Most people think that they will make their New Year’s resolution on January 1st by starting a new spending plan or budget in their household. The amount of money you spent in 2012 won’t really sink in until you begin to look at your year-end credit card statements. Today, I got my 2012 American Express end-of-year statement. For most of us, this is when we get into a small state of disbelief around all of the places we’ve spent money unless you look at your budget on a monthly basis. Since people rarely do anything more today than pay the bills that appear in their online bill pay, the year-end statement can be the perfect opportunity to have a family discussion about where the cash has gone out the door. Here are four areas to analyze on your end of year credit card statement:
- Groceries: I discovered this year that we are an equal opportunity grocery store shopping family. The statement showed that we buy from Whole Foods, Trader Joes, Publix, and Kroger. What you need to delve into within your grocery bill is how much of the bill is food, how much is household supplies, and then what is spent on various sundries like flowers, alcohol, etc. On average, it should cost you about $150 to $175 per person per month when you look at your grocery bill. If you are spending more than that amount, you might want to reflect on why it cost you more money than average. Is there a planning issue so you tend to buy purchases on the run rather than planned out? Are you making the most of store coupons or deals/offers? Do you buy items in bulk that you really don’t need? These are all good questions to start the conversation.
- Travel: Typically, most travel and vacation related expenses would be put on the credit card. This is a wonderful opportunity to set the budget around what you will spend in 2013 on your overall family and personal vacations. Travel shouldn’t exceed more than 3% to 5% of your gross income. For example, if you make $100,000 a year, you shouldn’t be spending more than $3,000 to $5,000 on vacations. You need to add up airfare, hotel, rent-a-car, entertainment, and food that were spent on the vacations. If you went over this amount, consider the type of hotel that you are staying in on your trips. Do you need to be in a Ritz-Carlton? You should also think about your travel dates. Do you need to travel during the high season or can your dates be flexible for a day or two to save on airfare? For meals and entertainment, can you get a deal on the tourist attractions that you would like to go to next time? Can you keep some food in the room to save on expensive snacks or breakfasts? All of these would be good questions to consider.
- Clothing: Since most of the clothing purchases will be on your credit card, this is a great time to be able to break down by family member just exactly how much got spent on clothing. If you don’t set a spending limit number in this category, you’ll end up buying really whatever comes to mind when you need it for your kids or yourself. Take stock of what you have in your closet or your wardrobe and consider what you haven’t worn over the last year. Maybe you don’t need new clothes, but instead need to recycle what is in your closet. You should also see if there is a neighbor or friend who would be interested in swapping cloches. Also remember that many consignment stores are right around the block and you might be able to get a good deal on clothes as well.
- Eating out: This category can be the kiss of death for a lot of families. My number one recommendation would be to categorize the eating out section by a high to low ranking to see where you’re dining the most as a family. Take the top ten restaurants and look at what kind of discounts you can get to save money over the course of next year. Perhaps if the dining area was a special event, just do the restaurant instead of gifts in addition to the restaurants. Our family is going to a great brunch place called Canoe for Valentine’s Day, but we are skipping the gifts this year to save a few bucks.
As one of my first bosses in the business told me, “the numbers don’t lie”. Spend some time to go through your statement and make a game plan for the year ahead. Consider getting a card that has frequent flyer miles if you don’t have one already. This exercise can help you save thousands of dollars in 2013!
Written by:
CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Editor in Chief of Your Smart Money Moves
Co-CEO and Founder of oXYGen Financial, Inc – The Leaders in Gen X & Y Financial Advice and Services
Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice to the X and Y Generation.
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