I am lazy in a lot of things in life, but tracking my finances has never been one. I have been tracking my expenses meticulously with Microsoft Money since 2004. A college friend has been tracking his expenses since college days, and he inspired me to do the same. When he was upgrading his Microsoft Money to the latest version in Y2K3, he gave me his old software. One great thing about having guy friends is that they like having the latest gadgets and software, and they upgrade very frequently. Before Craigslist and eBay became popular, my friends would donate the older version or throw it away.
This is where I come into the picture. I love getting free second hand gadgets and software. What is better than giving your old stuff to a friend in need? And I am always in need of free stuff.
Since I started putting myself on a tighter budget, I thought it would be fun to revisit where I spent most of my money in the past 10 years. I am only listing the categories where the amount is significant. I have calculated the annual average of the past ten years, and compare it to my spending last year and the first half of this year.
|Expense Categories||Past 10 Yrs
(2005 – 2014)
|1||Housing & Utility *||298,411||29,842||21,066||9,209|
|4||Healthcare & Insurance ***||30,190||3,019||2,070||598|
|7||Clothing & Personal Care||16,654||1,666||2,157||200|
|8||Gifts & Donations||13,890||1,389||1,691||873|
|Total (rounded up)
* Mortgage payments include additional principal
** Includes a brand new car paid in cash
*** Include some payments I made for my parents in lieu of paying rent in 2004
**** Include one-time furnishing of a brand new home in 2007
I seriously spend a lot of money each year. Those numbers in the last row really scare me (Table does not include a few miscellaneous categories). Either the cost of living in Silicon Valley is super high or I am throwing a lot of money away. Who are we kidding? It’s both. I thought I was doing a great job being frugal, but the numbers prove otherwise. There is a lot of room for improvement. Categories 1, 3 and 4 are fixed expenses and that is how much they cost to live in the SF Bay Area, and there is not much I can do to change that. I just have to keep reminding myself that great weather is priceless and put a smile on my face. Thank you, MasterCard, for all the “Priceless” commercials.
The rest of the categories are variable expenses and I need to find ways to cut back. My mom often tells me that friends cost money, and I think she might be right. I am spending a lot of money eating out, vacationing and buying gifts for friends each year. Food is my second highest spending category and for the second half of this year, I need to cut back on eating out and maybe cut back on the high end groceries like seafood and organic food. I don’t eat out or vacation by myself, and I rarely initiate dining out or vacationing with friends, but I generally say yes when I am invited. I have a hard time saying no to friends. My philosophy is this, if someone takes the time to organize an event and thinks of me, the least I could do is show up.
I don’t have any extended family in the area and my immediate family does not exchange gifts during holidays or birthdays, so that means the gifts and donations category is all for friends and strangers. I believe helping people in need is also priceless, so I will continue giving to charities. My friends are my second family. They have given me the most memorable and cherished moments of the last twenty years of my life, so it will be extremely difficult for me to cut back on activities with friends.
For a brighter retirement and shorter road to financial independence, I will try to opt out on expensive activities and participate only in, or suggest more inexpensive activities with my friends this year. Once I reach financial independence then this will not be an issue. I must practice stronger discipline to resist instant and short-term gratification for a brighter future.
At least there is one silver lining in this table, and that is the Clothing & Personal Care category for this year. On average, I spent a little over $1,500 per year, but I had cut back drastically in the first half of the year. I went a little overboard last year, and bought everything I need and don’t need. But so far in this first half of the year, this category has decreased by 75% compare to the annual average. I will try to stay on track for the rest of the year.
How are you tracking your expenses? Quicken, Money, Mint.com or the old fashion Microsoft Excel? I manually enter all my expenses because I don’t like giving away my username and password to a third party software to import my data.
If you are using Mint.com or a third party online software, please read the following article: