Each year, I track our expenses as the bills come in and get paid. At the end of the year, I add it all up and start comparing to previous years. I’m curious about my personal rate of inflation. I’m also looking for interesting trends like the long-term drop in the price of natural gas which could lull me into a false sense of security about being able to meet that need in the future. And, recently, I’ve started looking at the numbers to see if it would be possible to pay for our expenses using only the income from our investments such as our dividends, distributions and, in the case of REITs, our return of capital.
What I Found Doing the Review of Our 2014 Expenses
Well, it looks like we have not had any leaking toilets or taps during the first three quarters of 2014. Our water consumption has stayed the same. (We don’t water lawns or gardens in the summer, by the way. Planting perennials that are suited to the climate here has paid off; and I hate grass and prefer it to go dormant so I don’t have to mow it as often.)
We won’t know if we “sprung a leak” since December, though, until the next quarterly bill arrives. (It’s too cold to try to read the meter and I can’t be bothered. You can remind me I stupidly said that if I ever get one of those $1000 water bills….)
The drop in the price of gasoline is too recent to show a big impact on our annual gasoline spending. The price of gas was so high in the early part of the year, though, that we spent about the same as if we’d made a road trip to the Maritimes from Ontario this year, even though we didn’t. Good thing this was the “stay home” year!
We have GOT to do something, almost anything, about our internet bill!
I can continue to ridicule the government when they tell me how they have forced the insurance companies to reduce my home and auto insurance rates. (Although neither rate has gone up much either.)
How Does Our Investment Income Match Up to Our Expenses?
Mark at My Own Advisor was playing this game and reminded me to try a hand.
Simple Bills to Budget For
Ok, we’d have no trouble paying for
- House insurance
- Natural gas and
- Property taxes
From our investment income.
Car Expenses to Budget For
I separated out our auto-related expenses before starting the game. And I’m glad I did.
Wow! Who knew how fast those add up? (Ok, Mr. Money Mustache does and he talks about it ALL the time.)
The costs include
- Driver’s licenses
- License plates
- Car insurance (why does it cost the same to ensure a ’98 Corolla as a ’12 Camry?)
- Car repairs and maintenance
- Saving for the next cars
Somewhere down that list is where we ran out of income before we ran out of expenses.
Harder to Estimate Expenses to Budget For
Which is too bad, because the expense list continued with:
- Dental (no coverage in retirement)
- Eye care (almost no coverage now or in retirement)
- Drugs and health (does your doctor tell you the only way to prevent colon cancer is psyllium fibre at $20 a bottle even though you’ve never been constipated in your life?)
- Food and housekeeping
- Clothes and dry cleaning
- Gifts, hobbies, entertainment
- Pre-saving for home repair and maintenance costs
And probably a few dozen other costs I forgot to include. (I know our overall annual spending so I don’t usually bother to parse it out into categories.)
Yet if we ditched the cars (not literally) we’d be quite a ways down that list. So I guess if we plan to retire early, we may have to plan on reducing our stable of vehicles, or on increasing our retirement income. (There’s no trouble meeting all of these costs if we include CPP, OAS and a few other bits and pieces that we don’t get access to until 65+.)
Anyone want to buy a ’98 Corolla? It comes with a free (partial) can of Tremclad.
- Estimating our Personal Rate of Inflation
- How Much Should You Budget for your Child’s Orthodontics?
- Budgeting for Future Home Maintenance and Repairs
Is your investment income enough to cover your expenses? Or do you expect to have to use the capital? Please share your strategy with a comment.