The 2016 Summit of Coin Spending Rate

Every quarter and every year, I breakdown our spending and savings rates. A spending rate when compared to a savings rate will affect how fast you can reach financial independence.  The lower your savings rate, then the longer it will take you to reach the financial summit. In 2016, we had a 35% savings goal, which is 5% lower than our savings rate in 2015. Our goal dropped because of home ownership. It is amazing at how much money a house can suck out of your bank account. With all of that in mind, let's break down the October savings rate.

The image above shows our 2016 October spending rate, which shows most of our spending going towards savings and auto expenses. Below is the percentage breakdown of the spending rate:

  • Savings: 23% (includes principal from mortgage)
  • Auto: 20%
  • Household: 15%
  • Donations: 9%
  • Groceries: 9%
  • Utilities: 6%
  • Dining: 4%
  • Other: 14%

Well, we did not meet our goal in October. This was mainly because of an unexpected car repair that my car needed. This repair cost us nearly $2,000. That's $2,000 that could have went to savings, but instead was thrown at repairing my car (luckily we have the money to pay for these repairs). Not only did we have the car repairs, but we also extended our patio in October. The patio repairs did not cut into our savings rate, because the patio was an expense that we planned and saved for. Next, let's look at November, where we did not meet our savings goal again.

The image above shows our 2016 November spending rate, which shows most of our spending going towards savings!  Below is the percentage breakdown of the spending rate:

  • Savings: 21% (includes principal from mortgage)
  • Mortgage: 12%
  • Household: 10%
  • Groceries: 10%
  • Donations: 9%
  • Auto: 9%
  • Utilities: 6%
  • Health & Fitness: 4%
  • Other: 19%

Once again, we weren't even close to our savings goal in November. It looks like we aren't hitting our goal because of the increase in our grocery costs and our continued expenses for the house. Lastly, let's look at our December spending rate.

The image above shows our 2016 December spending rate, which shows one-fourth of our spending going towards savings!  Below is the percentage breakdown of the spending rate:

  • Savings: 25% (includes principal from mortgage)
  • Utilities: 12%
  • Mortgage: 11%
  • Groceries: 10%
  • Donations: 9%
  • Household: 9%
  • Gifts: 7%
  • Other: 18%

Once again, we did not hit our savings goal for December. We ended the year on a cold streak, but we still saved more than any other spending category. The savings rate was affected by the spending on Christmas gifts and the cost of our HOA dues (included in utilities).

It was amazing to see the difference in saving from the beginning of the year to the end of the year, but that is why budgets should be done on a monthly basis. Some months you may get paid more and some months may have unexpected expenses.  This is just part of life and your budget has to reflect each month individually.  Our monthly savings rate is a reflection of the difference in expenses each month.

We did not hit our 35% savings goal, but we still reached 32%. By saving 32% of our income, we are setting ourselves up to become financially independent earlier in life. Based on calculations done by Mr. Money Mustache, he has been able to calculate financial independence (also known as financial freedom). He was able to retire in 10 years, because his family saved 75% of their income and only lived on 25% of their income. Our 32% savings rate shows that we live on 68% of our income. This is still a little more for my preferences, but we will continue to work on decreasing expenses. Based on an article from Mr. Money Mustache, my wife and I will be financially secure in about 26.5 years. This article explains how MMM calculated the numbers and will show you how long until you are financially secure enough to stop working (if you want).  Plus, the article points out that the 10% savings rate will keep you working forever.  By only saving 10% of your income, then you could be looking at a 51 year working career.

Our yearly spending breakdown can be found below:

You will notice that the savings rate continues to be the largest amount of our monthly spending.  Below is the complete data of the yearly spending rate.

  • Savings: 32% - Decreased 2% from September
  • Mortgage: 10% - Decreased 1 % from September
  • Donations: 8% - No change from September
  • Household: 8% - No change from September
  • Auto: 7% - Increased 1% from September
  • Groceries: 7% - Increased 1% from September
  • Utilities: 5% - No change from September
  • Vacation/Travel 3% - Decreased 1% from September

Lastly, I want to compare the savings rate from 2014 to the savings rate in 2015.  

2014 Savings Rate: 29%

2015 Savings Rate: 40%

2016 Savings Rate: 32% (dropped 2 points from September)

My wife and I continue to budget and plan out our spending each month, but even with all of the planning, our savings rate dropped by 8 percentage points from last year. That is a pretty significant decrease, but a lot of the decrease can be associated with the extra auto repairs, the added expense of a house and the welcoming of a new daughter in November. Things will definitely get better once we finish paying medical bills and have our house fully furnished. With all of the life changes, I am ok with a 32% savings rate and think this is a great time to set our goal for next year. Based on the monthly mortgage payment and everything that comes with home ownership, we are going to shoot for a 35% savings rate in 2017 (again).  We hope to save more, but 35% is a good starting point.

Reaching the Financial Summit, Starts with You!

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