Thursday, February 13, 2014

The Simplest Way to Track Spending

I was thinking about the early money days in our marriage recently. One thing that I remember doing is tracking everything we spent. I specifically remember a three month period where I was very meticulous about it. If I remember right, it was just to gauge where we spent our discretionary money and how much that generally was. In this case, I mean discretionary as in anything that wasn't a bill with a due date. So this included gas, groceries, formula and diapers. 

I wanted to keep things simple because I had two young kids and a husband who worked three jobs and didn't have any interest in the information. I found a used envelope, wrote the month on the outside and stuffed all receipts inside. Some receipts my husband gave me where ATM withdrawals. Initially, I didn't care what he actually spent the cash on. Once it was out of our checking account it was spent. 

At the end of the month, I went through every receipt and did my best to categorize each item we purchased. It wasn't perfect, but I was able to get an idea how much we spent on diapers, formula, eating out, groceries, gas, entertainment, and even cash spending (even though I didn't know what it was spent on). I also made sure to know the total of all this spending for the month.

After tracking for at least three months, maybe four, I had an average we spent in a month. I ended up using this number or a number as a starting point for our budgeting system. I'm not entirely sure I remember the number but I think it was around $1000. Since my husband was paid weekly, we set aside $250 each week to cover all those discretionary expenses. I'm pretty sure this was relatively tight. Not too tight, but not so loose we were out buying music or eating out every week. 

I would take each paycheck subtract bills due that pay period as well as the $250 to see what amount we had left to do something else with. I do know some had to be saved for our mortgage payment each pay period as one weekly paycheck alone didn't cover our mortgage. And I'm positive some money each pay period was either sent in to pay down debt or at least set aside to add as extra on a debt we would pay later in the month. 

Over the years the amount we set aside each pay period has increased. We just recently increased our discretionary spending to $1000 per pay period. My husband is now paid twice per month. I think it was necessary to increase it as we have two teenage daughters and our grocery spending seems larger, likely inflation, but probably being more relaxed about what we buy. 

It doesn't have to be difficult to track your spending. I think it is an important exercise to try for a few months. It can help you see where you spend the majority of your discretionary money or to establish a discretionary spending amount for your budget each pay period.  All you need is commitment to holding on to your receipts, a place to store them and a calculator and pen to add them up at the end of the month. Then do it again for another couple months. This can be the start of knowing where you money goes and how much you really spend. Of course, if you have a budgeting spreadsheet that works too!! 

1 comment:

  1. As newlyweds we took a totally different approach to money. DH took charge and following 'rules' kept housing + utilities @ 28%, food/restaurant @ 17%,
    auto payments /operation/maintenance/insurance @ 15%, savings @5% [we both had defined pensions], medical a staff benefit @ 0%,, clothes 4%, 6% misc. included paper products/cleaning stuff/pet food/junk etc.

    Finances were so simple, sums left over went to savings for house or vacation.


I'd love to hear what you think! Thank you for keeping your comments relevant, friendly and clean.