I finally had a chance to tally my 2015 spending.
Back when I first joined this site in 2006 (!), I was an avid user of YNAB and tracked spending regularly, but once I left my regular job to embark on my career change in 2009 and first my dog and then my mother in short order became seriously ill, regular tracking (and regular filing and sorting and decluttering at home) all went out the window, so now I content myself with an annual review based on the useful year end summaries provided by my financial institutions.
My overall spending is up by about 6K compared with last year--which is fine given that my earned income is several times higher this year, since I was unemployed for 8 months last year.
Rather than looking at things microscopically, I will report here in terms of the categories developed by Senator Elizabeth Warren and her daughter Amelia Warren Tyagi in their 2006 book All your Worth: The Ultimate Lifetime Money Plan.
They suggest three macro-level categories for spending: Needs, Wants, and Saving/ Debt Repayment, and recommend that 50% of spending go to needs (e.g., mortgage, groceries, transportation, utilities, healthcare, insurance), 30% go for Wants (discretionary spending) and 20% go to Saving & Debt Repayment.
My spending this year is fairly close to these targets: 47% Needs, 34% Wants, and 18% Savings.
Needs 47% of my expenditures were for Needs. Nearly half of this was house-related (mortgage, insurance, taxes, repairs & maintenance), and another 21% was health related. The health expenses are down from last year, though. I took on a hundred-dollar-a-month prescription that makes a big difference in my quality of life, but I no longer have to pay all of my health insurance expenses out of pocket. Groceries are always a struggle for me to cut, at 17% of the needs category (8% of total). Transportation and expenses for my two cats round out this category.
Wants 34% of my expenses were for Wants. Other than not having to pay for my own health insurance now that I am fully employed, this is the biggest change in my spending. Basically, I spent 5K less on health insurance and 5K more on fun and recreation, including joining a premium gym (which I use a lot more than the el-cheapo gym I used to belong to), eating out, taking three short vacations, going to the movies and the theater, and buying books. As my best year of income ever, perhaps I went a little bit overboard here (since I am above the 30% mark), but not too drastically so. In particular, I want to cut down on the Dining Out, for health as well as budgetary reasons. And I will not buy subscriptions to two theatres next year but will be a little choosier on which plays I attend (4 instead of 7). One big expense in this area, which I will probably be reimbursed for, is that on December 31, I enrolled in a CFP program (before the fees went up by $500 on January 1). Actually eliminating that one expense alone brings the total down below 30%. I will be taking online classes for the next 10 months and will take the certification exam sometime between November 2016 and July 2017.
Savings & Debt Reduction Finally, 18% of my money out was for Savings and Debt Reduction. I reduced my mortgage balance by nearly 4K and added about 12K to my retirement accounts and HSA (this number is higher than the last entry because of the HSA contributions). The other personal debt was more moved around than paid down. It started the year mostly on credit cards, as I spent about 4 years transferring debt from one 0% balance transfer offer to another, moved to a personal loan mid-year, and finally to a HELOC by year end. This next year will be another big debt reduction push. It currently looks as though I will pay the non-mortgage debt off by mid-way through 2017, at which point, I will further accelerate mortgage payments so that my house is paid off by the time I reach 65.
So, all in all, even though I felt quite un-frugal in some areas this year (definitely NOT in a mood for penny pinching after having done so for the past decade!), I kept my spending in reasonable check. I expect next year to be similar, although next year's discretionary spending will be less for eating out and the theatre and more for hiring some help with decluttering, home organization, and cleaning.
In Sum The last time I did an annual spending re-cap was in 2011, and I see that my spending percentages have not really changed that much--there's less on expenses related to the house and health and pets percentage-wise, but my overall priorities seem about the same.
Viewing the 'Cost of Living' Category
I finally had a chance to tally my 2015 spending.
So here's my annual spending recap, with a comparison to Dave Ramsey's recommendations (rounded...he gives ranges). I'll note that my record-keeping was not as precise this year as I normally make it; I just summarized data from the Mint.com data aggregator about my spending and then put it into an Excel spreadsheet to graph it. This means that many entries are inexact--for example, a purchase at Costco might have been coded as groceries but was really half household goods. But the way life was this year, this approximation is "good enough for government work," as my Dad would have said.
