The Living Healthy in the Real World Guide to Budgeting: Part One: Understanding Your Expenses

Welcome to Part One of the Living Healthy in the Real World Guide to Budgeting mini-series!

When I wrote about my Raw Food Diet, I was surprised at the vast number of people who thoughts that spending $230 on food for one month was a lot of money. This was a very reasonable amount for me, and even a little less than I might normally spend.

This tells me that (no offense), most people don’t really realize just how much they spend, and where they are spending. That $230 figure included not only groceries from the grocery store, but also every time I would have gone out for a meal, bought a cup of tea at a cafe, and also any kind of alcohol (although, obviously, I was not drinking alcohol during my Raw Food Challenge). When I say “I spent $230 on groceries”, I’m including every single dollar that I spent on anything that was consumable.

$230 in one month is, to be honest, a shockingly low figure. I watch what I spend my money on. I shop the sales and I do not go out to eat very frequently. Even taking into account that food in the United States is cheaper than in Canada (or so I hear, anyways), I imagine that most people unknowingly spend over $250 a month on groceries per person in their families.

Understanding your expenses isn’t going to be pretty, especially if you haven’t ever tracked your expenses before, but it’s absolutely necessary. Here’s how to do it:

1. Track everything you spend. And I mean everything. If you give 25 cents to the homeless man down the street, write it down. If you lend a friend a couple dollars, write it down. If you buy a coffee at the corner store, write it down. There are five things that you want to make a note of when you’re tracking your expenses: first, write down the date. Second, write down the business that you bought the item from. Third, write down what it is that you bought. Fourth, write down how you paid for it. Fifth, write down how much it was, rounding up to the nearest 25 or 50 cents.

A few days of my notebook looks something like this:

31/01/10 Forks Market (2 yams and bananas) –> cash $2.50

02/02/10 Soma Cafe (roti) –> cash $6.00

01/02/10 Manitoba Hydro (monthly bill) –> bank withdrawal $25.00

2. Be specific. Write down not just “groceries” when you hit up Safeway, but the kind of groceries you’re buying. You don’t necessarily need to write down every single item, but at least distinguish between food and, for example, toilet paper. Instead of writing “Safeway (food)”, write down “Safeway (fruit, Kleenex, toilet paper, beans, and milk”). If you spend money on something for a specific event, such as a potluck or a dinner that you’re cooking for some friends, make a note of it. You want to know what you’re spending your money on and where it is going.

3. Never round your numbers down; always round up. If you spend $3.30 on an item, round it up to $3.50. Even if you spent $3.10 on an item, round it up to $3.25. It’s better if you assume that you’re spending slightly more than you actually are, rather than assume that you’re spending slightly less.

4. Track your income, too. Any time that people give you money- whether it be your paycheque, your roommate’s rent cheque, or a tax return- write it down on a separate piece of paper in your notebook.

5. Look at your bank account every day. I pay all of my bills online, plus my investments come directly out of my bank account each month. If I didn’t check my bank account online on a daily basis, I would have no idea that a few hundred dollars were “disappearing” each month. So, check your bank account online every day, and if there are direct deposits or direct withdrawals, record these as well.

6. Count it all up at the end of the month. On another separate piece of paper in your notebook, add up all of your expenses and all of your income. See if they somewhat level out. Chances are, you’ll be spending far more than you think and far more than is necessary, but that’s okay, we’ll find many ways for you to decrease any kinds of wasteful spending!

Now that you’ve started tracking your expenses, do not stop. Keep doing this for the rest of your life. It takes next to no time at all, just a few seconds to jot down what you’ve spent. Once we’re conscious of what we’re spending, how we spend, and what we’re spending it on, we can re-organize our finances to make life that much easier- and save a ton of money in the process.

Do you adore the convenience of online banking as much as I do? Do you track your spending? Have you done it in the past? Do you think you would be surprised at where your money goes if you began to keep a record of it?

Stay tuned for Part Two of the Guide to Budgeting mini-series, in which we’ll look at the issue of Making Sacrifices!

17 Comments

  1. I know exactly where my money goes. I am an engineering. I love numbers. I track almost everything. I know for a fact that if I count every dollar spend on food (dining out, coffee, and groceries), my husband and I double what you spent.

    I know some people think we spend far too much and others who thinks we spend far too less. One thing I know is that no matter what you do with your life, someone always think there is something to say about it.

