Now that the holidays are over and all the credit card transactions have been processed and checks from last year have been cashed, it's time to see how we spent our income last year. As background information, my wife and I have three kids: a 6 year old son who attends public school and an after school programs; and three year old twins that go to pre-school. My wife has been fully employed until October, but has been working part-time since, while I am an executive in a technology company. We have medical insurance (PPO). Although we do not have a formal budget, we are careful about our spending and lead a modest life style. We live in the San Francisco Bay Area in good ol' California. So where did our money go last year?
The really good news is that including our retirement savings, last year we saved 29.3% of our after-tax income. The remainder of our after-tax income was spent as follows:
A few comments on the numbers:
First, careful readers will notice that the numbers do not add up to 100% - there are a few other categories that I track, each of which accounts for under 1% of our spending. Nothing too exciting.
Medical - What struck me as amazing is that our third largest expense was health care, which accounted for about 7% of our spending, and this does not include the fact that I pay another $200 per pay period, or $4,800 a year, to cover my family under my company's PPO. This is insane! What do people WITHOUT insurance pay? We are pretty healthy and have decent medical insurance and still pay a very large amount of money for coverage. This system is truly broken.
Auto - note how little we spend on our two cars. We purchased each with a lump sum cash payment, and my 1997 Geo Prism - or as I lovingly call it: crap-on-wheels - is serving me well for my 12 mile round trip commute every day.
Vacation - normally we spend more of our money on vacations, but this year we were more modest given the economic situation.
Charity - we gave too little to charity last year. This is a spending category that we need to increase for sure.
All in all, I think that we save and spend very reasonably and I hope we can repeat this performance in 2009. Incidentally, to gather this report that I shared with you, I used Quicken software.
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