Each month – at least during 2013 – I have resolved to track all my household spending using my nifty expense tracker (Google Spreadsheet). February turned out to be a pretty good month, as my expenses were lower than January and my income was higher.
If you have never tracked every penny that left your wallet, I encourage you to give it a shot, at least for a month. The results can be eye opening and even embarrassing.
Let’s do the numbers.
|Groceries||$144||This is about average for the IM household|
|Utilities||$57||Artificially low since I pre-paid water last month|
|Mortgage + Escrow||$1,014|
|Internet||$15||AT&T promo rate|
|Cell Phones||$93||Two Sprint SERO plans|
|Rental House||$779||Mortgage, Escrow, and yard-work|
|General Merchandise||$190||Costco, Amazon, Target|
|Life Insurance||$62||Two term policies|
|Restaurants||$35||One meal; one pizza|
|Auto Insurance||$219||6-month policy|
|Online Services||$39||Internet domain renewals|
|Vehicle Expenses||$34||Oil filters and a f*cking parking ticket!|
I’m beginning to see some spending patterns emerge: For a middle-class household, we spend very little money in the grocery store. I chalk this up to Mrs. IM’s mad shopping skills. It also helps that we only eat two meals a day on average. Plus, we cook almost everything from scratch.
For the past two months, we only dined out at a restaurant once per month. This was not always the case. Back when we were in college/graduate school, and even for the first several years of our marriage, we dined out once or twice a week on average. As Mrs. IM’s passion for cooking grew, our interest and enjoyment in going out to eat waned, leading us to frequent restaurants only where she was less comfortable making meals of that type (Indian food… yum). Now that Baby IM is in the picture, restaurants have lost even more appeal.
We spend more on gasoline than I’d like, averaging three tanks a month so far in 2013. We’re planning to trip to see family in March (1,000 mile drive each way), so this category will be much higher next month.
Tracking all spending is revealing: I underestimated just how much I spend on annual fees related to Internet domain renewals. Over the years I’ve built up a small portfolio of domain names, intending to use each of them for some random purpose. Four of them came due for renewal in February, and it dawned on me that I was only using one of them while the other three sat unused, costing me ten bucks or so each year. So, I’ll probably just let them expire next time and save some cash.
Here’s the income side of the equation:
|Salary||$4,356||After taxes, health insurance, and 403(b) reduction|
Total salary is higher than last month thanks to the addition of my wife’s part-time work. That said, we’ve been having talks lately about whether she should bother resuming her adjunct teaching position in the fall versus staying at home to take care of our four-month-old baby. We’ve managed to avoid daycare so far, but we’re facing the dilemma that if she takes on more classes, then we have to spend all the newly earned income on daycare. On the other hand, teaching only one class right now pays a pittance of a few hundred dollars per month, barely worth the gas and driving time to get to the university. I suspect that she will quit and become a stay-at-home mom come June, and our salary figures will take a small hit. More on that in a later post.
February saw a drop in taxable dividends since I only had some bank interest and a dividend from my muni-bond fund (SWNTX). March should be more interesting since it’s the end of a quarter. Currently, I’m behind on my goal for 2013 of earning an average of $100 monthly in taxable dividends, so I hope to gain ground next month.
My savings rate for February using the above figures is 48%. If I add in my automatic 403(b) contribution, it bumps my total savings rate up to a healthy 53%. Shattering the 50% barrier is a tremendous mental hurdle to cross, and I’m overjoyed to see it. Let’s hope it can stay this way. If I played various accounting tricks – such as counting the principal portion of the mortgage payments as savings – then I could get the rate up even higher. My current preference is to look at a mortgage payment – principal included – as an expense.
What this tells me is that we’re doing just fine. Given that:
- We’re a middle-class household with only one full-time income
- We pay two mortgages
Yet we’re still able to save 50%+ of our income? I don’t see our household as absurdly frugal – I mean, we don’t separate two-ply toilet paper into two single rolls or re-use old coffee grounds or anything ridiculous like that, yet we still manage to hang onto 50% or more of our monthly income? By comparison, the average US Savings Rate is consistently in the low single digits (2.40% for January 2013). What the hell? What kind of luxurious lives filled with rampant consumer decadence do my fellow Americans lead? If my own neighbors are an example, they blow their money on toys: huge SUVs with fancy wheels (financed to the hilt), powerful motorcycles (not for commuting – just for zooming around the subdivision), and all the latest gadgets. It’s like a carnival of mass financial stupidity on my street every day.
The point is: my wife and I are both frugal by nature, yet we don’t let frugality rule our lives. I think all the years in graduate school, eking out a living on pitiful TA salaries made us this way. Earning more money wouldn’t make us run out and buy toys – the only thing we would “buy” is a higher savings rate and further advance “payments” toward our financial independence.
Here’s to a happy and healthy March!