Friday, January 11, 2019

Finance Friday: 2018 Spending

Happy Friday! Last year I intended to talk more about finances, but I totally failed at that because baby Paul took over the blog in 2018! I don't expect that to change too much in 2019 but hopefully I'll have the bandwidth and energy to talk about something besides my adorable baby. I love reading other peoples' finance-related posts and usually get great comments when I post about finances. So maybe I can attempt to do a finance post each quarter? We'll see!

For my first finance post of 2019, I'm sharing my annual spending review (see my 2017 post here, 2016 post here, and 2015 post here). It's hard to do a year-over-year comparison as something "new" pops up in each year that makes it unique. In 2016, I didn't have combined finances as I moved in with Phil mid-year; in 2017, we got married which cost a pretty penny; in 2018, we had a baby which came with a whole new set of expenses! But I'll try to draw some comparisons between 2017 and 2018.

Looking back on 2017, our 3 largest expense categories were wedding (23%), Auto and Transport (17%) and Home (16%). The wedding was a large, one-time expense (thank God!) and Auto and Transport was large because Phil paid off his car loan. Home was one of our top 3 expenses in 2018 but it will probably always be one of our top 3 expenses.

In 2018, we spent about 20% less than 2017 since 2 of the 3 expense categories of 2017 were temporary (wedding and auto/transport). Our 3 largest expense categories in 2018 were taxes (33%!!!), Home (19%), and Daycare (13%). I'll talk more about these categories below but man was I surprised by the size of our tax bill in 2018 (for 2017 income). After years of always getting (huge) refunds, we had to pay in - BIG TIME. I had no idea there was such a thing as "the marriage penalty." Phil knew all about this because his other married friends had complained about their first tax bill as a married couple (taxes is just not something my girlfriends mention, maybe because their husband handle the taxes??). I won't get into the nitty gritty but basically the sum of your tax obligations for your income as a single person is way less than the tax obligation of a married couple when that income is combined. Oy.

Here is our 2018 spending graph! I'm not going to talk about every category - just the ones that bear mentioning!

Taxes (33%): After having to pay in big time last April, we decided to make an extra tax payment at the end of 2018 to lessen our burden come April and avoid the potential of a tax penalty.So we paid A LOT in taxes in 2018. I don't think anyone really has a good idea of what is going to happen to them at tax time with the large scale changes that were made to tax policies in 2018 - like will it make sense to itemize deductions with the standard deduction increase? I guess we will find out in April (gone are the days of doing my taxes early as Phil gets a K-1 for some of his income and they aren't done until March usually). As much as it sucks to have a large chunk of change go to uncle Sam, we also recognize that we are in a higher tax bracket and that we need to contribute a larger % of our income to taxes. We also live in a state with one of the highest tax rates, but that comes with excellent schools, parks, libraries, etc. You get what you pay for!

Home (19%): I sold my condo in 2018 (woo hoo!) and managed to make a small profit (which adds another element of uncertainty when it comes to taxes - woo hoo). So our home expenses would have been a higher percentage of spending if it wasn't for that gain. But I had years of slight losses from the rental property so from a multi-year perspective, I about broke even. I expect that our home expense category will increase in 2019 as I REALLY hope this is the year that we find a house - which will come with a slightly larger mortgage payment.

Daycare (13%): Oh boy, daycare is expensive, and this was for a little less than 1/2 of the year! But this is not an area of the budget where we want to cut corners. Paul's daycare is not cheap but it's also not the most expensive program we looked at and it's probably about 1/2 the cost of hiring a nanny! We feel that we made an excellent choice and it's worth every penny to know that Paul is being well cared for and is learning Spanish! This expense will decline as Paul moves up to less high maintenance rooms where the teacher to student ratio is higher.

Groceries (5%):  This remained the same % as 2017. This is probably a bit under-stated as I buy some of our groceries at Target but I do not go to the trouble of splitting out the grocery part of Target transactions. That's just too much work! Our grocery bills stay reasonable because we only cook about 2-3 meals a week and get by on leftovers the rest of the week. Also, Phil buys his lunch every day but he usually spends less than $7-8. The guy barely spends any money so if he wants to spend $35-40/week on lunch - go for it!

Target (4%): This represents a combo of things for Paul, groceries, and household goods. There is a Target one block from where I work, which is DANGEROUS! But it's really nice to be able to pick things up during the workday.

Gifts and Donations (3%): This category went down in 2018, but doesn't include what I contribute to United Way through automatic deductions from my paycheck. We made fewer charitable contributions in 2018 but I think this category will go back up in 2019. We just need to sit down and figure out what we want to make contributions towards as a couple.

Amazon (2%): This was much lower than I thought it would be but then I remembered that we used hundreds of dollars of Amazon gift cards from our wedding and baby showers in the early part of the year. Amazon gift cards are probably the best gift you can get a new parent, especially if they have prime (we do - couldn't imagine not having it!)

