Single Ma’s 2008 Spending: The Devil’s in the Details
In yesterday’s post, Where Did My Money Go in 2008, I shared a summary breakdown of how I spent a net income of $90,303. The % for each category was reasonable: household (29%), savings (24%), rental/biz (22%), needs/wants (12% each), misc (0.5%), and debt repayment (0%). After further investigation, I’ve gathered the dirty details behind the numbers:
1. Debt Repayment ($0 – 0%): I have no consumer debt, but prior to November 2007, I was giving away almost 50% of my income to creditors. I don’t know about you, but there’s nothing worst than working 40+ hours and having nothing to show for it at the end of the week. That ish is for the crows. Now that I’m debt free, I have the flexibility to decide where I want my money to go. It’s a lovely feeling.
2. Rental Property/Business Expenses ($20,188 – 22%): A small amount is associated with Fabulous Financials, but the majority is rental property expenses. My townhouse was a blessing when I bought it as my primary residence in 2005. But when I decided to relocate for a new job ($20k+ more), better schools (A+ better), and convenience – it became my greatest financial strain. Monthly cash flow isn’t a major issue, but after depreciation, carrying costs during vacancies, and repairs (only minor so far, thank gawd!) – I’m in the hole every year. Thanks to the market, I no longer have 20% equity, so it will be damn near impossible to refinance for a lower fixed rate – despite having excellent credit and decent income. To make matters worse, the comps in the area are saturated with foreclosures and rock bottom new construction, which means I can’t sell – unless I sell at a loss. *sigh* Although I love(d) my house, I don’t think I will ever live in it again. So for the time being, I will continue to rent it until my tenant’s lease expires, then I’ll need to make a decision about the money pit.
3. Savings ($21,640 – 24%): This includes all savings and investments, excluding 401k. Some of it was saved the standard way that most people save – at end of the month after all bills are paid – but most was saved automatically through payroll allotment. I’m a firm believer in the “pay yourself FIRST” mantra. If I don’t, who else will? Besides, automation helps me avoid temptation because I have to think about every dollar that touches my hands. And when I’m tempted by shiny things, the end result can be disastrous. So I set it and forget it, then I’m able to achieve my goals and spend what’s left with little remorse.
4. Household ($26,029 – 29%): This includes my uber high rent and standard utilities (electric, gas, and water). Trash and internet is included in the rent, but I don’t have cable or a landline. When all you have are the basics, there isn’t much left to trim. I guess I could have moved to a cheaper place, but I love my little neighborhood. I really do. It has every convenience and luxury a girl could possibly need. But the rent is REE-DIK-U-LUS! And buying is out of the question. Can you say 700 sq ft, 1br condo for $450k? Puh-leeze! Believe it or not, it’s pretty standard for the location and I don’t see the prices changing anytime soon. *sigh* Oh well. My lease is scheduled to expire in May and I plan to renew for one more year. I hope the rent increase is less than 5% – it was only 3% last year. When BabyGirl graduates HS next summer, I’m out of here.
5. Needs ($11,200 – 12%): I define “needs” as things that are essential to my daily life. I can function without a few of them, if necessary, but none of them would be first on the chopping board if I were in a financial bind. Overall, I think my spending was pretty normal. I expect some areas to decrease this year while some may increase. In the end, the total will probably remain the same. Here’s the breakdown:
- Groceries & Essentials – $2,453: Hmm…this averages about $200 per month. I expected more. This will definitely increase in 2009.
- Medical – $2,026: Most of this was final payments on BabyGirl’s braces and retainers. The rest was annual exams and routine care. I expect a 50% reduction this year.
- Car Related – $3,815: My car has been paid off for almost 2 years and she’s in excellent condition, but I still incur regular expenses to keep her running smoothly.
- Auto Maintenance – $1,213: I bought a new set of tires last year, Good Year Triple Tread. Expensive but worth it. Needed a new oxygen sensor. Renewed my state registration. And the rest was spent on quarterly oil changes and annual maintenance. This year, I expect an overall 50% reduction.
- Auto Gas – $1,615: I damn near choked when I saw that number. Only two road trips and local travel. *smh* I hope $4 gas will remain a distant memory. I plan to take more road trips this year, so the net effect will probably be the same.
- Auto Insurance – $987: I try to shop around every 6 months to make sure I’m getting a competitive rate, but I was lazy last year. I don’t think my premium is bad but I need to make sure before I renew the policy again.
