How We Spent in 2016 and a New Challenge for 2017

Hello, the annual detailed expense report is now available!

We’ve been publishing our expenses since we started this blog, so this is the third annual report detailing how we spent our money. For the last five years, one of our New Year’s Day traditions has been to drink coffee while reviewing our previous year’s expenses in order to create a budget for the coming year.

It comes as no surprise that we keep track of our expenses. After all, if we are to run our home like a business, we must keep track of our expenses.

Last year’s spending was roughly in line with previous years, and we expect it to remain so until early retirement. The categories will change, but our living expenses are unlikely to change significantly.

We suffered a significant loss last year

We had another great year financially, but it was a rollercoaster ride emotionally. My mother died in 2016, and nothing will ever be the same without her. We will always cherish the wonderful memories we have of her.

Since our motto is to never take our loved ones for granted, we have no regrets because we spent as much time as we could with her. Our loss also served as a reminder of why we are pursuing FI—to have more time to spend with our loved ones.

We’ll miss you, mom.

How we classify our expenses

Speaking of life and death, we try to be mindful of how we spend our money because it represents the life energy we sacrificed to earn it. We can spend less on things that don’t add value to our lives and more on things and experiences that enrich our lives and bring us true happiness by lowering the cost of housing, dining, and transportation.

If you’re new to the blog, our expenses are classified as essential, discretionary, and gifts/donations.

Essential Expenses

We spent $13,438 on necessities. These are essential expenses that we cannot usually avoid.

Net Rent

What that heck is net rent?

We cheated on this one. We apply our rental property income to this line, which is why it is so low. Our monthly rent is $1,150. We decided a few years ago not to buy a house and instead invest the money in a rental property. We feel better knowing that someone else “pays” our rent, so we consider the rental property revenue to be a wash.

This gives us a psychological boost because we don’t feel like we’re wasting money by renting, and it also allows us to see how much we spend on housing after making this decision. We properly report it as income on our tax returns.

Discretionary Expenses

We spent $19,888 on discretionary expenses. These are expenses that we can eliminate if necessary.

Alcohol & Bars

We intended to spend less on alcohol last year but ended up spending more (at least on paper). On paper, this means that in previous years, the cost of drinking at an all-inclusive resort was buried under the cost of hotel travel. We didn’t go to an all-inclusive last year, so we had to pay for alcohol separately.

We also split any alcohol purchases from restaurants as well as our grocery bills. That way, we can see exactly how much we’re spending on alcohol.

We had a big wake-up call in August when we had a month of change and realized we were spending nearly $5 per day on alcohol. Even if we don’t drink every day and spend more money because we buy more expensive mixed drinks, that can’t be healthy.

The good news is that we reduced our alcohol consumption following the month of change, as shown in the graph below.

We spent more money on alcohol in February because we went to Punta Cana and did not stay at an all-inclusive resort.

We have a new challenge!

We’ve decided to go alcohol-free this year after much deliberation in our household, so our goal is to have no alcohol expenses. We’re up for the task. There will be no alcohol in 2017.

Fees, Interest and Bank Charges

The $0 in this column is not an error. There were no interest charges in this case. There are no car payments, credit card interest payments, or anything else that requires us to pay interest to a company. Those days are over, at least for Tatiana, who never had debt.

We are debt-free and intend to remain so.

Shopping

Last year, we spent an unusually large sum on shopping. I wanted to break it down so that we can keep track of it in the future. We needed to replenish a lot of clothing in the clothing department because we hadn’t done much shopping in previous years.

In terms of technology, we replaced my laptop as well as Tatiana’s smartphone 4.

Another significant expense was hiking equipment for the Colorado trip, which included boots and sneakers.

Travel

We were able to take a few trips last year.

1. In February, we went on a 15-day vacation to Punta Cana. It was a fantastic experience exploring Punta Cana without staying at a resort. We wholeheartedly recommend it!

2. Tatiana returned to her homeland of Belarus/Lithuania in July after an 18-year absence. She had a long layover in Finland, so she and her mother took advantage of the opportunity to explore downtown Helsinki. It was a nice 19-day vacation.

3. While she was away, I drove to Providence, RI to spend time with my father and family.

4. In September, we flew to Colorado for a 12-day trip.

5. Finally, in November, we took a flight to Tampa, Florida. Then we drove to Gainesville and North Port for a total of 12 days to see the family.

Overall, we had a great time at our destinations, and exploring Colorado’s hikes was a lot of fun.

Back to our expenses, In 2016, our living expenses totaled $33,326 when essential and discretionary expenses were combined.

Our living expenses and the Freedom Fund

This is the amount we hope to fund with our Freedom Fund when we retire—an annual budget of $30,000 to $35,000, adjusted annually for inflation. We anticipate that some of our expenses will be lower in early retirement.

Gifts and Donations

A large portion of this money is used to help our parents. The remainder is used for charitable contributions and a few thoughtful gifts for friends and family.

We spent a little more than usual this year because we attended a few beautiful weddings and Tatiana’s gifts to friends and family in Belarus/Lithuania. This bucket received $10,933, or 25% of our total expenses.

We convinced everyone two Christmases ago to forego excessive gift exchanges for birthdays and holidays in favor of spending time with our loved ones. So, no, we didn’t just go overboard on Christmas gifts, and here’s the chart to prove it. 🙂

How we spent our money

So there you have it. Our spending money was divided as follows: 30% for necessities, 45% for “fun stuff,” and 25% for charitable contributions.

Our expenses are not expected to increase this year. It’ll be interesting to see how our expenses change once we retire. That retirement date has yet to be determined, but it is not far away. We can already smell it!

How did you spend your money in 2016? Did you spend more or less than you planned? Where did you spend more or less money, and why?