How Much Do You Spend On Coffee - It May Be A Marketing Ploy But Is Also An Important Question
There’s a credit card commercial playing on TV here that’s point is to get you to use their credit card as a budgeting tool by asking a question: how much did you spend on coffee today, and then how much did you spend on coffee this year. It assumes that you may know the answer to the first part, but probably don’t to the second. Their point is that if you put everything on your credit card, you’ll have a record of what you spend and how, and they have tools to help you sort that and look at your overall spending choices.
I’m not recommending using a credit card to track your spending (or recommending against it, even) but the essential point of the commercial, that tracking your spending is important, really hits home for me. Two years ago, the only spending I tracked was bills that went in and out. Things like gasoline, groceries, and anything else that we spent money on, I just spent the money and didn’t really pay attention to how much it was. I thought I was trying to spend as little as I could and that was the best I could do. But I was wrong. The first month I actually tracked my spending, I was shocked at how much money I frittered away on little things. It isn’t that I spent money on non-essentials, it is that I was spending much more of the money that came in every month on non-essentials than I ever imagined.
Tracking my spending was the very first real step I took that made a difference in our financial future. Even now, when money is becoming tighter, unexpected expenses keep popping up simultaneously with the cost of everyday items rising, tracking spending is how I am going to keep things on track and continue to reduce our debt, even if it becomes a little by little process. We’ve had big strides, and small steps, and every one of them gets us closer to that debt-free line. And the tracking was that essential first step. Without being honest with ourselves about our financial picture and figuring out where to go from there, we wouldn’t be where we are today. We may have a long way to go, but we’ve also come a long way from that point almost 2 years ago when I didn’t have a clue what my money was really doing.
What does what you spend say about your priorities, and are you controlling that or is it happening by default?
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March 2nd, 2009 at 6:55 am
To be honest, I don’t track my spending. I do use credit cards for everything I can so that I have a record of how much goes where. But the reason I feel like I don’t need to track my spending is because we (my sister and I - we share our money) spend so little.
A year a half to 2 years ago, while we were still frugal but things weren’t so tight, there was a lot of little expenditures here and there and I would log into my online account a couple of times a week to check if all was well.
But these days, the majority of our monthly credit card bill consists of groceries and bills. We make an occasional order from Amazon, but we spend little enough in a month for me to remember exactly what and where I’ve spent.
I do agree that a credit card is a good way to track your spending. I’ve been saying that on my blog and on comments all over the web, and I stick to it. As long as you remember that it’s still money, and spend only what you need and pay in full every month, there’s no reason why you shouldn’t have a credit card. In my mind, it’s much better than paying in cash or by check.
Oh, and my philosophy is that if you’re going to have a credit card, it should be a rewards card - either cash back or gift certificates (i.e. Amazon) where you shop often, because you can earn money for things you need to buy anyway. With cash back, it’s akin to a discount on every purchase.
March 2nd, 2009 at 7:45 am
Great post!
I think tracking spending is, perhaps, the single most valuable exercise when one is beginning to get their finances in order. It’s such an eye-opener.
I’ve been tracking for 5 years, and while I feel much better about our financial situation than I did before I began tracking, I know it will be a very long time (if ever) before I’m comfortable with the idea of NOT tracking anymore. The peace of mind I get from knowing we’re staying on budget (and knowing where our problem areas are) is worth the time involved to track spending.
March 2nd, 2009 at 8:27 am
I am totally overwhelmed with the idea of tracking. Can you give me some pointers on how you got started and how you keep track?
March 2nd, 2009 at 9:04 am
I started tracking everything about a year ago and have been fine-tuning my tracking ever since. I even have a little spreadsheet at work specifically for tracking coffee and eating out while at work, since you don’t usually get receipts to tuck away for that. I find it really helps to motivate me to pack a lunch. lol. I’m sure that what I spend says a lot about my priorities. In fact, I’d say that this process of establishing a budget over the past year has given me a better sense of my own identity. I now set aside money for trips home because my family is important to me. I’ve been putting off buying a car because I like the financial peace of mind (my last car was a money pit) and I hate shoveling the driveway. I don’t worry about the cost of dog food because I figure my dog more than pays for it with the joy he gives me.
