Expense Logging: March Example Analysis

Now is a great time to examine your expense log.  If you’ve been following along with the expense grid system, you have been tracking all of the money you spent for the last month or two.  Over the past month, I’ve been doing the same – I know where every penny went and came from.  Though this is an extremely time-consuming process, over the past years I’ve found it to be an invaluable tool!

So, lets take a look.  You know your tertiary categories, as you set them up to track everything.  Split your expenses into their appropriate secondary categories, and from there sort everything into the appropriate primary categories: Fixed Necessary,  Fixed Discretionary,  Variable Necessary, and Variable Discretionary.  How does your profile look?

I just finished mine.  If we say my income was $1000.00 this month (not actually the case – merely a nice easy number to work with), then my total expenses – dollars that actually went out the door – amounted to $528.57.  Despite some unusual expenses (for example, a home inspection), I was able to save about 47% of my total income – that money has all been put into various savings and investment accounts.

I’ll be the first to admit that I am saving even more than I normally would.  In the next few months I’ll be buying a home for the first time, and I want to be sure that I have enough to put down a good down payment and then make any necessary repairs, plus all of the incidental expenses that go along with it; changing utilities, closing costs, and so on.

But how about my distribution this month?  It isn’t perfect, but it is definitely better than some of my previous months.  Take a look below and compare them to my ‘ideal’ proportions, laid out in the descriptions of each square.  Of the $528.57 I spent this month, roughly $190 were Fixed Necessary expenses, including my rent, insurance, and so on.  Only about $16 went towards Fixed Discretionary, thanks to my canceling of a magazine subscription.  My $204 in Variable Necessary expenses proportionally dramatically increased this month because I ate out very little (one of the easiest ways to save!).  And finally, the scourge of good financial health, my Variable Discretionary expenses came in at about $118.57.  This pie chart makes for an easy view:

March 2009 Expense Distribution

As you can see the proportions aren’t perfect, but they are acceptable to me.  This is for one major reason:  if my expenses this month were $1000.00, as we looked at before, last month my expenses were over $1200!  I managed to reduce my total expenses dramatically.  My goal for next month is to reduce it even more – I’d like to be able to  save 50% of what I earn.  Set your own goals for distribution and total amount and see how you do next month.  It can be an incredible motivator!

One part of the expense grid that we haven’t examined before is the total amount of your expenses, and an important one at that!  Redistributing the proportions of the four squares are all well and good, but if the total amount you spend during a month increases, it hasn’t done you any good.  Keep this in mind when you examine your expense log!

Tags: Budgeting, expense log, finances, long term, savings, The Expense Grid, tools, tracking