This time last year, I was writing about the shock of calculating our 2016 spending total. We had spent nearly $80,000, which didn’t even include housing costs. Having no idea what was possible, I set us the goal of reducing our spending by 10%, excluding a planned holiday. Our stretch goal was to reduce our spending by 10% overall.
We achieved our stretch goal, with a total reduction in spending of 10.75%. Here I will compare each of our spending categories to determine where the savings came from, starting with a cool Sankey Diagram. I recently learned of this from J.D. Roth at Get Rich Slowly, so of course I had to have a play. Check out J.D.’s post, and you can build one for yourself! This diagram shows all our inflows, and all our outflows for 2017. If you click on the image, then choose “view full size”, you should be able to see it properly. I have grouped some of our spending categories to make the diagram a little less busy, but I show full details in the tables below.
Total—Spending Reduced by 10.75%
I derived all the numbers and images displayed in this post from YNAB. If you are interested in checking it out for yourself, they offer a free 32-day trial. You can read about why I (and many, many others) choose to pay for a budgeting software on my Get YNAB page.
Food—Reduced by 30%
This was the one category that I thought would include some easy pickings. Actually, it was the only category I thought we could actively work on to reduce our spending. Firstly, I decided to make tracking somewhat easier by collapsing all the individual eating out categories into one. It was useful to record in 2016, because we could easily see that takeaway lunches were our biggest non-grocery expense. When added to takeaway breakfasts and coffees, this is the classic starting point to reduce spending on food.
We focused on meal planning, and making sure there were leftovers to take for lunch. It wasn’t an easy habit to change, and I have to give kudos to Mr. ETT. He moved from almost exclusively buying his lunch, to almost exclusively taking his lunch.
Despite buying more food at the grocery shop, we reduced our spending on Groceries Need by 14%. I attribute this to a few initiatives:
- Shopping at Aldi. We were lucky to have an Aldi open at our local shopping centre, right next door to Woolworths. This has absolutely transformed the way I shop, and I wouldn’t want to go back.
- Buying half-priced meat, and meal planning around what is in the freezer. The Woolies occasionally marks end-of-life meat down to half price. Every time I go in, I look for these markdowns. This means we ate very little beef or lamb (these are rarely marked down), and a lot of pork and chicken. If Aldi had a great special on, I would also stock up on meat.
- Having at least one vegetarian night a week (often two or more). We have found plenty of excellent, delicious vegetarian recipes that we both enjoy. Although I ensure we meal plan for a vegetarian recipe, it’s not something we focus on when we are eating during the week. We don’t say “oh, it’s vego night tonight.” We just cook and enjoy whatever meal we planned.
In 2016, we bought a lot of junk food, which was an easy one to reduce—by 43%! We still buy too much; it’s bad for our wallet and our health. Ditto with alcohol. Reduced by 38%, but we still drank too much. This should look even better in 2018, as I have decided to give up drinking for a year.
Finally, we reduced Eating Out by 37%. I’m actually impressed by that, but I don’t want to get too carried away. Enjoying great meals out with friends and family is one of our values, so this is a category we will never give up entirely.
Bills—Reduced by 17%
The biggest savings here came from electricity and gas, at 19% & 26% respectively. This doesn’t make a lot of sense, because we used more electricity in 2017 compared to 2016, and the prices rose in 2017. What I think may be happening is that we are on a payment smoothing plan. This means that the energy company estimates our usage, and we pay a set amount each month. We did get into credit on this account at least once in 2017, so didn’t have to make a quarterly payment. The same happened with gas. I can’t claim a true spending reduction here, then.
This year we didn’t pay anything off the mortgage, as it is sitting at less than $250, and that is the minimum payment the company accepts. Also, it looks like we included Mr. ETT’s tax bill in this category last year. Other than that, these expenses remained nearly the same.
Insurance—Increased by 4%
This is the category I dislike paying the most. Health insurance costs went up, as they do every year. Life insurance costs increased because one of us stepped up into a new age bracket, despite me reducing my life insurance coverage in October. Car, motorbike and house & contents reduced a little, with a reduction in the level of cover for some, and some shopping around.
Transport—Increased by 19%
Ouch! Ouch, ouch, ouch. Let’s just get it out there—we own 2 cars and a motorbike. Like food, this is an area where we could save money… but we don’t want to give up the convenience. Seriously, we are deliberately making the choice to spend this much money. The motorbike is central to much of Mr. ETT’s social life and fantastic for his mental health. I’ve also been able to participate, and travel to places I wouldn’t have had the chance to otherwise.
I did postulate getting rid of my car and replacing it with a scooter, because I think for the most part we could make that work. However, I baulked when I realised that I would need to wear all my safety gear on the train, then walking to and from work. There’s not a lot of room on the trains I catch; I don’t fancy walking in full leathers in 40^C-plus heat. In the future when I get another job close to home, I will revisit this idea.
The biggest difference in this category is because we needed to renew our NRMA Roadside Assistance membership, and we chose to do so for 5 years. There’s a new line item in the budget to save for the next time this comes around. I’ve also added a line for our driver’s licences so that isn’t a surprise when it comes. My spending on the train also increased by 36%, because in 2016 I hadn’t been in my new job for the full year. I expect this to remain steady for 2018.
