Step-by-step instructions for a spending stare down 🗒️

During this time of the year, we’re inundated with pressure to buy gifts for people and to treat ourselves. It’s my personal belief that the biggest “treat” we can give ourselves is a recurring deposit into an investment account with a robo-advisor. But before we can talk about that, we have to talk about spending. How can you decide how much you can afford to invest if you don’t know how much you’re already spending? You can’t!

When I talk to women about why they’re not investing, it’s almost always a) because they’re nervous/feel uninformed or b) because they don’t think they can afford it.

If you’re in the “a” camp, read this, this, or this.

If you’re in the “b” camp, you need to do a spending staredown to get clear on whether the story you’re telling yourself about what you can afford is really true.

Today, I’m sharing my process for doing a spending staredown so that you can finish the year with a super clear picture of where your money goes and how you spend it. Once you understand that, you can figure out how much you can reasonably start investing in 2020 (did I mention I really want you to start investing in 2020?!).

So how do you do a spending staredown? Let’s break it down:

1) Make a list of the 6 categories where you think you spend most of your money (this is totally personal to your unique situation, but as an example, my categories are “Bottom Line Life Expenses” (rent, utilities, any recurring costs that are on auto-pay), “Food”, “Transportation”, “Travel”, “Miscellaneous/Fun”, and “Self-Salary into Betterment” (this is also on auto-pay, but I take pride in having this as it’s own category!).

2) Create a simple excel spreadsheet where you have a column for each of these categories under which you can list all your monthly expenses.

3) Consider ways you spend money. For me, I spend primarily with my credit card or sometimes via Venmo. Pull up your credit card statement(s) for whichever month you’d like to “staredown”.

4) Go through your expenses, one-by-one (yup!), and place them into your 6 categories. You may notice as you go that certain categories you’ve created aren’t super relevant or that you’ve missed an important category. Make these changes as you see fit. In each category, write the name of the expense (under “food,” for example, I will write “Trader Joe’s”) and then the cost associated with that expense next to it (the spreadsheet will read: “Trader Joe’s” | $30.69” where the “|” denotes a separation of columns).

5) Before you find out your totals for each category, make some predictions. Challenge yourself to guess, without doing any math, how much you estimate you’re spending on each category (you might be surprised to find that you’re wildly under or over guessing in some categories). Don’t skip this step — it helps give some clarity on whether your perception of your spending is aligned with the reality of your spending. This is not an exercise about shaming, it’s about clarity and alignment.

6) Once you’ve listed every last expense for the month and made your guesses, do the actual math. Excel has algorithms you can use so you’re not manually adding everything up.

7) Last, make a final column where you list each category and the total amount spent in that category. By adding up all of the category totals, you’ll have your total spending for the month. This part feels scary but will bring a ton of clarity.

Sure, your bank probably has some automated software to tell you how much you’re broadly spending each month and in what categories (and I recommend using a software like Personal Capital to do this as a supplement), but this is called a staredown for a reason: you have to reconcile every last dollar you spent. It’s not this vague, “my bank says I spent around $700ish on food last month but they probably mis-categorized a few restaurants so it’s probably less than that,” rather, it’s a very clear and accountable“I spent $732 on food at X number of restaurants and grocery stores. When I look at these numbers, I see that I’m spending most of my food budget at restaurants rather than on groceries.” You may find that your spending is super aligned with your values OR that you want to make some shifts. For example, if you notice that you’re spending most of your “food” money at restaurants, yet you value saving money by cooking at home, you might want to recalibrate here. If you notice that you are both paying for a monthly metro card and also taking Ubers everywhere, you might want to recalibrate there. None of this process is about bringing shame, it’s solely about getting clarity so that you’re not left continuously telling yourself the story that you can’t afford certain things when the truth is, you don’t really know what you can afford because you don’t know how much you’re actually spending.

While this process is simple on the surface, a lot of us have trouble holding ourselves accountable to actually doing it. It took me about two years to develop a really strong habit of tracking my spending (now I look forward to it!). While I have all the faith that you are completely capable of developing this habit, I also recognize that having accountability and support around building habits can be tremendously helpful. I know this work can feel very personal and intimate; I want to recognize and name that and simultaneously let you know that I approach this work with no judgment, full confidentiality, and lots of love for you and your unique financial situation.

If you’re just starting out and want some support (which, let’s be real, we all need, especially when it comes to taboo money stuff we probably weren’t taught much about), let’s do a spending staredown together! I’ll gently guide you through this process and you’ll leave with more clarity on your monthly spending, ready to enter the new year with some new financial goals (one of which I hope is starting to invest your money regularly).