Broadly, there are three categories of expenses:
- Critical – Rates, rent, mortgage, other debts, electricity, gas, insurance and phones. We have a pretty good idea of what these are going to cost.
- Needs – Food and general household living expenses, transport and cars, school fees and health costs. This can be more variable, and we have some scope to reduce them.
- Wants – Jewellery, gifts, clothes, shoes, holidays, eating out, coffees and buying lunch at work, to name a few. If push came to shove, we could cut these back.
There are three ways to track your expenses.
Pretty straightforward. Go through your bank statements for the previous 6-12 months and categorise your expenses.
Use a spreadsheet
Most banks allow you to download your bank statements into a spreadsheet. The beauty of this is you can easily handle a lot of transactions in a short time.
Use a tracking App
You can now use a few different Apps that link in with your bank accounts and automatically categorise all your expenses. While it takes quite a bit of setting up, once you do, they generally do a pretty good job at allocating your expenses to the correct category. Beware, doubling counting the movement of funds from one account to the other as an expense.
Personally, I prefer either the second or third option, as they are easier to update.
No one is average, but it is always good to benchmark yourself against others. Here is what the banks are using as of September 2023 as a guide for people living a “lavish” lifestyle (note that these figures don’t include the mortgage or rent costs).
Single adult, no children: $24,000 per year.
Single adult, two children: $39,000 per year.
Two adults, no children: $43,000 per year.
Two adults, two children: $58,000 per year.
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