what’s the trend? Understanding your finances with graphs

When it comes to budgeting and spending less, there are good months and there are bad. Some months you nail your budget or even exceed expectations, and others you will fall off the wagon. But if your aim is to reduce your expenses (or in the case below, a particular expense), what is the overall trend once the good months and bad are averaged out? When looking a a bunch of figures, it’s easy to get lost in the detail. This is where a graph can really help you understand your spending habits and whether you are achieving your goal of spending less.

We don’t have too many spending foibles, but our biggest one is takeaway food. We eat it as an “I couldn’t be bothered to cook” option, but really it is overprice, unsatisfying crap that is taking money away from things that we truly value or actually need. So it is our takeaway food expenditure that I’ve been looking at lately and I thought I would share the results to show how graphing your data can be quite revealing.

There is only one way to really get a hold of your finances, and that is to track your expenditure by writing down every cent spent and organising it into specific categories. Once you have written down all expenses for a month, you can then plot the total on a graph and get an immediate visual impression of your spending patterns and overall trend over time.

I’ve been keeping a budget for quite some time, so I have a fair bit of data to graph. I’ve kept a budget since 2005, but it was only since 2007 that I actually starting categorising our expenses more specifically. Below is a graph of our actual takeaway expenditure since the beginning of 2007 to the present day.

The graph clearly shows the good months and the not so good. Purge and splurge isn’t an unusual pattern of spending. We swear we’ll do better this month, and then make up for it by going on a bender the next. Looking at the graph, it took a while to remember what happened in July 2007 as it is so obviously higher than every other month. It was the month we moved house, so I assume there was more packing and unpacking and less cooking.

In 2010 it seems we have come off the purge and splurge rollercoaster somewhat. Our chart shows higher lows, but also lower highs. In fact, the monthly takeaway bill is sitting fairly steadily between $100 and $150. Maybe we are reaching a plateau for takeaway spending, although I still think we have a little way to go before I’m happy with our takeaway spending level.

You will notice that I’ve added a trend line to the graph, which cuts through the monthly ups and downs to show that we are gradually reducing our takeaway expenditure overall. Despite the bad months, we are still reducing our overall yearly expenditure on takeaway. This is supported by the following graph which charts yearly takeaway expenditure.

The 2010 amount is projected. I’ve take the amount we’ve spent in the first 6 months and doubled it to get a projected figure for the year.

As the graph shows, we had a big drop in takeaway expenditure in 2008 followed by a more gradual reduction in expenditure for 2009 and (all things being equal) 2010.

If I had to guess before I did this little exercise whether or not we were spending less on takeaway, I would have said that it was my impression that we were, but I wouldn’t be sure. The above graphs are gratifying. We may not have reached our target yet, but at least I can see clearly that we’re heading in the right direction.

What is your spending foible? Have a go at tracking your expenditure (if you don’t already) and create a graph of the data. It will not only provide insight into your spending patterns, it will also give you motivation to continue working towards your financial goals.

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Have you read these posts?

1. Charting Your Progress – Creating Graphs In Excel
2. Gaining Control Of Your Finances Part Two
3. Gaining Control Of Your Finances. Where To Start. Part One
4. Gaining Control Of Your Finances Part Three
5. smoking: a drag on your finances