Restaurants (2%): We continue to spend very little at restaurants. I was surprised that we spent the same, percentage-wise, as 2017 because we barely go out to eat. But I do treat myself to lunch once a week and for my first 6 weeks back at work I gave myself permission to buy lunch every day because I had enough going on between caring for Paul, pumping, and adjusting to working full time again!


Looking ahead to 2019, there isn't too much that I want to change about how we spend money. This pie chart doesn't factor in the money we save. We save quite a bit between the two of us as we are definitely savers, not spenders. So when I factor in our savings, I feel like we spend the "right" amount of money and we certainly live well below our means which is important to both of us - especially since Phil and I work in a very volatile industry.

I do hope that travel shows up on our pie chart for 2019. We did not travel in 2018 since it would be too much work with a baby but we are hoping to go on a little beach getaway in April with my parents!

Do you look at your spending on a regular basis? I keep an eye on it on throughout the year but do a detailed review each January.


Charbelle said...

I do always appreciate your finance posts! This has probably been one of the bigger adjustments for me this time around with marriage because we did decide to merge finances. We both check the account, I know Michael does every day and I check it a handful of times a week. He uses quicken I still write everything down but overall we've done a good job this year. He's a BIG saver and I am not but I do have my retirement savings accounts in various places (still, oops). I think hands down our biggest expense is food. He goes to the grocery store almost every day but we also don't throw much food away. I would imagine if we went just once a week it would probably be around the same amount. Amazon gift cards are my favorite thing to receive and one of my favorite gifts to give!

katielookingforward said...

I love finance posts! I wish I tracked my expenses enough to do a similar report, but maybe some day. As for taxes, my friends thankfully had told me that they typically pay in. I took money out of savings to pay for my down payment, so just to cover myself I did an extra $50 per paycheck to the federal government (just for the last 6 months of 2018). If I were to get married, I'd probably bump that to $100 just to lessen the burden of having to pay in.

Stephany said...

I didn't know about the marriage penalty, but now that I'm thinking about it, I think something similar happened with my mom after she married my stepdad. Something to keep in mind! I've always gotten a refund when it comes to my taxes, and I'm really curious what it will look like this year since I've had less money coming out of my paycheck with the tax bill (which is nice paycheck-to-paycheck, but may not be as nice come refund time haha).

I love reading your finance posts and these budget breakdowns, so I hope you keep 'em coming!

Amber said...

So interesting!! There is no marriage penalty here, at least not from what I am aware of. I actually think you get better benefits by submitting your taxes together here but I'm honestly not even 100% sure how all that works. We got quite large tax refunds last year which was nice.

2018 was a super spendy year for me. I knew I would have a very low income from maternity leave so had saved up a lot in 2017, but yoga teacher training, our trip in September and honestly probably more shopping than was necessary due to being on maternity leave resulted in blowing through that savings pretty fast. I always start off the new year with really good intentions to be mindful of budget, but I am trying to be extra mindful of it this year to rebuild that savings account back up again, especially since I hope to be on another maternity leave in the next few years, though it won't be quite as hard on the finances next time as my new company tops you up to 80% of your wage for the full 12 months (!!!!), which is incredible!

Carolina John said...

I'm so glad the condo is finally gone!! And you'll be amazed at the big difference that having that little Paul will make on this years taxes. Dependents are huge.

The Many Thoughts of a Reader said...

Anthony is obssessed and looks all the time. I'm just there for the conversations. :) 2018 was a good year for us. I was able to quit my job and we are still able to fully save for our retirements and Isla's college savings. We aren't saving as much extra as we were before (my entire income!!!) but we still can do that, donate, and have fun! We also paid off our house at the end of 2018 (early!) and we will pay off Anthony's truck by the end of this year, which will also be 3 years early and the only other "debt" we have. It's pretty amazing. Now on to saving/buying a lake house!

Jeanie said...

I look at mine every day. But I don't usually break down into the pie chart -- that's quite illuminating.

I was going to be asking you your take on the tax situation. Guess I'll have to wait to find out!

Gracie said...

For 2018, housing was our biggest expense, as we put 69% down when we purchased our house! We waited so long to buy that we were able to save for a hefty downpayment. The next biggest expenditure, of course, is taxes.

Jolene - EverydayFoodie said...

I love these posts!

The tax thing must be different in Canada. We pay huge income tax amounts, but it just automatically comes off of our paychecks, so we don't even really notice it. There was no change after we got married.

San said...

Did you not change your witholdings after your got married? I am surprised you were hit with such a huge bill... I don't know what 33% of our expenses look like in actual $$, but it seems like a lot.

I always appreciate your finance posts (as you know) since you also work in the finance world and know a lot of things that other's might brush over....

I am still amazed at your low grocery (and restaurant) percentage (but again, maybe it just looks low because it's percentages of money spent). It's such a huge chunk of our expenses.