It’s taken me awhile, but just like the inevitability of dark chasing light or death stalking life, I’ve concluded that there is no such thing as a normal spending year for me.
I like to think of myself as quick on the draw, but for this one, I was the last one to show up to the party.Â
Idiot.
Just for some background, 2019 was the first year I tracked my expenses in detail. I’ve always had a running tally in my mind of what I thought they were, but last year was the first time I did a deep dive on all income received and every dime spent. It was enlightening to say the least. What I had assumed, was not actually correct.
Drum roll please… we were spending more than I thought we were.
Being a finance guy, I should have known that. Being comfortable with spreadsheets, why was I so late to peek behind the curtains? And the answer was simple: I thought I knew what I was doing. But like so many things in life, you can’t cut corners. You must put in the work, get your hands dirty, dig out the trenches and gather the data to honestly and unbiasedly measure the goal.
So, here we are. Year two of my new expense tracking endeavors. And the learning, has picked right back up from where we left off last year…
Now, for 2020, I know because of the pandemic, this wouldn’t be a normal spending year. Everyone knows that. Duh!
However, for me, 2019 was also not a normal spending year due to some big one-off items. Then, as I thought back and started to ponder my past spending/income more broadly over a greater time span, I realized surprisingly, that there has been no such thing as a normal spending year for me.
Which has been pretty fucking eye opening!
Here… I’ll show you what I mean from my past decade:
- 2010-2013 – I was paying for my MBA as I went, so every year I had much higher expenses for tuition than normal (whatever the fuck normal means).
- 2014 – We Spent our own money preparing for a small wedding in the beginning of 2015.
- 2015 – This is probably the only year I could use as a normal spending base – nothing crazy was happening or going on (too bad I never tracked it, plus, it being the only relatively normal spending year in the past decade, makes it abnormal… hahaha).
- 2016 – I was laid off, my income was cut, I lost my company car so had to buy a new one and had big medical expenses (detox and rehab).
- 2017 – I was unemployed for most of the year, so we cut our spending dramatically and only lived off my wife’s below median salary. It was a great learning experience in retrospect. Scary and stressful, but instructive, nonetheless.
- 2018 – I had a new job, but with my income back, we decided to go all in on a baby and pursue fertility treatments out of pocket and not covered by insurance that jacked up our spending.
- 2019 – I switched jobs again and cleaned up our balance sheet to get ready for our home purchase and have no debt – paid off car loan and student loans.
- 2020 – The fucking pandemic, all our spending was cut in half from the previous year, due to working from home and not being able to do jack shit.
- 2021 – This will probably entail higher spending due to a home purchase and fostering, plus our income will be reduced when my wife leaves her job.
- 2022 – Maybe additional spending on remodeling our new house and more furnishing?
- 2023 – Maybe finally, what our normal spending will look like? Hahaha. If I’ve learned anything so far… definitely not! Some new and unexpected annual cash outflow will always arise.
So, my biggest takeaway from looking at this year’s spending, isn’t really anything to do with 2020, it’s that when I started to compare 2019 and 2020 together, I was made astutely aware that there never has been such a thing as a normal spending year for me (at least over the past decade).
Fucking wild, bro.
In addition, here’s another tidbit that I’m ashamed to admit – one of the biggest improvements I’ve made financially both from last year and this year, is paying attention to my wife’s salary, and now pulling our incomes together to save and meet all our goals.
Hahahah…. I know, I know. You’re probably thinking, no fucking shit Q-FI, why the fuck wouldn’t you do that in the first place like any other nimrod?
That’s a great question, that I don’t have a good answer for. Simply put, this is how our life was…
In our relationship, I pay most of the bills and she usually buys the groceries. Prior to 2017, as long as she paid for the food and maxed out her 401K, her money was basically her money to do what she wanted with – I know, she had a pretty sweet deal! Hahaha. I didn’t pay attention beyond that and used my larger salary for all our bills and investments. Her extra money was her money.
