How We Spent Our Money in 2009

In the last week or so, we started to receive tax documents for filing our 2009 income taxes. At the around the same time, I also got email notifications from credit card issuers that the 2009 Year-End summaries of our credit card spending are also available for us to view. While we are waiting for all the W-2s and 1099s to come to know exactly how much we made in 2009, I think it’s a good idea to see how much we spent and on what last year first. The credit card summaries we just received make the job much easier.

Our spending goes into two broad categories. One is daily expenses that cover everything in our everyday life, from groceries, utilities, to mortgage/rent and child care/tuition. The other one is investments, where we put part of our take-home incomes from day jobs into investments such as brokerage accounts, IRAs, and 529 plans. Since most of those investments are for the long-term, I treat them as *expenses* here, even though we didn’t really spend the money.

Daily Expenses

Since both my wife and I use credit cards almost exclusively, figuring out how much and where we spent our money is quite easy, despite that I don’t track where every dollar went. In addition to credit cards, we also wrote some checks, though the use of checks is getting rarer these days with most payments being made electronically. Outside credit cards and the check book, we also paid with cash in some rare occasions. However, since I don’t expect the total amount to exceed a couple of hundred dollars, excluding cash payments from our total spending won’t have any significant impact overall.

Here’s a look of how much we spent each month last year.

We mainly use three credit cards: An AMEX Costco TrueEarnings Card to shop at Costco, a Chase Freedom Card to buy gas and groceries, and a Fidelity 529 Card for everything else, which generally carries the biggest balance. After we moved from NJ to VA last September, we also started to use a Discover Card to pay the kids’ tuition as Discover is the only card accepted there. The two spikes in February/March and July/August were all due to some one-time charges: $2,000 on credit card when we replaced our furnace in February, $900 paid for our annual life insurance policy in March, another $1,300 on credit card for a house repair in July, and a check of more than $1,000 in August to pay off the remaining balance for the furnace before moving to VA.

In total, we spent about $66,740 in 2009, with an average of more than $5,500 every month. Of that, the largest is kids’ tuition, followed by mortgage/rent. The two combined accounts for about $3,200 a month. The rest $2,300/month were for food, clothes, utilities, phones, gas, insurance (auto and home) and other expenses that were usually not regular and, thus, not planed ahead. After reaching the peak in July, I am glad that our monthly spending has been falling quite significantly since.

The above calculation doesn’t include taxes we paid on April 15th and estimated taxes paid throughout the year. If that’s included, then the total spending went up to $87,112 in 2009, with the monthly average jumped to $7,260.

Investments

Now to the investments.

Most of our investments were done automatically every month. That is, I set up automatic investment plans with mutual fund companies and brokers to buy a fixed amount of stocks, mutual funds, and bonds each month without manual intervention. I have been doing this for many years and it has really served us very well. In fact, I think the growth of our net worth last year and years in the past was largely due to the automatic investment plans we implemented. By investing automatically, we didn’t try to time the market. Instead, we kept buying on a regular basis, in a good market and bad, knowing that eventually, the market will recover (I am glad it did faster than I expected) and those shares we bought when the market was heading south will contribute more to the growth when things turn around.

In addition, I also put some money in the brokerage account at Scottrade, mostly in the first half of 2009 to take advantage of the market slump, as well as buy a couple of IPO stocks late in the year. The total amount of new money transferred to Scottrade last year was $16,100, much larger than usual. Overall in 2009, the new investments we made were about $59,310, with an average of $4,940 per month.

Comparing what we had in taxable accounts, 529s and the bond account at the end of 2009 with those at the end of 2008, the total market value in these three categories increased $151,971 in 2009. Excluding our own contributions, the net increase in market value was about $113,900. That gives us an annual return of nearly 53%, beating the S&P 500 Index easily On the other hand, cash in our savings accounts increased $42,780 excluding the proceed from selling our house.

Overall, our everyday expenses account for more than 35% of our 2009 spending, the largest piece of the pie, followed by 31% for investments. I did a same spending analysis this time last year. Surprisingly, we also had more than 31% of our money invested at that time. So we are quite consistent on that part. If I put investments and cash savings together, then we saved nearly 58% in 2009. This is a number I am very happy with.