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.

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.

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.

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.

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?
[Read more...]

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…