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.
YNAB (You Need a Budget) app – not my data
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.
Net Worth
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!
Savings Rate
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).
Budget Variance
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.
Biggest Splurges
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
Worst Purchase
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.
Best Purchases
- 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!
An Exacting Life 
You remain my hero. Thanks for sharing the information and suggestions.
There are far more heroic deeds, Keith, but thanks 🙂
I looked back at my spending spreadsheet for 2015 at the end of December and I spent WAY too much last year! Although I automatically transfer money into savings each month, I must have ‘borrowed’ from other savings during the year as I spent more than I earned. Sigh!
Some of it was big, rare expenses- like all of my footwear seemed to choose 2015 to give up and need replacing; I’ve also already paid for a weekend away later this month.
But I’ve also spent quite a lot on frivolous things- so I have made a budget this year based on income with no extra hours at work and I am determined to stick to it!
Hi Nicola, New Year, New Start! It’s no wonder you are wearing out your footwear with all those steps you are taking 🙂 I like the sound of your budget – you could choose to spend or save anything you earned from extra hours.
I’m trying to overcome my tendency to spend my extra wages before I have even been paid them 🙂
My steps will be low today- I have some kind of nasty feverish flu thing so I am on the sofa!
Hope you feel better soon!
I echo Keith! Your exacting recording and analysis is very inspirational.
Our financial year has really not been what we hoped for. We hadn’t planned on replacing our two vehicles, some significant house repairs (oven, carpet & now ducted heating) and having another job change (with 3 months loss of salary) for my husband. There are lessons to be learnt – most of all, budgeting for depreciation.
But on the plus side of the ledger, we’ve made ‘invisible’ gains with both getting work in the same workplace and all the economies-of-scale this will entail in the long run.
Oh dear. Depreciation is the elephant in the room for me. Rom and I both have relatively recent cars, and we expect them to last a long time, but we have no plan/no savings for their eventual replacement (although we will be going down to one vehicle at that point, unless our jobs change). It does nag at me sometimes. (Now I am rethinking those splurges.) I think your financial and personal situations will mesh nicely this coming year!
P.S. That is fantastic about the heat pump savings! I’m trying to find out more about whether ‘heat pumps’ are an option in Australia. I have never heard of anyone here having such a system installed, but surely it *is* available here.
Given your access to solar energy and the ability to sell it back, that is probably the best investment for you. Heat pumps have only caught on here in the past 5 years.
I spent New Years Eve/Day working on our budget for 2016. A lot of it copies over from last year but, as I’ve said before, we need to be strict about sticking to it this year.
I did some heartbreaking sums today and did an estimate on lost income from my husband changing jobs. Fingers crossed he enjoys the new job more (that is the plan!) and we won’t feel so bad about the lost money in a year or two. 🙂
The impact of job stress and job travel cannot be overstated. I am sure the decision will pay off handsomely in LIFE!
Inspiring data! I have kept a log of spending for years and have a table that gives me a 5 year average of our spending in certain categories. Comes in handy when my husband can’t believe what it costs us to live in and maintain this house! I have an Excel spreadsheet that I created so I don’t get fancy charts but I do know what it costs us to live and what keeps going up (all insurances, property tax and food!). Here’s hoping to a lovely 2016 and more lovely clothing, concerts & travel that you enjoy.
Hey, the graph at the start of the post was made right in Excel 🙂 I like reading about the changes you are making now to ramp up toward your new lifestyle.
Nicely done! I am still trying to wrap up my year end figures. I share your view on Mint – I still use only an Excel spreadsheet. I’m envious of your unaccounted $ amount as mine is much higher and I just can’t figure it out….well, my current theory is my non-exacting husband not logging in amounts!
Did you really have to pay for the dentist? I would have thought you had extended health coverage. Nevertheless, fillings are never fun.
Hi Lisa, No, the uninsured portion of my dental work was only $60, but I was annoyed with myself for having cavities! The YNAB program is undergoing a rebuild, so the reporting and exporting-to-Excel features are still in the works. I would definitely need them to stick with the app.
