How to compare spending from month to month fairly

Two months' totals are rarely comparable as they stand, because months differ in ways that have nothing to do with behavior. February has 28 days and March has 31; one month held the annual insurance premium and the other did not; one had five weekends; one had a third paycheck. A fair comparison removes the one-off events, converts the non-monthly bills to monthly shares, divides the variable categories by the number of days, and compares the seasonal categories with the same month a year earlier. The worked example is a March that looked 14% worse than February and was, per day and with the premium set aside, about 2% better.

The four things that make months differ

Weekends and paydays are smaller versions of the same thing: a month with five Saturdays has more dining and shopping days, and a month with three paychecks has more money in the account, which tends to become more spending. Both are covered by the per-day comparison and by knowing which month it was.

Make the two months comparable

1. Remove the one-off events from both months, and list them separately with their amounts.
2. Take out the non-monthly bills, quarterly and annual, and either put back a monthly share in each month or compare the months without them.
3. Separate fixed from variable. The fixed bills are the same in both months; the comparison is about the variable spending.
4. Divide each month's variable total by its number of days. That is the daily rate, and it is the number to compare.
5. For seasonal categories, utilities especially, compare each month with the same month last year rather than with the month before.

A worked example, February against March

The raw totals say March was $560 worse, a 14% increase. The premium was $720 of that: removing it, March's adjusted total is $160 lower than February's, even though March is three days longer. The variable spending, which is where behavior lives, was $1,780 against $1,650, higher in dollars because there were three more days, and $57.42 a day against $58.93, about 2.5% lower per day. March was the better month, and the raw comparison said the opposite.

The fixed bills differ by the premium's monthly share, $60, being in the February figure as a set-aside and not in March's after the premium was paid, plus a utility bill $230 lower as the heating season ended, which is the seasonal effect and is read against last March, not against February.

What to compare, and what to leave alone

Compare the variable spending per day, category by category, between adjacent months. Compare the seasonal categories with the same month last year. Compare the fixed bills only when one changes, since they are the same by definition. And compare the one-off events with nothing; they are listed, sized, and judged on their own terms, a repair against the car's history and a gift against the gift budget.

The per-day figure is the one that makes a five-weekend month and a four-weekend month comparable, and a February and a March. It is also the one to track over a year: a daily rate that drifts from $58 to $64 across twelve months is a 10% rise in variable spending that no single month-to-month comparison would have shown.

Common mistakes

• Comparing raw totals. A longer month and a lumpy bill make the comparison meaningless in a direction you cannot predict.
• Reading the premium month as overspending. The premium was known a year ago; it is a share, not an event.
• Comparing utilities with last month. That measures the weather.
• Ignoring the number of days. Three days is 11% of a month, which is larger than most real changes in behavior.
• Removing every large item as a one-off. Groceries are large and regular; only the events leave the comparison.
• Comparing one month's daily rate to one other month's. Two points make a line in any direction; the daily rate over six or twelve months makes a trend.

Common questions

Why does my spending vary so much from month to month? Because months differ in length, in which lumpy bills landed, in one-off events, and in season, and each of those moves the total more than most changes in behavior do. Remove the events, share out the lumpy bills, and divide the variable spending by the days, and the months usually differ by a few percent rather than by a fifth.

How do I compare months of different lengths? Divide each month's variable spending by its number of days and compare the daily rates. Fixed bills are the same regardless of length and are compared only when one changes.

Should I compare with last month or with last year? Adjacent months for the variable categories that do not depend on the season, per day. The same month last year for anything seasonal: heating, cooling, holidays, back-to-school, and any category with a yearly rhythm.

How do I handle a month with a third paycheck? Compare its spending the same way; the extra income is not a spending event. If the extra paycheck was spent, the per-day variable rate shows it, which is the point of looking.

What is a normal amount of month-to-month variation? After the adjustments, a few percent in the daily rate is ordinary, and a change of 10% or more in one category is worth a look. Before the adjustments, 15% or 20% swings are common and mean nothing.

How Zypper handles this

Zypper makes the adjusted comparison a matter of choosing periods. The cash flow page charts income against spending over any period you choose, this month, last quarter, or the year, and groups it by category or by category group, so the variable categories can be read for each month with the fixed group beside them; the recurring page lists the annual and quarterly bills with their amounts, which is the list to set aside, and a category budgeted Every year or Every three months shows its Monthly equivalent in the budget. On the budget page, the History panel beside a category's amount shows Spent last month and the Monthly average with a chart of the last four months, which is the trend in the daily rate at a glance. See Cash flow, Recurring transactions and bill tracking, and Creating your budget for the details, or get started with Zypper to compare your own months fairly.