How To Carry Out An Annual Spending Review

You really need to track expenditure over a year in order to draw up an accurate budget, and even then there will be surprises. If you’re making (or re-vamping) your budget, it really helps if you’re able to do an annual spending review. 

How To Carry Out An Annual Spending Review

One of the reasons I like to put most of my spending on credit cards is that it makes reviewing my annual spending particularly easy. I pay them off at the end of each month so never pay any interest, and I gather various rewards on them, so actually profit from them, just a little, in the long run.

Gather your records

Most of us will need to gather bank statements (maybe from more than one account), credit card statements, and maybe records from PayPal or other third-party payment processors. Unless you use cash for the majority of your spending, you should be able to get a good idea of what sort of things you’re spending on from electronic records.

Your electronic records should indicate how much you’re spending in different areas so you can now categorize expenses. There are various apps, such as Mint and Personal Capital, that you can use to help categorize expenses.

Categorize expenses

Review

Now you can take a close look at how much you spent over the last 12 months, and what you spent it on. The amount you spent, divided by 12, is what you need to be budgeting for each month.

Don’t forget to allow for any foreseeable new expenses that will occur over the next year, such as a child starting college, or indeed, expenses that will be coming to an end, such as a debt that will be paid off soon.

One last step before you make your budget, should be looking at that review and seeing where expenses can be cut. There’s nothing like seeing the evidence of your spending in front of you in black and white to force you to question it.

The final step

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