That’s just the way it was. There wasn’t any financial infidelity going on, my wife does like to shop more than I do, but I’m also proud to say she’s changed her financial habits quite a bit over the last 2-3 years now that we have tried starting a family and buying a house, as well as actively pursuing FI.
So, in 2017, when we had to live off only her salary, you bet I started paying attention to what she had been buying. And as I’ve mentioned before, my wife has a way bigger heart than I do. So, her gift giving side needed a little bit of compromise on both our parts.
Alright, with all that introduction out of the way, let’s look at the key takeaways for Q-FI’s 2020 spending. Here are our total categories by percentage breakdown:
| Ranking | Category | % of Total |
| 1 | Home | 39.48% |
| 2 | Food & Dining | 16.64% |
| 3 | Auto & Transport | 9.96% |
| 4 | Pets | 7.27% |
| 5 | Health & Fitness | 5.93% |
| 6 | Bills & Utilities | 4.90% |
| 7 | Gifts & Donations | 4.06% |
| 8 | Financial | 3.04% |
| 9 | Travel | 3.04% |
| 10 | Shopping | 2.06% |
| 11 | Personal Care | 1.26% |
| 12 | Taxes | 1.26% |
| 13 | Entertainment | 0.47% |
| 14 | Business Services | 0.45% |
| 15 | Kids | 0.18% |
| Total | 100.00% |
Some relevant notes:
- In case you want to see my spending percentages for 2019, here you go. Next year I’ll just put them side by side in the table. Not sure why I didn’t just do that this year. Guess I’m too lazy.
- These are out of pocket expenses (after take home pay) not total expenses. Taxes and health would be much higher if I included pre-paycheck expenses.
- My top five categories last year were Home, Auto, Health, Food and Taxes. Not much different from this year. The only big changes were Pets (#10 in 2019) cracked my top five because all my other spending was so low, and Taxes (#5 in 2019) dropped out of my top ten (separate bullet point on this below).
- Home jumped to a whopping 40% (23.55% in 2019) of my expenses even though I paid less for this category than year last. That increase is simply due to all my other spending decreasing so much.
- Overall, it’s just a bizarre year of tracking, because the overall spending was so low it skewed everything else. And hey, I’ll take the lower spending, however, it’s basically a lost year in trying to glean any habits to improve upon.
- Taxes are also an anomaly this year. Long story short that I don’t have space or time to get into, I overpaid last year, so that’s why they are so low this year. It’s a cashflow timing issue, not that I actually paid less. Those bad boys are going to be coming back with a vengeance in 2021. There’s no hiding from Uncle Sam, especially in the current political environment!
- The only reason my Auto is so high is because I had to drop $1K on tires in the last week of December. If not for that, I would have killed it in this category since I was fortunate to ditch my commute for 9 months in 2020 and work from home.
Without getting into actual numbers, my total spending for 2020 was less than half of what I spent in 2019. Pretty amazing. That being said, there were some big one-offs that jacked up my 2019 spending. So realistically it was probably more of a 30-40% decline like to like.
Our biggest savings from the year mostly resulted from not doing that much and knocking off my 74-mile round trip commute since I started to work from home in March.
Well, there you have it. That’s 2020 spending for you.
I’m almost positive that there’ll be a big uptick in my 2021 spending with a house purchase on the horizon, but we’ll see and cross that bridge when we get there.
I hope everyone’s staying safe and having a great start to the new year.
We’ll continue year three tracking once 2021 is complete and in the books. Only a little over 11 months to go!
Ciao.
-Q-FI
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So, my personal finance minions and gleeful spending trackers, what was the biggest takeaway you learned from tracking your 2020 spending? Did your spending go down or up? Any life changing events that affected you either way? I’d love to hear how your year went.
Nice work, we saw a nice reduction as well in 2020. I think you just motivated me to start reporting “taxes” as a line item in 2021. I have been holding out too long on that category.
You forgot about the next ‘historical event’, likely scheduled in 2024.
Max
Hahahaha – yeah, I should have listed Earthquake or Pandemic part II for 2024.
