The first 3 months of 2021 were good for us. I was on paternity leave for a month and half and enjoyed a lot of quality time with my daughters. When that ended, I went back to work and my oldest back to daycare in the middle of February. Other than that, we continued to adjust to life as a family of 4 and made the most of the winter.
With that, let’s dive into the numbers:
Daycare is once again one of our largest expenses. It started back up in the middle of February so the above is only for 6 weeks. I expect this to be higher going forward. We are still keeping our little one at home. She takes lots of naps, doesn’t crawl yet, and is entertained pretty easily so we can manage while working from home.
Next on the list is food, which is made up of “Supermarkets” (item 2) and “Food outside” (item 6). This totaled $1,523 for the quarter or $508 per month. With COVID-19 vaccines now available we are comfortable again going back to Aldi in person, which is helping us in the food category. Our oldest going back to daycare also helps a little since she eats snacks and lunch there. All in all, the food cost for this quarter came to $1.86 per person per meal.
Housing costs totaled $1,522 for the quarter or $507 per month. Housing expenses are made up of property tax (item 3), mortgage interest (item 4), HOA fees (item 5), home insurance (item 12), and home improvement and maintenance (item 18). Everything here was pretty much as expected. We did a light remodel to our half bath. I bought most of the items (mirror, faucet, towel rack, light fixture, toilet paper dispenser) on Amazon with gift cards, so the $12 is only for a tool I needed to complete the job.
A few other categories worth mentioning: the $115 on the travel category were passport fees for our baby daughter. The $84 of entertainment were for entrance fees to one of the city pools. Older daughter and I spent a lot of time there in January and February.
Besides those highlighted above, all other expenses were relatively small and just as expected.
We use Personal Capital, a very useful 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. Finally, we calculate our savings rate as follows (income – expenses)/income.
Expenses is exactly what you see in this post. We don’t include mortgage principal as we don’t see it as an expense. It’s simply one asset converting to another (cash to home equity). For income, we only count net income. It only counts if it increases our net worth. Things we count towards income: cash that hits our bank account from our paychecks, 401(k) contributions, HSA contributions, other small non-recurring items (cash back from credit cards, tax refunds, etc.). Things that are part of gross income but we don’t include in our calculation: taxes withheld from every paycheck (Federal, NC, FICA), and the employee cost of health insurance that gets automatically deducted.
The entire process of tracking our expenses takes 10 to 15 minutes per month, and we get a clear picture of where our money is going. You work hard for your money, make sure you know exactly where it is going, and ask yourself if the things you buy actually make you happy. Knowing exactly where your money goes is important all the time, but it becomes more so during difficult times. I encourage you to give it a shot if you haven’t already.
Savings Rate and Closing Thoughts
Q1 was a very strong quarter from an income perspective. While I’d like to say that I’m a genius and made a bunch of money as a result of my brilliant ideas, the truth is that most of the additional income came from Uncle Sam as follows:
- 2nd stimulus payment in January
investedgambled about $3,500 in Bitcoin in January and sold a couple of weeks later for a $1,450 profit
- 3rd stimulus payment in March
- Tax refund received in March. This was mostly driven by being able to claim an additional child tax credit as well as for the government making me whole for the first 2 stimulus payments that my youngest daughter didn’t receive (as the IRS didn’t know of her existence until we filed our 2020 tax return).
These income anomalies combined with relatively low expenses propelled our savings rate to an incredible 89%. While I don’t expect this to recur, I’ll take the win for now.
Oh, and speaking of lower savings rates in the horizon, we are under contract on a new primary residence! We were basically looking for better public schools and an extra bedroom so we made offers on a couple of houses and one of them got accepted. It’s still very early in the due diligence process, so I don’t have any more details at the moment. I will be sharing all the juicy financial details when/if the transaction closes so stay tuned!
What about you? How has your 2021 been so far?