Here’s our first post where we’re putting some of our numbers out there – it’s a bit intimidating to be honest! Also, it’s the middle of February and I’m just getting this analysis together, but better late than never. As January was my first month blogging, we’re still getting the feel for this and still determining what financial information to share here. For now we’ll focus on what we have the most control over in the near term – and that’s our spending. Our spending levels clearly impact our ability to save as well, and future posts will address our savings goals.
High Fixed Costs
Even focusing just on our spending, which is holds the greatest near-term potential to move the needle on our slog to financial independence, the depressing reality is that only roughly a third of our current spending is discretionary (it’s even less than a third this month). I am defining “discretionary” as things we can fairly easily adjust in the near term. However, this category includes key items such as food, bills, and utilities, so it’s certainly not going to disappear, but we are working on the areas where we have some flexibility. Here’s how the large categories break down:
The largest portion of our spending is our housing costs. We live in an area with very high housing costs compared to the national average, but it provides us with significant quality of life benefits. (By the way, I really appreciated Tanja at Our Next Life’s post on retiring early in a high-cost state where she outlines some of the broader nuance of choosing to live in a higher-cost area). While we have considered moving to lower cost areas, for the near-term we are staying put. We actually rent a house and then rent out a condo that we own. The condo has a positive cash flow that helps offset our own rental costs, and we are still able to build equity in the condo. More on that later. Housing costs are what they are for now.
The second largest portion of our spending is child care costs. Shocker, but it turns out that having two children makes life more expensive. Even if kids don’t have to cost as much as the average lifetime estimates state, day care years are brutal. This will be our first full year with full-time childcare costs for two kids. This line item will actually increase slightly in February and beyond because we need a bit more coverage for one of our kids. For now, we choose to keep two incomes and careers for financial and personal reasons. We are striving to reduce costs in other areas to accommodate for these significant child care costs.
The third large cost this month was a bit anomalous due to emergency dental work for our dog. Luckily, we have emergency savings to cover items just like this, so we were able to get her the care she needed. She’s been the most loyal friend to me for 12 years – we had to do it.
So, that leaves all the rest of it, which is the “discretionary” piece of the pie. Overall, I have to say I was quite happy that we squeezed by under the $3,000 mark here during the first month of 2018. This was especially good for us given that we spent almost $500 on a plane ticket for a future vacation, so the real day-to-day spending was around $2,500. I’m hoping that writing about our spending will help keep us accountable to limiting our cash out the door where we can.
Take a look at how we did and then I’ll dig in:
|Mortgage & Rent||$3,526||Fixed housing costs|
|Child Care||$2,394||Child care for two kids|
|Pets||$1,922||Emergency dental work for our dog|
|Kid Supplies||$219||Double stroller, $115 in diapers, thrift store clothes|
|Home Supplies||$83||Toiletries, paper goods, etc.|
|Food & Dining||$1,022||$559 groceries, $286 restaurants, $114 alcohol/bars, $60 coffee|
|Travel||$488||Plane tickets for upcoming trip to see family|
|Bills & Utilities||$363||Gas, electric, internet, mobile phone|
|Health & Fitness||$279||$100 doctor, $60 pharmacy, $119 gym|
|Auto & Transport||$179||Car insurance, gas, parking|
|Misc Expenses||$117||Amazon Prime membership, small cash purchases|
|Business Services||$115||Blog annual costs, work lunch|
|Gifts & Donations||$45||Charitable donations|
|Personal Care||$41||Mani-pedi (I know, I know. Not a regular thing)|
|Entertainment||$35||New York Times, Netflix|
|Discretionary Portion||$2,995||What we can control short-term (excludes fixed housing costs, child care, and emergency pet costs paid with savings)|
A few notes for this month:
Kid supplies is one where I have some good news! The ongoing costs for diapers should go down by $75 or so a month since we potty trained our oldest – yay!!! We will continue our ongoing efforts to buy used when we can and employ other methods to save on kids’ stuff.
Our food costs have been an issue in the past, and our goal for 2018 is to keep them below $1,000 a month, including all categories – groceries, restaurants, alcohol/bars, and coffee shops. We did phenomenally on groceries compared to our prior spending levels, and if we can keep grocery costs under $600/month I’ll be happy. We also slightly reduced our restaurant spending and hope to continue to chip away at it. The alcohol/bars category was higher than it would be normally due to a work event and a mom’s night out. I certainly don’t regret the latter of those two. 🙂 I hit my embarrassing target of $60/month for coffee shops to the dollar. I consider that a requirement to maintain my current income/job. Maybe I’ll evolve over time in that estimation but it’s doubtful.
In the auto and transport category, we should save a little on gas since I’m now back to bike commuting to work and loving it!
I’ll go into some of the other categories in future months. I think that’s probably enough boring detail about our spending for one month!
Anything else you’re curious about? What are your spending challenge areas?
Here’s a pic of paradise to remind me what we’re saving for. Among other things, more free time on the beach!