CY2014 Quarter 1 Financial Review

Chrissy and I review our spending on a quarterly basis. Updating every 90 days isn’t too long to correct mistakes and remember purchases, but it also allows for the busy multi-week sprints that life presents us. While we have used every financial management program available, I’ve found the most straightforward and flexible solution is to download historical transactions into Excel where I can assign categories and do the type of analysis you can see below. This works for me because I have complete control. All the other solutions I used (MS Money, Quicken, Mint, GNU Wallet) introduce errors that have required lots of time to fix (or that can’t be fixed), but more importantly they constrain me to their interface and I got used to exporting information into tools that could flexibly answer my questions.

My basic workflow is to download statements from all our bank accounts and credit cards in put them all into one spreadsheet, where I ensure a consistent list of categories. I can do this quickly by filtering and sorting as most of our expenses are cyclical. Once everything is in the right format, I use lots of Excel SUMIF and SUMIFS functions to produce reports.

My purpose of doing a financial review is intended to accomplish the following:

  • Quality check (Are we getting paid the right amounts? Any incorrect expenses?)
  • Spending feedback (Are we overpaying in any categories? Anything we need to reign in?)
  • Tax Production

While my tax production and quality check was very helpful to me, I wanted to share the results of the spend analysis in case my reports might be useful to others.

Spending feedback

In summary, we had a small rise in our overall Grocery and Dining out categories, but the major cost drivers were:

  • Ellie’s 12 cavities were very expensive (no dental insurance)
  • We bought a new espresso machine (major purchase for us)
  • We bought a new car
  • We went crazy on clothes
  • Committed (again) to Army Navy Country Club


Where are we spending?

This doesn’t have a real effect on our spending, but I thought this was interesting. We don’t have saving/investments in here, this is just “spending”. I treated stuff like insurance, taxes, medical, fees, haircuts, etc as “cost of life” — things I feel we can’t avoid and don’t really have discretion in spending. Some other stuff that might fit this category (power bill) gets lumped into household (as does home maintenance and mortgage). I would love to do some more analysis and compare our spending to this article.


Daily Feedback

The plot below has categories on the Y-axis and days on the bottom. Intensity of color is the spend amount. I used matlab to produce this plot. I like it because the colormap used filters everything in way that comes out like a log scale — and that tells me what is a big deal and what is noise. The interesting dynamic is the frequency/magnitude trade that happens with spending dynamics: medical is in seldom/big chunks while grocery expenses are a constant but smaller expense.


You can see that our daily spending has a huge variance: The spending had a standard deviation that was twice our average spending — big purchases had a pronounced effect. I explore four levels of spending: discretionary (dining out), some and limited discretion (haircuts, medical) and non-discretionary (mortgage, tax) at the bottom.


Weekly Feedback

Click on the below to see full size


So how much can we control this?

If I break down spending into four categories:

  • Committed — We have to pay it (i.e. Mortgage)
  • Limited Discretion — We can commit extra time to reduce it (i.e. Home and Car Maintenance)
  • Some Discretion — We can make choices to decrease our quality of purchase (i.e. Groceries)
  • Total Discretion — We can do without this if we have to (i.e. Dining Out/New Clothes)

It turns out that a third of our expenses are committed where about a quarter each apply to limited and some discretion. Roughly 20{aaa01f1184b23bc5204459599a780c2efd1a71f819cd2b338cab4b7a2f8e97d4} of our expenses are totally discretionary and 70{aaa01f1184b23bc5204459599a780c2efd1a71f819cd2b338cab4b7a2f8e97d4} of our expenses could be changed if we had to. The takeaway for me is to focus on eliminating the stuff we pay for but don’t enjoy (fees) and the things that don’t bring joy/reward for their cost.







2 responses to “CY2014 Quarter 1 Financial Review”

  1. Danielle ('95) Avatar

    Hi Tim. Seems as all is well thru my FB view of your life! I find this stuff interesting as well. You are way more high tech then I am by the looks of it. But I use peachtree for my husband’s business. Personally though I do this monthly with Excel and break down weekly a budget by hand in my paper planner. We started this years ago, when I had stumbled across Dave Ramsey and began the journey to try to live debt free. We had always budgeted before but I really enjoy eliminating stress with having less debt. I notice our decisions are much wiser when paying cash and when the month is over we have a lot more money then we used to. Our kids and eating out because of their sports/activities is our biggest expenses with a family of 5, along with groceries. We only have the house to payoff and my husband’s shop building with a small student loan I should have paid off within a year. Our home should be paid off long before our retirement at the rate we are going at now. We really saw a huge increase in cash flow when we got rid of car payments. I put $500/mo in a car savings account and so when the time comes to buy another car or fix a vehicle it is never a problem. We have purchased 3 vehicles this way each time buying newer and nicer. To cut grocery expense of course coupons can cut a ton but I rarely have time to do that. I have found with weekly grocery shopping you don’t waste as much food therefore cutting that expense or meal planning and sticking to the list cuts that expense as well. Even with insurance we have had major dental bills as well such as my husband had a 6k bridge put in and a daughter had 3k braces a while back and those things are hard to plan for but we always have money to pay for when we budget and save more to pay with cash. If you don’t know Dave Ramsey he has a radio show and all that you can listen to daily or thru podcasts if u don’t have time to read. I don’t follow his stuff to a T but a lot of his ideas have helped us use our money more wisely, reduce stress by not being surprised when life throws curveballs. I think the planning before the month/qtr along with the analysis like you have here really adds to the process. Maybe you do this already but I didn’t see it mentioned. I enjoyed the read!

    1. tim Avatar

      Thank you so much for your excellent thoughts. Very much appreciated. Looks like all is well in your home. Thanks for the update.

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