Uh-oh.
Work from home, save on lunch, no expensive trips abroad, less eating in a restaurant and so on, right? I should have easily saved a ton in expenses in 2020. How did it go then?
Total expenses increased by over 3,000€. For. Fucks. Sake.
How did that happen? Read on to find out.
Do you track your expenses? You should.
If you want to live a lean life financially, tracking your expenses every now and then is so sobering. Like me, you will absolutely find something of value if you start tracking your expenses.
The way I do it is not very complicated, but it does involve a bit of work. It helps if you pay for most of your things electronically. I don't use ATM anymore at all, and I've set up my phone so that I can pay everything with it. It makes tracking so much simpler.
It should be possible to export your transactions from your bank and categorize them like I've done. The most work I faced was copy-pasting the rows from my credit card bills. There are
But it's worth it. First of all, my annual costs for last year actually lowered to 28,848€ I'm embarrassed to say. The post from last year included an extra 1,000 for what we'll call a "handling error". It's fine. It's fine. Better this way.
My life costs me 31,942 € per year
This is the third time I'm going through my annual expenses and it's so sobering. Each year I have some expectation to how I think the year has gone, and each year I learn something surprising. So how did the year of a global pandemic affect my spending?
I'm up to 31,942€ in my annual expenses. At this rate I'm never going to be FIRE'd. I'm barely accumulating wealth faster than I'm adding expenses. I keep telling myself that I can cut my expenses if I need to. But can I? Have I fallen deeper into lifestyle inflation?
Read below how much I'm spending per category.
π️ Housing 7,593 € (-32 €) and electricity 365 € (-14 €)
I ended up excluding the housing fee from our rental duplex, since it doesn't describe our spending habits. When those are out, housing
One reason I calculate housing so expensive to me is due to lost opportunity cost: we own our home and because of that, the capital isn't working for us much. Compared to renting, it's roughly as expensive at the moment and the more we tie capital to our home, the more expensive lost opportunity cost makes it. In fact, out of the sum 54%, or 4,135 €, is "lost opportunity cost".
π Shopping 4,248 (+3,188 €)
What the hell? What are these costs? The top 7 purchases account for 50% of the total. A new dishwasher, expensive Christmas gifts, furniture for remote working. Is there something I should've left unbought? Maybe.
To be honest, most of the stuff I've bought have improved my quality of living, but not all.
π Restaurants 3,110 € (-446 €) and groceries 3,459 € (+1,614€)
I really thought I saved tons in Restaurant costs. And to a degree I did, but it's mostly because I wasn't eating lunch at the work canteen. So I'm not surprised I spent less in retaurants, but how on earth did I pay 1,6k€ more on groceries?!
Maybe our taste has become more expensive. We do seem to throw away food more now too. It could also be that in fact restaurant costs have gone down more, but due to many of those transactions being abroad, I just didn't share the bill.
Still, 24% of all my expenses go to food vs. 19% last year. Ewww...
π Car 2,906€ (+541 €)
The car cost includes deprecation (20%) and gas (30%), but the biggest expense has been maintenance (50%). Due to all of my insurances being bundled together, there are significant car-related costs in the insurance-section.
✈️ Traveling 2,566 € (-4,859 €)
I thought we didn't go anywhere in 2020? Oh yeah, yes we did, just before COVID hit and over the summer we toured a little bit by car. The nature of Finnish Lapland is just gorgeous!
I'm not extremely proud of our traveling as it adds to our CO2 emissions so much. I'm trying to more than make up for that by investing in solar energy through Sun Exchange and Trine. In fact, I managed to offset all my CO2 emissions in 2020 by investing, while getting around 7% interest on my investments. But I really should find less consuming ways to live. This isn't sustainable.
An interesting company to look out for is Havyard Group ASA in Norway. They're building zero emission vessels with Hydrogen to power even the biggest ships. Their stock rose over +800% last 12 months and insiders are buying. Imagine retro-fitting cruise ships with this? (no-one mention Hindenburg)
Any other ideas to invest in zero emission transport and travel?
π§Ό Cleaning 1,718 € (+1,718 €)
We sit around at home all day each day and yet we decided it's a great idea to outsource cleaning. To be honest, it's been one of the best decisions to improve our quality of life. And it's mostly because I'm such a bad cleaner.
π Insurance 1,384 € (-105 €)
⛷️ Hobbies 1,318 € (+525 €) and π½ Leisure 477 € (-67 €)
π Health and Wellness 664 € (+ 497)
π♂️ Services 574 € (+82 €) and π Transport 95 € (-70 €)
Not sure if "services" is a great category to have, since one of these is bike maintenance. Should that be a hobby thing? Or transport? Nevertheless, these are a mixed bag of services I need to buy.
π± Connectivity 50 € (- €)
Internet connections are pretty cheap for us, but it's only 100Mbit/s
Net income 64,001 € (-6,307 €)
So this is all after taxes are paid.
My income dropped by quite a bit since there were significant write-offs in the beginning of 2020. Other passive income increased though so the drop was less than what it could've been.
Outside of this, I'm working for my own company (side hustles), which I have excluded from this calculation. There isn't a straight forward way to calculate the net income impact from that, as there are many ways over time I can realize that.
With these inputs, my savings rate is 50% - the most important metric that matters when you are aiming for financial independence.
How about you?
Do you track your expenses? How do they look compared to mine?
If you don't, what's keeping you from doing it?
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