I’ve kept my expense tracking to after take home pay really only because of simplicity. It’s easy to export from Mint and if I want to do total expenses it will be more work. But I’m thinking at some point I will switch. Everyone talks about the big three expense being Home, Transportation and Food. But when you really look at it, my big three have always been Home, Taxes and Health Insurance/Medical.
So once, I get the housing situation figured out this year, I think eventually I’ll do my current tracking and then add a total expenses tracking to include all taxes paid and health insurance premiums as well.
BTW… I believe I saw that you will be expecting a new baby some time soon. Congrats to you and your wife Max! That’s phenomenal news!
100% agree that there is no normal spending. I’m painfully and acutely learning this as I do my own monthly spending tracking/budgeting. This does get a bit disconcerting when I think about early retirement, as I forecasted my FI number on a normal annual expense…I shouldn’t do this. Good job on transportation costs be so low! I know I’m thinking of asking to work from home too, now that I’m an “office guy” and completely computer work oriented.
What I learned after I started digging into my finances this year was that we used to eat out way too much and 2020 was a great year to up our savings rate. The real test will be once the economy get to normal and we have the option to spend like we used to. 2021 will be spendy in the home maintenance department for me. Lots of exterior water damaged siding I’ll have to replace come sunny weather. Plus I have a vacation I’m looking forward to next fall that will likely be a budget buster too.
Good luck on the house hunting!
If I were you Noel, I’d use a FI range and not a single number. Plus, I know you’re smart so you’ll have flexibility built into it. I’ve got it in the queue to write a future post on this, but that’s just me. As you learned from your expenses, life is lumpy not symmetrical.
Honestly, I just got super lucky on the work from home thing, but man has it worked out. So dude, you should definitely ask. It was a huge money savings for me. But in addition, the real benefit is the time you get back not sitting in a car. I know that would be a huge plus for you to spend more time with the kids.
And I agree, the real test will be what do you do when normal life finally returns. I was looking forward to 2020 to see how I did after my first year of tracking in 2019, but the uniqueness of this year and probably 2021 as well, means I won’t get to see more normalized spending until 2022.
Thanks for the well wishes on the house hunt. Still going slow, but we’re staying patient.
Good stuff. While generally my ‘routine’ spending is pretty static over a 5-7 year period, there’s usually some semi-expected large expense every few years, be it a new roof for the old place or a more reliable AWD vehicle this year. Oh well.
Overall, 2020 was far lower than 2019, but that’s distorted since I was spending massively on building the new house. 2020 still had house stuff in it which made it much larger than the pre-2019 run rate, but lower than 2020. My projections for this year is that we’ll finally begin setting the new lower average future run rate. At least I hope so.
That’s why I’m antsy to lock in my future housing costs, and start laying down some routine spending I can estimate from. I have my ranges, but until I get the housing solved, everything is only conceptual.
I’m curious to see how 2021 plays out for you up North. If you end up being pretty accurate in your estimates or some new learning experience arises – hahaha… hopefully you (and the rest of us) luck out and get a break from surprises like 2020!
I challenge your premise a little here Q-FI. You’re absolutely right that there is no such thing as a “normal” year.
That said, much of the vagaries in our year-to-year finances are predictably unpredictable.
We won’t know ahead of time whether it will be major car repairs, replacing the fridge freezer, or an emergency dental treatment that leaves us with as much pain in our wallets as in our mouths. But we can be damn sure that there will be something!
Everyone is constantly experiencing “life happens” events, though perhaps a bit less dramatic than your list here. All we can do is simply average across all that chaos and noise, derive a rough baseline that represents our particular lifestyle, and run with that. It won’t be perfect, but it should be good enough.
Budgets are comforting lies we tell ourselves about how well financially behaved our future selves will be. By contrast, this data driven average approach is based on fact, our actions rather than our hopes and dreams. Not as comforting perhaps, but grounded in our behaviours and a more reliable indicator of what the future will likely hold in store for us.
