My Personal Finance Journey

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A Year's Worth Of Expenses

Contributed by mm | January 17, 2005 3:16 PM PST

One interesting exercise at year start is to calculate how much you spent in the last year, figure out your spending pattern, and think about how you can cut some fat in the next 12 months.

Today, I finally got some time to complete this work for 2004, and here is how I ended up spending $65,703 in 2004.

Categories 2004 % of Total Comments
Auto      
  Auto Insurance  $         933 1.4%  
  Depreciation  $       2,850 4.3% Monthly automatic depreciation
  Gas  $       1,535 2.3%  
  Maintenance  $       1,182 1.8% Monthly accrual + misc repairs
  Licensing/Sales Tax  $         957 1.5% Includes ~740 sales tax with Kia purchase
  Other  $           47 0.1% Parking/Car Wash
  Auto Total  $       7,504 11.4%  
Bills      
  Cable/Internet/TiVo  $       1,426 2.2%  
  Cellular  $         297 0.5%  
  Day Care  $       6,058 9.2% Starting in late June
  Electricity and Gas  $       1,054 1.6%  
  Garbage  $         180 0.3%  
  Telephone  $         407 0.6%  
  Water  $         632 1.0%  
  Bills Total  $     10,054 15.3%  
Clothing  $       1,722 2.6%  
Education  $         715 1.1% CFA enrollment, etc.
Food and Groceries      
  Dining Out  $       3,934 6.0%  
  Lunch  $       1,290 2.0%  
  Groceries  $       9,853 15.0%  
  Food and Groceries Total  $     15,077 22.9%  
Healthcare  $         428 0.7% Dental/prescriptions
Household      
  Home Maintenance  $       3,637 5.5% Include $300 monthly accrual
  Appliance and Furnishings  $       2,415 3.7%  
  Property Tax  $       3,592 5.5%  
  Mortgage Interest  $       9,483 14.4%  
  Household Total  $     19,127 29.1%  
Insurance      
  Homeowner  $         459 0.7% Includes Umbrella Insurance
  AD&D/Disability  $       1,003 1.5% Thru Employment
  Life  $         513 0.8% Thru Employment
  Insurance Total  $       1,975 3.0%  
Leisure      
  Books and Magazines  $         269 0.4%  
  Movie and Video Rental  $         105 0.2%  
  Toys  $         202 0.3%  
  Vacation  $       2,208 3.4%  
  Leisure Total  $       2,785 4.2%  
Other Expenses      
  Gifts  $       2,148 3.3%  
  Other Expenses  $       4,168 6.3% ~$1,800 for refinancing; also donations, etc.
  Other Expenses Total  $       6,317 9.6%  
Total Expenses  $     65,703 100.0%  

(A quick note before further discussion: as you can find out from the comments, the breakdown includes certain expenses that wasn't actually paid out. Such expenses include accounting entry of car depreciation, home maintenance accrual and car maintenance accrual and amount to approximately $7,000 for the year.)

So, how does $65,703 compare to my 2004 goal of containing my cost within $59,000?

First, my original budget does not include the day care expense of $6,058, which is a legitimate increase to my cost structure, because as a result, my wife is now able to pull in additional income much more than the day care expense itself. This also justifies the second car and around $1,300 incurred for car related expenses (depreciation, maintenance accrual, insurance and gas).

Second, the "other expenses" line includes $1,800 refinancing cost. As I analyzed before, the deal would bring unfavorable consequences of ~$900 to my 2004 results, but is a great deal for the long run.

Adjusting for the impact of $6,000 for day care, $1,300 for the second set of wheels and $900 for refinancing, my annual 2004 expense is about $57,500, or $1,500 favorable to the $59,000 goal. Therefore, I consider the cost control goal as achieved.

What did the expense breakdown tell me? One key conclusion is I'm pretty lean in terms of cost structure. The largely fixed cost, household (29.1%), bills (15.3%), auto (11.4%) and insurance (3.0%), represents 58.8% of my total expenses. Adding food and groceries (22.9%), which is at least partially fixed cost, the ratio goes to 81.7%. In other words, I only have control to about 20% of my total cost structure. I will continue to find new ways to save, but it is growingly harder to find the next buck to cut :-)

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