This is either a post you’re going to linger over with a tall cup of hot coffee until it turns cold…or you’re going to fall asleep by the end of the second paragraph, amazed anyone is actually interested in reading this sort of thing.
So, if this isn’t your type of post, no hard feelings.
I’ve had a few questions about how our family keeps track of expenditures and if I recommend a particular accounting software, so I thought I’d tackle the subject today with a big ol’ roundup.
How do you budget?
Technically, I don’t think I’d call what we do budgeting. At this point, we don’t set aside specific amounts for different categories. We do, sometimes, make decisions with a cap in mind (this is a completely hypothetical example, but I could imagine us saying something like: “We’ll only buy a bathroom vanity that is under $350“). For the most part, I think our strategy would be better described as mindful tracking.
And, more generally, we just aim to be as frugal as possible. Boring perhaps, but true. The pandemic has impacted travel and adventuring but we typically aim to spend money on experiences and memories over “stuff”.
do you use accounting software to manage your finances?
Years and years ago I had to use Quickbooks as part of a job; it was fine, but certainly not my idea of fun. (Remember: my idea of fun is reorganizing sock drawers, so it’s not outside the realm of possibility that an evening spent on Quickbooks wouldn’t strike a similar chord. Alas, it doesn’t.)
Then, about a decade ago, when working in a local business incubator, we were introduced to a free program called Wave which is what we/our accountant still use to manage corporate finances. (Note: there are some paid features that could apply to certain users but, for personal finances, the functionality of the free version should more than suffice and I find it easier to use than Quickbooks.)
Despite being very familiar with Wave, it felt like more detail than I needed for tracking personal finances.
*Note: I know lots of people swear by You Need a Budget (YNAB). I’ve never tried it – and don’t plan to – but it might be something to check out if you’re on the hunt for a budgeting software?
…so what do you do?
Great question, hypothetical reader – I’m so glad you asked.
I use a spreadsheet.
Shortly after month-end, I export all the transactions from our credit cards and chequing account as a .csv file. I then manually copy and paste the different expenditures into the relevant categories in a spreadsheet.
It’s very simple…
There are totals for each category at the bottom. There is a different tab for each month, along with a summary tab that collates data from all the months. This final tab is where I do basic calculations, including monthly averages for each category.
how do you break down “lumped” receipts?
I don’t, sigh. By this, I’m referring to a trip to the grocery store where I might buy croutons AND green onion AND bananas AND Gorilla Glue AND toilet paper (because that is life as an adult.)
There are two categories where this is most applicable: “Groceries” and “Misc”.
For example, I do a lot of shopping at a local pharmacy. They have most kitchen staples, usually at the lowest prices (and they have a fantastic rewards program to boot). So I go there to get butter, frozen fruit, milk, tea, eggs – anything aside from fresh produce, I can likely source from this store. BUT…I also end up buying sunscreen and sanitary/cleaning products and stuffed animals for birthday parties.
I do not separate this out. Ever.
So our spreadsheet definitely an art (albeit messy), not a science. And if we did have specific numeric values associated for a budget within each category, I’d really need to up my game in being more careful with allocation.
IS THERE ANYTHING YOU don’t you track?
We don’t track cash. If someone gave me $100 for looking cheerful as I walked down the street (wouldn’t that be nice), it would go straight in my wallet, never to show up in the spreadsheet.
If we bought a pair of used skis off Kijiji (like Craigslist) for $100, that would not show up in the spreadsheet.
Investments also don’t show up on the main pages, either. On that final summary spreadsheet, I have a running tally of what’s in various investment accounts – including retirement savings, the remaining balance on our mortgage, and the college/university savings program for the kids. So while we have a snapshot of this information, it doesn’t factor into the tracked expenditures. So, for example, if we had $200 getting deposited into a savings account each month, this wouldn’t show up in the monthly spreadsheets…but would be accounted for in the overall equity tracking on the final spreadsheet.
what categories do you track?
The screenshot above, from 2022, is slightly different from previous years. I’ve teased out a few new categories (for example, I added in “Gifts” since this was falling under the “Misc” heading which was feeling too broad). And I’m going to add in a Renovation tab as well – the reasoning behind that will be better explained below.
But from 2018-2021 here are the categories we used:
- Household – includes: house insurance, mortgage payments, property taxes, renovations, hot water tank/propane tank rental, heating oil, electric/sewer bills. If we buy a plunger or a house plant, it goes here. Mattress, new sheets, lightbulbs, someone to mow the lawn or paint the living room? All under household.
- Charitable – includes: any donations that are tax deductible/we have a receipt for (see note on cash above; if I give $5 to someone bagging groceries to fund a band trip, this won’t show up in the spreadsheet).
- Auto – includes: fuel, insurance, repairs.
- Kids – includes: camp/school fees, kids clothing if it was very specifically just for them (if I spend $50 on second hand clothing but 1/2 of it’s mine, this will go under “Clothes;” if I spend $100 to buy the kids new sneakers for school, this will go under “Kids.” Again – these sheets are an art, not a science and I’m fine with that. Until 2020 we had preschool fees, so there was a big drop in 2020 when COVID + starting primary meant Levi was no longer in preschool. While I’m now hiring a babysitter every week or so, I pay her in cash so…you guessed it…that doesn’t show up in the spreadsheet.
- Groceries – includes: food from a grocery store (NO restaurants) + can also include miscellaneous household products that can be purchased at a grocery store (toilet paper, cleaning products will almost all show up here).