- BabyGirl – $898: School related activities and fees. She worked last year so she purchased most of her personal wants/needs. We’ve decided that she will only work during the summer months. So as we prep for senior year and college, I expect this amount to increase significantly in 2009.
- My Pooch – $943: Wow, I spent more on my dog than I did on my child! Ha! This number is unusually high because my poor baby was infected with e-coli and it caused a UTI. The vet/lab bills caught me by surprise. Other standard expenses include annual vet visit, vaccines, meds, and grooming. I expect a 20% reduction this year.
- Cell – $1,064: Whoa! That’s a lot of talk time! Sadly, I don’t expect this to change much.
6. Wants ($10,941 – 12%): I define “wants” as things I would eliminate without a second thought if I were in a financial bind. Due to the economy, I cut back on many things. By the look of these numbers, you can’t tell. LOL I can’t promise that I’ll cut back anymore, so I don’t expect the total spending to change that much in 2009. Here’s the breakdown:
- Entertainment & Dining Out – $2,160: Once again, I spent just as much in restaurants as I did at home. And you know what? That’s cool. Cooking is not my favorite activity and I don’t expect that to change anytime soon.
- Shopping – $1,246: Actually, I’m a little surprised by this because I had two shopping strikes last year – 2.5 months and 4 months, respectively. So that means I spent all of this in 5.5 months? Hmm…what did I buy? Must be more selective and focus on quality. This will definitely increase in 2009.
- Donations – $3,087: This is about 3.5% of my calculated net income but I could have given more. At least $4,500 or 5%. I need to plan my donations better throughout the year. Maybe create a separate savings account that’s earmarked specifically for donations. Hmm…whatever I decide, I expect this to increase in 2009.
- Personal – $1,008: I’ve cut back in this area considerably. Didn’t think I had it in me. Nothing a quality blow dryer, ceramic flat iron, and good hair products can’t cure. I still visit the salon but not nearly as often. I keep my nails natural and clear, but I still need regular pedicures and occasional spa days. I will try to stay within this total during 2009. *side eye*
- Travel – $3,440: Most of this was spent during the summer – one vacation and two extended weekend excursions. See what happens when a single mom gets 8 weeks to herself? LOL I expect this to increase in 2009. Work Hard, Play HardER!
7. Miscellaneous ($345 – <0.5%): This is a catch-all category for rare items that don’t fit any other category. Think bank fees, USPS shipping, membership dues, etc. This also includes about $70 of unknown, which is why I hate cash.
Compared to my 2007 income and expense review, I increased spending in areas that are important (savings) and decreased spending in areas that are not important (non-necessities and debt). Overall, I’m quite pleased.
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Wow i’m impressed how you kept track of your finances to the last dollar! I hear you on the high rent as Jersey’s a natural money pit in itself but if you want quality, you’ve gotta pay up. It’s a sad way of life but I look at it like you see it – a 700 sq ft condo for $450k or a 700 sq ft 1 br at ~$1450 a month – the apt is probably cheaper if you consider property taxes – what do you think?
Of course, I agree. With a condo, you also have those high arse HOA fees that can tack on another four/five hundred dollars per month. [-SM]
A large chuck of mine/my bf’s income goes to rent… We live in the NYC area so to get a decent amount of space in a nice area comes with a hefty price tag! To the tune of almost $2,500/month for a 950 sq. ft. 1 bed/1.5 bath. And we’re still just outside NYC! It’s insane. We want to buy at some point but like you mentioned, a 1 bed is easily $500K and that’s not practical for us or anyone really.
*dead* @ that rental price [-SM]
I didn’t realize you were renting. For some reason I thought when you sold your townhouse that you bought a large, single family home. Anyhow, I’ve debated going back to renting. I am financially secure and my job is stable, but with the recession and everyone feeling the pinch, I’m thinking that I, too, should cut back. I’m of course worried that I won’t get the full value for my house which was appraised at 450k—if it will even sell! I dont; want to take a loss either, and there are sooo many houses unsold in my area that have been sitting. So it’s either stay put and continue to pay my high mortgage, or move and rent it, which I’m not crazy about either.
But you’ve inspired me to track my expenses in a more detailed fashion. On the spreadsheet I use, I was lumping needs and personal expenses all together, but I think this year it will be interesting to see exactly how much is spent on what! So thanks…
Imagine having a loss on your rental property but not being able to claim it on your property taxes because your AGI is too high….sucks big time.
