If you’ve ever watched the television show ‘Til Debt Do Us Part, the first thing that Gail Vaz-Oxlade does is confront her clients with their spending record. She will go over their finances for the last couple of months and track every single dollar spent. She then categorizes these expenditures and averages them out so that she (and the client) will have an idea of how much money they are spending, and where it is going.
What Is A Spending Record?
A spending record is simply something that tells you where your money went. For example, when I started to get serious about understanding my finances, I created a spending record. It was simply a piece of paper where I wrote down every expense over the last few months. This was right after I had moved to North Vancouver, where things (groceries, transportation, etc) was more expensive. In addition, I started working a manual labour job, so I was eating a lot more than I was used to.
Back in Abbotsford my monthly grocery bill was between $100-150. I was shocked when I realized that I was spending around $300 a month in food! To me, this was unreasonable. It was way too much money to be spending every month just to keep myself fed. This didn’t even include eating out, which was a whole other category.
Finding out how much money I was spending shocked me into saving more. It wasn’t hard to buy less expensive or luxurious foods. I just stopped buying the frozen ready made meals that I craved because I was tired after work. I made smarter eating decisions, which also saved me money.
Why Have a Spending Record?
A spending record provides insight into your spending habits that you otherwise wouldn’t have. For all you know, you might be spending $600 a month at the grocery store. You might be wasting $150 a month buying coffees and muffins. You may be drinking yourself into debt. By recording your spending, you are not passing judgement on yourself. You are simply reducing your ignorance and becoming aware of your habits as a consumer. You may come to two conclusions from this exercise:
1. You will be repulsed by your lifestyle.
For me, I was disgusted that I was spending so much money on junk food that I didn’t need. Becoming aware of that spending allowed me to recognize my problem and take action to eliminate the issue. Perhaps you are leading a life that you don’t like. You might go out drinking because you are so stressed over your finances. If you stop drinking, you might have to stop worrying about your finances. By taking the time to fill out a spending record, you are allowing yourself to become aware of the problem, and that does end up leaving you open to the risk that you may not like what you see.
2. You can plan for the future.
Perhaps after going over your spending record you will see that you don’t spend any money on yourself. All of your money goes to bills, rent, clothes for the children, etc. This means that going into the future, you can see exactly how much money you are going to need every month to keep yourself afloat.
Instead of laying awake at night, worrying whether or not you will have enough, you have an exact number that you know you will need. Once you have that number, you are okay. You can stop stressing, you can relax. The bills are taken care of. If things are tight, or if you wish you had some more money but there is nowhere to cut anything, then you know that your plan for the future is to make more money.
How Do I Create My Spending Record?
There are a number of potential ways to keep track of your spending.
Pen and Paper
This was the first method I had of tracking my spending. I took a notebook, created one page for every month, and I just started to go through my old credit card and bank account statements. I labeled a few broad categories (groceries, eating out, bills, and other) and started listing things in whatever category I felt.
I soon realized I wanted a few more categories, so on the next few months I made a section for alcohol, entertainment, and gifts. After I had three or four months completed, I went back and totaled each category. That gave me a number of how much money I spent on each month in each category. Finally, I totaled those numbers, which gave me a monthly expenditure report.
Using pen and paper, while effective, was a time consuming process. I also am a bit of a perfectionist, so if I made a mistake, or wanted to change something to make it more efficient, I essentially had to start over. So I moved all that data onto my computer. Here I was able to create a new spreadsheet for each month, which would give me a quick overview of how much I had spent that month (or was in the process of spending). This was my preferred method of keeping track of my spending, though it is time consuming to input all the data manually.
It works the same as the pen and paper. Each month has a series of categories for my spending. There’s a “food” section (groceries, eating out, alcohol), a section for fixed expenses (housing/bills, debt repayment, saving, transportation), and a section for everything else (clothes, gifts, entertainment, bank fees, and other). The beauty of this system is that you can have the spreadsheet automatically calculate how much you have spent in each category, as well as a monthly total.
If actually going through the process of writing out your purchases is too difficult or time consuming for you, consider a website that serves the same function. Regular readers of MapleMoney will recognize that I have recommended on multiple occasions using a website like Mint. It gives so many options to track, plan, and budget, that most people are really doing themselves a disservice not using a program like Mint.
How do you track your finances?