How to Figure Out Your Spending For the First Time

May 9, 2017

How to Figure Out Your Spending For the First Time

Trying to figure out your spending for the first time can be frustrating. Whether you’re working on your first budget or you’re simply curious about your spending habits, nailing down exactly what you spend is not easy if you don’t have a clue where to begin.

There are a few steps you can take to help you gain a sense of what you spend on average. Starting with these will give you an idea of your spending habits.

1. Average Your Expenses for the Last Three Months

Look up your bank statements and credit card statements for the last three months and add up your spending by category (e.g., groceries, clothing, entertainment, dining out, etc.). Find the average by dividing each total by three.

This will provide some sense of what you spend in a typical month. If one of the months brought unusual spending (e.g., a holiday month), consider skipping that month and using a more “average month.”

2. Use Recommended Percentages

After averaging your expenses for the last three months, it can be helpful to compare what you spend to what’s recommended.

The following spending percentages are found in The Total Money Makeover and can serve as a helpful guideline. Keep in mind though, that these numbers are recommended and are not necessarily a hard and fast rule. Your income and overall financial picture may result in your spending being lower or higher than what’s recommended. These figures are based on your net income (take-home pay).

  • Charitable Gifts: 10 – 15%
  • Saving: 10 – 15%
  • Housing: 25 – 35% (rent or mortgage including principal, interest, taxes, and insurance)
  • Utilities: 5 – 10%
  • Food: 5 – 15%
  • Transportation: 10 – 15%
  • Clothing: 2 – 7%
  • Medical /Health: 5 – 10%
  • Insurance: 10 – 25%
  • Personal: 5 – 10%
  • Recreation: 5 – 10%
  • Debt 5 – 10% 

3. Track Your Expenses

If you’ve looked back at your spending, and you’ve compared it to the recommended percentages, consider tracking what you spend for the next three months. You’ll have a pretty accurate account of your spending since you are actively watching it.

Like you did in step one, add up your spending within each category and divide by three to find an average. Be sure to track all methods of spending including your debit cards, credit cards, and cash.

Related Reading:
•   How to Do a Zero-Based Budget
•   How to Budget When You Live Paycheck to Paycheck
•   How to Squeeze $500 Out of Your Budget

These steps will help you figure out what your average spending is and will give you a great starting point if you’re trying to rein in your spending for the first time. Be sure to continue to monitor your actual expenses in light of what your goals are and tweak your habits as necessary.

Have you tried to figure out your spending before? Were you surprised by your spending habits?