Friday, January 10, 2020

Finance Friday: 2019 Spending

The calendar year has turned, so it's time to review my 2019 spending! I've been doing this since 2015 (see 2018 here2017 here, 2016 here, and 2015 here). When I wrote my finance post last year, I made it a goal to do a financial post each quarter... and then never wrote another one! Whoops! My finance posts always get a lot of good comments and seem quite popular, so I am really going to try to write 3 more in 2020. We'll see if I achieve this goal!

Before I dig in, a couple of notes about adjustments made:

1. 2019 ended up being an expensive year since we bought a house. I feel weird talking about this, but I'm all about transparency, so here goes! We paid off our mortgage early in 2019. Phil bought our last house at a great time 5 years ago, so the mortgage wasn't very high since the price was fairly low and he'd made extra payments over time. The rate was going to reset (we had a 5-year ARM) and would be higher so we decided to just pay it off (we had money saved from previous bonuses, etc). Then in December, we sold it for almost $100k more than he paid for it and put all of the proceeds from the sale towards the mortgage on our new home. So paying off that mortgage/applying the sale proceeds toward our new mortgage combined with the down payment on the new house was a big chunk of money. Some might wonder why we are so committed to paying off our mortgage. The reason for this is that we both work in financial services which is a very volatile industry. So having 2 incomes that are subject to a lot of volatility means that we want to reduce our monthly expenses as much as possible in the event one or both of us gets laid off. Phil got laid off when the hedge fund he worked for blew up after the 2008 financial crisis and I had to move to Charlotte to keep my job when my department was moved, so we've already experienced the volatility of our industry. And it's only going to get worse as the financial services industry is shrinking. If we worked in less volatile industries or didn't BOTH work in a volatile industry, we might feel differently about not having a mortgage. Our goal is to pay off our new mortgage within 5 years. 

All that said, I removed the down payment/extra lump sum paid towards our new mortgage from the spending chart, because it was several multiples of the rest of our spending. Had I included it, the pie chart would have had one huge piece and some teeny tiny other ones!

2. This chart does not include savings. 

3. This chart does not include payroll deductions for things like health/dental/vision insurance or charitable contributions. I could easily add these items in but I haven't in the past. The charitable donation is in my control, but the insurance items aren't so I don't feel it's necessary to include them.

4. This chart doesn't include all of Phil's spending. He has some credit cards that are not on my mint account and it's not really worth the hassle of adding them. The guy barely spends any money so he doesn't really want/need to track it. But that means things like grocery shopping aren't included since he does all of our grocery shopping!

Overall, our spending (excluding our housing expenses) grew by 10%. Here's the category breakout - I'll talk about the categories that bear mentioning. 







Taxes: We paid less in taxes in 2019 compared to 2018, but I think Phil made a payment toward our 2019 taxes in early January, so we'll probably end up spending about the same amount as 2018. As I explained last year, we have to make extra tax payments because even though we each claim 0 with holdings, our companies don't hold back enough for taxes. Part of this is the "marriage penalty" - meaning the tax obligation of our combined income is significantly higher than the tax obligation when we were single (we used to both get large refunds each year and claimed 1-2 with holdings). It's too complicated to explain the marriage penalty but you can google it if you are interested. Things are further complicated because some of Phil's income doesn't come on a w-2, instead he gets a K-1 and has to estimate how much taxes he owes on his K-1 income. I let him do all the math and make the extra tax payments.

Kids:  This is mostly child care. This category jumped by about 1/3 this year as we only paid for about 4 months of daycare last year. Daycare is not cheap but we are so happy with the daycare Paul goes to. He has learned so much under their care and he seems to genuinely enjoy his time there! It was nice when tuition went down $40/week when he moved into the toddler room in September, though. Other than child care, I really do not spend much on Paul. I rarely buy clothes for him (mostly pajamas, not much else) and if I do buy clothes, I go to Once Upon a Child. Luckily Paul has received a lot of hand-me-downs from friends and Paul's grandmas, especially Phil's mom, enjoy shopping for him! We also have not bought many toys since he received a lot for his birthday and Christmas - plus we got a bunch of hand-me-down toys from my college friends in December. I do buy books for him but it's really important to have lots of books around the house and he thoroughly enjoys them!