  2. I use mint.com to track all my expenses and income. I never carry cash so this tool looks at my bank accounts and credit cards and condenses all the information in one place. You can also set up budgets so that you can compare. It’s awesome!

  3. I am a total tracker! I just signed up for online banking this month and will pay my bills tomorrow with it – can’t wait!

    My husband and I have no credit cards, and no debt other than our mortgage and utilities. We love living this way!

    Great post Sagan!

  4. I agree with you. Most people consider $250 high because maybe they are spending a lot of their food money on restaurant and or coffee food! So obviously their grocery bill will be smaller. You do count restaurant foods as your grocery spending? I don’t. I like to see the difference. I just printed out our spending for the month of March and we spent $440 on groceries (just food, not including toothpaste, soap, etc) and $45 on food out. Not bad! I was happy with this.

  5. Asithi & Biz- That’s awesome that you track it all!

    Lauren- I’d never heard of mint.com before; am DEFINITElY going to check it out.

    Tony- I know so many people with that exact same problem :)

    Gina- I lump all food/drink together in one bundle. And it works pretty well; I still know that obviously I can’t go out at restaurants all the time, but if I DO wind up splurging, I know that it’s time to bring out the bulk lentils ;) But I do separate them when I want to compare and see where I can cut back… because I so rarely dine out for meals, it seems almost pointless to NOT count restaurant foods as grocery shopping.

    Jamie- YES this is so very true. That’s what I’ll actually be talking about in Part Two! We have to make sacrifices, but we also have to decide what it is that we CANNOT live without. There’s no way that I’d stop buying fresh fruit and veggies even if they do sometimes get expensive; instead, I’ll either cut back in other areas of my spending life or else I’ll buy the cheaper (read: in-season) fruits and veggies. It’s all a matter of balance and deciding what we are willing to spend lots of money on… and where we are willing to cut back.

  6. Whenever I’m trying to figure out where a problem is (be it finances, weight, time, or whatever), the best tool of all is a pen and paper. It’s a great way to get a snapshot of what’s going on, and it’s loads of fun to watch the numbers go down (or up if I’m tracking savings) as I make little tweaks.

  7. I do on-line banking! As for keeping track of it all, I have NEVER balanced my checkbook in my life! I have gotten very good at apologizing for overdrafts, however :-)

    I think it goes, “It’s easier to be forgiven than to get permission!”

  8. these are great tips! I just started to note most of my expenses in a little notebook and it’s hard, I tend to forget since most of the time I use credit card. now i think I’ll do what you suggest, check bank account every day to keep tracking! :)

  9. Hey Sagan,
    This is all GREAT stuff!! I am big on keeping track of what we spend. And – while it seems like recently I haven’t been quite as consistent with it, it is still something that I at least semi-regularly follow up with. And it’s always a good reminder of where I am at financially…and if there are any trends one way or another….

  10. Diane- I haven’t heard of that book; I’ll have to keep an eye out for it.

    Cammy- I agree. It IS fun to see progress, and pen and paper are truly magical tools for the job!

    Dr. J- Is it? Is it REALLY? :D

    Sophia- I’m intrigued by this mint.com site!

    Miz- Oh me too. I’m not willing to cut back on healthy, good quality food too. That’s why I cut back in other areas of my life :)

    Coco- I think it’s awesome to use a credit card for most of what we pay for (provided we remember to PAY OFF our credit cards!). That way, there’s a paper trail to track everything that’s being spent. Plus it give you good credit rating!

    Lance- Yes: things definitely change as time goes on, so even if we don’t track ALL the time, it’s good to periodically come back to it to see what has changed and how we can work with the new things in our lives.

  11. All my banking is online. I track my money with mint.com. I know where my money goes and everything… it’s just unfortunate that there isn’t more of it. I’m the best in my family with money yet I struggle because of their habits. Sad. Anyway, this isn’t a pity party! I think 230 for food isn’t bad. I usually spend more than that on just myself with the kinds of food I buy and eating out (yeah, I include that which most people seem to forget). So I think that’s good.

  12. There was a time in my life when I wrote down every single penny that I spent and every single penny that came in as income. It was one of the best things I ever did and I did it religiously for 1.5 years.

    I became very aware and accountable about how I handled, spent and managed money. I highly recommend the practice. I’m now in the process of working with a bookkeeper to get the same practice set up through Quickbooks and I’ll do a daily entry of what I spend vs earn.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

CommentLuv badge