Friday, January 22, 2021

Finance Friday: 2020 Spending

This is certainly the most time consuming post I write each year, but the most useful for me! It was more challenging to write it this year thanks to our clingy newborn! Baby carrier for the win! 

Here are a couple of disclosures before I dive into the numbers:

1. Housing makes up the largest spending category by far as we ended up paying off our mortgage in 2020. I recognize how incredibly lucky we are to be able to do this at our age. I've received questions about why we decided to do this versus investing the money. The primary reason is that we love living debt-free. Phil and I both work in the same incredibly volatile industry so we have no diversification of income. We both feel fairly safe at our jobs, but you never know what might happen. We take great comfort in knowing our monthly expenses are lower thanks to not having a mortgage. Additionally, we both find the equity and debt markets very over-valued - i.e. it's not the best time, historically, to put a large sum of money into the markets. We still max out our 401ks, put money in our boys' 529s, etc. But since the rate on our mortgage was so low (below 3%) we opted to put cash we had saved towards our mortgage instead of investing it in the market. This is one of those 'you do you' decisions and I am sure there are other CFA charterholders (a designation we both hold) that would make a different decision, but it was the right decision for us! Next year our home category should look much more reasonable! Similar to 2019, I took out the payments towards our mortgage - otherwise that piece of the spending pie would be so huge and everything else would look tiny. By taking it out, this pie is more representative of the typical spending decisions we make each year.

2. This chart does not include savings or contributions to things like 529s, 401ks, etc. 

3. This chart does not include payroll deductions for things like health/dental/vision insurance, taxes (I break out extra payments) 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. I do pay the out-of-pocket maximum for insurance each year thanks to my pricy RA meds, but I use my HSA so I don't 'feel' the expense of those items so it doesn't feel like I need to add them to our spending pie.

4. This chart finally includes all of Phil's spending as he added his credit cards to my mint account mid-year. So next year I will be able to make comments about year-over-year spending. It won't be completely accurate since 2020 spending is missing Phil's credit cards during the first half of the year, but he spends so little that it will still be pretty accurate!

Here is how our 2020 spending broke out, with notes on notable categories below!

1. Taxes were once again the largest spending category by far. And this is what we pay IN ADDITION to what is automatically withdrawn from our paychecks! This is the reality of 2 well-compensated people who are married. The marriage penalty is REAL. We both claim 0 allowances and have to make extra tax payments at the end of the year to avoid a penalty for underpaying our taxes come tax season. We have just come to accept this. I really miss my huge refund checks from my single days. Even though I made a similar amount of money, I would always get a refund, even with claiming 1 allowance! That said, we recognize that we should have a higher tax burden than others so I am not complaining about the amount of taxes we pay. 

2. Home was our #2 spending category even without payments toward our mortgage. This category includes home improvement expenses, furniture, house cleaning, and home supplies like toilet paper, cleaning supplies, etc. This line item was higher than usual this year as Phil and his cousin built a new deck, we bought a new fridge, and had the interior walls painted last summer. Plus we bought some new furniture at the beginning of the year as we moved into this house in November so had some purchases to make. We bought end tables, stools, a tv stand, and bedside stands - mostly from Wayfair so they were inexpensive, but still costly!

3. Kids is our 3rd largest category, thanks to daycare! I also went to the trouble of categorizing our Target and Amazon purchases this year instead of having a line item for those stores. It turns out we buy a lot from those stores for our boys! This line item is going to get even bigger in 2021 with a 2nd child in daycare, but it's a worthwhile expense and part of having kids!

4. Groceries was the next largest line item. I didn't have a handle on our grocery spending last year since those purchases were on Phil's credit card (he does all of our grocery shopping - yay!). It's nice to see what we spend and I feel good about it. We tend to not eat out much and that was especially the case in 2020 thanks to Covid (we have only done take-out since late February - can't see us eating in a restaurant until 2022 most likely). Phil started going to Aldi this year and that has certainly resulted in savings! He goes there first and gets as much as he can and then goes to a big box grocery store for the rest. We look at the ads before meal planning so we can take sales into consideration when picking out meals. 

