Friday, January 20, 2023

Finance Friday: 2022 Spending

Were you all waiting with baited breath for my annual finance/spending post? Admittedly, this is a topic I really enjoy digging into but I recognize is is likely boring for some! I love reading others spending posts and by sharing our spending, I'm trying to destigmatize the tendency to NOT talk about money. It does put you in a vulnerable position to share how you spend money, but I still like talking about it! 

First off, some disclaimers:

1. The chart doesn't include contributions to investment accounts like our 401ks, the boys' 529s, our brokerage account, etc. This year I also excluded any equity we purchased in Phil's firm. That is part of his compensation package - he buys equity and then receives dividends. But it feels similar to investing in a retirement account so I left it out this year.

2. Our housing category is smaller than the typical household but this is because we made the (controversial) decision to pay off our mortgage in 2020. There are a variety of reasons for this, but we didn't sacrifice investing in order to pay off our mortgage. We loved the feeling of having no debt when we paid off our last house so decided to do it again. We especially like having no debt since Phil and I work in the same industry (asset management) which is very volatile. The likelihood of one or both of us losing our jobs at some point is pretty significant. I mean, it's already happened to both of us. I took a forced relocation in Charlotte in 2013 because I did not have the savings to roll the dice on finding another job in Minneapolis, and Phil was let go when he worked for a hedge fund that blew up during the financial crisis. So we feel a great sense of comfort in having no mortgage payment. It's a personal decision and I completely recognize our privilege in being able to do this, although we have definitely lived frugally/below our means so that we can do things like pay off a mortgage. 

3. This does not include any spending on healthcare costs (neither our deductibles nor out-of-pocket expenses). I pay for everything with my HSA card and luckily have a large enough balance to cover those out-of-pocket expenses (which are not insignificant. We nearly always meet our out-of-pocket maximum). 

So here goes! This is going to be a lengthy post, so buckle up!!




Overall - our spending increased last year, nearly all due to the daycare line item as we only paid for about 8.5 months of daycare for Will last year since I was on maternity leave until mid-April. Overall, I'm ok with the total amount we spend, especially when I compare it to our take-home pay. 

Kids (43%) - Unsurprisingly, kids is the biggest expense category. 99% of this is daycare. Daycare is EXPENSIVE! But - they earn every penny and I do feel like our daycare treats their employees well in terms of time off, benefits, etc. This expense will go down next year when Paul starts kindergarten although he'll still need before and after care since the school day is something like 8-2:30. Plus as Will moves into the preschool rooms, tuition will go down as the teacher/student ratio increases. I don't even focus on this expensive item because it is completely essential with us both working demanding, full-time jobs. Phil forecasts the future expense within our quarterly financial review spreadsheet but I just breeze past it because it's not optional!

Donations (8%) - I am happy that this category increased in 2022. As part of our quarterly review process, we've talked more about how to give back. Our donations mostly go to our local United Way, our county library (which we are HUGE users of!) and another organization that benefited Phil's late brother. 

Home (7%) - Since we don't have a mortgage payment, this category includes taxes and insurance as well as home projects. In 2022, we paid the 2nd half of the expense of converting our wood-burning fireplace into gas (best money spent - I use it so much!) and we also replaced our front door. 

Groceries (6%) - This stayed about the same as last year, percentage-wise, but our total spending increased since our daycare spending increased (we only paid for 8 months of daycare in 2021 since I was on maternity leave until mid-April). So overall, the dollars spent increased but not by a ridiculously amount. Buying so much at Aldi has definitely kept our grocery spending from increasing too much!

Auto & Transport (6%)  - This includes insurance on our 2 cars, gas, and our monthly parking contract (a steal at $99 since we pay a special carpool rate - we both work downtown and work the same schedules so can drive together).

