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My Cash Analysis

Identify the problem

So once I realized that I didn’t know where all my money was actually going, I decided it was time for some detective work.  Even though I had thought my spending was pretty normal, I decided to pull up my Mint account and do an analysis.  I broke it down by the major categories, and started digging in to each one.

As you can see, the “shopping” pie piece is almost as large as “food”, and I wasn’t exactly sure which each one contained.  This brought up a good question.  Is this how everyone else spends their money?  Which parts of this budget are actually essential, and which are just nice-to-have? What do I want my spending to look like.  These were all important questions, that actually took a long time to answer.

The Average American

It was interesting to compare my spending to that of average Americans.  By using Mint’s comparison feature I was able to see how my spending stacked up.  It seems I spend a considerable amount less than average on housing (because I have a roommate) and utilities (apartments don’t need as much energy as a single family home).  I was pretty much in sync with average for shopping, food, transportation, and everything else.  Here’s the thing, the average American isn’t doing so well these days, so I decided I need to cut a few chunks out of my monthly spending.

The Essentials

Before I could start cutting my spending, I had to figure out what I truly needed to survive, be happy, and do well at work.  I thought back to my grad school days and realized that my “needs” had gotten a little out of control.  Back in the day, I was good at living I didn’t have much “discretionary income”.  So here’s what I came up with.

First off, I’d need moderately nice housing in a safe area, close to the train to work.  The apartment I was in fit the bill, so I could check that one off the list.  I’d need to get to work, but I certainly didn’t NEED to drive, I  just had to get there.  This realization was daunting since I’d been driving every day since I started my job.  Spending enough money on groceries to be able to put together healthy meals was and is important to me.

I knew going to fancy restaurants was not necessary, even though I did enjoy it.  The only shopping I really needed to do was buying a few articles of clothing each year to replace what had worn out.  buying shiny new TVs, computers, and Iphones suddenly didn’t make the list.  I also left Entertainment and travel off the list since they don’t fulfill any essential human needs.  Then besides health insurance and personal care products to look presentable for work everyday, everything else fell into the “non-essential” category.  I was truly surprised at how large the non-essential category was.  It included things like monthly hair cuts, gas for my car, and the salad I customarily bough for lunch at work.  I didn’t immediately strip all of these non-essentials from my life right then.  I just recognized that most of them could be cut if I ever really needed to.

The Spending Goal

After pondering all my non-essential spending for a few days, I started to draft a list of what, besides the essentials, would end up in my budget, and what would be cut out like unnecessary fat!

The first thing to go was the giant Shopping budget (14% of spending).  As you can see by the pie chart above, I spent a hell of a lot of cash on “shopping”.  I don’t even like the act of shopping, like some people do, so why was I committing such a hefty chunk of my budget to it.  When I dug into it I realized it was clothing for work, street clothes, gadgets and computer stuff, impulse buys, and gifts.  I settled on a goal of 60% less shopping.  Most of the stuff I ended up buying was useless anyway, so I decided to set an ambitious goal.  40% of my previous spending level didn’t eliminate all shopping, it just make me think long and hard about each purchase.

Food was the next item on the chopping block.  Eating healthfully has always been important to me, so buys lots of fruit and veggies at the local Jewel seemed like a great way to live.  I also ate out with friends at least three times a week.  I decided to make a few changes, including shopping at a different grocery store, trying harder to find deals on fruit and veggies, and eating at restaurants less ofter.  By doing some rough calculations I decided that I’d cut 40% from this budget too.  I know these are starting to sound like unrealistic goals, but like I always say, go big or go home.

The next big expense that could be reduced was transportation. Now let me explain this one a little further.  When I got my job, I decided to live in the city near my friends, even though my office was located 30 miles away.  At that time I was driving at least 60 miles/day in a 24 mpg car.  Anyway, I decided to stop doing that.  I moved closer to a train station and committed to taking the train every day, even though it took longer.  By my calculations, I figured I could cut 65% off of my ongoing expenses as well as milk another 10 years out of my current car.  (more to come on this).

The best laid plans

So after doing some math, estimating my future spending, and comparing it to the previous year, I had my final goal.  I decided that I wanted to increase my savings rate from 20% to 35%.  A lot of people have told me that a 20% savings rate is great, but I just thought I might be able to accomplish more if I set my mind to it.  Looking back on that goal, I now know I was letting myself off easy.  Over the past year I didn’t save just 35% of my after tax income, I saved 49%. (Isn’t that badass!?)

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  1. October 18, 2012 at 6:14 AM
  2. December 5, 2012 at 4:40 AM

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