Sunday, March 19, 2017

Review of Spending, 2016 - Scary Stuff!


Logging all expenses allows you to produce a chart of where your spending went, which can be a bit disappointing but illuminating.

Where does all the money go?   That is the question everyone asks.  Until you log your purchases, you'll never know.

I just reviewed my 2016 spending.  Since my logging isn't perfect, I had to go through and re-categorize some entries.  For example, some car repairs and gasoline charges were under "auto- misc" instead of the subcategories.  This logging doesn't include cash purchases, but we try to use as little cash as possible, taking out an average of $150 a month from the ATM (again, this is logged).

Some things are not accurately logged in the correct category.  For example, I have a separate category for "Liquor" and "Pets" - but liquor (including beer and wine) bought at the grocery store, as well as pet food, is logged under "groceries."   Nevertheless, these two entries were rather enlightening!

What was really scary was that the largest category was in home repairs and upgrades.    If you add in all housing costs, including insurance, taxes, utilities and repairs, it is the single largest category of spending.   Indeed, even home repairs was larger than any other category - although we did do a lot of upgrades last year, including a new split system A/C unit for the garage/laundry room and a new sidewalk and driveway repair, as well as some plumbing issues.   Housing is expensive - even when it is paid for entirely!  Big box home improvement stores are evil.

So.... where DID all the money go?  Let's take a look.   My situation may be unique (indeed, everyone's is).   Some folks spend a lot more on housing, others on medical expenses.  Still others on cars (as I used to do).   But it does show me where I can trim the budget a bit.


1.  HOUSING:

Maintenance and Repairs: $12,284.69
Taxes: $3342.67
Utilities: $3117.23
Insurance: $2692.56 
Lot Rent:  $290.00
Umbrella Insurance:  $191.00

TOTAL:  $21,918.15  ($1800 a month with no mortgage!)

NOTES: Utilities includes electric, water, sewer, and trash fees.   Taxes includes fire fee.  Maintenance and repairs is the big item here, as we made several major improvements to the house this year and hope to do a few more next year.   All those little trips to Lowes and Home Depot also add up as well.  A plant here, some edging there, you end up spending a lot of money.  Renters take note, owning a home is not cheap!

The replacement windows, however, are paying for themselves in terms of lower utilities, saving an average of $100 a month in electricity.


2.  FOOD & BEVERAGE:

1.  Groceries: $7836.40
2.  Liquor: $4519.19
3.  Meals (Restaurant): $6990.39

TOTAL: $19,345.98

NOTES:  Now you know why I am skeptical that you can "live" on $7000 a year as some online "financial gurus" claim.   That doesn't even cover a food budget for two people!   If you cut out all restaurant meals, all beer, wine, and liquor, all pet food, you could get this down to under $5000 for a couple, I expect, but it is pretty hard to get it down less than that, unless you want to eat nothing but raman noodles and huge bags of rice (BTDT!).  We want to live, not live like monks.  The point of this blog is how to live better on less.  Living on less is easy to do - just starve.

This is still an area for potential savings.   Less beer, less wine.  Since we are no longer buying pet food, there should be savings there as well.  Those Mormons and Baptists obviously save a lot of money in the liquor department, but then again, tithing and that funny underwear probably offsets this cost.  Better to tithe to the liquor store - less hypocrisy.


3.  MEDICAL:

Health Insurance:  $13,206.00 (Thank you President Obama!)
Prescriptions:  42.00
Other: $1,337.90

TOTAL:  $14,585.90

NOTES:  Last year, we were not on Obamacare, so this is a one-year anomaly.  This year, on Obamacare, our medical insurance will cost about $250, so our costs here will drop dramatically to under $2000 a year.  Since we are fairly healthy, our medical costs are lower than average.  Under Trumpcare, costs will likely rise back up to $6000 a year or more, perhaps even more than Obamacare!

Thank you President Trump!  For nothing!


4.  TRAVEL & ENTERTAINMENT:

Lodging: $8966.36
Entertainment:  $1289.04
Travel:  197.14

TOTAL:  $10,452.54

NOTES:  We do travel by RV several months of the year.  It can be expensive in terms of gasoline (which is not listed under this category) and RV park fees, which can be $50 to $100 a night.  State parks are far cheaper, and we need to spend more time there or at cheaper places to stay (e.g., truck stop parking lot, if just for the night).

