Earn What You Spend

Last night while looking at my finances, I came up with an idea - let’s try to deduce trends about the economy using the anonymized data generated by Mint.  I’ll be exploring this in a new series of posts which I’ll call, for lack of a better name, TrendMints.  But first, some background. 

Mint is an incredibly useful tool for online money management, budgeting, and tracking your spending.  It has become a critical part of my arsenal of financial management tools, and the weekly summary emails I receive from them remind me that yes, the stock market really is in shambles. 

One of the most powerful tools they offer is the ability to visualize your spending history - allowing you to slice and dice your personal financial data to glean insightful trends.  This means, of course, that Mint is sitting upon a gold mine of data voluntarily handed over by its users.  No sense in that going to waste, right?  Mint allows you to compare your spending in various categories to the anonymized data from other cities across America: you can see if you are spending more or less than the average in any given city.

So, let’s use this anonymized, aggregated data in the way American Express, Visa and other credit card companies have for quite a while: as an insight tool into the spending habits of the American consumer. 

Let’s look at the ‘all shopping’ category first.  We’ll compare the dataset across two cities - New York City and Minneapolis.  The former because it is where I live, and of course is the finance epicenter of this country, the latter because I wanted a location that hasn’t been subject to the same wild swings in real estate prices and the economy.  Minneapolis is quintessentially Midwestern. 

[NB: For some reason, the master category 'all shopping' is not fully inclusive - the sum of the sub categories such as 'Clothing' and 'Electronics' are greater than the amounts provided in 'All Shopping'.  Clearly what the general public has access to is an imperfect data set, or at the very least there is an issue with categorization, but we can still analyze trends by looking at the master and sub-categories separately.] 

From July to October, we see no discernible pattern in either city - the spending levels stay consistent or, if anything, trend up:

The story here, of course, is the month of November.  November includes what is historically one of the biggest shopping days of the year, Black Friday. In what should have been an increase in spending, both New York and Minneapolis show a significant decline.

Even with stronger-than-expected sales reported on Black Friday, this clearly corroborates the story that the consumer is drastically pulling back his or her spending. 

Now of course there are a multitude of potential objections over this data - it doesn’t include cash purchases unless manually entered, it is likely not a representative sample, the time stamp of your purchase could be inaccurate by a few days and thus count a purchase made on Black Friday for the month of December.  What we’re looking for, though, are general trends, and in this sense it is clear: spending has clearly decreased. 

Next, let’s take a look at a graph for the clothing category. 

Here, we see the same pattern in both cities - a pullback in spending.  Again, the assumption is that spending on clothing would increase in November given the holiday season.  Not only do we not see an increase, but we in fact see the lowest levels of spending in each city over the five months represented. 

Finally, let’s look at this same data set for the electronics & software category.  Given the two previous graphs, this is pretty interesting. 

Minneapolis, again, shows a decline in spending on electronics and software.  Given the heavy emphasis on flat-screen TVs, iPhones, and new laptops this holiday season, this is especially surprising.  The major Black Friday deals all seemed centered around electronics, even at discount retailers such as Wal-Mart.  The trend in New York, though, is quite different - spending on this category has increased since September.  This is exactly what we’d expect this graph to look like in a normal environment - a nice uptick in spending on consumer electronics closer to the holidays.  Has New York been sparred the pullback in consumer spending we see throughout the country?  That seems doubtful given that some are predicting as many as 165,000 jobs lost in New York City during this downturn.  What, then, is keeping the consumer spending more in New York City?  I won’t pretend to have an answer now, but it is something I’ll be giving more thought to. 

So there we have it - a strong corroboration from the aggregate data of Mint users that the American consumer is pulling back their spending like never before.  I’m only beginning to explore this data set, so stay tuned for more posts.