Tuesday, June 24, 2008

12 months of spending - revisited

If you don't use Mint.com, you should. It's an account aggregation service that consolidates your entire financial situation onto one screen. With one click of a button, you can get an up-to-the-minute view of your net-worth, bills, transactions, etc.

So, like many financial products, Mint.com enables you to categorize expenses. Here are a few of our biggest expenses over the past 12 months:

Rent       $12,560.00
Groceries         $6,511.33
Travel         $3,239.11
Hobbies         $1,496.83
Gasoline/Fuel         $1,221.31
Child/Dependent Expenses         $1,000.73
Insurance         $934.40
Automotive Expenses $643.88
Home Improvement $586.54
Utilities $346.63
Restaurants/Dining $329.32
Cable/Satellite Services     $301.16
Clothing/Shoes $278.04
Healthcare/Medical $230.15
Telephone Services $108.90 

This is what the Baugh family spends their money on. I glean a few bits of information from this list.
  1. I should own a house. Too bad $400k is the going rate for a starter home.
  2. I should live closer to family to cut down on travel expenses. What's within a short driving distance of both San Jose and Chicago?
  3. I'm lazy at categorizing my expenses. Every Costco expense counts as "groceries" even though at least 25% of our expenses there are not food.
  4. I love prepaid cell phones combined with VOIP. We paid $109 last year for all of our phones. It would have been about $120 more, but our VOIP was prepaid this year.
  5. We paid $1200 on gas during the last 12 months. Since gas is up about 25% from last year, we can expect to pay about $300 more this year on gas if our driving habits stay the same and gas prices stay elevated. I'm skeptical that gas prices will stay this high, but our driving habits have changed. We've started to drive less. We try to consolidate errand running so we visit stores that are next to each other. When we want to go out for fun, we walk/bike/play tennis, which don't require cars.
  6. We only paid $330 in restaurants during the past twelve months. That makes me happy. I'm convinced that cutting back on restaurants, cell phones, phone services, TV, and movies is some of the most effective ways to increase your savings. Most of these are recurring things which you don't even think about.
You probably don't care about my finances. I just thought that this might be a thought-provoking post that might convince on or two of you out there to get a better hold of your finances. As I have said before, it's not how much you make, it's how little you spend.

Does anyone have any recommendations on how I can cut my expenses? What are you spending your money on?

If I cared about budgets, I'd probably do something responsible and divide these amounts by 12 and allocate a set amount to each category each month. I don't care about budgets, so we spend our money on stuff we need and try to avoid frivolous wants. It works out well for us that way.

If nothing else, this post may convince on or two of you to check out mint.com. It's a cool program that I wish I had discovered a decade ago. I love tracking our net worth over time. It's empowering. It might help some of you to realize what you are spending your money on. I encourage you to at least glance at every penny that leaves your accounts.

- Brian

I Love Costco

My love for Costco is surpassed only by my love for Tiffany (and Megan). Seriously, I love that place. When I got home from my mission, it was one of the first two places that I wanted to go (the other was Fry's Electronics).

I just got my executive membership rebate in the mail last week. It was a check for $100. Doing some quick math, at 2% rewards, that means I spent $5000 at Costco over the course of the year. Though some may gasp at that number, let me tell you what we buy there:
  • Pretty much all of our food ever (with the exception of a few items such as condiments, onions, and minor cleaning supplies). We don't eat out too much, so the $5000 includes breakfast, lunch, and dinner for a whole year.
  • Pictures. We print lots of picture through costco.
  • Staples such as laundary detergent, toothpaste, trash bags, diapers, wipes.
  • Gas. It's cheaper there than it is anywhere else. I love the fact that I don't have to go to a different place to gas up. (The gas doesn't count towards my 2% cash back on the executive membership).
  • Applicances. Last year we bought a rice cooker. We also bought a KitchenAid (it was actually a gift, but bought on our card so counted towards our rebate). I've also bought tools and other stuff there.
  • Clothes. I'm a dork. I buy my clothes at Costco. We have several of Megan's outfits there. I have worn Kirkland Signatures $14.99 Court Classic Tennis Shoes for the past 4 years now. They've taken me up Mount Timp 3 times and gone on countless hikes here in Washington. I love striking up conversations with fellow Court Classic wearers. One of them happened to be a director of engineering at Boeing. I had a fun chat with him...we're good friends now. Maybe my shoes will land me a job as CEO of Boeing....one can only hope.
After looking at what is included in my $5,000, I felt a bit more comfortable with the astounding number. I pretty much convinced myself that I could sustain life on $5,000 a year! That's pretty impressive. Maybe I'll retire in a few years. Too bad there's other expenses like housing and health insurance.

I'll try to dispel a few myths about Costco:
  • "The membership cost isn't worth it." As described in the first paragraph, I got a rebate for $100. I paid $100 for my executive membership, so I got a free year of membership because I used it so much. One nice thing about the executive membership is that if you don't make at least $50 back (which is the added cost of the executive membership), you can get it reimbursed. I did that last year. They gave me cash. In diapers/wipes alone, I swear I've almost saved enough to justify the basic $50 membership.
  • "My family is too small to buy in bulk." This isn't true either. When Tiffany and I were dating at BYU, we shopped at Costco. We split things like milk and bread, and we saved a lot of money on groceries. We freeze lots of things like bread and cheese to keep it from going bad. Buying fruits/veggies in bulk has been great for our health. It has encouraged us to eat lots more. Costco has some great prices on produce.
  • "It's impossible to get out of there under $100." If you don't want to spend a lot of money, don't do it. Costco will kill you on impulse buys if you let it. Seeing a 50 pack of snickers for $20 may be a great deal, but you'd go broke if you bought everything in the store just because it is a good deal. Only buy stuff you need. Make a list and stick to it.
  • "I can get better prices shopping sales." While this may be true for some sale items, I would argue that Costco is much more economical when you consider your time and gas for shopping. Tiffany and I can go grocery shopping about twice a month no problem when we shop at Costco. We don't bother to sale shop at 10 different stores during the week to beat Costco's prices.
Lastly, Costco has an amazing return policy. Tiffany and I bought a pillow at Costco about 2.5 years ago. We tried it once, but it was like sleeping on a brick. We never used it again, and it sat unused in our laundry room collecting dust for 2.5 years. We didn't return it at the time because we had used it and felt bad. Fast forward 2.5 years. We didn't have a receipt or a box, but I suddenly had the urge to return the thing. I convinced Tiff to do it (because it was humiliating to me), and she came back from the return counter with $30 cash. I LOVE COSTCO!!!!!!!!!

In conclusion, everyone on earth should shop at Costco. It is a worthwhile investment. If you already shop there, try to buy more stuff there. Be wise in your purchases; don't buy stuff that you shouldn't just because it is a good deal.