I can’t believe we’re barely over a month into 2018! Becky and I have been extremely busy over the past month traveling and preparing for our Gap Year adventure, but the trip has officially begun. After a brief family trip to an all-inclusive resort in Cabo, we hit the road and are currently making our way down the coast to San Francisco.
There will be plenty more posts specifically about our gap year and all of our travels coming up soon, but first lets take a look back at where our money went in 2017. I’ve made a habit of tracking our spending here on the blog starting with 2015 and it’s been a great way to look back at the year and also hold ourselves accountable.
Without further ado, let’s take a look at the 2017 numbers.
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 2017.
2017 Total Expenses – $69,000
Yes, that is a weirdly exact number! After rounding all of the categories below off to the nearest dollar amount, the total came out to a precise sixty-nine thousand dollars.
One thing to put this number in perspective is that we spent the entire year living in Seattle, WA which is one of the higher cost of living areas in the country (but certainly not the highest). The average spending for households in the greater Seattle area during 2015-2016 came out to a whopping $74,723 (compared to the national average of $56,648). If you wanted to “scale” our spending down to an average household in the US, $52,309 would be our spending in average America.
It’s great that we beat the average this year, especially considering we upgraded our car, but as a couple pursuing very early financial independence, using the average doesn’t really help us much. One thing that’s probably much more useful is comparing our results to our past selves, but let’s first break down the big total number by category and dive into some of the details.
The Big 3 – Housing, Food, and Transportation
These 3 categories of spending make up the majority of most household’s expenses and we are no exception.
2017 Housing Expenses – $24,332 (-$4,112 vs. 2016)
- Mortgage (including taxes and insurance) – $20,847 (-$290)
- Maintenence/Upgrades – $439 (-$2,645)
- Utilities (including internet, excluding cell phones) – $3,046 (+$199)
The mortgage number is almost the same as last year and will remain so for the next ~27 years (we have no desire to pay it off early). Of course, we’re using it as a rental property while we’re away on our trip, so most of that “spending” will fall into a business category in future years, hopefully offset by enough rental income to cover it. One item of note is that we removed the escrow account from our mortgage this year in order to bring a little extra income our way going forward.
Related Article: How to Remove Escrow From Your Mortgage and Save Hundreds Each Year
No major maintenance or upgrades this year, just miscellaneous small repairs and furniture items.
Utilities stayed fairly consistent and we didn’t make any changes, so nothing surprising here.
2017 Food Expenses – $11,750 (-$142 vs. 2016)
- Groceries – $4,193 (-$168)
- Eating Out – $7,557 (+$26)
We were remarkably consistent with our food spending year over year, but this is the first year that I decided to break out the actual “food” part of our grocery spending from all of the other household goods and miscellaneous items that end up on the same receipt. The primary motivation being so we could see exactly how much we were spending on food per day (on average) over the course of the year.
The result was that 82% of our grocery spending was on food and drink for a total grocery food spending total of $3,433. By adding this to our rather large eating out spending, we get a total of $10,990 spent on all the calories that went into our bodies this year (except for alcohol, I’ll get to that later).
Split between two people, that means we’re averaging ~$15 per person per day on food. Breaking it out further, that means we’re spending about $5 per person per meal.
Could this number be lower? Absolutely, but we’re pretty content with where our food spending is at right now. Neither of us are big fans of cooking at this point in our lives although we do try to eat at home when we can. Eating out is also a common social setting for us and friends, plus there’s no way we could ever give up regular helpings of Chicago-style deep dish pizza. Never!
2017 Transportation Expenses – $15,752 (+$13,208 vs. 2016)
- A New (Used) 2010 Mazda 3 Hatchback – $13,031 (new for 2017)
- Car Related – $2,429 (+$562)
- Public Transportation and Ride-Sharing – $292 (-$385)
Spending on transportation is bound to go up in any given year that you upgrade a car, but otherwise this category remained consistent. Our 1999 CR-V finally gave out on us early last year and we decided to upgrade to a 2010 Mazda 3 hatchback. The new-to-us car is in great condition and we made the entire purchase in cash (except for $3k on a credit card of course, which was paid off immediately)!
Buying a car in cash was a new experience for us, but it was fantastic to walk away without any new debt. This is yet another benefit of aggressively saving for financial independence while being able to leverage those savings during the journey as needed.
