This is my second update to this post – for the simple reason that tracking expenses accurately amidst countless accounts (read: credit cards) can result in some errors.
Each time I find more missed expenses, my depression deepens with our increased (historical) spending. And on that note, let’s take a look a the numbers.
. . .
Let’s a take a look at where the money went in 2017:
|Home Ownership||$ (17,475.04)|
|Groceries & Household Goods||$ (7,369.91)|
|Unknown & Misc.||$ (5,437.52)|
|Grand Total||$ (93,485.55)|
$93,485.55 of spending means a pre-tax savings rate of 20%. Post income & payroll taxes, that’s a 23.5% savings rate. According to MMM, that means it’ll take us 37 years to retire. Of course, we’ve already been working for some time – but it’s not as if our savings rate was always 20%. But assuming it was, that means another couple dozen years 0f work. Ouch!
So, let’s look at the numbers to figure out what the fuck is going on.
Let’s start with the biggest category: homeownership. I actually thought this would be bigger. (That’s what she said.) I’m sure many folks pay more in rent than $1,456/month. And I think we’d be hard-pressed to find a place for less than $1,456 to fit our wants. (I know because I looked recently.)
Side note: I did say “wants,” and not “needs.” This is because our little guy requires a little spot outside where he can do his business while we’re out making that cheddar. Without him, I’m sure we could get that number down.
Now – to be fair – I’ve separated mortgage interest from mortgage principal. I’m treating mortgage interest as an expense (and is included in this category) and am not counting mortgage principal – because that’s an investment.
|Home Improvement||$ (1,679.63)|
|Insurance, HO||$ (1,330.00)|
|Mortgage Interest||$ (8,749.43)|
|Taxes, Property||$ (5,087.69)|
|Water & Sewer||$ (628.29)|
I should probably include a portion of our electric and gas utilities here too – since technically renting a smaller apartment would leave us with a smaller utility bill. Mortgage interest is the biggest expense for the category – followed by property taxes. And of course insurance. Note that I’ve included water & sewer utilities in here. Why? Because were we to rent, that cost would be included in the cost of rent. Also, the line items for HOI includes both flood and earthquake insurance.
In the future, the home improvement line item could go anywhere – either increase or decrease. (We had some asbestos work done on the house that ran us a pretty penny in 2017.) Property taxes will only go up over time and mortgage interest will do down over time as the loan naturally amortizes. It’s frustrating that the biggest line item in our budget doesn’t leave us with a big opportunity to cut our spending – outside of moving!
Our second biggest line item and everyone’s least favorite. Taxes will definitely be lower in 2018 because I plan to use more tax-advantaged retirement accounts. In addition to the usual route of maxing out the HSA, I’ve got a few other plans this year to drastically decrease our taxes:
- Contribute to a Traditional IRA instead of a Roth IRA. (We contributed to a Roth IRA in year’s past)
- Max out the wife’s 401(k) account. (We were previously putting in a token amount into her Roth 401(k).)
- Create and max out a solo 401(k) for me. (Last year, I contributed the max possible a SEP IRA – which is to say not much given my income!)
|Federal Income Tax||$ (8,420.00)|
|state income tax||$ (2,133.00)|
|Lien’s payroll taxes||$ (6,888.18)|
Making tax-deductible contributions should drop our taxable income by roughly $50,000, slashing our tax bill. I can’t wait to do this exercise again next year just to see how little we will pay in taxes! (The lower tax rates won’t hurt either.) There is much promise for this category for reducing our spending. And given that taxes are our second-biggest expense, that’s very comforting.
Side note: these taxes are actually estimates. I’ve filed an extension for 2017.
Second side note: I wish my wish had a section 125 Cafeteria plan at work – so HSA contributions could go directly into it – avoiding FICA and $527.85 of taxes.
What. The. Fuck.
|Eating Out||$ (1,488.74)|
Obviously, this is ruining us. I think I’m so upset about this that I can’t even write about it write now. Perhaps I’ll this as a draft and come back to it later.
. . .
OK. It’s now later. Here we go: Now, let’s look at that vacation line item. Ohmiegawd. That’s a lot of money. The bar line item is more or less the wife socializing with friends – and I wouldn’t dare tell her what to do – so that’s that. Our eating out budget isn’t huge – roughly $124/month. For now, it may make sense to maintain a date night once a month – and focus on cutting spending in other categories. (Or at least that’s what I already promised the wife!) But at the very least, I think we could get it down to $100/month. Of course, savings $24/month isn’t really going to move the needle.
