This is the part where most people lose their $hit. Doing a spending analysis can feel a lot passing a gall stone or giving birth; neither of which I have done - THANK GOD. Others could liken probing through your finances to actually getting probed. After all, you can’t spell analysis without anal. Now, all jokes aside, doing the analysis wasn’t all that bad. It was kind of exciting to see how I was spending all my hard earned moolah. When following the Tao of Gail she asks you to look back through all your finances for the past 6 months. Yes, that is about 180 days worth of spending. Gail thinks that looking back anything more than six months is excessive. I just think you’re flaunting it in my face so quit showing off!
|Debit and Credit cards are made from the Devil's feces.|
I’m certain that most people who have dug themselves into nearly $40,000 of debt (like me) are also big fans of plastic. I’m not talking nose jobs here; I’m talking credit and debit cards. My debit card was actually attached to the pleasure centre of my brain so that every time I used it I felt like I won the lottery. Oooh! I entered the magic code and money came out! Hooray! Anyway, where was I? Oh yes, debit and credit cards. Ok, so if you’re like me, you use these things every single day and therefore have a great record of where you spent all your money. Here’s what you need to do; print all of your bank and credit statements (yes you have to open them now) for the past 6 months and split everything up into categories so that you literally see where you spend. Gail Vaz-Oxlade’s amazing book Debt Free Forever provides a plethora of categories to divide everything into. The categories you use are going to depend on your “lifestyle.” For example, I don’t have children (unless you count goldfish as children) so I was able to leave all that kids stuff out. The categories I used were:
Rent; Electricity; Furniture and Home Décor; Public Transportation; Taxis; Doctor’s Fees, Dentist, Optometrist, Prescription, and other Medical Costs; Cell Phone; Groceries/Personal Care; Restaurant; Convenience/Corner Store; Clothes; Hair/Tanning/Spa Services; Entertainment; Sports; Reading; Music; Booze; Electronics Store; Drugstore; Pet; Family/Gifts; Vacation; Charity; Bank Fees; Debt Repayment; Interest Costs; Cash Withdrawal; and Other
|Depend Undergarments will be your best friend during your Analysis|
If you’re reading all this and going OMFG, that’s a bit excessive, consider that I only used about 1/3 of all the available categories that Gail provided. Wowsa. I used Microsoft Excel and made a spreadsheet to add up all my expenses. I also printed all my statements off the internet (yes you can do that so no excuses about lost statements) and crossed things off as I entered them. For entries into savings, you don’t count them at this point. It’s just thought of as moving money around, not “spending.” A few hours or days later, you will have a lovely spreadsheet full of all your expenditures. I used colours in my spreadsheet to make it look more pretty and jazzy because finances are more boring than 4-year-olds playing hockey. Alright, so you have all your totals for each category added up. Now take those amounts and divide them by 6 (for 6 months) and be shocked! That’s how much you’re spending on everything each month. Yep, every month! Now, put on some Depends and take that number and multiply it by 12. Good thing you were wearing Depends, because you probably $hit your pants.
You’re probably curious to know where I was spending my money, which is why you read this in the first place. Yes I know you’re all talking to your friends and saying “Oh-Em-Gee, this one guy on the Internet has $40,000 of debt and telling people about it openly!” And then you say something like: “We should subscribe to his blog and tell all our friends to subscribe too.” Ok, so here’s where my money fell each month. Some cases, not so bad, if anything, impressive, other cases, well...
- Rent: $690.61 (Usually lower than this, but had to split 2 ways instead of 3 one month)
- Electricity: $14.15
- Furniture and Home Décor: $9.31
- Public Transportation: $2.64
- Taxis: $15.00
- Doctor, etc: $14.75
- Cell Phone: $93.07 (Yikes!)
- Internet: $15.74
- Groceries/Personal Care: $228.45
- Restaurant: $406.81 (So not worth it!)
- Convenience Store: $10.70
- Clothes: $157.40
- Hair/Tanning/Spa: $15.43
- Entertainment: $119.32
- Sports: $127.63
- Reading: $10.32
- Music: $29.49
- Booze: $175.93 (good thing I quit)
- Electronics Store: $13.35
- Drugstore: $54.16 (on what?)
- Pet: $3.76 (not laughing at goldfish so much now are you?!)
- Family/Gifts: $31.80
- Vacation: $117.33
- Charity: $20.83
- Bank Fees: $19.12
- Debt Repayment: $718.80 (So depressing)
- Interest Costs: $314.06 (So angry!!)
- Cash Withdrawal: $555.00 (No idea where I spent this)
- Other: $38.34
Every month I was spending and average of $3,985.83! That number is very sobering. This is why the analysis is so important. $314.06 on interest wasn’t even registering in my brain. When I had finished adding it all up I was terrified, mad, and a little blue. But that wasn’t even the worst part. You add up what you actually take home in pay AFTER taxes and get some fresh Depends. My actual monthly average was $2,912.88. You know what that means?!? I’m over spending EVERY month $1,072.95!! Now, deep breath, every YEAR I overspend by $12,875.44! That, my friends, is how I got into debt.
It’s that simple. When you spend small amounts here and there you don’t think that $8.00 on lunch is that big a deal, or $20 on prophylactics is excessive, but really, it all adds up to one giant flustercuck of a mess. Wow, that was exhausting. It is such a good thing to sit down and really see where you sit with your spending. I challenge you all to do this exercise yourselves and get the same wake up call that I so desperately needed. Next post, cutting out the crap.