5. Dining out just slightly edged out auto and transport. This category was higher than I expected but over 20% of our dining spending was at coffee shops since I drank a large Starbucks latte every single day during the last 10 weeks of pregnancy which really adds up. This drove my frugal husband crazy but he learned not to say anything. I was in a lot of pain from RA flares and didn't have many treat options due to gestational diabetes so he accepted this as a temporary expense. I can count on one hand the number of Starbucks/Caribou purchase I've made since Will was born so this line item will be back to normal in 2021! We probably order food about 1-2 times/month so we really don't spend much on dining out. Phil buys his lunch on the 2-3 days he goes into the office each week but spends less than $8 so that expense is pretty low. I miss my weekly lunches out when I was working in the office, but will occasionally have him bring me home a salad from my fave place which ends up being $12!

6. Auto and Transport is mostly insurance premiums. We probably drove more in 2020 than years past because Phil drove into work when he went into the office. Pre-pandemic, we took the bus. It's hard to imagine resuming a bus commute for a long time, but maybe by 2022 he can go back to taking the bus. I doubt I will as I think I'll be working from home part of the week going forward (hopefully!). But even with driving in a few days each week, we still don't spend much on gas. This category will be higher in 2021 as we are looking to buy a small SUV like a Rav 4 or CRV now that we have 2 bulky car seats.They do fit in our Camry so we could keep our current car, but we'd also like to have an all-wheel drive car as we've gotten our Camry stuck multiple times when we've had heavy snowfalls. We will sell my Camry and keep Phil's Corolla. I think we will get quite a bit for our Camry as it's only 4 years old and has less than 25k miles on it. When Phil test drove a Rav 4 this month, the sales person was told him our car would be in high demand, especially with our low mileage!

7. Donations and Gifts were split 50/50. My donations used to be a higher percentage of spending but I now primarily contribute to charitable causes through my paycheck since it's easier/automatic!

Other things of note are that shopping and personal care were very low. I can count on one hand the number of times I wore make-up in 2020 and don't expect to wear it very often going forward. This has made my skin VERY happy! I struggle with acne, and had it really bad during Paul's pregnancy but didn't get a single blemish this time around! I did spend some money on maternity clothes, but most were purchased at a pregnancy consignment shop so I didn't spend all that much. I don't expect to buy much for clothes in 2021 either but in 2022, I told Phil I'd like to splurge a bit and hire a wardrobe consultant. A good friend did this and I got to come along on the shopping trip. I'm not great at putting outfits together so I would benefit from having an expert look at what I own, help me determine what to keep, and help put outfits together! I do a lot of zoom calls with clients and would like to look more presentable/polished! But I want to be back at a stable/normal body size so that needs to wait until I am done breastfeeding!


So there you have it! All in all, I feel good about our spending. There are always places that you can cut back, but in general I feel very good about how we spend our money. I know Phil would like us to spend less money because he is incredibly frugal!! But I think splurges like ordering coffees during a difficult pregnancy and hiring a house cleaner are worthwhile and brought me a lot of joy in 2020! We have our cleaners on hold for the first 2 months of Will's life to limit our exposure to others (they do wear masks but a team of 4-6 people come in to clean so we felt it was best to put them on hold). Can't wait to bring them back!

Do you do a deep dive/review of your spending on a regular basis? Besides this annual review, Phil and I sit down each quarter and review our account balances/discuss how we want to invest going forward. 


Kyria @ Travel Spot said...

As you know, I do do a deep dive on my spending and I think each year I realize what I should be diving into and it gets more and more detailed (and helpful!) as I get better at doing it. I really enjoyed seeing how my Amazon etc. purchases were broken down, as generally I don't think my pie was super accurate.

One thing that you do count which I normally do not is taxes. I just did a quick recalc just for fun (nerd alert) to see what mine would look like with taxes. It really would depend on whether or not I did or did not include savings/investments, but without savings, my taxes are the biggest by a mile (and that does not even include property, which is in "home") and with savings, taxes are still the biggest, but savings is neck and neck with them. Even though I am not married, I get reamed by taxes, and also have started having to pay extra each paycheck so I do not get penalized (but I still have to pay!) That is one thing I would like to get a better handle on financially so that I don't have such a big payment each year.

