The last three months of 2018 were quite busy for us. As soon as tax season started winding down we took a trip to Texas to celebrate my daughter’s birthday. We enjoyed exploring around Dallas, Austin, and San Antonio. We also attended a friend’s wedding in South Carolina, and traveled to Florida to receive the new year. Other than that, we enjoyed some fantastic weather (at least in October and November) in Raleigh spending time as a family.
Let’s Dive Into the Q4 Numbers
Not surprisingly, daycare was our largest expense at $698 per month. This is lower than usual for two reasons. First, we took a vacation week (a week of daycare we don’t pay for) for our trip to Texas. Also, since my daughter turned two the weekly rate is slightly lower now.
Housing (mortgage interest + escrow + HOA fees): Housing costs totaled $433 per month. The main reason this is a little lower than usual is that we closed our mortgage escrow account in November. From now on, we’ll be paying for home insurance and property taxes on our own. Even though the overall cost will be the same. We’ll be able to keep our money invested longer (only deploying when payments are due rather than every month). Also, we can now pay our home insurance with a credit card, which will save us money on travel.
Food (supermarkets + food outside): we paid $380 per month to feed ourselves this quarter. The food outside category was a little higher than usual since we took a couple of trips and we eat out more when we are not at home.
Travel (lodging and airfare, parking, rides, car rentals, gas): all this subcategories totaled $241 per month. This comes mainly for the trips to Texas, Florida, and South Carolina. The costs seem low given all these trips. This is because we paid for most of the Texas trip in the previous quarter. We also split some of the costs with family. Last but not least, we pay for a significant portion of our travels with credit card rewards.
Aside from the categories mentioned above, everything else was pretty inexpensive and uneventful, so let’s move right into our total expenses for 2018.
Total 2018 Expenses
Here is a quarter by quarter summary.
Q4 2018 expenses: $6,456
This is the total for 2017 as well as a comparison against 2017:
Others: this was the biggest positive difference versus the prior year. The main reason is that I bought a car in 2017 and didn’t buy any cars in 2018 🙂
Daycare: this was biggest negative difference. My daughter started daycare in March of 2017 so we paid for a little less than 10 months versus the full 12 months for 2018.
Travel: our travels were similar in 2018 and 2017. In 2017 we took two international trips. While those flights tend to be more expensive, we stayed with family on both trips. This year, all of our travels were domestic (cheaper flights) but we also went to places where we don’t have family (more expensive lodging). All in all I think the main reason for the lower cost this year is that we are getting better at this travel rewards thing.
Food: both eating out and grocery shopping were more expensive in 2018 than in 2017. By $147 and $367 respectively ($514 total). I think this is mainly my daughter eating more as she continues grow :). The total cost of our food the year ($4,598) comes out to $1.40 per person per meal if counting all of us (4,598 / 365 days / 3 people / 3 meals per day). Or $2.10 per person per meal if we only count the adults (4,598 / 365 days / 2 people / 3 meals per day).
I think it is fair to count all 3 of us since my daughter is eating a lot these days. Seriously, Elisa and I are baffled sometimes by the amounts of food her little body can hold :). Also, we buy diapers and wipes at Aldi (same place where we buy our groceries) so that ends up being lumped into the “supermarkets” category.
Savings Rate: our savings rate for 2018 was 78%. This makes 2018 our best financial year so far! We both got promotions, raises, and bonuses this year. More income and less expenses naturally result in more money saved. Looking ahead, we are not expecting any promotions in 2019 so raises and bonuses will probably be more modest. Also, we didn’t experience any large unexpected expenses in 2018. Who knows if we will have any in 2019. We just hope for continued good health and good fortune, and focus on the things we can control.
Methodology and Closing Thoughts
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. The practice of tracking expenses, regardless of what method you use, is one of the most commonly recommended by most of my FI role models. I encourage you to give it a shot if you haven’t already.
How was 2018 for you? Let us know in the comments!