18 Jan 2024 How Far We’ve Come

One of my favorite features of photo applications is the prompt to view pictures taken 4 years, 6 years, 10 years ago, or when the app shows you random featured pictures of the day with no rhyme or reason to the collection. Just this week, I was reminded of Ollie (our dog) and his friends with extreme snow zoomies during one of Raleigh’s last meaningful snowfalls, and of just how, erm, green our yard was when we moved into our house almost 5 years ago. We’ll just chalk that up to having extreme heat lately.

It’s fun to see how far we’ve come (or not!) and look back with 20/20 vision and insight into the greater perspective of what was going on at that time. Pictures help jostle memories out of their hiding places, giving context to the little snapshot captured. I don’t just see a green yard at our house – I remember the relief of finding a home that met most of our criteria and feeling a bit of shock after spending a big percentage of our savings for a down payment. Looking back, it doesn’t seem like that big of a deal, but at the time, it was!

We can look back at various tools and resources to remember how far we’ve come in our financial lives, too. Your Social Security statement shows your income history over time. Or for some really light weekend reading, you could look back at old tax returns to see how things have changed over time (I hope you can tell I’m kidding…).

If you have your accounts linked to any sort of budgeting tool, you might have a quick view of net worth changes over time, or spending trends. Once accounts are linked up and some initial set up is done, some software tracks trends for you.

A few years ago, Ryan wrote about how Americans spent their money in 2021, referencing findings from the Bureau of Labor Statistics Consumer Expenditure Survey. They have updated the data with 2022 information. Since 2023 brought many changes for our family – in particular, a new baby and adjusting from two incomes to one – I was curious how our family spending patterns adjusted to these changes, and how our family spending relates to these national figures. Below is a chart from the latest BLS survey summarizing percent of expenditures by category from 2019-2022.

As you can see above, housing, transportation, and food are the top 3 categories that take up 62.9% of the average American’s total expenditures. Forbes summarized some reasons for the increases between 2021 and 2022, if you’re interested.

Now for the Martin family spending in 2023. I looked at a quick report from YNAB, the budgeting software we use, and adjusted our spending categories so that our spending lined up with the BLS major categories. For my own curiosity, I also kept children and pet expenses as separate categories. This chart does not include any savings to retirement plans, HSAs, or savings accounts, or any other expenses that were deducted from paychecks.

Housing, healthcare, and charitable giving (named “cash contributions” on the BLS chart) were the top 3 categories for our family last year, which is very different from the results of the BLS survey. But the context around those numbers is important to tell the whole story.

We did not travel because of having a newborn. We had not planned to go from two incomes to one, but that is what made the most sense for our family midway through the year. Which meant we cut back some of our spending. We had already planned to use some of our savings for some home projects, so housing was higher than normal. Transportation averages over 10 years would be more meaningful, as we do not have a consistent car payment or lease. We had higher than normal health expenses, plus changed health plans throughout the year so restarted a deductible halfway through the year. 2022 spending likely looked very different, and 2024 will be as well.

Net worth changes and plan confidence levels over time matter, but there is always more to the story not captured by a snapshot. Am I spending less time worried about finances? Have I added or removed long-term goals that don’t align with my values and desires? What changes in life brought about changes within my plan? Am I constantly moving the goalpost forward to the point where I’m never there, wherever there is?

I also hope we can look back on earlier years with understanding and compassion for our former selves as needed. Developing new financial habits takes time and hard work! And who knows, maybe one day we’ll come up with a way to make photos pop up while reviewing your financial plan to help tell the larger story around the data of just how far we’ve come.

The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.