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A Breakdown of Our Expenses in 2016

mdj 2016 annual expenses

Back in 2008, I wrote my initial post about our monthly expenses.  It’s always interesting going back in time to see what the circumstances were.  Back then, the update was compiled just before we had our first child, and we had a mortgage on our principal residence (a new build).  Our annual recurring outlay was around $50k (not including RRSP, savings, captial expenses etc).

Five years later in 2013, I wrote an updated post with quite a different life story.  By that point, we had two young children and we managed to pay off our mortgage a few years prior.  Even though the mortgage payments were eliminated, the kids tied up the extra cash flow and more!  At that time, child care/pre-school costs were high at around $12,000 per year (spouse working part-time).  Our total annual recurring expenses back then were around $52k (not including RRSP, RESP, TFSA contributions etc).

Fast forward to 2015 and my oldest child is in grade school and my youngest in pre-school about to start kindergarten in the fall.  Although one child is out of daycare/pre-school, there are still summer camps and activities that really add up.  We managed to keep costs fairly low spending about $53k for the year.

Now onto 2016!  Pre-school costs only consume half of the school year, the other half year is covered through kindergarten.  However, children activities in 2016 really kicked it up a couple notches which resulted in a few more swipes of the credit card (starting to see burn marks!).  The increased activities offset any savings we received from reduced pre-school fees.  I’m all for the kids going out and enjoying activities, but what I didn’t anticipate was that it would result in lifestyle inflation.

With a high number of activities and neighbors/friends going to the same location, we discovered that we were limited in carpooling opportunities (car seats take up a lot of space!).  After much discussion and debate, this frugal blogger reluctantly upgraded to a seven-seater SUV.  The details of the purchase are for another post, but we managed to buy a high-quality three-year-old SUV for about half retail price (with cash so no financing charges).  While we got a good deal on the purchase and a very fair trade-in value, it was no surprise that the large SUV increased our annual recurring expenses.  Specifically, gas and insurance.  I’m hoping though that as the kids grow out of car seats, that going back to a mid-size car/SUV (or maybe an electric vehicle) would suit any carpooling situation.

As we funnel our spending through a credit card (where possible), I use mint.com to organize transactions into categories where I pulled most of the numbers below.

Here are the numbers:

Housing Expenses: $9,867 (vs. $9,180 )

  • Mortgage: $0
  • Property tax: $3,700 (vs $3,500)
  • Maintenance: $2,500 (vs. $2,000)
  • Utilities: $2,600 (vs. $3,000)
  • Home Supplies: $1,067 (vs. $680)

Car Expenses (2 vehicles): $4,041 (vs. $3,475)

  • Car payments: $0
  • Gasoline: $2,371 (vs. $2,250)
  • Maintenance: $1,345 (vs. $900)
  • Registration: $325

Home Essentials: $1,509 (vs $1,609)

  • TV/Internet/Landline phone: $1,509
  • Cell phones: $0 (work provided cell phone)

Food and Booze: $13,000 (vs. $12,360)

  • Groceries: $11,500 (vs. $11,000)
  • Entertainment/Eating Out: $1,500 (vs. $1,360)

Insurance: $5,780 (vs. $5,130)

Children: $11,500 (vs. $11,700)

  • Preschool: $3,500
  • Activities/summer camp:  $8,000

Spending: $5,100 (vs. $4,500)

  • Shopping/clothing/hair/gym/misc: $5,100

Other Expenses: $6,200 (vs. $5,160)

  • Charity: $2,400 (vs. $2,360)
  • Gifts: $2,300 (vs. $2,000)
  • Health care (prescriptions, eyecare, dentist): $1,500 (vs $800)

Total Annual Expense: $56,997 (vs. $53,114)

As you can see from the numbers, it’s a bit of a jump in expenses since the 2015 update.  The culprits seem to be spread evenly throughout the list, but big jumps for insurance, car expenses, and other expenses.  I’m hoping this lifestyle inflation doesn’t last too long where I’d actually like to see some lifestyle deflation in the coming years.  Especially since I’m planning on reaching financial freedom in 3.5 years!

