Personal finances

This is a description of how Firefly III works, and how I feel about personal finances.

Firefly III has been built around how I manage my finances. Please read this carefully, so we match on how to do things.

The general idea

After being a grownup for a while I noticed I was living from paycheck to paycheck. I could not save money. At the end of my money, I still had a part of the month to cover.

I built a system where you have transactions as the main concept of Firefly III. I've added an envelope-based based budgeting system. That means that you set a fixed amount every period (per month is most common). Firefly III can do that automatically as well.

As you spend money every month, the amount in the budget goes down (duh). Once the budget is empty, you will have to top it up or stop spending money on that particular subject. Most people have five or six budgets.

There are also categories and tags to further narrow down your transactions.

The next step

To keep on top of your finances (using Firefly III), you must be aware of your finances. There are no shortcuts. You can use the import function, and you can use the recurring transactions, but it won't help you one bit. It just gives you fancy charts. All knowledge and no wisdom.

If you're serious about changing your financial habits, you should enter each transaction manually. Feel the impact of each penny you spend, and before you know it you'll spend a lot less of them.

Accounting versus personal finance

I don't like accounting. I don't like the fact that people buy a $60,000 sports car and then pretend they haven't just lost 60 grand by putting up the car as an "asset". As if you get your money back. I also don't like that people put up their house against their mortgage. It's not money. You don't have it. A Rembrandt could be worth a million, but it won't buy you a loaf of bread.