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2018 Yearly Review and 2019 Goals
2018 was an important year for Frugal Firefly.
After thinking and talking about financial principles for years, it was this year that I decided to take the website live and put myself out there for the world to see. The last six months have been an anxiety-inducing crash course in what and what not to do. And I'm not even sure I've fully figured that out yet.
For all of the writing I do on planning and being good financial stewards, readers might be surprised to hear that my wife and I have not really created financial goals in the past.
Sure, we have overarching directions like "save a high percentage towards retirement" or "reduce our food spending budget," but these are simply too vague to make the difference we hoped.
With that in mind, here was the result of 2018's spending:
2018 Budget Review
My wife and my W2 income from our primary jobs accounts for roughly 92% of the total gross number.
The major difference in 2018 is the inclusion of "Other" income - Etsy projects, bank account bonuses, cash back from apps and other programs, and Frugal Firefly website income.
While this "other" income is quite low compared with our other sources, it is a starting point. The goal is to continue to grow these additional revenue streams and ultimately replace our current income (or come close to it) by retirement.
Total spending this year came in at 96.7% of our gross income. While this is very high, there were several uncommon costs and aggressive paying down of loans.
Here are some of the more interesting categories of spending:
Auto & Fuel
We drive relatively modest vehicles - I drive a Ford Fiesta and my wife drives a Ford Escape. Yet, the cost of car ownership remains the third largest expense category in 2018 at almost 10%.
Fortunately this is one expense that is relatively easy to improve. Here were the top three things we did to reduce our automobile expenses this year:
Education costs were the fourth largest expense in 2018, accounting for 9.8% of gross pay.
After completing my MBA in 2017, we were left with a modest amount of student loans. The interest rate on graduate-level student loans surpassed any of our other debts, making it the top priority on that side of the equation.
Aggressively paying off these loans skyrocketed expenses, but saved us in recurring interest costs.
Health and Fitness, Doctor, Dentist
This category does, not include medical insurance, but actual medical expenses. In 2018, this accounted for 6.7% of our gross earnings.
Why so high? This was mainly due to the cost of having our twin girls. We completed IUI and IVF treatments, spent time in the hospital, and left our girls in the NICU for a week. All things considered, we were lucky for our costs to be as limited as they were!
Here's the big one! Home costs accounted for over 20% our our gross earnings and is the most expensive single category in 2018. Let's look at why.
First, we pay a mortgage on our home each month instead of renting. This is probably our single biggest recurring expense.
Second, part of our monthly mortgage is a HELOC loan with a variable interest rate. With the Federal Reserve increasing rates multiple times throughout the year, this HELOC loan became our highest interest rate after paying off student loans. Late in 2018, we began to pay off this loan more aggressively, increasing home costs.
Lastly, several other major home projects accounted for the large percentage expense. We built a raised herb and vegetable garden in the back yard, furnished the girls' nursery, and replaced our 28-year old furnace and air-conditioning units when they died late in the year.
Isn't home ownership fun?!
Here's hoping 2019 will not see as many major expenses in the home.
Shopping is actually a very broad category that includes all supplies, children's expenses like diapers and formula, charitable contributions, gifts, and the like.
Considering everything that goes into this category, we came in below budget for the year.
This category includes taxes withheld from our paychecks, sales and use taxes from Etsy sales, and other costs such as property taxes.
This is one of the expenses that concerns me the most from a percentage standpoint. There are no "special" expenses that drove this to a high level. This is simply income lost to the government, 17% to be exact.
Fortunately there are several ways to decrease taxable income, and we will continue to drive these in 2019.
But I'll save that for the goals section.
Retirement and Long-Term Savings
I decided to break out this expense separately from the others, since the money remains in each respective account (as opposed to other expenses that represent lost dollars.
In 2018, we contributed 9.7% of our gross income to retirement and other long-term savings accounts.
The percentage shocked me a bit when I first did this analysis. I currently contribute a much higher percentage of my paycheck to a 401k. However, the overall percentage is lowered because of additional income streams.
My wife unfortunately does not have an option for retirement through work. While we contribute with after-tax dollars to other retirement accounts, the percentage is ultimately lowered.
You'll notice that this is a negative number. We reduced our short-term savings by 6.3% due to expenses and retirement contributions.
This is precisely why we maintain emergency funds and overage in our short-term account (checking account).
Do you want to start an emergency account but not quite sure how? Check out my post on how to use a bank account bonus to get you there quicker.
Now that 2018 is in the rear-view, it is time to plan for the year ahead. This would actually be the first time my wife and I define financial goals for the year (rather than simply try to follow good financial principles). These goals are not in any particular order.
1. Max 401k
The IRS recently released their updated 2019 contribution limits and the 401k limit has now increased to $19,000.
Since this account comes from pre-tax dollars, thereby reducing taxable income, we are prioritizing this account in 2019.
2. Max HSA Account
The Health Savings Account (HSA) is one of the best savings (and arguably retirement account) that exists today.
Like the 401k, contributions are made pre-tax and reduce taxable income. The account then grows tax-free for as long as you keep it. Finally, withdrawals are also tax free if they are used for qualified medical expenses (of which you are bound to have at least in later years of your life).
The limit for 2019 was also increased to a new value of $7,000.
3. Decrease Taxable Income
The first two goals above are directly tied to this goal - we want to decrease taxable income as much as possible.
Since itemized deductions are probably a thing of the past (at least in the short-term), we will focus instead on pre-tax contributions.
4. Make My First Dollar on FFF
I wrote a bit of a tongue-in-cheek article about my journey with Frugal Firefly last month. In it, I shared that the website has not yet made anything back.
While other metrics such as site traffic and time-on-page have been positive, that first dollar has remained elusive.
My goal for 2019 is to start making money. While I don't believe I'll have an income-replacer on my hand in just one more year, I think a goal of $1 is reasonable, right?
5. Build Emergency Fund (Again)
When medical and home expenses hit in short succession, our emergency fund foot the bill. A goal for 2019 will be to build back our emergency fund to around 3 months of expenses.
With another bank account bonus or two and reasonable interest rates, we hope to hit this in the first half of the year.
2018 was a big year for the Frugal Firefly family. We added two more in the form of our twin girls, improved our finances through lower costs and more retirement contributions, and paid down over $20,000 in debt.
But there's always more room for improvement!
What were your spending wins and woes for 2018? What are your goals for the new year? Let me know in the comments below!
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