Show Me the Money: A Study of Personal Finance Anthony Donohoo IME 301 Winter 2010 My name is Anthony Donohoo. For my statistical analysis project I chose to study the fluctuations in my personal finance over the past eight months.

Project Objective How much we spend on the following every month: Food (Groceries) Gasoline Eating Out Entertainment (Movies, Sporting Events, etc.) Data collected from monthly budget forms, credit card records, and receipts Hypothesis: we spend less in all 4 categories I got married in June of 2009. My wife and I decided early on that we should make a monthly budget and try to adhere to that budget as best as we can. We still continue to budget our finances, but I feel that it has become more lax lately. For this project, I collected data from four major categories where our expenditures tend to fluctuate the most: groceries, gasoline, eating out, and entertainment. This data comes from three sources: our monthly budgets, credit card records, and receipts for individual items purchased. I hope to find that we are spending less and less every month in each of these categories.

Data Analysis I first organized the data from the months of July 2009 to February 2010 into histograms for their respective categories. I made a few observations from this data. The amount we spend on groceries each month stays pretty consistent. The amount we spend in the other three categories, however, fluctuates quite a bit each month. It is hard to see a trend of spending for gasoline and entertainment, but a trend is clear for the money we spend on eating out: it is increasing. Against my hypothesis, it seems that we are spending more now than we were last year.

Data Analysis Groceries Gasoline Eating Out Entertainment Mean: $154.73 Median: $154.20 Standard Deviation: $18.41 Gasoline Mean: $205.10 Median: $200.75 Standard Deviation: $73.33 Eating Out Mean: $36.01 Median: $36.92 Standard Deviation: $12.74 Entertainment Mean: $60.96 Median: $63.80 Standard Deviation: $20.58 Next, I organized the data into a box and whisker diagram to more easily compare the total amount spent each month in each category, and to calculate the mean, median, and standard deviation of each category. Again, I was surprised by how consistent we are in our monthly spending for groceries; we tend to spend just over $150 each month, give or take $20. Gasoline is the most difficult expenditure to predict. We spend the least amount dining out each month, but we can easily cut this amount down even more (we both cook, and home-cooked meals are a LOT cheaper than fast food and restaurants).

Data Analysis Lastly, I lumped the sums of each category together to create this histogram. There is no clear trend, but we are spending more now than we have in past months. One interesting observation here: the four months when our expenditures were more than the mean (July, October, January, and February) are the months when we traveled to Central California to visit my wife’s family. Maybe if we cut back our visits with them, we can get our budget under $450 a month! 

Observations Hypothesis was incorrect Goals: We spend more now than in the past Goals: Spend less than the mean amount in each category We can cut back our spending on groceries, eating out, and entertainment most easily After completing this project, I have found that my wife and I actually spend more now that we have in past months. For our March budget, we will set a goal to spend less than the average amount for the past 8 months. It will be easiest for us to cut our spending on groceries, eating out, and entertainment. While grocery shopping, we do not need to buy name-brand items; instead we can buy more generic brand items in order to save money. As far as eating out, we will try to limit it to twice a month (we have currently set our limit at once a week). Lastly, for entertainment we can cut back on this as well. I don’t know of any good movies coming out in March (Clash of the Titans comes out in April), and the weather should be warmer in March, so we can do more activities like hiking and biking that don’t cost anything at all. Since we have to use our cars to get to school and work, I don’t see a way to drastically reduce the amount we spend on gasoline each month. We will, however, try to limit our driving to a minimum. This has been an eye-opening project. I know that my wife and I can budget better, and we now have some areas where we can cut back on our spending in order to save for our future.

QUESTIONS? Thank you! Are there any questions?