Home:  This includes our regular mortgage payments before paying off our mortgage, and the payments on the new house, our cleaning service (I talked Phil into hiring one in August), moving expenses, some of the furniture for our new house and miscellaneous repairs. Overall I'm content with what we are spending on our house. Hiring a cleaning service isn't cheap but it's money well-spent!

Target:  Ay yi yi. This is a category I would like to cut down on. I was surprised to see that I spent more at Target than Amazon since it feels like we buy a lot from Amazon! There is a Target a block from where I work so I go there quite a bit. I think a lot of this spending is on groceries, household items and things Paul needs, like pajamas, winter hats/gloves, etc. My plan for 2020 is to track what I am buying at Target so I can get a better handle on why I spend so much there! I don't feel like I make many frivolous purchases at Target - it usually feels like I am buying necessities - but I want to watch it more closely in 2020.

Travel:  I am happy that travel is back on my spending grid in 2019 after spending next to nothing on travel in 2018 since we had a baby that year! We took one trip in 2019 - a trip to the Sarasota area of Florida. We also paid for 1/2 of the VRBO for our 2020 trip to the Tampa area of Florida. We are hoping to continue to take one family/trip per year and are really hoping to take our first trip without Paul in May or June if my mom is able to watch him - we'll see if she is able to retire this year!

Food and Dining: Since I don't do the grocery shopping, this is money spent on meals out, coffee, alcohol, etc. This increased by about 50% in 2019 but it was really low in 2018 since I was wrapping up the pregnancy (and laid up for 6 weeks with a blood clot) and then home for a good chunk of the year with a young baby. We really do not eat out much as a couple/family- maybe once every 2-3 months, if that! So a good portion of that expense is lunches during the workweek (I eat out once/week), meals out with my book club, and coffee. I typically only let myself get a coffee once/week but broke this rule during our move as our coffee pot was packed away. I had packed it away early in my pregnancy as coffee was a huge turnoff. I didn't feel like unpacking it after the miscarriage it so got lattes every day for about 5-6 weeks. Oh well!

Personal Care: This increased quite a bit from 2018 as well, mostly because I replaced all my make-up and skin care with cleaner products (Beauty Counter). I also treated myself to a couple of massages which was money well-spent! I expect this category to shrink in 2019 since I won't be buying much make-up/skincare products.

Focus for 2020:

2019 was an incredibly expensive year between paying off a mortgage, buying a house, and buying some furniture for the new house. We had been saving for the house/furniture so we were ready for it, but it's still hard to look at the outflow from 2019. In 2020 I'd like to really focus on spending LESS! Not buying a house will really help! I am a frugal person in general, but there's always room for improvement. Here is what I plan to do:

1. My biggest focus for 2020 will be examining my spending at Target and trying to spend less there. We'll continue to aggressively pay down our mortgage this year, so it will still be a spendy year, but overall I'd like my spending at places like Target to decline.

2. I also want to stop ordering so much from Amazon. With free 2-day shipping through Prime, it's so easy to buy things when I realize we need them. What I'd like to do is add something to a wish list if it's not something I absolutely NEED. If it's something we need, I'd like to add it to our cart and wait 1-2 weeks to place the order. Obviously if it's something we urgently need, I will order it, but a lot of my orders aren't urgent needs. This will cut down on the number of boxes we receive (which is a bit of a sore subject in my house)!

Overall, I know we are doing well with how we manage our finances, though, so I am trying not to be too critical. Life is meant to be enjoyed so I fully believe in continuing to spend money on things like coffee, lunches out, meals with friends, our bi-weekly cleaning services, etc. If it was up to Phil, we'd cut most of that spending out. Ha! But, "you can't take it with you!" so I want to enjoy the fruits of our hard labor - within reason, of course!

Do you review your spending? Is there a spending category you'd like to spend less on? Are there any finance topics you'd like me to cover this year?

13 comments:

  1. This is fascinating, Lisa. And three cheers on your mortgage pay off and goal for five years. I speak from BAD experience (called stupidity) about the "lure" of the 30 year or 25 year mortgage that seems to go FOREVER and cost so much more. I was ignorant. My last mortgage (refinance) was 10 years at 2.6 percent and I'll do it in about eight or maybe less. I have considered paying it off all at once when I get down a little lower and probably could but it will mean pulling from retirement and I just have to see if it's worth it. The interest is so low, I'm thinking not.

