you can enter it and it will deduct the amount from the envelope and tell you how much you have left to spend in that category. It’s done wonders for how we spend and save. Plus, I think you can actually have it hooked up to your bank account so it will deduct expenses from the app automatically, but we don’t do that because I don’t trust technology. 🙂
Wow, this sounds very cool. I love the enveloping which is a new concept to me. Thank you for the suggestion!
I’m old school and still love my spreadsheets for both finances and health-related metrics like miles ran. I use Google Drive now, though, which is pretty handy since I can use any computer or my phone and it’ll be right there, ready to use. Good luck with the business venture!
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I love Google Drive. I love how everything automagically saves to the cloud. No worries about Word crashing and losing 20 minutes of work.
A lifetime of free beer is really something that cannot be properly valued. It is like winning the lottery, every day, one cold pint at a time.
We use our good old Excel spreadsheet to keep track of our spending, typing in each item from the CC statements…
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I know, right? If they throw that out there, it will be touch to pass up.
I’m with Allie. We use the Goodbudget app (formerly EEBA). Before that I had created a series of spreadsheets that were such a pain to use that I just plain didn’t end up using them. Since my husband travels constantly for work, having the app makes it so that he can easily log purchases. Since I don’t have a smart phone, I usually end up logging items every couple days from the online account for my credit card which has actually helped us catch and stay on top of a couple vendor mistakes. It works with the way I was raised budgeting and was the exact app I was looking for.
Nikki, thank you for the tip. Apps like this really turn smartphones into useful tools instead of time robbers.
I do a combination of Personal Capital and a simple Excel spreadsheet. I like setting up the spreadsheet so I can look back at my monthly trends in spending and find patterns. That may be a bit nerdy, but hey, we’re all a little nerdy here, right?
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Nerds rule the world, so I’m proud whenever someone calls me a nerd. Damn right!
I love patterns. I enjoy putting numbers into spreadsheets and then watching the chart. I totally do.
Mint all the way! It’s so easy since we almost never use cash. I used to track in an Excel spreadsheet, but my husband refused to do the legwork of remembering purchases or looking them up retroactively. I do love Mint now for tracking and part of our budgeting.
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I like the idea of Mint since we don’t use cash either. I agree with your husband that remembering to enter numbers every day can be a pain.
Excel sheet — An automated budgeting tool I created myself — http://www.thebudgetingtool.com
I refuse to use online budgeting tools or software because:
a) It can bug
b) Your personal information is available for sale (how do you think they make money?) and I don’t give my personal info for free especially since they can track where you spend your time and your money, how creepy is that?
c) You are not guaranteed to have any immunity in case the company gets hacked and obtains your personal banking information.
Even the government of Canada cautions against this.
http://www.theglobeandmail.com/globe-investor/personal-finance/home-cents/ottawa-issues-warning-about-online-budgeting-sites/article1937493/
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Thanks for the recommendation! Very cool that you donate proceeds to charity too.
We’re hard core mint lovers. I signed up for it when it was still in beta and have been addicted to it ever since.
Mrs. Pop @ Planting Our Pennies recently posted…PoP Balance Sheet – March 2014
Wow, if the PoPs use it, I must give it another try…
Good old fashioned spreadsheet for me. At the end of the month I download all the transactions from my debit and credit card statements. I categorize them manually and add them up. For me it’s the right combo of automation and manual work. If I fully automate (Mint.com) I feel a little too detached from the details. However, fully manual would be way to time intensive and error prone.
I like doing it once a month. Sounds much more efficient that trying to keep track of expenses daily or even weekly.
You Need a Budget (youneedabudget.com) all the way! We have to manually enter our transactions on our phones so we realize what we’re spending. (It uses dropbox to sync, and we just have a shared dropbox folder). It’s not free, but so worth the $60. You stop thinking about what you have in your bank account, and start thinking about what you have in each budget line. It’s fundamentally envelope budgeting.
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Very cool. I need to check out this product!
Honestly YNAB(you need a budget) is the best of the available products. I cannot rave about it enough.
Another vote for YNAB! Thanks!
I use Mint, but I’m not happy with it. I would really like the ability to plan budgets in advance, which Mint doesn’t do (to be fair, they say they’re working on it). I’ve also had issues with Mint not connecting to certain accounts. The automation can be a pain in the butt, too — I really have to babysit it and fix transactions that are miscategorized. I want to try You Need a Budget next, but I’m waiting until it goes on sale.
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Hmmm, I’ve used Mint for a while, but never tried it for keeping track of a budget.
I think I need to give YNAB a try…
Quicken, all the way!! I use a Excel spreadsheet to keep track of net worth items, and to project income.
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Embarrassed to say that I’ve never used Quicken. Perhaps now is the time?
Do it. It’s cheap and easy.
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I input my spending into an excel sheet. I have the date, where I spent it, and how much. I input info once a day at the end of the day. Works for me! Good luck on figuring out if this is a good investment opportunity.
