One big advantage of tracking the categories of personal spending is that you can see where the weak spots are — categories that have grown a little too big for their britches and are ripe for cutting down to size.
As I pile through a year's worth of financial statements in time for taxes, in order to make tax time easier and to get some financial organization in place, these trends will reveal themselves naturally. Entering the transactions, and then refining the categories of these transactions by reconciling the transactions to what was actually purchased via the receipts, will give my financial software the data it needs to chew on to create the spending reports.
Fortunately, I got early confirmation of something I had suspected. My Chase Sapphire card has a year-in-review statement feature that not only shows all of the transactions for the past year, but takes a first cut at categorizing them: Travel and Entertainment, Restaurant, Automotive, Merchandise, Services, and Miscellaneous. Apparently we're boring homebodies, as our Travel and Entertainment charges were only a third of a page out of 29 pages of transactions.
However, the Restaurant section was almost six full pages, and ran nearly $4,000 for the year. And this doesn't include the charges that were classified as Automotive but were actually us buying subs and other fast food at our nearby Sheetz gas station.
This wasn't a surprise to us. We know that we ate out a lot this past year. What did surprise me was the sheer volume of the transactions. They took quite a while to enter! I was also a little surprised how a lot of little charges add up. (I know: The Latte Factor®, right?) A majority of the charges were under $10, and many of those were under $5.
That's the bad(ish) news. The good news is that we're already taking steps to knocking this amount down, and that we can measure whether we've made progress on knocking the amount down. Without the baseline, any feeling that we've made progress is just that: a feeling.
(The Latte Factor is a registered trademark of FinishRich, Inc., and was made famous by David Bach, author of The Automatic Millionaire and several other popular personal finance books.)
Our family dines out (note that I use the word “dines”, as opposed to “eats”) a fair amount also. But, we feel it’s a necessary expense for sanity, entertainment, and well-being. We usually combine a restaurant trip with a walk near a beach (we live near the ocean), or in a scenic shopping area or other worthwhile walking venue. The result: a mini “trip” that might look expensive when viewed as “eating out”; but is actually cost-effective when viewed as the hobby/family time/date/pleasant evening out that it actually is. We just decide to cut back in other areas. Oh yeah – if a local fine restaurant has mails us a 2-for-1 entree coupon, we’re all over it!
@Matt: We’ve said off and on that we’d only go out to eat if we were with other people, but it didn’t seem to work out like that. 🙂
Wow that is one big restaurant bill! Is it just you and your wife, or are kids adding to that?
We try to keep our restaurant budget to under $100 a month (2 of us).
Perhaps switching to a monthly tracking system could help you get a better handle on this compared to the annual analysis?
Those “weak spots” very quickly become apparent. Our biggest line items is tuition and day care expenses for our 3 kids. But eating out was one of our next biggest expenses. Those Subway sandwiches add up fast!
My biggest weakness to spending is food. I love to eat out. I love to be wined and dined in nice restaurants. Its nice not having to clean up the dishes after eating. Though it does cost a lot of money, at least I am enjoying what I am spending.
This year I am planning on learning how to cook better to save money.