So as promised, and unlike when I was in school all those many moons ago, I did my homework. I reviewed every single debit over a one month period. And boy, did I learn a lot…
Firstly, if you are going to do this – don’t worry about the timeline you choose to examine. I looked back over the past few months and saw large “once-off” transactions in every month. Originally I was thinking ‘no, this won’t be a “typical” month, but realised that’s just it – there will always be something. House Insurance one month, car tax, car service the next, dental treatment etc. So there’s my first lesson from this review – I need a money reserve for these once off/annual/ad-hoc payments. What if there comes a month where I need to pay the dentist, get the car looked at, buy birthday presents etc – all from the one paycheck along with the usual bills. I would be up the proverbial creek, without being able to afford a paddle!
So I chose the period from June 25th to July 24th as I am paid on the 25th of each month. I logged into my online banking and listed out every single transaction for that period. I then split these into appropriate categories. The categories that were relevant to me are below. You may have other categories such as childcare, sport or education expenses, travel expenses, medical needs etc. Hopefully the categories I have used may be a good start for you too.
- Credits (Salary and any other credits to your account)
- Loans & Insurance
- Grocery Shopping
- Annual Payments (House Insurance, Car Tax etc)
- Travel & Entertainment
- Eating Out
- Misc/Once Off
- Health & Beauty
- Utility Bills
I simply put all of these expenses into an Excel spreadsheet and totted up the figures. I compared all of the outgoings against the incomings. As shared in my previous post, apart from a very small amount going to an online savings account, there was a grand total of 60c remaining before the lovely payroll people at my company came along with my monthly salary for July. This is dangerous territory and not at all sustainable at this stage of my life.
I then created a graph to better display the spending pattern for comparison, and I suppose – shock factor! Using the total for each category as a percentage of my overall monthly salary, I was able to see exactly where my money was going. And it’s safe to say it’s not going towards an early retirement…
Here are some of the cold hard facts of the initial observations:
- I am spending almost the same amount of money on groceries as I am on my mortgage <insert shocked face here peeps> Quick reminder that there are 2 people in this house!
- The Annual and Once-Off payments I needed to pay over this period were 15% of my entire monthly salary.
- While Eating Out does not appear to be a large percentage of my salary, I can assure you there was no fine dining or Michelin stars to be had… So there’s 4% of my salary going on bags of chips or grabbing a quick sandwich.
- Savings is right down there at the bottom, with only 3% of my monthly salary going towards future-me. Confession time here too – this goes to an online saving account and is very easy to quickly transfer as needed. So you can imagine where that ends up in the few days before payday…
So though I haven’t yet made any changes, I am now better acquainted with where my hard earned money is going each month. This will allow me to focus on a few key areas and identify where I could be making savings.
Try it too guys – list out all your spending over the last month. I’m sure there’ll be some surprises and hopefully even help you to also identify where the quick savings could be made.
I’ll be back to you all soon with updates on how I get on with my deeper analysis on my spending.