Reviewing Our 2016 Expenses

The past year is getting further away in the rear-view, but won’t completely disappear out of sight until we’ve at least filed our taxes in a couple months.  This is a good time to look over last year’s expenses to see where all of our money went and look ahead to see if there’s any changes we want to make for the coming year.  As I’ve said before, tracking your expenses it probably one of the most fundamental tasks you can do to start improving your finances.  Just knowing where the money is going (good or bad!) allows you to make much more informed decisions on every purchase, investment strategy, and any future-looking forecasts you might want to make for things like your net worth.

We track our expenses by having everything plugged into Mint.com which does it all for us automatically.  Our credit cards, bank accounts, investment accounts, and more are all digested on at least a daily basis by Mint and we can then view the status of them all at any point.  I’m a big fan of Mint, but it definitely falls short on a few things, investment tracking in particular (Personal Capital is much better for this part).  I take care of this by exporting all of our transactions in my own custom excel sheet where I clean them up a bit and categorize them to my liking.  It takes a little bit of effort every month or so, but I like the process of looking over every expense.

Looking back at the totals for the past year usually aren’t a big surprise because we keep up with our expenses monthly in most cases, but being able to compare categories to the previous year is helpful for finding trends.  Last year around this time, we shared the total of our 2015 Expenses and it turns out our expenses this year weren’t too far off of that number IF you don’t count the two very large one-off expenses we had this year, a wedding and Lasik surgery…  Let’s break it all down by category below.

Disclaimers

Opening up this aspect of our finances wasn’t a decision made lightly, but I think we’ll be able to handle whatever comments come up.  What’s funny is that I can imagine reactions all the way from “You live like kings!” to “How do you even enjoy life?” and everything in-between based on what we’ve decided to spend our money on.  At the end of the day, everyone has different goals and desires and decides to spend their money in different ways.

Our number one goal is to just keep improving year after year, and that doesn’t always mean spending less.  Sure, there are a ton of savings opportunities and we’ll do our best to take advantage of them going forward, but it’s really about happiness and enjoying life along the way.  We’d happily spend an extra thousand dollars a year (or more!) if it made our lives significantly better in some way.  Remember, it’s less about the price paid and more about the value gained from every transaction you make.

Alright, that’s enough delaying on my part, let’s get down to where our money went in 2016.

Total 2016 Expenses – $84,380

Alright, we threw out the big number right off the bat.  Hopefully there’s not too much sticker shock and people start petitioning for my demise as a reputable financial blogger (wait, do I even count as that now?).  One thing to keep in mind is the area we live, Seattle, which skews towards the higher cost of living end of the spectrum.  Average expenses for our area came in at $64,933 for the 2013-14 time-frame and I doubt that’s gone down in the few years since.

Since that number itself doesn’t tell you much on it’s own, let’s break it down:

The Big 3 – Housing, Food, and Transportation

These three expense categories make up the largest components of the average household across the entire US and it remains mostly true for us as well.  We’re way ahead of the curve on Transportation (for now), but give a lot of those savings back when it comes to food.

2016 Housing Expenses – $28,444 (-$1,022 vs. 2015)

  • Mortgage (including taxes and insurance) – $21,137 (-$4,750)
  • Cost to Refinance – $1,376 (new)
  • Maintenance and Necessary Upgrades – $3,084 (+$1,963)
  • Utilities (including internet, excluding cell phones) – $2,847 (+$389)

This one had a big change this year because we refinanced our mortgage to both take advantage of lower rates AND get rid of our PMI payment!  The timing of the refinance means we made only 11 mortgage payments this year and are now saving several hundred dollars per month going forward.  The refinance itself had a cost between the appraisal and various fees related to closing, but it paid for itself before the year was up and it’s all pure savings going forward.

Maintenance included getting our gutters cleaned out and clearing debris after mother nature decided to blow off a significant chunk of the tree in our front yard.  The upgrade I classified as “necessary” was replacing the old carpets on our first floor with bamboo flooring (which now matches our second floor).  The not-so-necessary upgrades I left out were adding some new furniture and some home automation stuff which I’ll talk about in the fun stuff below.

