Budgeting/Expense Tracking - Practicalities

[FUEGO]

I'm curious about how much we spend and what we are spending on. As a result I have decided to attempt to track expenses for the next year, starting 4/1/2010 through 3/31/2011.

My goal is to keep this task as simple, quick, and efficient as possible while yielding expense data that is sufficiently categorized and accurate to tell me where the money is going. DW is involved, so it must be incredibly quick and easy to comply with the data requirements or her cash spending will simply not be recorded in a category other than "cash".

I am going to run the basic plan for expense tracking by her (to get buy-in from stakeholders) and demonstrate that 95% of the work will be done by me, and 5% will be her letting me know where the money that drips from the bottomless hole in her purse actually goes. Keeping track of every penny is not very important, but keeping track of every $5 or $10 is important over the course of a year.

A few questions/notes to myself from my not-quite-fully-developed plan:
Cash – how to account? When withdrawn or when spent or hybrid?
Credit cards – copy/paste/categorize from online statements at the end of each month (ie at the time the checking account is reconciled, enter previous month’s CC transactions). Based on transaction date. Don’t include cost of walmart gift cards – these are booked when ultimate goods purchased
Check/ETF – copy/paste from checkbook register spreadsheet
Gift cards – record manually in spreadsheet at time of purchase of ultimate goods


Categories of spending:

House-Mortgage
House - repairs/maintenance (incl. appliances/repairs)
House - insurance/taxes
Utilities-Gas/Electric
Utilities-Water/Sewer/Trash
Utilities-Cable TV
Communications - Phone/Cell Phone/Internet

Auto-maintenance/insurance/taxes/license/regis.
Auto-gas

Medical/Dental
Clothing
Groceries/Household (Walmart, Target, Grocery Store)
Student Loan Payments
Education
Childcare/Afterschool care

Dining out
Entertainment/Toys/Fun (incl. ABC store)
Vacations
Electronics

Gifts
Charity

Misc.
Cash (??)


============================================


Comments/suggestions? Too many/too few categories? I'll pre-emptively say I don't feel like setting up quicken to do the tracking since it would likely take longer to configure, download, QC, and troubleshoot vs just keeping the records in a spreadsheet in a fairly manual manner.


In regards to the grocery/household expense category, this is very lumpy and I know that. That is mainly because we spend probably 90-95% of our money in this category at walmart. And the receipts are long. And I'm too lazy to break apart the receipt into more discrete categories. The resulting data wouldn't tell me enough to justify the greatly increased data entry requirements.

 

[W2R]

My categories are

groceries
ATM (cash)
gasoline
cable
natural gas
water/sewage/trash
electricity
cell phone
landline
insurance, car
insurance, house
clothes
fitness
books
misc/electronics
medical
house improvement
home maintenance
car maintenance
travel
income tax (federal and state)
property tax

I get ALL the information from my bank statement, which shows my automatic bank deductions, checks, and debit card transactions. Your wife would like that - - all she has to do is hand the bank statement to you once a month. (Personally I loathe credit cards and do not use them, but she could hand you those statements as well).

Cash includes a lot such as all entertainment, gifts, dining out, lawn guy, and so on - - everything that I buy with cash from the ATM. I don't break that down. I do try to use my debit card for bigger purchases (over maybe $20-$30?) so that they show up on my bank statement separately from my ATM withdrawals, and I can categorize them. It is pretty easy for me to remember that a $40 purchase at Home Depot was for that painting project, or that the $70 purchase at Office Depot was the shredder that I got on sale, and so on. So, categorizing is simple and requires no further records. If every $10 is that important to you then you could draw the line for using the debit card at $10, I suppose.

My grocery category includes everything bought at the grocery store, like detergent, toiletries, and so on. But, I don't shop at Wally World. I guess that if I did, I would break down the receipt or something. That's a problem and could be a potential PITA.

 

[audreyh1]

Here are the categories I currently use in Quicken. Since I download all my transactions - bank, credit card, etc., these are automatically categorized unless it's a new business, in which case I assign the category, and Quicken remembers thereafter.

We don't use much cash, so I don't usually split that out unless we know of some large ticket item that will be paid for in cash.

