2009 Budget Review

When I shared some insights into my finances, I said I'd be reviewing my 2009 budget in a later post to see if anything interesting turned up. This is that later post.

I'll start by listing my top 10 expenses as a percentage of my total spending (and from the earlier post, you'll remember that my spending -- what I labelled then as "spending" and "giving" -- was 60% of my gross income):

• Giving -- 41.9%
• Taxes -- 35.2%
• Home Repair -- 5.4%
• Food -- 2.9%
• Miscellaneous -- 2.4%
• Depreciation -- 2.1%
• Furnishings -- 2.1%
• Utilities -- 2.0%
• Gas -- 1.0%
• Car Insurance -- 0.7%

And the comments on these:

• Giving includes our tithe, gifts above that to charities (like these), and non-deductible gifts to those in need (mostly friends or acquaintances)
• Taxes includes all taxes -- income (federal and state), Social Security, Medicare, and real estate.
• Home repair is such a high number because we got a new furnace and AC in 2009
• Food is rather steady from year to year.
• Miscellaneous are odds and ends that don't fit elsewhere. It's about the same each year as well.
• Depreciation is the loss of value on our two cars. I estimate the year-end value of our cars using Kelley Blue Book. I then deduct the same amount each month to make sure the value of the cars at year-end matches the book value. (Yes, it's a non-cash expense.)
• Furnishings is higher than usual because we bought a new couch and some office furniture.
• Utilities includes all utilities -- gas, electric, phone, internet, cable, water, and trash removal.
• Gas is simply gas for our cars.
• Car insurance -- it is what it is.

Add all these up and you account for 95.6% of our spending.

It's almost as interesting to see what didn't make the top 10 as it is to see what did. Some highlights:

• Clothes were 0.4% of our spending. My wife and I don't need many new clothes, and the bulk of this was for our kids.
• Entertainment (including babysitting) was 0.4% of spending. Most of our entertainment is getting together with friends, kids' activities, or church events -- all of which don't cost much. And our cable bill is accounted for in utilities.
• Eating out was 0.4% of our spending. We try to limit how much we eat out. We MAY go out once per week on average, but hardly ever go to a place that's over $35 for all of us.
• Vacation was 0.4% of our spending. We took a big Disney vacation a couple years ago and will be due for a big one this year or next, but most of our vacation expenses are associated with traveling to see our family (we did visit Niagara Falls this summer, but combined it with a family trip.)

A few other notes:

• Not sure if you caught it, but I mention at the top that was spend 60% of our gross income. That leaves 40% for savings. Our savings rate hasn't always been that large. But over the years we worked to increase our income while keeping expenses in check, and the gap between what we make and what we spend has grown and grown. Just wanted to point this out so you all know that I practice what I preach. ;-)
• If we had to, we could live on much less than 60% of our income. Giving alone is 26.3% of our gross income, so we really only need 33.7% to live on. Again, we've focused on creating the biggest possible gap between income and expenses.
• None of these results happened overnight. They took two decades to achieve. But with the right effort (working to increase income and keep expenses in check) as well as a ton of time, most people can get similar results.
• We have fun. Some may read this, see the amounts we spend on entertainment, vacations and the like and think we live a boring life. We don't! It's just that most of our fun is centered around family events, interacting with friends, and so on -- things that don't cost much money. We don't need all the latest and greatest gadgets to have fun, we don't need to go to the movies every weekend, and we don't need exotic vacations each year to be happy. We simply need our friends and family. And believe me, they are very entertaining. ;-)

How about you? What's your annual spending look like?

Comments

[Mike]

You are pulling in a LOT of dough...

[KT]

thanks for sharing this. You're a great inspiration! I am learning so much!

[Mark]

We also track our spending each year. Our biggest category is taxes - like yours between 35 and 40% of our total. And similar to you, I track depreciation on our cars (with over 100,000 miles on them) using KBB.com.

We often buy higher-end items (e.g. TV, furniture), but have also focused on keeping our recurring costs low (no cable TV, no fixed-line phone, $10 per month cellphone plan, minimal services (no lawn-care, housekeepers, termite, etc.)), and could live on less than 50% of our income.

Our major difference from your perecentages is that our second category for several years has been vacation. We have chosen to go to many different parts of the world, as well within the USA. We have learned so much about other places and people, and in fact when we reviedw our spending each year, we have sometimes joked that any year in which vacation is not near the top of the list will be a "bad" year. We made a very conscious decision to see and understand (and ensure that our children see and understand) other cultures - and also just to enjoy going to the beach or riding a jet-ski!

