Financial Management Tip Day 4: Categorize Your Spending
Yesterday’s tip was on the importance of tracking your spending and today’s financial management tip is to take the information/numbers you gathered from yesterday’s tip and now you must categorize your spending. This take’s it beyond a mix of numbers and rather organizes them so that you can begin to see the bigger picture of where your money is going on a daily and monthly basis.
Now there are a few different ways to do this- you can write right beside your notes in your spending journal especially if you only spending money from one category in each shopping trip. For example, do you have a shopping trip that you spend money on groceries, toiletries, kids, and clothing all on 1 receipt?
If you are extremely visual, you could also use different color highlighters or markers to show each different category.
So the first question you are going to ask is…..What are the categories? I believe there isn’t a one fits all system for categories of spending. I like to have more categories because I make them very specific.
Also no miscellaneous category!
So let’s look at yesterday sample
Sample (7 days): Sally recorded the in’s and out’s of her money for 1 week….let’s examine it more closely
Date / Amount / Store / What you bought
June 9th/ +$450.00 /pay cheque (IN)
June 9th/ -$55.50 / monthly cell phone bill (OUT- UTILITIES)
June 9th/ -$3.40 /local coffee shop /coffee and brownie (OUT- EITHER ENTERTAINMENT OR EATING OUT)
June 9th/ -$24.80/grocery store/ milk, eggs, bread, bananas, apples, cream cheese (OUT- GROCERIES/FOOD)
June 9th/ -$7.90/drug store/magazine (OUT- LEISURE-MAGAZINE)
June 10th/ -$40.00/gas station/gas (TRANSPORTATION- GAS)
June 10th/ -$6.75/pizza/pizza for lunch (OUT- EITHER ENTERTAINMENT OR EATING OUT)
June 10th/-$75.00/vet bill for Fluffy (OUT- PETS)
June 10th/-$17.90/grocery store/ fried chicken for supper (OUT- GROCERIES/FOOD OR ENTERTAINMENT/EATING OUT)
June 11th/-$21.49/walmart/kitty litter, birthday card, new shirt (OUT- PETS, GIFTS, CLOTHING)
June 11th/-$5.40/coffee shop/coffee and a treat (OUT- EITHER ENTERTAINMENT OR EATING OUT)
June 11th/-$9.80/book store/new book (OUT- LEISURE/HOBBY)
June 12th/-$30.00/walmart/new toy for Johnny (OUT- KIDS)
June 12th/-$7.80/sandwich shop for lunch (OUT- EITHER ENTERTAINMENT OR EATING OUT)
June 12th/-$15.40/grocery store/supper (ground beef, spaghetti sauce, spaghetti, garlic bread) (OUT- GROCERIES/FOOD)
June 13th/ -$80.50/car maintenance (oil change) (OUT- TRANSPORTATION- MAINTENANCE)
June 13th/ -$120.00/ costco/ toilet paper, laundry soap, steak, salad mix, box of oranges, multivitamins, box of cereal (OUT- GROCERIES/FOOD, HOUSEHOLD, TOILETRIES, MEDICAL)
June 13th/ -$33.50/movie theater/ movie tickets and concession treats (OUT- EITHER ENTERTAINMENT OR EATING OUT)
June 14th/ -$8.80/chinese food for lunch (OUT- EITHER ENTERTAINMENT OR EATING OUT)
June 14th/-$56.70/clothing store/new shift and pants (OUT- CLOTHING)
June 14th/-$20.30/drug store/conditioner, shampoo, body wash, nail polish (OUT- TOILETRIES)
June 15th/-$11.30/drug store/prescription (OUT-MEDICAL)
June 15th/-$6.45/coffee and donut (OUT- EITHER ENTERTAINMENT OR EATING OUT)
June 15th/-$78.90/ car insurance (OUT- TRANSPORTATION-INSURANCE)
Today we will look at examining where Sally’s money went in a 7 day span.
- Is she in the red or the black? RED Sally overspent by -$287.59
- Did she under or over spend? Over spent
- What hasn’t Sally paid this month? Just to name a few items missing but what about rent, heat, lights, house or apartment insurance, debt repayments, television/internet/home phone, savings just to name a few missing aspects that Sally hasn’t paid
- Where has Sally’s money gone- what did she spend money on? Sally spent considerable money on her wants this month including toiletries, clothing, entertainment/eating out
- What were Sally’s needs vs. wants? Needs: Food/Groceries, Vet Bills -preventive or curative for Fluffy, insurance on her vehicle, regular and preventable maintenance on her vehicle, a basic cell phone package so Johnny can reach her Wants: Magazine, books, entertainment/eating out, non basic toiletries such as nail polish, clothing
- What patterns do you see? Sally likes to shop. Sally doesn’t meal plan- supper seems spur of the moment. Maybe Sally doesn’t like to cook. Sally could bring her lunch with her rather than eating out all the time. Sally might go with the crowd from work for lunch and coffee (could she go but not spend money)
- How could Sally save money? Sally could meal plan- shop the sales, have a specific grocery list, coupon. Sally needs a more concrete plan for her money- what is essential? Sally could brown-bag her lunch (a plan for lunches)