On things like Walmart that might fit into several categories - when I reconcile my credit card statements (which involves going through the receipts), I might split out the differences of groceries versus other bought items. But in general we are either buying - groceries or supplies or household items (pretty lumpy) or prescriptions or whatever.

Categories (sub-categories are indented) - These don't have every last one, because I don't have an easy list without pulling it from one years expenses, but this will give you an idea. We rarely add new ones and have been using this system almost 20 years.

Oops - the indentation of the sub-category is no appearing in the post. But when there is a category followed by a colon : and then some listed, followed by Total category - those in between are the sub-categories.

Auto:
License Plate:
Registration Fee

Total License Plate
parts
Service

Total Auto
Bank Charges
Books
Camping
Cash
Cash Rewards
Clothing
Computer
Contribution
Dining
Donation
Dry Cleaning
Entertainment
Exercise
Fraudulent Charges
Fuel:
Auto
Motorhome

Total Fuel
Groceries
Hair Cut
Hobby
Household
Insurance:
Auto
Medical
motorhome
Umbrella

Total Insurance
Internet Service
Lodging
Medical:
Dentist
Doctor
eyewear
Medical - Other

Total Medical
Membership
Motorhome:
License Plate
parts
Service

Total Motorhome
Photography:
Equipment
Photography - Other

Total Photography
Postage
Recreation:
Birding

Total Recreation
Software
Souvenir
Storage
Subscriptions
Supplies
Tax Software
Telephone :
Long Distance
Wireless Services

Total Telephone
Tour
Utilities:
Cable
Electric

Total Utilities

 

[FUEGO]

Thanks W2R. Looks like your categories roughly line up with mine (except I'm not keeping track of income tax).

DW and my accounts are all joint. So I think the only thing she will have to do is keep track of her very limited cash transactions. 95+% (probably 99% based on dollar amounts) of our transactions are either on the credit card statements or on the bank statements. I may abandon the requirement for her to keep track of individual cash expenses and just call it "cash". I don't want to nitpick.

 

[Animorph]

We track 100% and have for years. We use Quicken, with DW doing her 5%. I've set it up with liability accounts for each budget category, so that the total net worth is always $0. Money spent comes from something like a cash account and a matching liability account and always balances to $0. That way I can ignore Quicken's budgeting tools and always see how much is left in the budget categories at a glance.

I use receipts to enter the expenses of all types. Cash is still a problem when you don't get a receipt, but if you enter it soon after you pay and still remember what it was for it minimizes the guessing. I reconcile most accounts by downloading transactions over the web. Usually they all match and I push one "Accept All" button and it's done.

I have more categories than you listed, but it's pretty easy once everything is set up. I'd probably have less if I used a spreadsheet.

Don't forget major home stuff like painting, A/C replacement, roof replacement, and new furniture. I use one category for normal house maintenance and one for "home improvement" for the big stuff. Also a tax category that you can let go negative if you are expecting a refund or save up if you are going to owe.

You might distinguish between miscellaneous stuff for the house (new clock or lamp) versus personal stuff. We maintain a common budget and separate budgets for each person, including a category for each kid.

I enter all my stuff within a day or so of the expense. DW manages once a month or so.

 

[Danmar]

We record cash when withdrawn from bank account. We have found that expenses that don't change much and aren't discressionary(groceries, parking, cleaning ladies,etc) can just go in cash. Other expense categories we use are donations, bank/card fees, gifts(both to each other and to others), clubs, travel (big one). We also track income and calculate increase or decrease in cash (difference between income and expenses) and track our investments. The spread sheet has monthly columns adding up to yearly totals. Have a yearly budget set at beginning. This is a very important process for us. Can't control if you can't track/measure.

 

[W2R]

Thanks W2R. Looks like your categories roughly line up with mine (except I'm not keeping track of income tax).

Well, I didn't either until 2008 and even now, instead of adding it into my expenses I subtract it from my income. For some reason that is less aggravating to me.

I use Excel, not quicken. It takes me about 10 minutes/month to type in the numbers from my bank statement and I like doing it myself (ok, I'm odd).

DW and my accounts are all joint. So I think the only thing she will have to do is keep track of her very limited cash transactions. 95+% (probably 99% based on dollar amounts) of our transactions are either on the credit card statements or on the bank statements. I may abandon the requirement for her to keep track of individual cash expenses and just call it "cash". I don't want to nitpick.

