Perhaps one of the keys to financial independence for us mere mortals is to review our finances on a regular enough basis – at least annually. Specifically this might mean looking at expenses and income along with outstanding debts and investment performance. Half of the battle of course is to reflect upon avenues for increasing income (whether through education, a second job, investments etc) and reducing debts. The other half is to understand where one can reduce expenses to increase savings and investment rates, and taking appropriate action toward these ends.
With that in mind, I thought I’d post an annual report of my finances in 2015. It was an unusually expensive year for me (read: most expensive yet). I sold a car and bought one second hand, had to replace a laptop, bought a road bike for fitness and travel to work and travelled interstate and overseas more than ever before.
I made some smart and some borderline crazy decisions this year, financially speaking. I saved an emergency fund (now slightly over $7,000AUD), started regularly investing for the long term, topped up my retirement account, moved to a cheaper rental and bought the aforementioned road bike (the cost of the entry level road bike could have been halved had I had more success on the local second hand market, after months of waiting around I bought a new ‘last years model’ on sale). Other aspects I was pleased with were increasing my income by $1,460 on a side hustle (it may not sound like much, but it’s almost an extra fortnights income for the year), payed out two credit cards (one left) and re-started self-education on value investing. On the less savvy side, I followed my heart and bought a second hand but well maintained european car with low km’s at a price well below market value. The downside is that whilst servicing costs are very reasonable, parts are expensive (I had to fit it with new tyres, replace an engine air/fuel mix sensor and also chose to tint the windows [summer in Aus gets rather warm!]). Perhaps the most important aspect of the financial review this year was that I spent more than I earned. Several unplanned expenses occurred, some of which I wouldn’t for a moment have foregone (international and interstate weddings, I bought a suit – or rather, a very nice blazer to make a suit out of my existing wardrobe) and others expenses were just frustrating (replacement laptop for my old one which failed a few months out of a 3 year warranty) the reality is I slightly more than two grand more than I planned for.
You can view my December Net Worth Update to get a breakdown of ah… my current financial net worth (check the archives for previous updates!).
More specific details on the year past are continued below…all $ values are in AUD. I analysed my data by exporting my Pocketsmith transactions to .csv and manipulating these in excel. (You can read why I love Pocketsmith so much in an earlier post!).
Total income for the year: $46,471. A chart depicting the source of income is below (other income represents a side hustle editing manuscripts)
Total expenses for the year: $48,782. Net deficit: – $2,311. The chart below breaks down all expenses proportionately (plus it’s very pretty!).
Top 10 expense categories (these made up 90% of expenses)
|Food||Auto||Housing||Air Travel||Professional Development|
|Utilities||Gym & Fitness||Electronics & Software||Clothing & Accessories||Vacations|
Healthcare including health insurance, which made up most of this expense was the 11th most expensive category, at $1,648 and over 2.5x the next largest category. The category ‘Other’ includes Alcohol & Bars (not the sleazy ones! $644), Gifts ($512), Entertainment ($479), Personal Care ($388), Investment Education ($309), Fees & Charges ($263), Public/Private Transport ($148), PhD expenses ($125) and Credit Card Interest ($108).
As the chart above shows, the top three categories by a country mile were Food (groceries and eating out), Auto (registration, insurance, maintenance, servicing, detailing, fuel and parking) and Housing (rent, utilities, furniture, kitchenware etc).
Food: I spent $4,718 on groceries and $4,917(!) eating out. That’s an average of $7 per meal at 4 meals per day. One of my financial goals for 2016 is to reduce eating out to under $3,000 per year. If I can do that, I’d be rather happy with my food bills. I eat a 90% plant-based diet, with fish and eggs a couple times a week and red meat maybe once a month (meat is expensive!).
As I noted above, I sold my car at the beginning of the year (a Mazda) however included in the Auto expense category is the Mazda’s registration, insurance for 6 months and servicing prior to selling. For the car I purchased, Recurring Auto expenses for 2016/17 like fuel, servicing, insurance and parking totalled $5,284. Non-recurring auto expenses came to $4,148, yes, way more than I expected and yes, I’ve thought of selling it on many occasions, certainly if it costs more than $6,000 to own a car in 2016 I revisit the idea of selling it. Overall, using a car in 2015 cost $1.04 per km driven or a massive $25/day this year (excluding non-recurring expenses, it cost $0.58cents/km, slightly below the national average of ~ $0.70 or $14.4/day). Oh my god!
Keeping a roof over my head and a bed to sleep on etc cost an average of $24.92 per day. Nothing special to say here except that in October 2015 I moved from a place costing $210/week plus bills to $150/week bills inclusive. This should help save me a fair amount of money in 2016, particularly now that I’m within cycling distance to work.
The chart below shows my monthly income vs expense for the year.
Month of greatest income: September $5,494 🙂
Month of least income: February $1,982
Most expensive month: September ($6,514) 😦
Least expensive month: May ($2,643)
You can see from the chart above the second half of the year was more expensive than the first, and from the chart below, free cash flows for saving much less frequent in H2 than H1 (because, well, negative free cash flow is not good for savings).
Regarding short-term debt (i.e. debts excluding student loans etc), 2016 ended with slightly over $2,700 in credit card debt (up $2,200 since July and including $108 in interest charges for the year). By contrast, I accrued $263 in bank account interest. I contributed slightly over $3,200 in investments and $1000 after tax to my retirement account which now totals $31,905 (up almost $3,000 inclusive of employer contributions since 31st July). Interest earned vs payed is shown in the chart below.
Overall, it was a year with both good and bad financial choices. I won’t go as far to say any were ugly! I’m pretty happy I’ve identified the main areas I can save on (eating out, auto and housing) and have incorporated these into my goals for the year ahead.
What was your financial 2015 like?