Recently, we want on a six-day trip to Hawaii. That trip cost us $2,200 – and included a scuba dive and a luau. The daily cost of the vacation was $366/day (and we didn’t even out that much).
Side note: If we’re spending $366/day on vacation, this begs the question: how much do we spend per day when not on vacation? Assuming the same spending, but without the line item and the actual vacation time taken when we are on vacation, we spend about $166/day. So, vacation costs 2.2 times as much as not.
Wait a second – can we go back to that other figure? It costs us $166/day just to exist. Wow. That seems like a lot. Every day we’re spending $166 (not including vacation!). That seems like a lot of money, right? I feel like getting that to be a double-digit such as $99/day would be a good goal. I’ll add this to my goals list.
And looking at vacation spending, we only really went on one awesome trip in 2017 – Playa Del Carmen. Jesus. What is going on here!?
Well, what’s great about tracking expenses is the knowledge it provides. I know that we are spending more than $13k/year on vacation. Wow. Can it be decreased? Of course! Will it? I have no idea. We’ll see what 2018 has in store for us. Of course, with the $2,200 trip for HI for six days, we’re off to a dubious start.
Decreasing Vacation Expenses
There are at least three ways that I can think of right now.
Credit Card Rewards
We have already been doing this. And in fact, we recently have been denied on a couple credit card applications because we’ve likely flown far and above the 5/24 rule. So, while we will keep doing this strategy over the long-term, I’m not sure how helpful it will be for 2018. Not being able to heavily lean on this strategy for 2018 may mean that this could increase our travel expenses. FAIL!
This means going to less-expensive destinations, like Mexico, Thailand, or Bali (instead of Hawaii). I’m super excited about these trips – because I can spend money and not feel guilty about the value I’m getting for it. We did Mexico last year – and are gearing up for possibly Bali either later this year or next year. I’m really looking forward to that.
Be Less Particular
I can be kind of annoying. You know, as in I-need-my-own-private-bathroom-kind-annoying. Well, not anymore! If a shared bathroom means a less expensive vacation expense, then sign me up for the hostel or the Captain’s Quarters! Of course, when you take advantage of the second principle – geo-arbitrage – you may be able to afford to be more particular just because the dollar can sometimes go so much farther in certain places.
Groceries & Household Goods
I know that I can get this expense down. I am determined to spend less in 2018.
|Costco (Groceries, etc.)||$ (2,538.94)|
|Household Goods||$ (1,036.04)|
I think a good goal for 2018 would be to target grocery spending to $3,600 for the year – or $300/month. (In the past when I tracked my expenses, I was able to achieve $300/month in groceries.) I think that this is definitely achievable again. I’ve been shopping more at Costco Business Center recently which has cheaper cuts of meat available (like beef cheek!) and larger quantities available at a bigger discount (like ground beef for $1.99/lbs).
Side note: I buy a lot of non-groceries at Costco, such as movie tickets, sunscreen, clothes, and alcohol. But for now, my expenses aren’t that detailed.
I think that I can also whittle down the household goods categories. More than $100 of that is from Target – which I am determined never to set foot in for the rest of my life. Some of that is als0 some uncategorized stuff from Amazon. (We had a free prime trial for a while that certainly prompted us to spend more than necessary on stuff we didn’t need.) Without those two lines items, I am confident that I can get this category down for $4,000 for 2018.
I had several one-time start-up costs (for websites, etc.) and also did a lot of outsourcing to rather mediocre editors, etc. I foresee cutting this figure in at half for 2018. Those start-up costs are gone and I’ll just be doing my own editing, etc. I look forward to seeing how 2018 goes for this line item.
Most of this was for (some overdue) dental procedures. This was pretty fairly split between myself and the wife. I believe that the wife is all caught up – but I might need yet another $3,000+ procedure. At least that’s $3,000 that my previous dentist quoted me.
I plan for this line item to be smaller in 2018. On my list of To-Do’s is shopping that procedure in Tijuana or elsewhere. If I can find a competitively-priced, competent dentist south of the border, then this line item should much less for 2018.
Unkown & Misc.
