Should old expenses be forgot, and never brought to mind? Should old expenses be forgot, and auld lang syne? It’s time to say goodbye to 2017, but before that, it’s that time again to review our expenses and gains! On our path to financial independence, this was our best year yet! We’re also getting a clearer and clearer picture of where our money goes and where it grows.
Bills & Utilities: $6,454
There’s a very unsettling trend in our bills and utilities. Year-over-year, we’re seeing a marked increase, nearly doubling since 2014, the first full year we were in our home. It’s hard to say where this one is going because e
ach year has been pretty different. In 2013 we were in an apartment until November, 2014 was the first year in our house, in 2015, we started doing Airbnb, last year, we had a long winter.
The cost is really not bad when broken down further. This year, we spent about $540/month on all bills and utilities. Since our house is no longer considered “new”, our home insurance rate went up, but is still hovering around $45/month. Our HOA bill has gone up to $180/month. And we pay a fee for the sewage for a new construction of $150 quarterly, or $50/month. Internet costs us about $40/month after it’s all said and done. Cell phones cost us about $20/month since I don’t pay for one and ECA has Ting (it’s super cheap). The remaining $205/month is split between our electric, gas, trash pickup, and water bills. So, overall, our bills are reasonable and it’s hard to see where we can make any meaningful difference in any of these amounts considering we really only have control over the utilities, and they only represent about 1/3 of the costs.
If I had to guess, I would expect costs in this category to flatten out, but continue growing, probably around 5%-10% per year.
Our costs of food, including groceries and eating out has stayed rather consistent over the past 5 years. It just ebbs and flows, but is hovering right around our average of $4,000 per year which comes out to just around $340 per month. This figure may also include some non-food items since I’m too lazy to track and split the costs of non-food grocery items. It also includes all our fast food and restaurant expenditures which came out to be $224 and $247 this year respectively, or around $19/month and $21/month respectively (our target is around $50).
I expect this cost to raise slightly over time as the costs of food goes up, probably just above inflation or around 2-3% per year.
Big drop this past year thanks to the new job! Sparky has been going strong without any major trouble. Unfortunately, I did have a fender-bender this year which reduced the car’s value (my fault, and only cosmetic damage, yes, I have liability insurance too), but since I have no intention of selling it anytime soon, that doesn’t really factor into our costs. Of course, just like last year, I haven’t captured the total cost of the car which we bought with cash back in 2015 for just under $10,000. I’m hoping that it lasts me at least 10 years total, but we’ll see exactly where and how that goes.
I’m betting that this coming year, we’ll see a drop in this cost since I will be working the whole year at my current employer and last year, 1/3 of the year, I was still driving a ton. This category has a large chance of volatility though depending on gas prices and the chance of catastrophic loss of the vehicle.
Our housing costs consist of the interest on the mortgage and our property tax since all of the utilities are covered above. Since we mostly have payed off the mortgage, our interest is very low, just under $740 for the year. Our property tax has been steadily increasing, at $3,769 this year, up again from the last two years. We will pay off the loan in about 10 months our standard payments, so I expect that we will spend about $250 in interest this year. Our taxes will probably go up again, so I expect to pay around $3,900 in property tax. I would assume that this will continue to grow at its current rate at about 5%-10% per year considering Seattle’s propensity to vote to tax itself. Well, I have voted to agree to some of those in the past, so I can’t complain too much!
Shopping & Entertainment: $3,634
There’s very little rhyme or reason to this category. Sometimes, we want to buy something, so we do. Sometimes that thing is expensive. This year was my turn. I bought a VR headset and a computer powerful enough to use it, together costing about $1500. It’s awesome though and I’m glad that I did it. The rest of the $2000 was mostly another $175 or so on video games, $200 in miscellaneous things we’ve done just for fun, but the rest was pretty much all clothes (mostly ECA’s clothes :P). So, we probably split this category 50/50 this year!
This category is one of the hardest to predict, but it’s also one that we have the most control over. If I had to guess, I imagine it will be lower next year. We could also practically eliminate this category if things ever did get rough. I imagine it will continue to ebb and flow due to the way we use technology, we probably will continue to spend every 4-5 years to replace our existing equipment and upgrade. So, I expect to see a sinusoidal pattern with peaks about every 2 years where either I buy something or ECA buys something big in the peaks. Over the long term, it should average out to about what we have been spending and will track with inflation.
This category is the strangest right now as this does not necessarily reflect the true costs of the vacations, but instead what we paid out of pocket. This past year, we got into credit card churning pretty hard, both opening a Chase Sapphire Reserve as well as several other cards. Through these rewards, the vast majority of our costs were covered since we used those points for airfare and rental cars. This was by-far the best way to use these rewards since Chase offered a 1.5x bonus when used for these expenses than what we would have received as cash and we planned to take the trips anyway.
Overall, this category acts a lot like our shopping & entertainment. It’s completely discretionary and the cost varies just based on what we want to do. I expect this to go back closer to average over the next year, perhaps increasing if we decide to go somewhere expensive.
Summary: $23,016 spent in 2017!
Bringing our average annual expense to around $26,800. At this rate, we could maintain our standard of living with one of us working 40 hours per week with an after-tax income of $12.90/hour (without any savings). Or, using the 5% rule, an account of $536,000 would suffice. Of course, any more we gather will allow us greater flexibility, and the freedom to increase our lifestyle if we desire. Either way, I think we’re on fire! Happy New Year! Here’s to a wonderful 2018!