Five easy steps to figure out your Annual Household Expenses in five minutes
Sanjib Saha
20 March 2025
How many of us know our annual household expenses with 90% accuracy? Chances are, we either have a vague number in mind that’s far from the actuals, or no clue at all. Tracking every expense sounds daunting, but if your bank allows transaction downloads, figuring your annual spending is surprisingly simple. Here’s how:
Step 1: Download Transactions
Most households use a single checking account for payments. Log in and download all transactions from any recent 12-month period (e.g., March 1, 2024 – March 1, 2025) into a spreadsheet.
Ensure your spreadsheet includes transaction amounts and descriptions. Remove empty rows before the header to make sorting easier. Freezing the top row and enabling filters can help manage large datasets more easily.
Tip: Save the file locally with a clear name like AnnualSpendingMarch2025 in case you need to revisit it later.
Note: If you use multiple spending accounts, download from each and consolidate all to the same spreadsheet. To simplify future tracking, consider consolidating payments through one single account.
Step 2: Filter Out Clutter
Sort transactions by amount (smallest amount first), making sure the first row remains a header. Withdrawals (expenses) should appear first because they negative.
Note: If your spreadsheet has both deposits and withdrawals marked as positive numbers, filter out or delete “Credit” transactions and sort the data with largest amount first.
Remove all deposits (rows with positive amount), as they aren’t part of this calculation.
Step 3: Exclude Savings and Transfers
Eyeball large withdrawals and remove anything that isn’t an actual expense. For example, transfers to savings, investments, or college funds don’t count as spending. You can either zero them out or delete those rows entirely.
Tip: No need to scrutinize every small expense—just focus on the bigger ones.
Step 4: Adjust for Atypical Expenses
Some big purchases, like a $10,000 purchase of a used car, don’t happen every year. If you have any such infrequent large spending, delete that row or zero out the amount. Including them in this year’s total would create misleading spikes. Instead, you will need to smooth out your spending variations by amortizing these expenses by dividing them over the number of years until they are likely to recur.
For such infrequent expenses, maintain a separate list or spreadsheet with the cost and the estimated recurrence periods in years. If you buy a used car every 5 years, only $2,000 per year should be counted as a recurring annual expense in each year, not the full amount of $10,000. Divide the first number ($10,000 for the car) by the second (5 years) to arrive at the annual pro-rated expense ($2,000) towards used car purchase.
This is a good time to anticipate and account for all such big expense that already incurred in the past or are inevitable in the future—like a new roof every 20 years. Calculate the annual pro-rated expense for each such item. Add up all the annual pro-rated expenses in this list. This figure will be needed in the final adjustments.
Tip: Keep this second list handy as this would be needed in future rounds of this exercise. Give it a clear name like InfrequentLargeExpenses.
Step 5: Optional Tweaks
You can refine it further for better accuracy. For example, income tax payments should be excluded because they are better tracked from the tax return documents. Similarly, if you have a mortgage, feel free to exclude any mortgage principal payments—only count interest, property taxes, insurance, and mortgage insurance as expenses since the principal builds home equity and is more like forced savings.
The Result!
Add up all the individual expenses in the spreadsheet. To account for those missing infrequent large expenses, add the total annual pro-rated expenses from your second list that you created in step 4, and voilà—you have a solid estimate of your annual spending! While it may not be 100% precise, it’s close enough for practical decision-making. If this is your first time, it might take longer than five minutes, but it’ll get faster next time.
How Often Should You Do This?
Try repeating the process with another 12-month window (e.g., October 2023 – October 2024) to compare results. Due to inflation and spending changes, numbers may vary slightly but should be within the same range.
At first, consider doing this quarterly to catch discrepancies or changes in spending habits. Once you’re comfortable, an annual review should be enough to stay on top of your household finances.
Figuring out your annual expenses doesn’t have to be overwhelming—give it a try and take control of your financial future!