My new budget for 2008
Posted by Frugal on April 28th, 2008
While doing this new budget, I was extremely impressed by the tools provided by the credit card companies. They have made the budgeting process so much easier that you no longer need to spend hours and hours trying to figure out where your money has gone. All of them provide spending by categories and dates, so that you can easily figure out your own spending style. Although the tools will never be perfect in categorizing every bill, at least it’s a very good start.
|
item |
amount |
comment |
|---|---|---|
|
Mortgage |
2200 |
This is not the true value that I pay, but only serves as what I should be paying in terms of interest cost due to carrying a mortgage, or the equivalent rent that I should be paying. |
|
Homeowner due |
165 |
Includes the insurance for the condo. |
|
Electricity & Gas |
120 |
|
|
Water |
26 |
|
|
Trash |
14 |
|
|
Local Phone |
16 |
|
|
Cell Phone |
9 |
There has been some increase due to usage, but here is how I get it so low. |
|
Long Distance Phone |
20 |
Mostly it’s international calling cards. |
|
Cable/Satellite |
17 |
Most vanilla plan because I can’t get clear TV signals. |
|
Medical Insurance |
137 |
Covered thru my employer. |
|
Car Insurance |
75 |
Only pay about $900 a year for two old cars, liability only, plus full coverage on 1 new car. |
|
Gasoline |
260 |
My round trip work commute is 24 miles. My car has about 20 miles/gallon. |
|
Car Maintenance |
40 |
Oil changes + prorate for changing brake + 30K/60K miles service. |
|
Travel/Vacation |
385 |
Annual of $4600, mainly for flying (internationally) back home to visit parents. |
|
Food + diapers + baby milk powder |
415 |
Does not include dining out. |
|
Dining out |
265 |
Never realize that it’s quite a lot of money spent here. |
|
Toys/Books for children |
50 |
|
|
Preschool/other educational expenses |
0 |
Currently zero, but expect hefty increases starting next year. |
|
Wife’s allowance |
350 |
Wife’s happiness is of the most importance. |
|
Cash Usage |
100 |
God knows where I spent these dollars. |
|
Charity |
290 |
Increase due to a more realistic assessment of my contribution. |
|
Miscellaneous/Clothing/etc. |
300 |
About $100 extra padding, while the other $200 do get spent on all kinds of things. |
|
Federal Tax |
500 |
Tax can increase very fast with additional income or without 401k/IRA contribution. |
|
State tax |
250 |
|
|
City tax |
24 |
|
|
Social security tax |
504 |
|
|
Medicare tax |
133 |
|
|
Property tax |
250 |
|
|
401k |
1292 |
Annual limit is $15500. |
|
Spousal IRA |
0 |
I’m not allowed to contribute to this due to my high tax bracket. |
|
ESPP |
1500 |
Employee stock purchase plan, maximum amount of $18000. |
Here are some reflections on the increase of my expenses from 2 years ago:
My gasoline cost increased from $160 to $260, mostly to due crude oil price increase and longer commute distance.
The other major increase in the total of food+dining is from dining out, even though the most (if not all) of the dining bill is less than $35 per family. This category has gone up by almost 50%. The main reason is that my kid is no longer 0 to 1.5 year old, and I can finally dine out.
My cell phone usage has gone up too from $7 monthly to about $9, due to the increase in my other side activities besides the blog. But the absolute amount is tiny in comparison to any other items. And yes, I’m still using T-mobile prepaid.
And I have also decided to simply budget for my charity spending, instead of deluding myself. It has been pretty consistent for past 5 years, and the amount of money going towards charity purpose will only go up instead of down. I have under-budgeted the charity amount somewhat, just to give myself a little financial breathing room. I think putting it at $290 monthly should be a good compromise.
My “vacation” expenses have gone up a lot because of the cost increase in international travels going back home, and also now I’m forced to take these travels ONLY during school recess.
In case you wonder, I also zero out Spousal IRA item since that is simply a “theoretical” contribution instead of a real one. My tax brackets have disallowed this contribution almost every year.
I also up $200 on miscellaneous category, which appears to be the right amount from my past 12 months of spending.
Looking forward, I expect that I will be spending more and more on children on educational purposes as they grow up.
From above, my total expenses (in white) are $5238, and my total taxes (in red) are $1661, and the savings (in green) are $2792. Assuming a household income of about $110K, or a monthly wage of $9167, my cashflow after deducting all the above items is negative $524, which needs to be deducted from savings. Please note that the above taxes are just the taxes that one might be paying at such income level, but I actually pay A LOT more (3X or more). This is mainly due to a very progressive tax system that extract a lot more taxes from any additional income beyond this level. My marginal bracket is at about 40%, instead of 20% from the above. The only problem is that it just doesn’t take much more income to quickly go to 40% marginal bracket.
The bottomline is that my net saving has dropped to $30400 from the previous $45000, after I account for the 15% discount in share purchases of my company ESPP plan. Some of the drop is due to the differences in what I’m accounting for budget, but nevertheless, the drop is significant enough to be observable from bank account balances. Unfortunately, I expect my saving levels to continue to dwindle, due to the increase in the child expenses going forward.
