Wednesday, November 30, 2016

Financial Independence Family Budget 2007 -2016

     This year I continue to analyse and publish our family budget.  Over the period of 8 years this helped us to understand better our expenses and more accurately plan our future.
     Tracking daily expenses takes no more than a few minutes a day. We are simply doing it in a spreadsheet.  More historical data helps to make sense of it, look at the inflation – actual and imaginary.
    For example, we have been renting out the same house for the last 5 years – home bills (energy, property taxes) cumulatively went up by 12%. As an observation - it is much more beneficial to stay in the same house when renting. Rent rate went by 4% over 5 years (once we moved out the property owner pushed it up by 12%, admittedly the house is still on the market 3 months later).

Financial independence family budget 2016-2007:
Financial independence family budget. True story -

As you could see our family budget figures for the last 8 years are distinctly split into two periods: 2007-2011 and 2011-2016.  The main reason is that we moved to a different area, where the cost of living is significantly higher in all possible respects.  
I need to convert my last year expenses into US dollars and that is why it appears that we spent less.  Local currency exchange rate is falling to USD (year to year basis over 15%).
 Here are our expenses in the local currency:
Family budget 2011-2016. 5 years family budget in the UK. Oxford cost of living.
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 in 2016 came from following contributing factors:
-         Education (in September our child went from nursery to school, which is relatively free of charge).  Expect to fall further next year by at least 50%;
-         Medical expenses were slightly reduced. Kids’ clothes went a little bit down as the school uniform is cheaper than normal clothes;
-         Adult clothing expense stayed down as well.
         Additional expenses:
-         Car is getting older and doing proper maintenance is getting more expensive. We also had minor incident, so there were deductibles and insurance premium went up;
-         We moved out of the house and there were some additional expenses – paint, end of the term cleaning, etc.
        -         We did not go on overseas vacation, so “Joy” stayed stable;
Next year projection:
-         For the house we bought mortgage payments are 30% more expensive than rent. The house is in the same area and same size as rental – this is price of emotional attachment and dream of ownership. Extra payment will be offset by lower educational bills (no nursery fees);
-         There will be additional expense “commuting” – for me getting to and from work, as well as second insurance for a car.  They are likely to be around ~$8K a year.
I am overall expenses to go up by approximately $12K a year, mainly due to commuting and fact that new house will start sucking in money. There is no economy growth in Western Europe and governments will do its best to unleash inflation, so salaries would stay or increase in notional terms.  Potentially it should help to pay off mortgage if we stay employed.   In local currency annual expenses  should be around 66 K .
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 8 years average (living expenses comparison between the USA and the UK):
Life in the UK vs. the USA. How much does it cost to move to the UK? Cost of living comparison - Financial independence.
     There is one distinct difference between Oxford and Chicago, as 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. The price will go at least 30% higher if you decide to buy house.
    On in all I kept my last year goal to stay under $100,000 for our expenses event at last year exchange rate, when the dollar was much weaker. 
  This may sounds insane but we were not paying for cars or mortgage last year.

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