Where did all the money go?

I posted our Net Worth chart for the last 10 years earlier.

When I generated this information from Quicken, I also ran a report on our income and expenses for the 10 years from 1997 to 2006. The results were quite interesting (at least for me), so I thought I will post that here as well.

This also explains the categories that I use in Quicken to itemize expenses. I never liked the default categories that came with Quicken, so I customized it till I had about a dozen categories that I really wanted to keep track of. Here they are, along with the percentage of our income over the last 10 years that went into each category:

  • Payroll taxes [24%]: Federal, state, Social security, Medicare
  • Housing [17%]: Rent, Mortgage, Property taxes, Homeowner insurance, Home improvement expenses (but not routine maintenance)
  • Merchandise [7%]: This includes all kind of "things" we buy. I used to track this in separate subcategories like books, clothes, electronics, furniture etc., but now I realize that every single item here must be sold, thrown out or given away at some point, so I just group them together.
  • Car expenses [6%]: Auto purchase costs, gas, service, auto and liability insurance, registration fees.
  • Entertainment [6%]: This is mainly vacations and dining out.
  • School and child care [4%]
  • Services [3%]: Memberships, subscriptions, Lawn care, Dry cleaning, Hair salon etc.
  • Groceries and Food [3%]: This is for groceries and other food-related expenses (but not eating out)
  • Utilities [3%]: Electricity, Gas, Phone, Cable, Internet
  • Medical and Dental expenses [2%]: Medical insurance premiums and out-of-pocket expenses. I also included disability and term life insurance payments here.
  • Gifts and charity [2%]: Charitable contributions and cash gifts (the latter mostly to family and relatives)
  • Savings [23%]: This is not a category, but is whatever is left after all expenses are subtracted from our income.
Some thoughts:
  • The amount of money we pay in payroll taxes never fails to amaze me. It is as if we worked for 2.4 years out of the last 10 just to pay taxes.
  • Overall, I am quite happy with our savings rate. Most of the savings went into our retirement accounts. We also paid for a small real estate investment out of our savings.

5 comments:

Kevin P said...

Congrats on being able to save 23%! I was proud I was saving at 14%.

Nigel said...

Thanks! This savings is averaged over the 10 years from 1997-2006. Some years have been much better than others. I have a goal of saving one-third of our gross income in the coming years, but have to see how it goes..

Anonymous said...

I have recently started taking my finances seriously ( part of it is because I was impressed by your blog)

I have used excel for budgeting in the past. I know you mention you use Quicken.

1. How do you find it ?
2. Also, now there are many online
services
( like mint.com,wesabe.com and even quicken online ). Have you ever tried these ? If yes, do you have any recommendation ??

Thanks

Anonymous said...

Hi,

I just typed a huge comment but i think it got erased.

Anyway, I wanted to ask if how do you like the Quicken software?

Also, have you tried any of the online solutions ( like mint.com, wesabe, even quicken online). If yes, how do you like those.

Nigel said...

Anon,
Thanks for the comment. I started using Quicken in 1995. At that time, Quicken and Money were the only choices available and I found Quicken easier to use. I am not entirely happy with Quicken (many annoying bugs, being forced to upgrade every 3 years etc.) but I have learned to work around its quirks.

If I were to start over now, I probably won't use Quicken but would try out one of the online alternatives where I don't have to worry about keeping the software updated, or backing up my data even if I had to pay a small yearly fee.

I also use Fidelity Full View (available free to Fidelity customers) for tracking all our accounts. I find it quite useful for getting an up-to-date snapshot of all our assets/debts and recent transactions, but it doesn't do many of the other things that Quicken does.