This Is How Much I Spend in a Year

My view of the famous Jerry Jones screen/dome from my trip to the 2017 Cotton Bowl, in which my Badgers narrowly defeated an over matched, but extremely motivated opponent with a bizarre team motto that was repeated almost nonstop by its fans – and yes, the expenses from this trip are included in the numbers below.

Words are all well and good. But without numbers, how much do they really mean? I’ve decided that in order to make this blog as valuable as possible for readers, I need to make it specific. As such, I’m going to give you a very intimate look at an important element of my personal finances. In particular, I’m going to show you what I spend on EVERYTHING. Obviously this is all specific to me, but to illustrate things more vividly, I’m going to go into detail on each of these “line items,” one post per week. Hopefully it will give some folks an idea or two on how to cut expenses without sacrificing anything that’s important to them.

Before I jump into the numbers, here is some basic information about me for context. I’m a male in my early thirties with no dependents (not even pets) and while I spend my share of time with certain young ladies, I live alone. The numbers below are average figures between what I spent in 2017 and 2018. In 2017, I lived in an upper middle class Milwaukee suburb with a relatively moderate cost of living. But for most of 2018, I lived in the Galleria area of Houston, which is pricier than almost anywhere in Wisconsin, but still very reasonable for a wealthy part of a major city.

I work as an outside sales rep in the commercial finance industry. That affects a couple of areas of my spending. First, since I expense around half a dozen restaurant meals most weeks, I don’t have much desire to eat at restaurants in my personal life and as a result, I spend almost nothing in that category. This also cuts down on my grocery spending somewhat, although I like to cook and spend fairly liberally on groceries for the meals I do buy. Second, in spite of my employer’s generous vacation policy, actually taking advantage of it would cost me much more in income than in any other way. Plus, I travel a lot for work, resulting in general travel fatigue, and I’m single. So this is just not an area I spend much in. However, I consider both restaurants and vacations luxury spending categories and thus, if one were trying to live as economically efficiently as possible, these numbers would still be very low.

As I said above, I’ll get more specific about what I do in each area in subsequent posts. But in general, my lifestyle (note, I said lifestyle, not spending; the difference between the two is the foundation of my financial success) is somewhere between middle class and upper middle class and I save over half my gross income. In other words, there is plenty of fat in my expenses since I pretty much do whatever makes me happy. No economic constraints limit my spending besides my desire to increase my net worth rapidly.

The first number in each category is what I actually spent; the second is about what I would spend if I needed to live as economically as reasonably possible. I will note that the most advantaged living situation is two productive people under one roof, assuming they can trust one another and are on the same page financially. When I lived with my ex-wife and we were working on paying off a mountain of student loans, we spent more than my bare bones total figure below but didn’t come anywhere close to doubling it (keep in mind the figure is for one person, not two). So it is definitely realistically achievable. If you are astute, you will notice that I’ve omitted one very large expense: taxes and fees. In the interest of keeping things at least somewhat private, I’ve decided to leave that exact figure out, at least for now. I’ll simply tell you it is less than the total of all my other expenses but not by much. Plus, there is only so much one can do to limit that number when the majority of your income is W2. I’ve been investing more of my time into improving that situation and if I find success, I may post about it at a later date. Anyway, here we go!

My Average Annual Expenses Between 2017 and 2018

  • Auto maintenance/repairs: 1300 (500)
  • Cash donations: 2100 (subjective)
  • Clothing: 700 (100)
  • Food – groceries: 1700 (1200)
  • Food – restaurants: 500 (0)
  • Fun: 2100 (300)
  • Gas: 2800 (1200)
  • Gifts: 1200 (200)
  • Household expenses: 700 (300)
  • Housing: 12,600 (6000-10,000)
  • Insurance: 3000 (2000)
  • Medical: 900 (0)
  • Memberships: 300 (300)
  • Other: 2400 (0)
  • Supplements: 100 (0)
  • Technology services: 500 (350)
  • Utilities: 1100 (600)
  • Vacation: 300 (0)
  • Vehicle depreciation: 2100 (500)

Total: 36,400 (13,550-17,550)

How did I arrive at these numbers? And why the range in the housing category for the minimalist budget? You’re just going to have to stay tuned to find out…

Happy New Year!

Can you believe this blog survived 2018? Of course you can’t; you don’t exist because there is no one reading this. That’s all right. Did you have a good New Year’s? I know I did! For a few years running now, my celebration is always great. No, I don’t leave home for it. As wonderful as crowds of increasingly drunken fools, cover charges at bars that don’t normally charge them, and cops everywhere (seriously, it’s their damn super bowl) may be, I manage to resist. Why? I can go out and have a good time literally any of 364 days a year; I will leave this one for the amateurs. And there are always more than enough of them out there to make paying a huge premium over any other night a huge waste. Today I want to talk about what I do on New Year’s Eve because whether you like to take the night off or not, these are very important activities that can really help kickstart (that term didn’t used to mean online panhandling, sigh) your financial goals in the new year.