The wind storm victim that cost us several hundred dollars to clean up properly.

Utilities went up a bit, but looking over the individual categories (water, sewer, trash, electricity, gas, internet) doesn’t reveal any big differences.  This will be something I’ll look closer at next year if the trend line keeps going in the positive direction.

2016 Food Expenses – $11,892 (+$394 vs. 2015)

  • Groceries – $4,361 (-$545)
  • Eating Out – $7,531 (+$939)

First, I want to note that our “grocery” category includes pretty much anything we buy at the grocery store including a lot of household goods and sometimes clothing because we don’t bother to break it out separately.  Second, despite that we still spend a ton of money on food, eating out in particular.  Treating it all as food means we’re spending $32.49 per day on food, or $16.25 per person per day.  That number doesn’t seem terrible, but there is room for improvement if we decided to cut back on the restaurants and fast food a bit.  At this point, I think we’re fairly happy with our food expenses (especially given we don’t like to cook often) and simply making sure they don’t get worse is probably sufficient for our goals.

Another note is that “Eating Out” includes all of the food we eat while traveling which adds up pretty quick when you spend a couple weeks in Fiji without a lot of options for cheap food.  We do a little better while at home which lessens the blow a little bit.

2016 Transportation Expenses – $2,544 (-$611 vs. 2015)

  • Car Related – $1,867 (-$765)
  • Public Transportation and Ride-Sharing – $677 (+$154)

Our transportation expenses remain very low compared to the average household, but we expect a large bump in them for 2017 as it finally seems like the right time to upgrade our car.  The 1999 Honda CR-V has done us well, but a recent trip to the mechanic revealed a few problems that add up to more than the car is worth to fix.  Luckily, it still drives reasonably for the time being so we can take our time finding the replacement and still get something for it in trade-in value.  For the entire year between the two of us, we only drove the car 5,800 miles so hopefully we can find something reasonable that fits our lifestyle.

Expenses for the car this year were pretty evenly divided between gas, insurance, and other standard stuff (oil change, registration, licensing) with some parking and tolls thrown in.

The public transportation part is mostly Uber with a little bit of Lyft, Car2Go, and bus fares on top.  This category does not include the transportation we use while traveling which also includes things like Uber, that is captured below in the Travel category.

Other “Necessities” – $3,861 (+$448 vs. 2015)

Aside from the big three above, there’s only a few other items that we consider necessities in our lives.  While there is certainly room to cut back in the different categories, it would be very difficult to get rid of them completely.  All of the “Fun Stuff” below would get cut before any of these things in some kind of financial emergency.

  • Our Dog, Bogey – $558 (-$699)
  • Cell Phones – $1,203 (+$14)
  • Personal Care, Medical, and Fitness – $2,100 (+$1,133)

Our pet expenses seem pretty reasonable, but we’re currently looking at switching our cell phone plan.  We have AT&T right now and pay ~$100/month, but are looking to switch to T-mobile for the free international data benefit.  T-mobile’s new plan structure will actually have us paying a little bit more per month, but I think the various benefits such as unlimited data will make it worth it.

Our corgi is pretty awesome. Here you can see him copying his toy’s posture in an attempt to befriend the beast.

The Big One-Off Expenses in 2016 – $19,813

  • The Wedding – $15,890 (we did spend $3,829 last year in deposits, so the total cost of the event comes out to $19,719)
  • Lasik surgery – $3,923

As I mentioned at the top, this year was exceptional for the fact that we got married and I got Lasik surgery.  Two rather large expenses that we don’t intend to make again for the rest of our lives.  We’re really happy with the way our wedding turned out as we hosted ~120 people at a large venue in downtown Seattle for less than $20,000.  Certainly not as cheap as we could have made the event, but I think we got a lot of bang for our buck.

One of our many wedding pictures which were a lot of fun to take.

