One of the regular posts on this blog will be monthly financial updates where I’ll show exactly what our family spent in the last month, and how our net worth changed month over month.
Why am I sharing this information on the blog? Well I hope that it will be beneficial for at least two reasons:
- By posting this every month, I will benefit from reflecting on where our dollars are going, and continually asking myself and my family whether we are being good stewards of our resources and maximizing the utility of our money.
- I hope that seeing how a larger family spends money will encourage other families that it does not take that much money to build a pretty awesome life. By being intentional about spending and avoiding big money sucks, we can carve out a great life that is not lacking anything for under $50K/year even with two adults and three children.
Oh and as a bonus, maybe I’ll actually get my wife to look at our budget results more often. When we first got married I tried to set up a monthly meeting where I’d walk through our net worth updates and our actual vs. budget, and in the first meeting she was so bored that she immediately ceded all financial matters to me. But she has a great blog that she’s been writing for SIX YEARS STRAIGHT, and she’s going to be my editor.
My budgeting philosophy: I think it’s helpful to set a budget based on past spending and desired future spending, but I don’t spend much time throughout the month making sure my family is hitting the budget. My wife and I are on the same page about being frugal, and I haven’t found that we’ve needed to try to hit our budget exactly. Some months we go over, some we go under, but we generally stay around what we’d like to spend. When we do go over for a longer period of time, it usually is something we can’t avoid (like unexpected medical expenses) or related to changes in our family (like our little ones eating a lot more food than they did when they were babies and toddlers).
Taxes: I don’t show taxes for a couple of reasons. First, my main goal of tracking expenses is to keep track of what I’ll need in “retirement”, and I don’t plan to pay any taxes in retirement (more on that in a future post). Second, despite my best efforts at claiming the right number of exemptions, I end up getting tax refunds, so the monthly taxes are not what I actually end up paying. Taxes paid are a function of income, and my goal here is to show the expense side of my equation, not the income one.
Charitable Giving: I don’t share my giving because that is also an expense that is a function of my current income. It will not be the same in retirement when my income is much lower. Giving is super important to me, and I want to find a way to talk about it that encourages other people but doesn’t set up comparisons or induce guilt in myself or others.
2017 Budget: I’ve broken down our spending into five key categories:
- Housing ($1,150/mo, $13,800/yr)
- Transportation ($235/mo, $2,820/yr)
- Food ($500/mo, $6,000/yr)
- Core Expenses ($1,000/mo, 12,000/yr)
- Discretionary Expenses: ($855/mo, $10,260/yr)
Total budget for 2017: ~$3750/mo, ~$45,000/yr
Housing ($1,150/month) I’m including the following sub-categories in tracking housing expenses. The goal of putting these together into the housing category is to track how much my family spends on where we live. We recently upgraded to a larger house with a much larger yard and a pool, and I’m interested to keep track of how much more we are spending as a result.
- Homeowners Insurance
- Property Tax
- Home Mortgage Interest
- Home Maintenance
- Utilities (electric)
- Utilities (gas)
- Utilities (water and sewer)
Transportation ($235/month) I also track deprecation for our cars, but I’m leaving it out of monthly reports as it is less of an actual expense and more of an impact to our net worth. I highly recommend tracking it, as it’s a great motivator not to buy expensive cars! It’s crazy to see the value of cars plummet each year using tools like Kelly Blue Book or Edmunds.
- Car Tax
- Auto Insurance
- Fuel and Maintenance
Food ($500/month) The only core expense I track here is groceries. If we had to cut our budget back further, we would be fine only eating groceries and not going out to eat or treating ourselves with alcohol.
Core Expenses ($1,000/month) Here I will track all expenses that my family of five more or less has to keep. We couldn’t cut much from these expenses if we needed to, which is why I consider them to be core living expenses.
One of the areas I’ve always wanted to track was the true cost of children. I’ve heard crazy numbers about kids costing millions of dollars, and I wanted to prove that it’s possible to raise children without spending crazy amounts of money. In future posts we’ll dive deep into the costs that we’ve experienced with our children and compare them to the tax savings.
- Dental Insurance
- Life Insurance
- Health Insurance Premiums
- Healthcare Expenses
- Cell phone
- Miscellaneous Expenses
Discretionary Expenses ($855/month) Here is where I track all the expenses that we could slash to zero if we needed to do so. We don’t plan to take these expenses to zero, but we also don’t need any of this stuff and could do without it if we had to. I do include dining here vs. including it with groceries because eating out is an occasional luxury, not a core food expense. I also include the money we spend on entertaining – inviting people over to dinner, throwing parties, going out with friends, etc. It’s important to me that we track this separately because it’s not an area where I want to try to slash expenses. My wife and I both want to be generous entertainers and not to limit our hosting to save money.
- Beer and Wine
- Entertainment (inc. education)
- Gifts Given
- Pet Care
- Recreation (travel/vac/wedding)