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!

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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.