Very few families talk about money, but my mom did. As a kid, if I asked questions about cost, she always answered. I knew how much she made, how much our house and cars cost, and since I went with her to the grocery store, I knew how much she spent to feed a family of three. We didn't get much deeper than that, but it was enough to provide context for my life and our lifestyle.
As an adult, I've gradually become more interested in money: how I spend it, how I save it, and how I can optimize each. It's easier than ever with software that automatically imports data from various accounts. I simply log in, make sure all transactions are categorized correctly, and then keep an eye on a few budgets in categories I watch extra carefully.
It's not always easy to look at my spending. In some ways, it reveals my weaknesses and strengths, my good and bad decisions. But, ultimately, at least for me, putting my finances under a magnifying glass makes me feel powerful and in control of a life where many things are beyond my control.
How I Spent in 2016
Here is the breakdown of my spending and saving in 2016. In the interest of concealing facts like my salary, etc., I've used percentages of my net income rather than dollar amount.
Health and Fitness: 8%
Other (Entertainment, Personal Care, Taxes): 6%
TOTAL SAVINGS RATE: 31.8%*
*This includes cash savings, cash towards investments, and cash towards principal of my home. It does NOT include cash towards principal of my car, growth of investments, or any money towards interest.)
A few notes on my Top 5 categories:
Home (27%) - When I bought my condo in 2013, I only put down 10% and paid a small private mortgage insurance (PMI) fee each month. This year, I decided to make an additional lump sum payment to get me over 20%, partly to ditch the PMI and partly to feel like a badass. My house has actually appreciated in value such that I may have had 20% paid off, if including appreciation. However, the fee to reassess the value of the home was significant enough that I decided it was best to simply write a check rather than wasting money on fees. I also bought a damn storm door, which cost more than $1,000. (Yes, you read that right: a door.) It keeps rain from leaking in my deck door and lets air in during spring and summer and THAT, my friends, is priceless.
Auto (11%) - The ugly truth is that I owe money on my car, which I bought used, also in 2013. Car payments are shunned in the financial communities I follow (/r/leanfire, /r/financialindependence, and Mr. Money Mustache). I only fill up my gas tank about once a month, so the bulk of this cost is paying off the car (plus insurance).
Food (15%) - This is the source of my financial shame and my biggest area for improvement. I do not go out to eat Monday through Friday and eat home-cooked or grocery-bought breakfast, lunch, and dinner at work. 50% of this category is spent on groceries and the other 50% is on restaurants on the weekend. I fucking love eating at restaurants, and sharing a meal with my girlfriend or friends is one of my great loves. Still, I know there are plenty of times where we went out on a whim rather than intentionally, and this is what I'd like to change in 2017.
Investing (9%) - Every month, I automatically invest in a handful of stocks and mutual funds. I would love this number to be higher, but due to putting cash towards the house, I had to work on rebuilding my cash reserves.
Health and Fitness (8%) - There's no way to sugarcoat it: I spent a BOATLOAD of cash on fitness in 2016. Honestly, the tipping point was when I got a tattoo and saw the photo of my arm on Instagram. It looked flabby and shapeless, and I decided that I would prioritize (and dedicate financial resources) to getting strong and in shape... except I had no idea where to start. I was clueless about gym equipment, I didn't know how to work out at home, fitness classes scared me, and every time I tried to run on my own, I could barely manage an 11-minute mile without feeling sick and discouraged. I signed up with a personal trainer and finally joined the gym near work, which was paid for my company. (That's how lazy I was. I didn't use the FREE GYM across the street from my office.) The financial investment was a little overwhelming at first and I had to rebudget my life, but the cost ultimately kept me accountable and motivated. Today, I go to bootcamp 3x per week and am a member at two gyms, plus my arms are fucking jacked. Mission: accomplished. Plug: I got personal training and go to bootcamp at Functional Fitness STL.
So What About Savings?
My savings rate was just over 30% last year, but my cash in the bank was actually slightly less in 2016 than 2015. This goes back to my spending on Home, which included a fat check to get me over the 20% mark. However, that check went towards the principal on my mortgage, and thus it counts as savings. Still, here I am, with negative cashflow for 2016! This isn't something I'm scared of, but I know it would scare some people who like seeing cash accumulate in their bank accounts. I like watching my bank account grow too, but I also know cash in the bank isn't doing anything but gathering dust. It's a fine line between peace of mind and wasted resources. Make your money work for you!
The Plan for 2017 + Advice For Others
You would think that with all that data, I'd have a more concrete plan for 2017. The fact is, I don't. I am focused on building up my cash again and potentially taking on a home renovation project, like a bathroom or kitchen upgrade. I know I will stick more closely to a budget for restaurants. Other than that, I expect automatic savings in categories like Health & Fitness, where I've already scaled down, and Gifts and Travel, because NO WEDDINGS 2017. Fuck, yeah! I will also continue to use my budget tracking software of choice, Mint.com, because this keeps me accountable on a consistent basis.
I notice many of my friends and peers a.) rely on their aging parents for financial advice; b.) rely on their significant other; or c.) put their head in the sand.
PLEASE STOP, GOOGLE THAT SHIT, and EDUCATE YOURSELF. Knowing your own finances and/or playing an active role is empowering, and it is a skill you'll need for life. Learning about it is literally a Google search away.
FACT: Your parents WILL DIE. They can't give you advice forever.
MAYBE: Your parents are actually giving you bad advice. How are their finances? How did they get to where they are? Don't put your parents on a pedestal. You are a damn adult.
MAYBE: Maybe you'll get divorced.
MAYBE: Your husband/wife will die unexpectedly.
MAYBE: You'll never get married and you will have to plan for a financial future as a single person.
I have no idea if I'm doing it right, but I feel like I'm on the right path and I know I have the power to educate myself about any financial matter. How do you feel? Step one is simply looking at how you're spending. Where are you bleeding? Sign up for YNAB or Mint.com. Start reading and stop calling mom and dad. Get your sh*t together and get started.