How do I find out where my money is actually going?

Budgets fail because they are built on estimates. Almost everyone underestimates the small recurring spending and overestimates the large one-offs, and only looking at the actual record corrects that.

What you'll need

• Bank and card statements
• A spreadsheet (optional)

Step by step

1. Download three months of statements.Every account and card. One month is not enough to show the pattern; a year is more work than it needs to be.
2. Use broad categories, not detailed ones.Housing, food, transport, bills, debt, discretionary. Six or seven groups. Detailed categorisation takes hours and tells you no more.
3. Include cash withdrawals as a category.If a lot goes out as cash, that is itself a finding. Track it for a couple of weeks if it is a large share.
4. Separate fixed from variable.Fixed costs are what you must cover; variable is where you have choices. Knowing your fixed total tells you what a bad month actually looks like.
5. Look for recurring payments you had forgotten.Subscriptions, insurance add-ons, memberships. Nearly everyone finds several, and cancelling them is the fastest saving available.
6. Add up the annual costs separately.Insurance, car tax, servicing, Christmas. Dividing them by twelve shows the true monthly cost of running your life.
7. Compare the total against income.The gap, in either direction, is the number that matters. Everything else is detail.
8. Look at it without judgement first.The point is information. Deciding what to change comes afterwards, and it is much easier from an accurate picture.

Tips

• Most banking apps now categorise spending automatically. It is rough but usually good enough to reveal the pattern in minutes rather than hours.
• The surprises are usually in small frequent spending rather than large purchases. Daily coffee, lunches and delivery add up more than people expect.
• Repeat this once a year rather than tracking continuously. Continuous tracking is a burden most people abandon; an annual review is sustainable.

Common mistakes

• Budgeting from estimates rather than statements — Almost everyone underestimates small recurring spending. Only the actual record gives an accurate picture.
• Categorising in too much detail — It takes hours and produces no more insight than six broad categories. The detail is not where the decisions are.
• Looking at one month — It misses annual and irregular costs and may be atypical. Three months shows the real pattern.

Questions people ask