The last three months of 2019 were quite busy for us. As soon as tax season started winding down we took a trip to California to celebrate my daughter’s birthday. We enjoyed exploring around Los Angeles, San Diego, coastal towns in between, and Sequoia & Kings Canyon National Parks. Other than that, we enjoyed some fantastic weather in Raleigh spending time as a family.
While the last 3 months of 2019 were pretty good on their own right, they seem absolutely glorious given the current state of the world. I’ll write about some my thoughts on the COVID-19 situation towards the end of this post.
Let’s Dive Into the Q4 Numbers
Not surprisingly, daycare was our largest expense at $722 per month. This is a little lower than usual. Since my daughter turned three the weekly rate is slightly lower now. Not by much but anything helps!
Food (supermarkets + food outside): we paid $540 per month to feed ourselves this quarter. This is much higher than usual since we ate out a lot during our travels.
Housing (mortgage interest + HOA fees + property tax + home insurance + maintenance & improvements): housing costs totaled $498 per month. Everything here was as expected. We paid for home insurance and property taxes on our own for the first time this quarter (these got paid through mortgage escrow previously). We removed the escrow from our mortgage. 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.
Health was a category that was unusually large this quarter, averaging $250 per month. Most of it was driven by exams that were not covered by insurance.
Travel (lodging and airfare, parking, rides, car rentals, gas): all this subcategories totaled $38 per month. This is pretty low since we had prepaid for most of this trip in the past quarter, and also split lodging and rental car costs with the other people on this trip. 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 2019.
Total 2019 Expenses
Here is a quarter by quarter summary:
Q4 2019 expenses = 7,894
This is the total for 2019 by category as well as as a comparison against 2018:
Mortgage escrow was the biggest positive difference. As I mentioned before, we removed the escrow account for our mortgage so now we pay for property taxes and home insurance on our own. These payments came due late in 2019 so the total 2019 cost is low compared to what it will be going forward. For example, we paid $1,872 of property tax in November so the monthly cost is 156 = 1,872 / 12, and the total for 2019 is $312 = 156 * 2.
Food (supermarkets and food outside) was the biggest negative difference. As it is obvious from the chart, we eat out a lot more. Another factor at play is my daughter’s ever increasing appetite :). Last but not least, inflation probably plays a small role as well. Total food expense for the year came out to be $5,672, which comes out to be $1.73 per person per meal = (5,672 / 365 days / 3 people / 3 meals per day). Overall, I’m not too worried yet or plan on making any changes. Ask me again when/if we get above $2 per person per meal.
Home improvement and maintenance was another large negative difference. Our house was pretty maintenance free in 2018. In 2019 the biggest expense was to repair some moisture damage to the hardwood floor from water that was getting in through the backdoor. One day the water heater, or the furnace, or something more expensive will need to be replaced and will make the 2019 amount look small. Home ownership is much more expensive than just your mortgage payment so plan accordingly.
Savings Rate: our savings rate for 2018 was 81%. This makes 2019 our best financial year so far! We both got raises and bonuses this year while expenses remained pretty much the same. Looking ahead, needless to say that 2020 is poised to be a strange year. On one hand, our little one is no longer attending daycare, and seems like travel is shot for much, if not all, of the year so that should make 2020 inexpensive.
On the other hand, we have been ordering groceries online (Aldi is 20-40% more expensive via Instacart than in person) and we tip the delivery people generously, which will probably make our grocery expenses in 2020 be much higher. That’s OK, staying healthy and helping others is top of mind these days. I also underestimated how much free food and snacks I got from work. Not anymore now that we are working from home!
Speaking of work, we remain employed for the moment, which we are very grateful for and realize not everyone is as lucky. My company already announced there will be no bonuses in 2020, nothing has been said about raises, but I wouldn’t be surprised if there are none. Elisa’s company has not said anything yet but it’s probably fair to expect cuts to bonuses and/or raises. Honestly, money and finances are not one of my top concerns these days. That’s been taking care of from all these years of living well below our means. For now, we are just trying to stay healthy, sane, find joy everyday, be good parents, and help others where possible.
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 rough times. I encourage you to give it a shot if you haven’t already.
Other Random Thoughts on COVID-19
This new coronavirus is a pretty scary bug. No other pandemic has hit the world so hard since the 1918 Spanish flu, and nobody could have predicted when and how it would happen. That being said, history and experts around the world had been warning us that we were not prepared for the next big pandemic. And boy were they right. This 2015 Ted Talk from Bill Gates is one such warning.
While it is too late to prepare for this one, there are a couple of valuable takeaways from all of this:
- We can do a much better job at electing world leaders who are competent, care about others, and make decisions based on science and expert advice, even when such decisions are unpopular in the moment.
- There will likely be another pandemic, perhaps worse that this one, during our lifetimes. So let’s not forget all the pain and struggle of the current one and work towards being better prepared next time.
I’m not a doctor, epidemiologist, or otherwise expert to discuss the health implications of COVID-19, but here are some of my thoughts:
- I think it’s too early to “open the economy” back to normal. Balancing the spread of the virus and the economic and human costs of being in lock-down for too long is an extremely complex dynamic, and there are still many unknowns. This graph and article from Dr. Peter Attia does an excellent job at explaining where we are and where we might be going.
- Someone I know personally (healthy 36 year-old) had a “mild” case of COVID-19 and survived, yet her experience was brutal. I know friends of friends who have died from the disease. And yes, some cases appear to be very mild or even asymptomatic. Overall, there are still too many unknowns and life is too precious to put yourself at risk unnecessarily.
- That being said, going for walks, bike rides, or otherwise spending time outdoors while keeping your distance from others, is probably an overall positive for your health, both physical and mental.
- Despite the fact that this an unfortunate and painful situation, there are many silver linings. Here are a few of my favorites:
- Families spending more time together
- The planet is getting a massive, much needed break. Air quality hasn’t been this good in years/decades, especially in big cities. Industry shutdowns and decrease foot traffic have led to less pollutants in waterways, and there has been significant reductions in carbon emissions just to mention a few.
- Hard times make us stronger and lead us to question and value things we have taken for granted in the past. We gain insight into what really matters and what does not.
That’s all I got for now. On the next post, I’ll discuss more of the financial aspects of the pandemic and how it is affecting our financial independence plans. Thank you for reading! 🙂
How are you doing during these challenging times? What are some your positive takeaways?