Looking back to move forward (2020)

January 1, 2020
Dear Z, E, and T,

(Don’t want to read? Check out the video here) Another year has passed. The time is going so quickly and you’re growing too fast! We had a fun year. Just like last year, it’s time to evaluate our annual budget.

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, but to help you make decisions in the moment and to look forward. Your money will always go somewhere, it’s better if you tell it where to go. Telling it where to 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 manage our family finances.

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

1) Overall, 2019 was quite the anomaly. For the below observations I normalized the expenses year over year by subtracting out unusual income or expenses. For example, some investment properties sold, we had to purchase a new car, and we gave significantly more charitable gifts (from the extra income we received). I’m grateful to the Lord for his provision that is always right on time!

2) Housing: We stayed put for over 2 years! Our housing costs pretty much stayed the same, which makes sense. It actually dropped a little and that’s because in 2018 we were still settling in and purchasing furniture, etc. for the house after we moved. We also spent less in utilities!

Advice: In staying put we saved money by not needing to furnish a ‘new to us’ living space as well as not having any moving costs. On a personal note, our neighborhood, church, and school communities are all awesome and I don’t expect we’ll go anywhere anytime soon.

3) Groceries increased significantly from 2017-2018. However, from 2018-2019 they basically were identical. Groceries crept up a little while eating out went down a similar amount. I continue to be proud of our eating out costs ($22 per person per month). I don’t think there’s much we could do to get groceries down… 3 growing boys = lots of $$$ for food… and yet $160 per person per month isn’t too bad I don’t think.

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.

4) Vehicle expenses (gas, tolls, insurance, repairs) were within $30 from year to year. Nothing to note really, just fascinating the spending was so similar even though amounts moved up/down in each individual category.

Advice: Buy used cars, not new. Let someone else take that depreciation hit… if you do want a new car, hang on to it for 10+ years and you’ll probably be alright. Never borrow money. Check out this blog post or this video to learn how to avoid car debt.

5) Medical bills were through the roof in 2018. Luckily in 2019 we didn’t have any ER visits with you guys. However, Z needing to get started on his braces earlier than expected and adding the chiropractor visits didn’t help us save too much in 2019 vs 2018.

Advice: Have a high deductible health insurance plan. Save the difference between the “better” insurance plan premiums and the cheaper plan. 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) Vacation expenses were up 408%! (this is a good example of why using percentages isn’t always best). We spent next to nothing in 2018 so when we went to NY in 2019 it caused a major jump in this category.

Advice: NY was a blast! Always spend a little money and take the time to relax and have fun experiences with family. We’ll make sure 2020 looks more like 2019 than 2018 if at all possible. Where do you want to go?

Love,
Dad