As always, it is so fun to see how other people spend their money and I especially enjoy yours since you are both in the same industry as me and so I can relate to a lot of what you are saying!

The Many Thoughts of a Reader said...

I'm sure my husband would nerd about this ha. We paid our mortgage off a couple years ago and it was nice! My husband has enjoyed playing in the market a lot this year and that stressed me out. I'm all of tell me when you make oodles of money and then sell that shit quick! ha. Like he made a ton of money on Monday and I'm like abort abort abort! Ha. My husband also would spend nothing ever. Super frugal. I had a bunch of amazon come this week and he happened to be getting mail and he was like WTF ARE YOU BUYING??? But honestly, it was two birthday presents, a box of hand soap, and a bathing suit. I really needed a bathing suit last year because mine had a hole in it, but since we didn't utilize our local lake sbecuase they are freaking gone, and we only used our pool I didn't replace it since I was nursing/losing weight. But now I am on mission buy me a non holy suit! ha. We definitely saved money on cars this year. We also saved money on drive thru coffees. We have been averaging about one take out meal a week since school started. Our groceries may have gone up since we were all here eating all the food all the time. Thank goodness, my husbands business has been booming in this and there is no worry there. IT is in very high demand when you have to start moving employees home and what not!

Grateful Kae said...

Wow, this is awesome! It's always so interesting to see how others handle finances. So how exactly do you track all of this? You use Or another method? I have a whole spreadsheet system but am always looking for ways to streamline things or improve our system. I think our system is great for looking back on the big picture and reviewing totals and trends, but not the best for "in the moment" tracking. I basically go through each of our credit cards each month (but after the statement has posted and/or bill has been paid in full)and break down the charges into certain categories, etc. But that isn't very helpful for knowing how much I've spent "so far", say, on the 12th of the month. We don't really follow a strict "budget" each month anyway, but I think it would be helpful to be monitoring it better as we go. We have a bazillion credit cards thanks to my husband and his obsession with getting free money through various rewards (eye roll). It's fine, bc we pay them all in full every single month anyway, and this means no single card has THAT many charges on it. But it drives me insane when he is constantly like, "oh, use the Chase Freedom this month for gas" or "use this one at any restaurants this month. Extra 2% back this quarter". LOL. I can never keep it straight!! I do like all the rewards benefits that we end up with though. :)

Jeanie said...

This is really good. I get frustrated -- my CU gives me a little pie chart but I can't control the parameters (year, week, month) and it doesn't say what that little pie IS (it has categories but not the length of time involved. So, I can search my categories but still have to do the math by hand. I've been thrilled that since my mortgage was paid,I don't have one penny of debt. Not even on the CC, which I pay as soon as it is posted. (I suspect that might change if I had a massive expenditure like a major appliance or car repair. I have saved so much money during Covid, not even counting no house payments (because I reduced my monthly TIAA allocaion by that amount and a little more. This is super.

Stephany said...

As you know, I've finally gotten interested in detailing my spending - started with monthly recaps and then did an annual one. It was really fascinating to actually figure out where all my money was going! Like, for me, food is definitely my biggest expense. And I could try to spend less ORRR... just make it a bigger part of my budget (which I've done). It's definitely time-consuming but also so very helpful as I try to become a better manager of my money.

dailycandy said...

Im interested what your favorite salad is! Maybe during your maternity leave, just to make it easier on yourself and treat yourself, you could order in lunch on a day Phil is at the office. Or if there is a local place close to you, walk and do curbside pickup if its decent out!

Have you heard of Fashion Fix here in Mpls? She is one of my favorite IG accounts to follow. She goes to Goodwill and finds flattering clothing for women and helps you weed through your closet and keep only essential pieces. Here is her website--I think you would really like her.

Abby said...