First, I'll note that spending exceeded income by about $3000, the balance going to credit card debt. A no-no, but this was an extraordinary year--the "triple whammy" of negative life events.
So a comparison: my mortgage spending looks great by the recommendations, but then there's the "Other Home," which included about $1800 of needed home repairs (water heater and sidewalk replacement). Still, even that total is 32% compared to his 30%, so not bad.
My food and medical are both 5% above his recommendations. The medical is because I paid my own health insurance for 11 months out of this year. The food is always a struggle for me.
My utilities are within his recommended range of 5-10%, even though the #s aren't comparable here (I was making his ranges add up to 100%). My transportation costs are actually a bit lower.
He has 10% to charity and I have 9% to Pets (and maybe there's another 1% to Basset Hound rescue....Pets *are* my charity, I guess).
And of course, he has 10% to savings, which I didn't manage this past year, but now that I'm a working girl again, I'm well on track towards being able to meet that for 2012 and beyond.
Last year, my mortgage company (Wells Fargo) called me and offered me an easy refinance...no appraisal, no cost (though I'm not sure what that means...I'll have to look at the documents I have from last year to be clear). Last year, even though I was approved for the loan, I didn't go through with it, because I was employed only part-time and still collecting unemployment, and I was worried that somehow things would come back to "bite" me.
Now that I'm employed full-time again, it makes sense to think about refinancing with the rates so low. So I googled "mortgage refinance calculator," pulled one up, filled it out, and, as typically happens with these, got a list of potential lenders to call me rather than an actual printout of an estimate.
I talked to two of them today. Seems like I can go from a 30-year mortgage with 24 years remaining at 5.875% to a 20-year mortgage at 3.75%, AND lower my monthly payment by about $50. Sweet.
And, of course, if I keep on paying the same amount, I lower the payoff date to about 17 years, which brings me to full retirement age (not that I plan to retire then, but I want to be ABLE to, debt free).
So I'm going to do it. Now I need to figure out who to do it with. I have two phone quotes (both of which agreed that I can get the 20 year 3.75% rate; one also offered a 15-year, 3.5% loan, but that takes my payment a little bit higher than I'd like it).
If I stay in the house, I'll save about $24,000 in interest over the life of the loan (less any points or closing costs, which still leaves savings of over $20,000). Even if I decide to move and even if there are points or closing costs, it would be worth it in just a year or two.
I know that with both of the lenders that I spoke to today, there'd be an appraisal to get. Don't yet have the details on other closing costs.
Now I need to contact Wells Fargo and get their rate and see if it is comparable, and weigh whatever that is against avoiding the hassle of getting another appraisal.
This is my first house and I've never refinanced before. Any words of wisdom on things I should look at for as I navigate this process?
Question for you: Are there expenditures you make that you consider more as an "investment" than an expense?
I'm not talking traditional investments here, but things that you purchase that you believe will have the effect of saving you money in the long term.
I've made three such purchases in the past six months, and two other purchases from the past 3 years come to mind as well:
1. A new wool comforter. If I can stay warm at night, I can keep the house temperature cooler and save money on heating bills. My old down comforter actually kept me warm, but about 6 years ago, I was first diagnosed with asthma, and last year, I landed in the ER because of it, to the tune of $1500, currently the deductible on my health insurance. I had previously poo-pooed the idea that the down was making my allergies worse, but this year, the effect when I put the down comforter on my bed was striking and notable, requiring the use of my inhaler several nights in a row (normally, only exercise induces an attack). So the comforter went into storage and I researched replacements online. Wool appears warm, breathable, and dust-mite resistant, as well as natural, so I purchased a comforter made out of wool.
2. A Vita-Mix: If you haven't heard of these, these are basically blenders on steroids, and highly touted by many in the raw foods community. While I'm not raw, I do try to eat minimally processed whole foods as much as possible to cut down my grocery bills in the short term and my doctor's bills in the long term. I haven't owned this long enough to calculate the monthly grocery savings yet, but I am using it multiple times a day and eating more fruits and veggies than ever, which can only be good for my health. Today I ran out of soy milk and at first was tempted to go to the grocery store....then realized I still had a cup of raw almonds, so instead, using the Vita-Mix and a "nut-mylk bag," I made myself a quart of almond milk that will do for cereal and coffee for a few days...saving me a grocery store trip, which means saving money because I *know* I wouldn't just buy soy milk while I was there! Plus now instead of buying pre-minced garlic and prechopped onions, I'm buying them whole and chopping my own.
