The Average American’s Spending Breakdown

I’ve been trying to find a pie chart listing the spending breakdown of the average American to provide a frame of reference for our spending pie chart last year, and here is the closest I could find. It’s in terms of pre-tax numbers, and I added the percentages for clarification:

The chart was taken from an article by the Tax Foundation think tank, whose stated mission is to “educate taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government.” However, there is some argument about the accuracy of these numbers.

Note that there is no slice for Savings, as our savings rate is negative according to their calculations.

Posted in Budgeting | 23 Comments »

Our Spending Breakdown For The Last 12 Months

Several readers shared their own spending breakdowns in the comments of my previous post, so that inspired me to dig up the numbers for ourselves. I don’t have exact stats, and our income varies each month, but I did the best I could by averaging everything over the last 12 months. The percentages are taken from after-tax, or “take home”, income.

Quick explanations for each category:

Food is both eating out and groceries. Car means gas, maintenance, and insurance. Insurance means everything but car insurance: Health, Dental, Disability, Renter’s, and Umbrella. Utilities are all monthly recurring expenses like natural gas, electricity, trash, cell phone, VoIP, and water. Travel includes both visiting family and sightseeing. Savings includes both short-term savings for a house downpayment and putting away for retirement. Other is everything else - pet-related, clothes, gifts, donations, etc.

Things look pretty manageable for us right now, but soon our housing slice will probably double or more in size, and we have no kids right now, so the pie will definitely evolve over time. Of course, hopefully we’ll be earning more too. I also want to add life insurance and maybe better disability insurance to the mix soon.

This was an interesting exercise, perhaps just as illuminating as tracking your expenses for a month. Even if you guesstimate, you’ll likely end up with something that may inspire some change or simply reinforce your efforts so far.

Just like with my net worth tracking, I’m not here to compete with anyone else, I think we all have our own goals to work towards. However, feel free to comment with your own numbers.

Posted in Budgeting, Frugal Living | 40 Comments »

Expense Tracking and Budget Results - February 2007

Yes, you read it correctly. It’s the end of March and I’m finally typing in the last of my receipts into my PearBudget spreadsheet. Tsk tsk.

Overall Results
I started out strong, with my carefully laid out Expense Tracking Plan of Attack (with all of 2 steps!), and my Mid-Month update. But then I started dreading the monotony of sifting through receipts. “I’ll do it tomorrow” are four very dangerous words.

My usual method for managing my spending is to simply consider each and every purchase before I make it. The main benefit of typing in these receipts over that is the ability to judge my progress and perhaps adjust my money “attitude” as the month goes on. Am I in thrift-mode or relaxed-mode? It gives you an reason to perhaps not splurge on that seemingly minor-item, either for yourself or as an explanation to others - “Oh, I’ve already spent to much on XXX this month”.

But I did finish, and I still think that everyone should do this if they are trying to improve their financial situation. The only two ways to get more money is to either make more or spend less. And the best way to spend less is to fully comprehend what you are buying.

Specific Numbers
I won’t share all the gory details, but here are some of the major categories. This is for two people:

The first step of the budget spreadsheet is to put down the amount of money you want to budget for each category. If you have never tracked your spending before, you may be very surprised after the first month and need to make some adjustments.

We were actually pretty close in most of the categories. We could do better than $600 a month on food, but we consciously enjoy eating out and it is within our means. We bought some new ski gear and bought some gifts this month but nothing special, so I should probably bump up the allowance for the “Personal” category a bit more.

One surprise we did have was our heating bill. Old house + old furnace = $200+ gas bill! Even when we had electric baseboard heat in our old house our heating bills peaked at $100. Nothing we can really do about it now, but it’s something we should have considered it while browsing for rentals.

In the end, the only real thing I would change is to add more cushion into our budget for “expected” unexpected expenses that I’ve mentioned before. To that end, I think I’ll continue to try out new budgeting methods each month.