Bills & Utilities (6%) - Nothing interesting here - it's all the typical bills and utilities and includes things like my cell phone plan (Phil's is paid for by his employer), heating, electricity, internet, etc. We do save money by not having cable. We've never had cable; instead we get by with Hulu and Amazon Prime, and we share a Netflix account with Phil's mom. We have an antennae that sits on our tv stand (it's this odd, flat squared-shaped thing so not the antennae you may be picturing in your head!) so we can watch local channels. 

Travel (5%) - I'm thrilled that this increased from 2% last year to 5% this year! Woot woot! We went to Tucson in February to visit my little sister, although the flights were purchase in 2020, and Phil and I went to Mexico in December. 

Target (5%) - Our Target spending increased last year and that is definitely related to the fact that I'm back in the office. There is a Target 1 block from work so I go there about weekly. We spent way less at Amazon, though, which I am happy about. I'd rather support Target, which is a local company, than Amazon!

Gifts (4%) - This was a heftier line items in 2022, but that's because I wrote my Godson/nephew a nice check for his high school graduation gift. I never gave him a single toy for birthdays and Christmas; instead, I would put money in his savings account and gave him books when he was younger. I was not the "fun" aunt, but I think he really appreciated my approach to gifts when he got a check from us for graduation!

Dining (4%) - Our dining out stayed the same, percentage-wise, but I definitely ate out way more in 2022 thanks to book club returning to in-person meals in the spring! We didn't physically eat in a restaurant until February of 2022 as we were very, very careful during the pandemic. Since we went from not eating out besides Phil's lunches, to me eating out once/month, I would have expected this category to increase as a % of our spending. But it turns out we spent less on alcohol and at coffee shops in 2022. Our total spending on alcohol isn't much in general, but in 2022 I bought wine through a membership program called first leaf several times and then stopped the membership after the first month (the first month is an extremely good deal - I would pay $6.25/bottle!!). And in general we bought less wine in 2022 as I decided to only drink wine when we had people over, when we were going to someone’s house or when I went out to eat. Previously I would have some wine every weekend. 

I'm kind of shocked my coffee shop spending decreased! I typically get one coffee/week and drink coffee made at home all other days. But there are weeks I talk myself into getting an extra coffee out but I also received a lot of gift cards last Christmas so that likely had an impact on my out-of-pocket spending on coffee! 

I suspect that the money we spent on dining out is still pretty low overall in comparison to the average family. But even before having kids we did not eat out all that often. Phil buys lunch when he's in the office 4-5 days/week, we get take-and-bake pizza 1-2 times/month, and I have my monthly book clubs where I order/eat with abandon! Ha! But that's typically it for dining out. I would like to return to quarterly dinners out with Phil so this category should increase a bit in 2023, but not substantially. 

The rest - The remaining categories are too small to warrant much of a deep dive. As I said above in my Target section, I'm glad our Amazon spending declined. I'm trying to buy less from Amazon although there is a huge convenience factor that I enjoy during these little kid years. Having a huge thing of diapers or pull-ups show up at the door is pretty priceless. Subscriptions include the various Patreon communities I am a member of - I support Best of Both Worlds, Current Reading, From the Front Porch, and Sarah's Bookshelves Live. I love that there is a way for me to support these hard-working podcasters and the extra benefits I receive are well worth the money spent! Personal care is haircut/color - which only happened twice last year, despite the fact that I'm really graying along my hairline!

***

Overall, I feel good about our 2022 spending. I hope the travel category increases as our kids get older but we have opted to not travel much in the little kids years of life. I think we are very thoughtful and intentional about how we are spending our money but I try not to obsess over it too much. I want us to be prepared for a time when we experience an employment interruption, but I also want to enjoy the fruits of our labor. We are frugal by nature, but I do think we are striking that balance! 

Do you review your spending on a regular basis? Are there any finance posts you'd want me to write this year? 

17 comments:

  1. You know I LOVE these posts. I've been debating doing a 2022 review on my blog, too.

    We don't "budget" per se, but I do track all our expenditures once a month in a master spreadsheet (here's the post I did last year about my process: http://elisabeth-frost.com/?p=5390).

