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Friday, November 13, 2015

Improve Your Budgeting And Save More With Quantitative Data

Welcome amigos!  I like to use data in my life.  Perhaps it's because I'm somewhat of a nerd and like to make the unknown, known with numbers.  The other day I was thinking how I could create the best meal plan (starting with lunch and dinners) with a set amount of money, my monthly grocery budget.  My parameters include having a starch, protein, and vegetable at each meal, and if possible, to make it as delectable as possible because nobody likes to eat food that tastes like cardboard.

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All this reminds me of how hedge funds are getting a leg-up on earnings reports these days.  You see, there are companies out there that specialize in extracting data that is of particular use in measuring something useful (information) to anyone willing to pay enough for it.  For example, companies have set-up cameras outside retail parking lots and are able to quantify traffic to a store (using fancy algorithms) by counting the number of parked cars over a period of time.  If the data spits out that a retailer has experienced several positive points in favor of increased revenue, not made public, then those with this data stand to benefit over those waiting for news releases.  Quant Hedge Funds use quantitative information to analyse the prospects of companies and favor the statistical over the subjective.
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What if we quantified our lives?  I've not seen financial bloggers talking about this yet as a means to save money, though some may have.  What would this look like?  Here are some examples:

You could look at your water bill, see how many gallons of water you used and do an experiment on showering.  Decide to shower for five minutes per shower for a month without changing anything else that has to do with your water use.  What does that do to your consumption numbers?

How about finding a route to work that optimizes the number of right turns?  This will save you money on gas and possibly commuting time.  Do you know how many miles you are driving per typical month?  Would knowing this information help you be more informed about your driving (gas using) decisions?

My favorite use of quantitative life data is making the most out of my family's grocery budget.  We spend $800 a month on food.  This is for all breakfast, lunch, and dinner meals, plus snacking.  $800 can buy you a ton of pasta if that's what you wanted.  How to make the $800 go longer than a month is the goal, however.  And this involves buying economical meats and starches, and so on.  Imagine if we treated our homes as if we were Chief Financial Officers or at minimum, owners of a small grocery store.  We would be responsible for taking inventory of every can, box, and bag in our pantry, the food in our refrigerators, etc.  Sort of what Matt Damon did on Mars in the The Martian.  Can you imagine having to figure out how long our food will last as if our survival was at stake?

Would you be so willing to buy that fresh, green, broccoli and leave it in a bottom drawer of your refrigerator...only to go bad because you forgot about it?  We waste so much food, not cooking it, at my house.  And I know I'm not alone in this.  Using a log, we could all better use our money so that we buy almost the exact amount of food we need each month, and not an atom more.

The next phase of personal finance is teaching people to take note and pay numerical attention to the items we consume.  If Hedge Funds are paying data mining companies hefty sums to gather useful information so they stay ahead of the average fundamental analyst, we should seriously consider adopting a similar strategy.  It is applicable to our own lives too!

Thanks for reading!  For more info on Quant Hedge Funds, go here: What is a Quantitative Hedge Fund?  By the way, this is not an investment endorsement...investing in anything comes with specific risks.  Recent news on this topic: This is the future of investing, and you probably can't afford it.       

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