Congratulations on having your house paid off! That is amazing!!! 100% agree not having the debt of a house payment is a huge lifesaver and relief. That is one of the goals we are working on as well!

2020 was the year we shifted most of our "investments" into real estate - as like you said, the interest rates are insanely low. We are getting about 3-3.3% rates on all the houses we have closed on, and our ROI is about 10-15%, which is better than what we would get on any other type of investment account.

You deserved a latte every day for the last phase of your pregnancy for sure!!! And since you don't eat out at all due to COVID - it all works out!!

I love when you do these posts -I think it is always interesting to see how different people do their finances! We have started doing "Bookkeeping Friday date" on our calendars every other Friday - we try to make it "fun" where I'll have a mocktail and Ryan has a beer, and we get out our laptops and review the last 2 weeks expenses and make sure everything is logged appropriately. We actually use "Every Dollar" for our personal spending and "Stessa" for our business.

Amber said...

These are always fun posts to read every year and I bet fun to look back on! Great job paying off your mortgage, that is such a huge relief to have that huge debt taken care of!

I am continuing to use YNAB for all my budgeting and I just love it. It's really helped me prioritize spending. I know I could still do a lot better though. I spent way too much on 'misc' items for myself in 2020 so I'm re categorizing things this year to keep track on a more granular level. So instead of just Amber Misc I now have Amber Books, Amber Clothes, Amber Takeout Food & Coffee etc. in the budget lines. So it will be interesting to see how that money breaks out and where I can cut some corners. We also paid off my car last month so it's nice to go into 2021 with no car payment - though I'm now starting to save as I'd like to pay for my next car with cash! I think I can get a good 8 - 10 years out of my little suv though. I have a smaller SUV, so not as big as Rav4 or CRV, but it's still so much nicer to have an SUV over a car. I love the hatchback trunk - way easier for groceries or to fit the stroller in and the headspace is just a little roomier than a car. Plus it has AWD which is necessary with the amount of snow and ice we get!!

Jolene - EverydayFoodie said...

Christopher and I are SO impressed that you two paid off your mortgage in 2020!! We love fiscal responsibility, lol, and are trying to pay ours off quickly too. The only debt we have is our mortgage. We spend a huge amount on travel and invest a tonne, but with Covid limiting our travel, we are saving more to put on our mortgage. We love talking about finances and learning about it, and investing our money, and paying off debt. Haha, such #adults. But, we'll see you in our comfy retirements :-)

San said...

Thanks so much for allowing a glimpse into your finances... and congrats on paying off that mortgage. That is huge!

I am truly amazed that you have your own spending category for "taxes".... because I don't factor taxes into our spending, since they're taken out of my paycheck before I even see that money. But I guess it makes sense that you count it as spending, if you always do owe when you don't even claim allowances. It sucks. They should be able to figure out what you owe and take it out of your paycheck and not have you pay retroactively. I guess, at least you do feel it's fair as you have 2 high incomes.

I am not surprised that you're also spending a lot on your kids - ha. Kids are expensive. I honestly don't know if we would pay for them, if we had any LOL

As you probably recall, I've been using YNAB for 5+ years now for budgeting and I love all the insights. I'll be posting my spending report soon, too.

Elisabeth said...

Obviously coming late to this party but LOVE these sorts of posts.

We are also in the "you do you" category of paying down our mortgage. We're not quite there yet but should have it all paid off in the next 5 years (more likely 2-3). That means we will have paid off our first home in under 10 years, which is pretty great considering we bootstrapped for a decade to start two small businesses.

Our accountant shakes his head (our rate is about 3%, fixed), but I just really like putting lumps on the house instead of other investment vehicles since I feel like it's easy to control and we are going to get a big savings boost in terms of all that interest we don't spend.

Our other big "investment" has been purchasing stock options in a particular work channel; this could pay off BIG time, or we could get nothing out of the investment. Other than that, we just do tax-free savings accounts (maximizing their bonus interest options) and the registered retirement savings program here in Canada (which gives a tax break).

I don't break things down by percentage of income, but do a monthly budget. We don't allocate a cap on any one category as we honestly just try to keep things as low as possible!