    This year our grocery spending per month actually went down. I was shocked at first but then realized that a) my husband started traveling again for work so at least 2 months combined time in the year there was only 1 adult at home and b) we were on a road trip/vacation for about 6 weeks so were either visiting with family and had meals provided or eating out which went into our travel budget.

    You also know how I feel about paying down a mortgage early; which reminds me, you're due an update ;)

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  2. Is the decision to pay off your mortgage controversial? I think it's very sensible, really. We paid ours off in 2004 and it was such a good decision, I think. Especially since I left my job in 2004!

    Groceries are a huge part of our monthly expenditures. I can't even believe how much we spend, but we don't eat out very often so that's pretty much every meal for four people. Two of whom are teenage boys and hence, garbage disposals.

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  3. Given that you have a chronic health condition, you must have some fantastic insurance given that your health expenses are so low. We had great insurance when we lived in Wisconsin. Florida... not so much.

    My son's medical expenses (some covered by insurance, some - like occupational therapy - not) are either the largest or second largest line item in our budget every month. Especially factoring in the private school tuition we have to pay because of his condition (though a large chunk is covered by a state government scholarship for disabled children).

    Maybe I'd feel better about it if I tried to view it as an investment rather than just a giant expense - it's certainly an investment in his future.

    I suppose this long, somewhat grouchy comment is a reaction to this week's BOBW episode where Sarah and Laura seemed to insinuate that - if you couldn't afford to travel as much as they did - it was because you were buying too many Teslas and Jimmy Choos. Not actually reality for most of us.

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  4. @Chelsea - I should have specified that I pay for my out-of-pocket medical expenses through my HSA, which isn't included in this. I kind of luck out because of how my ridiculously expensive RA injections get handled by insurance. They are $6,600/month, but the drug company makes so much money off the drug that they provide co-pay assistance, but I get "credit" towards my deductible for the co-pay assistance! It feels a little bit like cheating, which I've mentioned to my husband and his response was - 'do not feel bad for insurance companies, they are making plenty!' So I've already met my $3,200 deductible in mid-January because of that expensive injection! But I will say that overall, I have really good insurance! We do seem to always meet our out-of-pocket max which is $6k, but the amount I pay in comparison to what is billed each year is kind of impressive. But I agree - there are so many factors out of your control when it comes to disposable income!

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  5. GREAT decision to pay off your mortgage! That must give you tremendous peace of mind. Before we lived where we live now, we had a little house and the mortgage was paid off. Then we moved, and my husband has always wanted to pay off this one- but with all the expenses of two kids, etc. it's just not happening. Oh well.
    About the childcare expense- you have a good attitude. Yes, it's expensive but it's necessary and worth it. Lately my daughter has become mysteriously frugal, and she'll question me if something is too expensive. I always tell her, no, this is what money is FOR. It's important to save and invest, but really money is for paying for things that matter to you.

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  6. I WISH we had paid off our mortgage before we start shelling out for college GAH. Love these posts! We also use HSA for med expenses, so I don't count it in my spending. Our groceries rival our mortgage which is not surprising, given how many of us there are. BUT STILL.

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  7. I love this kind of post. So fascinating! And I really enjoyed your explanation of why you paid off your mortgage. My husband and I are contemplating moving at some point and a big part of that planning process is, what could we afford in terms of a mortgage payment vs what we WANT to pay vs what we SHOULD pay, if those differentiations make sense.

    I also love that you and Phil drive to work together! I don't think I knew that. Seems like that would be such a good time to connect and prepare for the day or unload/vent after a long day.

    Another thing I either did not realize you'd mentioned or did not see was that you'd converted your fireplace from wood-burning to gas. I feel like I am always asking for your advice, but we would LOVE to convert our fireplace and I get so overwhelmed I don't know where to start! Would you be willing to share details of the process - how you went about finding someone to do it, what steps were involved, and what the cost was like?

