Yes, you read it correctly. It’s the end of March and I’m finally typing in the last of my receipts into my PearBudget spreadsheet. Tsk tsk.
Overall Results
I started out strong, with my carefully laid out Expense Tracking Plan of Attack (with all of 2 steps!), and my Mid-Month update. But then I started dreading the monotony of sifting through receipts. “I’ll do it tomorrow” are four very dangerous words.
My usual method for managing my spending is to simply consider each and every purchase before I make it. The main benefit of typing in these receipts over that is the ability to judge my progress and perhaps adjust my money “attitude” as the month goes on. Am I in thrift-mode or relaxed-mode? It gives you an reason to perhaps not splurge on that seemingly minor-item, either for yourself or as an explanation to others – “Oh, I’ve already spent to much on XXX this month”.
But I did finish, and I still think that everyone should do this if they are trying to improve their financial situation. The only two ways to get more money is to either make more or spend less. And the best way to spend less is to fully comprehend what you are buying.
Specific Numbers
I won’t share all the gory details, but here are some of the major categories. This is for two people:
The first step of the budget spreadsheet is to put down the amount of money you want to budget for each category. If you have never tracked your spending before, you may be very surprised after the first month and need to make some adjustments.
We were actually pretty close in most of the categories. We could do better than $600 a month on food, but we consciously enjoy eating out and it is within our means. We bought some new ski gear and bought some gifts this month but nothing special, so I should probably bump up the allowance for the “Personal” category a bit more.
One surprise we did have was our heating bill. Old house + old furnace = $200+ gas bill! Even when we had electric baseboard heat in our old house our heating bills peaked at $100. Nothing we can really do about it now, but it’s something we should have considered it while browsing for rentals.
In the end, the only real thing I would change is to add more cushion into our budget for “expected” unexpected expenses that I’ve mentioned before. To that end, I think I’ll continue to try out new budgeting methods each month.
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I just have one word for you and I said it before: quicken.
It does our budgeting, asset allocation, bill payment calendar, net worth tracking, etc. My quicken file goes back to 1992.
TallWes has it right! Use Microsoft Money or Quicken. It does all the reports for you and allows you to spend less time on the tedious task of putting together a spreadsheet and more time on analysis of what can be adjusted.
I would say this, it is good to understand where your money has went, but that is OLD NEWS. That is yesterday’s news. I found that the MAJOR change in my finances happened when I prepared a spending plan for the upcoming month PRIOR to receiving the paycheck.
About 1 or 2 days PRIOR to the money showing up in my account, I sit down with my wife for 15 minutes and put together a written plan that shows EXACTLY where our money is going to go.
There is power when you work with your spouse to spend your money on paper PRIOR to actually receiving the money! When George Washington, Andrew Jackson, and Ben Franklin are told where to go, I have personally found that I was able to take my finances to an entirely new level!
200 gas bill? That’s not so bad – Since the beginning of winter I’ve received 4 gargantuan oil bills (once a month or sometimes just 3 weeks apart). The first one for around $450 (December), followed by $315 (January), followed by $323 (February), followed by $321 (March – this was just 3 weeks after the Feb bill). Ughhh!! My last tank fill up is usually in June and lasts until winter, so I’m looking forward to that.
I started using Pear Budget after I read about it on your post and I really like it. I never wanted something as complex as Quicken or Money, but even though I love using excel I couldn’t quite create the right spreadsheet. It seems like I handle my budget similarly to you and I agree that Pear Budget is a really useful tool through which you can track your expenses throughout the month.
Jonathan: Your budget on grocery is quite close to what you actually spent. That I can understand because, well, those are the stuff we have to eat every day. BTW, do you think getting a budget constrained your expenses? I saw you have two red items which are much higher than your budget. When you have a budget, do you try to stick to it?
I promised myself at the beginning of the year to start to track my spending, but haven’t done anything so far. I guess I am too lazy to take care of all the receipts. Besides, these are things you never expect to happen at a certain time, but then they just come up (like a sale or promotion) and you don’t want to miss them. For these occasions, we always over spend.
I like your expense tracking scheme. You are being a good steward of your finances. Or, at the very least, you are ahead of the game because you *know* when you’re over budget. Most people don’t bother to care where their money is going, but complain about having money problems.