Hahahah… I love that line – “Budgets are comforting lies we tell ourselves about how well financially behaved our future selves will be.” You really do well with the one liners, Indeedably.
I entirely agree with all of your points – the unpredictable should be predictable, once you start tracking and seeing the trends.
The big surprise for me wasn’t necessarily the “normal” unpredictable items, it was I had kind of forgotten how big some of my past one-off items were… grad school, wedding, new car, rehab and detox, fertility treatment… etc. are much larger expenses than replacing a refrigerator or car repairs. For some reason I got lulled to sleep after 2019, and it wasn’t until I really started thinking about in after 2020 ended, that I was like damn, I’ve had some big ones over the years that would have been interesting to analyze if I had been tracking my spending.
Always good stuff from you pal and thanks for the comment.
Funny you should draw that conclusion. I’ve been realizing the same, but I hadn’t organized it into an actual thought. You articulated it perfectly by saying there is no normal year. Exactly! A few years ago, I incurred the ridiculously high cost of renovating my master bathroom. In the years leading up to that renovation, I was paying off my student loan, buying a house, paying for renovations, rescuing a dog (who would have thought it was so expensive?!). I traveled a lot before the pandemic. This year I got a car. Man, it all adds up! I thought I’d spend less last year with the pandemic. Nope. Not at all!
I guess the main take away is to spend less than you earn and keep saving everywhere you can. It’s great you and your wife are now working as a team to get your spending and goals aligned. But I wouldn’t have minded her previous deal! ;P Lucky her!!
Good luck moving forward! You’ll do great!
Yeah, as I mentioned in the comment above to Indeedably, for some reason it had slipped my mind how big some of my one-off expenses had been over the years. I know we always budget for some unknowns, but I had forgotten how wild my past decade had been…. hahaha. Seems similar to you in some ways as well.
I think your takeaway is exactly the point, “spend less than you earn and keep saving everywhere you can.” And the wife spending was just one of those bizarre things I had never looked at, for no good reason. It’s funny how you kind of keep behaving in a certain way until you’re forced to really look at it. I can say that our communication has really improved after we started budgeting and goal planning together post 2017.
Thanks for chiming in Katie!
Honestly I agree with indeedably that most one offs are predictable. I’ve also found you can spread them in such a way that things are fairly level most years. Ie if you want to do home improvements doing them a bit a year keeps things relatively uniform. Our two normal exceptions are car purchases and the travel trailer. Kind of like a stock earnings report, I manage them as outside my normal expenditures because they are rare. (Cars last me a minimum of a decade)
2020 though was a different beast. It was exasperated by both covid and paying off our mortgage late in 2019. At present I’m still trying to plan to 2019 spending but all the numbers are still way below that line. Very weird feeling and perhaps a good idea for a post.
Must feel good having that mortgage paid off! Ha! That gives you a lot of flexibility. Great job.
Just me, but I think certain spans of life can be predictable. I think my past decade was a little bit of an outlier and had some big transition expenses and rough patches. I’m hoping the next 10 years will be more predictable. At least, that’s what I’m planning on. Then again, the pandemic pretty much stuck a fork in that one. Hahaha.
But as you and Indeedably point out, it all pretty much averages out eventually.
We’ll see. Thanks for stopping by FTF!
that’s funny you should mention couples finances. i have a whole category just called MB because i have no idea what mary begley bought with that money. when her 20 year J.O.B. ended in ’17 we went to the same system like what you are using. her part time job buys groceries and mine covers the rest. i read this post about 6 hours ago and instead of commenting right away i went and looked up all our expenses and made a crappy post about them.
a couple of other comments mentioned that “it’s always something” and i found that to be mostly true of abnormal expenses. we usually sort of put away for them and if they don’t happen we spend some and keep some for that leaky roof replacement. rock on!
Hahahaha… awesome. I’ll go read your post now.
The couples finance thing is always interesting to hear how different couples have evolved. Yours and mine seem pretty similar, that something changed and then we got on the same page. Pretty funny how that plays out.
Word Freddy!