In 2017, we plan on a shorter summer holiday, but in 2018 we plan on going to Alaska, which will cost a lot more.  We also would like to take a transitioning cruise, maybe in 2019 and spending a month in Europe, if they are still letting Americans in at that point.   The entire point of retiring early was to travel while we are still young and ambulatory.   However, there are ways to travel cheaply, and considering how many months we travel, this is pretty reasonable.


5.  AUTOMOBILE:

Gasoline:  $2499.54
Repairs:  $2953.11
Tolls, Registration, Parking:  $228.64
Car Insurance: $833.80

TOTAL: $6515.09

NOTE:  This does not include the largest "expense" of car ownership, depreciation.  Combined, both cars depreciated a total of about $5000 this year, assuming a 50% depreciation every five years.

The Repairs section also includes about $1500 for the golf cart "buggy".   We put new tires and battery and serpentine belt on the truck this year, and also had the transmission fluid changed.  The remainder of repairs is just oil changes.   Down the road, the repair cost will indeed increase.

Gasoline includes gas for travel on vacation. Total miles driven, annually, for both cars, is only about 15,000 total.  Our insurance is also very low (Thank you, GEICO!) so our expenses are far below average.

We could save money by going to one car, which someday maybe we will do.

6.  OTHER: 

Clothing:  $1304.82
Pets: $543 (vet bills)
Miscellaneous: $1299.22
Dues and Subscriptions:  $728.84 
Telephone:  $938.62
ATM Cash: $1800.00

TOTAL: $6,614.50

NOTES:   The clothing amount was more than we expected.   We buy souvenir t-shirts, the occasional jacket, and Mark's No. 1 vice - HATS.   A good hat can cost more than $100, sometimes much more! At this point in our lives, we have too much clothing and are giving away large amounts to charity.  We could spend less here, particularly in the hat department.

Old Joke:

SHE: "Whenever I'm down in the dumps, I get a new hat!"
HE:  So that's where you get them!

No more $100 hats!

Dues and subscriptions should drop for 2017 as well, as we dropped our Pandora subscription (didn't use it enough to warrant $4.99 a month) and our subscription to the New York Times (you can read that for free on MSN half the time anyway).

* * * 

So, what to make of all of this?   The amount we spend is scary.  Overall, we spent $79,432.16 which is far more than I intended to spend - nearly 5% of my net worth!  At this rate, we will run out of money in 30 years or so, although eventually we will qualify for social security which will help, and some expenses will no doubt drop, as we downsize our housing, cars, and travel expenses as we age.  A part-time job might also offset spending, and that is an option.

And that is part of the game, I guess.  You do want to spend it all before you die.  Because if you become infirm with a million dollars in the bank, Medicaid will say "thank you" and empty that bank account if you have to go into assisted living.

The home repair thing really shocked me, quite frankly.   All those little "home improvement" projects add up, and now I understand why old people let their homes fall down around them.   They don't want to spend the money and who cares if it is out-of-date?   By the time they sell, they don't really give a damn, and the new owner will renovate anyway.

We were planning on replacing the contractor-grade carpeting in the bedrooms with engineered hardwood, doing the work ourselves.   We'll see - it would be cheaper than hiring a carpeting company.  We could delay the project for another year, though, and just live with crappy carpeting.  The house needs to be painted (inside) after nearly a decade - the colors are outdated and there are scuff marks in places.

We will have to budget for a new air conditioner, new hot water heater, new washer and dryer and new stove, dishwasher, and refrigerator, as all of them are over 10 years old and will start to fail in the next 5-10 years.   That could keep the old home repair category topping the list for years to come.

NOW you see why I am against $1500 washing machines and $2000 refrigerators.   Houses are expensive enough as it is, without spending extra to make them look fancy.

To all you renters out there, whose housing expense has one line, "Rent", consider how lucky you are.   When something breaks, the landlord pays for it!   Owning a home is no special treat.

If we take away the Obamacare cost ($13,000) the cost of PETS (vet bills and food, about $1000), trim back the hat spending and HOME REPAIRS, as well as restaurant meals and liquor, we should be able to cut back our spending to about $50,000 a year, which is the median income in the United States.

That will be our goal for next year.  Let's see if we can reach it.

UPDATE:   According to this Fidelity "Retiree Test" we are actually on track and my unexpected results are in fact, expected.   The test says you should spend no more than 5% per year in retirement (check) have enough money to live to age 87 (check), you should have saved ten times your highest salary (check) and that housing costs will be your greatest expense (check, check, check!).

Nevertheless, we will look for ways to trim the budget in the coming year.

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