Ohio State University Fact Sheet

Family and Consumer Sciences

1787 Neil Avenue, Columbus, OH 43210-1295

Keeping Track of Spending

MM-07-02

Carolyn McKinney, Ph.D.,
Extension Specialist, Family Resource Management,
The Ohio State University, June 2001

In just a few years, an average family spends over $100,000. Without organized expense records, it's often difficult to know just how this large sum was used. Expense records can help you decide whether more debt can be afforded realistically or where spending adjustments are needed to reduce debt, increase savings or cut spending "leaks." With organized financial information, credit applications can be completed more efficiently and tax preparation can be less difficult and more accurate.

Record-Keeping Tools

While it's possible that only accountants enjoy keeping records, personal or family record keeping need not be a burden. The task can be much easier with these basic tools: 1) a "bill holder,"1 2) an "in box,"2 3) a "receipt file,"1 4) an account book, and 5) an inexpensive calculator.

Purchase an account book at the county Extension office or at an office supply. Or, use a notebook in which you rule your own account columns. An inexpensive calculator simplifies math computations. Computer software (such as Quicken or Microsoft Money) also may be an option.

Categorizing Expenses

For a meaningful picture, individual expenses need to be grouped in categories. There is no single list of categories that will work for everyone. Consider the following when developing categories that will work in your situation:

• Start with a "sample" list (as illustrated). Delete items that don't apply and add others or combine categories to fit your needs.

• Think about the information YOU need or want (for example, use a category for "meals eaten out" if you want to keep track of the cost of eating away from home).

• Try to use categories that "match" your spending. (If you've not kept records, use a 6- to 8-week trial period of recording expenses and adjust the categories as needed.)3

• Separating "fixed" expenses (such as rent, loan payments, etc.) from "variable" outlays can help you determine whether additional fixed obligations can be undertaken. (Remember that once committed, fixed expenses are hard to reduce should you change your mind or suddenly have a reduced income.)

Keeping Track of Spending Cut out and tape or paste these labels on small boxes (shoe box for the bill holder, coffee can for the "in-box," etc.). Bill Holder Open Bills AS They Arrive Write Payment Date: On Outside of Envelope & on Payment Calendar File Bills By Date in "BILL HOLDER" NOTE: Allow Enough Time for Payment to Reach Creditor by Due Date. In-box To Hold TEMPORARILY: Receipts and Paid Bills Notes of Non-receipt "Cash Payments" (such as gasoline) REGULARLY, Record Items (2-4 times per month) Transfer Recorded Items to "RECEIPT FILE" as Each is Recorded Receipt File File Receipts By Category AFTER Recording Expenses At End of Tax Year, Transfer Receipts Required for Tax Records and Insurance Proof of Purchase to Long-Term File (for example, medical payments, statement of mortgage payments, furniture purchase receipts, etc.)

Find a Workable System

Some make notes on shirt cuffs and others scribble in the backs of checkbooks. People sometimes use unusual methods to keep track of spending. Finding a workable system may be puzzling, especially because there is no single best system that will work for everybody.

The approach suggested earlier (bill holder, keeping can, etc.) is one possibility. It may be easier if one person assumes the primary record keeping responsibility. This means that other family members need to regularly report their spending. Perhaps the recording task could be rotated every six to twelve months to share responsibility and to keep familiar with the financial information.

