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,”
“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.