March 2nd, 2009 at 10:57 am
@Cindy - I started to write a reply and it was getting so long I decided I might as well turn it into a post. I’ll write it up and publish it this week. Hopefully it will help take some of the mystery out of tracking spending!
March 2nd, 2009 at 11:25 am
In addition to track your expenses/expenditures I think the thing that helps our family more than anything is our budget. Each month we sit down and allocate our income into different categories and determine how we will spend every penny. Obviously, we have to maintain a level of flexibility because I can’t quite predict the electric bill, but knowing where our money should be going gives us something to track against.
Great post.
March 2nd, 2009 at 11:26 am
I track our family’s expenses by using a debit card for 90% of our purchases, and then downloading the transactions from the bank into Quicken. This makes categorizing things fairly easy, and generating reports is a breeze.
I discovered, for example, that my wife and I have spent over $1500 in the past 12 months on coffee. It’s amazing how quickly a latte here and there can add up. Without tracking the expenses in Quicken, it would be pretty much impossible to add up all the $4 and $5 expenses over time.
March 2nd, 2009 at 12:30 pm
I, too, have used Quicken for several years. So, in theory I’ve gotten the tracking aspect down pat. Well, the big issue was that I haven’t always looked carefully at the numbers. When I started to run “reports” and learned how much trickles out in various categories THEN it became pretty depressing. It still gets depressing at times, as I’ll do really well in one category (say, groceries), then blow it, unknowingly, in another (latest: shipping things to our DD in college). The ultimate rein [for us] on spending, sadly, is to not have any $ -and knowing it!. This of course is the problem with credit cards, as you NEVER don’t have any $. We still use one, in theory only for specific expenses, but it’s really scary what a slippery slope that is.
But, back to your post *EXCELLENT* Until you know what you’re spending money on, its pretty hopeless to decide on a realistic plan for reducing expenses. Then, you must monitor to know you’re actually being successful. I suspect no one could “remember” all their spending over the course of even a week. Even if you allow yourself only a cash allowance, wouldn’t you want to know how it all got spent? Really, this IS the first step to controlling your money. Great post, PaidTwice! Looking forward to the follow-up
March 2nd, 2009 at 1:35 pm
I just use a notebook. I write down every expense for the day, then write the total for each day and draw a box around it. Then I draw a line in between each day and at the end of the month I add up all the boxes. I also write the location next to each amount. So like: $6.67 McDonalds. And at the end of the month I go back and add up the categories of gas, clothes, junk food, and groceries. I was amazed at where little bits of money were escaping.
I also have the Discover card that the commercial is talking about and I LOVE it. I charge absolutely everything that I can to that card (pay it off each month) and it does create a little pie chart for you based on the spending. The pie chart is based on what the company labels the places you shop. So every once in a while things will be mislabeled (like when I found food at a gas station), but otherwise it is pretty handy to see where most of your expenses are going. Plus Discover has a pretty awesome rewards program, so it is win/win for me
March 2nd, 2009 at 1:48 pm
@Cindy: I use Mint.com to track my spending and I love it. It’s basically the laziest posible way to see where your money goes because it all updates automagically (assuming you do mostly online banking anyway).
March 2nd, 2009 at 5:12 pm
@Cindy and paidtwice
Mint.com, which hasnt really been around that long so I dont think it will be mentioned in your post (@paidtwice) has such great tools to track accounts as well as pick new accounts based on what would save a person money.
It is a must for me and getting my finances in line
March 2nd, 2009 at 5:54 pm
I have to tell you, I’ve been on autopilot for so long with spending that it was finally time to get down to 1. Budgeting and 2. tracking of spending.
Happily my bank now has tracking software for free linked to my accounts, and since we’ve recently moved to cash only…it helps. However we do hit up the ATM and that will get spend on items like gas (pay cash at some places, pay LESS!) and food….so I’m going to start keeping receipts as well.
I feel it’s just another step to gaining CONTROL back. Hey you do Weight Watchers, you track points, you gain CONTROL, you lose weight.
