Our Financial Year in Review

Alright let’s talk about money! I track every dollar we spend and I think you should too. I much prefer the personal financial statement approach to budgeting and hopefully I’ll explain why in some future post I cover it in this post. So let’s take a look at a summary of what we did financially in 2016.

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A little bit of context

We’re a dual income household with no kids (DINKs!) living near a large city in Middle America. We have a modest home in the suburbs and commute to our office jobs. We’ve been in our careers for 5-10 years and have enjoyed the level of success parents are proud of but no one else really cares about – relatively high performers but future CEOs we are not.

Our spending habits are highly influenced by our dissatisfaction with our careers. We don’t dread every day, but we’re not exactly bouncing out of bed on Monday mornings. With that we appreciate our present opportunity to earn above average incomes and are trying to take advantage by living below our means. I love reading financial independence blogs and while I’m no badass or ultra-committed and relatable early retiree I am motivated by those who’ve shown financial independence and fulfilled lives are more attainable than conventional wisdom would suggest.

But enough about that – on to the numbers!

Where Did our Money Come From?

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Let’s break down our sources of income in 2016… well that was easy – it is all coming from our jobs. As previously mentioned, I work as an Accounting Manager for a largish company. My wife also has a cubicle-dweller job in a very stable and pragmatic field (lame!). Our salaries are nothing to complain about and both our employers’ cover most of our insurance premiums.

Additionally we both get matched on 401k contributions, I get matched on an employee stock purchase program (“ESPP”), and my wife receives an HSA contribution from her employer. These “perks” are often taken for granted but really add up – they’re 12% of our total compensation! I don’t include investment gains or dividends in income as they are occurring in tax-advantaged accounts – instead I think of those as equity items (see the net worth chart later in post).

Where Did our Money Go?

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Ok so our total compensation was $204,000 which sounds like a ton, but where did it all go? Our life expenses were the bulk of it at $61,000. This means we spend a touch over $5,000/month which is border-line embarrassing. We’ve since brought this down a little – but our biggest expense (Travel) continues to grow (I am not sad about this). Here’s a detailed breakdown of our expenses.

The mortgage principal refers to extra principal payments we made in our quest to be debt free (a goal achieved in 2017!). Check out my post on why we decided to pay off our mortgage instead of investing the extra cash.

The savings categories are pretty self-explanatory with “other” being my wife’s HSA and an after-tax brokerage account we fund. We’re assuming these years as DINKs will be our highest earning, so we’re trying to save in pre-tax accounts (401k and HSA) as much as the IRS allows. The “ESPP” is a program that allows me to buy company stock and receive a match from my employer. The generous match is really the only reason I participate and I liquidate the stock at every unrestricted opportunity.

The astute among you might notice my taxes on this chart don’t agree to my previous post dedicated to Taxes. For this chart I’ve taken out sales taxes and property taxes and moved them into expense. They just feel more like expenses, I think because property and sales taxes are variable – totally dependent on my spending.

Insurance is just health insurance – most of which is covered by our employers, but since I included the benefit in income I need to show the outflow here. Car and home insurance are included in expense.

How Did our Money Grow?

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Ok last chart. Our net worth increased $152,600 in 2016! I wanted to break down what was driving this increase and there are really only 3 components. The biggest is what we’re adding to savings which was outlined in the “Where Did it Go?” chart earlier.

Almost as prolific was market growth, which includes any dividends or interest reinvested. 2016 was a big year for the markets and we find it incredibly encouraging to see the money we’ve saved going to work for us.

Lastly I included the extra principal payments we made toward our mortgage. I include home equity in our net worth calculation, but I do not include appreciation (Zillow values). For our net worth calculation I just keep our home value equal to our purchase price and reduce by our outstanding mortgage. I don’t think of our house as an investment, I think of it as a place to live. Trying not to get on my soapbox but failing… rising home prices are generally not good for homeowner’s (gasp!?) Unless you’re planning on downsizing, rising home values mean you’ll pay more in insurance and property taxes, oh and your future home is also getting proportionately more expensive… but seriously I need to stop now, this could go on for a while.

So there you have it. That is a summary of our financial activity last year. I plan on posting monthly updates on our spending/savings/net worth so be looking out for that. I also think writing this generated some nice ideas for future posts. If it raised any questions or ideas about what you might like me to talk about, please let me know.

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4 comments

    1. I used Excel. Basically I just download all the transactions from my credit card and bank account websites into Excel every month, then I assign categories to each transaction. It’s a little time consuming but I like it. I use Personal Capital to track Net Worth and I know a lot of people use it to track expenses and really like it for that too.

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