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Expenses report from bloggers are hardly exciting.
I have been compiling this since 2014, so this year will be the 4th consecutive year that I been doing this.
They say you should get your income up rather than prioritize optimizing your expenses. There is only so much you can optimize. Getting your income up, now that is boundless.
So I got my income up a little over time, and while many have start to find optimizing expenses to be time consuming and not worth it as your income go up, I still do it.
Because it is easy to track, budget. It is as if you are in the dashboard of a car you are driving.
In this report I will cover:
- how difficult or easy it is to tally these expense figure annually
- the annual 2017 expenses review
- the annual expenses versus the previous 3 years
- how knowing this expense affect the financial security and independence target
- one tip for budgeting
How Easy is It to Tally These Annual Figures?
I don’t find it too difficult. And I took about 1 hour listening to music doing this.
On a daily basis, I use an older version 4 of You Need a Budget (YNAB for short) to enter my expenses.
So with YNAB4, you can see each category and its actual outflows are already nicely laid out.
YNAB4 is no longer available and now it is a recurring online service. This is a very good form of zero-based budgeting or envelope budgeting. (For more on the different levels of budgeting you can do, from easy to detail, read my comprehensive budgeting guide)
If you wish to try Envelope Budgeting, but do not wish to spend so much, there is an alternative clone that someone developed called Financier.io.
They have a free version, that you run off your Safari, Firefox or Chrome browser (as long as you do not clear your cache it is ok), allows you to back up your budget. It is a FREE way to learn zero-based budgeting.
As you can see, they did a pretty good job cloning.
I actually was on Financier for 5 months in 2017 and 7 months later in YNAB4.
As long as you understand how to kick start a budget, you can switch budgeting products easily. The important thing is to understand the budgeting principles.
So for the year end, I just take each monthly categories, and update them in a custom spreadsheet such as this:
As long as you create a similar template (you can look at mine and modify it) its not so difficult.
I actually closed off some category versus the previous years, and open up some. As long as you understand what you are doing, it should not be a problem.
My Past Annual Expenses Review
Since 2014, I been doing this review, and while the figures look pretty similar, there are some slight shifts here and there.
You can review what I wrote about my expenses in the past.
My 2017 Annual Expenses
In 2017, I decide to combined some categories. I also created major category for the categories by grouping them into support services and rich life.
I could have classified them into personal, support services, and rich life, but I got to the stage where the household is managed by Kyith.
Update: Some of you have asked me if I can share this template. Here is my spreadsheet. Just go to File > Make a copy. Don’t ask me to Share it. I also am not supporting. You can modify it to your liking.
At this point I do not see a need to separate expenses for the household and my personal.
Rich Life are the things that are really optional in life that makes you look forward to. Support services are the things you buy that keeps the house and person going. Without these items, you will face certain deficiency in your household. Support services is linked closer to survival than an optional expenses.
This year’s spending is less than last year ($26,238), but its no very far off.
Gifting Increased. I actually went back to the amount that I gave in the years prior to 2016. A lot of it was given in Chinese New Year. Some how you cannot save much for this. Perhaps next year its on me to prepare the Ang Bao for the festive period.
Entertainment Increased. More dinner and meet ups than in the past. This explains the increase. I seldom spend money on myself.
Hobbies was negligible. No time for hobbies.
Family contribution & Household. Family contribution went down eventually because I decided to close it off and account most of it under household. This includes Dad’s mobile phone bill, the home conservancy charges, the home mortgage. I do expect this category to be $5000++ going forward, unless I pay off the mortgage.
Family Survival Expenses went down. This will be the grocery bill, my own lunch outside, and foodstuff we purchase from the wet market. After household, this is the second biggest category (or it could be the biggest category). Grandmother and mother do not eat with us anymore. So it will be 2 person.
Yet the 2 of us was not able to minimize this, despite me and him most of the time eating very little lunch. We stabilized at $420.00. Dad tells me the vegetables are getting expensive.
Insurance went down. This one is surprising and I wonder if there are expenses that fell through the gap. There are no major cancellation of policies so by right, the average should be around $310. Hmm.
Medical expenses will pick up. This year it is pretty low, because I decided to charge my mom’s medical treatment on its own. However, I anticipate next year for this to average $150/mth as I am trying out some TCM my auntie recommended.
