I have this idea that I want to take 3-6 months off of work beginning early 2018. I anticipation of this, I have been taking a deep dive into my current monthly spending and what I can do to cut back. I typically charge all my monthly expenses to my American Express card because there website has great features that lets you track your spend by category, etc. See below. To start the analysis I pulled all my transactions from Jan 1, 2017 – April 30, 2017. Amex automatically categorizes my transactions into their predetermined categories.
This is great for a quick glance, but I wanted to do the categorization myself. One – to re-review of all my historical transactions and also to make sure they were properly categorized as I would view them. For example, I wanted to separate my “Grocery” expenses (need) from my Restaurant purchase which are more of a want (not necessary). I want to understand my true monthly “survival” expense vs. what is a luxury and could be cut out on a limited budget. The Amex website allowed me to easily do this by downloading the individual transactions for my selected time period into an Excel file.
Results:
My 4 month avg. trend data showed that I am spending approximately $1,500/month excluding my rent. My spend by category is displayed below. The biggest component of my monthly spend is Groceries (~$300/month). This is fine, this is a need. What was alarming to me is how much I am spending per month on Clothes, Entertainment and Restaurants! Approximately $500 when you add them together. To me, this was shocking. I didn’t believe it as first, but this is why I downloaded the individual transaction data. That way I can go back and see which purchases I assigned to the individual categories. This allows me to answer questions like, Is the $200/month in clothes due to multiple individual purchases/items? Or did I make one big purchase (i.e. perhaps a winter coat) that may be skewing the true monthly average?
Also, I can get a high level idea of what an average monthly spend would be should I cut out a lot of my wants. If I cut out Clothes, Entertainment and Restaurants completely, I would be closer to $900K in monthly spend.
Action:
By analyzing my historical spend, I am able to benchmark where my monthly trend has been. This exercise has also allowed me to be more conscious of each and every transaction I make. Ultimately, the goal of this exercise is to understand where I am at, so that I can reduce my monthly expenses go forward. My goal in my monthly reduction will be the subject of a future post as it will correlate to my new monthly savings goal that will allow me to take this 3-6 month retirement.
Follow along to see what my goal is!