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  8. @Chelsea - I'm so sorry we came off that way. I guess it's true all relative. I was just trying to explain that I spend a far higher percentage of income on travel than most (just did the math and last year was like 16% of take home pay). But I 100% get that many people have no discretionary income for travel. Other people have money for Teslas AND travel, or at least they seem to . . .

    @Lisa - this is fascinating, I just opened my YNAB and kid-related expenses are also our most weighted (34%). Though truthfully the whole exercise kind of made me panic as I do think we've had some lifestyle inflation and I'm not sure how to turn it around or what I'd be fine cutting back on.

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  9. Wow at paying off your mortgage? Why is that controversial? It seems to me that most people want to be debt free and outright ownership would be amazing. We have been able to pay an extra mortgage payment on our house every year since we bought it, but are no where near close to paying it off! It would be great if we could!

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  10. @Lisa - +1 to not feeling bad for insurance companies. I mean, it's just insane that somewhere someone has justified to themself that it's ethical to charge that much for basic care.

    @Sarah - I get that you guys feel like you have to hedge against complaints about privilege when you talk about fun things like travel. I suppose people (including me!) will always project their own issues whenever topics like money come up.

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  11. it's always so interesting to see how others make financial decisions. I know that paying off mortgage in 2020 could be controversial and I think it's more an emotional decision than financial. haha...
    we spent lot more on travel now that kids are older and less on shopping. it's a family decision and there's not right or wrong either way.

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  12. I'm also curious as to why paying off a mortgage early is a controversial decision! Is there a reason for that? I would think that would be a really amazing thing to do!

    I love these posts, as you know. :) I do not live frugally at all, so it's always interesting to me to see how other people make it happen! I can't believe Paul is going to be in kindergarten this year. Where did the time go?!

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  13. There's a lot here, Lisa. I really appreciate these posts.It's interesting to see how you evaluate and change things up. I think paying off the mortgage early is very smart and as Stephany said don't know why it's controversial apart from tax deductions. I just did a small look at mine -- comparing to the year before.I was surprised food expense was only $500 more than 2021. I need to run those numbers again. I fear "books" was probably more but I haven't done those yet!

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  14. I love these posts and the comments that others have posted are quite interesting and entertaining too! It seems that the mortgage is the one most people have focused on, so I think your next finance post should be about WHY it is controversial! You already know my view on the subject, but it seems that your audience wants to know! I am happy to weigh in if you want to do point/counterpoint :)

    The other one I go about a bit differently than you is health care; one of the reasons I do my yearly (and quarterly, but I don't post those) finance roundup is that I do want to have a good idea of what I will need in the future (just like Phil and I presume you as well) and I know that healthcare is one of the bigger costs for retirees so I want to try to have a realistic idea of what I am up against. I think a lot of people encounter a lot of financial surprises when they retire or when they are older, and obviously I can't predict everything but I do try to as much as I can. For instance, when you are retired, will Medicare/Insurance cover your RA meds or will your cost be substantially larger?

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  15. I love these posts, especially as I'm slowly working to combine finances with my husband it helps to have examples of how other people break down their spending. I do a monthly tracker of some of these categories, but not all. medical isn't a big driver for us at this time, and there aren't kids to budget for yet. I'd love to attack our mortgage, but I'm not ready to go full Dave Ramsey. Our debt is minimal besides the mortgage, and we follow many of his other principals.

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  16. I always appreciate your finance posts (since you also work in the industry and have a lot of knowledge) and because it shows us that people are in all kinds of different financial situations.

    I think the reason why paying off your mortgage early is controversial is because most of the time when people do that, they sacrifice investing (which for a long time would get much better returns than the interest on your mortgage... ) but since you didn't have to compromise, I think it only makes sense to get rid off any debt asap.

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  17. Not a financial whiz, but I'm guessing that paying off your mortgage is controversial if you have a low interest rate... considered "good debt" compared to other liabilities. However, if you have the means to do it, not sure why it's a negative??

    I read somewhere once that the worst financial decision you can make is to have children... luckily, most of the time they're worth it ;)

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