April, May, and June brought some big changes. We had been discussing the possibility of buying a new house to have an extra room and better public schools. We started looking at houses early in the year and ended up closing on our new house in June (I’ll write an article dedicated exclusively to the new house, you’ll see some numbers related to it here).
I also enjoyed some additional weeks of parental leave. It is difficult to take all 16-weeks at once, so I have been taking it in chunks. We also took a couple of trips to the beach and the mountains, and were able to reunite with old friends. Last but not least, we welcomed my in laws who came to spend time with our girls and help us with the move.
With that, let’s dive into the numbers:
Housing was the top expense category for this quarter. This includes mortgage interest, property taxes, HOA fees, home insurance, home improvement, and basically everything related to home ownership. We closed on our new house towards the end of June so most of the ongoing costs are not reflected here yet. However, the one time costs like inspections, initial repairs, and so on were paid mostly in June.
Household items was the biggest subcategory at $1,215. This is what we paid for a new fridge as our new house didn’t have one. We also spent $782 on home improvement & maintenance. Most of this was for termite treatment on the new house and the rest for various purchases at Lowes and Home Depot.
The others category, which totaled $2,069 for the quarter, also includes things like the home inspection, appraisal, U-Haul truck rental, and other miscellaneous spending. I’ll be writing a separate post on the purchase of the new house that will outline all the numbers in more detail.
As mentioned on the Q1 post, our oldest daughter went back to daycare in mid February. So this is once again one of our biggest expenses at $2,298 for the quarter or $766 per month. We are still keeping our little one at home thanks to the flexibility of working from home. That being said, I don’t know how much longer we’ll be able to keep it up. As she grows up, she sleeps less and less and gets bored more easily so we shall see.
Food is next on the list. Supermarkets + food outside totaled $1,828 for the quarter or $609 per month. With our two trips out of town we ate out a lot more than usual. For reference, food expenses for Q1 2021 were $508 per month. Besides more eating out, is inflation to blame for some of the increase? It’s hard to say, our little one eats more and more as time goes by. We have had family staying with us since mid June and they will stay until mid August so there is lot going on on the food category to say for sure.
Health is next on the list at $706 for the quarter or $235 per month. The biggest expense here was for my oldest daughter who had a dental emergency. The rest is for a small medical procedure for myself.
All other expenses were relatively minor and as expected. We spent some money on travel. $270 for gas, and $86 for hotels. For 6 nights, this comes out to $14.33 per night. Shout out to the world of travel rewards for making this possible. If you want to start traveling for free or close to free check out some of the best offers on travel credit cards.
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
Q2 was a relatively expensive quarter for us. We spent a total of $11,991 vs $5,537 on Q1. Fortunately, we had 2 things going for us:
- We live way below our means so we still saved 68% of our income in what turned out to be a pretty expensive 3 months.
- Since this is the second house we purchase, I know the process a little better and was able to negotiate better terms on our mortgage. We ended up receiving around $2,500 of lender credits as well as a credit from the seller of the property for repairs. After all closing costs, we ended up with a net credit of $3,114. In other words, we put down $3,114 less than we expected. I ended up counting this credit as income for this quarter. I could have also accounted for it by offsetting expenses related to buying the home (like the new fridge, home inspections, etc.), but I ultimately didn’t want to lose track of any expenses.
Looking ahead, Q3 will also be somewhat expensive due to more home repairs/improvements, the fact that we are hosting family, and some upcoming trips as well. Hopefully, expenses won’t be as high as in Q2 but only time will tell 🙂
What about you? How has the first half of 2021 been for you?