Tracking spending
I have tracked every cent of the money I have spent for 15 years
Introduction
When I moved to my first apartment in August 2001, I figured I’d better get some understanding about my personal finances. After all, I had just taken a mortgage of more than 100 000 dollars (720 000 Finnish markka).
I didn’t have any financial difficulties. I had my bachelor’s degree and a full time job, and my monthly income was more than enough to cover my basic needs. A part of the reason I started tracking my spending was security. I wanted to be more certain about which purchases were safe to make. Another part was curiosity. Did I spend more on certain things than others? Was there something I could save in? What was the “normal” amount spent on groceries, alcohol, entertainment and hobbies?
Choosing tools
I looked for budgeting and tracking software available. I decided to write my own. I wanted a web-based solution that I could use anywhere.
The data model was simple and straightforward. I wanted to store 4 things: the date, cost, type and description of each purchase I made.
Date and cost were easy. With a bit of searching I found out a standard called COICOP/HBS. COICOP stands for classification of individual consumption by purpose. The HBS variant is used in household budget surveys in the European Union. COICOP/HBS classification became my type. I set the length of description to 255 characters. I used hashtags to group purchases.
In 2002, we started using Euro in Finland. I changed the data model so I could store the costs of purchases in different currencies. Apart from that, I have had no reason to make the data model any more complex.
I created a web form and a database and started logging my spending by typing in the receipts.
Collecting data
At first I was quite motivated to collect the data, and it didn’t feel like much work. I only have 766 items stored from the first full year. Filling out a simple web form twice a day on average isn’t that much.
I grew a habit and it stuck.
In 2016 I logged 1 886 purchases. Nowadays, I tend to pile a bunch of receipts and type in all the data from one or two weeks at a time. I confess that sometimes it is a chore, but having been doing it for so long, it’s hard to stop.
I have a total of 21 431 rows in the database when I’m writing this post. Estimating that each entry has taken me 20 seconds, I have spent around 120 hours in 15 years to log my expenses. That’s about 9 minutes per week.
Basic analysis
My long term trend shows the development from a single person household to a family of four. After all, I’m not tracking just my own expenses but the whole household. (Most of my wife’s personal use of money is excluded.)
The biggest (green) bumps in the graph are renovations and deposits related to apartment deals. It’s also pretty obvious that we have bought a car in 2007, 2009 and 2016. The miscellaneous category includes the kids’ daycare fees.
When basic purchases and investments (e.g. house or car) take a lot of money, recreation and culture tend to get less. And they are the first to go up when there’s money left from the essentials.
The increase (or decrease) of prices also affects the graph. I could exclude them — I have monthly price indices for all categories available. I just consider the actual prices (that economists call nominal) more fitting for my purposes than adjusted prices (what they call real).
Comparing to others
A part of the reason why I started to track my spending was to find out how I compared to others or “normal” consumption.
Statistics Finland has wonderful resources about households’ consumption and consumer price index. They also have lots of data you can browse on the web and also access programmatically. My scripts use that data to pull in household consumption statistics. I adjust them for price index, so I have up-to-date monthly data I can compare my own spending to.
I won’t share my actual comparison data here, since it feels somewhat sensitive. But I can use the same tools to compare between different datasets. For example, how did a Finnish four person family spend their money compared to the average Finnish household in 2016?
In many categories, the consumption of a family is more than 50 % greater than average.
If you have a family, it makes little sense comparing your expenses to national averages. Statistics Finland has statistics for single person households, couples without children, single parent families, four person families, elderly couples, and others. There are plenty of targets to benchmark with.
There are also reference budgets for minimum consumption available. I compare my spending to them.
The comparisons show that we are pretty near to the average family in most categories. We exceed the minimum budget in some categories (e.g. recreation and culture). We also hit close to the budget in some. We even manage to stay under the minimum budget in transport. (The transport budget is quite generous for families living in the Capital Area.)
More detailed analysis
I recently read an article where Josh Elman pondered about home IT budgets. Says Josh:
In conversations with a lot of people, I’ve found that many people have a mental model of making one or two major technology purchases per year. While not explicit, I think people account for “home IT budget” is in terms of buying “new stuff” and do have some fixed capacity for how many new things to get per year and add to our homes.
I don’t have a home IT budget and I don’t recognize having a mental model of one or two purchases per year. But do I have a fixed capacity? Let’s see. For technology, I include items in audio-visual, photographic and information processing equipment. Wireless and cable subscriptions fall under communication.
My average yearly spending on technology is around 2 400 euros — 36 000 euros between 2002 and 2016. When I spend less than average (in 2003, 2006 and 2009–2011), I compensate with more spending in the next year. And after I exceeded the average in 2015, I hit the all-time low in 2016.
I may have a subconscious home IT budget after all.
Best ways to save
Has tracking my spending made allowed me to save money? Not really. The ways to save money are proverbial stuff that your grandmother can tell you better than me.
- The best way to save is not to buy.
- The second best way to save is not to buy something that doesn’t last. The poor can’t afford to buy cheap.
- It is possible to save money without compromising quality. You may have to spend some time comparing alternatives.
Mostly it’s not about where you could save but where you’re willing to save.
What I have learnt
Through tracking my spending I have a better picture of myself (or our household). I have a baseline of monthly spending and I can quickly see whether I’m currently running above or below normal.
It’s nice to be able to see a financial picture spanning most of my adult life. It helps to put things into perspective and also to plan ahead. I know which purchases really affect our balances and where there’s space for improvement. In smaller scale, I have a pretty good grasp about what things cost in general.
Tracking my spending has affected my decision making. When I’m buying something, I try to estimate the long term value of the item at hand. How often will I use this? When will I buy one again?
Many years ago, I had the habit of counting in pints. The cost for a pair of jeans could equal ten pints of beer in my favorite bar. A movie ticket was about two pints.
Nowadays I try to evaluate how my purchases affect my happiness. Does a product or service really make my life easier or better? How often will I feel happier using something I have bought? If I take the cheaper option instead of the perfect fit, will I regret later?
When I’m choosing outdoor gear I tend to favor the more expensive brands. At the same time, I take advantage of offers that let me save a few cents in a grocery store. It might seem illogical, but it isn’t.
I want my clothes to keep me warm and dry in various activities. I don’t want my future self to blame me for buying a cheap car that’s too small or requires frequent maintenance. Those are wrong places to save.
I don’t think more expensive flour makes me a better baker. I can’t taste the difference between two brands of sugar. Even if the savings are small, I rarely have a reason to pay extra.
Having said that, perhaps the most significant change I have made is the decision to spend more on food. I try to take the healthier and more ethical option when available. And when I buy special treats, I aim for the best instead of cheap or good enough. Our spending on groceries is on par with an average family, and this is an area where I want to exceed the others.
Final words
There are many personal budgeting and expense tracking apps and services. Most of them can give you a picture of your own spending, and a way to track whether you’re above or below baseline.
I haven’t found any that let you compare your spending to national or international statistics. (OK, last time I checked was 15 years ago.) For me, comparing to others was a key feature.
Many apps and services force you to input the data manually. Others try to categorize the data from your bank or credit card company. Mostly it’s a trade-off between ease-of-use and accuracy. Please let me know if you find a solution that knows whether you bought bread or beer from the grocery store. (And when you bought both, knows how much you spent on each.)
I’m really looking forward to the day when I get electronic receipts from most of my purchases. The shops already have the data and many are already opening their APIs. I’m going to continue tracking my spending, and expect to mostly automate it in the next few years.