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Thanks Melanie for the tip. Perhaps I’ll use the Google Drive version of Excel. I like keeping stuff online.
Sometimes the best methods are the old school ones. I’m all about the pen and paper, especially a notebook that I can carry around in my purse. Every few days, I’ll input those numbers into excel and it makes it super easy to see where I’m overspending!
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I like your hybrid idea. The notebook insures that you won’t forget anything.
We use Google Drive to track our monthly expenses and net worth. I update our spending from our cc’s at least once a week, usually more. It’s convenient to be able to access it from any computer, or our phones. (although, I’d much rather enter information on a computer than on the phone) The goodbudget app sounds intriguing. I’ll have to check that out…maybe my honey will enter his own spending with that 😉
Thank Jen. I use Google Drive all of the time, but had never considered it for a budget. Thanks for the suggestion!
Another You Need A Budget (YNAB) fan here. I don’t want to just track my spending once it’s happened – I want to plan it in advance! It really helps you focus on what you most value, to allocate the money into virtual envelopes; I’ve learnt that I’ll happily squeeze budget pots for clothes and replacing cars, to stuff more in the ‘envelope’ for travel.
And spending a fully-funded budget pot is very freeing – the money is set aside for that purpose, all other bills are met, everything’s good, so enjoy that book/ meal out/ new techie toy. It helps me relax and live a little, whilst we slog on to early retirement.
I also use a Lifetime Spreadsheet to ensure we meet our long-term goals. It’s soberingly useful to see just what a finite resource the money in your life is going to be.
Thanks for the tip. I definitely need to check out YNAB.
I use the Mac version of iBank. It’s similar to Quicken, but a little more modern interface and substantially cheaper. There’s an iPhone version, but I haven’t tried it yet.
My friends just started a brewery! They actually opened up a brick and mortar versus the great majority of my friends who are doing it out of their garage. It seems to be very popular right now but they took the next step. They have no business or service industry experience so I’m hoping for the best for them.
My family owns a restaurant so I have some idea of what goes into it but I’m very reluctant to put my own capital into it just because it’s such a tough industry. I love reading Anthony Bourdain because he talks all about the people who opens places up and why they fail or succeed.
On a separate note I use Mint to track my spending. I have a lot of history there and I love the notes feature so I can write down what I bought because I have the memory of a goldfish. I use Personal Capital for investments because Mint doesn’t seem to like some loans, credit cards and brokers. I love both of them!
Wow, free beer from your friends! I’d love to hear their story and how it goes.
Owning a restaurant seems like a LOT of work.
Aw shucks you’re making me blush Mr and Mrs. 1500!
I’m glad you guys found my humble opinion important 🙂
With all the wisdom passed around here by all the other readers, I’m sure you guys are in a solid position to make a wise investment decision!
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Thanks again TSML, much appreciated.
I track my spending with my credit union’s online banking software, which seems similar to Mint. It’s really changed my life financially (well, graduating college and getting my first decent paying job helped too…but I’d still have probably gotten myself into trouble without the software). The monthly cashflow page where I can mark expected bills and income makes it really easy to see how much I can safely spend at any given time. It also lets me set up alerts when I get close to exceeding any amount I set in a certain category. It’s made it pretty fun and addictive to keep track of my finances, actually. It’s really satisfying to map everything out and have a real plan.
“It’s made it pretty fun and addictive to keep track of my finances, actually. It’s really satisfying to map everything out and have a real plan.”
That is pretty powerful stuff. Maybe that is half the battle, making it seem like it’s not such a chore?
We do track almost everything we spend. We track it on a spreadsheet. Well, Mrs Y does spreadsheets and looks at numbers for a living. Haha. We enter all the receipts within a day of the purchase.
Also, we do like Personal Capital. The only problem is that some of the categories are not accurate, but it is an easier way to keep track of everything.
We also used Mint for a little bit. Mrs Y was not too big of a fan of it, compared to Personal Capital.
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Agree with Mrs. Y that Personal Capital is pretty awesome. I kind of gave on Mint after I discovered PC.
I’m still on the old, paper notebook. It is just a bit easier that way. Perhaps I’ll enter it into a spreadsheet at the end of every week?
Another Mint girl here but also excel. I use MINT for Actuals against budget and Net Worth including residence values, Excel for actuals, cash flow and Net Worth excluding non-monetary assets. I know it seems like double work, but I started with excel only before I knew anything about these tools. I’m more comfortable keeping it up because it provides a little cross-check with Mint, and is not much additional effort.
I can’t imagine doing it on paper (sorry!).
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I like YNAB for spending and budgeting. And I like Excel for NW tracking. You can build it up slowly but generally I’d suggest listing all of your brokerages/ employer plans in columns, maybe breakdown or color code by asset class or ticker and then track each monthly or however often you like.