I tracked every penny I spent in 2013. I did it because I was curious about how much I spent on different items – rent vs food, eating in vs eating out, booze vs sports and so on.
My spending is of course specific to me and my situation – 30yo, living in London, no mortgage and no kids. But I expect that several of the things I learnt are applicable to many others, so I wanted to share what I found.
1. You manage what you measure – I was more conscious of every single spending decision, and as a result would usually choose the cheaper option when it was comparable and available
2. The impact of the act of tracking itself wasn’t 20%, but it probably was c.2%. Tracking changed small decisions, not big ones. The cheaper lunch option got picked over the more expensive lunch option, even when it was less appealing – because tracking made me more aware of my choices.
3. Rent is a net worth killer. >25% of total spending for me last year.
4. Alcohol + eating out quickly add up. Cut this in half to save a lot of money. Not too difficult since spending is concentrated into a small number of relatively expensive occasions. So one night extra at home per week would make a noticeable difference.
5. Related: food shopping should always be substantially bigger than eating out. This is a balance worth getting right because you can’t go without eating.
6. Bills are a big chunk: 10% of total spend for me. So I’m going to see where we can switch and save. E.g. today I’m changing phone contracts and will save £20/month, nice.
7. Charity direct debits might feel like a drain because you don’t directly see the benefits, but they’re a tiny % of total spend. If anything, I’m considering increasing them once I’ve identified other savings.
8. When you have the data, there is A LOT you can do with it. I’m not going to publish my graphs since I don’t want to make my my spending patterns public beyond the basics above, which I hope are helpful indicators. But I can use the mass of data I’ve got to see how one category relates to another, and how my spend changed over the course of the year. These trends are quite revealing, and you can only see them once you have a sufficiently large and set of data.
9. Forcing functions work well. Automated transfers for savings, rent, and bills on the 1st of the month mean that you always have a clear picture of what remains after savings + fixed costs are covered.
10. Tracking your spending in this amount of detail is an almighty pain in the ass. It would be easier if one could live without spending cash, since some banks already automatically categorise card purchases. Read the tips below if you’re thinking of tracking your own spending.
Tools: I used the aptly-named Money app from Jumsoft: http://www.jumsoft.
Methodology: I paid for everything possible on card so that I would have a paper receipt and could batch-input spending later. I probably did miss a few cash items along the way, but I’d be surprised if the final figures were >1% inaccurate as I was pretty diligent about the whole thing. I omitted all costs from our wedding, since that’s a one-off and I wanted to learn things that I can use in 2014.
Three top tips if you’re going to track your spending:
1. Set a clear start and end date – I’m surprised at myself for continuing for a full year, but when the first thing I bought in 2014 came with a huge sigh of relief because I didn’t have to note the bloody thing down in my tracking app
2. Get into the habit of adding items directly after purchase, and don’t rely on your memory for adding cash purchases later – as soon as your tracked spend deviates too much from your actual spend, you’ll give up and learn nothing
3. Be clear in advance about what categories you are interested in. The biggest mistake I made was not separating ‘Lunch’ from ‘Eating Out’ in the spend categories. I could do it retrospectively by assuming everything <£10 was Lunch (burritos etc), and everything >£10 was Eating Out (restaurants etc), but to do so would mean recategorising every lunch item individually for the whole year – no thanks.
So, what to track next? Well, I got a Fitbit for Christmas…
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