The Lasik was 100% worth the cost already for the quality of life improvement and it should keep paying dividends for the next 20+ years!

The 2016 Fun Stuff – $17,826 (+$2,513)

  • Travel/Vacations – $4,012 (-$3,412)
  • Entertainment – $5,777 (+$3,644)
  • Shopping – $3,676 (+$1,683)
  • Gifts and Charity – $1,277 (-$446)
  • Bars and Alcohol – $1,352 (-$427)
  • Non-Necessary Home Upgrades – $1,548 (new!)
  • Other – $184 (-$77)

Our travel expenses took a dive this year, primarily because we were able to utilize miles and points to book a lot of it, but there were a few trips that we either couldn’t book with points or chose not to for various reasons.  For example, we split an Airbnb with friends in Maui instead of getting our own place and paid cash for a cruise and our hotels in Vegas.  Overall, we managed to spend 57 nights somewhere other than our bed at home this past year.  That includes 37 nights in hotels and couple dozen different flights, the highlights of which include Cancun, Maui, Camp Mustache, FinCon, and of course our honeymoon that took us to New Zealand and Fiji.  All of those trips taken into account and I’m really happy that we were able to pull that off for around 4 grand thanks to churning credit cards!

Entertainment on the other hand blew up and contains a pretty crazy mix of movies, recreational sports, golf, PAX, some Mariner’s games, a couple of DNA tests (turns out I’m half Scandinavian! I had no idea), and several other smaller things that kept us entertained this year.  The movie category was inflated this year because we bought a bunch of Regal tickets in bulk which will save us a lot over the next year or two.  Everything else was probably worth it expect for the food and drinks at the baseball games, that stuff is just too expensive to say it was worth it!

Shopping was way up this year because we both upgraded our phones.  We jumped from each having the iPhone 5 to both having the iPhone 6s (after the 7 came out).  Becky’s was subsidized by the $650 credit on the Citi AT&T Access More card (the full cost shows up here), but that card had disappeared by the time I wanted it myself so I settled for a decent price online on a refurb.  We also got a new laptop this year for $200 that holds the singular job of playing movies on our TV and both decided to get Fitbit’s on Black Friday to motivate ourselves to start working out (so far it’s working!).  The rest was some clothing, a few video games, some new board games, and a few miscellaneous items.

We really like board games!

Gifts and charity is pretty self-explanatory, while our drinking seems to have subsided a bit compared to the last year.  No strong feelings either way on that one.

The totally non-necessary home upgrades this year are ones that I’m pretty excited about.  The first relates to the picture directly above and is our very own board game table!  It has a recessed play area with cup holders that swivel out, plus can be covered to turned into a regular dining table.  Definitely a splurge, but one that should be a lot of fun to use going forward.

Our new board game table! The recessed area that can be covered will also be great for puzzles that we might take a while to complete.
The new table with the dining topper on. Getting some better/matching chairs is on the short list of things to look out for.

The other fun upgrade for our house this year was a bit of home automation.  We picked up an Amazon Echo on Black Friday and a bunch of smart dimmer switches and dimmable LED bulbs to go with it.  Not having to get off the couch to change the lighting seems a little lazy, but we absolutely love it and use it all the time.  I’m not sure if I’ll expand our smart home to other areas or into different devices this year because we already hit all of the areas we spend the most time in, but it’s a possibility.  I did do all of the installation and wiring myself, so that saved us a decent amount of money.

Phase 1 of our smart home adventure which was a great success.

Why Our “Actual” Expenses Are A Little Lower

Pretty much everything I track in our personal finances has a little bit of a buffer built in.  This mostly has to do with our goal of financial independence and how it ties to the amount of money we’ll eventually need to accumulate to live off of indefinitely.  That magic FI number is directly tied to our annual costs and I try to keep that in mind whenever I’m totaling up our expenses.  For that reason, the totals are more of a “worst-case” representation of what living the same year over again would cost us.