While the ideal situation would have all of our costs included in the $57k annual number, unfortunately, that is not true.  It does not include a family vacation, large capital expenses, or savings via TFSA, RRSP, RESP.  So realistically, our annual expense number is much higher.

So what does your budget look like compared to mine?

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 17 comments… add one }
  • Leo T. Ly @ isaved5k.com June 26, 2017, 9:16 am

    It’s great that you are able to keep the expenses that you are able to control pretty stable. I find that uncontrollable expenses such as utility rates, property taxes, cost of home improvement materials and a whole laundry list of items that I am struggling to keep them from rising quicker than my income.

    I think that if our income during our financial independence years are not growing at least the same rate our own lifestyle’s inflation, we may be in trouble. However, knowing that you are able to build a great list of dividend income assets, I think that you would probably be able to continue to grow your passive income at that rate.

  • BK June 26, 2017, 9:37 am

    Our 2016 expenses are still under $50K for a family of five. We run a pretty lean household, but I do see our two-car set up as something that could be trimmed but yet we are hesitant to do so. Most of the time one car just sits. The cost of insurance/repairs/registration is probably costing around $2k/year, so the amount is not trivial, but our eldest child will be learning to drive in a year.

    Our biggest expense, like yours, is in the food category. Even though we don’t drink or eat out very much we do tend to buy better quality food, and with three children in their teenage years, you can understand why it’s the biggest expense.

  • rgz June 26, 2017, 1:02 pm

    You listed car payments as $0 but didn’t list any depreciation. Your estimate is clearly low as a result.

    • BK June 27, 2017, 9:57 am

      I don’t think anyone tracking household expenses is going to factor in depreciation of an asset like a car. People do it because it gives them a detail report of where the spending goes, and if necessary, where to cut back. Depreciation of the value of a car is totally useless in this regard.

      • nobleea June 27, 2017, 11:59 am

        Depreciation is a non-cash expense. It should be tracked in a net worth statement, but not necessarily in a expenditure tracking sheet. FT is tracking and commenting on cash outlays, in which case depreciation does not count.

  • Al June 26, 2017, 2:09 pm

    This is one area of my family’s finances I am pretty lax on. We live a modest lifestyle, drive used cars, have a house that’s 1/2 our annual income, shop at costco etc. We do spend what seems like “a lot” on discretionary things – furniture, home renos etc but when put in the context of annual income they’re not insane.

    I feel like I should “take it to the next level” and start keeping track of expenses, sadly I never have cause our income was always so much more than what we were spending.

  • Tawcan June 26, 2017, 3:38 pm

    It’s great to see annual expenses from a fellow Canadian blogger. You see a lot of these expense reports from US bloggers but it’s not apple to apple comparison. I think cost of living for us Canadians is generally a bit higher than the US.

    For us we spent a total of $44,138.77 in 2016 (not including business expenses) which I analyzed in this post
    http://www.tawcan.com/2016-financial-review/
    This number is a bit lower than our previous years. With 2 growing kids hopefully we can keep the expenses in check this year.

    • FT FT June 26, 2017, 7:44 pm

      $44k and you live in Vancouver with two kids? You guys really put us to shame! Do you have any vehicles? What are the biggest differences between your budget and mine?

      • Tawcan June 26, 2017, 8:33 pm

        We have one vehicle that I typically take to go to work. My wife try walking or taking the bus to places. Funny you said that because when I compare our expenses to other American bloggers our numbers seem very high (I guess I did not take exchange rate into consideration).

        Just comparing your numbers against ours…. ours are lower in..
        -Utilities
        -Car gas
        -Preschool & activities (I’m sure that’ll go up a bit once kids are older)
        -TV/Internet/landline phone
        -We spend a bit less on food than you. We have been growing produces in the yard though.
        -Health care, work’s extended health covers most of the health care expenses we have

  • Freedom 40 June 27, 2017, 10:14 am

    Your expenses are very similar to ours. Low 50’s with no mortgage. Living in Southern Ontario. Biggest “discretionary” cost is the Misc Spending (house, gifts, booze, restaurants, etc) and Kid cost (care, camps, sports). MMM would suggest that these are senseless and you should live on $30k, however the MDJ lifestyle is far more reasonable/realistic. I’m now 40 with approx $1.2M (split evenly between real estate and investments), however I don’t feel much closer to FI. My dividends only yield $15-$20k annually, but like you, I need $50k for a reasonable lifestyle. Getting my dividends up to where they need to be feels un-achievable in the short/mid term. Hoping that $1M (non real estate) at age 45 will get me there.