Throughout the year, I record my expenses, investments, and any other transactions. This can be done very simply using Mint or one of what I’m sure are many available apps. Or it can be done with somewhat more of a hassle but also the advantage of not connecting many financial accounts to a single online source if you’re like me and trust no one. Whatever method you choose, New Year’s Eve, or whatever day you do this, is the day it all comes together. So you want to be thinking about that end goal when you set this all up in the first place.

Anyway, while many people are out having one last hurrah before they swear off everything fun for at least the week or two their resolutions survive, I’m at home reviewing what I did over the course of the outgoing year and setting new goals for the new one. All those transactions get aggregated into a handful of spreadsheets, which I use for both direct analysis and creating financial statements – at least my lazy man’s set of financial statements – an income statement and a balance sheet. Screw you, cashflow statement and statement of owner’s (or stockholders’) equity!

The income statement puts all my income sources and expense categories in one place, making it very easy to see where I did well and where I didn’t. This year, there was plenty in both categories. My balance sheet shows me where I stand with everything right now – all my assets and any debts I would have if I were someone who did. These statements are especially useful when comparing them to last year’s versions so this exercise really needs to be done for at least two years to see the full value.

Why do I do this? Sure, part of it is because there is something wrong with my brain. I’d be lying if I said I don’t write a little executive summary and then read it to myself in a poor imitation of a CEO on an earnings call at the end. I do. But it amuses me. And I believe that at least a basic version of this process will help anyone. Not only do you get to see exactly where you stand financially, but if there are any concerns, you can go back and see the exact transactions that got you here. I can’t imagine a more effective way to look back at your year, set goals for the next one, and have a great picture in mind of exactly what it will take to meet them while doing it.

After all, fail to plan, plan to fail. And the information gathering stage is a vital part of planning. If your life is a ship, you’re the captain. How crazy would it be for a captain to care neither where he intends to go or even where he is now? If you want to improve your finances over the next year, and I think we all do, my New Year’s process is a great way to start moving in that direction. And no, you don’t have to do it on New Year’s. After all, if you do it a couple months later, you won’t have to go back and make updates when you have your final tax figures in hand like I do. But then again, your year will also be less fresh in your mind and I think you will lose some of the effect of punctuating one year and outlining the next. Everything is a trade off.

If you don’t know how to create an income statement or a balance sheet, I will outline the process – although before I do that, I will recommend that you learn the basics of accounting. It is a horrible field to work in. Horrible. I know because I did it for a while. But it is a very valuable skillset whether you want to gain insight into a publicly traded company you’re considering investing in or simply trying to understand why things are the way they are at work and how you can get ahead. With all the ways we waste time, I think it’s a crime not to invest some in educating ourselves on an ongoing basis. And accounting is a highly recommended area to do that.  

A balance sheet is simply an expansion of the basic accounting equation: assets minus liabilities equals equity. This equation really is the key to life. Think about it. It could just as easily be calories taken in minus calories expended equals live or die and then it literally applies to everything alive. So first you list your assets –  bank accounts, investments, vehicles, real estate, etc. These are the total values mind you – not the equity you have in them. Then you list your liabilities – any loans, credit card balances (hopefully not!) IOUs to your Mom, anything you owe anyone. Finally, you subtract total liabilities from total assets and you have your net worth. Some folks think you shouldn’t include your primary residence in that but let’s not split hairs. The point is to have a big picture view of your financial life and a basis for comparing one year to another. Oh. Every balance should be as of a specific date – December 31 in this case.

An income statement is a whole year statement as opposed to a snapshot at a specific point in time like a balance sheet. It looks a lot like a balance sheet but instead of assets, you start with income sources – employment income, business income, investment income, credit cards (yes, that’s in my income section ONLY; I’ll post a guide to doing that soon), and so on. Then you list your expense categories – housing, gas, food, insurance, taxes, everything, however you want to break it all up. Total income minus total expenses gives you your net income for the year. Bonus points if that amount for 2018 equals the difference between the 2017 net worth and your 2018 net worth from your balance sheets. Full disclosure: mine was off this year and I don’t care. It was by less than $1000 and even my insanity has limits.

Questions? Leave a comment or shoot me an email. Oh, that’s right. No one is reading this. Oh well. My net worth is soaring, even in a bad year which 2018 certainly was for a handful of reasons (but now I know the how and why and I can work on making the necessary adjustments), and my New Year’s exercise not only contributes to that indirectly by getting me in the right mindset, but it documents the whole thing for me. Here’s to a happy and prosperous 2019 for everyone!