For example, I don’t count any cashback earned via credit cards against our expenses, but instead treat that money as a sort of “income” on the balance sheet.  So while we earned ~6% back on groceries to the tune of ~$262 this year, I didn’t subtract that out of our grocery expenses.  Along the same lines, assuming a conservative 2% cashback across the rest of our expenses that can be put on a credit card (everything but the mortgage), we essentially reduced our spending another $1,200 or so!  In reality, we get a ton of our regular spending into 5-10% back bonus categories in addition to a lot of spend that goes towards signup bonuses for a huge return (but not always a cash return).

In addition to simple cash-back on credit cards, we also try to use discount gift cards whenever possible on our day to day purchases.  In 2016, this saved us over $700!  For tracking our expenses though, I put the amount on the receipt towards our costs, not the adjusted amount based on the discount we got on the gift card.

Another thing worth mentioning is that my employer reimburses us $50/month for cell phone use, so that’s another $600/year that we’re not “actually” spending.  I included the full un-subsidized expense above.

I might be leaving out something else, but I think you get the idea.  The total $84,380 number above is a little bit higher than we actually spent, but a pretty good representation of our past year’s expenses.

Comparing to Our 2015 Expenses

Overall, our spending was a bit higher this year but a lot of that can be attributed to the wedding and Lasik one time expenses.  With those two items taken out, our spending was actually really close to the previous year ($64,567 in 2016 vs. $62,845 last year).  Hopefully that small increase isn’t due to lifestyle inflation, but given the make-up of our expenses this year I don’t think anything is spiraling out of control.  A few upgrades here and there certainly add up, but so far I think they are all adding value to our lives in one way or another.

The good news I suppose is that our core expenses only make up $46,741 and a large percentage of that is the mortgage (not to mention the larger than necessary eating out expense).  If we really wanted jump into FI and retire crazy early, there are plenty of places we could easily cut back.  Our current plan is to get to a comfortable level of FI before pulling the plug on work, but it’s good to know how flexible we could be in some of the more extreme market conditions that are always possible.

What We’re Looking Out for in 2017

The first big expense for the year will be the car purchase we’re looking to make pretty soon.  Not sure what price range that expense will put us, but we do plan to hold onto whatever car we get for 10+ years so it shouldn’t become a regular expense.  Something with better gas mileage and less required maintenance will actually reduce our Transportation expenses if you don’t count the price of the car itself outside of the first year we have it.

Overall, we’re still saving a good % of our income and are fairly content with where our expenses currently fall.  There’s always the urge to reduce reduce reduce in order to bring that FI date closer, but we try to focus on happiness both now and for when we eventually retire.  As always, there are ways we can probably meet both of those goals and we’ll try to take advantage of as many of them as possible going forward.  So far our goal of FI by 40 is still well on track as we dial into our perfect lifestyle.

Hopefully this was useful for you in one way or another, I always enjoy looking through other blog’s expense reports and usually get some new ideas.  As always, thanks for reading!


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19 thoughts on “Reviewing Our 2016 Expenses

    1. I don’t consider it a vice at this point even though the table is probably a bit extravagant. Our total spending on the hobby was less that $1,000 last year including the table and we get good use out of most of the games we buy. The price per hour of entertainment is far lower than a lot of our other expenses.

      Having said that, there are some games we never touch that should probably be tossed to make room for more if we ever fill up the cabinet we’re using.

  1. My wife just realized that Mint is not tracking her/our Sapphire Reserve purchases correctly. We’ve met the spend requirement already and now we only use it for restaurants and travel (restaurants are much more often). She’s noticed that not all restaurant charges are showing up. She’s made Mint aware of this but as of two weeks ago we still had to enter a charge in manually (we try to not eat out very often). Just something to be aware of.

    I’ll be honest, even your after-wedding/lasik number gave me a bit of sticker shock. We live in a much lower priced area (college town in north-central florida), but our expenses last year were in the 35k area. If you’ve got a plan to retire by 40 though congrats! We started later (I think?), so 40 probably won’t happen for us.