Obviously, I need to do a better job of tracking my expenses. And I will for 2018. I am looking at expenses monthly now – giving me a much better idea of what a particular line item on that budget actually was.
|Cash Withdrawal||$ (1,183.50)|
|Fees, Account/Bank||$ (197.31)|
|Gift / Donation||$ (568.00)|
|Unknown & Misc.||$ (1,784.19)|
|Women’s Stuff||$ (213.17)|
Automobiles are certainly a wealth destroyer. Pretty much every early retirement blog and everything else says so. For 2017, we’ve managed to let automobiles destroy close to $4,000 of our wealth. That sucks.
|Auto Expenses||$ (1,374.99)|
|Insurance, Auto||$ (1,065.00)|
For the sake of an experiment, let’s see what putting $4,000 away every year in investments could do for our financial future. Using the MMM post as an example, we could retire at least two years earlier were it not for this line time.
Brazilian Jiu-Jitsu (BJJ) is expensive. I do it really enjoy it, though. Both my wife and are moving offices later this year. That means a different commute – and possibly a different housing situation. But, it also means a different jiu-jitsu studio for me – as the studio I’m currently at is en route to (and from) work – making it very convenient.
This means that price I pay for BJJ will likely change. I’m aiming for it to decrease. $165/month plus various other fees and expenses is just too much money given my goals.
Note that I’ve segregated out HOI into homeownership and auto insurance into the automotive category. Insurance will actually be going up for 2018. That’s because the wife left her sweet gig at Deloitte for a new firm. The new firm’s benefits aren’t competitive with Deloitte. This includes not providing long-term disability insurance (LTDI). So, I went out to buy more LTDI to make up for her current lack of benefits. This expense will likely be $800 or more in the future.
|Insurance, Disability||$ (1,024.30)|
|Insurance, Life||$ (534.00)|
|Insurance, Umbrella||$ (215.00)|
Side note: Having no LTDI from Deloitte is actually a blessing in disguise because most employer-provided LTD policies aren’t any good. (Deloitte was no exception to this.) So, while we are now paying more money than when we were paying before, we are getting protection. This wasn’t even possible before because you can’t buy a good LTD policy is your employer gives you a bad LTD policy for free. Click here to learn what constitutes a good LTD policy.
This might go down a little bit for 2018. I am doing my best to keep lights off – and use the heater less. I’ll try very hard to sweat it out in the summer instead of using the A/C. So, perhaps a small decrease is in store for us in 2018, but not a big change overall.
|Gas & Electric||$ (656.82)|
|Utilities, Internet||$ (575.72)|
|Utilities, Phone||$ (543.64)|
Also, I am switching to a new cell phone (MintSim) that is 1/3 the cost of my old plan (Straight Talk Wireless). Mint offers plans as low as $15/month. On Straight Talk, I’m currently paying $45/month. I haven’t made the switch yet so I can’t yet attest to the quality of MintSim. I can only hope it’s good enough I can have a smaller phone bill.
It’s anyone’s guess what our little guy is going to cost us in 2018. He’s a wild card! Hopefully less than 2017 because of a needed tooth procedure.
I’m pretty much determined not to buy any clothing for 2018. I have more clothes than I ever wear. So, I’m confident that this figure will be less in 2018.
2018 (Non-?) Spending Goals
I think that there is a lot of possibilities to decrease expenses for 2018
|Home Ownership||$ (17,475)||$ (1,456)||No Change|
|Taxes||$ (17,441)||$ (1,453)||Decrease|
|Fun!||$ (15,281)||$ (1,273)||Decrease|
|Work||$ (9,608)||$ (801)||Decrease|
|Medical||$ (8,736)||$ (728)||Decrease|
|Groceries & Household Goods||$ (7,370)||$ (614)||Decrease|
|Unknown & Misc.||$ (5,438)||$ (453)||No Change|
|Automobile||$ (4,205)||$ (350)||Decrease|
|Exercise||$ (1,889)||$ (157)||No Change|
|Pooper||$ (1,809)||$ (151)||No Change|
|Utilities||$ (1,776)||$ (148)||No Change|
|Insurance||$ (1,773)||$ (148)||No Change|
|Clothing||$ (684)||$ (57)||Decrease|
Some changes to less expensive options (like a different cell phone plan, and a lower-cost vet for Pooper), or new strategies (like taxes), some one-time costs (work and hopefully medical), and a general determination to spend less money on everything should mean lower spending across multiple categories. Wish me luck for 2018!