As I share more of my spending numbers – for example, how much I actually spend on my dog on a monthly basis – I’ve had a lot of amazing conversations with people about how much they spend on similar categories of things.
Either the conversation starts out with an admission of
“Oh thank god, someone is actually talking about how much things really cost, because I spend that much or more as well,”
or
“Wow, I never spend that much on my [food, pet, clothing, Christmas presents, etc.]”
In the case of the second comment, there are two ways this conversation plays out.
If the person saying that tracks their spending, and has the data to look back on, this can be the start of an amazing conversation.
We can compare notes, share strategies and talk about the factors that influence those costs. Sometimes, they’re entirely beyond our control, like with provincial car insurance costs in Canada. (Apparently, there’s only one insurer for cars in BC! Who knew?)
But if the person doesn’t track their spending?
Honestly, all I can think about is how little I really knew about my spending before I starting tracking it.
Before I started tracking my spending, I could spend $4,000 in a month and not even notice. That’s unfortunately not an out-of-nowhere statistic either – that was my February 2015 spending total. (Thanks, Mint.)
When you aren’t tracking your spending, it’s easy to get by on estimates and not realize the impact of irregular spending on your budget.
By “irregular spending,” I mean the kind of thing you don’t buy every month.
- Dog food? That’s a regular expense, so you probably have a good idea of how much it takes out of your monthly budget.
- Vet bills? Easy to overlook as a one-off cost, since it’s irregular spending.
It turns out, there’s even research to back this up.
People are really good at estimating how much they spend on regular categories, but as a collective, we humans kind of suck at noticing the irregular spending items and how they’re impacting our budget. It’s so easy to write them off as
“Oh but I never ever celebrate a birthday / need to replace my snow tires / have to replace my dog’s harness and leash,”
that we mentally factor them out of our spending without even noticing it.
I’ve learned this lesson more than once, and both times it was thanks to a more active look at how much I was really spending on different categories.
(And no, setting up a Mint account to track your spending doesn’t really count, as much as it can be a good first step.)
Do You Know How Much You Spend On… Groceries
The first time was with my grocery budget. Or should I say, the lack of a grocery budget.
When I moved in with The Boyfriend, we decided to split our grocery costs evenly. Because we handle the costs on a monthly basis, I had inadvertently set up a perfect way to track our grocery spending.
At the end of every month, I’d gather up the receipts and total up how much we’d each spent that month on food. I’d figure out who owed who what, and see our total monthly food spending.
In September, our first month of sharing grocery costs, we spent over $800 on food.
For two people.
And to take ownership of this – it was all me.
Groceries and meal planning is my jam, so the overspending? It was mine, entirely.
All of a sudden, my summer of feeling like I never had any money left over at the end of the month started to make sense. Our summer of going to farmer’s markets, cooking elaborate recipes and buying all the local fruit we wanted had clearly been harder on my wallet than I realized, especially considering all of the “oh but we never buy this” moments.
Now, with a tracking system in place – albeit one that was never actually intended to track our spending – I quickly realized how much those one-off “let’s try this fancy recipe” or “whoops, we forgot to eat these leftovers” moments were adding up.
But even that kick in the pants – which saw our grocery budget fall to a steady $500 to $600 a month – wasn’t enough to get me on board the “track your spending” train. I was still convinced that my Mint account was good enough to keep tabs on my spending.
Do You Know How Much You Spend On… Everything
That lasted about a year. Then, I challenged myself to track every single penny I spent for a month.
And it blew my mind.
This all started thanks to my first baby steps into personal finance blogging, and an idea that I should take on a monthly challenge. So at the start of September, I declared that it was going to be the month of tracking my spending.
I wrote about what the challenge taught me at the end of the month, but above all else, it taught me that I had no idea what I was really spending money on. Sure, I knew my grocery spending habits, thanks to a year of grocery-splitting with The Boyfriend, but beyond that?
The numbers I had used to estimate my projected save-50%-of-my-income budget were nothing but best guesses.
And they weren’t great guesses, it turns out.
Beyond that, I was the picture-perfect example of that research, where people fail to account for their irregular spending when they think about their budgets. As I continued the challenge into the following months, I noticed that without fail, the reason I wasn’t hitting my 50% savings goal each month was that elusive “irregular spending” category.
When it’s written down like that, you can’t write it off or ignore that you spent hundreds more than anticipated.
- In September, it was The Boyfriend’s milestone birthday and annual pet insurance premiums.
- In October, it was Thanksgiving travel.
- In November, it was an unexpected ticket and license plate renewal costs.
- In December, it was having-no-idea-what-I-actually-spend-on-holidays, because I had never tracked my spending in December before, and Christmas is expensive, yo.
- In January, it was registering for a CFP class and renewing my license plate – again, this time when I was supposed to do it.
These were all $400+ unexpected expenses that, even as I was paying attention to my spending, I didn’t see coming. Or, I did see coming, but somehow had mentally placed them outside of my “budgeted” expenses.
Since I was tracking my spending, I was able to factor them into my plans, whether that meant spending a bit less on fun or withdrawing money from my savings to balance out my cash mid-month. But you know what?
