Contributed by mm | February 1, 2005 11:24 AM
PST
For people without a huge cash pile for investment (myself included), the formula for financial success is as easy as two sentences: earn more, and spend less. Thanks to my many cost-cutting initiatives in the last two years, my cost structure is already very lean. For 2005, I'm expecting my expense to grow 14% from $65,703 in 2004 to $74,843 in 2005. The growth is significantly less than the 27% improvement I expect from my top line.
Before sharing the details, let me provide some context for year-over-year growth: most of the YoY cost increase is associated with my wife's employment starting in mid 2004. As a result, 2004 results include approximately six months' expense for day care and the expense of the second car while 2005 will see these expenses throughout the year. The YoY comparison is also harder as with two workers we expect more dining-out, lunch and wardrobe expenses.
To a lesser extent, I am also creating more room in my 2005 budget for more entertainment expenses. Last year we only took two short trips and we expect to have more fun this year.
On the favorable side, we will reap the full benefits from last year's successful refinancing to 3.5% 5/1 ARM by reducing our mortgage interest payout. I am also expecting to save $1,200 thru various CFI initiatives.
Now the details line by line and how my 2005 projection compares to my 2004 actual expense:
|
Categories |
2004 |
2005 |
YoY |
YoY % |
Comments |
|
Auto |
|
|
|
|
|
|
Auto Insurance |
$ 933 |
$ 1,140 |
$ 207 |
22.2% |
|
|
Depreciation |
$ 2,850 |
$ 3,000 |
$ 150 |
5.3% |
|
|
Gas |
$ 1,535 |
$ 1,920 |
$ 385 |
25.0% |
|
|
Maintenance |
$ 1,182 |
$ 1,560 |
$ 378 |
32.0% |
|
|
Licensing/Sales Tax |
$ 957 |
$ 160 |
$ (797) |
-83.3% |
2004 includes one-time sales tax |
|
Other |
$ 47 |
$ 120 |
$ 73 |
155.3% |
|
|
Auto Total |
$ 7,504 |
$ 7,900 |
$ 396 |
5.3% |
|
|
Bills |
|
|
|
|
|
|
Cable/Internet/TiVo |
$ 1,426 |
$ 1,404 |
$ (22) |
-1.5% |
|
|
Cellular |
$ 297 |
$ 176 |
$ (121) |
-40.7% |
2004 includes one-time phone purchase |
|
Day Care |
$ 6,058 |
$ 11,520 |
$ 5,462 |
90.2% |
Only 6.5 months' daycare in 2004 |
|
Electricity and Gas |
$ 1,054 |
$ 1,080 |
$ 26 |
2.5% |
|
|
Garbage |
$ 180 |
$ 197 |
$ 17 |
9.5% |
|
|
Telephone |
$ 407 |
$ 384 |
$ (23) |
-5.6% |
|
|
Water |
$ 632 |
$ 670 |
$ 38 |
5.9% |
|
|
Bills Total |
$ 10,054 |
$ 15,431 |
$ 5,377 |
53.5% |
|
|
Clothing |
$ 1,722 |
$ 2,400 |
$ 678 |
39.3% |
Larger professional wardrobe |
|
Education |
$ 715 |
$ 620 |
$ (95) |
-13.3% |
CFA enrollment, etc. |
|
Food and Groceries |
|
|
|
|
|
|
Dining Out |
$ 3,934 |
$ 4,800 |
$ 866 |
22.0% |
|
|
Lunch |
$ 1,290 |
$ 1,800 |
$ 510 |
39.6% |
|
|
Groceries |
$ 9,853 |
$ 9,840 |
$ (13) |
-0.1% |
|
|
Food and Groceries Total |
$ 15,077 |
$ 16,440 |
$ 1,363 |
9.0% |
|
|
Healthcare |
$ 428 |
$ 1,560 |
$ 1,133 |
264.9% |
Expect major dental expenses in 2005 |
|
Household |
|
|
|
|
|
|
Home Maintenance |
$ 3,637 |
$ 3,600 |
$ (37) |
-1.0% |
Accrual |
|
Appliance and Furnishings |
$ 2,415 |
$ 2,400 |
$ (15) |