So you input every single purchase into Excel individually? Wow, that’s dedication! I’d love to have that kind of detail, but can’t handle the upkeep. Totally agree about Mint and the like. Nobody gets account access (except direct deposit and the mortgage payment). But I charge 95% off my spending (minus utility bills and the mortgage) to my credit card which include a great spending analyzer that isn’t perfect, but categorizes things pretty well. So that helps.
I’m just not a budgeter. Sometimes I wonder if I’m missing out cause it seems like what most people do, but fnd it too tedious and don’t stick with it. Nonetheless, I saved 26% of my take home pay this year. Plus 10% of gross goes right to retirement savings. Still, there’s always room for improvement.
Also kind of surprised you don’t track networth? I find it helpful to see if things are moving in the right direction. I track savings as part of that too, which I like watching grow. Overall it was an okay year here. Some unexpected vet bills, but overall spending is still down.
Hi Candi, All of my regular income and expense transactions are automated so I just manually add variable and discretionary things like groceries and haircuts. With your savings and retirement funding, you must have few problems! I budget so I stay on track to pay for vacations and big annual bills such as insurance and property tax; I like saving for them month by month. I do track my investments to make sure they are moving in the right direction (or making up for previous losses) but I just don’t include my house because I don’t know what it will eventually sell for (20 years or so from now) and I don’t want to treat it like a nest egg. I’m glad you had a good financial year!
As always, I get ideas and inspiration from your tracking detail. Last year was one for the record books for me with unexpected costs leading up to my husband passing away in late October. I did track wardrobe expenses and that was it. For 2016 I’m embarking on a more detailed budgeting system as I am newly single and while I need to pay down some debt and save, I also need some fun and want to maximize my available funds for some travel in the second half of the year, and to allow for going out to eat with friends on a fairly regular basis. I can cut elsewhere, but I wanted a tool to help me track. I looked at YNAB but was hesitant to spend the $ ongoing. Then I learned the new credit union I’m using for living expense money offers their own online budget tracking system. I am going to give this a go for tracking my living expenses against the budget I’ve drawn up. It seems a lot like YNAB except it won’t nag me when I go over. And given it’s part of the financial institution’s structure, I don’t have the qualms I’d have with Mint.
Hi Holly, I am so sorry to hear your news. You sound so “together” in your comment but it must be a hard time for you. I wish you contentment especially these winter months. It’s good that you are looking ahead to things you will do, and starting to line up the finances accordingly! All the best.
Thanks much. It was a long decline and I knew as we started 2015 that he was not likely to make it the whole year. What a crazy ride it was for the next ten months. Do not be fooled, some days I am more together than others but as a planner by nature I find it comforting to list and track and think ahead. I had to fight the urge to pay off everything I owe, put the house on the market, book a bunch of travel, sell everything else I own and join a monastery. Ok, not really on that last one but you get the drift.
Ha ha! I bet I would be like that too. I’m glad you are holding up and carrying on. As one does 🙂
God you’re good! Especially the consistency with which you track and monitor.
I say stick with the program that you can control. I worry about all my words that would be lost from WordPress should it close down.
This gives you such a complete picture; I am still pen and paper for the things I track– fuel(oil and propane), food, clothes, and the big ticket items of the year, usually a couple of trips. We are thrifty with fuel ( house is about 62 degrees now) so we can travel as we like. Retired from our “real” jobs, we are able to live on just consulting money for now without touching the retirement $, but within a couple of years will be accessing that. I too spent more on clothes than I thought I would(but less than when i worked outside my house), but tried to purchase things I will love for years. One of our trips was to Canada this year– PEI and NB. So lovely!
Hi Lane, Sorry you didn’t get to Nova Scotia but glad you enjoyed your trip! It’s great that you haven’t had to dip into the retirement funds yet. Some of the things I track have a purpose (such as keeping costs down) but others I fear are more for the novelty of it – more of a hobby!
Thanks for the link love! And yay! I love financial recaps! You had a good year. I’m a bit surprised about the Fitbit… I kinda wanted to buy one but I didn’t realize it was so… Flimsy?
PS – My 2015 recap is scheduled for tomorrow.
I do think Fitbits are flimsy. Their customer service is great, though 😉 I look forward to your recap and will link it up.