Wow, what a year. I didn’t post that much during 2014, but I’m still here. The year 2014 was an eventful year in many ways, both good and bad. For the bad news, my father was diagnosed with Stage 4 colon cancer, and while it has spread to his liver, he has responded pretty well to chemotherapy. He could be here for a few more years, or his life could end in the next few months. One never knows. Life is a precious, fleeting thing.
Also on the bad-news front, my son – who is now two years old – was diagnosed early in 2014 with a visual disability called congenital nystagmus. Basically, his eyes twitch back and forth involuntarily, and while the condition is not tremendously debilitating, it will affect his vision for the rest of his life. Back in October he had a surgery (called the modified Kestenbaum-Anderson surgery for those interested) to improve his eyesight by moving his eye muscles in order to center his “best” vision straight in front of him. Time will tell how effective it was, but we’re optimistic.
On to good news: my wife and I had another child this year, a little girl this time. In a sense, we’re living the dream: a married couple owning a house with a two-car garage out in the suburbs, two kids (a boy and girl), and a white-picket fence. Just kidding about that last part. Our fence is made out of flimsy pine wood. Overall, we feel like we have now replaced ourselves, and (at the moment) do not plan to have any more children. We’ll see.
Also on the good-news front, I got a small raise at work this year, and despite my wife not working, our net worth still improved significantly. I do not consider us paragons of frugality. Far from it, actually. I feel that we spent with reckless abandon this year; neither my wife nor I hold each other accountable for our spending. And to be certain, we spent far more than we did last year, mainly due to my son’s surgery and the birth of my daughter (all on a high-deductible health plan). Medical expenses aside, we still spent freely, entertaining guests and neighbors once a week or more, taking a few trips from Texas to Georgia to visit family, and pursuing hobbies. I even got into a new hobby – brewing my own beer and cider.
OK, I’ll stop rattling incoherently now. And without any further ado, let’s see the numbers for all of 2014!
|Mortgage (Primary Residence)||$7,980||15-year fixed; principal + $2,703 interest|
|Rental Mortgage + Escrow||$8,994||15-year fixed; includes taxes & insurance|
|Rental Upkeep||$1,247||Kitchen renovation; plumbing|
|Property Taxes||$3,105||TX property taxes|
|Grocery & Dining||$5,314|
|General Merchandise||$4,180||Most of this is Costco, Amazon, & Lowes|
|Cell Phones||$507||Mostly Ting, plus one new Android phone|
|Online Services||$278||Web hosting & Domains|
|Medical||$6,168||Son’s surgery; birth of daughter|
|Dental||$360||Four total cleanings|
|Gasoline||$1,391||My commute, plus long drives to visit family|
|Auto Insurance||$489||For two aging cars|
|Life Insurance||$1,392||Two term-life policies, plus small whole-life policies for the two children|
|Donations||$20||Need to increase this next year|
|Memberships||$210||Organization related to career, plus Costco|
|Umbrella Insurance||$195||Owning rental property, this helps me sleep at night|
|Federal Taxes||$50||Filing fee for LLC|
|Random Pet Food||$24||For extended family|
|Credit Card Fees||$75||AMEX Blue Cash Preferred – Annual fee|
|Total (without Rental Property)||$36,496|
|Total (Also Without Mortgage)||$28,516|
We spent over 45k last year? WTF?! That’s almost 9k more than in 2013. While that number does indeed strike fear into my frugal heart, keep in mind that the total of 45k includes mortgage payments (principal and interest) for two houses. Subtracting the cost of the rental property (since it basically pays for itself), our total spending drops to just above 36k. The number looks even better if I ignore the mortgage on our primary residence. Speaking of which, for our mortgage balance of just over 70k, we only had to pay $2,703 in interest, and for the record, I’m considering eliminating that balance entirely in 2015. The stock market is near an all-time high, and we do have the funds in a taxable account to cover the entire remaining balance. Paying off a house versus investing in the stock market is an endless debate and ultimately boils down to one’s personal decision. No rash decisions here – I just want to take some more time to think on it.
By far the largest increase in spending from 2013 to 2014 was in healthcare. As I mentioned at the start of this post, my son had a surgery in October and my wife gave birth to a daughter in December. Neither of these expenses were anticipated at the beginning of the year. Our high-deductible health insurance plan has a 6k family deductible, and we exhausted all of it this year. I can’t predict the future, but I remain optimistic that our medical expenses in 2015 will be minimal.
Another expense that sticks out is Alcohol. We spent over $900 on alcohol last year? What kind of sopping-wet lushes are we? Am I crawling between pubs every weekend? No, certainly not. The reality is that I got into homebrewing as a hobby last year, and about $300 of that total was in startup equipment. Brewing one’s own beer is time consuming, but fun, though it’s not necessarily frugal. Homebrewing – like raising a child – is as expensive as you allow it to be. For those who wish to splurge, there’s plenty of specialty equipment out there to satisfy one’s desires (and empty one’s wallet). So far, I’ve resisted that urge pretty well, and each of my batches – which typically yield somewhere around 50-55 bottles – only costs about $33 or so to brew.
All-in-all, our no-frills, non-mortgage spending in 2014 for a family of four was about 28k. Considering that over 6k of that was on one-time medical expenses, I can’t complain too much.
And here is the income side of the equation for all of 2014:
|Salary||$42,138||After taxes, health insurance, and reductions for HSA and 403(b)|
|Royalties / Web||$17,546|
Here’s the fun stuff. We’re a one-income household since my wife is a stay-at-home-mom to our (now two) children. That’s why you didn’t see anything related to daycare in our expenses. My salary is on the lower-middle-class side, but we pick up some extra money in a variety of ways. Our rental property is one, although we basically break even on it every year. After years of thinking that we might move back to that house (it was our primary residence for a few years in graduate school – see A Tale of Two Mortgages), we’re beginning to give up on that idea and are now considering putting it on the market when our tenants’ lease expires later this year. To be continued.
The Royalties / Web category looks impressive, but the reality is a little more complicated. Part of it is blog income, though I don’t make that much money from writing content for this site. Another part of it is royalties from a couple of technology books that I’ve published. A third part is an unexpectedly large federal tax refund (I’ve since adjusted my W-4 withholdings). And the last chunk is a few thousand in gifts from family. Basically, given my father’s failing health, he has started advancing some of his assets to his heirs since you can’t take it with you. I am grateful for the gifts, but I would rather have my father.
I am impressed that we made over $6,700 in dividends last year. In 2013 we earned slightly over $5,000, so this represents a healthy increase. I didn’t sell shares of any investments last year, so with each paycheck I keep plowing spare cash into extra shares, which in turn earn more dividends, which reinvest themselves into even more shares, and on and on. My hope is that we will earn at least $8,000 in total dividends in 2015, which is a significant number for me consider that’s the exact amount I use to earn in salary per year as a graduate teaching assistant.
Naturally, I’m obligated to report my savings rate for the year, which is how much of what I earned I was able to keep. Using the above figures, my savings rate works out to 50.5%, which is pretty damn good for a one-income household with two mortgages. Both our income and our expenses saw a significant boost from the previous year, but the latter was almost entire due to medical expenses. I can’t predict the future, but I anticipate that our 2015 expenses will be lower than last year.
So, there we have it – my entire financial life for 2014 lain bare in front of you. And to you, dear reader, I wish you a better and better 2015!