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:
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:
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:
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):
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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