    1. Mint does a terrible job with the CSR’s Travel Credits, it often ignores either the expense or reimbursement as a duplicate and the total ends up being off. During our monthly export, I’ve been going over the CSR charges by hand to add in anything that Mint incorrectly purged. A bit of a pain, but nothing too bad. I haven’t had any problem with restaurant purchases though, so that’s interesting.

      Part of the spending is related to the high cost of living area (mortgage cost for sure), but the rest is our relatively extravagant lifestyle. The retire by 40 part is largely thanks to how early we started and our higher than average income certainly doesn’t hurt our pace.

      If you want to relate our expenses to your own, Numbeo has a lot of fun data for comparing two cities:
      https://www.numbeo.com/cost-of-living/compare_cities.jsp?country1=United+States&country2=United+States&city1=Gainesville%2C+FL&city2=Seattle%2C+WA&tracking=getDispatchComparison

      I chose a city in North-ish Florida and it looks like cost of living is about 65% of Seattle according to them. That means our $64,567 number that ignore the one-off expenses would be equal to ~$41,881 in your part of the country. Not sure if that helps put it in perspective or not.

      1. Cool, thanks for the numbeo link…seems like a cool feature to play around with. And you got the city right 🙂 So, looks like we’re roughly on par with each other. And I didn’t mean any offense by my statement, to each their own. Enjoy your game table!

        1. No offense taken, thanks for the comment.

          Cost of living varies a ton across the US. We might even take advantage of that by moving somewhere else after reaching FI, once we’re just living off investments the relative income potential of different cities no longer matters.

          1. Especially how you streamline mint. I have our accounts set up within it but the transfers seem to mess with it a lot.

      2. Hi Noah

        Love your blog really looking for someone to converse with about optimizing our household spending. I feel like I have a good handle on a few areas but as you say looking for year on year improvement. If you’d like to chat let me know

    1. Yeah! We just got that one recently and it’s a lot of fun. Best in a group, but we also enjoy just playing with the 2 of us to try getting it in as few turns as possible.

  2. The 84k might sound high, but without knowing what you two lovebirds earned during 2016, no one can really make a judgement.

    It’s interesting how you lump restaurants with food, but separate entertainment and bars. I separate groceries and lump restaurants with entertainment and bars. You are using different buckets!

    Also, wtf is a “shopping” category? That one just looks weird.

    1. I’ve always wondered how some people split up these different categories, so thanks for responding. I know a lot of people count any food consumed while traveling towards “Travel”, but I didn’t like that method. Same goes for a lot of other split choices I made, but I think it’s a personal choice on what exactly you are trying to track/optimize.

      Considering a good chunk of our calories in a given year come from restaurants and fast food (at home and abroad), I think it’s necessary for us to lump them in with Food. Otherwise, it would look like we’re hardly spending anything on food when that’s simply not the case. I guess my main goal with the Food category is to capture all of the non-alcohol based stuff we consume, grocery or eating out. If you lump with entertainment, how do you go about breaking out how much you spent on food each year? (or do you not care about that metric?)

      As for Shopping, that was set up to capture any “Stuff” that we purchased although I agree it’s pretty broad. Travel captures our experiences away from home, while entertainment captures our experiences at home. Shopping is for the physical stuff we bring home. Of course the fun home upgrades should also fall under Shopping in that case, but I decided to break that out separately.

      The name “Shopping” is weak, but that was the best I came up with to capture any “Stuff” we were bringing into our home. How do you categorize various things like electronics, clothing, games, decorations, kitchen gadgets, etc?

      1. Interesting!

        I did not think about the calories. My rationale is mostly psychological. The primary goal of going out is entertainment – not food. You can eat similar food at home or 20% of the cost, so including restaurants as “food” seems misleading. I also did not think of tracking travel as a category, as it also falls under entertainment for me. It helps that most of my travel is pretty cheap. I am closer to MMM than to frequentmiler.

