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Frugal Metrics: Compare Your 2013 Spending to National Averages

Human nature is natural. And it’s only natural to compare yourself with others, especially when it comes to spending. When mainstream consumers do this, the impulse takes the time-honored form of “keeping up with the Joneses.” New cars, smartphone upgrades, and extravagant vacations are duly noted, and many purchases are inspired by what others have already bought into.

Frugal Fringers are humans too. They also make comparisons. But their comparisons enter a land of limbo, because the yardstick isn’t how quick anyone buys the latest and greatest. Instead, it’s “how low you can go” in living your life for less than your neighbors live theirs. In either case, mainstream or fringe, it’s all about bragging rights. Fringers just brag for less.

For those interested in under-spending their neighbors, the federal government is here to help. The Bureau of Labor Statistics conducts an annual Consumer Expenditure Survey (CES), which reports the average household expenses for various income brackets. If you’re curious, you can see how your own spending compares with the numbers for your particular income level.

Here’s a summary of CES figures for 2012 (the latest year for which data is available). In reporting Household Expenditures, I’ve backed out spending for taxes, social security, and pensions.

Household Income

Household

Before Taxes

Expenditures

$20,000-$29,999

$29,732

$30,000-$39,999

$34,065

$40,000-$49,999

$38,369

$50,000-$69,999

$45,373

$70,000-$79,999

$53,875

$80,000-$99,999

$59,766

$100,000-$119,999

$68,275

$120,000-$149,999

$77,201

$150,000 & up

$107,860

Overall Mean Average

$46,204

So how do you compare? If you can’t tell because you don’t know what you spent last year, there’s a way to find out very quickly. It doesn’t force you to prepare a line-by-line recapitulation of every expense you incurred in 2013 (that would take way too much work). This shorthand method produces a single “down and dirty” number that tallies your “burn rate” for all expenses. It’s a simple calculation that takes just a few minutes.

And if you make this short calculation, you’ll receive an even more valuable benefit than measuring yourself against the CES averages. This website’s avowed purpose is to help you spend less than you did last year. To understand how much you’ve improved by this year’s end, you need a baseline that shows where you started out from. That baseline just happens to be your 2013 burn rate.

So here’s how to measure last year’s spending in three easy steps.

Step 1: List Each Account From Which You Paid any Expense in 2013

When you spent money in 2013, you probably used only a small handful of accounts. These likely included accounts for credit cards, debit cards, and checking. Less common sources of spending include savings accounts, brokerage accounts, and possibly direct withdrawals from paychecks (e.g., for commuting costs, union dues, etc.). Whatever your actual sources of spending, do your best to come up with a complete list. It might help to go through your wallet.

Step 2: Gather the Relevant Statements for Each Account Listed in Step 1

If you used credit and debit cards in 2013, there’s good news: most card issuers provide a year-end summary that reports your total spending as a single bottom-line figure. This makes it incredibly easy to tally your expenses. To see these summaries, log into each card’s account and click whichever link accesses your paperless statements.

If you used a checking account, it’s less likely the bank provides a year-end summary, so you might need to review twelve separate statements. If that’s the case, it’s still a simple process. Each monthly report provides totals for processed checks, electronic auto-payments, ATM cash withdrawals, miscellaneous fees, and the like. As a test, I reviewed my own online bank records and it took only fifteen minutes to come up with a year-end number.

Step 3: Add the Total Annual Spending for Each Account

The math is easy: just add the figures for each of your accounts. This is your annual burn rate. It’s the figure you use to compare yourself to the CES results. It’s also the baseline you’ll compete against in 2014. Here’s a sample calculation.

No. Account Name Source of Amount Year-End Total

1

Mastercard Year-end summary  $             16,204

2

Am Express Year-end summary  $               8,207

3

Debit card Year-end summary  $               5,231

4

Checks written Monthly bank statements  $             11,062

5

Electronic debits Monthly bank statements  $               4,793

6

ATM withdrawals Monthly bank statements  $               1,350

7

Fees Monthly bank statements  $                    25
Total Spending  $             46,872

When gathering your annual totals, beware of a couple basic issues. First, avoid double counts of spending. For example, if you paid off credit cards each month with checks from your bank account, don’t include both the checks and the cards’ year-end summaries—count only one or the other. Second, account correctly for any major reimbursements you received. If you loaned $500 to your sister which she repaid, the net cost of the transaction was zero and it doesn’t count as an expense even though your bank statement lists a $500 check. And if you spent $800 on a business trip and your employer later repaid you, that doesn’t count as an expense either.

*   *   *

So that’s it. In less than an hour, you can figure your annual burn rate and see how it stacks up against other households with similar incomes. The stage is now set for you to improve your finances in 2014—live cheap and prosper!

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