The past year is getting further away in the rear-view, but won’t completely disappear out of sight until we’ve at least filed our taxes in a couple months. This is a good time to look over last year’s expenses to see where all of our money went and look ahead to see if there’s any changes we want to make for the coming year. As I’ve said before, tracking your expenses it probably one of the most fundamental tasks you can do to start improving your finances. Just knowing where the money is going (good or bad!) allows you to make much more informed decisions on every purchase, investment strategy, and any future-looking forecasts you might want to make for things like your net worth.
We track our expenses by having everything plugged into Mint.com which does it all for us automatically. Our credit cards, bank accounts, investment accounts, and more are all digested on at least a daily basis by Mint and we can then view the status of them all at any point. I’m a big fan of Mint, but it definitely falls short on a few things, investment tracking in particular (Personal Capital is much better for this part). I take care of this by exporting all of our transactions in my own custom excel sheet where I clean them up a bit and categorize them to my liking. It takes a little bit of effort every month or so, but I like the process of looking over every expense.
Looking back at the totals for the past year usually aren’t a big surprise because we keep up with our expenses monthly in most cases, but being able to compare categories to the previous year is helpful for finding trends. Last year around this time, we shared the total of our 2015 Expenses and it turns out our expenses this year weren’t too far off of that number IF you don’t count the two very large one-off expenses we had this year, a wedding and Lasik surgery… Let’s break it all down by category below.
Disclaimers
Opening up this aspect of our finances wasn’t a decision made lightly, but I think we’ll be able to handle whatever comments come up. What’s funny is that I can imagine reactions all the way from “You live like kings!” to “How do you even enjoy life?” and everything in-between based on what we’ve decided to spend our money on. At the end of the day, everyone has different goals and desires and decides to spend their money in different ways.
Our number one goal is to just keep improving year after year, and that doesn’t always mean spending less. Sure, there are a ton of savings opportunities and we’ll do our best to take advantage of them going forward, but it’s really about happiness and enjoying life along the way. We’d happily spend an extra thousand dollars a year (or more!) if it made our lives significantly better in some way. Remember, it’s less about the price paid and more about the value gained from every transaction you make.
Alright, that’s enough delaying on my part, let’s get down to where our money went in 2016.
Total 2016 Expenses – $84,380
Alright, we threw out the big number right off the bat. Hopefully there’s not too much sticker shock and people start petitioning for my demise as a reputable financial blogger (wait, do I even count as that now?). One thing to keep in mind is the area we live, Seattle, which skews towards the higher cost of living end of the spectrum. Average expenses for our area came in at $64,933 for the 2013-14 time-frame and I doubt that’s gone down in the few years since.
Since that number itself doesn’t tell you much on it’s own, let’s break it down:
The Big 3 – Housing, Food, and Transportation
These three expense categories make up the largest components of the average household across the entire US and it remains mostly true for us as well. We’re way ahead of the curve on Transportation (for now), but give a lot of those savings back when it comes to food.
2016 Housing Expenses – $28,444 (-$1,022 vs. 2015)
- Mortgage (including taxes and insurance) – $21,137 (-$4,750)
- Cost to Refinance – $1,376 (new)
- Maintenance and Necessary Upgrades – $3,084 (+$1,963)
- Utilities (including internet, excluding cell phones) – $2,847 (+$389)
This one had a big change this year because we refinanced our mortgage to both take advantage of lower rates AND get rid of our PMI payment! The timing of the refinance means we made only 11 mortgage payments this year and are now saving several hundred dollars per month going forward. The refinance itself had a cost between the appraisal and various fees related to closing, but it paid for itself before the year was up and it’s all pure savings going forward.
Maintenance included getting our gutters cleaned out and clearing debris after mother nature decided to blow off a significant chunk of the tree in our front yard. The upgrade I classified as “necessary” was replacing the old carpets on our first floor with bamboo flooring (which now matches our second floor). The not-so-necessary upgrades I left out were adding some new furniture and some home automation stuff which I’ll talk about in the fun stuff below.
Utilities went up a bit, but looking over the individual categories (water, sewer, trash, electricity, gas, internet) doesn’t reveal any big differences. This will be something I’ll look closer at next year if the trend line keeps going in the positive direction.
2016 Food Expenses – $11,892 (+$394 vs. 2015)
- Groceries – $4,361 (-$545)
- Eating Out – $7,531 (+$939)
First, I want to note that our “grocery” category includes pretty much anything we buy at the grocery store including a lot of household goods and sometimes clothing because we don’t bother to break it out separately. Second, despite that we still spend a ton of money on food, eating out in particular. Treating it all as food means we’re spending $32.49 per day on food, or $16.25 per person per day. That number doesn’t seem terrible, but there is room for improvement if we decided to cut back on the restaurants and fast food a bit. At this point, I think we’re fairly happy with our food expenses (especially given we don’t like to cook often) and simply making sure they don’t get worse is probably sufficient for our goals.
