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We started the year off unpacking. We moved over Christmas break into a larger home that we purchased at a great deal. If you’re interested in learning more, check out my post on live-in house flips. Mr. R2R also received a bonus this year, so that helped keep our savings rate up, even though we had a few large expenses this year. In the past, I had too many categories in our budget, so this year I tried to simplify it into 8 categories. These included Housing, Utilities, Food, Transportation, Medical, Vacation, Miscellaneous, and Savings. Although I loved the simplicity, I think I’ll go back to having more categories. Our miscellaneous fund was just too broad.
Our housing expenses this year was at 16%. We extended our patio this fall, because when we purchased the home, it didn’t have any grass in the side yard. We quickly realized that our side yard was located in a completely shaded area that didn’t receive any sunlight. Having two dogs, it became a huge hassle to mop the mud up every time they came inside. It was a great investment, and gave us a larger patio to enjoy. We fully expect to get our money back once we sell the home in a few years. We also managed to keep some expenses down by doing some of our own repairs. Thanks Youtube!
Moving into a larger home this year really had me worried that our utility costs were going to be significantly higher. I was pleasantly surprised when I discovered that our bills stayed about the same as our previous house that was half the size. I’m relieved that our home is energy efficient, and we were able to keep our utility costs roughly the same. We included electric, gas, water, trash, internet, cell phones, security monitoring, netflix and hulu in this category.
I’ve struggled keeping our food budget down, and I’m finally finding some things that work for us. I use Walmart’s free grocery pick-up service , which really helps cut down on impulse purchases, especially with kids. My kids want every cereal, cookie, and snack once we get into the grocery store. Ordering my groceries online helps me make better decisions by comparing prices, and it stops me from buying things that aren’t necessarily on my shopping list. I also shop a lot at Sam’s Club for my bulk items like toilet paper, paper towels, meat, fruit, eggs, milk, and vegetables. I freeze a lot of our bulk items, so that nothing goes to waste. Bonus! Use cash back reward sites like Dosh to receive cash back for all of your shopping at Sam’s Club, and use Ebates to receive cash back from your walmart online order.
Transportation costs are reported as the second largest expense in most households. Thankfully, we aren’t most households. We keep our transportation costs low by avoiding auto loans. This category includes our auto insurance, fuel, maintenance, and a car payment that we pay ourselves. We stash the “car payment” into a car fund, and in 8-10 years, we pay cash for our next vehicle.
Despite spending 6 days at Disney World, we were able to keep our vacation expenses fairly low. We did this by utilizing our credit card rewards, not buying useless souvenirs, and sticking to street foods and off-site restaurants. We did splurge once, and ate at the Sci-Fi Dine-In Theater in Hollywood Studios. They mostly served good old fashioned burgers and fries, and it wasn’t too pricey compared to other fancy restaurants on site. It was a neat experience that we really enjoyed.
We did have a few medical expenses, but nothing too big. We also included our medical expenses for our pets. This year, our 13 year old dog needed to have 9 teeth pulled on top of the usual vet bills. Our son had a cavity that needed a filling, and our daughter got prescription glasses towards the end of the year.
This is the part of our budget that everything else falls into like clothing, recreation, household items, and anything else that didn’t fit into the other categories. For 2019, I have expanded this category to include personal, personal care, entertainment, pets, and household goods.
We were fortunate to have a higher than usual savings rate this year, which is largely due to the bonus that Mr. R2R received. Typically, we are closer to 30%. We dispersed our savings into our IRAs, 401k, and our mortgage. We could have placed the excess into a taxable account, but we feel that the financial peace that comes with a paid off house far exceeds the money that we could make in a volatile market. Our goal is to be mortgage free by the time Mr. R2R retires in less than 10 years.
In less than 5 short years, we went from having a -$32,000 net worth, to now being 1/3 of the way to our FIRE goal. I never would have believed that we could come this far in such a short amount of time. We are still heavily invested in real estate, with it accounting for 53% of our overall net worth. A lot of this is due to the equity in our primary residence. We sold two of our rentals last year, and rolled the money into our new home. The down payment, coupled with purchasing our home below market value, gave us instant equity. We also have some equity in our rental property, which we hope to liquidate in the next few years. Our retirement accounts make up 32% of our net worth, and we keep 15% in liquid accounts for emergencies.
Overall, I think 2018 was a financial success. I don’t anticipate our numbers looking this great next year, but I’m hopeful. I have to keep in mind that the road to financial independence isn’t paved in a day, a month, or even a year. It takes time to build wealth, but I know with every brick we lay, we are that much closer to freedom.