I can relate to the tedium of keeping receipts and entering them into a spreadsheet. My wife and I simply didn’t have the patience or organization to handle that. So we reverted to a simple, cash-only system. We keep an envelope for “groceries” $350 and “miscellaneous” $200 each month. When the money is gone, its gone. Back to water and PB&J.
Basically, unless we are buying gasoline (pay-at-the-pump), we us cash for everything now. Yes, I dearly miss my 5% cash back credit card rewards, but it is much more rewarding for us that we stay within our budget. Besides, a card can’t be used cheaply when running a 0% cash advance offer. 🙂 haha
I find a very high correlation between 1) using credit cards, and 2) having no idea where the heck all the money goes each month, thus spending more. It probably has something to do with psychology. Bankers are not dummies.
Jonathan C
Some people live and die by products like quicken. I guess I died by it about three years ago, especially on the Mac since it wasn’t quite as good with downloads. Quicken seemed as just as tedious as doing it by hand. I also found quicken very lacking in terms of flexibility – but that might be just because I like designing my own spreadsheets as that’s something I do at work all the time. My solution is a bit of hack. I use yodlee to track all my credit card expenses and categoriz it in there. I then manually export the data into excel and have a macro take of the rest. Of course the cash I still need to manually, but I just lump into a cash category 🙂 and try to keep almost everything on my credit cards.
I’ve tried Quicken, and it actually took more time than this. Many banks don’t sync, so I have to download the QFX files manually. Then, I have mark all the categories and resolve any interaccount transfers so they don’t show up on both. There are plenty of workarounds, but I guess I just haven’t spent the time to learn them all. Also, at least a couple years ago, there are some banks which Quicken simply doesn’t even sync manually with unless the bank pays for access to the most recent file type. This means I would need to enter everything manually.
Sometimes with all the features I felt like I was trying to cook a hot dog with a flamethrower.
Yodlee actually has a bunch of new transaction tracking tools, which I will look into soon. The only problem with Yodlee is that their features keep changing.
A $200 gas bill may not be that high for much of the country, but Portland is not that cold at all. That’s why I tried to give the reference from how much we used to pay in previous years – less than half. It balances out though, since we don’t even have A/C so there’s nothing to pay for in the summertime even if it hits the 90s 🙁
Have you ever thought about automating this process with a receipt scanner. i remember seeing some online for a couple hundred bucks. Figure over the years it would pay off, but have not gotten around to buying one. Has anyone had experience with just scanning receipt and having software do all the categorizing? One other benefit of this is one could go into such detail as seeing how much one spends on apples or cereal :-). Just more fun for the frugally minded.
Count me in the Quicken camp. I do agree with Jonathan that much of the tedium is still there, but the newest version of Quicken (I use the “Premier 2007” version) seems to work really well with statement downloads. Only my small local bank accounts require me to manually download the requisite file. I don’t have to manually input any data for any accounts. I recently switched from MS Money. It, too, was powerful but a bit less so than Quicken. I think the lesson here for us all is to find a method we’re happy with and will use and stick to.
Just wanted to thank you for writing about PearBudget. I’ve been looking for a good, free way to track my expenses without creating my own spreadsheet, and this fit the bill perfectly. I’ve started filling it out for March, & will be tracking down expenses for Jan & Feb of this year as well, so I’ll be able to sort thru & track everything much better.
I’ve always thought I had a good handle on my finances, but this will show me _exactly_ where my moolah is going on a monthly basis.
Well done!
I have started with PearBudget and find it VERY VERY good.. Also, very straightforward.. I have tried using Money before.. As of now, just too complex.. I am starting out with PearBudget and see if I need to move to anything later.. But till now, this has been very very valuable..
I agree with DC that PearBudget is very useful and very straightforward. I too tried Money before but just couldn’t keep up the habit because of its complexity.
The unexpected expected expenses use to kill me. Now that I’ve tracked expense for many years I use actual historical data to project my annual usage and budget 1/12th each month. Every month that I spend less than my budgeted amount I transfer the difference to a savings/mm account. For example clothing (900/yr or 75/mo., car repairs (1000/yr or 83/mo.), gifts (1000/yr. or 83/mo. If I don’t spend anything on clothing, car repairs or gifts during the month I transfer 75+83+83 = 241 to my savings/mm account.