[This entry is almost entirely about my finances. If you’re the sort of person who is uncomfortable reading that sort of thing, best leave now.]
I spent a lot more in 2018 than I meant to.
Gnucash tells me that I spent $36,600.67. That’s probably close to the truth–I’m pretty good at entering things into the program–but I’m sure some stuff slipped past. For the purposes of this article, let’s round up and call it $37k. I wanted that number to be closer to $30k… and I overshot by more than twenty percent.
I should note that that number very explicitly does not include the taxes I paid last year, which was another $30,000, thanks to the sale of almost all of my tech-company stocks I got while I was an employee. Taxes cost money, yes, but you’re going to pay them no matter what, so it feels disingenuous to consider them with other expenditures. (Besides, my tax rate has already plummeted, since I only worked in January last year, and will drop again for 2019.)
I should also note that, while I do track, I don’t budget. That’s probably a mistake, but it turns out that my regular costs are very regular indeed, so a bunch of the variability comes either from stuff out of my control (maintenance, twice-a-year car insurance, etc.) or stuff I know I shouldn’t be spending anyhow (healthy servings of boardgames and videogames, mostly, with a light sweet drizzle of puzzle magazines from Japan on top).
Now, some amount of that $37k is pretty fixed. My rent is $650 a month, and I paid a bit more than that each month for my COBRA health insurance continuation. Yes, that means had I not had health insurance, I would have hit my $30,000 goal pretty much on the nose. I wasn’t willing to risk that, though, and I still feel that keeping said insurance was the right decision even though it cost me a lot of money.
In my heart, though, I know there’s a lot of obvious wastage in those numbers as well. (In a moment, you’ll even get to see it in graphical form.)
The first question is: did I get better at this spending thing over time?
The answer: yes, by a bit. My monthly spend rate dropped from ~$3,000 to ~$2,500 by the end of the year. That’s a good sign; were I to stay at that level for this year, it would save me ~$6,000 for the year, which is a significant chunk of change when you no longer have a regular income.
There’s still a whole lot of orange in the bars, though, which means that most months I spent north of $500 on unnecessary stuff. In fact, for the year, my Frivolities sub-section accounts for almost $11,000 of the $37,000 I spent. That’s… well, it’s stupid, not to put too fine a point on it. That leads to the second question: can I stop setting so much money on metaphorical fire?
Fortunately I realized the need to do that even before writing this up, and have already adjusted course pretty aggressively. For January it looks like I’ll have spent less than $300 on frivolous things this year, and part of that is an $80 once-a-year payment to Grandmaster Puzzles, which you should check out if you’re as much of a puzzle fiend as I am. On the other hand, I already know of at least one big Kickstarter in February that I’ll be backing to the tune of $300… ugh.
In addition, thanks to the Affordable Care Act’s subsidies being income-based rather than means-based, I’m not paying anything for my health insurance this year. That’s another $6,000 or so I’m saving this year.
Given all of that, let’s ask a third question: is it plausible that I only spend about $25,000 in 2019, rather than the $37,000 I spent in 2018? It is, and that’s my goal. I won’t be furious with myself if I miss it… but I will be if I break $30,000 due to unnecessary spending.
I do have one big purchase coming up that’s going to hurt the numbers a bit. My current desktop is more than nine years old, so calling it a “potato” is honestly a bit of an insult to potatoes. (I kid; as long as I’m not playing modern games, it actually still works perfectly fine.) I don’t plan on spending more than $1,200 or so on a new machine, all bits and bobs included, but we’ll see how that goes.
And, honestly, we’ll see how this all goes. I knew this first year was going to take some getting-settled time, and honestly that’s still going on. I suspect my expenditure rate will continue to drop over the coming year or two as I figure out what I do and don’t need to spend money on, and that’s on top of my having explicitly decided to spend less on unnecessary stuff.
Hopefully year-in-the-future me will be proud… or, y’know, at least not furious… at the soon-to-come me. We shall see!
Like you said, don’t beat yourself up because it is the first year. There’s a lot of adjustment to be done and acknowledgement is the first step.
