23 Jan 2014

Where Does My Salary Vanish ?

I was recently having a discussion with some friends about monthly income vs. monthly expenses. Most of them made the same remark – I wonder where my salary goes every month !
This is a common dilemma and there is an easy solution to it.
How does one find out where his or her money goes? The golden way to keep track is to keep a record.  We should pen down every expense no matter how little or big. You can do this on paper or on a machine. 

I know friends who love to use spreadsheets to track their expenses. They make six columns  - Date, Description, Amount, Comments, Category and Total. The “total” column has an automated formula inserted which shows how much you have spent at any given point of time. “Date” is the date of expenditure, description defines what you spent on – e.g. bought gifts for sister, groceries, milk etc. Comments could be any additional info – e.g. bought clothes, brand of milk, store it was bought from etc. A category is a helpful addition. Categories include – office cafeteria, restaurant or eat out, groceries, cell phone bill, milk, gifts, commute etc. Categories help you track the amount you spend and whether reduction can be made in any one area. An example of a budget would look like the following:

Amount (Rs.)
1st Jan 2014
Guavas 1 kilo
Rs.50 a kilo
1st Jan 2014
Bus to the store and back
Rs.9 each way

2nd Jan 2014
Tea at office


3rd Jan 2014
Auto to cousin’s house

4th Jan 2014
Bought 7 eggs

4th Jan 2014
Beans 1 kg. Rs.30, coriander (dhaniya) 1 bunch Rs.5, oranges 1 kilo Rs.50, onions 1 kilo Rs.30, tomatoes 1 kilo Rs.20, Potaoes ½ kilo Rs.10

5th Jan 2014
Tea at office

5th Jan 2014
Salary for house help


6th Jan 2014
Petrol for car


7th Jan 2014
Ate out with friends
Bill Rs.580 +tip Rs.20

7th Jan 2014
Chat at office


The same budget can be written down on pen and paper. It can have similar or different columns.
I like to have my budget on a spreadsheet with different sheets in the same file. I open a new file every year. I also like to color code certain categories like milk coupons, cell phone recharge amount, petrol and restaurant bills. This makes it easier to track these expenses month to month.
Many of my friends have stuck to a budget and made significant realizations. E.g. I never realized that I was spending Rs.4000 a month on eating out. I cannot believe that the amount I spend at the office cafeteria adds up so quickly ! Keeping a budget makes us see, what is right under our nose.
Now the question is how does one keep a budget and stick to it. Most people start a budget but then fail to adhere to it. Here are a few tips:
  1. Set aside five minutes to write down your expenses every day.
  2. The best way to track expenses is to put them down as soon as it occurs. I have seen people making an immediate note on their phone or on a piece of paper. This gets jotted down a second time to the file or notebook you maintain.
  3. Analyze the expense sheet every weekend. Track how much you spend on a particular category and if there is a way to reduce it.
  4. Remember to ask your spouse and kids how much they have spent.
  5. If eating out or gifts make a large category, cut down on it and start saving the money in a recurring deposit. Eventually, you will see your money grow
  6.  I had a friend who cut his TV connection for a year. This saved him Rs.500 a month and at the end of the year he had Rs.6000 which is now earning a good interest rate. This might sound extreme to some people but is television really a necessity? Savings in these forms give a feeling of triumph.
Track expenses so as to identify and eventually cut down.  It will seem like extra work in the beginning but it grows on you and at some stage you start enjoying the task. I have maintained a budget for a few years now and still enjoy doing it.


  1. Interesting article and good guide to keeping track of expenses.
    I do this on and off, for a month at a time, when I wondered where the money went (is my purse leaking?). Once I figure out the approx. expenses in each category, e.g. grocery so much, veg+fruits so much etc. I stop doing it. I find it tedious basically.

    Another problem is that the unplanned expenses often far outweigh the regular planned expenses. Every month it is some thing or the other.

  2. Hello Sanjaya, I agree that unplanned expenses can outweight planned expenses during some months. I find it helpful to track everything so that I can plan for the unplanned ! It can be difficult at times. Thanks a lot for the comment and appreciation.