    Well done, my friend.

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  2. This is such an interesting post! Thank you for taking the time to put it together. I don't talk finances nearly enough and should!! I look forward to your follow-up posts, too.

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  3. I love reading your financial wrap up every year! Last year was my first full calendar year using the YNAB software and I absolutely love it. I have tried to use mint before and would prefer to use mint because it's free, but YNAB just works so well for me and I saved significantly more money last year than I would have without YNAB. I'm back to the same amount in my savings account as I had in there when I was working at a job where I made 1/3 more of the income I'm making now!

    I want to work on having less personal spending this year. My personal spending on myself which was mostly just coffees, lunches out, random pieces of clothing purchased for myself, drop-in classes at fitness studios etc. was a bit ridiculous. So I am trying to cut back on those kinds of purchases and really be mindful about what I'm spending money on. I also feel like we spend a bit of a crazy amount on groceries, but I'd rather do that then spend a lot on eating out and I actually think our eating out wasn't too bad last year. I am going to try and track things a bit differently so I have a better picture this year though as last year I had an "entertainment" category which includes eating out, alcohol, takeout, going to the movies... anything "entertainment" really. So this year I've separated that out so I can see exactly how much we spend on eating out. We have a shared MasterCard and a shared bills account and then our own separate spending accounts which works well for us because we have different spending habits and I think I would go crazy if I saw some of Eric's spending. I actually bet our personal spending is similar for the year, but I tend to make more small purchases that add up and he makes fewer HUGE purchases which always stress me out a bit haha.

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  4. Huge congrats on paying off the mortgage last year! That is such an incredible milestone, I know you are dedicated to getting the new one paid off quickly as well. Debt is such a strange thing, it really does slow everything down. I have a kind of secret project to build a tiny house without taking on any debt, but it looks like that will take about $40k and I'm not sure where it will come from.

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  5. Nice work on the mortgage. We got a ten-year when we bought our house, and put 70% down...and our house was expensive. Housing here is stupid. But I was willing to pay it to get exactly what I wanted. A rare spendthrift moment from me!
    I definitely want to spend less on healthcare this year. We paid my huge deductible last year, and made it right up to the out of pocket max - on December 30th. Seriously. We got no benefit from that whatsoever. This year we got the premium healthcare plan, because doing the math with baby visits, delivery, and almost certainly surgery this year it works out to be a few thousand less in the long run. 2020 will still probably be an expensive healthcare year for us, though!

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  6. I always love reading your finance posts because we are VASTLY different with our finances, haha. I am not as frugal as I should be and it's always inspiring to read your thoughts about finances! My biggest spending category this year was travel since I went on three trips: to Ireland, Boston, and on a cruise. 

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  7. Funny that you have a Target and Amazon category! :) Usually I split out those expenses into what they were spent on, like clothing or groceries or household goods. Since my Amazon/Whole Foods spending hasn't been very high this year, I'm cancelling Amazon Prime when the renewal comes up to see if it changes anything. I still have to do my spending summary for 2020, but I suspect it's similar to previous years. BUT maybe not! We'll see :D

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  8. I was so inspired by these posts the last couple years that I tracked everything that went on my credit card (I pay in full each month, don't worry) to see where all the money goes. But instead of including target, I break everything into categories. So I have grocery, dining out, home, clothes, etc. I did figure out that I needed to include a gift section, and I actually want to grow that a little in the coming year, because I have some friends whose love language is gifts (seeing as they give me things) but it is not necessarily my language. I bought my plane ticket for Singapore and a new iPhone, so my spending got a little crazy at the end of the year, but I feel pretty good about my spending in general.

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  9. I always love your finance posts and seeing how others handle their finances throughout the year. I'd love for you to write more about retirement and investment, if you have the time, as I still need to learn more about these areas in finance.

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  10. That is SO impressive how quickly you can pay off your mortgage! Being mortgage-free is huge. We put lump sum payments on ours throughout the year, but we've still got about 10 years to go for ours ... unless we really cut back on travel, but I don't see that happening.

    I love these posts!

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