Hi! The categories for my financial review were inspired by Asian Pear in this blog post (I will link to the 2015 version when it arrives: soon, I think!)
Budget Method and Tools
Around November each year, I think about what the following year will be like financially, and start to plan. I look at what my monthly averages have been for the usual bills, and predict whether they will change in the new year. I pencil in any unusual, one-time, or saved-for expenses, and when they are due. I look at whether any big personal or job events are in the works, and what months we are likely to travel. I am mindful of what my contribution limits are for tax-free accounts, and when I will make them. Then I do a rough draft of monthly and annual expenses, including savings goals, for the whole year. My income doesn’t change much, but payroll deductions do, so I try to factor them in.
At the end of December, I look at my actual expenses for the whole previous year and tweak the new budget a bit. I just keep going until every dollar I expect to bring in is assigned to planned spending or planned saving.
I an still using an old software product called Money Plus, the unsupported “legacy” version of Microsoft Money. The basics work fine, but it’s a desktop product (no mobile app) and it is intended to document spending, not to motivate. I supplement it with numerous little spreadsheets – for example, I spend a lot on gifts, so rather than have 6 gift savings and spending accounts in Money Plus, I keep little lists “on the side.”
I have been really reluctant to use apps like Mint because by allowing the app to access my bank data, I would be breaking my security and privacy agreement with my bank, and then they don’t have to cover me for any data breaches.
Meanwhile, a friend of mine was telling me all about YNAB (You Need a Budget) so I have just started a free trial for a month. It appears it will do everything I normally do, but using a very attractive user-friendly interface, and with lots of motivating tips and tricks. I can enter transactions manually rather than allow it to access my bank. I will let you know how it goes! I would then be on the hook for a monthly fee which is $45 US or $63 CDN if paid annually. I see a potential problem: if I stop paying, I lose access to my account, and all of my historical data will be lost. A significant decision!
Here are some of the ways my money went in and out over the course of the past year.
I don’t track net worth because too much is tied up in my house and in locked-in retirement accounts which I can’t access until the products are sold at market rate. I verify that my accounts are mostly gaining, and that I won’t be adversely affected by keeping them too long. So I track investment performance, but I don’t have confidence in that “one big number.” Although I suppose net worth is only an indicator of financial health and not a be-all-end-all figure.
So, this year my take-home pay was 5% higher, partly due to a lump sum payment which will not be repeated. In 2016 we get a small increase. And my income falls in the federal tax bracket which is supposed to get a 1.5% tax cut.
I have a small GIC earning just 1.5% which was meant as a way to “park” some cash until I could decide how to invest it.
My two private retirement accounts (RRSP & LIRA) earned 3.4 and 4.6% this year after management fees. Meanwhile the payroll deductions for our workplace pension plan are up to 12.21% of income, off the top!
I put 21.9% of take-home pay into long-term savings. I contribute as much as I can to tax-free savings (RRSP and TFSA accounts).
OK, now the fun stuff starts!
- I budgeted $900 for clothes and spent $1530 which is 70% over budget. (+630) The items are detailed in this post.
- I budgeted $300 for fitness and spent $561 which is 87% over budget. (+261) I paid for my elliptical machine to be fixed – it’s still going strong – and for an unbudgeted Fitbit!
- On December 31, I had $152 left over after all savings goals were met and all spending was finished for the year. Not much of a head start on 2016 but no debt either.
Best Savings / Lowest Spending Areas
I was super-happy with energy savings. I walk to work and only take my car when I have a meeting across town. I use my car for local errands on the weekends, and we made one little road trip (3 hours each way). In 12 months, I filled up the gas tank 15 times for a cost of $589, versus 18 fill-ups and $898 the year before. Using your mental calculation powers, you can see that gas prices were also down by about $10 per fill-up.
In 2014 we switched our heating system to electric heat pumps. If I compare 2015 to the last full year we were on oil heat (2013), we saved 33% for the year AND were able to use A/C in the summer which we didn’t have before. Plus, January to April 2015 was the longest, coldest winter on record for decades.
Finally, we cut cable TV in January 2015 and saved $50/month.
These three items combined saved almost $2000.
Most Stable / Most Volatile Prices
- The property taxes charged by the city on my house have remained unchanged for 7 years because home appraisal values are capped.
- Home insurance prices are hiked every year and are predicted to keep going up despite never having had a claim.
- My chequing account is subject to high fees for debit transactions so I pay cash for most things. I recently changed account types to get a break on this.
Now here’s where those energy savings went – THREE splurges of over $500 each, and that is not even counting our side-trip from London to Paris in June!
- Increased charitable giving and it felt great
- Took Link and friend out for AYCE sushi and to see Kinky Boots (musical) in Toronto
- Took little overnight trip to nearby city to see the Scorpions in concert
No offense to my dentist, but I did not enjoy having to get two fillings this year. And I had even cut back on sweets – I guess the damage was already done.
- You know I love my Fitbit which was $179 plus tax in August (they were reduced in December). It malfunctioned and was replaced under warranty. I have decided if it bites the dust after it is out of warranty, I won’t replace it. I have the feeling they are quite a disposable product and not good for the environment. But I will enjoy it while it lasts.
- I set up some bird feeders last winter when the weather was so horrible, and enjoyed keeping them topped up all year for the very reasonable price of $55!
- I subscribed to Apple Music after their 3-month free trial was up, and I love their playlists and recommendations. This is the year I stopped buying CDs. I will have to support my favourite artists by seeing them perform and buying their merchandise.
Room for Improvement
Rom and I weren’t able to spend our whole entertainment budget on live shows as we normally do. Not enough of our favourite bands passed through town. So our surplus funds were channelled into more meals out. In addition to that, I spent another $50 a month out-of-pocket on dining out. No wonder our grocery bill didn’t go up 🙂 We averaged 3 restaurant meals a month for the two of us, a much higher number than past years. We spent $80-90 on a couple of occasions (like the fancy brunch) but equally enjoyed the local Korean and Lebanese spots where we ate very well for $27 for lunch for two.
After looking at the whole year, which was decidedly not frugal, I realized we may be at peak income right now, or at least peak disposable income. It has not been difficult to meet high savings goals while living a life of relative luxury by some standards. I know this is only one of many life phases and things will inevitably change, but I feel very privileged right now.
How was your financial year?
Oh, in case you are wondering (ha!), I had $86.88 unaccounted for this year, or about $7.25 a month!