Expenses—Increased by 34%
This is a fairly eclectic category, so like the Sankey Diagram above, I’ll collapse some categories. The biggest difference is in Giving. After seeing how much we spent on presents in 2016, and how little we gave to charity, I was pretty upset with ourselves. I made a rule that whatever we spent on gifts, we would match in giving. Now somehow I still managed to fall a little short in the final totals, but we increased our donations to charity by a whopping 1,437%. We also reduced our spending on gifts by 20%, which was mostly accomplished by Mr. ETT saying “Let’s buy this person this,” and Mrs. ETT responding ungraciously and negotiating the total downwards.
Spending on various medical and pharmaceutical services increased by 47%. We’re both on various ongoing medications, and Mr. ETT has regular visits to medical practitioners that aren’t fully covered by Medicare. Still, we are grateful to have access to the services we need, and extra grateful that we can afford to pay for them.
It appears we got the lawn mowed more in 2017, but I’ve detailed before how that is a service that I really value, and I’m happy to pay for. The amount we spent in the clothing category surprised me. It is mostly compromised of undies, bras, singlets, and repairs to shoes/clothes (as we don’t want to be part of the throw-away generation). A large chunk was taken up with getting my wedding and engagement rings cleaned, checked and rhodium-plated, but still. Goes to show how lots of little purchases really can add up.
A new line item here is online subscriptions. We have so many things that we pay for now, I thought it deserved its own category. I expect this will keep growing in the future.
Pets—Reduced by 23%
I buy most of Frank and Jelly’s food in bulk from online suppliers, shopping around before each order. I always order enough to get free postage. The prices are much better than walking into a pet store. We do buy premium food for them, which is a choice we make.
Spending at the vet was down. All we had was their annual vaccination, along with getting an eye ulcer attended to for Jelly. She seems to have a habit of rubbing her head so hard on things, she hurts her face! Silly cat.
I laughed when I saw I only spent $2.50 on toys for them all year. Firstly, they have a lot of toys and I’ve actually begun giving some away. Secondly, string, cardboard boxes and rolled up pieces of paper do just as well at keeping them entertained as purchased toys.
Quality of Life—Decreased by 25%
I’m not sure I should be celebrating a decrease in spending on our quality of life, but it is actually a win. Spending on the gym was down by 17% because I got access to a deal through work. While it was great at the time, Mr. ETT doesn’t use it enough. As soon as I am out of the contract period, I will be cancelling this. Mr. ETT can then just pay on a visit by visit basis.
Activities decreased because we spent more of our time on short weekends away, which we covered under another category. We actually did quite a bit for this amount spent. Looking back over it, I’m pleased.
Most of the education cost was me paying off the final part of my HECS. I’d only accumulated this because I forgot to pay upfront one semester. There was also a community college course, along with a few books and certificates to sit for. I value education highly, and don’t begrudge spending on it. I am, however, coming around to the idea that not all education provides a return on investment. We look at our education spending through a sharper lens these days.
Savings—Reduced by 22%
Savings is really planned spending. LTO is for things that are Less Than One thousand dollars, OTT is One To Ten thousand dollars, and GTT is Greater Than Ten thousand dollars (or holidays). I created a “Current Holiday” category in 2017 so I could keep a track of the major holiday we undertook to New Zealand’s North Island. I’ll be using this again for our UK trip in 2018.
In 2016, we paid to have the whole yard enclosed so the cats could go outside safely. In 2017, we bought a new dryer, microwave, clothesline, and had to get a tree lopped, despite doing what we could ourselves. We haven’t yet installed the new stove we also purchased. It will happen in 2018.
In 2017 we went to Mudgee, played board games on a houseboat, and visited Kiama, as well as our main holiday to New Zealand. In 2016, we had a wonderful holiday in Tasmania. This is an excellent category, we love travel!
Just For Fun—Reduced by 17%
This is our play money—money for which we are not beholden to the other. It’s ours to do with what we will, save or splurge. The reduction came about because we wanted to save for our holiday to the UK in 2018. Mr. ETT reluctantly agreed to a 25% cut from May, so we both receive $300 a month. I feel we could cut more, but he is unwilling at this point, so I am not going to push it. I keep 50% to spend on frivolous things, and donate/invest the other 50%. What Mr. ETT does with most of his, I don’t know—because that’s the whole point of this category!
While I’m happy to have met our goal, I acknowledge that $70,334 is still a huge amount of money for two people to spend, when housing isn’t included. If we remove the holiday, then our everyday expenses were $64,000. This is still super high compared to others’ yearly spending without housing or holidays, such as Aussie Firebug ($40,619) and Wealth From Thirty ($26,564).
At this point, I still don’t have a solid financial goal for 2018. Obviously, I want to—at the very least—maintain this level of spending. I think I may have identified a few more points for reduction in 2018, but I’ll need to do some thinking. We know we don’t want to become full-on frugalistas, or aim for the 70% savings rate to meet FIRE in the fastest possible time. We want to find a balance between knowing we’ll be able to retire comfortably, and having experiences/living life now.
Does anything jump out at you? What are we paying for that you don’t pay for? What are we paying too much for?