Create a Year-End Spending Summary

Each year, American Express compiles a yearly spending summary and then sends me a link to it. It totals my spending by category and subcategory. I use it to see if any area of my spending is out of whack. Since we make most of our day-to-day purchases on the card, I can easily get a snapshot of my expenses. If you don’t have an American Express, or don’t use just one credit card for all your purchases, you can make your own spending summary. In fact, you should make a summary for ALL of your income and expenses to make sure you’re still on track.

How to Make a Spending Summary
By now you should have received all of your bills and credit card statements for purchases through the end of 2009. Hopefully you use software like Quicken or an online money-management program, which will make this easier.

If you use either of the above, just go to the reports tab and click through to generate an expense summary for all of 2009. If you don’t use software, then this is going to be tougher and take a long time, so maybe just start with a typical month.

  1. Open up Excel and label the rows by your expense categories and subcategories.
  2. Fill the columns with the amounts. If you’re doing more than one month, label each column with a month. Use this formula in the cell: =0.00+1.00+1.52. In place of the amounts I entered, use actual amounts. That will create a running total.
  3. Go through your receipts or statements and enter each amount into the appropriate column.
  4. Now look at your totals. Does anything surprise you? Do you see any large jumps?

The nice thing about using personal finance software is that you can see where you made each purchase. With an Excel chart, you’ll have to go back to your receipts to detect the pattern.

How to Use Your Spending Summary
The spending summary is good for two things: patting yourself on the back for keeping your expenses low, and spotting the areas where your spending is creeping up. For example, our Amex summary showed $108 at Bars & Cafes for Oct.-Dec. 2009. I clicked for more detail and discovered that all but $30 of that was my husband’s Saturday pizzas. We’ve talked about him not eating out six days a week, but he hasn’t broken the habit. Now I see that if it continues, it will cost us over $400 a year! It’s time to have a talk again.

I also worked out that we spend only $85 a week, on average on groceries. This would be great, if only we weren’t spending another $60-$70 a week on my husband eating out. So, that tells me we have enough money in our budget to spend more on groceries if I can at least get him to eat at home on Saturdays.

Of course, some categories will be much higher than you expect, until you dig deeper. For example, our “internet purchases” category was shockingly high, until I clicked through and discovered our laundry machines and blinds were both in that category (rather than furnishing, where I would have put them.)

Don’t use your spending summary to make yourself or anyone else feel guilty. It is what it is. If you find something alarming, talk about it and agree to do better. Then, make a plan to reduce that spending. I see that was my mistake with my husband – we talked about him not eating out six days a week, but he continued to do so. Since he ate out, I stopped buying him lunch food. And then when we discussed it again, he said, “But that’s my pizza day.” I need to start buying him the frozen mini-pizzas he likes again. Maybe that will solve the problem. I can usually get coupons for those.

You should also use your spending summary to adjust your budget if any of the items are markedly different from the amount you planned. That will help you better manage your spending in 2010.

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