Looking back to move forward

January 1, 2019
Dearest Z, E, and T,

It’s always wise to review the past in order to make necessary adjustments as you move forward. However, the main purpose of budgeting is not to look back. It is to help you make decisions in the moment and to look forward with intentionality. Your money will always go somewhere, it’s better if you tell it where it should go. Telling it where it should go ahead of time is always more valuable than looking at where it went after the fact. Our family uses You Need a Budget (YNAB) to plan ahead, track our budget categories, and manage our family finances.

With that said, here are some reflections on our spending last year.

1) Housing is hard to compare b/c we were without housing for 2 months in 2017 during our move from California to Florida (remember that awesome summer in Colorado!?) So we will compare FL 2018 housing to CA 2016 housing: FL mortgage+insurance+property taxes+HOA+Electric Bill = CA rent alone.

Advice: Living in a lower cost of living area will allow you to be more generous, save more, and have more $$$ for family fun.

2) When you purchase vs rent, guess what, you spend more in repairs and furnishings. Duh. That was the case for us in 2017-2018 vs when we were renting in 2012-2016.

Advice: Buying isn’t always cheaper. However, I think it usually makes more sense than renting and giving someone else your money. Eventually you can pay your house off (I recommend something you can afford to do on a 15-20 yr mortgage) and then your housing cost will be much lower than renting over the long term.

3) Groceries continue to soar year after year: up another 12% vs last year. We did reduce eating out by a full 20% though. Grocery Avg = $783 (or $156 per person) per month. Eating Out = $117 (or $23 per person) per month. I continue to be proud of our eating out costs. I don’t think there’s much we could do to get groceries down… 3 growing boys = lots of $$$ for food.

Advice: 10 out of 10 people spend more eating out than they think they do. In my experience, this is the main category people could cut in order to save money. Buying groceries is cheaper and normally healthier than eating out. Eat healthy and you’ll feel better and save on healthcare. Don’t waste money to pay someone else to make the food for you.

4) We spent less in vehicle gas than last year. We did drive from California to Colorado to Florida… remember E losing his flip flop in that hole in Louisiana? We spent more in gas than when in CA even though CA gas cost much much more… My daily driver in CA was a motorcycle (they’re dangerous, you’re not allowed to have one) and got much better gas mileage.

Advice: Buy used cars, not new. Don’t get a motorcycle, but if you do, wait until you have kids so you have a reason to not be stupid. Read this post or watch this video to learn how to avoid car debt and pay cash for your cars.

5) Medical bills were through the roof in 2018. Z and T spent some time in the ER at the end of 2017 which was paid in early 2018. T, remember watching Beauty and the Beast 5 times in 18 hours? I sure do! Mom’s ongoing medical costs are higher in FL than CA; which is the opposite of what I’d expect.

Advice: Have a high deductible health insurance plan. Save the difference between the “better” insurance plan premiums and the cheaper plan you have. When you have high medical costs you can use the savings to pay the deductible. In years when medical costs are lower, you have the savings for other things instead of giving it to the insurance company.

6) My most hated category – “Other Miscellaneous” is steady at $90/month. I’d prefer it to be lower, but as a % of our total spending, it’s immaterial.

Advice: Know what you’re spending your money on. Don’t waste too much of it on stuff you can’t even remember what it was a year later.

Love,
Dad