2023 Spending Review
When I started working almost 2 decades ago, I used Quicken to create a budget, categorize, and track my spending. As my salary increased, I stopped tracking my spending. I’m naturally frugal and am conscious of my spending habits. Instead of tracking categories, I had an overall spending bucket that fluctuated each month. There are some months when spending increases, such as during tax season or when I pay for car and home insurance. Since I learned about FIRE, I started tracking my monthly and annual spending to calculate my FIRE number and determine whether my passive income covers annual spending. Based on past years’ spending, I determined that I need between $20k-$22k annually in a normal year. The annual spending numbers include my half of shared expenses and the entirety of my personal spending.
| Year | Annual Spending | Notes |
|---|---|---|
| 2019 | $90,152 | Car purchase, home maintenance |
| 2020 | $28,995 | COVID lockdown, home maintenance |
| 2021 | $21,823 | |
| 2022 | $31,457 | Home maintenance |
| 2023 | $21,820 |
While the pandemic was terrible, it showed me what it would be like if I didn’t have to commute to work. When I commuted to work, I purchased multiple coffees a day, purchased daily lunch, and ate out for dinner at least twice a week. These habits changed when I worked from home. Suddenly I didn’t have to pay for public transit, parking, or lunch and dinner.
When I retire, I don’t plan to stay at home the entire time. I expect to travel a bit, but I will continue to have to pay for housing expenses like property tax. So I expect that expenses may increase in retirement. Fortunately, I have enough money saved to cover a significant spending increase.
Here is the 2023 annual spending breakdown:
| Category | Annual Spending | Percentage | Description |
|---|---|---|---|
| Taxes | $4,253 | 19% | Property tax, additional income tax |
| Transportation | $3,496 | 16% | Car insurance, maintenance, gas, public transit |
| Food | $2,719 | 12% | Groceries, restaurants, coffee |
| Utilities | $1,995 | 9% | Electricity, gas, water, internet |
| Recreation | $1,794 | 8% | Outdoor sports, exercise equipment |
| Finance | $1,674 | 8% | Finance subscriptions, tax preparation |
| Shopping | $1,566 | 7% | Discretionary shopping |
| Donations | $1,265 | 6% | Charity |
| Healthcare | $1,058 | 5% | Health spending not covered by insurance |
| Home | $840 | 4% | Home insurance, maintenance |
| Other | $1,160 | 6% | Everything else |
There are a few things that stand out:
- I include federal tax payment ($1,354) in tax spending, but I shouldn’t because I don’t include taxes withheld at payroll. Most of the spending in this category is property tax.
- Transportation spending is high because we have 2 cars and my spouse drives to work daily. Most of the spending in this category is car insurance.
- The majority of recreation spending was for a one-time purchase of an exercise bike.
- I expect healthcare spending to increase after retirement as I will no longer have employer-provided insurance, but I will also reduce charitable donations.
Based on the 2023 year-end dividend income report, I earned $46,079 in passive income. $34,201 of that amount can be withdrawn into a bank account penalty-free. The amount that I earned in passive income in 2023 covered all of my expenses for the year.
I don’t expect much to change this coming year unless I decide to end my 9-to-5 earlier than expected. My original plan was to retire by 2025.