Another note is that “Eating Out” includes all of the food we eat while traveling which adds up pretty quick when you spend a couple weeks in Fiji without a lot of options for cheap food. We do a little better while at home which lessens the blow a little bit.
2016 Transportation Expenses – $2,544 (-$611 vs. 2015)
- Car Related – $1,867 (-$765)
- Public Transportation and Ride-Sharing – $677 (+$154)
Our transportation expenses remain very low compared to the average household, but we expect a large bump in them for 2017 as it finally seems like the right time to upgrade our car. The 1999 Honda CR-V has done us well, but a recent trip to the mechanic revealed a few problems that add up to more than the car is worth to fix. Luckily, it still drives reasonably for the time being so we can take our time finding the replacement and still get something for it in trade-in value. For the entire year between the two of us, we only drove the car 5,800 miles so hopefully we can find something reasonable that fits our lifestyle.
Expenses for the car this year were pretty evenly divided between gas, insurance, and other standard stuff (oil change, registration, licensing) with some parking and tolls thrown in.
The public transportation part is mostly Uber with a little bit of Lyft, Car2Go, and bus fares on top. This category does not include the transportation we use while traveling which also includes things like Uber, that is captured below in the Travel category.
Other “Necessities” – $3,861 (+$448 vs. 2015)
Aside from the big three above, there’s only a few other items that we consider necessities in our lives. While there is certainly room to cut back in the different categories, it would be very difficult to get rid of them completely. All of the “Fun Stuff” below would get cut before any of these things in some kind of financial emergency.
- Our Dog, Bogey – $558 (-$699)
- Cell Phones – $1,203 (+$14)
- Personal Care, Medical, and Fitness – $2,100 (+$1,133)
Our pet expenses seem pretty reasonable, but we’re currently looking at switching our cell phone plan. We have AT&T right now and pay ~$100/month, but are looking to switch to T-mobile for the free international data benefit. T-mobile’s new plan structure will actually have us paying a little bit more per month, but I think the various benefits such as unlimited data will make it worth it.
The Big One-Off Expenses in 2016 – $19,813
- The Wedding – $15,890 (we did spend $3,829 last year in deposits, so the total cost of the event comes out to $19,719)
- Lasik surgery – $3,923
As I mentioned at the top, this year was exceptional for the fact that we got married and I got Lasik surgery. Two rather large expenses that we don’t intend to make again for the rest of our lives. We’re really happy with the way our wedding turned out as we hosted ~120 people at a large venue in downtown Seattle for less than $20,000. Certainly not as cheap as we could have made the event, but I thing we got a lot of bang for our buck.
The Lasik was 100% worth the cost already for the quality of life improvement and it should keep paying dividends for the next 20+ years!
The 2016 Fun Stuff – $17,826 (+$2,513)
- Travel/Vacations – $4,012 (-$3,412)
- Entertainment – $5,777 (+$3,644)
- Shopping – $3,676 (+$1,683)
- Gifts and Charity – $1,277 (-$446)
- Bars and Alcohol – $1,352 (-$427)
- Non-Necessary Home Upgrades – $1,548 (new!)
- Other – $184 (-$77)
Our travel expenses took a dive this year, primarily because we were able to utilize miles and points to book a lot of it, but there were a few trips that we either couldn’t book with points or chose not to for various reasons. For example, we split an Airbnb with friends in Maui instead of getting our own place and paid cash for a cruise and our hotels in Vegas. Overall, we managed to spend 57 nights somewhere other than our bed at home this past year. That includes 37 nights in hotels and couple dozen different flights, the highlights of which include Cancun, Maui, Camp Mustache, FinCon, and of course our honeymoon that took us to New Zealand and Fiji. All of those trips taken into account and I’m really happy that we were able to pull that off for around 4 grand thanks to churning credit cards!
Entertainment on the other hand blew up and contains a pretty crazy mix of movies, recreational sports, golf, PAX, some Mariner’s games, a couple of DNA tests (turns out I’m half Scandinavian! I had no idea), and several other smaller things that kept us entertained this year. The movie category was inflated this year because we bought a bunch of Regal tickets in bulk which will save us a lot over the next year or two. Everything else was probably worth it expect for the food and drinks at the baseball games, that stuff is just too expensive to say it was worth it!