Just ask her to put the cash transactions over $10 on the debit card if it matters to you. I lump a whole lot of things into "cash" and it still just averaged $500/mo before retirement and $400/mo after retirement. I did itemize my cash in December out of curiousity (what a PITA!), and almost all of it was spent dining out (one of the perils of living in New Orleans is the temptations of our local great restaurants). As long as the cash/ATM category does not get any bigger than that, I am willing to leave it un-itemized.

 

[MuirWannabe]

I've tracked expenses for several years doing Quicken. I understand your 'requirements' from DW about keeping it simple. Similar requriements from my DW limit the detail I'm able to capture. The biggest problems I have are the following areas:

Cash - Only able to track cash withdrawn. I've no idea what it is all spent on. So I can tell you how much cash we took out during the year. What it was used for is always a mystery.

Walmart/Costco/Target - We put almost everything on our credit card which I pay off every month. I use the monthly credit card bill to itemize the expenses to specific budget categories in Quicken. For the most part this works great. But charges to Walmart, Costco, or Target could be for many different things. You can buy groceries, furniture, household items, clothes, etc from each of these places. So I don't have any idea how to break out these charges to categories. In the end I've jsut created budget categories called Walmart, Costco, and Target. I can tell you how much we spend each year at eeach store. But not what was purchased at each store.

Other than that my categores are pretty solid. But capturing detail to eliminate these holes in my itemization would require a level of effort from DW (and myself) that we have not overcome. If anyone has easy ideas for these areas I'm all ears.

Good luck with your project and getting DW fully on board.

 

[FUEGO]

Animorph, thanks. I'm trying to do this "quick and dirty". My "house repairs/maintenance" will include painting, a/c maintenance/upgrade/replacement, roof, appliances, (and any remodeling). Haven't thought about furniture, but that will probably go in the house category too (I think we have bought exactly three pieces of furniture in our adult lifetimes - we are cheap!).

I'm trying to sort of lump certain expense types together. So I have a few categories that will sum to tell me "what does my car cost" and another few that will tell me "what does living in this house cost".

I like the idea of setting up this accounting system to have income being an asset and expenses a liability - and summing to zero and forcing myself to reconcile and find the leaks in our budget. But not sure if I want to incur the additional work required to do so.

 

[FUEGO]

Well, I didn't either until 2008 and even now, instead of adding it into my expenses I subtract it from my income. For some reason that is less aggravating to me.

I treat income tax as a cost to produce my income. Income changes, deductions and tax laws change, my tax strategy changes, and I don't really care to keep track of expenditures on income tax. I minimize taxes to the extent possible and can't do anything else to reduce them (besides stop working lol).

Just ask her to put the cash transactions over $10 on the debit card if it matters to you. I lump a whole lot of things into "cash" and it still just averaged $500/mo before retirement and $400/mo after retirement. I did itemize my cash in December, and almost all of it was spent dining out (one of the perils of living in New Orleans is the temptations of our local great restaurants). As long as the cash/ATM category does not get any bigger than that, I am willing to leave it un-itemized.

Our cash category would probably be under $100 a month (DW's share even less). We rarely spend cash, since we get cash rewards for spending on the CC's. Even things like $2-3 bucks at a cafe, fast food or take out goes on the CC if it is allowed. This practice will also really help with record keeping since all these expenses are consolidated on our 3 CC statements (we never use our debit cards).

I may just take DW's cash expenditures (ie money extraction from my wallet! ) and call it "cash" to save some time (and record it at the time of extraction from my wallet).

 

[FUEGO]

Cash - Only able to track cash withdrawn. I've no idea what it is all spent on. So I can tell you how much cash we took out during the year. What it was used for is always a mystery.

Walmart/Costco/Target - We put almost everything on our credit card which I pay off every month. I use the monthly credit card bill to itemize the expenses to specific budget categories in Quicken. For the most part this works great. But charges to Walmart, Costco, or Target could be for many different things. You can buy groceries, furniture, household items, clothes, etc from each of these places. So I don't have any idea how to break out these charges to categories. In the end I've jsut created budget categories called Walmart, Costco, and Target. I can tell you how much we spend each year at eeach store. But not what was purchased at each store.

