The second quarter of 2020 was mostly about settling into our new reality. With our daughter out of daycare and both of us working from home, we tried to adjust as best as we could and make the most of everyday.
On the bright side, we remained healthy, enjoyed more time as a family, and saw our second daughter grow and turn into a baby bump.
With that, let’s dive into the numbers:
Daycare used to be our largest expense. In Q2 it wasn’t even a line item at all since we pulled our daughter out in the middle of March. Crazy how quick things can change.
With daycare out the way for now, housing became the top category. It totaled $1,613 for the quarter or $538 per month. This category includes mortgage interest, property taxes, HOA fees, home insurance, and maintenance.
Food (supermarkets + food outside) was the second largest expense. It totaled $1,519 for the quarter or $506 per month. Food expenses have certainly increased since we started working from home. I used to get free snacks and some free lunches at work, and my daughter also used to get lunch and snacks at daycare. Also, we paid more for groceries for a while to have them delivered to us. Aldi is definitely more expensive via Instacart than in person. Despite the increase on food expenses, it still comes to $1.85 per person per meal.
Another interesting category is transportation (gas, car insurance, registration fees and maintenance). I feel very proud to only have spent $13 on gas for the whole quarter. We must have finished March with full tanks on both of our vehicles, and obviously didn’t do much driving otherwise. We are fortunate to have plenty of outdoor entertaining within walking or biking distance.
The $114 of “car others” is for replacing the battery on my car. It’s a 2014 model and looks like it had the original battery so it was definitely time.
Besides those highlighted above, all other expenses were relatively small and 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.
P.S. If you are wondering how the pandemic and related economic downturn have affected our financial independence plans, check out the Q1 update. I go more in depth there. Not much has changed so that’s still a good place to see where we stand.