2019 Expenses Review: Principles & Budgeting

What makes a relationship compatible? Some say it’s the 5 love languages, others say it’s couples personality.

For us, a big part is living according to our financial principles through budgeting.

Here’s our 2019 expenses review. It reveals how we approach life through the lens of financial budgeting.

What’re Our Fatfire Principles?

At a high level, my husband and I share the following financial principles:

1. Save 50% of income
2. Dual-income to early retirement
3. Maximize dollar earned per hour worked
4. Uninterrupted time for the family
5. Spend money on quality things

Financial Principle #1: Save 50% of income

Saving, for us, means saving at least 50% of our takehome pay.

We are lucky to be able to achieve this goal.

But this decision wasn’t easy for us, and we had to sacrifice to meet our 50% savings commitment:

• Minimize auto expenses: We take public transit to work and own an old, beat-up car with 200,000 miles and we intend to drive it until it breaks down completely.
• Rent, not buy: We rent a 2-bedroom apartment for $3,300 a month. Renting saves us more money in the long run. So we rent.
• Limited clothing: I rarely buy expensive clothing and only invest in a few quality pieces a year. My husband rarely spends any on clothing. Our children wear almost exclusively second-hand or gifts.
• Low travel and entertainment: We do not go to expensive concerts or go on lavish trips.

Financial Principle #2: Dual-income

Those of you who have babies know this. There is a crushing desire to just stay home and love them, all day long.

But for now, we’ve both work and will continue to work for at least ten more years.

We choose to have dual-income because we both make good money and we want to expedite our path toward early retirement together.

If one of us stays home today, the other person needs to work until he is sixty years old. And we don’t want that.

Financial Principle #3: Maximize dollar earned per hour

We could have doubled our income had we switched our jobs to finance. But we work in tech instead.

Why? Because we don’t want to max our total income. We want to maximize our income per hour of work.

Don’t get me wrong. It’s stressful working in tech, too.

But overall, we work normal hours, can take time off whenever we want, and make a decent amount of money.

This arrangement has allowed us to take on a truly equal partnership, where my husband does much of the housework, setting a great example for our son to follow as he grows up.

Financial Principle #4: Uninterrupted time for the family

After maximizing our income per hour of work, we use the rest of our time to live our life according to our values.

This means spending time together to play.

This isn’t a financial value strictly speaking, but time is money; it’s our most valuable asset.

I don’t want to miss the best years of my life and miss out on my relationship with my family just to end up with a few million dollars extra.

Financial Principle #5: Spend money on quality things

We minimize our expenses as much as possible. But we do spend quite a bit of money on making our home a great place to live.

We buy high-quality things that improve our health and convenience. Here’re the favorite things we’ve purchased in 2019:

2019 Expenses and Budgeting

Every year, we backward calculate our monthly budget knowing we’ll need to save 50% of our takehome pay. 2019 is no different.

When we calculated our budget in 2019, our budget came out to be $8,125. And after reviewing our 2019 expenses, the verdict is that we’ve not only met our goals, we’ve exceeded our savings goals – saving 57% this year!

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You might think it’s insane that we spend $8,000 every month and call ourselves frugal spenders.

But we could’ve easily spent more if we had a new car, a higher mortgage, or if we had just taken a few more luxury vacations.

We live in a high cost of living area so all things considered, we consider this a success story, and you’ll see why below.

Monthly 2019 Expenses, Trends

Here’s how our monthly 2019 expenses break down, month-by-month, across ten major categories.

You’ll see that it’s hovered above $6,000, but below $8,125, our budget limit.

Also notice that our month-to-month 2019 expenses started low but trended up, driven by an increase in food expenses.

In particular, we began to spend more on food around May.

It turns out this is because my job got suddenly a lot more stressful right around May.

So I stopped cooking and started eating out more! My parents also stayed with us for much of this year to take care of our babies, and their food expenses also led to this increase.

Is this increase justified? I think so.

Between my job, side businesses and family, I’m willing to spend more money on food in exchange for my sanity.

Monthly 2019 Expenses, Deep Dive

Where did the rest of my expenses go? It turns out they went into things that are fairly meaningful and necessary for our lifestyle.

• Housing: Our rent is $3,300 a month and we expect the same in 2020.
• Food: This includes both groceries and restaurants. We spend over $1,000 every month on food. It’s high, but a critical way for us to relax. So it’s worth it.
• Home & Clothing: This includes all the things we buy for the home, for ourselves, from clothing to furniture to toilet paper to gym memberships. But clothing accounts for very little.
• Internet, Phone, Electricity: We spent a normal amount on phones, internet, and electricity, about $100 each.
• Travel: This is mainly plane tickets we paid for the grandparents to come take care of our babies. We did not vacation much this year.
• Fun: This includes all of our entertainment and hobby expenses. We spend little on “fun” because fun is almost always free.
• Gifts: From birthdays, Christmas, to weddings. These are the necessary expenses to be socially human!
• Car: It is necessary to have a car where we live, especially with kids. But we’ve pushed down this cost to a minimum with AAA membership to catch us when we’re stranded.
• Fees & Cash: Miscellaneous expenses that all makes sense. We pay an annual fee to use the Chase Sapphire Reserve.

80/20 Analysis of 2019 Expenses

We often brainstorm how we could further cut our expenses. Should I stop buying coffee? Or should we stop eating out?

After some consideration, we’ve come to the conclusion that we are actually spending at a comfortably low amount without sacrificing comfort.

In other words: we think we are okay. So if a cup of coffee makes me happy, I should buy it.

We’re already achieving our savings goal, so eliminating small expenses won’t make much of a dent to my net worth.

As you can see above, rent alone accounts for nearly half of our 2019 expenses. And this is an expense that’s as low as we can without significantly sacrificing our lifestyle, given the area we live in today.

I still believe we made the right decision to rent instead of buy. This has saved our sanity with a shorter commute and has allowed us to put more into the stock market, which has performed well in the past few years.

Also notice from the chart above that rent, food, and home & clothing account for 80% of our 2019 expenses.

We’re spending the bulk of our 2019 expenses on living our life: a nice location, great food, and building a home we love.

Looking Forward to 2020 Expenses

Looking forward to 2020, we have several things changing:

• My son will start daycare, which means we’ll be spending between $2,000 to $3,000 extra per month.
• Our combined income for 2020 will likely increase. We need this given our daycare costs!

Your 2019 Expenses

What does your 2019 expenses look like? Did you have a budget?

What would you learn if you were to look at your spending from last year?

Every family and every person is unique – and we should each set our own financial goals that align with our internal values.

Comment below to share your story.

What’s Next?

Investing in a 401K? Make sure you’re doing it right by reading: 401K Scams: How to Avoid 401K Traps and Mistakes

Are you maxing out your 401K? If not, check out 401K Contribution: Why You Should Max Out Your 401K

Are you ready to start investing? Already investing? Check all the boxes with How to Start Investing: A Step-by-Step Guide