3. A Nu-Wave counter-top oven. Yes, I'm a kitchen-gadget queen. But I've never had good luck making meats in the traditional oven. Baked veggies and the yearly turkey, yes, but until now, I've only had good luck making chicken on the stove top in some kind of sauce, usually marsala or cacciatore...and most of the chicken I've bought has been in the form of boneless skinless chicken breasts. Now every week I'm buying a whole frying chicken (better size for one person thann a roasting bird) and making it in this baby....then using the drippings and carcass to make my own broth. This machine will also cook meat straight from frozen, and chicken breasts are done fast--15 minutes if thawed, 25 i frozen--so there goes one of my excuses for buying something out. I buy a big bag of turkey burgers from BJ's and keep those in the freezer for quick meals that save me from going to BK's!
4. Not a new purchase, but an old one that I hadn't used for a couple of years that I recently put into action again: my Food Saver. The bags are a bit pricey, but Ball Mason jars are reusable, and if you spend a few bucks extra for a jar sealer attachment, you can buy in bulk and have the food last longer--a good solution for someone who is single like me who cannot take advantage of buy-in-bulk deals without a long-lasting storage solution.
5. My rice cooker--this was the first kitchen gadget I bought with the intent of using it to cook more, and it definitely has helped. A "fuzzy logic" cooker with multiple functions can be used for much beyond basic grains! Mine has a soup and a slow cook function and will even bake bread! I love being able to dump my ingredients, press a button, go out for a walk and come home to a cooked meal! This is faster than a slow cooker but can act similarly, plus because it vents moisture, things will brown in it that won't brown in a slow cooker. Right now the teflon on the inner pan has begun to wear out, and I'm going to have to replace this....I'm considering a gadget by Fagor that has a pressure cooking function as well (unfortunately Panasonic does not seem to sell replacement liner pans).
So what purchases have you made recently with the intent of saving yourself money in the long term?
Since February is the shortest month of the year, it's a month that I try to do as much of a "fiscal fast" as possible. No extras, but I still go to the grocery store weekly, take the furkids to the vet if they need it, etc. Last year I was able to keep my monthly expenses down to $2200. This year, I'm budgeting for $2400. Weight Watchers is running a promotion starting Feb 2 and running for 2 weeks that allows you to save about 15% over their weekly fee. They'll allow you to pay up to 16 weeks in advance, so I'm going to do that. I still have 3 weekly coupons left, so if I pay for that next week, I'll have my Weight Watchers paid for through June 13. So far I've lost 12 pounds, and am hoping to at least double that by the time those new coupons run out.
I found an old file last night that contained a summary of my expenses that I created in August 2003, so almost exactly 5 years ago. I pulled out the current data and compared the two. Here's how my expenses have changed, and why:
First, there are two categories of expenses I have now that I didn't have in 2003: school books (fortunately work pays for tuition) and home maintenance, as I'm now an owner.
Biggest increase is eating out, up 193%, or 24%/year. Why? Call it either laziness or busyness. The past two years, I've been working a full-time job, a part-time job, and going to school part-time. Cooking is fairly low on the priority list at the moment. Going to work on this.
Next is work-related expenses (books and films I use in teaching, software that I use that's not paid for by work, and office supplies, up 145%, or 18%/year. That figure is somewhat distorted. Back in 2002 and 2003, I was at my poorest in my adult life, patching together a series of part-time jobs rather than having a full-time job (the full-time job I have now began in Sept. 2003). So the August 2003 figure is low; the current figure reflects more of what I tend to spend when I do have a full-time job.
Personal Expenses: up 103%, or 13%/year--mostly because I recently spent about $500 to buy a few professional wardrobe pieces in preparation for job interviews as I change careers.
