We
have started our family budget, tracking all expenses back in 2007. Initially
it was looked at as fairly cumbersome and time consuming exercise. However, over the period of a few years we
educated and trained ourselves to spend 5 minutes a day
in the evening to record all expenses.
Now
with the statistic we could more accurately predict and plan our expenses.
It also helps to clarify some fallacies and incorrect assumptions. For
example, as a young parent when you look at nursery cost you think that over
the period of time, as your child grows it will be cheaper. Our personal
experience clearly tells that it is not happening, nurseries keep rising fees and
even at “low inflation” you are lucky if you keep paying the same prize. However,
enough of that, let’s go directly to figures and who we spent $92,814 vs. previous 6 years.
Financial
independence family budget:
As
you could see our family budget figures for the last 7 years are distinctly
split into two periods: 2007-2011 and 2011-2015. The main reason is that we moved to a
different area, where the cost of living is significantly higher in all
possible respects.
I
needed to convert my last year expenses into US dollars and that are why it
appears that we spent less. This is true however only partially. Here are our
expenses in the local currency:
With
more information gathered it is interesting to look at difference not only from
the last year but from average value as well.
Our main savings from last year where on
dentist which is not covered by insurance,
less gasoline for the car, no
major furniture for the house and significantly less on travel (we went twice
on vacation last year – locally and abroad). This year due to the work load it
was not possible, so the expense happened in October 2015.
Quite educating to look at average figures,
which was only $6K USD different from average (this is not visible, as dollar
is much stronger, so it appears that we spent less US last year in comparison
with average). We spent less money due
to the deferred vacation but compensated it with more money on education for
the kids. This is easy to explain - one child left nursery and went to school,
the other one was born and did not go to nursery. That disturbed average
figure.
For the next year we could expect following
trends:
-
Educational
expenses would stay the same as this year.
-
Joy
would be above average, unless deferred again.
-
Rent
to go up by at least $1,500 a year (This
could balloon quite significantly if we
decided to buy a house).
I invite to have a look at percentage per
category comparison new locations vs. old one. Real life example comparison
Chicago vs. Oxford based on 7 years average:
There
is one distinct difference between Oxford and Chicago - percentage of budget
house rent and bills are significantly higher than in Chicago, while cost of
the child care is significantly less.
It
is bad news if you decide to stay in Oxford for long, as eventually kids will
go to school, while need for house and paying bills will stay.
Saying that Oxford is considered to be the
least affordable city in the UK to live in,
average annual salary vs. house
is times 16. That is why not having affordable housing is bad for the economy,
in Chicago with more money left on our hands we spent them on
miscellaneous items and this would only go higher, once kids are in school.
Otherwise
you could tell that prices in Chicago and Oxford are exactly the same, with one
exception, in Oxford these are in sterling pounds…
On in all I kept my last year intention to
stay under $100,000 for our expenses even at last year exchange rate, when the
dollar was much weaker. Plan for the
next year? Stay the same – under $100,000.
This may sounds insane but we are not paying
for cars or mortgage. The most expensive single item was probably airline
ticket last year…
On the other hand you could tell, if not for
the kids our budget would be ~ $27 K US less, should we own a house another ~
$23 K US is gone. We are only need
~$40-50 K US for our financial independence and freedom a year once kids are
out of the house and into the open world.
For sure we could trim further if required but it is off the point. I invite all to keep budget on the way to
financial independence and share true story, as it is quite fascinating
reading.
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