How to Audit Your Monthly Spending


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How to Audit Your Monthly Spending

Does this sound familiar?…..”Don’t worry babe, I really don’t spend that much.”

I would be willing to bet 90% of my readers have heard that line from their spouse at some time or another. It’s a line that got my wife and I off track from our financial goals, and I don’t want it to happen to you.

Living Without a Monthly Budget

At its core, you’re going to hear that line my wife said to me if you’re not living on a budget. The question is, how accurate is that statement? In most cases, whoever is saying that line has no idea what they are actually spending each month. That is potential disaster for your financial future.

In our mid 20s, my wife and I didn’t live on a budget. HUGE mistake! Being a CPA, I had a good idea of how much our bank account should be growing each month and thought I could just monitor that growth without a strict written budget.

After a few months of no growth in the bank account, I asked my wife if she was keeping an eye on her spending. Her response, “Don’t worry babe, I really don’t spend that much.” Looking back on it, that should have been a smoking gun that something was a miss, but I just took it for face value and didn’t dig deeper. A couple more months went by and I didn’t see growth again.

Disclaimer: As my wife was definitely spending too much during this particular time period, I had my own months of overspending as well. It wasn’t just her. That’s for sure. I’m guilty of telling her back then that I didn’t spend that much either. We both genuinely thought we didn’t, and neither of us was trying to hide anything from the other.

So, I finally had a couple days off from work with nothing planned and I decided to take that time to audit our monthly spending.

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How to Audit Your Monthly Spending

During that first day of my “vacation,” I dove deep into our financial statements looking very closely at every purchase during that previous 30 days of spending.

STEP 1: List Out All Bank Accounts & Credit Cards

At the time, my wife and I only had 1 checking account, but we also had 2 credit cards (NOT RECOMMENDED).

It was very easy for me to list them out, but for some it might not be as easy. Make sure you discuss this with your spouse, because he/she very well might have credit cards you have no clue about. It happens a lot!

STEP 2: Download Statements For Each Bank Account & Credit Card

Hopefully you have online statements and can easily go in and download your previous 30 days of activity for each account. If not, pull out your previous statements that were mailed to you.

STEP 3: Sort All Spending Into Categories

I personally sorted our spending into the primary categories listed below.

Note: Do not include paycheck deductions such has health insurance, 401K, tax withholdings, etc.. We are analyzing your post paycheck spending only.

Important: There are a few items that may not show up in your previous 30 days of spending that you MUST consider. Things like your property taxes, insurance payments, etc.. You technically have a monthly cost for these items. You’re just not always paying for them out of pocket each month. Typically, car insurance is paid every 6 months. So, make sure to calculate what your monthly cost is. Also, most people have their property taxes included in their monthly mortgage payment each month. It’s put into escrow each month and then your lender sends a check to your city at the end of the year for all the property tax money the lender collected from your monthly mortgage payments. Don’t forget to factor monthly costs like this in. They are very important within the budget process.

  1. Housing: Include taxes if you have a mortgage
  2. Utilities
  3. Food: Grocery store & going out
  4. Transportation:Insurance, gas, oil….not repairs though. If a repair is needed, you have to sacrifice your fun budget below. Also, I don’t believe in car payments. If you have one, it goes in this category for auditing your spending, but know that once you start crunching the percentages below, you’ll likely discover you can’t afford your car. Sell it and get a cheap car you can pay cash for, because this primary category is not meant for car payments.
  5. Insurance: Housing, car, life, etc.. (Note: Health insurance does not go here. That is because, for most people, your health insurance is deducted from your paycheck)
  6. Personal & Fun
    1. Wife Spending (Personal & Fun: i.e. hair cuts, clothes, nails, movies, girls night out, etc.)
    2. Husband Spending (Personal & Fun: i.e. hair cuts, clothes, golf, happy hours, new fishing gear, etc.)
    3. Children Spending (Daycare, clothes, baseball league, classes for XYZ, etc.)
  7. Savings
  8. Giving

Disclaimer: I didn’t develop these high level categories. You will find similar categories on many personal finance books and websites. 

