No seriously, do you know?
It can be pretty sobering looking at the credit card bill and checking account statement. Is the bill too high and the account balance too low? Most of us have been there - repeatedly.
Taking my own advice, last week I pulled together a view of 2022’s household expenses. My goal was to evaluate last year and figure out where we spent our money. This is to be our starting point for the 2023 budget.
I knew our account balances were a lot lower than I’d hoped (gulp), and I knew certain spending categories would be higher than usual (medical and vacation). What I wasn’t prepared for this year is exactly how far into our savings we’d gone. I knew the decrease in balance HAD happened, but I didn’t know the painful details.
Reality check: Not knowing doesn’t make it not real.
Let’s pause for a moment here. I, who loves all this financial stuff, had lost track of our household’s spending? Yup.
How did this happen? The short answer is “life” … life happened. It happens to us all.
Should I have been keeping an eye on spending all year long? YES, yes I should have.
Are there automated tools to help? YES, yes there are.
Did I? Nope.
All self-criticizing aside, at this point the only useful thing to do is to pick up where we left off, and get back on track. And that’s what we’re fixing to do. I implore you to do the same. Here’s what helps me, and what we’ll recommit to doing in 2023:
1. Pay electronically as much as you can handle. If you can’t handle credit, use debit. The problem with cash is that unless you write down everything you pay for, you lose track. It becomes invisible inasmuch as you don’t know where it went, but it still leaves a hole in the checking account.
Electronic payments leave a trail for you, and almost every bank will allow you to download transactions automatically. It makes it easy to pull all your data together.
2. Use an aggregation tool. Here are nine free options - I haven’t dug into them all but another FI blogger (shout out to Rob Berger!) has done the homework and we’ll take his word for them until I can do my own evaluations.
Personally, I’ve used Excel (free) - which is extremely manual, Quicken (paid) - which I loved but is expensive, and Mint - which is pretty good, but is not nearly as awesome (functionally) as Quicken. I’m test-driving Personal Capital in 2023 because my household has outgrown Mint, though it's an excellent starting point if you're new to electronically tracking your finances.
Mint.com - the original free site; works pretty well but has a crap ton of ads
Personal Capital – Best Overall Alternative to Mint.com
Tiller Money – Best for those who love spreadsheets
Monarch Money – Best for Couples
CountAbout – Best for converting data from Mint
Simplifi – Best budgeting app for smartphones
You Need a Budget (YNAB) – Best for budgeting
PocketSmith
Fidelity Full View
3. Set a refresh and review schedule (this is where I went sideways in ‘22). Put a calendar time block on one day every month. Use this time to refresh all of your account feeds and update running totals.
These tools also should allow you to enter your budget, set goals, and track progress to each. Let them help you accomplish what you’ve set out to do.
We talked about figuring out your net worth - these tools will help not just with spend tracking but also with wealth tracking. It can be motivational to see where you stand month over month.
4. After you have updated the data, sit down with your partner (or better yet, the whole family) and have a monthly finance review. Set your goals for the next month.
Once you know what your baseline spending is, you can change it. You may have already identified your personal latte factors; this deeper look allows you to find bigger insights and make a greater impact.
We’re going through this exercise now, asking ourselves where can we cut back relatively pain-free, and where we want to keep spending the way we are. This goes into budgeting and being intentional about where we use our money. I’ll give an example from our largest spend bucket.
Two huge “categories” for us are “Shopping” and “Groceries”, which collectively include all Amazon, Costco, Target, Walmart, and grocery store purchases plus all the random small business purchases throughout the year. Without scrutinizing and splitting out every last receipt, it’s really hard to know what’s food shopping vs. consumable household items vs. buying all those THINGs that everyone really wanted.
Think about your recent Target or Walmart or Costco trips - chances are you’ve bought something to eat, some kind of paper product, and something you plan to use for a long while - all on one receipt. Without manually splitting it, it’s a black box of spending on your credit card statement. I used to split all my receipts when I was flying solo. With a husband and three kids - there’s no way. I don’t have the time or the patience, and I’m seeking ways to simplify my life.
The key questions on consumables (food, soap, toilet paper…) are (1) whether they’re being fully consumed (look to reduce waste), and (2) are you happy with the quality you’re getting for the price you’re paying. Some store brands are equal or better than the name brands. Others are not. Otherwise, I’m not overly worried about the routine consumables because they get used up on a regular basis.
For all the non-consumables (gifts, clothes, electronics, games, linens, books, home decor … you name it!), the action here is to be more mindful at the moment on every purchase. Set a budget, and do everything you can to stay within it. As you’re adding unplanned purchases to your real or online cart, challenge yourself on the trade-off between adding that thing to your life vs. your longer-term financial goals. Remember - all the *stuff* in your house once was cash. A lot of that *stuff* later will become trash.
I can go deeper into other categories later, but somewhat unintentional spending will derail the best of us. Assuming it’s too late to return it all, the best we can do is to set an intentional budget, commit as a household to stick to it, and do better next time. My goal is for each monthly review and the 2023 annual review to be a much happier event than the 2022 review.
Stephanie Brooke Lennon is the author of Family Bank Blueprint, GoldQuest, and What Would Water Do? Simple Strategies for Navigating Life's Obstacles. Her titles are available in Paperback and Kindle on Amazon.com. Follow Stephanie Brooke on Facebook, Instagram, TikTok, YouTube, Twitter, Amazon, and at BrookeLennon.com.