Getting a handle on your spending

One of the first steps I will take with you as a finances coach is to get an idea of your recent spending. If you buy everything on credit card and you bank online (like we do), then it’s reasonably straightforward. You can use a spreadsheet like Excel or Google Sheets to keep your information organized. Most credit card sites allow you to download information in a .csv (comma separated value) file. You can open these directly in the spreadsheet program. You may have to fiddle a bit with it to clean up the data, or you can use it as is.

The numbers for the amounts that you’ve spent will show up in one column. You can use one of the first few rows to label your spending categories, such as groceries, restaurant, insurance, etc. Keep all of your amounts in that one column, and copy and paste each number to its appropriate category, trying to stay on the same line, if possible. Because I had so many categories, my sheet stretched past one screen going sideways, which made it a little difficult to keep amounts on the correct line.

Capture
I cleaned up my spreadsheet by deleting everything but the business name and amount. I also shaded every second row to make it easier to put the category amount on the correct line — although that doesn’t really matter.

Once you’ve categorized everything, total up the data. Find the total of the month’s spending (making sure you only include purchases, not payments), and find the total for each category. As a cross-check to make sure you’ve included everything in the categories, find the total of all of the categories. It should match your total for the month.

If you do that for three months, you’ll have a good idea of your recent spending. You should also be able to start identifying spending anomalies, purchases that only happen once in a long time, or may never happen again.

If you do a lot of transactions by cash rather than credit card, then you’ve got an extra bit of work ahead of you, and you may not be able to track your three-month historical spending unless you’ve kept all of your receipts. If you don’t keep receipts, you may have to start — and look forward to organizing your spending over the next three months. But that’s something I can help you out with, too.

Thinking about retirement

This CBC article addresses two issues for people moving into their pre-retirement phase (late forties to mid-fifties): massive debt, and not knowing if they have enough money to retire.

Canadians burdened with hefty debt worry about retirement: CBC Toronto

In the article, a financial advisor offers the following advice:

  • Look at your total net worth (everything you own vs. everything you owe).
  • How much are you earning today and how much are you spending?
  • What do you want to live on when you aren’t working — be honest, is that doable?
  • Break it down to “pots” of money (RRSP, pension, savings, property value).

Then it’s time to do the math and she says your answer should be pretty clear.

As a finances coach, these steps are what I would help you with. Many people I’ve talked to have stated that they want to organize their finances, but I suspect that most find the process a little overwhelming.

 

How important is a budget?

Do you have a budget? Do you stick to it — most of the time?

As a finances coach, these are probably among the first few questions that I’ll ask you, along with some other “big” questions, like the following:

  • Do you know how much your take-home pay is?
  • Do you know the total value of your assets?
  • Do you have an emergency fund to cover your costs if you’re out of work for six months?

I think that having a budget is fairly important. The process of creating one will answer a lot of questions for you, even if you don’t continue to track your expenses and record them. When my husband decided to retire in 2014, we wanted to know if we could afford it, as his retirement income would be considerably less than what he was making while at work. To create a monthly budget, I took the last three months’ worth of credit card statements (we do everything by credit card) and categorized each amount. The average of the amounts in each category became our budget number. We haven’t concerned ourselves so much with tracking our numbers each month and making sure we’re sticking to our budget, but I do a three-month retroactive checkup about once per year.

Partial budget
We use Google Sheets to create and maintain our budgets

Recently I’ve noticed that we’re spending a lot more on groceries than budgeted for. It has a lot to do with the low Canadian dollar and produce purchased from the US, but also our two teenage/young adult children who are still living with us — they eat a lot! However, we also throw out food, a lot more than we should. So we decided to start tracking our grocery and restaurant spending to see if we could keep it within the budgeted amount.

We’re now 22 days into February, and so far, so good, but it’s close. We’re 76% of the way through the month, and 74% of the way through our budgeted amount. We’ll have to keep a close eye on our food spending for the next week and make an effort to use up the food that’s already in the house. This should be interesting as we have visitors coming to stay with us for two days and a restaurant meal with friends booked for the weekend!