These are the exact two issues I have. How to account for what little cash we spend, and the lack of categorization for our $7000 walmart bill every year.

I guess the walmart issue is relatively minor. I may miscategorize $10-20 a month (like $7 for wiper blades or an air filter that should rightfully go to "auto-maintenance" or some hardware type stuff that should go to home-repairs/maintenance"). So be it! I may start out trying to separate that stuff out, but I think the ratio of "value of data obtained" versus "work required" is low.

FYI, to put this discussion in context, I'm trying to see if we are spending significantly more now versus 5 years ago pre-kids. And to do a little sensitivity analysis/what-ifs for ER planning, semi-ER, turning into perpetual traveler/cheap living abroad bums, etc. Some of those scenarios could theoretically occur within a few years.

 

[FIREd]

I track my expenses using Quicken.

Cash: accounted for when withdrawn from the bank. Cash represents less than 1% of our total annual expenses, so we have decided not to track how it was spent.

Walmart/Target are the most painful expenses to track because they can usually fall in several categories: groceries/clothing/furnishings/gifts/entertainment, etc... So For those transactions, I have to rely on the receipt to try and figure out how to break it down.

My categories are:

Administrative fees (passport, driver's license, etc...)
Auto depreciation
Auto repair and maintenance
Auto fuel
Auto Insurance
Auto Loan
Auto Registration and Taxes
Bank Charges
Cash
Charitable contributions
Clothing
Computer
Dining
Entertainment
Financial Service Fees
Financial Support
Furnishings / Durable Goods
Gifts
Groceries (food, cleaning products, toiletries, alcohol, and anything else we buy at the grocery store)
Home mortgage interests
Home improvements
Home repair and maintenance
Home pest control
Home property taxes and insurance
Home security
Disability insurance
Life insurance
Medical dentist
Medical doctor
Medical insurance
Medical medicine
Medical vision
Personal care
Pets
Utilities Cable TV/internet
Utilities telephone
Utilities water and electric
Vacation

 

[youbet]

I may abandon the requirement for her to keep track of individual cash expenses and just call it "cash". I don't want to nitpick.

Spoken with wisdom.

 

[FUEGO]

Spoken with wisdom.

I want to keep the following categories off my budget/expense tracking spreadsheet: "divorce attorney", "alimony", "child support". You know, to simplify.

 

[Leonidas]

My personal feelings are that if someone already has keyed in data that it's an abomination for me to re-enter the same data into another program. I've reconsidered Quicken recently because MS Money is becoming extinct next year, and I'll say that I've been pleasantly surprised at how easy the setup was - of course it was just my Money file converted so it had already been set up for years. But, back to my original point - I do zero data entry now - just download and analyze.

On tracking cash receipts: I did that several years ago and found it was a good exercise that caused me to change a few bad habits. I set up quicken/money to automatically send all the cash from ATM and other cash withdrawals into a "cash account" and then accounted for where all the cash went from that account until I zeroed it out. I kept all of my receipts and some handwritten notes to help my memory. I made a few minor changes after analyzing how I was spending cash.

Your results may be different, but I found that 95% of my cash spending was predictable. If I got $100 cash out and spent it in a week, I knew within a few dollars how much had gone for gasoline, how much for work meals, etc., before I looked at the receipts. My cash expenses were so predictable that I just made an automated entry for the things I spent cash on during each week. If my cash account still had a balance at the end of the week I just had to make a couple of tweaks, or if it was a large difference I would have to remember what semi-major thing I spent cash on.

Since then I've started using a rewards credit card for most of those kind of purchases and have stopped tracking where all the cash goes. If my cash withdrawals should suddenly rise I guess it would be worth it to go back and look at them again.

At one time I would go through the wally mart and tarjay receipts and break it all down into either groceries, household goods or clothing, but that was way too big a PITA.

I'm not pooh-poohing your manual spreadsheet entry - if you've never tracked your expenses before it's a great way to see the nuts and bolts of your spending. But after having done that for years I've sort of moved on now and just look at the weekly/monthly/yearly totals and compare them to the appropriate budget. Using credit cards for most of my purchases and then being able to download everything has made that much simpler.

 

[FUEGO]

I track my expenses using Quicken.

