2016 was a really exiting year for us! We kicked off the year by traveling back to the U.S. after our wedding. A few months later I finished grad school, and attended Camp Mustache to kick off the summer. My dad came to visit us towards the end of the summer and we took him to the U.S. Open. As the fall season kicked in I started my new job, we bought a house, and we welcomed our beautiful baby daughter into the family! Definitely the highlight of the year 🙂
One would think a year like this would cost a fortune, and it certainly could have if we were not being thoughtful and intentional with our decisions. Fortunately, we discovered the world of financial independence two years ago. Knowing that money can help us buy our freedom, we try to save and invest as much as we can while still living a great life in the present.
Without further introduction, here are all of our expenses for 2016 from highest to lowest:
Let’s dig into some of the larger and more interesting items!
Housing: rent was our highest expense for 2016, though it was lower than for 2015 since we bought a house in September. On the flip side, buying a house opened some new expense categories such as mortgage interest, mortgage escrow (homeowners insurance and property taxes), home owners association (HOA) fees, and home improvement and maintenance. For a full analysis of our home purchase and how it compares to renting, check out this article. So far our home improvement projects include installing two bike lifts to open up space in the garage, and a storm door to get more light into the living room.
Others: this was a big increase over the 2015 amount. It is mainly comprised of $2,400 of closing costs for our house, $1,500 we spent replacing the carpet upstairs, and $220 for a new cell phone. The other $2,000 or so include some eBay selling fees, TurboTax fees, and other miscellaneous things that don’t fit into other categories. During 2017 we don’t expect to see as many expenses here.
Food: the “supermarkets” category is made up of groceries, mainly. Diapers, paper towels, and other similar items get lumped in there as well. “Food outside” include food and drinks outside of groceries (restaurants, bars, etc.). Adding this two categories together and subtracting $200 for the non-food items that get caught up in “supermarkets” gives us a total of $4,600 spent on food. This divided by 2 people, by 365 days, and by 3 meals per day gives us a total food cost per person per meal of $2.10. Who said inexpensive food can’t be healthy and delicious? We do most of our grocery shopping at Aldi, which has the best prices I have been in able to find in Raleigh so far. Here is one of our favorite dishes: homemade thin crust pizza! (we even make the dough from scratch using this bread machine).
Health: health was another item that increased in 2016. $1,600 are related to the delivery of our baby daughter and the pregnancy care. The rest includes insurance premiums, a pair of prescription glasses, and a small dental procedure. We expect the 2017 health related expenses to be much lower since I’m now on my employer’s insurance plan and we are not expecting any more babies for now 🙂
Travel: in 2016 we traveled back from Colombia. Then to Seattle to attend Camp Mustache, Chicago, New York City for the U.S. Open, and some road trips to closer destinations such as the Outer Banks of North Carolina. Despite all of our adventures, the total cost of airfare and hotels was $477 lower than in 2015. This was partly due to using travel rewards. In 2017, we are stepping up our travel hacking game, and have already booked flights to Colombia and Mexico for close to free! If you are new to this concept and would like to travel for free or close to free, I recommend you listen to this podcast. It is a great introduction to the amazing world of travel rewards.
Cars: the category “car others” includes things such as oil changes, routine maintenance, registration fees, etc. It was kind of freaky that this category was almost the same for 2015 and 2016! Gas was much lower this year mainly because I no longer have to commute 25 miles to grad school. If you want to see a more detailed breakdown of our total cost of car ownerships you can use the following links: Juan’s car, Elisa’s car. Last but not least, we saved $148 on car insurance by shopping around. You may be able to do the same by simply getting some quotes online.
Cell Phones: I switched from T-Mobile to Republic Wireless, which saves us $10 per month. Elisa had been a happy Republic Wireless customer for a while, so when my old phone died, I made the switch. We pay a combined monthly bill of $34-$37. Elisa’s plan has a refundable feature so she gets some money back if she doesn’t use all her data. Last I checked, that plan is no longer being offered to new customers, though the current plans are still pretty good. For 2017, my employer has been picking up my cell phone bill so we expect this number to be even lower in the future.
Daycare: the only expense here for 2016 was a $35 signup fee since Elisa was able to stay home with our baby for 3 months after her birth. We were able to do this thanks to our savings because her employer’s maternity leave benefits were lackluster. We expect this cost to be much higher in 2017, stay tuned!
Savings Rate: this is probably the single most important metric for someone pursuing financial independence. As Mr. Money Mustache explains on The Shockingly Simple Math Behind Early Retirement, it all comes down to your savings rate. For example, if you are staring from zero and you save 55% of your take home pay, you will be financially independent in 14.5 years. We were glad to see our savings rate increase from 54% to 58% despite an increase in overall spending. Spoiler alert: for 2017 we expect our savings rate to be in the around 65%. Stay tuned for the actual figure once the year ends.
Methodology and Closing Thoughts
We use Personal Capital, an awesome free online tool, to track all of our finances. From there, it is easy to move the data into a spreadsheet to have it in the format you see above. You can download a free copy of the spreadsheet we use here. Finally, we calculate our savings rate based on our take home pay (the money that ultimately makes its way to us after Uncle Sam has taken his share). The entire process takes about 15 minutes, and you get a clear picture of where your money is going. You work hard for your money! Make sure you know where it is going, and ask yourself if the things you buy with it actually make you happy.
I believe tracking your expenses is one of the most powerful things you can do to take control of your money, build some serious wealth, and make your life better and less stressful. So if you haven’t already, go ahead and start today! There is no time like the present 🙂
Related: Our 2015 Expenses!