I’ve been spending a lot of my investing time recently helping friends and family set up various personal finance strategies focused on saving, investing and improving their financial situation.
One key focus I’ve recommended in each instance is implementing a tracking tool in order for each family to track, analyze and interpret where their spending is occurring each month to help implement a budget. Far too often individuals and families don’t adequately track their spending and saving money successfully can be just as difficult as investing successfully.
In my own household my wife and I are very diligent on tracking our spending and staying on our budget. Including discretionary spending (which we actually budget for) our budgeted monthly household expenses currently come to $4,033. Often we spend less by finding discounts, opportunities for following our spending closely, but understanding where expected expenses come from helps us to budget for savings and not overspend.
Our spreadsheet is actually quite simple; we track our mortgage, property taxes, insurance (car, home & life), utilities (natural gas, hydro, phones, internet, satellite & water heater), car payment (1), gasoline, groceries and gym memberships as well as a budgeted discretionary spending.
I then created a separate tab in Microsoft Excel for each month and enter the values for each category. We have a dedicated amount of our income that goes into savings automatically, but any extra savings are moved to appropriate items at the end of the year such as an extra mortgage payment, RSP contribution or investment in our non-registered portfolios.
Finding your average monthly cost for things such utilities is actually quite easy. If you make payments online through your bank you can often view payees for up to 12 months. Simply tracking that spending online or through your credit card receipts helps you to understand what you’ve spent and likely what you’ll spend in the future considering things such as inflation.
The savings schedule in the last tab is helpful for those interested in tracking their debt and saving priorities. By simply entering pieces of information you can get an idea of how your savings can be broken up each month in order to see how much you’ll save for various items in a 12 month period. You can then commit to a saving plan that allows you to achieve a number of objectives easily by committing those funds outside of your budget without overspending.
Tracking each and every receipt may seem obsessive, but once you become accustomed to tracking what you are spending you have a better understanding of where you money is going each month.