I wouldn’t mind having your problems, Big Money Grip! LOL Last year was my 1st year claiming the rental property, and I hired an accountant, so I don’t know how much my AGI affected the write off. [-SM]
It’s been a while since I summarized my annual expenses like this. I’ll do it this year when I do my taxes, because I know I spent more on ‘wants’ than I should have…
I love this post. I’m hoping in the coming months to do something similar monthly until I can handle keeping track as you did for a whole year. Right now I might need to do daily or weekly but I’m working on getting there.
Good job!!
Baby steps.
Buy yourself a small notebook and begin by tracking your daily expenses. Then graduate to a week. Then a month. After a while, it will become second nature. [-SM]
I am simply impressed by the details of knowing where each dollar goes. I am working on getting to that point this fiscal year ;o)
Good tracking for sure ;) And no debt repayment = sexy as hell girl!!! keep doing your thing…
Whew, that’s a lot of cash (and mental energy!) to the money pit. That number surprised me, I thought you’d be closer to breaking even.
From a monthly cash flow perspective, I earn a decent profit. But owning rental property is more than just mortgage vs. rent collected. From a tax perspective (including depreciation), I do not profit. Given the current market, the financial impact is even worse. But I keep reminding myself that this property was not purchased with the intent of being an investment. It was my home so I put more into it than I would have otherwise. [-SM]
SM, this is so impressive it is almost indimidating (no offense here, please).
What is your opinion on eating healthy even if it will cost more, or spending less money, however no necessarily eating the best foods in the world?
It seems that trying to save more comes with price tag of having to make sacrifices of healthy food against not so healthy food and vice versa.
I’d rather pay more for healthy food because I only have one body, but I can always earn more money. However, healthy is not always expensive. When you really think about it, healthy food simply have fewer additives/preservatives and require more prep time. More preservatives and faster prep, 9x out of 10, it’s usually junk. Trust me, prior to the spring of last year, I primarily ate a bunch of junk.
If you want ideas on how to eat healthy AND save money, try reading foodie blogs. Here are a few that I read regularly:
$5 Dinners
The Grocery Cart Challenge
A Year of CrockPotting
And why are you commenting under a different name? [-SM]
Sorry, I did not realize that, I had posted a comment one time and did not want my real name to be seen as it was CSS related and somewhat specific, I felt better to protect my identity than risk that someone from CSS is reading your blog as well, I was posting from work and had a different user ID set up there, I will change it back to me at work tomorrow.
Your careful record keeping is inspirational. The last time I was super attentive to every dollar in and out was one summer during college when I was saving for a semester studying off campus. That was – gulp – 10 years ago and since then there have been very bad times and much better times. I’m currently credit card debt free (hoooorayyy!) for the first time in, um, ah, forever? Down from a high over $25,000 in 2005 – paid off right after my 2008 tax refund (and obviously, a lot of pay down effort during 2007 and the beginning of 2008).
But I still feel like we’re struggling despite having an income that would be considered “high” on most any scale. With over $600/month in student loans (and a, believe me, lucky, total of about $90k in student loan balances – which is still $100k less than many friends) and our new mortgage in California, I feel less-than-stable.
Guess we need to do more to follow your first bit of advice to maximize revenue sources. Nothing makes me feel poorer than when I get my W-2. Where’d all that go! I would feel better (or maybe worse, but more informed) if I could give as detailed an answer as you can.
Ever since getting serious about paying off debt, i am notorious for tracking every penny. Every morning the first thing i do while everyone else is drinking coffee is, while waiting for my computer to warm up every morning, i record all my receipts in my full-page sized “check register”, where i record every type of transaction i made the day before: checks, debit cards, credit card (promptly paid off the following month), even cash purchases. It is SO helpful, and not really that painful when you do a lil’ every day.
I tried to break down the figures into the same categories as you, and here’s how it went for 2008: 1. Debt- 17% 2. Business- 0% (don’t have my own biz anymore) 3. Saving- 0% (seems bad, but i spent the money on a scooter to save next year on gasoline) 4. Household- 14% 5. Needs- 47% 6. Wants- 22% 7. Misc .5%
I included half of my gasoline to the “Wants” category, since i CHOSE to live an hour’s drive from work… I moved to a fun sea-side-type area, and after spending 10 hours a day in the office, i look forward to driving an hour thru the country to my little pad! So, my long-distance driving is sort of part of my recreation! :) I average 100 miles a day in work as well as my off-hours driving. Thus the scooter purchase at the end of summer 2008!
My budget for 2009: 1.Debt 0% 2.Biz 0% 3.Save 31% 4.Household 24% 5.Needs 30% 6.Wants 15% 7.Misc 0%
Now let’s see if i can stick to it! ;)