Finance Friday: 2023 Spending

This is my final 2023 in review post and I'm discussing my favorite topic - finances! This shouldn't be a surprise since I work in finance (the fixed income area of asset management, to be specific). My finance posts seem to be especially popular so it seems like it is interesting to many of you! In general, people tend to be very private about finances but I feel like I've threaded the needle of being transparent without oversharing. At least that is my intent. After all, I am married to one of the most private people I know! 

First off, some disclaimers:

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

2. It doesn't include most medical expenses because I generally use my HSA for mine and the boys' medical expenses. Phil is on his own insurance because it's more economical that way. He typically has next to no medical expenses, although 2023 was the outlier as you'll see below. I also don't include the premiums for our medical insurance because those are pre-tax and out of our control. 

3. Our housing category is extremely small because we paid our mortgage off 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. 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. I also know that most financial advisors would not recommend that we pay off our mortgage because it was a low cost source of financing when we obtained our mortgage in 2019. But Phil and I are both CFA charterholders and are smart and logical and this was the decision that worked best for us and our circumstances/preferences.

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

Overall - our spending increased again last year and that was entirely related to buying a new car in October. We also sold our Camry and did very well on that sale (bought it new for $18k 8 years ago, sold it for $15k), so the net increase in spending wasn't as bad as it could have been.

Call-outs on categories that warrant mentioning:

Auto & Transport (28%) - This went from 6% in 2022 to 28% in 2023 since we bought a Rav4 Hybrid. We got a loan at the time of purchase and then paid it off within a couple of weeks. As I've mentioned before, we do not like to have debt. Interest rates are so high so I am glad this is possible for us. We don't drive very much so we should not need to buy another car for a very long time, barring anything happening to one of our cars! My 8 year old Camry had about 40k miles on it when we sold it and the car Phil has had since 2013 has even fewer miles on it!

Daycare (25%) - After being our biggest expense for several years, this dropped to our second highest expense. This year I broke out kid activities from daycare because I know that expense bucket will grow going forward. Even if I included activities, this category is still less than the car category. But back to daycare - the expense decreased by 15% since Paul started kindergarten, but it is still pretty high since we pay for before and after care for Paul, care on non-school days, and Taco transitioned to a slightly more expensive daycare in August. It's worth every penny paid and we are extremely happy with both of the boys' programs. 

Donations (7%) - Donations as a % of spending decreased, but since our spending increased, our donations still increased. I feel good about this number although it could be higher.

Travel (6%) - Travel increased which I am thrilled about. It's still pretty low since we are not big fans of traveling with little kids (you do you but it's not worth the money spent generally). The 2023 travel expenses were for my trip to Tucson, AZ with Paul, my girls trip to Banff, and flights and VRBO for our April Destin, FL trip later this spring.

Doctor (5%) - New and hopefully one-time category for us! I use my HSA for medical expenses but Phil pays out of pocket since he usually has very few expenses. He found out he had skin cancer on his nose in early 2023 so this expense is entirely related to having it removed which was an extremely painful and kind of expensive procedure. 

Dining (4%) - Our dining expenses stayed the same, percentage-wise. I definitely generate more dining-related expenses than Phil. He buys lunch when he goes into the office but generally spends $10 or less. I have monthly book club meals where we order with abandon plus other occasional gathering. This also includes my weeklyish latte from Starbucks.

Groceries (4%) - Oddly this category decreased in 2023 as both a percentage of spending and on an absolute basis. I don't know how. I think we spend less than the average family on groceries. Phil buys as much at Aldi as he can which really keeps your grocery bill down. And we don't eat a ton of meat? Also Phil is not a big guy. We eat about the same amount so meals stretch further than if he was like a 200 pound man. I'm not sure how else to explain how low our grocery spending is. I feel like we eat high quality meals so it’s not like we are forsaking quality to keep our spending down, nor are we trying to target a certain budget. We spend what we spend and it ends up being fairly low. 

Target (4%) - I work a block from Target and have young kids so this is always going to be a healthy line item in our spending! I do not go to the trouble of splitting out my Target shopping into specific categories because that seems like a lot of trouble just to know that X% went to groceries or diapers or what have you. I feel good about the fact that my Target spending exceeds my Amazon spending because I'd rather support a local company (Target headquarters are in Minneapolis). Some of this spending is on groceries, but I don't buy a lot of groceries - just odds and ends that we run out of mid-week, like bananas (we eat so many bananas in this house!).

Kid Activities (3%) - Another new category! I'll track this going forward as I know kid activities will only increase. This line item includes the cost of gymnastics (which we stopped doing in December as I got burnt out on the parent/tot class and Paul was complaining about going in the fall), Karate (which Paul started in November), and swimming lessons for Paul. 

Home (2%) - Well this category sure got small in 2023! It was bigger the prior to 2 years as we installed a gas fireplace in Jan 2023 so had a down payment in 2022 and then final payment in 2023. Now this is a very measly line item since we don't have a mortgage. I think our property taxes probably went to the taxes category (which I also exclude from this spending analysis) so I should probably fix that going forward so this category is more representative of our true housing costs. [Edit: home would have increased to 9% of our spending if I included our property taxes. I will fix this next year!]

The rest - The remaining categories are too small to warrant much of a deep dive. Amazon is a smaller piece of our pie since I try to choose Target over Amazon whenever possible. Clothing expenses increased in 2023 because I bought some new work clothes - most of which were work dresses from Boden. Personal care is haircut/color - which only happened twice last year since I had to cancel my final appointment of the year due to work travel. Other is any category that represented less than 1% of our spending.

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Overall, I feel good about our 2023 spending since it's a fairly low percentage of our incomes. We are frugal by nature and value growing our nest egg so we can hopefully retire early or at least opt off the hamster wheel of asset management. I look forward to a time when travel is a bigger piece of the pie but as long as I have a child that naps daily, I'm not looking to increase our family travel budget. Plus we are fortunate that my parents have a beautiful lake home and are always thrilled to host us. We go there quite often in the summer so that is a cheap family "vacation". 

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