    • FT FT July 3, 2017, 8:15 am

      Freedom40, also note that $30kUSD should be converted to CAD. :) But I’m with you, I like the more balanced approach. Sounds like you are doing very well financially. Question, are you generating much cash flow from the $600k in real estate?

  • Passivecanadianincome June 28, 2017, 11:45 pm

    Nice list. While I don’t find our son costs much atm it’s scary to think about future expenses when he cares about brands. 8k for activities and summer camp that sounds high. What activities are they in?

    • FT FT July 2, 2017, 3:28 pm

      The kids are in quite a few activities, but the priciest is probably private piano lessons. It costs $2,200/year which covers both kids. My kids aren’t in hockey, but I’ve been told that it costs $1,800/year plus any extra camps that you do, plus hockey equipment. This doesn’t include any travel that is required. Activities really add up, especially if they get serious and start going multiple times a week.

  • David June 30, 2017, 12:30 pm

    This is the first year I’m actively tracking my expenses. I’ve always been someone who just pays himself first and I save a large portion of my income. However, looking at the FIRE community, I thought it best to figure out exactly how much I spend so I know when I can reitre early if I wish.

    I guessed prior to the process what my expenses are and I’m now estimated to be about 50% higher than that. It will still be less than $30,000 a year, but it is surprising where your money goes. I’m actively not trying to cut back anything, just listing it. At the end of the year I can figure out if I want to cut anything.

    • FT FT July 3, 2017, 8:12 am

      Hi David, what are you using to track your expenses? Are you using an online program that tracks credit card spending? What age are you going to call it quits?

  • Bhramar July 17, 2017, 1:10 am

    Your blog was one of the first blogs I came across when I started researching about investment options and other personal finance related items in Canada. Thanks for all the excellent blog posts.

    Along with my wife and daughter (she is four now) I moved from a small Mid-West US town to Canada (Vancouver) in Sep, 2016. We have been tracking our expenses in US since 2014 and recently finished reviewing our expenses in Canada for 2017 Jan-Jun period. Here is the average monthly expenses breakdown –

    Canada (CAD 5,355/per month or CAD 64,260/year) –
    Housing (2 Bed/2 Bath Condo Rent + BC Hydro + Internet): $1800 (34% of total expense)
    Recreation & Travel: $1250 (23%)
    Daycare: $850 (16%)
    Grocery: $400 (7%)
    Car (Gas + Insurance): $380 (7%)
    Misc. Expenses + Shopping: $335 (6%)
    Eat-outs/Restaurants: $170 (3%)
    Charity: $125 (2%)
    Phone: $45 (1%)

    US (USD 4,310/ per month or USD 51,720/year) –
    Below is expense by category and % of total
    Housing (2 Bed 2 Bath Townhouse Rent + Utilities + Internet): $1030 (24% of total expense)
    Recreation & Travel: $1000 (23%)
    Daycare: $950 (22%)
    Misc. Expenses + Shopping: $490 (11%)
    Grocery: $310 (7%)
    Car (Gas + Insurance): $200 (5%)
    Eat-outs/Restaurants: $155 (4%)
    Charity: $130 (3%)
    Phone: $45 (1%)

    Housing, Car Insurance cost increased for us in Canada, but daycare is relatively cheaper than where we lived in US. We have made some other minor adjustments but overall expenses have remained at the same level at least at the current exchange rate. Savings rate though is lower for us in Canada than US, mainly because of relatively lower income (around 20% lower).

    • FT FT July 17, 2017, 10:34 am

      Thanks for the kind feedback Bhramar. It’s interesting to see the differences in cost when comparing U.S vs Canada.

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