Medical Expenses: up 71%, or 9%/year
Rent/Mortgage: up 67%, or 8%/year. But back then, I rented. Now I own. So I pay $300/month more, but that includes not just the mortage but homeowner's insurance, property taxes, and an extra 5% that I pay each month towards the principal.
Transportation: up 64%, or 8%/year. Inflation.
Household: up 58%, or 7%/year. Now that I own, I buy a few more things 'for the home' than I did when I rented.
Groceries: up 55%, or 7%/year.
Gifts & Donations: up 24%, or 3%/year.
Utilities: up 20%, or 3%/year. I expect these to soar in 2010 when the rate caps come off in the state (PA). Meanwhile, I've actually managed to cut my phone bill by savvy shopping.
Pets: Down 6%. Distorted comparison--my Simon was terminally ill June-Aug 2003, so the expenses for 2003 were quite high. He was less expensive to care for for most of his life, and generally Henry has been more so--Henry has more chronic problems.
Entertainment: down 33%. With the increased workload, I've pretty much given up any entertainment other than paying the minimal Netflix fee most months (although I actually have Netflix on hold for the summer), and paying the most basic cable TV bill ($15/month). (I didn't even have cable TV back in '03.)
Going through this has been educational. I had no idea that my eating out expenses had gone up so drastically, and actually, I thought my grocery expenses had gone up more, but on a per-annum basis, it's about 7%, which is what the inflation on food has been of late. (That doesn't mean there's no need to cut, though; I'm just routinely a fairly high spender in this area and really could stand to get these expenses down.)
The categories where my increased spending far outweighs inflation are the first three. I'm hoping the personal care expense is temporary because of the big clothing outlay. Two years ago, I managed to spend only about $200 for the year on clothes, for two new pair of athletic shoes, so I know it is possible to pull my expenses her way down.
I need to be more cautious on work-related expenses--it's way too easy to give myself work as an excuse for buying a book, and particularly on eating out. Eating out so much has just become a bad habit. And it's very rarely eating out at a sit-down restaurant--it's grabbing a sandwich and a cup of coffee at the convenience store more often than I should that adds up--not the kind of dining out that one gets special pleasure from, but just the convenience of having someone else prepare the food and not having to remember to take it with you.
I need to think ahead about how I'll handle "extra expenses" this summer, given the change in my summer plans (my previous entry). So I'm "thinking out loud" here.
My income from my FT job will handle my basic expenses, but cannot handle multiple extraordinary events--eg a medical or veterinary emergency or a major car repair--there's the emergency fund for that, but if I'm just living off the FT income, as I am for the next 3 months, it's hard to rebuild the emergency fund when I go into it.
Right now the only known additional income is a $300 gift from my mother. I may be able to add some part-time earnings to this.
And there will be multiple extra expenses this summer:
Home Repairs: 1200-1700
New Glasses 400? (it's been 4 years since I got some, so it may cost more now)
Trip to L.A. 500 (should visit Mom; it's been 2 years & she turns 75 soon)
That's $2500 that might have to come from savings, and I would expect at least $500 more in either unexpected vet or car repair bills, just based on past experience.
So that's potentially $3000 from the E-fund, minus the $300 gift = $2700 from the E-fund, or 28% of it. Certainly doesn't deplete it but also it will take most of the rest of the year to build it back up again.
I'll have to see what I can do about earning some part-time or temp income over the next two months. In addition, I'm trying very hard to cut back on my food expenses especially (the most malleable), and hopefully luck will be with me and there will be no major vet bills or car repair expenses this summer.
Now that I've been a homeowner for 2.5 years, I have my first major home repair to make--the gutters on my front and back porches have rusted through (they're old steel half-rounds).
So I've been getting estimates--I contacted 5 contractors; 4 have been by so far, and I have 3 estimates in hand.
In any case, I'm going to get seamless aluminum "K" gutters--no need to worry about rust again.
The choice seems to come down to either spending about $600 for .027 gauge "industry standard" gutters, or spending about $1200 for .032 gauge gutters--he showed me a piece of one and it really does look much more sturdy than the typical gutter. The .032 gutters come with a 10 year warranty on workmanship and 20 years on the parts.
