The Dangers of Double Counting

I’ve just uncovered a mistake in my Expenses Spreadsheet.  It tracks all of my Income, Outgoings, Assets, Liabilities and Transfers.  I’ve been keeping it in some form for 17 years and if I spent as much time as I have working on it, learning the piano, I’d be a maestro!

Anyway, this mistake goes to show why it’s important to have financial control and to understand what’s going on with you moneyI’m not a fan of cars and I hate them!  But one thing that is difficult with cars is how to accomodate them within my spreadsheet.  Are they an asset?  Well, my last car cost £8,000 – so yes.  But it’s actually a liability because it costs me money to run and it deprectiates too!  Also, that £8,000 is actually not an investment, it’s just spending – so that month I must have spent an extra £8000 on the car.  See what I mean, it’s a bit complicated.

What I thought made sense was to say the car cost £8,000 and that is a transfer from my liquid asset to “HPSO” where the “O” means Other and that includes cars.  I’d then depreciate the £8,000 by 2% a month to cover the drop in value – so it ends up as about £6275 after a year.  If I sell it for more or less than it’s “book value”, I can adjust the rate of depreciation to match the final value.

So far so good – but a few months ago I was concerned that I wasn’t including car depreciation as an Expense.  That £8,000 was not only costing me opportunity cost but also it was dropping in real value.  Now, I don’t put a value on opportunity cost but I should on the depreciation.  Owning that car is making me poorer every month.  So in my Expense Tab  I created a separate Car Depreciation Line and added that to Household Costs – a sexy term for things like the utilities, council tax and the like.  So my monthly costs are made up of:

  1. Childcare costs – for the nanny/childcare
  2. Car Depreciation – for the cars (2 at the moment)
  3. Household Expenses
  4. Mortgage Interest
  5. Flex and Other spending – day to day spending from current accounts/credit cards

Where’s the problem?  I added in the Car Depreciation as a separate line as well as including it in the Household Costs – meaning I double counted!

Once I spotted this, it meant that I could have another look at my spending.  The impact is that I’ve been spending around £150 a month less than I had thought – which is good!  It also means some of my FIRE metrics change for November (November / November’s six month average)

  • Savings Rate 62% / 41% goes to 65% / 43%
  • PWR 3.3% / 5.9% goes to 3.1% / 5.7%
  • Pre-Pension Funds PWR 7.8% / 13.8% goes to 7.4% / 13.3%

Those might not seem significant but it really is.  To get an extra £150 a month would require an investment of £43,000 in a FTSE100 tracker to generate the same income.  And I’ve been looking at my spreadsheet and humming and haaing over  how doable is FIRE when I’ve been double counting £150 a month (which is about 7% of our post-FIRE budget) – how amateurish of me!

So the lesson is; be careful when you put together your spreadsheets.  You should be tracking these things – but mistakes are easy to make especially when you leave things alone (I don’t have my car revalued every month so didn’t think much about it).  In this case, I was overstating my spending but it could have easily been the other way round and I was spending more than I thought.

Thanks, GFF


  1. One should never muddle together outward Cash Flows – such as paying the elec bill – with notional items – such as Depreciation.

    Similarly do not muddle together inward cash flows – such as salary – and hoped-for appreciation of an asset e.g. your house.

    While you’re at it, might it not be wise to model the depreciation of your car more realistically? I’m out of touch with new cars – we’ve only ever bought one and that was decades ago – but wouldn’t it be wise to deduct somewhere around a quarter of its new price the moment you drive it off the forecourt?

    That’s assuming that the purpose of this accounting is to give you a picture of your net assets and, separately, of your monthly net cash flows. If your purpose is something to do with tax that is no doubt rather different.

    If you are doing the sums more often than once a year, why? Surely all you need calculate more often is your current cash and near-cash availability? Perhaps you could break that down into “fund for planned abnormal expenditure” – other people might think of it as holiday fund, cars fund, Xmas fund and so on – and an emergency cash fund – which would cover anything that turns up that you hadn’t expected.


    1. The car was second hand and bought from a private seller at a price just above the webuyanycar price that he had been offered. So not mich depreciation the second i drive off the forecourt.

      Thanks and i agree that there should be a dsitimctiin between notional and real cash flow – the change i made was to include the depreciation as an expense since if i buy for £8k and sell for £2k fove years later it has actually costing me £100 a month and i want to accurately present my spending.

      On valuing of assets into the future – that’s anyone’s guess – i have share price inflation at 6% (less divis). Hpi and inflation at 3%.
      The difference these numbers can make over 10 – 50 years is huge!


  2. “if i buy for £8k and sell for £2k five years later it has actually costing me £100 a month and i want to accurately present my spending.” I still think you are wrong. A depreciating asset isn’t spending. Your spending happened when you bought it. It should show up in your annual calculation of your schedule of assets, not (I suggest) your monthly cash flow calculation. You shouldn’t be trying to hide the essential bumpiness of buying and selling cars. The bumpiness is perfectly real.

    One advantage of what I am advocating (i.e. a rigorous distinction between cash flows and everything else) is that by using it I’ve never double-counted.

    To return to your post: “Are they an asset? Well, my last car cost £8,000 – so yes.” Quite right, it was an asset worth approx 8k. More accurately, it was worth whatever you might have got for it had you immediately tried to sell it.

    “But it’s actually a liability because it costs me money to run”: no. It’s not a liability; you could sell it tomorrow so it’s still an asset, albeit a less valuable one.

    “and it depreciates too”: yes but that is not comparable to your outgoing cash flows for fuel, servicing, insurance, and so forth. If you wish to insist on somehow disguising the bumpiness of car purchase and sale, at least have the sense to ignore the present car and what it cost you originally – that’s water under the bridge. Just open a “cars fund” – notional or real – and transfer in enough every month to let you buy your next car when the time comes. At least that way you can represent reality rather better – a bigger car if you will have more children, or bigger children, or old folks to ferry around, or whatever. A four wheel drive if you move to live up a glen. It’s the future expenditure that matters: the previous expenditure is spilt milk.


  3. Our future car fund is paid monthly into a Nationwide Regular Saver: 5% AER. Whooppee! One a year we have to decide where to move the accumulated capital. As it’s a car fund it should really stay in cash, and instant access cash at that. 1.5% seems to be about the best available.

    Mind you, this is all only half honest as the great bulk of our “portfolio” is in cash, or near-cash, or commodities, or gold, because I think the short term prospects for equities are poor and because gilts look poor value too. At our age it’s no good saying that the markets will recover from any crash in only 20 or 30 years time.


  4. You worked terribly hard for that sort of accounting gymnastics. It’s fair enough, what you have to do in bookkeeping for a company, but as a private individual it’s so much easier.

    Write off the £8000 as a spending splurge in the year you bought the car. Then immediately start saving for the next one you will buy in x years time, where for the frugal x is about 10 years. I agree with dearieme ,that should be in cash.

    Job done, and less complexity all round. It’s worked for me for my cars, ever since I daftly bought the first one s/h with a bank loan. While I was living in London FFS and went to work by bike… It was handy when I moved out of London though.

    Complexity is the enemy of knowledge. It’s fair enough for a company to smooth out the depreciation on the P&L sheet, and sometimes they finance capital plant with loans. There’s some argument that a car is capital plant if it it is necessary to enable you to earn more, but most of the time it’s an elective spend for an individual.


    1. The value of the cars are already written off so to speak and in the “other” tab along with a barrel of whisky i own (defined by hmrc as a depreciating asset) and childcare vouchers .
      What matters most to me is net assets, pre-pension assets (not including the cars or whisky), monthly spending.
      No gymnastics required


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