02 Nov Expenditure – what do I spend?
I have been trying to track all our family expenditure for several years now, partly because it is a good thing to do and also, given my profession, I should “walk the talk”.
But I struggle to remember to update my spreadsheet, whereas my wife just hates doing it so she never does! This got me thinking about exactly why doing it is useful, but also how I might be able to make it easier.
Tracking family expenditure is an important part of financial planning and is also good housekeeping. However, I am not alone in finding it difficult as this tends to be one area where most people struggle to do anything beyond scanning each month’s bank statements for errors or looking at recent transactions on their banking app.
Tracking expenditure or having an idea of the level of current expenditure is important for several reasons:
- It allows us to know what our disposable income is each month, or year, that could be put away for future expenditure
- We can keep track of our spending patterns and see where we may be over spending or paying for something we don’t use, like a monthly subscription we’ve forgotten about
- It provides a more meaningful idea of what our future expenditure needs or desires might look like
- It will also form one of the most important assumptions in any financial plan that is created and regularly reviewed
So why is it so difficult? Mainly because it’s boring and time consuming. We all have better things to do. It’s like doing our tax returns; no one looks forward to it but it has to be done.
This got me thinking … how can I make this easier than itemising every transaction in a spreadsheet each month?
Most online bank sites allow you to export your transaction information, but most of us use more than one account and often with different banks, so combining the information would still be time consuming.
There are various apps that offer expenditure tracking tools but I don’t want to upload bank account information or set up links using software from companies that I don’t know. Call me paranoid but I want to be able to do this myself.
So here is my lazy short cut solution to working out how much we are spending each month and therefore what is our regular disposable income that can be put aside for the future.
Step 1 – take my net income per month and add this to my wife’s net income per month. This gives me our total net family income per month after tax and any company pension deductions.
Step 2 – total any regular direct debits for other pensions, ISAs, other investments or savings accounts that we have.
Step 3 – take the total in step 2 away from the figure in step 1. This should give me the total amount we spent that month that is not already saved for the future.
Step 4 – check mine and my wife’s accounts to see if we ended the month with any surplus and if we did, did we save it or spend it in the following month? If we saved it, then I can deduct this from the total in step 3.
What this gives me is a rough calculation of the total expenditure for the month. I can repeat this exercise each month recording the figures in a spreadsheet and over time I will get a better understanding of how much our current lifestyle is costing, how much we actually save for the future and how much more we might be able to save.
It won’t let me see each transaction, but at least I will know what our lifestyle costs and if it seems too high given our goals for the future I can delve a bit deeper if I want to.
Of course the added bonus is that I don’t have to list each transaction and my wife has stopped complaining! Win win