Why can’t money be the same?
March 2nd, 2009 at 9:52 pm
It is amazing how the tiny little things add up. You hit Dunkin Donuts for a large coffee that costs ~$2.25, a cookie for a treat while you are out, $1.00, that bottled water because you were filling up your gas tank, $1.50. If you do all 3 of these once a week it will cost you close to $5 dollars a week. That is over $250 a year on very small things. Of course at the time is was just a buck or two.
However, there comes a point to where you need to say is it worth it to not doing anything for a treat? Just a small reason as to why it is so important to budget and have a plan.
March 2nd, 2009 at 10:32 pm
I know I *should* track our finances, but right now it’s all we can do to hold things together. It is a future goal, though.
As for spending the most money, we’re living relatively frugally. I’d say our biggest “nonessential” expense is delivery. I have chronic fatigue, and my husband has health problems as well, plus no license. So it can sometimes lead to a situation wherein I’m too tired to go out for the essential foodstuffs for cooking.
Or days like today, where most of our dishes are dirty, and just about all our plans. But my husband sliced up his finger badly while cooking the other night and we don’t want him getting the bandage wet, since he’s prone to infections. Meanwhile I was too exhausted to do dishes.
We keep “easy” foods around — frozen pizza, peanut butter and bread for PBJs, hot dogs, etc — but we still do get stranded from time to time. In general, though, I try to keep it to once a week. At up to $30 a shot, though, that adds up fast!
March 3rd, 2009 at 9:23 am
Abigail - I wonder if a healthier diet might ease your chronic fatigue symptoms. Have you asked your grocery store if they deliver? A lot of grocery stores deliver for free or for a very small fee. If you can’t chop the veggies, you can get bags of chopped veggies or even frozen ones (they still have vitamins). It would be more bang for your buck than take-out.
March 3rd, 2009 at 3:46 pm
Melissa, I had wondered the same thing. We’ve toyed with deliveries, and around here (pretty urban) there are actually enough out-of-work chefs that you can get a service to make up a week’s worth of meals and deliver it. Pretty cool idea, and still cheaper than take out ;-). I’ve been researching this a bit since my older DD is disabled and knives/gas stoves/etc. are an anathema to her
Also, any one tried NeatReceipts, or similar programs? The concept is having someone else, or a specialized scanner, handle all those paper sales receipts. I can’t imagine it being useful simply as a cost saving measure, but an intriguing bookkeeping aspect of our “electronic” age.
March 4th, 2009 at 11:05 am
All I see in the comments is “I deserve a little treat now and then” and “I use my credit card to track my expenses.”
Frankly, I don’t believe either of those lines. They’re both total BS.
Deserving has nothing to do with anything. The point is to choose. If you want that coffee and donut and are willing to pay for it, live it up. But don’t excuse $1500 a year away by saying that you deserve it.
And I seriously do not believe anyone who says they’re using their credit card to track expenses. That’s just a glorified way of claiming to track expenses without actually looking at them.
I know I’m at the other end of the scale. I do everything manually and have for years. But the point of tracking is not to track, it’s to decide for yourself if you’re really spending money the way you want to. And if not, to realize it and to make rational decisions.
March 4th, 2009 at 2:07 pm
Jay - What a great idea! I had never even heard of the hire a chef idea before.
March 4th, 2009 at 6:16 pm
I’m with you, Chris. Don’t justify and don’t make excuses. If you want a coffee beverage, get it. Discipline yourself to examine if it is worth the expense first. If it isn’t, don’t make an excuse.
I used to track expenses manually but it became expensive, time-wise. I use Quicken and mint.com, and decided mint.com is definitely worth the price (free) and better if you don’t have to track business expenses, which is why I bought Quicken. Taxes with a business and with Quicken were heaven, I have to say.
If you haven’t used mint.com or something similar, you’re not using a really good tool.
March 7th, 2009 at 12:32 pm
Yes, tracking is key but don’t let the credit card folks trick you into thinking that they are on your team! It is funny to watch them reposition their product now as a tool for fiscal responsibility. Humourous but dangerous as many will fall prey.