I’m sure I had this many, if not more, unexpected expenses in the years before I tracked my spending.
And I’m also sure I never once adjusted my other spending to account for them.
That’s terrifying, right?
Don’t get me wrong, I had vague ideas of my spending, and I always kept an eye on my credit card balances and my accounts, so things never got too out of hand. However, when I look back on it, of course I felt like a stress-coloured elephant was sitting on my chest at the end of every month, and every time I thought about money. I felt like it was entirely out of my control, because it was.
Now, I won’t argue that tracking your spending is without challenges. I have been known to bury my head in the sand for weeks at a time, even since starting to track my spending semi-diligently.
But even still, I’m not kidding when I say that if there was a silver bullet, or some kind of gold-plated first step, to achieving your financial goals? Tracking your spending is it.
- It can help you identify where your money is actually going.
- It’ll help you keep track of extra income that comes in, which is easy to lose sight of.
- It will make you feel like you actually can control your money – instead of feeling like it’s totally out of control.
- It gives you the best chance of actually changing your behaviour – because looking at a retrospective Mint dashboard once a month probably isn’t going to make you scale back on your Starbucks habit.
It never did for me, anyways. But you know what did?
Writing down every coffee I bought in a spreadsheet.
I’m putting together a 30-day track your spending challenge for people who want to try it out, and want a few resources to help you get through it – including those moments when you realize “Oh shit, I spent way too much” and you never want to look at the spreadsheet again.
(I’ve sooooo been there, so I get it.)
Sign up to get updates when it launches, and insider content to help you actually stick with it – and rock your money goals.
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Most people don’t know how much they’ve spent on anything unless they track their expenses faithfully. I know that when we started budgeting that we were amazed just how out of touch we were with the so-called frugal life we “thought” we were living. Numbers never tell a lie. Best thing we ever did was track our expenses. Debt free feels good! Great post.
I love that I’m not the only one who had that “oh my god” wakeup moment when I started tracking my spending! Hahaha it was so easy to overlook how often we really ordered pizza or went out for drinks… until looking at it in black and white. “Nah, we never do that!” “Oh… turns out we do, a lot.”
Thanks Mr. CBB!
I just started tracking again since beginning of December, and I`m appalled at my spending on beauty 🙂
Haha I was a bit appalled by my dog spending – but when I really think about it, it’s so in line with what makes me happy on a day to day basis that I made my peace with it! If beauty is that for you, I’m sure tracking it will just help you find the optimum amount of spending that works with the rest of your budget and your happiness levels 🙂
Oh gosh, Des, same same same same same. Looking back, I cannot believe how long I thought I was being a responsible spending tracker by vaguely glancing in the direction of my credit card bill each month (mostly just to double-check that I had enough in my checking account to pay it off). I had no idea. Just no idea. I thought I was spending around maybe like $100 on food per month and it was actually over $400.
That’s such a good point about unexpected expenses too. I feel like even though I’m tracking everything religiously now, I’m still inserting little asterisks in my mind, like, yeah, I spent a lot in January but that was just because I had to pay a bunch of random fees and annual renewals of things that I don’t usually pay, so those things don’t really count. But as you say, there’s stuff like that almost every month. It’s so true.
Hahaha oh my god, that moment with food is NO JOKE. “How much could I really eat? Surely it can’t be… but… oh. Oh my god.”
And honestly, if nothing else, I now start to notice when future asterisk-spending is coming up. I have to renew my post office box (for my email list – most digital reason to buy a post office box, right?!) in April, so I’m already thinking about how I can or can’t add additional purchases to April if I want to hit my goals. It took me a few months to get that oh, maybe months *without* exceptional spending are the rare ones, haha.
That said, so far February has been one, so maybe – JUST MAYBE! – I might save 50% this month. I’m pretty sure if I do, my end-of-February blog post is just going to be a series of alternating Beyonce-hair-flip gifs and fireworks GIFs. It will be my masterpiece.
This is one of my favorite posts! I totally agree. You have no idea how much you actually spend on something until you track it and analyze it. We’ve done that on the blog with our food and our two cars. And honestly, the food one ended up better than I anticipated, so I was pretty happy there. 🙂 I’ve been reading “Your Money or Your Life” and they talk about setting up a tracking budget based on YOUR categories. If you get coffees, make that a separate category under “food.” What a brilliant plan!
Awww thank you so much Maggie! And I am alllll for setting categories that work for you! It took me five months of tracking in a super basic, no-categories type way to get to the very first sort-of-budget I’ve ever used, and that’s what I’m planning to advocate in the track your spending challenge: just take notes about what you spend every month. Maybe coffee does need to be a category (or in my case… dog expenses, haha.) Until you have that data from tracking in a basic, in-and-out model, it’s so hard to know where you should be allocating a typical budget.
And also, I’m pretty sure a “typical” budget has never worked long term for anyone, ever, lol. Money is just far too personal!
For all that I love my personal finance nerdiness, I have not been tracking my spending since I paid off all my debt! I’m definitely living on frugal auto-pilot and my spending hasn’t gotten buckwild, but I know for a fact I’m spending more than I was. I’m definitely not as diligent as I was. I really need to get a much clearer picture of where every dollar is going if I’m going to hit my ambitious savings goals for the year. Thanks for the kick in the butt!