- Recurring – I’ve changed this for 2022, but it used to include: life insurance, telephone/internet (the latter is now covered by work, so not included in 2020 or 2021) and some monthly household expenses – like our hot-water tank rental (how boring is that? I love my hot showers but somehow I never envisioned adult life to be so practically uninspiring that a monthly line item is renting a hot-water tank) – which I’ve now moved over to “Household”.
- Travel – includes: any airfare, meals/entertainment etc. while travelling.
- Clothes – includes: clothes. This is a small category for us, and about 90% of all items are sourced second-hand.
- Meals/Entertainment – includes: trips to the movies/zoo etc., any restaurant or take-out meal, Spotify/Netflix/Disney+ subscriptions
- Health – includes: any medications, chiropractor/massage/dental work. Chances are, though, if I buy something like Advil at the pharmacy along with a grocery order, that will get lumped under “Groceries”.
- Misc – includes: gifts, trips to the DollarStore (could be craft supplies, prizes, decorations etc). Orders from online (Amazon, Aliexpress). Sometimes I’ll put a bigger order into the appropriate category (e.g. a pair of shoes off Amazon might go under clothes; hypothetical as I’m quite certain we’ve never ordered a pair of shoes off Amazon!). For 2022 I’ve teased out Gifts and VV (Value Village, one of our favourite places to thrift, but for very miscellaneous things, so I gave it a category of its own).
This is a lot of words. Do you have pictures?
Thank you, once again, hypothetical questioner extraordinaire. I do, in fact, have some pictures.
But first, a huge caveat. These numbers are quite distorted because I really should have had subcategories under the House designation. Things like mortgage payments and renovations (investments) versus utilities and property taxes (sunk costs) should ideally be kept separate. So the house category is a HUGE chunk of the expenditure pie, but this includes a lot of different inputs surrounding homeownership that don’t necessarily all belong together.
Wow. Household was big (55.8%) – this was the year we had to excavate all around the perimeter of our property to improve drainage. Ugh. Yet another very un-fun reality of being an adult. Health was very, very low (0.5%).
Kids would be almost exclusively preschool fees (7.7%); Meals and Entertainment is consistently between (2-3%). Household dropped to 41.3% (no major renovations or repairs in 2019, thank goodness).
It took me a while to sort out the Charitable tab for 2020. Why so high? Then I realized, charitable giving is always related to income, where other expenses aren’t (for example, if we make extra money, we don’t pay more for our telephone bill). So this reflects a bump in income, while expenses stayed the same. “Kids” expenses halved (down to 3.3%) because we only had preschool for a few months and, beyond that, there was NOTHING OUR CHILDREN COULD DO because we had just started living in a pandemic world.
2021 was all about the house and a lot of this was renovations. When we bought out 1970’s house we knew there was work to be done. A rotting exterior structure had to be removed (2021), windows needed to be replaced (2021), we wanted to add insulation since our walls are very thin and it gets very cold in the winter (2021), adding insulation meant we really should re-do the exterior (2021). You get the idea. So it was a very big year for the house. Again, though, it would be helpful if I had broken this down into fixed costs (utilities, home insurance etc.) vs investments (mortgage + renovations).
“Household” represents the majority of our expenditures. This makes sense; paying down our mortgage + a lot of home repairs. From extensive excavating work to fix drainage issues, to replacing windows and doors – there have been major expenses associated with owning a home.
We spend very little on: “Health,” “Meals and Entertainment,” and “Clothes” (for the latter our max spend rate was in 2020 when this was 1.0% of our expenditures for the year; the minimum was 0.6%).
Now that we have no regular childcare, the “Kids” category is also very low. This will likely pick up as both kids will do some sports this summer and, as pandemic restrictions ease, there will be more opportunities for camps and the like.
let’s talk groceries
Yes, please. Let’s talk groceries.
We love to eat. Like really, really love to eat. I’ve written about this before but we tend to eat simple meals. We don’t buy organic but do eat a lot of whole foods…which aren’t cheap. We have found a lot of great ways to save money at the grocery store (shopping sales and reduced produce being the biggest money-savers for us).
But groceries are more variable than expected.
Our monthly cost of groceries only went up by $3 from 2018 to 2019. Then it took a HUGE leap in 2020, going up by $229 extra PER MONTH! I puzzled and puzzled over this (until my puzzler was sore; thanks, Dr. Seuss) and then realized: John stopped traveling! He was away 50% of the time before COVID, and Levi’s preschool also shut down so we were suddenly doing a lot more eating at home. And while we didn’t eat out much before COVID, this completely dried up for months (and that food would have been shunted over to Meals and Entertainment).
This all makes complete sense now, but at first glance I was incredulous! Why the sudden spike? COVID, of course…
Last year, in 2021, we actually spent almost $50 less per month on groceries from 2020. That one I’ve not quite figured out? Maybe we spent less on household miscellany, as I don’t think we’re eating less!?
I am confident, though, that our grocery expenditures will go up significantly as food prices are starting to jump at alarming rates. I rang up a jug of milk last week and actually went back to the fridge compartment to check that the price was correct. It went up by $1.20 IN ONE WEEK. Milk. A subsidized, staple food (that I don’t drink, but my kids sure do)!
And there you have it. An overview of how we/I track expenditures. Nothing too exciting but, as Gretchen Rubin says, you monitor what you measure. And as we want to be wise stewards with our money, it feels prudent to monitor spending habits.
What about you? Do you love budgeting? Do you track things monthly and use software? Anyone else go old-school with Excel spreadsheets?