What’s the lesson here? I’m not becoming much less frugal, but my saving drops. Inflation accounts partially for the drop, but the main reason is as stages in life progress, your saving (if it is still positive) will be dropping to its LOWEST when your children start going to college. I’ve written an entire post (boring, but truth that you don’t want to hear) on this point to advise anyone out there to start SAVING NOW. The best time to accumulate your savings is before having any kids, especially before getting married (and after you just started working). The next best time to accumulate your savings is when your kids finish college, and before you retire. The rest of the time, one should consider oneself lucky to scrap away something left after all expenses are paid. If you have any doubts about my drawn conclusion, simply ask your parents.
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April 28th, 2008 at 4:01 pm
I am just starting my journey to be debt free and become wealthy I still am not convinced it can be done yet but I am still going , I have figured out bits and pieces along the way and have visited many sites , within the last couple of months I decided to blog about it and sign up for adsens to help me out of debt faster along with ebay and some small stock trading I am earning a couple hundred more dollars a week , your site is way ahead of mine and has many incredible tools for learning , I am going to figure all this out one way or another
thank you
April 28th, 2008 at 4:53 pm
One of my main goals for blogging at this site is to show the younger generation that it CAN BE DONE.
And the time to start the financial marathon is NOW, not later.
Best luck.
April 28th, 2008 at 5:49 pm
I can see you are a high earner, and you have a very detailed budget. I’m not sure where you live, but your utilities are extremely low , as is you auto insurance, I deduce you live in a low cost of living area, if that is true, you must have a very nice house. I live in Southern California and utilities, insurance and taxes are ridiculous.
April 29th, 2008 at 12:25 pm
Have you tried mint.com who categorize your transactions across all accounts? They also let you compare your spending in the categories to the averages for each state as well as many cities or the country as a whole.
August 28th, 2008 at 9:52 pm
I just stumbled on your website and love it! I live in San Francisco, single, close to your tax bracket. The numbers ring true. I am happy to say that over the years I have fought the tendency to develop expensive habits … and you are a millionaire+ now, but I am nipping at your heels.
It’s encouraging to see a kindred spirit.
September 11th, 2008 at 6:07 pm
Frugal how come you say you make less than 120k as a couple yet you don’t qualify for a roth ira, as long as you make less than 166k as a couple yyou should be fine.
November 16th, 2008 at 8:27 pm
Just found this blog..nice post, I agree the monthly savings start dwindling when you have kids.. To Eimesor, I am assuming Frugal’s salary is $180K as typically ESPPs are capped at 10% of income.. just a thought.
November 18th, 2008 at 9:30 am
I can’t believe your posts. You are fooling yourself. 110k income yet can’t qualify for IRA???? You must sell a lot of your ESPP. I guess with the market in the dumpster your ESPP is also down a lot. You get a 90k+30k headstart on anybody else so investing that wisely at the start even in CD’s would have spun off would have been around 250k today given average CD rates over the last 10-12 years. Sounds like you lucked into the housing bubble in CA. I am wondering if now you are upside down in your mortgage. Stop with the hypothecticals and start putting down your real spending, your real mortgage costs inlcuding outstanding balances and your real home value today. As for running at a loss every month now by $525 odd dollars that is called living beyond your means. Come on man. Your site is full of good stuff, but this budget of yours is total BS. Get real…
June 13th, 2009 at 3:16 pm
I agree with the previous commenter. You start by saying how easy it is to track spending these days, then give a made-up figure for mortgage and taxes. What’s the point?
Also, you say your insurance is for 2 old cars and 1 new car, but you’ve blogged about selling 1 old car. You drive an old Camry and your wife drives a new-ish Honda minivan, just like every other couple in the South Bay. 1 old, 1 new. Something doesn’t add up. Again, what’s the point?
This is just another PF blog that’s been slaughtered by the market, and has little left except misdirection.
June 15th, 2009 at 8:51 am
I am not putting the real number of mortgage and taxes, so that people can figure out the value of my home/mortgage, and my exact income. My car insurance has changed after selling one car. I’m paying $740 for 2 cars, with 1 car at full coverage.
And I have never taken any control of the money that was given by my parents until recently. In fact, it’s not really transferred to under my name at all. It doesn’t compounded for me either, because I have never intended to spend a dime from my parents’ pocket.
So for those of you who can’t save a dollar with your own budget, I feel truly sorry for your state as simply a modern day economic slaves, and nothing more.
June 15th, 2009 at 8:48 pm
No-one cares about your exact income. Knowing it’s around $110K is enough to evaluate if a budget is realistic. Putting down fake numbers in a budget is something I’ve never seen any other PF blog do. You may as well put taxes at $50 for all the sense it makes.
It’s really impressive that you recovered from $240K to $480K between end-08 and mid-09, without using your relatives’ cash, so let’s hear how that happened. And leave out the endless discussions of relatives’ cash if it’s irrelevant!