In the comments on my December 2009 net worth post, someone asked about the change in my net worth since 2003 and whether I'd gotten a higher paying job or had changed any of my spending habits to enable my net worth to grow as it did. It prompted me to tackle a project I'd been thinking about for a while: a long-term analysis of my income vs. expenses.
2003 is the first year for which I have full data in Quicken so I looked at that seven year window, and the results were quite interesting! First, let's just look at after-tax income vs. expenses (click on image for larger view):
I thought it would be easiest to take taxes totally out of the picture, so my income is net after all those deductions, and the taxes paid are also taken out of my expenses. (I also backed out my tax refunds from the previous year's taxes paid.) Income includes salary, bonus, gifts received and interest earned on bank accounts. It does not include dividends and investment gains as those are reinvested into my investment accounts.
As the graph shows, my income has been gradually increasing, and my expenses have been much more flat, and tending to increase in proportion to my income-- just what I wanted to see!
So what made up my expenses? First of all, let me explain the category definitions here, as I've grouped things slightly differently than in previous expense breakdowns.
- Household: mostly laundry and drycleaning but also includes some minor decorative stuff like curtains (not new furniture, as noted below)
- Education and Information: this is a new one, which I thought made a good catch-all for newspapers, magazines, books, music, French lessons, internet access and other miscellaneous entertainment. (I actually meant to name the category "Entertainment and Information")
- Travel and Vacation includes commuting, family visits and trips for fun.
- Food & Liquor includes restaurant meals, take-out, and groceries for home cooking
- Miscellaneous includes haircuts and other random "stuff" like art supplies and electronic gadgetry, etc.
- Housing includes mortgage payments (to interest and principal), condo charges, property taxes, homeowner's insurance, and gas and electric bills
- The rest are pretty self-explanatory.
I then did another chart of the expenses without housing or taxes, so you could get a larger view of all the types of expenses that are more variable and controllable. Here, I tried to order the different expense categories so that the bottom of each bar is the stuff that stayed really steady from year to year, with the things that changed the most on the top. It's amazing how consistent some things are!
A few things to note:
- My pay is part salary, part bonus. I got an unusually large bonus in 2004 that slightly skews the always-up trend of my income.
- I started this blog in 2005 and my expenses went down noticeably that year: did the self-scrutiny make me more frugal? Probably!
- I moved at the end of 2006 so I've had higher housing costs since then. For the purposes of this exercise, I did not include some large one-time expenses relating to my condo purchase and moving (like closing costs, moving & storage charges, and new furniture, all totaling almost $30,000 over 2 years) but I did include minor stuff like hardware store items and lots of cleaning supplies under "Household"
- I bought a new laptop in 2008, which is why miscellaneous expenses spiked.
- My "Gifts Given" expenses were high in some years because I bought my mother plane tickets at a point when she was separated from my father and having a hard time making ends meet.
- I took a big vacation in 2008, and another significant trip in 2004. My travel budget was also affected by the end of an international long-distance relationship in 2007.
- In 2008 I started spending more and more time with a new, local sweetie. We tend to alternate paying for things kind of haphazardly, which has blurred the line between grocery and restaurant expenses and some household stuff, even though we don't live together.
- My medical expenses have increased gradually over the 7 years, mainly due to higher health insurance costs for what's not covered by my employer.
It's great to be able to say that I saved more in 2009 than I ever have before:
I'm sure I'll keep staring at all this data and digging into individual years and categories to see more detail-- it is weirdly fascinating! The whole thing was fun to pull together and I highly recommend that you try it for yourself!