Shopping was way up this year because we both upgraded our phones. We jumped from each having the iPhone 5 to both having the iPhone 6s (after the 7 came out). Becky’s was subsidized by the $650 credit on the Citi AT&T Access More card (the full cost shows up here), but that card had disappeared by the time I wanted it myself so I settled for a decent price online on a refurb. We also got a new laptop this year for $200 that holds the singular job of playing movies on our TV and both decided to get Fitbit’s on Black Friday to motivate ourselves to start working out (so far it’s working!). The rest was some clothing, a few video games, some new board games, and a few miscellaneous items.
Gifts and charity is pretty self-explanatory, while our drinking seems to have subsided a bit compared to the last year. No strong feelings either way on that one.
The totally non-necessary home upgrades this year are ones that I’m pretty excited about. The first relates to the picture directly above and is our very own board game table! It has a recessed play area with cup holders that swivel out, plus can be covered to turned into a regular dining table. Definitely a splurge, but one that should be a lot of fun to use going forward.
The other fun upgrade for our house this year was a bit of home automation. We picked up an Amazon Echo on Black Friday and a bunch of smart dimmer switches and dimmable LED bulbs to go with it. Not having to get off the couch to change the lighting seems a little lazy, but we absolutely love it and use it all the time. I’m not sure if I’ll expand our smart home to other areas or into different devices this year because we already hit all of the areas we spend the most time in, but it’s a possibility. I did do all of the installation and wiring myself, so that saved us a decent amount of money.
Why Our “Actual” Expenses Are A Little Lower
Pretty much everything I track in our personal finances has a little bit of a buffer built in. This mostly has to do with our goal of financial independence and how it ties to the amount of money we’ll eventually need to accumulate to live off of indefinitely. That magic FI number is directly tied to our annual costs and I try to keep that in mind whenever I’m totaling up our expenses. For that reason, the totals are more of a “worst-case” representation of what living the same year over again would cost us.
For example, I don’t count any cashback earned via credit cards against our expenses, but instead treat that money as a sort of “income” on the balance sheet. So while we earned ~6% back on groceries to the tune of ~$262 this year, I didn’t subtract that out of our grocery expenses. Along the same lines, assuming a conservative 2% cashback across the rest of our expenses that can be put on a credit card (everything but the mortgage), we essentially reduced our spending another $1,200 or so! In reality, we get a ton of our regular spending into 5-10% back bonus categories in addition to a lot of spend that goes towards signup bonuses for a huge return (but not always a cash return).
In addition to simple cash-back on credit cards, we also try to use discount gift cards whenever possible on our day to day purchases. In 2016, this saved us over $700! For tracking our expenses though, I put the amount on the receipt towards our costs, not the adjusted amount based on the discount we got on the gift card.
Another thing worth mentioning is that my employer reimburses us $50/month for cell phone use, so that’s another $600/year that we’re not “actually” spending. I included the full un-subsidized expense above.
I might be leaving out something else, but I think you get the idea. The total $84,380 number above is a little bit higher than we actually spent, but a pretty good representation of our past year’s expenses.
Comparing to Our 2015 Expenses
Overall, our spending was a bit higher this year but a lot of that can be attributed to the wedding and Lasik one time expenses. With those two items taken out, our spending was actually really close to the previous year ($64,567 in 2016 vs. $62,845 last year). Hopefully that small increase isn’t due to lifestyle inflation, but given the make-up of our expenses this year I don’t think anything is spiraling out of control. A few upgrades here and there certainly add up, but so far I think they are all adding value to our lives in one way or another.
The good news I suppose is that our core expenses only make up $46,741 and a large percentage of that is the mortgage (not to mention the larger than necessary eating out expense). If we really wanted jump into FI and retire crazy early, there are plenty of places we could easily cut back. Our current plan is to get to a comfortable level of FI before pulling the plug on work, but it’s good to know how flexible we could be in some of the more extreme market conditions that are always possible.
What We’re Looking Out for in 2017
The first big expense for the year will be the car purchase we’re looking to make pretty soon. Not sure what price range that expense will put us, but we do plan to hold onto whatever car we get for 10+ years so it shouldn’t become a regular expense. Something with better gas mileage and less required maintenance will actually reduce our Transportation expenses if you don’t count the price of the car itself outside of the first year we have it.
Overall, we’re still saving a good % of our income and are fairly content with where our expenses currently fall. There’s always the urge to reduce reduce reduce in order to bring that FI date closer, but we try to focus on happiness both now and for when we eventually retire. As always, there are ways we can probably meet both of those goals and we’ll try to take advantage of as many of them as possible going forward. So far our goal of FI by 40 is still well on track as we dial into our perfect lifestyle.
Hopefully this was useful for you in one way or another, I always enjoy looking through other blog’s expense reports and usually get some new ideas. As always, thanks for reading!