Key ideas

1. Ninety days beats one month. Three months smooths out one-time repairs and catches charges that bill every other month or once a quarter.
2. 8 to 12 categories is enough. Use broad buckets like housing, groceries and subscriptions. Too many categories and you spend the hour deciding where a coffee goes.
3. A $12 subscription costs $144 a year. Recurring charges add up quietly. Sam's six repeating charges came to $99 a month, and canceling four saved $1,020 a year.

Vocabulary

Emergency fund

Cash set aside only for surprises like a job loss, a car repair or a medical bill. A common goal is 3 to 6 months of essential costs.

Work it out

Sam, 31, runs out of money a few days before payday. Sam downloads three months of statements from checking and two credit cards to find out why.

1. Video streaming
2. Second video streaming
3. Music
4. Gym, unused since spring
5. Cloud storage
6. App trial that renewed
7. Subscriptions per month
8. Keep music and storage
9. Cut per month
10. Saved in a year ($85 × 12)

Check yourself

1. You spent $210, $250 and $230 on groceries over three months. What is your monthly average?

   • A. $210
   • B. $230
   • C. $250
   • D. $690

2. Which should you leave out of a spending audit to avoid double counting?

   • A. The credit card payment from checking
   • B. Grocery purchases on the card
   • C. Your rent payment
   • D. A streaming subscription

3. Why look at 90 days instead of 30?

   • A. Banks require it
   • B. It catches charges that don't bill every month and gives a truer average
   • C. It makes your spending look lower

Your turn

Open your main credit card and checking statements for last month. Write down every charge that repeats on a schedule, add up the monthly total and cancel one you haven't used in 30 days.