Heard on the radio yesterday: “Hey people, there’s only 3 paychecks left until Christmas!”

The Holidays are coming! Black Friday ads are already being leaked. The new mantra is “Why not just buy it now?” You hear a lot of scolding about all the consumerism in response, but the malls always end up packed no matter way. Perhaps the best way to deal with this annual event is to simply budget for it? It’s not like these are surprise expenses – should it really matter how many paychecks are left?

The other day I was reading about a tiny credit union that my wife’s company partners with, and they offered a “Christmas account”. It’s just an extra savings account where you can put in regular deposits each month. My cynical side thought “How quaint… like anyone does that anymore.” Kind of like how layaway no longer exists.

Or does it? Here’s a poll exploring how people deal with the expected expenses of the winter holidays. Decorations, travel, food, gifts…

Do you think that the following statement is true or false? “Buying a single company stock usually provides a safer return than a stock mutual fund.” True False Don't know Refuse to answer View Results  Loading ...

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.