Note: I’ve decided to not completely disclose our finances here. So I’ve included percentages instead of £ or $. You’ll still have an idea of how we spend and save but it gives my family some privacy.
The summer of 2005 was my ‘summer of dating.’ I was finally single and living in a big city and not training 18 times a week. There were no long distance or lifestyle barriers to looking for a mate.
It ended up being my last stint of dating because I met my future husband that August. But before him I met a lot of interesting men. Interesting but not a love match.
One man that I went on a handful of dates with confessed on our first meeting that he tracked every penny he spent. That he could tell me at that moment exactly how much money was in his wallet and checking account.
Bizarre, I thought, but smiled and said, good for you. This guy’s financial savvy and intensity was un-chic to me. If I can be honest it wasn’t that I found it extremely nerdy to know exactly how much money you had, it was that it made me think about how out of touch I was with my own finances.
I had student loans and credit cards and couldn’t tell you how much was on either of them or what the interest rate was. I could give a guess at what I spent on groceries and dining out each month but it would just be a guess. At that point in my life I was earning and spending and just hoping it all evened out in the end.
A Year of Tracking Our Finances
Of course, now I know exactly what we spend. I know how much groceries ran us every month for the last year. I know what those small coffees out or a lunch on the run cost us.
I’d been taking stabs at tracking spending since February of 2010, using spreadsheets and different apps, but it never really clicked. One of the reasons it wasn’t working was that I was doing it alone. My husband wasn’t on board with tracking until we moved overseas a year ago in May of 2011. With a predictable income he was ready to star tracking what we spent so he found a spending app that we could both use. For the record we use Smart Budget and you can read my review of it here.
What We Spent in the Last Year
Our tracking tool isn’t perfect.
And our use of it could be a lot better.
For instance, we put a lot of things under Miscellaneous. A lot. Things like passport application fees and the 20p it costs to use the toilet near the park we frequent. We’ve also used it to track money we wired back to Canada. I’d like to get a better idea of where that money is going so I’ll be adding a few new categories to our budgeting app.
Miscellaneous – 36.2% Money wired home (majority – 20%), random expenses and purchases.
Accommodation – 24.4% Includes rent, utilities and some random items like buying a vacuum when we moved.
Child 4.8% Includes part-time nursery/daycare fees, classes, drop-in fees and any clothing or toys.
Travel 6.2 %
Dining Out 4.2 %
Casual Spending 3.2 % Coffee, movies, rides at the fair, etc.
Public Transport 1.4%
Chris’s Work Lunches: 0.9%
Grooming 1% Hair cuts, eyebrow wax and tint, husband occasionally gets a goatee trim.
Dry Cleaning .7 %
Gifts .4 %
Mobile Phones .4 %
Charity .1 % This is random contributions. Our main charity contribution will be in the fall and we set aside money every month for it.
What We Saved in the Last Year
We have two focuses right now: our mortgage in Canada and building our emergency fund.
Our emergency fund is now at six months of low cost living in Canada (as in we live with family while continuing to rent out our property there). One of the reasons we will need a considerable amount of cash is the mortgage/rental income short fall talked about below. I think our goal is to double our emergency fund which we should accomplish in three years if we continue to put 5% of our annual income towards it.
We’re throwing everything else at our mortgage. We renegotiated a lower interest rate back in November and increased our payments by 15%. The shortfall between what our rental income and mortgage, strata fees and property tax is considerable (one of the reasons we are building a bigger emergency fund). We just made our first extra payment on the mortgage and are hoping to do a few more this year.
The other two areas of saving are our son’s education fund and our charity fund. We upped both of those contributions in the spring when my husband received a raise.
Here’s a breakdown of how we have split out our savings in the last year:
Emergency Fund: 70%
General Savings: 14% This account fluctuates based on contributions to our emergency fund and sending money back to Canada.
Education Fund: 10.5%
Charity Fund: 5.5% We will probably spend/gift this money out in the fall.
Confession: it would take too much time for me to breakdown what we have put on our mortgage and how much we have sent back to cover our short fall. It’s considerable.
Our other life expenses.
The other thing we haven’t been tracking very well is our financial life in Canada. We don’t have a UK credit card but we do have a Canadian one. Occasionally we will have expenses from our life here, hello iTunes, that go on our Canadian card.
It’s all quite confusing and I’d like to put some better systems in place so we have a grasp on our expenses at home. Right now we have recurring expenses like our life insurance policy that just get rolled into costs when we send money back for the mortgage shortfall.
The other interesting piece is that Chris and I have sporadic income that goes into our Canadian account. This income helps with the mortgage shortfall (yeah!) but we pay taxes on that income here in the Isle of Man. So some months we squirrel away money from our general living funds into an account for Isle of Man taxes.
It pays to know what you spend.
When I think back to the date that tracked all of his expenses I now see that it was neither geeky or obsessive. He knew what he spent and what he earned but it didn’t stop him from enjoying his life. I remember he told me that at one point he consciously decided to go into a bit of debt so that he could do a big trip he had been planning for years. He knew he could return to his job and be out of debt a few months later.
We’ve really enjoyed living in the Isle of Man in the last year. Some of it we may have enjoyed too much. Our dining out spending surprises me. Mostly because we don’t eat out that much. But restaurants here are expensive. For example we were out for a friend’s birthday with a few couples the other week. The restaurant was very nice but not white glove service. I ordered the Nasi Goreng and it was £15/$22. Ouch. In a similar restaurant in Canada it would have been £8/$12.
Our other big expense is travel. We bought tickets for the Olympics a few months back, my husband went on a solo trip to Dublin in May and recently to Manchester and I’m meeting my sister in Glasgow for a weekend soon. All of this has been within our generous travel savings but that savings account is at zero right now. We’ll have to reign it in if we want to save for a fall trip.
We’re thinking of cutting way back on travel in 2013 and just doing a trip back to Canada and a visit to Liverpool once or twice.
It’s not just because we could use that money elsewhere. We also want to sharpen our skills for living on less money. We want to easily be able to give up our luxuries – travel, dining out – when we need to.
Any other budget and spending geeks out there? Do you do an annual review of your spending?