Just a quick (nearly) three month update since I started tracking my own spending dollar for dollar: I'm very glad I decided to do this. So far, my numbers have been coming in within my initial estimates, but only barely. As I've gone along, I've found little purchases here and there that I hadn't accounted for. I think it takes time to really shake out all of the smaller purchases and recurring annual charges, so this has been an exercise well worth doing.
It takes some diligence to really keep up with as well. My wife and I often shop at a farmers market where we're both paying for everything in cash, so we need to both keep track of exactly how much we've spent. I then take those numbers and put them into a spreadsheet so I can make sure we're dividing up our monthly expenses fairly (according to our respective incomes), and finally entering my own groceries expenses into my own tracking spreadsheet. Point being, when paying for some things in cash, some things with our separate credit cards and other things like restaurants together on just one of our cards, it would be easy to forget to account for a purchase here or there.
It's become a thing I enjoy doing, though, stopping to enter in my portion of the latest receipts and watching the numbers stack up. Even after another month or two of this, I'd feel comfortable extrapolating my expenses out across the year, but I'll go ahead and keep this up for the full one year term. There have been a few small surprises so far, so there are bound to be a few more.
The other big benefit of doing this is that it makes me that much more aware of when I choose to spend money, particularly on small things like coffee or a snack when I'm out around the city. At the same time, I can understand how one could take this too far and never stop to enjoy a little something special, or to stop and just sit with a really good coffee with your companion. I've also had to add certain categories to my spreadsheet like 'music' as a reminder that I should do some record shopping once in a while, go see a show or whatever. That's always been a big part of my life, and it would be easy to tighten the belt a bit too much when breaking everything down in a table.
The most important benefit is the confidence in knowing precisely what I'm spending. Even though I don't plan on continuing this beyond one full year, I'm glad that I'm going to the trouble of doing it, and I'd recommend it to others.
I'm reporting back in after having just completed a full one-year accounting of all my expenses. As I mentioned in this earlier post above, I'm glad I decided to go through the trouble to do this. The most notable piece of information is that my earlier estimate (extrapolated from credit card records and bills, and then a lot of gut feeling for general cash spending, travel and trips, etc.) was significantly off. My actual spending over the course of a year was a full 25% higher than the estimate. The culprits lay in holiday/travel spending, Christmas or other gift buying, and then a lot of smaller purchases across the year which I almost always just pay for in cash: coffee here, tea there, beer or cocktails, an appetizer there, so on and so forth. My wife and I are actually reasonably frugal about that kind of stuff, but it still all does add up and was difficult to account for in the first estimate.
Now I've got a real and trustworthy number to work from which feels really good, plus it's a significant item in the "pre-FIRE checklist" to cross off. I can now easily break all of my expenses down into their basic categories and go on to make pre/post-FIRE estimates (e.g. work-related expenses such as commuting costs going down, trips and travel probably going up), as well as getting a look at what I'd consider bare-bones spending in the case of serious market turmoil.
Again, I'd recommend anyone to do a thorough tracking of every penny spent like this, at least just for a few months. It really has made me much more cognizant of smaller purchases here and there and helped bring me closer to an even more mustachian mindset. The funny thing was due to tracking each little expense carefully like this, I'd often want to just skip something that I was thinking of buying ... something small like coffee or lunch out with the wife or an album by some new band, or even larger things like a short weekend trip in a nearby city ... because I didn't want to see the total numbers in my expense tracking sheet tick upward. But then I had to remind myself that this is supposed to be an accounting of what I actually spend day-to-day with no changes, no adjustments: simply what does it cost me to live just as I am, not holding back from anything? So that was a good exercise in itself, because I felt like there were a lot of expenses here and there that I could easily go without, and I wouldn't feel any less happy.
Most of the time I just used a simple note-taking app in my phone to keep track of everything. Sometimes, such as on an overseas trip, that list became very long and would involve multiple currencies, so I had to be very thorough upon returning home to get it all entered, factor in the exchange rates I would have paid at the time, any additional foreign transaction fees that might not appear until later, maybe an ATM fee, etc, etc, etc. Again, it's all of those little things or delayed expenses that are very easy to lose sight of or shrug off, and I wanted each and every one of them.
I ended up entering everything into an Excel spreadsheet, and in the first couple of months kept finding new classes of expenses that I really wanted to track as their own separate item (e.g. how much do I spend on just coffee and tea, so I separated that out from normal grocery expenses). It's obviously not totally necessary to get that granular, but it's illuminating to see that data as part of the final pie chart.
And there you have it, a one-year test finally complete, and well worth doing in my opinion. It's actually a little difficult to not keep right on tracking into this next month, but I would only do a penny-for-penny tracking like this again after actually FIRE'ing, just to see how the ratios might change. No doubt there will be some surprises in either direction.