Cash: accounted for when withdrawn from the bank. Cash represents less than 1% of our total annual expenses, so we have decided not to track how it was spent.

I have a feeling our cash expenditures will be a rather small component of total annual spending as well. Edited to add: Since 1/1/2010, we have withdrawn $400 from ATM. $200 for vacation abroad (the "vacation" category) and $100 for gift to daughter. $100 otherwise unaccounted for, probably sitting in DW's and my wallet .

Interesting that everyone who uses quicken has many more categories versus the spreadsheeters. I guess having the process mostly automated makes it easier to get more discrete categories.

You have a category for "financial support"? Like sending money home to family overseas? I'm thinking about putting this type of expense under "gift" or "charity".

 

[LOL!]

Quick & dirty:

Try not to use any cash at all.

Give each of you an allowance. If you don't have a receipt that can put it in another category, it's part of your allowance. That's how we do the limited cash that we have. This mostly becomes vending machine stuff and some lunches. But allowance covers anything personal such as haircuts, clothes, your tanning sessions, your hobbies, etc. The point is that you do not have to account for it beyond the fact that it's your allowance.

Use specific credit cards for major specific categories. One card for gasoline. One card for groceries, one card for restaurants. One card for all other stuff. This way, you are not having to decipher a credit card statement into the individual charges.

I didn't understand "Bank charges". What's that? No one pays any bank charges nowadays. Is that a mistake?

 

[youbet]

I want to keep the following categories off my budget/expense tracking spreadsheet: "divorce attorney", "alimony", "child support". You know, to simplify.

For a young fella, you really seem to get it. You may just make it through this exercise without suffering any permanent damage.

 

[FUEGO]

My personal feelings are that if someone already has keyed in data that it's an abomination for me to re-enter the same data into another program....

I'm not pooh-poohing your manual spreadsheet entry - if you've never tracked your expenses before it's a great way to see the nuts and bolts of your spending. But after having done that for years I've sort of moved on now and just look at the weekly/monthly/yearly totals and compare them to the appropriate budget. Using credit cards for most of my purchases and then being able to download everything has made that much simpler.

I plan to copy/paste most of the data from online statements and my checkbook spreadsheet. There will be a little manual work required to properly categorize spending, but probably a lot less than setting up quicken. And I'll know with certainty how the data flows through the spreadsheets. My brief experience with quicken and money left me a little confused. Not a feeling I need when dealing with my money!

I'll probably abandon the expense tracking after a year. We manage to stay very frugal just buy following the maxim "don't spend money on crap that doesn't bring value". I think it even works on the lovely DW.

 

[FUEGO]

Quick & dirty:

Try not to use any cash at all.

Give each of you an allowance. If you don't have a receipt that can put it in another category, it's part of your allowance. That's how we do the limited cash that we have. This mostly becomes vending machine stuff and some lunches. But allowance covers anything personal such as haircuts, clothes, your tanning sessions, your hobbies, etc. The point is that you do not have to account for it beyond the fact that it's your allowance.

Use specific credit cards for major specific categories. One card for gasoline. One card for groceries, one card for restaurants. One card for all other stuff. This way, you are not having to decipher a credit card statement into the individual charges.

I didn't understand "Bank charges". What's that? No one pays any bank charges nowadays. Is that a mistake?

We spend virtually no cash now. Couple bucks on sports pools at w*rk. DW's $1-2 at the cafe at work. Maybe a buck or two for tips at a bar or resto if we can't charge it. Parking meters. I don't even think we spend any money at vending machines any more. $1-2 at McD's would go on the cashback CC.

Our CC purchases are basically segregated already. Gas/Grocery/drugstore on one card. Amex everywhere else. Dining out on a visa and all other places that won't take amex on that visa. Makes manually categorizing really simple since our Gas/Grocery/drugstore card is really just a gas card (at least the last 2 months) and other purchases broadly categorize themselves at the time of purchase.

 

[Leonidas]

I didn't understand "Bank charges". What's that? No one pays any bank charges nowadays. Is that a mistake?

The occasional ATM fee, wire transfer fees, check orders, and back before I learned how to schedule automated transfers from savings to checking I had to pay the occasional $2 charge for the CU to make the transfer for me.