This auditing of your spending is easily done in Microsoft Excel, but you can do it by hand too. So, no excuses!

If you both are spending quite a bit each month on items that would go in the “personal and fun” category, then it can take some time to separate everything out within those categories.

STEP 4: Evaluate Each Primary Expense Category as a Percentage of Total Take Home Pay

When I say total take home pay, I mean all money coming in the door each month whether that is a regular paycheck, tips, business income, retirement check, etc..

If you’re reading this, there is a high likelihood you don’t have a budget setup. That said, there is a chance it’s not the “personal and fun” category that is killing your savings potential or even your potential to just stay out of credit card debt. There are rules of thumb to follow when it comes to what are appropriate percentages of your total take home pay to allocate to each primary category. I’m going to give you those percentages below.

For my wife and I, we had six of the eight primary categories under control, but we were waaaay off for two of them. I’ll get into our trouble categories here in just a minute.

Note: These are my recommended percentages of take home pay you should be spending each month on the primary categories listed above. I have already factored in that you are contributing 15% of your gross salary to retirement through your employer’s 401K program and it’s being withheld from your monthly paycheck. I’ve also factored in that your employer withheld an appropriate amount each month for FICA, federal taxes, state taxes, health insurance, and other small deductions like vision insurance.

Reminder – These recommended percentages are in relation to your “take home pay.” Not your gross salary.

  1. Housing: Recommend less than 25%
  2. Utilities: Recommend less than 10%
  3. Food: Recommend less than 20%
  4. Transportation: Recommend less than 10%
  5. Insurance: Recommend less than 12.5%
  6. Personal & Fun: Recommend less than 20%
  7. Extra Savings: Recommend at least 2.5%
  8. Giving: The recommended percentages above for the first 7 primary categories totals 100% of your take home pay. I strongly encourage everybody to cut where you can to try your best to increase your giving percentage. I strongly believe in helping others when you can, but I know it can be difficult to squeeze that out of your budget.

STEP 5: Doing a Deep Dive Into Your “Trouble Categories”

Everybody reading this article will be different. Maybe it’s your housing category that is hurting you. Possibly, it’s the fact that you have car payments and you’re realizing those don’t fit in the recommended transportation percentage. For my wife and I, it was our food and personal and fun categories that were causing us issues.

If you are the one who is auditing your food or personal and fun spending, then the first thing you want to do is try and recall everything you personally spent during the month as you’re going through the statements. If you can do that, everything else is your spouses spending. Go through all the line items that apply to these categories and mark each one that was your purchase. Again, if you can export all your statements to Microsoft Excel, it makes this process much easier. Just highlight the purchases you made in a certain color.

This part of the spending audit is incredibly important, because there is no running from numbers. Neither you nor your spouse can hide from what has transpired over the past months of spending.

Caution: Be very careful how you approach your spouse about what you discover. You always want to be completely honest and own up to any spending mistakes you have made, but you also want to be sensitive to your spouses feelings even if you have just discovered they significantly overspent. It’s technically both of your faults for not having a written budget and a plan for how to ensure you follow it. So, accept some of the blame, but, at the same time, make it known that things must change going forward.

Discovering the Spending Problem

When I went through our statements, I had discovered my wife and I had spent about $1,300 over what we should have. Recall my wife had said, “don’t worry babe, I don’t spend that much.” Her portion of that overspending was about $1,000 during that 30 day period. To give her credit though, she was NOT spending money on high end clothes, purses, shoes, or anything like that. Yeah, she had a couple clothes purchases, but that’s not a problem on its own. It’s when you combine that with lunches at restaurants, house decorations, excess grocery store spending, and a bunch of random $35 – $50 purchases. It really was hard to believe that her purchases totaled to more than $1,000, but they did. I couldn’t be mad at her, because I wouldn’t have guessed it either and I know we were BOTH responsible for just “winging it” each month.

