Sarah Deveau: Money Matters


Where is Your Money Going?

Making Smart Money Decisions Means Being Aware

Any idea how much you spent eating out last year? How much did you pay in interest on debt? What about your spending on cosmetics, kids clothing, or books?

Should you know these numbers? Probably, but not necessarily.

If your household income covers all of your expenses, without any debt other than a mortgage, and you maximize your RRSP, RESP and TFSA contribution room, then you don’t necessarily need to track your spending.

Carry a balance on your credit card? Have a line of credit? Pay the minimum on your 30-year mortgage? Not contributing enough, if at all, to the savings vehicles mentioned above? Then you need to track what you spend. It’s that simple.

On Gail Vaz-Oxlade’s fantastic show, Til Debt Do Us Part, every family in debt crisis has something in common – they underestimate their expenses, big time. Gail spends a lot of time on this, because it’s really the root of each family’s debt problem.

Are you sure you can’t find an extra $200 a month for an RESP? Maybe you’re spending $200 more than necessary on groceries every month. Reclaim that $200 monthly with careful attention to your grocery spending combined with meal planning and savvy sale shopping.

Indiscriminate spending on kids stuff is a huge problem for many families. Our generation didn’t receive “stuff” and expensive experiences as freely as we lavish it on our children. In one month, today’s average seven-year-old might enjoy a Wiggles concert (plus parking, food, and souvenirs), a few stops at McDonalds, a cute new dress or hoodie, the Scholastic book order, a new Nintendo DS game, and an afternoon at the theatre for the new Pixar movie. Poof! $300 or more gone in the blink of an eye. And don’t forget swimming lessons, ballet, hockey, tutoring, and more.

I am painfully aware of how much money we bring into our household, and how much goes out. No sticking my head in the sand permitted. But I HATE tracking our spending. It's boring, tedious work. Over the past 11 years, I’ve tried various methods for tracking our spending to be aware of where our money is going, from the super complicated to the ridiculously easy.

I’ve used Simple Accounting, Quickbooks, a simple notebook, specialized programs, and an iPhone app. All of them will work for awhile, but inevitably I fall off the wagon in updating them, inputting income and expenses, sorting out what expenses went on this credit card or that debit card, or this ING account.

Again and again I’ve gone back to the old standby – a simple Excel spreadsheet.

At the top, I record each source of income in the first column, and in the second column, the amount of predicted income. At the bottom of this info is a total income for the month. Further down, in each row of the first column are the spending categories – mortgage payments, debt repayment, interest, insurance (house, life, auto), health, groceries, kids activity, clothing, miscellaneous household, you get the picture. In the second column, I estimate what we’ll spend on each category for the month.

The projected spending is totaled, and compared to the income amount to see if we plan on going into debt that month, or having extra to invest in savings or debt repayment. As the month progresses, we record what we’ve spent in the third, fourth, fifth and beyond columns. Over to the right, a column subtracts each purchase to give us a running total of how much money we have allocated to that category for the rest of the month. Spent more on entertainment that we had allocated? I'm digging deep in the freezer that month, because the grocery budget will have to take the hit.

We have our budget set up in one document with a separate worksheet for every month of the year, and can adjust monthly for seasonal expenses such as sports registration, vacations, and Christmas gifts.

I’m always curious to know how other people track their spending. Or if they don't, why not?