Posted by Tim Stobbs on November 15, 2012
As some of you might recall I’ve been using Mint Canada to help track my spending and income now for about six months, so I thought a report card would be in order. So I login into Mint and looked at my spending data and nearly fell over in shock that I’ve spent about $58,0oo in just six months. At that kind of spending rate I can kiss goodbye my entire retirement plan.
How the hell did that happen? As I dug into the numbers it started to make a lot more sense. First off, my regular and lump sum mortgage payments accounted for about $22,000 of that total amount. Then of course I bought the a used car for $18,500. So that leaves me with $17,500 in spending, which is slightly more reasonable, but still higher than I would guess.
As I dug into the number a bit more a few things became apparent. Mint had tracked my lump sum payment on our taxes for last year of $3300, which then takes us down to $14,200. Yet if you double that number to get a yearly spending amount that still clocks in at $28,400, which still seemed high to me.
So where is the issue? Well like many things in life beware extrapolation of a limited data set. The particular six month period I have data for includes most of my annual expenses such as auto and house insurance as well a property taxes which in total comes to about $5500. The issue becomes that those outflows include about 66% of what I normally average out during a year with my savings account. So if I correct for that my true average spending (less the mortgage, lump sum taxes and the new car) would end being $12,900 for the last six months. Which if you extrapolate that value turns into $25,800 in spending.
So that value is significantly closer to my target spending level of $24,000/year in my retirement years. Actually if I consider the fact I still spent about $1700/year just on the kids (for example clothes, activities, school supplies) that gets me almost bang on to my target spending.
In the end a six month sample size is interesting to look for patterns on where you spend your money, but in reality it is a very small sample size. Time will tell if I really am spending around $24,000 plus inflation on a consistent basis. My ideal case would be to have about five years worth of data to tell me if I’ve got it right or not.
So do you ever have those high spending periods in life? How do you try to balance that out over the long term?