Posted in Budgeting | 14 Comments »

Americans Assess Their Saving Habits: Unexpected Expenses

Here is an interesting survey from the Pew Research Center - Americans Assess Their Saving Habits. A lot of the results are what you would guess:

• Most people (77%) say they are always trying to save money.
• Most people (63%) also say they aren’t saving enough.
• Housing, cars, and utility bills are the hardest to afford.
• Dining out, entertainment, and shopping are the most common areas that people splurge on.

What caught my eye was the section on unexpected expenses. About a third of adults say they had an unexpected expense in the past year that “seriously set them back financially.” Among this group, here is the breakdown of the top 4 most common expenses:

By these numbers, the average American this year will have:

• 11% chance of having a significant unexpected medical bill, and a
• 8% chance of having a significant unexpected car expense, and a
• 7% chance of having a significant unexpected housing-related expense

My conclusion? Expect the unexpected. It’s only February and we’ve already had unexpected family-related expenses in 2007. I think an allowance for such occurrences should be included in our budgets specifically, and not just reserved as a reason to use the emergency fund.

Do you budget for the unexpected? Or do you just let it happen and deal with the ups and downs?

Posted in Budgeting, Insurance | 19 Comments »

Tracking My Expenses: Mid-Month Update

I’ve been dutifully recording my expenses for two weeks now. Here are a couple of observations so far.

It really is simple and flexible. Just as I had hoped, this method is much less stressful that when I had to worry about synchronizing accounts online or reconciling debits and credits with personal finance software; Now I just have to dedicate about 10 minutes twice a week and type in single digit numbers into a spreadsheet. Just simple addition!

You can see how much you have left as you go. By setting an goal for each spending category and updating every few days, I notice things like “hey, I already spent $115 eating out this week, I should cut back a bit”. It’s similar to the envelope or bucket method of budgeting, where you can only spend a set amount from each category, but not as strict.

Posted in Budgeting | 11 Comments »

Reminder: Track Your Expenses For A Month

Just a quick reminder that I’m tracking my expenses in February, and everyone with a similar inclination should join in the fun.

Here are the categories I assigned myself in PearBudget:

Regular Expenses - Housing, Phone, Cable, Internet, Garbage, Insurance
Variable Expenses - Gasoline, Electricity/Gas, Groceries, Dining out, Household, Personal Care, Pet Care, Recreation, Everything Else
Irregular Expenses - Car Repair, Travel, Gifts, Healthcare, Water/Sewer

My receipt spike is excited! I’ll check back in after a week.

Posted in Budgeting | No Comments »

My Expense Tracking Plan Of Attack! (Join Me?)

I fell off the budgeting wagon months ago, and haven’t been back on since. I’m still saving a good chunk of money each month, but it’s high time that I drink my own Kool-Aid and start tracking my expenses.

I haven’t been overly impressed with either Money and Quicken in the past, so I needed to find an alternative. After browsing through my big list of free budgeting tools, I’ve decided to try the PearBudget spreadsheet out first. It seemed to be the best candidate for me because:

It’s free, and it won’t stop working after 2 years, either!
It’s offline, so no worrying about importing files or syncing problems.
It’s flexible; I can update every day or once a month, whatever works.
It’s simple. I’m only concerned about tracking expenses. I don’t need any other features to distract me or take up more time.

In fact, there are only 2 steps that require any effort:

I just finished the first step today, which is name the categories you want to track and give some rough estimates. It really did only take 10 minutes.

To help me with the second step, I went out and bought one of those restaurant receipt spindles from OfficeMax for $2. My plan is to get receipts for everything, and whenever I get home to spear them all on the spike. Every day or two, I’ll empty the spike and punch in a few quick numbers into PearBudget. All tax-deductible expenses will be stored in a folder for tax time. Sounds reasonable, doesn’t it? I plan to start tracking in February. I invite anyone interested to join me and discover exactly how our money is spent during any given month!

