Sunday, January 09, 2011

Household consumption in the Hadley-Ives family, 2010

I keep track of my spending and consumption, and almost every transaction, be it with cash, credit card, or checking account, gets recorded and assigned a category in some spreadsheets I use. Every two weeks I check on these and update them. The spreadsheets keep a running total for our spending in the various categories. I’m interested in my own household as a case study in economic life.

So, let me share how our expenses went into various categories in 2010.

The top two categories are:
Housing: 12%
Travel and Lodging: 12%

The four-way tie for third place in spending are:
Groceries and household expenses: 10%
Taxes: 10%
Vehicle purchase, maintenance, and insurance: 10%
Other: 10% (mostly retirement savings)

In seventh place, we have:
Utilities: 7%

Then, tied for eighth place, we have:
Health: 6%
Education: 6% (mostly college savings)

The remaining categories are:
Giving: 4%
Food out-of-home: 3%
Entertainment: 3%
Clothing: 3%
Gas: 2%
Interest on debt: 2%
Communication: 1%
Money given to our sons: 1%

Explanation of these categories follows:

The housing figure includes both the interest and principle on our mortgage, but not our property taxes. I figure unless one is wealthy or inherits a home, the interest on a mortgage is unavoidable, and is just part of the cost of owning a home, so I keep it as a housing expense rather than looking it as interest.

The travel and lodging category includes both work-related travel for which I was later compensated and personal travel, and also includes all cash withdrawals made while traveling abroad, even though much of the cash spending could more accurately have been assigned to “food out-of-home” or “entertainment” or “groceries”. If we subtract the money I received from faculty development or scholarly grants for the travel, it would drop to 11%, and another 1%-point could be reassigned from travel to entertainment, and probably another 1% reassigned to food out-of-home. Gas costs for travel are kept separate in the “gas” spending category. So, a most realistic estimate for actual travel expenses in 2010 would be 9% of our spending. That is still quite high, but we all went to Asia this summer, and Jeri went back to Taiwan in March and December as well. I had conferences to attend in San Francisco, Las Vegas, Hong Kong, Dallas, and Strasbourg. We also visited Vancouver and Oregon this year (I went to Oregon twice), although most of the expenses on those trips were covered by others, so not many of those expenses are included in this category.

The groceries and household expenses include any charge or spending made at a grocery store, department store, or hardware store. Well, if I remember specifically buying prescription drugs, clothing, or toys I do assign those expenses to their appropriate categories (e.g., health, clothing, entertainment). Mostly though, if we buy something to eat or use in our home, it goes in this category.

Taxes include income taxes and property taxes, and some small portion of our total sales taxes. Actually, if I went through our purchases and shifted all the sales taxes we pay into the tax category, it’s likely our groceries and household category would shrink by nearly half-a-percentage-point, and taxes would go up by half-a-point.

The “Other” category is mainly the retirement savings from my paycheck, life insurance, and a few miscellaneous expenses that are hard to categorize. I do not qualify for any social security (I’m a state worker, and exempt from Social Security taxes, but I won’t get any Social Security benefits when I retire). I also will not receive any pension when I retire (I’m in the self-managed plan for academic workers in the University of Illinois system, which means that when I retire all I get is the money I’ve saved in the self-managed plan, and no pension). As my family has a history of heart disease and I have (treated) high blood pressure, I assume I won’t have many years of life in retirement, if in fact I live long enough to retire, and the self-managed plan has the benefit that my heirs and survivors will get all I’ve saved, whereas if I was enlisted for a pension my survivors would get very little.

The Vehicle purchase, maintenance, and insurance category costs include the costs of repairing my bike and our two cars. It also includes the interest in the loan we used to purchase our minivan, which seemed more appropriate in this category rather than in the “interest” category.

The utilities cost is much higher this year because we had a new heating and cooling system installed this year. That was put in “utilities” rather than “housing” as a spending category.

The education spending category includes the college savings we have put away, and certain purchases of school materials, educational books, subscriptions to news and science magazines and journals, and so forth. My memberships in scholarly associations are also included as “educational” expenses in my system of accounting. Our educational expenses ought to be much less, as we must save a high percentage of our income to pay for college, and college ought to be far more affordable (subsidized by the public).

The health spending category includes medical, dental, and vision care, including services, insurance, and medicine or glasses / contact lenses. At only 6%, it’s a bit low, as a household such as ours ought to be paying much more for health services (to make health care universally accessible to poor, sick, and elderly households). I include Medicare taxes in health spending rather than in the taxes category.

Our giving is about 2.5% charitable giving and 1.5% buying gifts or sending money for family members and friends.

Our “communications” spending includes our internet service, phone service, postage on packages and stamps, and our subscription to the local newspaper.

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