Budgeting 101 Cartoon

Here’s an ideal monthly budget for $1000.

But it often ends up like this…

As Leonardo da Vinci said:

Knowing is not enough; we must apply. Being willing is not enough; we must do.

So having the perfect budget doesn’t help unless it’s followed. To stick to a budget, tracking your expense is essential. Every day, make it a habit to itemize everything you spend on an excel sheet. This is very cumbersome but it will force you to review your daily spending and where you’re spending too much.

For example, I have set my ideal food budget to $330 to achieve my financial goal, but the first month I started tracking I spent well over $600 (for a two person household). This forced me to be more mindful of my grocery shopping and to think of ways to cut my grocery bill. It is a work in progress.

Here are some free tools that would help you with budgeting:

  • Google Sheets/Open Office ODS file
    • Free excel sheets are available, no need to purchase any special software. I am currenty using google sheets so I can enter my data on my phone/computer.
  • Google Keep
    • Take a picture of your receipt, then capture expense by using “Grab Image Text”. This will make the data entry slightly less cumbersome.

Note: There are many budget/expense tracking apps out there that takes a picture of receipts but at this time I haven’t found one that would capture each item bought on the receipt. Most of them will capture the total spent at a certain store, which is not very helpful.

I found this Japanese app which captures every item bought, and even suggests a recipe. Unfortunately, it is not available outside Japan. If you have any suggestions about which app to use to make receipt -> expense tracking easy, please let me know. Because of the way my receipts tend to build up (not practicing what I preach), I’m willing to use a pay-for-app. I think it’s worth it!

Comics & Cartoons

Financialtoons: Tracking Your Expenses

Budgeting Cartoon

“Mere act of monitoring expenses tends to reduce spending”. This is a tip from the book Wealthy Barber Returns. How can you monitor spending?
I pay almost everything with my credit card. So tracking my expenses is relatively easy.  Every month I download my credit card statement and categorize all my spending. Grocery, Entertainment, Alcohol, Eating Out, Coffee, etc. Then I sum up how much I spent in each category.  That way if I’m spending too much in one area, I can make a plan on how to minimize my spending. It’s like trying to find out which faucet in the house is leaking.

Here are the steps:

(1) Download credit card statement
When I get notice from my credit card company that my statement is ready, I download the transactions as a .csv file and open it in excel.  For example, since I have a RBC credit card, so I click on download transactions.
Download CSV file (Credit Card)

(2) Categorize Expenses in Excel
I add a “Category” column and add the category of each expense, for example, Grocery, Eating Out, Entertainment, Gas, etc etc.

(3) Calculate the Subtotal of each expense
You can easily achieve this by using excel’s built-in tools:

  1. Click the Data tab in Excel’s ribbon toolbar
  2. Click the Sort button and sort by Category column
  3. Click the Subtotal button and fill in the dialog as appropriate, then click OK

This process subgroups each category and calculates the subtotal. Here is my breakdown for July:

Alcohol – $130 (yikes! I can shave this off)
Coffee – $30 (not bad)
Eating Out – $100 (not bad)
Entertainement – $90 (I think I spent it on DVD, clothes etc)
Gas – $130
Gifts – $320
Grocery – $1300 (OMG definitely I can shave this off!)
Parking – $30

Now I can go over which expenses I can work with.I spent $130 on gas and $28 on parking, both expenses I can’t really do much about, unless I bus for 3 hours.  I spent on (gaaasp!) $130 of alcohol and a whopping $1,300 on grocercies! I did entertain a lot this summer so that is why.  On the other hand, I had thought I spent too much money on coffee in July, but I’ve only spent $30, which isn’t too bad.

What I learned from this exercise: I became AWARE of my spending habits.

In the summer, it looks like I spend too much on alcohol & groceries because of entertaining people. I can be mindful by trying to shop at discount grocery stores like Superstore/Walmart, instead of going to the closest grocery store which is not the cheapest.  Also, instead of buying a bottle of wine and going to the liquor store every time I run out of wine, I could’ve bought boxed wine.  Boxed wine is not too bad, and you can start the evening with a more classy looking bottle, and then serve from the boxed wine. After the second wine, it tastes the same!

What I learned from this exercise: I became less stressed about some areas of spending – I always felt guilty when I grabbed a coffee from a coffee shop, but $30 ain’t too bad. Next time I go to the coffee shop, I won’t be too guilty. And, guilt is not good for stress eating.  Or, if I’m feeling motivated every time I refrain from buying coffee, I can think of the saving I can make in an year – which would be about $360 / year.

By being aware of your spending, you can devise a strategy to save more. That is why, the “Mere act of monitoring expenses tends to reduce spending”. In addition, it makes me want to get a glass of wine, after all the calculation. After you start keeping track of your expenses, now is the time to budget – to allocate how much you should be spending on a particular category.