I also discovered that I had overspent as well. I overspent by something like $300 during those same 30 days. Again, I had no clue I was even close to spending over what I should be spending, but I did. For me, it was lunches during the week; a couple rounds of golf, and some other small random purchases that put me over the edge.

This is the problem with having a general idea for what you should be spending coupled with the disaster of having credit cards in your wallet.

Going Deeper in Your Spending Audit

Once you discover how much you spent in the past 30 days, your next step is to determine if those 30 days was normal or not. To do that, you have to go back even further. I recommend going back 3 total months. So, I had to now go back an additional 2 months to see if that $1,300 of overspending was consistent.

Sure enough, it was consistent across all 3 months. Right around the same amount of overspending ($1,300) and the types of purchases were very similar.

Now, some of you might be saying to yourself that $1,300/mo isn’t that bad….That’s $15,600/year! After just 2 years, that would be $31,200.  Boom….That’s how people get themselves into credit card trouble. I constantly hear stories of people being in massive amounts of credit card debt. This is one major reason why. People buy waaaay too many $50 items each month.

What really makes me hurt for people is knowing that they are doing exactly as we did when it comes to over spending on small items, but they are also in way over their head with their car and/or house.

STEP 6: Implementing a Plan to Change Your Spending Habits

If you’re married, you definitely need to sit down together and look at the numbers you just ran. Show your spouse how much you’re over spending for each primary category, and help your spouse understand how bad that financial behavior is over time.

You next need to make sure you both understand what exactly goes in each of the primary categories of spending. The great news is that I detail it out above in this article. Go over that section with your spouse to make sure you both have a full understanding of the primary categories.

Using my recommended percentages above, build a monthly budget together. Sit down and really work through all your fixed costs and what you’re willing to cut.

The work isn’t done when you finalize the budget as most would assume. No, that’s when the work is just beginning. At the end of every month, you and your spouse need to do a monthly spending audit to ensure you both spent within your budget.

Once done with the monthly spending audit, talk with each other about what expenses are coming through the pipeline for the upcoming month and make sure you have a plan to stay within your budget. If any adjustments need to be made, make them at the beginning of the month.

What To Do If You’re In Debt (non-mortgage debt)?

A big question many people have is, how does the percent allocation change if we’re in debt? Let me address that here.

You definitely wouldn’t want to be contributing 15% of your salary to retirement like I suggest above. So, immediately reduce that to $0 and use that to pay down the debt.

Next, your personal and fun category needs to be reduced as much as possible. When you’re in debt, you don’t have money. When you don’t have money, you don’t do. It’s that plain and simple. Find things to do that are free and try not to buy anything for yourself.

Depending on how large your family is and what your take home pay is, your food budget might not be flexible. Just make sure you’re not going out to eat at all. If friends ask you, just be honest and say you can’t afford it until you pay down your debt. They will appreciate your honesty and will likely suggest something else that is free.

If you have a car loan that isn’t close to being paid off, seriously consider selling the car and going to buy a much cheaper car. If you have high debt other than your car loan, consider whether or not you could sell your car and make a decent profit to pay down that other debt.

For example, if a person had $50,000 in student loans and a $30,000 car with only $5,000 left to pay on the car. I would recommend selling the car; buying a $5,000 car with cash; and throwing the remaining $20,000 of profit at the student loan balance.

Consider moving into a more affordable place to live. It all depends on how extreme your situation is as to whether or not you sell your place or move. This is one move that takes a lot of thought before you do anything though. Really take time to think everything through.


Taking the time to audit your spending can prove to be life changing for many people. Unfortunately, it’s not the most thrilling thing to do and that’s why many people put it off. Also, they don’t want to stop living their lifestyle. So, many people try and ignore the problem for as long as they can.

If you’re ready to make a change for yourself, follow the simple steps above and really dive into your family monthly spending. I promise you that it’s the beginning to a much happier life. It might be tough for a while, but once you get on track, you will feel much better about your financial health.