Helping you plan, start and grow your business
Numbers Can Talk — Are You Listening?
Periodically, my husband I and update a spreadsheet that details our spending over the previous twelve months. We had not done this since becoming empty-nesters, and recently decided it was time to review our expenses.
There were plenty of surprises! As happens with most analyses, the numbers “spoke” to us. We were spending more than we thought in some areas, and less in others. As a result, we have identified changes for the future.
I started this process years ago when I had a sense that money was slipping through our fingers in an out-of-control way. Initially, I kept it simple. Credit card charges to a grocery store were groceries, etc. A receipt from a more general store (e.g., Target, Costco) was divided between the key categories of our purchases. Payments by check and cash were also included – even if I had to guess at them.
Because I love spreadsheets, ours has become more complex over time. However, beginners can learn a lot with these twelve basic cost groups:
o Housing – fixed: mortgage, utilities, cable, property tax, insurance, phones.
o Housing – variable: landscaping, repairs, paint, furniture, household items.
o Transportation: car loan, insurance, repairs, upkeep (i.e., oil changes), gas, property taxes, licenses, AAA membership, public transportation.
o Medical: insurance, out-of-pocket costs, prescriptions, related medical travel costs.
o Insurance: life, disability, other.
o Physical appearance: clothing, shoes, cleaning/alterations, hair cuts.
o Kids: allowance, gifts, toys, sports participation fees, summer classes.
o Donations: deductible, non-deductible.
o Food, Health & Beauty Aids: groceries, toiletries.
o Entertainment: vacation, restaurant meals, concerts, CDs & DVDs, books, magazines, pool membership, sports tickets, health club membership.
o Miscellaneous: gifts, pets, parking, tax preparation, legal fees, postage & shipping, safety deposit box, etc.
o Extraordinary costs: Occasional large expenses such as car purchases, home renovations, special travel, moving costs.
Your expense categories should be defined in a way that makes sense for you. For example, children’s clothing could be included under Kids or under Physical Appearance. Also, you can compress the dozen categories shown above into five or six, based on your needs.
Do you have a household budget?
Do you know what your actual expenditures are?
Is it time to take an honest look?
This process is worth the investment of time. When it comes to personal finance, ignorance is not likely to result in bliss!
Until we meet again,
The Entrepreneur’s Friend