Expense Management End of Year Review: 2007
I took a portion of my time off during the holidays to update my accounts in Quicken and analyze where we ended up spending our money over the past 12 months.
I was quite disappointed to find that we were $20,000 over what I had guessed our yearly expenses would be in 2007.
I had forecasted our expenses to be about $40,000 in 2007. I arrived at this number as a random starting point based off the calculation that this is what we could spend with a pre-tax income of approximately $53,000($40,000*1.3265).
$51,000 was my expected salary for 2007. I had hoped that once we were married that we would have been able to live solely off my salary and be able to save my wife’s entire salary, unfortunately we weren’t even close most of the time.
Our biggest surprise was that our biggest expense was our education. A focal point of this blog that I will develop as time goes on is that although pursuing higher education is a very expensive proposition, if you chose the right career this money should be seen as an investment and not as an expense.
That being said, I am counting the money we pay on our student loans as an expense that we incurred years ago, similar to a mortgage.
This year our student loans made up 23.75% of our spending for a total around $15,600. The vast majority of this money went to pay off my sole private loan that I had taken out during the interview process for residency.
With my private loan paid off, we will continue to make our minimal monthly payments on 2 of our remaining loans and I will keep my largest loan in forbearance for at least 6 more months.
We are lucky that housing only makes up about 15% of our spending. Although our rent is as much as a mortgage for most individuals, we are doing our best to minimize the expense by living in a studio apartment in a walkable part of town. Because we rent in a large city where I am finishing my training, this is a pretty fixed cost for us until July.
Ever since I have had to buy my own groceries I have been amazed at how much money I spend on food. This year groceries were our 3rd highest expense and made up 10% of our expenses. This doesn’t sound excessive but when 10% is equal to $130/week, this is a high priority item for our family.
My explanation for our grocery bill is that as a physician, I see on a daily basis what a bad diet and lack of exercise can do to a person, therefore my wife and I are very particular about what we eat. We eat very little processed foods and strive for as “natural” of a diet as possible. We try to buy all of our fruits and vegetables at a local farmer’s market and do eat a fair amount of fresh fish or meat. This diet of nutrient dense foods is much more expensive than the usual low nutrient/high calorie food all around us. That being said, we will find a way to bring this down for next year.
Vacation and Travel was another surprise as our 4th largest expense of 2007, comprising a little over 7% of our expenses. Between flying back home and attending a conference or two we have spent more of our income on airfare and hotels than clothing, utilities, transportation or any other normal “household” expense. I know that this is mostly due to the fact that I have not done the best job of managing our miles programs maximizing our free flights.
This is a category where we could really save some money in a few years at the end of my residency by moving closer to our relatives when we settle down.
The rest of our expenses are all small contributors(about 5% or less) to our yearly total. This is good news in the sense that our expenses are balanced but bad news for 2008 when I am looking for areas of our budget where I could save us money.