A tip to motivate NOT buying a new car: Track all auto expenses INCLUDING depreciation and insurance and that $1000 transmission job on the old heap will feel like a bargain. Every time I pay a mechanic to keep my car running I feel good. Not that I enjoy handing over my cash, but because I think of the months of savings I have just accomplished by not having to buy another vehicle.

[Old Limey]

@Mark
I'm with you about vacations.
Geography was hard to remember and never very interesting at school but travel brings it alive.
I could write a book about our travel experiences, many of which are unforgettable.
We visited Bali 5 times and made many good Hindu friends there, attended a variety of their religious ceremonies and grew to love their ethnic music and dancing.
I visited Nepal three times, once with my wife, and likewise made lots of Buddhist friends there, especially the Sherpas that helped us over high passes and to the top of several mountains.
In Indonesia we hired a Moslem driver for a week and drove all over Java, he took great care of us and introduced us to the culture.
In the Amazon we travelled up a tributary by canoe and stayed in the village of a tribe of Machinguenga Indians. In Thailand we hiked through the areas where the hill tribes lived and met many of the ethnic minorities that have settled there. In Africa we visited Masai and Samburu villages. In China we travelled from coast to coast by train, climbed the Sacred Peaks, visited many temples and also the birthplace of Confucious. In America's wonderful southwest we have visited many indian reservations and read about the wisdom of some of their great chiefs. Visiting Russia was another great experience, especially after spending my whole career helping to produce nuclear missiles whose sole purpose was to blow them to smithereens.
The travel company we use these days emphasizes 'home hosted visits' and we have had wonderful times breaking bread with families in many countries.
Travel doesn't just teach you about geography and other cultures but above all it broadens your outlook on religion, especially for someone that was raised in England where there is a state religion and you are brainwashed from birth into becoming a protestant. After almost six decades of travel I have grown to appreciate the inate goodness in all religions but personally we are now confirmed agnostics.

[D]

@Old Limey, Mark:

I like the way the both of you think - nothing beats experiencing it first hand! Three years ago my parents took our whole family (all 8 of us) to Turks and Caicos for a week. We stayed on a private beach away from all the touristy stuff and had the best times of our lives. My nephews are still talking about it today; "Remember when we were at CurksN'Cacas..." (they're still learning to say it correctly). In any event traveling has become a big part of our budget!

[Mark B.]

@FMF,

The greatest thing about this is your giving. You are much more generous than most, and many people certainly benefit from that. Thanks for you contributions to society. Keep it up.

[Mike Hunt]

@Old Limey,

What does Coast to Coast mean in China? You mean Qingdao to Guangzhou or what? Or you mean West China to Coastal China.

-Mike

[Mike Hunt]

My 2009 breakdown is as follows:

Savings: 49% of gross
Taxes: 29% of gross
Charity: 10% of gross
Allowance for the wife: 4.4% of gross
Food: 2.5% of gross
Housing related expenses: 2% of gross
Fun money: 3% of gross

-Mike

[Mark B.]

@Mike Hunt -

LOL - Allowance for Wife - LOL

[Nick]

What about Mortgages/rent no-one seems to be mentioning that. In the UK we all either pay a mortgage or rent?!

[Nick]

And isn't it more useful to list expenditure as a percentage of disposable income i.e. Net annual wages

The reason I bring up rent is because rent makes up 30% of my (gross) annual wage, and that's not being extravagant, its just expensive to rent where I live (and I have to live there because of work) and buying a home is out of the question given the deposit requirements on first time buyers in the current climate

[Mike Hunt]

@Mark B, it's true, why is it so funny? BTW, I read your response to my wife and she said "ok, make it 5% then"!

-Mike

[Nick]

So you all own your houses out right then? No-one has mortgage and no-one rents?

[MikeS]

Nick, my mortgage makes up about 18% of my gross. FMF's post made me curious as to what my percentages were. My biggest is taxes at 23%, which includes my property taxes.

[FMF]

Nick --

We paid off our mortgage years ago.

[Nick]

I see, thanks for clearing that one up. I don't have my budget on me at the moment but I will share my full 2009 breakdown hopefully this evening or tommorow

FMF --

If you don't mind me asking how old were you when you paid off your mortgage? I am 29 now and a well paid proffessional, my wife also works, but in the UK it seems buying a house that would be sufficient for me my wife and 2 children is a Looooooong way off, we would be looking at around £240,000 and a 30% deposit, phew

[FMF]

Nick --

I was 34.