How A Budgeting Audit Saved Me $500
Have you ever done a budgeting audit? What do I mean by a budgeting audit? It’s a lot less complicated than it sounds. Basically, it’s me writing out all spending for a two to three month period and looking for ways to improve my budget by going through my spending with a fine tooth comb. You might be wondering how this is different from budgeting on a regular basis, but if you’re anything like me, I tend to mindlessly input my expenses on my cloud-based budget through my phone app, then not really think about it so long as I am spending within my means. But sitting down and writing out by hand exactly where I have spent our hard-earned money gives me a real idea of my spending patterns, and where I could be doing better.
Picking Up On Patterns
Here were my observations the first time I did this last year. Although I have a spending category in my budget, I don’t categorize who the spending was for. So I took four sheets of paper and designated a sheet for me, my husband, the kids (as one category) and household for the last sheet. I looked at my expenses for three months and wrote down the amount, store name and put it on the person’s sheet who the spending was for. For instance, if it was $45 at a kids clothing store, I would put that amount and the store name on my kids sheet. If it was $20 at a craft store, I put it under my name. If it was $300 for groceries, I wrote it on the household sheet. As you can imagine, this is a very tedious process, but there is something really powerful about writing it out and having to recall what exactly you spent all this money on. By the end of a three month cycle, my original sheet had three to four extra sheets under it while my husband still had only one sheet. I mean, I know that my husband is not a spender, but there was something sobering about seeing how long my list was compared to his. Also, the number of times I saw the same store or type of spending come up on the sheets shocked me. For instance, under the household sheet, it surprised me how many times I was buying wine and beer each month. Even though I considered us only social drinkers, it appeared we were very social. Looking at my sheets, I found that I was purchasing alcohol almost every weekend (a bottle of wine, craft beers), which was adding up to over $100 every month.
Does This Align With My Values?
The reason why I was so shocked (not in a good way) with our alcohol spending was that spending this much money on beer and wine didn’t align with our values. When we have friends over for a meal, or go to their place for a potluck, we do it for the fellowship. It never matters what we’re serving or whether there’s wine, what matters is that we’re carving out time in each of our busy lives to spend a few hours together to catch up and enjoy one another’s company. I never like to show up to a friend’s home empty-handed, so bringing a bottle of wine is the easy thing to do. But when I started to think about what would be more meaningful to bring, I began to get more creative. For instance, I love baking and if I know the tastes of the person’s home I am going to, I try to bake with those flavors in mind. Or if I know they suffer from certain allergies, I will bake without those ingredients. Making more mindful choices about gifts and thinking about our values when spending money helped cut $500 from our budget this year so far. This is because we stopped buying alcohol so regularly. Now, we buy it for special occasions, such as our anniversary or a wino friend’s birthday, rather than a go-to mindless gift expense.
Out Of Sight, Out Of Mind
I recently did another budget audit and while I was happy to see that my personal list was a couple pages lighter than my last audit, I noticed a recurring household expense that went even beyond grocery spending some weeks. It was at Homesense and Winner’s (Canadian equivalent of Homegoods and TJ Maxx in the US). I do recall needing to replace certain cooking and baking supplies one month, but the expenses never stopped the following month. I knew that I was finding an excuse to go into the store (kids bedsheets) but leaving with bedsheets for the whole family, as well as a new oil diffuser. The latter two which were absolutely not necessary. When I saw how often I was writing out these two store names on my expenses list, I knew I had to do something drastic. I am now currently on a self-imposed Marshalls/Homesense ban. This doesn’t mean I can never go back to these stores. But for now, out of sight, out of mind. And my budget is a lot happier for it.
Doing a budget audit will open your eyes to your bad shopping habits and make you mindfully consider whether the way you spend your money aligns with your values. Just because you aren’t overspending in your discretionary budget doesn’t mean you should be mindless about what you spend your money on. This exercise will help you trim the fat and get you even more laser focused on hitting your financial goals faster. Go ahead and try it. The patterns you find might surprise you.