Anytime Kara, thank you for the comment – and WOOHOO TO PAYING OFF YOUR DEBT! That is and always will be a big deal! Having read your stuff you are rocking the frugal autopilot – I literally don’t know anyone who spends less on food! – but it’s awesome that you’re still aware of where your money is going and feeling it creeping up there on the spending front.
I’m so excited to spend a month really focusing on tracking again, and blogging about it, along with the challenge! I hope it ends up being a good kick in the pants for everyone 🙂
I hear ya! My expense tracking is seasonal but this year I’m giving it another go, onto my 3rd month now. And boy am I getting the “Oh shit, I spent how much on that?!” True story, I spent close to $600 on taxis and cabs. Granted, some of them are for work but still. Now I know I could easily save on taxis and put all that good money to get a good surfboard. Speaking of which, I think once I knew what my priorities are, I automatically think, “mmm those pair of shoes can go towards a surfboard instead” and end up not buying anything. I think that helps.
Oh my gosh, YES to the priorities thing! Maybe I don’t have a fancy car / watch / travel history, but someday, I am going to have so many dogs. (It sounds silly but for real, that is my happy place.) Knowing what I really value and what adds happiness to my life has been such an important part of optimizing my spending – because cutting spending on things that bring you joy is never going to be a good long-term strategy!
I think it’s so cool that the same thing has helped you with spending – and um, surfing is SO HARD I am the most impressed! I tried it a few times when I lived in Australia and never quite got the hang of it, but even still, it was a great time.
It’s crazy how most people don’t track their spending. I was that way for years. As long as we had a positive bank account balance, that’s all that mattered to me. Tracking where every dollar goes has been completely liberating for my family. It allows us to save more, invest more, and be more comfortable with our financial situation. We can look to see if our spending truly aligns with what we value most.
That was exactly my rationale too! As long as my bank account is good, I’ll be fine. I think you hit the nail on the head – it has been so liberating, which is kind of something I didn’t expect – the feeling of freedom, instead of the feeling like uuuuugh, I have to track everything I spend, this is the worst. It really is the best – and there’s no way I would have saved or invested as much as I have without it!
Love this, Des! So…I balanced a checkbook until about a year ago (See? Take my millennial card right now.). I would also include credit card transactions in my register. While I don’t know that I was entirely aware of spending by category, I was always abundantly aware of what I spent and how it impacted my account balances. Now, I input my spending by category in a super basic spending tracker app. It’s really powerful stuff watching the numbers adding up by category each month.
Millennial cards are sooooo overrated. Let’s go to the library and whisper about free books and then drink tea and talk about it.
I’m super interested – what app are you using? Do you like it? (And omg yes to the power of watching it add up. As I see the % spent creep up past 50 every month I start becoming the Most Frugal Human. “Let’s just eat what’s in the pantry.” “You mean… the dried chickpeas and rice paper wraps?” “Sure, that sounds delicious.”)
Tracking is incredibly essential, especially when it comes to wanting to increase your savings! Without out, a lot of people do not even recognize that they may be going into the red that month where they are spending more than they are making. Then when you dig deep into tracking your expenses, you’ll determine “oh hey, I’ve got to pay for renewing my license next month!” so that way the month prior, you can scale back on a few categories to account for that. It almost becomes a fun priority, versus a daunting challenge when you are aware. 🙂
Right?! I think it’s SO fun now, although I will admit that for the first two months it was easy to see it as a huge source of guilt. Honestly though, it’s been huge, and I’ve used the information so many times since. Now getting to update my spreadsheet is like, a fun treat, haha.
(This is the nerdiest comment I think I’ve ever tied my real name to, ever. I stand by it.)
I fully support your nerdiness!! 🙂
Saving a large portion of your income is great in two ways. First, you save more. Second, you learn to live in less.
I save 80%+ of my net income, but I also make a bit more with my rentals. Keep up the great work and do not let lifestyle creep get in the way.
Yes to all of this! I’ll totally confess that, even though we’ve been good savers for quite some time, we really only started to track our spending in detail in the last year. And it was EYE OPENING, to put it mildly. $800 a month on groceries? Yep. Crazy surprises in other categories too? Yes, yes and yes. This is the best advice you can give anyone: track your expenses, and figure out if they really align to your values. Then adjust accordingly. 🙂
Excellent article. Those who want to start a budget can get going RIGHT NOW with your suggestion of writing down every expense.
Having it all written and added up for the day can be shock, on day one.
Having it all on paper for just the first week can be expected to disclose expenditure patterns that need an “overhaul”.
I hope more people read your article. 🙂
Thank you Peter, and sorry for the delayed reply!
Hahaha and I know exactly what you mean – I’ll be sending out multiple “Don’t panic!” emails to my Track Your Spending challenge group, because I remember my first month of tracking was hugely eye-opening, and not in the good, “look at all my good habits!” kind of way. That said, it really did bring to light things I needed to be more aware of!