Taking Stock of your Spending

In these days of electronic banking and online statements, it’s easier than ever to take stock of how much you are spending each month and where your money goes. Are you one of the many people who isn’t sure how much you’re spending, you just know that at the end of the month, it’s all gone? Knowing how much you spend each month will make it easier to set goals around savings and debt repayment, and it will also make retirement planning (a very long-term goal) possible. So let’s take a few minutes to figure out how much you spend.

Almost everyone is paid using direct deposit. In that case, seeing how much you earn (after taxes and withholdings) is as easy as seeing how much money hits your bank account. At the same time, seeing how much you spend should be as simple as looking at the other column on your bank statement. How much do you withdraw in a given month? Many people use debit and credit cards to make purchases. That means there may be a large number of withdrawals from your bank account. For the moment, that doesn’t matter. Just look at the total amount withdrawn and that’s how much you spend in a month.

There are a couple of exceptions to account for, however. Debt repayment is different than spending. It is certainly a monthly (or bi-monthly) expense, but it doesn’t need to be accounted for in retirement planning. In fact, once you pay back your debts, you’ll have additional cash for monthly spending. Separate out car payments, mortgage payments, line of credit payments from the rest of  your spending. Don’t ignore it, but understand that it isn’t part of your lifestyle spending (unless you spend more than you earn). Saving is another exception. If you put money each month into a savings account, a TFSA or an RRSP (or other account), that’s also not lifestyle spending. It won’t need to be replaced in retirement, and once you’ve saved for retirement, it will also be available for spending.

If you want to further categorize your spending, for your own information, review the spending from  your bank statement (debit card and cash withdrawals) and credit card statement.  Is there somewhere you spend more money than you’re comfortable admitting? Is there cash that you don’t know where it’s going? If so, you might consider giving yourself an allowance. As an example, I withdraw $50 cash from the bank each week. That’s how much money I feel comfortable spending on fast food, entertainment, etc. Sometimes it accumulates week to week. Other times, I run out of cash and stop spending. This way, I limit the amount that I spend without really knowing where it’s going.

One idea to make it easier to save more and spend less is to use automatic transfers to save money from yourself. Each month I have $250 transferred automatically from my chequing account to an investment account. This way, I’m not tempted to spend the money, since it’s not there, and my savings (for my kids’ education) continues to grow.

Have you spent time figuring out how much you spend? Did you find any surprises? Did you make any changes as a result?


7 thoughts on “Taking Stock of your Spending”

  1. Jon, I’m not unretired or back at work. I’m not quite sure where I gave that impression, but I did try to write this article so it would be relevant to working people who have recently resolved to get their finances in order.

    In my life, I’m working on a Master of Education degree (by distance) at the University of Calgary. On top of that, I volunteer at the YMCA and I’m planning to work on one or more campaigns leading up to the October 2013 Calgary election. I feel quite busy, but none of it pays 🙂

  2. I’ve tracked expenses since going to university (OMG almost 40 years ago!) so I have a detailed monthly expense breakdown spanning most of my life.

    Very interesting to have these numbers as I can VERY accurately predict what I need to live at my lifestyle. Also gives me an accurate map as to what needs to go if push came to shove and conversely how much room to do something frivolous :-).

    Very simple methodology:

    – a single sheet of 8×10 with about 25 expense categories (utilities, groceries gas, gifts etc.) where expenses are recorded when they occur – usually daily; takes 1-2 minutes at most – getting/creating receipts for ALL outlays (without exception) helps a lot

    – a monthly aggregation of those numbers to a very simple spreadsheet – takes maybe 10 minutes per month.

    – once the year is complete link the yearly totals to another year over year spreadsheet – 5 minutes or so
    and you’re done

  3. I keep track of my expenses in broad categories, as I use cash for most of my day-to-day activities such as food and other shopping for low-cost items. One column includes my ATM cash withrawals.

    Before I bought a PC in the mid-1990s, I kept track of these on a single sheet of paper, one line per month with a bunch of columns for the expenses. I still use such a piece of paper but I have more sophisticated homemade spreadsheets which are expenaded versions of my checkbook register.

    I also have a big summary spreadsheet which shows my annual spending and income in those checkbook register categories going back to 1985, my first year of working. That spreadsheet was very useful when I was planning my ER budget in 2007-2008 (which had its own spreadsheet, of course!).

  4. I never tracked my spending during my working years but being a frugal person, as long as my savings grew consistently month after month, that was enough information. It was only when faced with the decision to retire that I did a detailed spreadsheet to accurately see where the money was going. I still do it more,for fun than anything else. The only major expense I gave up on upon retiring was travel to other countries and I was fine with that. If I need to cut in the near future, I would take a hard look at my monthly resturant bill of about $300/month

  5. I am attempting to charge everything to my cash back Visa this year. It gives me a running total of my spending although the charges from some small businesses can take more than a week to show up on my online statement.

    I, too, have an weekly allowance but it has to cover everything including food, gas, clothing, entertainment and stuff. All my money gets sent to bill, debt repayment and savings and I only leave myself a little room to spend.

    I charge almost everything and pay the charges weekly.

    If my work group wins the lottery this weekend the entire plan will have to change.

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