The Car Related category includes all the standards of auto insurance, gas, tabs, parking, tolls, etc. Public Transportation and Ride-Sharing was a mix of riding the bus, Uber, Lyft, Car2Go, and ReachNow. It’s extremely easy to get around Seattle without a car and we could never see ourselves owning more than one car in the Seattle area.
Other Necessities – $2,693 (-$1,168 vs. 2016)
Aside from the big 3 above, these are the other expense categories in our life that we consider “necessities” and would be the last place we would ever cut back in an emergency.
- Our Dog, Bogey – $539 (-$19)
- Cell Phone Service – $746 (-$457)
- Personal/Medical Care – $1,408 (-$692)
The spending on our dog has been very consistent for the last couple of years and probably won’t change much this year either.
Our cell phone category on the other hand had a significant drop of over $400 which can largely be attributed to us switching from AT&T to T-Mobile. Despite the savings, we actually have way more features with the new plan versus the old including unlimited data, unlimited usage in Canada/Mexico, and free international data+texting! We got an amazing deal at the time we chose to switch and probably should have switched sooner.
Personal care and medical pretty much just is what it is and will fluctuate year to year depending on what ailments befall us. This year was a particularly healthy one with very little visits or procedures needed, but future years could differ significantly.
Big One-Off Expenses – $0 (-$19,813 vs. 2016)
Last year we had two very significant one-off expenses between a wedding and LASIK surgery, but this year we managed to avoid any similar expenses.
Some might consider the new car purchase a one-off expense because it doesn’t happen every year, but I don’t think that is the right way to look at it. Inevitably, you will need to purchase new vehicles over time, so it’s better to amortize the expense over the number of years you think you will get out of the vehicle.
In our case, we went from a 1999 to a 2010, or a difference of 11 years, in similarly reliable models. For that reason, I would estimate a conservative 10 years for the newest vehicle which means we expect to spend ~$1,300/year on new vehicles (assuming we stick to a ~$13k purchase price each time).
This is of course just an estimate based on our own limited history of owning cars, so I prefer to just lump a new car purchase into the year it happens and ignore it for the rest.
The 2017 Fun Stuff – $14,473 (-$3,353 vs. 2016)
While everything else above consisted of necessities (of course, not to the level we spent on them), this is all of the extra stuff we spent money on. While the above categories can never really be removed completely, these could all be scaled down dramatically if we chose. As I mentioned above, our goal isn’t to minimize spending at all cost, but to instead find the optimal level of spending for the life we want to live, the primary motivator being happiness.
- Travel/Vacations – $1,792 (-$2,220)
- Entertainment – $2,203 (-$3,574)
- Shopping – $1,865 (-$1,811)
- “Fitness” – $5,821 (new category)
- Gifts/Charity – $1,474 (+$197)
- Bars/Alcohol – $788 (-$564)
- Other – $530 (+$346)
While our travel spending shrunk significantly, I don’t think our frequency of travel changed much at all. We still managed to visit Spain, LA, Florida, Portland, Chicago (x2), and Las Vegas over the course of the year. That totaled 13 round trip flights and 21 hotel nights that we paid for primarily with points and miles earned from credit card signup bonuses. Those numbers don’t include any trips that were considered “business trips”, but does include some international business class! Most of the spending ends up being on airport parking, uber, and rental cars when we need them, but we do occasionally book a hotel with cash. Any food or entertainment purchased during our travels falls into those respective categories, not into our Travel category.
Entertainment represents all of the “experiences” we spend money on, while Shopping represents all of the “stuff” we spend money on. Entertainment dropped significantly this year, but that is partially due to the new Fitness category. Highlights from the entertainment category include a fútbol game in Spain, PAX, MoviePass, and a lot of recreational sports.
Shopping was also down this year (probably because we both upgraded our phones in 2016) and included a new laptop, computer monitor, clothing, games, and other miscellaneous items.
Fitness is a brand new spending category I added this year because we really ramped up both of our fitness goals and habits. I declared my latest obsession for obstacle course racing early in the year and we hit it pretty hard. I successfully completed both the Spartan Race Trifecta and the Tough Mudder Holy Grail in 2017, which culminated with a 50+ mile, 24-hour race through the Las Vegas desert to finish off the year.
While I’m extremely proud of my accomplishments, racing in this number of events can add up quickly if you aren’t paying attention. About half of the total spending went to entry fees, including several that Becky joined in for as well. The other half was split between getting the necessary equipment and clothing to compete, as well as training in our local bouldering gym.
Most of the equipment and clothing will last well beyond this first year of using it and we’ll probably scale down the number of events we compete in, so I don’t expect to ever hit this level of spending again.
