The Importance of Tracking Your Spending

The first four months of 2016 thus far.

I don't know what it is, but from time to time, I get asked by friends and family how they can save more money.

Frankly, I don't know why they ask me. Maybe it's my clothing. Maybe it's because wifey is telling people our plans to retire early. Maybe it's because I'm rarely seen spending money.

In any case, I always ask them how much money they bring in each month. I usually get a rough estimate. Okay. So how are you spending the money?

Well, now I'd get a rough breakdown. So and so much for the mortgage, this much for groceries, that much for whatever, etc.

Okay, that's great that you have a general idea. But most of the time, people are underestimating how much they are actually spending!

I'd tally the figures spewed out and tell them that based on their figures, they should be saving such and such! Generally, people ask me if I'm sure. We'd do the math again. This time with paper. Sorry, I was wrong, you should be saving more on top of my first estimate!

Again, they'd be in disbelief (why don't people believe me?) and they'd run the numbers again on their phone.

Why the disbelief?

Well, most likely because they aren't saving any money in the first place! That is the reason they asked for my advice, right?

After triple checking the figures they provided me, I usually tell them "Hey, in order to get a good understanding of where your money is going, you'll need to keep track of all your spending. You need to account for every penny."

Some people are receptive to the idea, and some people just politely nod and continue with their non-saving lifestyle.

Frankly, it's not that hard.

For years I've been tracking my spending with Google Sheets. Originally, I used an Excel spreadsheet, but I migrated the spreadsheet to Google so we'd be able to access the file anytime we needed to. When I'm talking to people about money, sometimes people don't believe my figures. e.g. "You spend how much a month on food?"

Anytime, wifey and I spend money, we keep the receipts and we'd add the figures into our spreadsheet. I even got the in-laws to give me their receipts when they go grocery shopping.

It doesn't matter if it's a $2 item from Tim Hortons or a $100 charge at Home Depot. It gets added to the spreadsheet and the formulas I programmed (simple sums and averages really) do the rest of the work.

In the snippet I provided above, I can see that our spending for food is around what I budgeted ($450 a month). The only problem is that there is still one weekend to go in April so that will push our monthly average past our budget. In March and January, the food budget was exceeded because of a few restaurant trips with the in-laws. Looking at transportation, we can see the amounts steadily declining. That makes sense since wifey changed jobs and doesn't required her weekly GTA Pass. As a result, we're driving the car more and gas use has gone up in April. Part of that is also because of the increase in gas prices from the beginning of the year. I budgeted $100 a month for gas, seems we may need to change this if the trend continues.

Of course, this alone doesn't help you spend money. However, once you have an idea of how you're spending money, the next step is to determine where you can make sacrifices in order to keep more money for yourself.

Spending $200 a month on cable, internet and home phone? I'm sure you can get that down a lot.

Spending $150 a month on two mobile phone plans? Wow. Definitely can bring those down.

Spending $100 a month buying coffee from Tim Hortons? Maybe consider making your coffee at home? Possibly cut back on the amount of coffee you consume daily?

Once you start cutting back on what you're spending money on, that's when you'll start seeing the savings.

Of course, none of that matters if you don't believe me.