"SAMPLE" EXPENSE CATEGORIES
	FIXED	FLEXIBLE		FIXED	FLEXIBLE
EMERGENCY FUND	___________	___________	FOOD	___________	___________
SAVINGS/INVESTMENT	___________	___________	AT HOME	___________	___________
TAXES	___________	___________	MEALS OUT	___________	___________
INCOME	___________	___________	CLOTHING	___________	___________
OTHER __________	___________	___________	NEW PURCHASES	___________	___________
OTHER __________	___________	___________	DRY CLEANING	___________	___________
HOUSING	___________	___________	OTHER __________	___________	___________
RENT/MORTGAGE	___________	___________	HEALTH	___________	___________
INSURANCE	___________	___________	MEDICAL	___________	___________
REPAIRS/MAINT.	___________	___________	DENTAL	___________	___________
EQUIP./FURN.	___________	___________	DRUGS	___________	___________
OPERATION/SUPP.	___________	___________	SUPPLIES	___________	___________
TAXES	___________	___________	OTHER __________	___________	___________
OTHER __________	___________	___________	CHURCH/CHARITY	___________	___________
UTILITIES	___________	___________	GIFTS	___________	___________
ELECTRICITY	___________	___________	BIRTHDAYS	___________	___________
GAS	___________	___________	GRAD./WEDDING	___________	___________
OTHER FUEL	___________	___________	HOLIDAY	___________	___________
WATER	___________	___________	OTHER __________	___________	___________
TELEPHONE	___________	___________	PERSONAL	___________	___________
TRASH COLLECT.	___________	___________	GROOMING	___________	___________
TV CABLE	___________	___________	OTHER __________	___________	___________
OTHER __________	___________	___________	ALLOWANCES	___________	___________
CONSUMER CREDIT	___________	___________	RECREATION	___________	___________
PAYMENTS	___________	___________	MOVIES/SPORTS	___________	___________
CAR LOAN	___________	___________	HOBBIES	___________	___________
OTHER __________	___________	___________	VACATIONS	___________	___________
OTHER __________	___________	___________	OTHER __________	___________	___________
TRANSPORTATION	___________	___________	EDUCATION/INFORMATION	___________	___________
LICENSE PLATES	___________	___________	SUBSCRIPTIONS	___________	___________
DRIVER'S LICENSE	___________	___________	NEWSPAPER(S)	___________	___________
GASOLINE	___________	___________	TUITION/REGISTRA.	___________	___________
REPAIRS/UPKEEP	___________	___________	SCHOOL SUPPLIES	___________	___________
PARKING	___________	___________	OTHER __________	___________	___________
FARES	___________	___________	OTHER __________	___________	___________
OTHER __________	___________	___________	OTHER	___________	___________
INSURANCE	___________	___________	___________________	___________	___________
LIFE	___________	___________	___________________	___________	___________
CAR	___________	___________	___________________	___________	___________
MEDICAL	___________	___________	___________________	___________	___________
OTHER __________	___________	___________	___________________	___________	___________

Some Record-Keeping Tips

It's possible to simplify the accounting task. For example, use a "reasonable" personal allowance to cover the many small "incidentals" that add up over time. This means fewer accounting entries and also gives a sense of some personal spending freedom, which can be especially important for tight budget situations. Other tips include:

• Simplify math by rounding home account book entries to nearest half or whole dollar (not appropriate for your check register, however).

• Use a wallet-size file card or notebook to record the nonreceipted cash purchases (gasoline, vending machines, etc.).

• Star entries that are tax-deductible to save work when you complete tax returns (or, use additional categories for tax-deductible items).

• Avoid "hiding" expenses and don't put too many items in the "miscellaneous category."

• Remember that habits, including spending, are not changed easily. Avoid controlling too tightly. Also, recognize that individual tolerance for detail can vary considerably from one person to another. Try to evolve a system that is compatible with personal tolerances.

RECORD KEEPING & FINANCIAL PLANNING For More Information . . . Ohio State University Extension Home Account Book, $1.25 (plus "T, P & H") Counting Your Money Calendar, $0.75 (plus "T, P & H") Managing Your Money (6-part self study price determined in county) Consumer Information Center P.O. Box 100 Pueblo, CO 81002 www.pueblo.gsa.gov Consumer's Almanac, 353G ($0.50) ("T, P & H" = sales tax, postage & handling. Prices current as of date of publication but are subject to change without notice.)

This fact sheet is intended for educational purposes only. Mention of a proprietary product, trademark or commercial firm in text or figures does not constitute endorsement by Ohio State University Extension and does not imply approval to the exclusion of other products or firms. For specific advice, consult your financial or legal advisor.

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