Posted in Budgeting, Goals | 64 Comments »

Death and Taxes: A Visual Guide to the Federal Budget

Ever wondered where your taxes went? Who has the time to actually read our $2.8 trillion budget? Well, now there’s an easier way: the incredibly high-res Visual Guide to the Federal Budget. From the site:

Knowledge of how your taxes are spent is essential to being a responsible citizen. If people actually knew what their thousands of dollars of income taxes paid for, there would be rioting in the streets, or at least some more accountability in Congress.

Posted in Budgeting, General | 5 Comments »

You Have Some Money. Where Do You Put It?

I went over understanding your spending and also free budgeting tools. Once you start managing your money better, you should be spending less than you earn. Or maybe you have come across a lump sum of money somehow. Now what do you do with the money? Although everyone’s situation is different, I think that a good discussion can evolve from this.

Here’s a list of possibilities:
Read the rest of this entry…

Posted in Budgeting, Investing, Real Estate | 64 Comments »

Big List of Free Budgeting Tools and Software

More than a month ago, I wrote a post about tracking your spending for a month. I tried to think of the best way to budget, but I don’t think there is anything that works for everyone.

Everyone knows about MS Money and Quicken, so instead I’ve decided to compile a resource of free budgeting tools so that people can try them out on their own. Try a few. Get some ideas. Make your own. The important thing is to find something that works for you.

Here they are in no particular order:

• Quicken Online - Recently became free of charge. Tracks your spending and categorizes it automatically.
• SimpleD - An “open source Windows application designed for personal or household financial management.” The screenshots actually look pretty slick.
• AceMoney Lite - Freeware version of an offline personal finance management program. It even downloads stock quotes from the internet. Thanks Ken.
• PearBudget - An Excel spreadsheet that has definitely had a lot of time put into it. It’s a bit busy, but I still like it.
• Microsoft Office Accounting Express 2007 - Seems targeted at business, so this may be overkill for home budgets. But amazingly it’s free!
• Yodlee MoneyCenter - Initially just an account aggregator, Yodlee now offers spending categories which can be used to help you budget. (Why I use Yodlee for account aggregation.)
• Mint.com - Based on Yodlee back-end, with different features.
• Stackbacks - The “Stackbacks Automated Budget System” is more of a budgeting setup guide than a tool, but hey, download the .pdf and read away.
• Buddi - An open-source personal finance and budgeting program, which will run on any machine with Java installed. Thanks Gerard.
• Budget On Web - Also more biz-oriented, it is a “free online system that integrates project management with contacts management and financial tools.” Free up to 5mb of storage, that is. But that sounds like plenty for personal needs.
• Mo.neytrack.in - A “free online webapp that allows you to track all your expenses and income.”
• Grisbi - Another offline open-source personal finance app.
• MySpendingPlan - A free online budgeting software system that works on the ?”envelope” system. (Somewhat dated overview here.)
• PHPFIN - An open-source personal finance management program. It seems like you have to install it on your own server?
• GnuCash - “Personal and small-business financial-accounting software, freely licensed under the GNU GPL and available for GNU/Linux, *BSD, Solaris and Mac OS X.” Does OFX and QIF imports.
• Budget Master - A free personal budgeting program that offers charts and visual reports.

I haven’t had the chance to look through all of these, but if you go to SourceForge and search for “budget”, you get a variety of programs. Some look interesting and some haven’t been updated in a while.

Unnamed “Homegrown” Spreadsheets

Some of these I have on my computer, but I can’t remember where I got them from. Either it was downloaded somewhere where it was openly available, or someone e-mailed it to me and said it was okay to distribute. I do not take credit for any of them.

• Spreadsheet #1 - Very simple budgeting spreadsheet. Nothing fancy.

• Spreadsheet #2 - by a Neil Rothman - A bit more advanced with pull down menus and better layout.
• Spreadsheet #3 - Not sure who made this, but according to the file properties it was by “Anne, Edward & Frank Robinson”.
• Spreadsheet #4 - Another simplistic spreadsheet, author unknown.
• Spreadsheet #5 - Submitted by user Tony B. Instructions on use are included.
• Within Your Means - Via LeisureGuy, it looks like pretty polished.