 

[FUEGO]

For a young fella, you really seem to get it. You may just make it through this exercise without suffering any permanent damage.

Agile mobile and hostile.

 

[FUEGO]

The occasional ATM fee, wire transfer fees, check orders, and back before I learned how to schedule automated transfers from savings to checking I had to pay the occasional $2 charge for the CU to make the transfer for me.

Those fees don't make an appearance in my categories! I do occasionally pay a few cents a month for checking account maintenance when the $1 fee isn't completely offset by interest on the float. Rounding down means it costs nothing!!

 

[FIREd]

I have a feeling our cash expenditures will be a rather small component of total annual spending as well. Edited to add: Since 1/1/2010, we have withdrawn $400 from ATM. $200 for vacation abroad (the "vacation" category) and $100 for gift to daughter. $100 otherwise unaccounted for, probably sitting in DW's and my wallet .

Interesting that everyone who uses quicken has many more categories versus the spreadsheeters. I guess having the process mostly automated makes it easier to get more discrete categories.

You have a category for "financial support"? Like sending money home to family overseas? I'm thinking about putting this type of expense under "gift" or "charity".

Yes, financial support is the money that I send to my mom when she needs a bit of cash. The reason why I do not lump it with gifts/charity is because I regard gifts/charity as discretionary spending (spending that can be cut in an emergency) but not financial support. I consider financial support a committed expense.

The great thing about Quicken is that it can be trained. For example, when I download my credit card transactions, it now knows that Publix goes under "groceries", Banana Republic goes under "clothing" and Starbucks goes under "dining". So I can have a lot more categories because most transactions get categorized effortlessly.

 

[aaronc879]

I just use WordPad. Every time I spend money I make an entry. I only spend money about 15 times per month so it's pretty easy. I'm sure couples, especially those with kids, would have many more entries. Here's an example of what I do:

2010 Expenses

BUDGET
-Mortgage: 400/mo
-Electric: 125/mo
-Condo Fees/ins/
maintenance: 150/mo
-Cable/internet/cell phone: 150/mo
-Car-gas/ins./maint.: 125/mo
-Groceries: 200/mo
-Entertainment/misc.: 100/mo

Total: 1250/mo

Jan. '10

1/4 Groceries: 67.00
1/6 electric bill: 217.00 217.00
1/6 cell phone: 40.00
1/6 Gas: 25.00
1/6 Groceries: 67.00
1/7 Condo fee:115.00 115.00
1/11 Mortgage: 175.00
1/12 Cable Bill: 101.00 141.00
1/16 entertainment: 23.00
1/20 Groceries:58.00 192.00
1/20 Gas: 30.00
1/20 entertainment:
1/25 Mortgage: 350.00
1/29 Gas/car: 22.00 77.00
1/29 entertainment:
1/30 entertainment: 122.00 $100+ at clubs(rare expense)
Total: $1214

Feb. '10
2/4 Groceries: 59.00
2/4 Cell Phone: 40.00
2/7 Condo Fee:115.00 115.00
2/8 Gas: 23.00
2/8 Groceries: 54.00
2/8 Mortgage:175.00
2/11 Electric:210.00 210.00
2/11 AAA Membership
Car expense:80.00
2/11 Cable: 102.00 142.00
2/13 entertainment:28.00
2/13 Groceries: 31.00
2/22 mortgage:176.00 351.00
2/23 haircut/misc:8.00
2/23 gas/car:29.00 132.00
2.26 Groceries: 50.00 194.00
2/27 enter,/misc.:19.00 55.00
Total: $1199

Mar. '10
3/4 Cell Phone: 41.00
3/4 Groceries: 36.00
3/8 Condo Fee:115.00 115.00
3/8 Gas: 24.00
3/8 Groceries: 51.00
3/8 Mortgage: 175.00
3/11 Electric: 199.00 199.00
3/11 Cable: 102.00 143.00
3/12 enter.: 33.00
3/18 Haircut/misc.:8.00 41.00
3/18 Groceries: 70.00 157.00
3/18 Gas:22.00 46.00
3/22 Mortgage: 175.00 350.00
3/
3/

Total:

The bold on the right is the total for each of my 7 categories for that month. My budget includes every thing I buy rounded up to the next dollar.