2021 Personal Budget Review
As part of my tax preparation practice in Lake Nona, a community within Orlando, FL "the City Beautiful", I write a lot about taxes. However, I really enjoy personal finances and write quite a bit about that subject as well.
Every January 1st I look forward to sitting down and looking at our personal budget. I have an excel file with 10+ years of data in graphs to identify trends and compare the last year to the previous year. It's not something everyone does, but I think it provides some valuable information.
It’s always wise to review the past in order to make necessary adjustments as you move forward. However, the main purpose of budgeting is not to look back, but to help you make decisions in the moment and to look forward. Your money will always go somewhere, it’s better if you tell it where to go. Telling it where to go ahead of time is always more valuable than looking at where it went after the fact. Our family uses You Need a Budget (YNAB) to manage our family finances.
With that said, here are some reflections on our spending last year. We use these insights to set our budget for 2022.
1) The last couple of years have all had some unique things that have occurred. For the below observations, I normalized the expenses year over year by subtracting out unusual income or expenses. For example, we sold a duplex we owned in NC and used some of the money to pay extra principal on our home mortgage one year.
2) Housing: Our electric costs went down about 6%. I'm not sure what we did to drive that, but hopefully we can keep it up! Likely due to more travel and being away from home more in 2021 than 2020. HOA fees increased another 14%... that needs to stop. Also our homeowners insurance jumped 18%, which is something I hope we don't see every year.
3) Groceries increased just 5% year over year (last year it was up 13% from the prior year). Eating out went up 23%, but we still spend very little eating out (just 12% of our food budget). I continue to be proud of our eating out costs ($28 per person per month). I don’t think there’s much we could do to get food costs down… 3 growing boys = lots of $$$ for food… with the inflation and pandemic issues, I'll take a 5% increase and call it a win!
Advice: 10 out of 10 people spend more eating out than they think they do. In my experience, this is the main category people could cut in order to save money. Buying groceries is cheaper and usually healthier than eating out too.
4) Vehicle expenses (gas, tolls, insurance, repairs) went up 132%! Wow. Last year was down significantly, so we're back to normal maybe... The dollar amount isn't large, so the % swings easier, but we drove to Maine and back and had some repairs on a used truck I purchased. Also we added insurance for the camper.
Advice: Buy used cars, not new. Let someone else take that depreciation hit… if you do want a new car, hang on to it for 10+ years and you’ll probably be alright. Never borrow money. Check out this blog post or this video to learn how to avoid car debt.
5) Other observations: Giving was up significantly (due to larger income), Family entertainment was up significantly (this category includes our vacations and we traveled more since we bought the camper), medical was up 6%.
6) Overall spending was up 11% in 2021 vs 2020. This makes sense because 2020 was down from 2019 due to the pandemic limiting our travel and transportation costs as well as the fact that I was newly self-employed, made less money in 2020, and kept a tighter watch over expenses. 2021 provided increased income and much higher travel costs (including our 3 week camping trip to Maine and back).
I enjoy helping individuals with tax preparation and tax planning as well as offering tax help to individuals dealing with tax debt, IRS liens, IRS levies, Wage Garnishments, etc. I also service businesses (including nonprofits and churches) by providing tax preparation and tax planning as well as consulting for accounting, bookkeeping, and other finance related questions. I live in Orlando, FL, but I serve clients all across the country. Schedule an appointment if you need assistance and take a look at the resource page.
6900 Tavistock Lakes Blvd Ste 400
Orlando, FL 32827
Serving clients in Orlando, Lake Nona, Altamonte Springs, Apopka, Azalea Park, Celebration, Hunters Creek, Lake Buena Vista, Lake Hart, St Cloud, Winter Garden, Winter Park and via the latest technology remotely around the country.
*The blog posts (as well as the YouTube channel) are my personal opinions and thoughts about a wide range of topics. They are not meant to apply to individuals specifically and should never be relied on as tax or investment advice. You should contact a professional for specific advice before taking action.