This list is will be updated as I find more. If I missed anything or you have your own spreadsheet to share, leave a comment or shoot me a message with it attached.

Posted in Budgeting, Tools & Calculators | 54 Comments »

Back To Basics: Track Your Spending

Pop Quiz: How much money did you spend on food last month?

I’ve been blogging about money now for almost two years, and I’ve been wanting to put together a kind of distillation of all the things that I’ve learned. All these posts are the equivalent of rough drafts, so comments are welcome.

Taking a step back and thinking of what is the first step to setting yourself up for financial security, the first thing I thought of was to make a budget and make sure you spend less than you earn. But then I thought, before even doing that, I think you need to first sit back and observe your current habits. What are you spending now?
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Posted in Budgeting | 37 Comments »

Sticking To Paper Bills…

You’d think that with all the accounts that I have, I would love getting my bills electronically. Nope. I recently tried to go 100% e-bill. Nearly ended very badly with multiple late payments. I get so many e-mails a day, it’s just too easy for me to put them off initially. Of course, if it then gets pushed off the first page of e-mails, I may never see it again for weeks.

Paper bills are nice in that even with a cluttered desktop, I still clean it off constantly and at most I wait a few days before paying the bill online. For some reason, also having a hardcopy of the bill for recordkeeping is comforting. Anyhow, not that anyone cares, but I’m now back to 100% paper bills. Even if Citi keeps dangling that $5 carrot to get me back…

Posted in Budgeting | 37 Comments »

Be Careful of 0% Financing At Retail Stores Like Lowes

Most homeowners may already know this, but since I’ve never had to purchase a bunch of large appliances, I only noticed this recently while fawning over fancy appliances (Man, I’m getting old). When stores like Home Depot, Lowes, or Best Buy offer “No payments and no interest for 12 months”, it’s true, but with an interesting catch. If you don’t pay in full before that 12 months ends, they will charge you back interest for the full price of the purchase from the date of purchase, often at about 20% APR! It doesn’t just start accruing from when the promo period ends.

Here’s an example. You buy a nice stainless steel fridge and oven range for $1,500. You’re happy, paying nothing for 364 days. If you pay it off early, you pay $1,500. If you figure, well, I’ll wait after the whole 12 months is up and then start paying it off, you get to pay $1,800 ($300 more!)
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Posted in Budgeting | 21 Comments »

SunRocket VoIP 2nd Year Renewal for $99

I’ve had my SunRocket VoIP phone line for over a year now, and was happy to renew it for another $199 per year (see my Sunrocket Review for more about the service). Shortly after agreeing to another year at $199, I read somewhere on DSLReports that people who were calling in near their 1-year anniversary were being offered a 1-year extension for $99. Of course, I wanted in.

But when I called, they said that I was already locked in for $199, and that I would have to wait until the end of that year to ask again for the $99 deal. Bummer. Well, after calling back with some polite sweet-talking and a month of waiting, it looks like I got it. $100 saved for not giving up, cha-ching! So if you have Sunrocket and are near your 1-year anniversary, I’d definitely recommend calling in before your annual contract renews.
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Posted in Budgeting, Deals & Offers | 17 Comments »

Looking Back: A Year of Owning a Dog

It’s been a year now since we’ve gotten our kid… err, dog. Cavalier King Charles Spaniel to be exact. I know this because we just had our annual vet appointment for more shots and a general exam. This got me to thinking how much we’ve spent on pet care over the last year. I think many people who get pets fail to realize the financial committment that it requires. They also may underestimate the emotional attachment you get to your pup. I know I did.

Since we broke the $1000 cost barrier only 3 months into having him, we’ve actually settled down to a nice routine with him. Basically all the things we bought, like the crate, bed, leash, nail clippers, etc. were all decent quality and are still working just fine. Here are the rest of our expenses.
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Posted in Budgeting | 25 Comments »