Taxes are higher. This is not just due to pay, business income. What balanced this off was a tax rebate for the majority of Singapore. Going forward next year I anticipate greater income tax paid due to higher income, business income and no more rebate.
You can perhaps work out the rough amount of taxes you will pay then divide by 12 to save for it. This year although I paid less, I allocated more to taxes because I know its going to go up.
Mom’s Medical Treatment. I created a category for this. I had it last year, but I put into household. But just for this year, I decide to put it out independently. I spend it on outpatient medical bills, supplements, rides, medical equipment. Pioneer Generation tank a lot of the damage. So did my CPF Medisave. Then there is a drastic drop after August.
Annual Expenses Over the Years
The spending over the years don’t change much.
I find that it sort of proves the idea that your spending do not drastically change suddenly. Some of you might think, oh, if we encounter this circumstances we will be able to step down our expenses drastically.
This can be a bit of nonsense.
If you lost your job, it will be a struggle to change a lot of your spending habits. People cannot cut down their rich life expenses. People don’t dare to cut down some of their support services, because it will be troublesome if they need to restore them. There will also be much negotiation involve.
I would venture to say, would financial security, or knowing your annual survival expenses is important, you have to think through what can you survive on.
The solution to this, is to sometimes practice poverty.
Review of the Financial Security & Independence Readiness
Knowing the break down of your expenses. helps you identify where you spend your money on so that you can make sense of:
- What are your survival expenses, or the bare minimum baseline that you require to live
- What are the kind of expenses you do not spend now, but will probably spend during financial independence
Just like past year, I worked out for each category, how much I could possibly spend in survival mode, or in a more lavish retirement mode.
Based on my current expenses of $21,723, I will need to accumulate $434,465, deploy it in my wealth machine(s) at a 5% rate of return at least, to provide me a cash flow for this expense.
If my annual survival expense is $13,920 (financial security), I will need to accumulate $278,400, deploy it in my wealth machine(s) at a 5% rate of return at least, to provide me a cash flow for this expense.
If my annual expense for financial independence is $18,480 (financial security), I will need to accumulate $368,600, deploy it in my wealth machine(s) at a 5% rate of return at least, to provide me a cash flow for this expense.
If your expenses is low, you need to accumulate less in your wealth machine to give you financial security. You won’t possibly can stop working, but then again you might not want to stop working at 36 years old, after accumulating $280,000 in 11 years by putting $22,000/yr into wealth building.
I think I seldom see people stopping work totally at 36 years old.
Some of you might prefer to coast or practice barista financial independence as well.
You need more in financial independence, and folks usually want more safety because they want a very comfortable existence when they are not working.
A wealth withdrawal percentage of 5% is high, in the grand scheme of safe withdrawal rate. However, it might suit you if you are securing financial security because you are not going to depend entirely on it for an extended period of time (10-20 years).
If the stock market is volatile, and so is the value of your wealth machine, you can afford to not increase your annual survival expenses by the inflation amount by gritting your teeth and surviving through this tough times. This means when the value of your wealth machine is volatile, so can your annual expenses.
In this case a higher withdrawal percentage would work, because you are tolerant that you can ratchet the rate of return up and down depending on the performance of the financial assets or the wealth machine.
Some of your circumstances can afford a volatile annual expenses, some of you cannot.
For those that cannot afford volatile expenses, the suggestion is to plan with a lower withdrawal percentage of 3.5-4% and that would mean you need to accumulate much more wealth.
Only Expand Out Category from Another Category If there is a Purpose to it.
I thought I will take this opportunity to emphasis some aspect of budgeting that might help you.
You may go into overdrive by creating numerous categories and assigning a budget for it.
By going granular you have a lot of control to visualize how much you have to spend. However, it might also create a lot of fatigue in managing so much categories.
The rule of thumb is: Create a new category if it is a spending that you wish to monitor meaningfully.
For example, I expanded a category for my mom’s treatment because I need to have an idea how much I am spending on it.
I also have a lot of meaningless categories from 10 years ago such as haircut and books & magazines. I used to think I will spend a fair bit on books. Over the years, I spend lesser and lesser, until I realize its not a problem.
So I might not need a virtual account to manage how much I spend on books.
Open category you wish to track. Close category when you have realize the purpose.
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