A fellow personal finance blogger, Mrs. Micah, has declared February to be Where’s My Money Going Month.  She’s challenging her readers to track their spending for 28 days and participate in the ongoing discussion on her blog.  I have a guest post on her blog, describing why tracking my money is more important than ever.

In addition to that contribution, I thought I’d share with you where my money went in 2008.  I track every dollar I spend and have found the practice to be quite enlightening.  Even though I don’t have as much fat to trim now that I’ve been doing it for a few years, it is still worthwhile.  Looking at my top expenses for the year is also very informative.

The chart below shows my 10 largest expenses for last year in relative terms.  So if one category is twice as large as another, that means I spent twice as much.  Some of my expenses were mandatory (like taxes) and others were discretionary (like gifts).  To help me feel better about my spending habits, I also included the amount that I saved/invested.  Our goal is to save at least 50% of our take home pay, and last year we saved about 75%.  30% was saved pre-tax, and the rest was saved after taxes.

For those interested, a brief description of the non-obvious categories follows the graph.

Taxes: Federal and state income taxes, medicare, social security, etc
Housing: Mortgage payment, which includes escrow account for homeowner’s insurance and property taxes
Autos: Insurance, gas and maintenance for two cars (no car payment since they are both paid off)
Travel: Costs to travel to and from family and expenses while visiting
Baby: Gear, clothing, and supplies such as diapers
Saving: Money invested in retirement accounts, college saving plans, stocks, extra mortgage principal, or high interest savings

Be sure to follow the discussion on this topic throughout the month at Mrs. Micah, Finance for a Freelance Life.