I need to call back the contractors for the .027 gauge gutters and ask about a warranty, since neither contractor whose estimate was in this range spontaneously mentioned one.
As I'm writing this, I'm convincing myself to go for the $1200 gauge gutters, at least in the front. The front porch has a roof that still is under warranty for another 10 years and is in good condition. I'm not sure about the condition of the "soffit" or section underneath. The back porch has a stationary aluminum awning which the gutter hangs off of--it's attached to wood strips that are screwed to the awning supports. The awning supports are beginning to rust a bit, and one contractor (the one who hasn't gotten back to me yet) said that he recommended replacing the awning instead, and said he'd give me the name of the contractor. He tried to scare me that during an ice storm it could collapse on my dog. While it might need some new supports on the far side of the porch, the awning itself is perfectly good, and it is firmly attached to the house, so I just vowed for the moment to get a roof rake before next winter. I'm hoping to have that awning last another 10 or so years--if I'm still in this house (and the only reason I wouldn't be is if DBF & I get married), I'm hoping to renovate the kitchen and expand the house by about 3 feet into the patio, which would entail redoing the concrete patio as well.
Also this summer I need to have the roof silvercoated, the furnace serviced, and I desperately need new glasses (it's been 4 years and I'm reading thru scratches). That's at least $1000 in additional expenses there--and, to be prepared, I should probably expect about another $500 in unexpected expenses, either a big car repair or a big vet bill. Praying neither comes to pass, but I can't ignore history, and I haven't had either of those since a $500 vet bill in February, and I usually experience about 3 major "unanticipated expense" events a year. (Hopefully the laws of probability will work in my favor--if things work out to average, I'm still way ahead in expenses paid on based on the $8000 I spent on Henry the year I adopted him!)
Also I really should travel to L.A. and visit my mother this summer--another $500 expense.
Summers always end up being pricey, and this summer my income is low, which means that some of these expenses will get paid for out of savings. I have one more year on my job and then need to make the big career change, so I hate going into savings to do this--which is the one temptation to go for the $600 gutters. They might not last as long or look as pretty, but that's about what I had originally planned to spend (based on the first estimate that I got way back in March when a contractor was working on a neighbor's roof).
Well, March was a spendy month; I spent about double what I spent in February (gulp). Much of the addtional spending was justified but still I hate to see so much variability--and I *really* hate it when my spending for the month surpasses my income for the month, even with the tax refund.
Extra spending was as follows:
$600 another expensive vet trip for Henry and his allergies
$165 getting a broken tooth fixed at the dentist
$500 buying the beginnings of a new professional wardrobe as I prepare to transition from academia into the corporate world
$200 in professional expenses (books, software)
$100 stocking up on wine, beer, sodas and extra food for a party
another $200 in extra food expenses--not that the food was wasted, but that it was eaten out or bought prepared, thus unnecessarily expensive
$82 to buy 200 "forever" stamps before the price increases on May 12
$132 prepaying an extra month early on my home gas bill--they changed the date the bill was due and refused to change it back, and I really like to pay my bill immediately after my monthly paycheck arrives and not a week before it arrives, so I decided to get a month ahead to avoid any late fees.
$90 extra prepayment on the mortgage to get it down to 89K.
As so often happens, financial and weight control go together--I slacked off a lot on exercise during March, and gained back 2 pounds. Still down about 7 from the end of last year, but I can feel those two pounds.
So the goal for April is another personal "challenge" month to see how close I can keep my monthly total spending to about $2000. No "extras" this month (unless I get a job interview, in which case I still need a professional pair of shoes), and I need to start back shopping more at Aldi's and Giant, much as I hate them, rather than at my beloved Wegmans. And I pulled out the pricebook I put together two years ago--time to update it since the last time I used it was in 2006. Should be interesting to see how food prices have changed in that time.
And it's a challenge month for health, too--I've joined an online "April Boot Camp" challenge on Leslie Sansone's walk club board, the goal of which is to lose 8 pounds during April. So I'll tighten up and refocus on fitness, too. I just started another round of "First Strides," the local women's walking/running program (that was another $40 out the door); those two workouts a week with other people (in addition to the two mornings a week I walk with my friend Anne) should help keep me from slacking off).