        You can tell I prefer broader categories. I don’t even keep track of these in any formal fashion. I could not tell you how much I spent on what last year. I could tell you total (like one third of yours) and I could tell you that nothing was wasted. I never liked budgeting.

        Once you are at a point when you can evaluate every purchase rationally, you would have no need to engage in mental accounting of putting money into buckets. Money is money and money is time.

        I feel you on the “shopping” label. My own is no better – “Uncategorized”.

        1. Agreed on evaluating each transaction on it’s own. We try to do that to the best of our ability and there’s only a few purchases here and there that would probably qualify as regrettable in the simplest sense.

          Our main goal with tracking expenses in general is to get a better handle on when we can retire early comfortably which requires us to have a very good understanding of where our money is going. The different categories help break it down a bit and separate needs vs wants which should be helpful if we decide to move somewhere else after retiring or are thinking about modifying our habits. Things like housing and food should scale with the local cost of living while travel will remain largely unchanged (along with anything we purchased at Amazon for example).

  3. I’m wondering how you track/categorize any MS in Mint. I feel like that always throws things off for me since some is auto categorized as grocery, pharmacy, shopping, etc and then inflates my spending in those categories.

    1. I don’t do much MS, but when I do I have a pretty clever way of tracking it in Mint that doesn’t throw off all the regular spending categories. I created a custom category under miscellaneous (only possible in a browser, not in the app unfortunately) called “MS”.

      Now, every time I have an transaction related to manufactured spending, I categorize it as “MS”. This includes both the expense part and the income part where it gets back to your bank account. That way they offset each other and actually reveal exactly how much you’re spending (or profiting) from the MS itself without interfering with your regular spending categories or trends in Mint.

      One example would be buying dinner for everyone and having them pay you back on Venmo. First, I would split the dinner transaction into 2 parts, one for what I spent and another for everyone else. The first part would be categorized as “Restaurants” and the second part would be categorized as “MS”. At this point, you have a pretty big deficit in MS, but as soon as everyone pays you back and you transfer it to your bank account, I categorize that income part of it as “MS” as well. Assuming everyone paid you back and in the right amount, the whole MS category should now be showing as $0 in Mint.

      Same thing for buying a VGC and turning it into a money order. Categorize the purchase of the VGC as “MS” which will make the category show -$505.95 or similar. Once you turn it into a money order for 79 cents and deposit it back into your bank account, mark that transaction (of +$499.21 or so) as “MS” as well. Now the overall MS category now shows -$6.74 which is your current deficit for MSing. Now if you were MSing for cash back, I would also categorize that eventual deposit as MS as well (maybe splitting out the regular spend part of it if applicable). In an example where you used a 5% back card for the above VGC purchase, there should eventually be a deposit of ~$25.30 into your bank account or applied against the credit card and that can also be categorized as MS. Now the overall MS category in Mint is showing +$18.56 and you can smile knowing you pulled one over on the banks. 😉

      I find this method particularly useful for tracking my cash flow in MS at any given time and making sure all of my MS is eventually getting turned back into cash. Plus at the end of the year, it’s easy to see exactly how much you spent on MS and whether you were positive or negative cash (which will depend on your goals of course).

      This info should probably go into it’s own post. Hopefully that helps!

      1. We pretty much do this exact same thing in Mint, except my wife “runs” Mint and refers to MS as “Ben’s crazy credit card stuff”. But, I do keep a separate spreadsheet that has essentially the same info, but also gives a more detailed written account of what the deal was as well as keeping track of the number of points I earn plus “other” forms of “cash” such as cash from portals (I typically use TCB/eBates unless a mileage portal is offering a big bonus) as well as “cash” in the form of GCs (this was more true when the 5Back visa was working at CVS and I’d convert the 5% back into Amazon GCs which are close to, but not exactly, cash). Also, this extra spreadsheet allows has detailed descriptions of Amex Offers which are sometimes pure MS/cash profit (Sears/Neiman Marcus) and other times are a cash profit on a bill/purchase that I really needed to make (Verizon).

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