How to Compile Your Living Expenses
The process of compiling living expenses may seem like a tedious chore, but following these steps simplifies the work involved.
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Things You'll Need
- Budgeting software (optional but helpful)
- Highlighters to track expenses per category (use yellow to highlight food purchases, green to highlight entertainment costs, etc.)
- Bank account records from past 6-12 months
- Pen/pencil and calculator to add expenses
Instructions
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Go through your records for the past 6 to 12 months and break down your spending into categories (rent, food, clothes). The finer your categories are, the more accurate your budget will be. Expenses come in two broad groups: fixed (repeating costs, like rent and car payment) and variable (changing costs, like entertainment).
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Some living expenses may be harder to categorize than others. Where does that random trip to the pharmacist fit in, for example? Create a miscellaneous category to keep things simple.
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Calculate how much you're spending per category per month. To do this, take your summed expenses and divide by the number of months in your survey. For instance, if your total phone costs for the past 12 months come to $904.32, then your average monthly phone bill is $75.36.
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At the end of the month, audit and tally all your expenses. How do these numbers match up to your predictions? If you're way off in one category, you may need to readjust.
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Once you can stick to the budget you have laid out, move on to long-term planning. Set a time frame to review your budget again and make adjustments.
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Tips & Warnings
Remember that tracking expenses can also highlight reserves of cash you didn't know existed. Instead of allotting this money to a spending category, protect it by putting it into a savings account or investment portfolio.
Turn expense tracking into a fun affair by rewarding yourself with a treat for staying within budget.
Create a filing system that allows you to easily re-budget when life changes hit. Having to un-bunch hundreds of receipts can lead to procrastination.
Give yourself room to make budget errors in living expenses, so that you win (stay in the black) every month.
Never stack on a major living expense unless your budget allows for it. If you can't pay for something, either adjust your budget so you can afford it or save up to get it later.