-0.6% |
|
|
Property Tax |
$ 3,592 |
$ 3,600 |
$ 8 |
0.2% |
|
|
Mortgage Interest |
$ 9,483 |
$ 8,580 |
$ (903) |
-9.5% |
Refinancing benefits |
|
Household Total |
$ 19,127 |
$ 18,180 |
$ (947) |
-5.0% |
|
|
Insurance |
|
|
|
|
|
|
Homeowner |
$ 459 |
$ 552 |
$ 93 |
20.3% |
Includes Umbrella Insurance |
|
AD&D/Disability |
$ 1,003 |
$ 1,200 |
$ 197 |
19.7% |
Thru Employment |
|
Life |
$ 513 |
$ 840 |
$ 327 |
63.7% |
Thru Employment |
|
Insurance Total |
$ 1,975 |
$ 2,592 |
$ 617 |
31.3% |
|
|
Leisure |
|
|
|
|
|
|
Books and Magazines |
$ 269 |
$ 300 |
$ 31 |
11.4% |
|
|
Movie and Video Rental |
$ 105 |
$ 180 |
$ 75 |
70.7% |
|
|
Toys |
$ 202 |
$ 480 |
$ 278 |
137.5% |
|
|
Vacation |
$ 2,208 |
$ 4,800 |
$ 2,592 |
117.4% |
|
|
Leisure Total |
$ 2,785 |
$ 5,760 |
$ 2,975 |
106.8% |
|
|
Other Expenses |
|
|
|
|
|
|
Gifts |
$ 2,148 |
$ 3,000 |
$ 852 |
39.6% |
|
|
Other Expenses |
$ 4,168 |
$ 2,160 |
$ (2,008) |
-48.2% |
2004 includes $1,800 refinancing |
|
CFI - Expense Avoidance |
$ - |
$ (1,200) |
$ (1,200) |
|
|
|
Other Expenses Total |
$ 6,317 |
$ 3,960 |
$ (2,357) |
-37.3% |
|
|
Total Expenses |
$ 65,703 |
$ 74,843 |
$ 9,140 |
13.9% |
|
Actually, I feel pretty confident about the spending plan; it is tight in certain ways but also provides some room for better quality of life. As you might already know, cost control against this plan is one of my goals for 2005.
P.S. From a personal finance perspective, keeping more does not necessarily equal to spend less; Uncle Sam will claim its share and to keep more, smart tax analysis is also needed. Read on.
(This post is part of the five-post Financial Plan 2005 series. If you miss some parts of the series, you might find links to all posts at Financial Plan 2005: The Overview.)
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opinions.
Financial Plan 2005: Summary (February 08, 2005)
Now that we have gone through the respective analysis of income, expense and tax, it is time to connect the dots. In a nutshell, how much I can keep -- in other words, net worth growth, equals my income after expenses and Uncle Sam's share ... Read
Financial Plan 2005: Tax (February 05, 2005)
After some serious look for income and expense, the next step is to look at the tax consequences and learn something. As a matter of fact, I have a system to track my tax liability related to income and tax-related activities throughout the year: when ... Read
Financial Plan 2005: Income (January 30, 2005)
If you recall, my net worth increase in 2004 was $20,000 higher than my original plan, and the variance is predominantly driven by the additional income my wife brought in from her (unplanned) daily job. To some extent, my net worth increase in 2005 depends ... Read
Financial Plan 2005: The Overview (January 30, 2005)
Behind my set of ambitious 2005 goals is a financial plan. I finished the plan about two weeks ago (in an Excel workbook), and I am happy to share the details of my plan in the next few posts. In this five part series about ... Read
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