25 Feb 2010

How to analyse your spending and why you need it

When you first decide that you may need to structure your finances and get more control over it you very quickly discover that the corner stone of successful budget is a good understanding of your pending patterns.
When I first started I thought it will be easy! How can I not know what I spend?!

Well, the truth was – I actually had no idea… I knew the end result documented on the month end in a fat overdraft but I had no idea how it came about!
I’ve tried several things and none worked in isolation but together they helped me a lot – so here I am sharing my experience with you!
If you’ve been reading this blog for a while you would know that I am not a great support of detailed and painful budgeting or tracking. But some times detailed tracking is kinda necessary….

So, what did I do?

1. Analysed categories.
I have looked at my monthly bank statements and categorised what I could. I also found out that I was withdrawing a lot of cash and I couldn’t account for 30% of our overall spending because of that

2. Tracked daily for a short period.
So, I decided I need to track my daily spending for a several weeks (would never manage to do it for longer!). I had a choice of writing down on a piece of paper or use something more sophisticated. I did both!


  • I first created all monthly spend categories online (I’ve used a dead simple online free tool - it’s a bit ugly but it allows for USD, GBP, Euros and Rupee and does everything you need for such a basic task)

  • I’ve allocated budget per category per week (take your monthly budget and divide it by 4.3 – this is your weekly allowed spend) I did it on a weekly basis because I find month a bit too long-term when I am thinking about buying or not buying a latte in the morning!) I also have used moneystrands free online tool and a couple of others until I had to admit to myself that I won’t be tracking my expenses that rigorously for long!
  • As a converted iPhone user I’ve downloaded a free app (called Spendometer) … There are many more apps, so have a look around!
3. Made go/no-go choices.
After about three weeks I actually got a very good feeling for what and where I spend. I stopped obsessing with my Latt̩ spending as it never amount to more than 0.5% of our earnings. So I kept buying it; but on some days I now buy coffee first thing at work (costs only 1/3 of my Costa Coffee) so РI still feel happy and spend less. I also found out that shopping at Waitrose online is actually often cheaper than at ASDA (so Рthe most expensive brand proved to be a much better value for money than the UK WalMart version)!

4. Looked for better value for money online.
I used http://www.mysupermarket.com/ to help me see how much my online grocery shopping would cost me where. This site is precious! You type in the whole grocery list at once, it puts everything into your shopping trolley and shows you how much this trolley will cost you at: Sainsbury’s; Tesco, ASDA and Ocado! You than need to click on the shop of your choice and the trolley gets sent over to the online shop for you to complete the order.

What have I achieved so far?

  • We are adhering to most of our monthly budgets (for grocery, petrol and clothing)
  • I feel in control of rather than controlled by money
  • We save enough to cover most of irregular or unexpected spending

I actually can tell you what I am spending money on! I understand how our expenses are coming together and why we might overspend and where to get the extra money if we need to (by cutting spending)

Our monthly budget is achievable and not overambitious, I don’t feel threatened by the whole money topic and most importantly I haven’t abandoned the whole budgeting – money management thing even though this month we ended up overspending.

 image by krossbow

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