A Recipe to Calculate How Much You Spend Each Month

Marc Freedman, CFP, Investopedia

Most people entering retirement don’t have the slightest understanding of where their money goes each month. For many, it’s an uneducated guess. In my opinion, it’s the number one reason individuals procrastinate on planning for (or even enjoying) their retirement.

Grab a piece of paper and a pen. Now imagine, just for a moment what you think it costs, on average, to cover all of the expenses in your home on a monthly basis. Don’t forget about the quarterly bills such as property taxes and/or annual payments such as life insurance.

Go ahead. Take all the time you need.

How’d you do? Was it tough? Do you think you captured everything? Honestly, unless you are a walking budget calculator, this exercise is really hard.

In my opinion, this is one of the reasons most people have no idea how much they spend each month; It’s just too darn hard to figure out. That’s because there are some months where more expenses are due than others. And I’ll bet as you’re reading this paragraph you’re thinking “Oh yeah, I forgot about birthday gifts, eating out, the money I take from the ATM each week,” and so on. So what do you say? Let’s try something a little easier.

Your Spending Reality Check – a Secret Recipe

Prep time: 15 minutes

Calculation time: 10

Genius Level: Easy

Financial Planning Time: Priceless!


  • 1 calculator

  • 1 piece of paper

  • 1 pencil (preferably sharpened)

  • 6 consecutive monthly checking account statements.

  • good lighting (If you’re like me, your eyes aren’t what they used to be.)

  • 1 bottle of wine (Trust me, it will help ease the pain.)


  1. Create two columns on your piece of paper. At the top of one column write “Month” and at the top of the other, write “Amount.”

  2. Find the term “Total Withdrawals” on one of your checking account statements. It’s usually on the front or back page.

  3. Write the name of the month that represents the statement in the month column of your paper. In the “Total Withdrawal” column for that row, write the corresponding amount.

  4. Continue this step with all six of your checking account statements.

  5. Total the six amounts using your calculator. (This isn’t school, calculators are allowed!)

  6. Now multiply this number by two. This will give you an estimated annual amount spent. (If you want a more accurate depiction of the annual amount, use 12 previous statements rather than six.)

  7. Divide the number by 12. You’re now looking at the approximate monthly amount you need to maintain your current lifestyle.

  8. Contemplate…What did you just learn?

  9. Need more wine?

Note: If you spend money from more than one checking account, you’ll want to do this exercise for all of them. Be sure to add up all the accounts to produce a more complete and accurate measurement of how much you spend each month. (For related reading, see: Evaluating Your Personal Financial Statement.)

Now how hard was that? Are you surprised by the amount? Is it more or less than what you thought?

Guess what? Now that you know how much you need to spend each year or month you’re better prepared to answer the “real” question on your mind: “Do I have enough money to retire?”

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