Just curious if you’re against using a budget or just haven’t felt the need? My wife and I budget every month (we’re nerdy in that sense) but it’s also nice to know that we’re meeting our goals because of it.
I’m not against using budgets at all. Any household with two (or more) spending parties should probably have a budget, if only to make sure a] necessary things get paid and b] unnecessary things are distributed more equitably (or at least to each person’s satisfaction.)
For me, though, they don’t make a ton of sense. My fixed spending needs to be done and I’m the only one who’s going to do it, so that obviates point a] above, and there is no meaningful number I can budget for “fun stuff” when even scrupulous spending for it can be very spiky thanks to big Kickstarters.
If I ate out a lot, that might be a place where budgeting would actually come in handy for me; I could go “yeah, already ate out too much this month” and curtail it. But I go to a restaurant, like, once every other week at most. I’m not sure where else in my spending a budget would actually come in handy. That said, I know my situation is pretty quirky, and so probably shouldn’t be used as an example for anyone else.
As someone who lives alone, I do at least have a fairly simple speadsheet I use to keep track of my spending, which is reviewed at week’s end. Static bills and most other monthly/annual expenses are anticipated and subtracted by default, so much of the adjustment comes from what my credit card balances are (which I use for the majority of my frivolous purchases). I don’t do any strict budgeting per-say, just some monitoring to make sure I’m not spending too much money each month. Since I work, I still have have income coming in at regular periods, which will be different from you, but what the sheet basically shows me is where my discretionary income stands, and I adjust my buying of “fun things” accordingly (or at least ideally sometimes). You could probably do something similar by taking your annual spending target, and dividing it into monthly intervals. From there, you can subtract all of your bills and whatnot and use the remainder as the “money you can spend this month” target. You can tailor to other time frames as you see fit of course.
I do sort of do it at a year-long scale, in that I set a goal amount to spend when I set up each year’s book in Gnucash. I’m just not sure what interval I’d actually use for discretionary income, due to the aforementioned spikiness. Maybe quarterly would work? But that sounds like effort. 😛
Yeah, It’s a bit of work, especially in the beginning when setting it up, or making any big adjustments. I find that the spiky things are what end up fucking you in the end (for me at least), so part of it is to help combat some of that impulsive spending, or at least spread it out across different months. You may not get as much mileage from that based on working from retirement income.
It’s not a bad idea, honestly. When I see how the money usage situation settles down this year I may end up doing some broad-strokes budgeting. My hope is that I just manage to curtail the needless spending enough that I don’t have to bother, though. Wishful thinking… but thinking nonetheless.
I do a similar spending breakdown with a spreadsheet a few days after the end of the month. I export debt & credit card transaction CSVs then categorize each transaction into:
ATM, Bar, Clothing, Entertainment, Gift, Groceries, Home, Investments, Medical, Mortgage, Restaurant, Travel, Car, Taxes, Insurance, Utilities, and (Income)
Some of these categories are obviously more necessary/desirable than others. It helps me keep a check on bar/restaurant/entertainment spending in particular.
I tend to think of local/property taxes as a utility.
The categories aren’t sacrosanct. I’ll add/remove categories as life changes. For instance, when I lived in the Bay Area I didn’t have a car and mortgage used to be rent.
Smart. I could take that route too, given that the amount of stuff I do with cash (or cheque) is very, very low, but I prefer early entry.
You probably know this already, but: you should never use your debit card as a credit card, like, ever. Only use it as an ATM card (and some banks will actually give you an ATM-only one if you ask). The consumer protections on credit card transactions do *not* apply to debit cards, and it’s a potential way to get completely screwed over by your bank if something goes wrong.
Ah, yeah, debt card was a bit of misnomer. Basically all of the transactions on that account are ATM withdrawals and utility companies/banks/credit unions that only accept direct deposit from a checking account.
Gotcha. Interestingly, all of the utilities here in Lenoir take credit cards. The only thing I pay with a cheque is my rent. I’d do direct deposit… but it’s literally just to the owners of the house, so. Fortunately Capital One’s online banking has that “mail a cheque for free” thing, and it can be set up on a schedule, so I don’t have to bother. Cash is just for housecleaning and the guy that mows my lawn nowadays.