The rest of the categories are fairly standard and we’re happy with our amount of spending on each of them.
Why Our “Actual” Spending Is a Little Lower
With our goal of financial independence being based on a multiple of our regular spending, I tend to be fairly conservative when adding up the numbers. For this reason, several things that might typically be subtracted out of spending are instead added to our many “Income” categories.
The first big example is cash back earned on credit cards. While the majority of our earnings from credit cards is in the form of miles and points (used for travel), there is also a significant amount of cash back earned. Instead of subtracting 5% back on gas stations out of our gas spending, it simply gets lumped into our “Churning” income category every time we cash points out. At the end of the year, I subtract out any annual fees we paid (which also don’t show up above) from this income number to see how we did on credit cards overall (at least for the cash portion). In 2017, this amounted to a profit of $2,399!
Another example is the use of discount gift cards. While our usage of them has scaled back ever since I got out of the gift card arbitrage game, we still saved a few hundred dollars this year by using discount gift cards. For our spending above, the full receipt amount was included, not the amount we paid for the gift card we used. This money instead goes into a “Discount Gift Card” income category.
One final item that comes to mind is that my employer reimbursed a certain amount of cell phone expenses every month. Because we won’t have access to this after leaving work, I include the full amount spent on our cell phone plan above.
There are probably a couple other items I’m forgetting, but I think you get the idea. The total $69,000 number is sort of a “worst case” version of what we spent in 2017 rather than our actual “out of pocket” cost.
Comparing to Past Years
As mentioned above, we beat the average household spending in the Seattle area by a bit, but it’s probably more useful to compare ourselves to our own prior years. This is especially true considering our goal of reaching financial independence by 40 is anything but average. Luckily, it’s easy to look back at the last couple of years to get a baseline for how we’re doing.
- 2015 Spending – $62,845
- 2016 Spending – $84,380
- ignoring wedding and LASIK – $64,567
- 2017 Spending – $69,000
- ignoring car purchase – $55,969
Last year was a significant outlier considering we had two large once in a lifetime purchases of a wedding and LASIK eye surgery. Subtracting out those once per lifetime numbers gives us a more reasonable number to compare to. I am also choosing to subtract out the purchase price of the new car because that should really be amortized over every year rather than just in 2017.
At first glance, it looks like we killed it this year by knocking thousands of dollars off of our regular spending!
I would probably attribute half of this improvement to reeling in some unnecessary “fun” expenses that weren’t adding value to our lives (instead focusing on the ones that were such as fitness) and optimizing some of our existing expenses like the mortgage and cell phone. The other half can probably be attributed to good luck more than anything else. We didn’t need any major home repairs AND didn’t have any significant medical events that we had to pay for. Those things are somewhat out of our control and we happened to be on the better side of it this past year.
Another useful metric is our “core” level of spending that excludes any of the “Fun” purchases (which are almost entirely optional). Of course our “necessities” like housing and food can be scaled back significantly as well, but can never be eliminated entirely.
- 2015 “Core” Spending – $47,532
- 2016 “Core” Spending – $46,741
- 2017 “Core” Spending – $41,496
Another great improvement for the year! Possibly due to luck of course, but still awesome nonetheless.
While tracking spending is my number one recommended thing to do if you want to improve your financial picture, it can only go so far with predicting the future. I’ve never declared an official “FI” number or goal for us because there is still a number of life events to come our way in the next decade. These include children, possibly living in a totally different part of the country (or world), and more that we can’t even anticipate.
Saying that we could retire today with $69k x 25 in the bank (via the 4% rule) may be correct, but I think it’s naive to pretend our spending can’t fluctuate significantly in the coming decades. Until now, we’ve followed the plan of spending consciously and saving a large percentage of our income each year as efficiently as possible.
“Until now” of course because we recently threw a big wrench in our plans by organizing and starting a “Gap Year“! Both of us quit our jobs and plan to spend the majority of 2018 road tripping around the country (and possibly beyond). The theory is that we’ll settle back into jobs at the end of the trip and continue our journey to financial independence, but anything feels possible at this point in time.
I have a rough idea of how much the upcoming year will cost us, but we’ve obviously never put living on the road full time to the test. Predicting our 2018 expenses probably deserves a post of it’s own, but I can imagine they won’t look very similar to the numbers laid out above.
All we know for sure is that we’ll keep tracking everything and will be sure to fill you in on the details along the way.