Household Budget Analysis For 2009

Posted on January 7 · Comments

Even though the new year is up and running, I usually take some time to look back over the previous year’s household budget and evaluate how we went and what areas we can improve on. The accountant in me loves this kind of number crunching analysis and it’s motivating to see in black and white just what has happened with our finances over the last 12 months.

While it’s easy to guess or get a feeling for your finances, I can guarantee that doing the figures always offers up a few surprises.

So I thought I would show you how we went over the course of 2009 and what kind of information can be gleaned from keeping a budget. It’s great to write down your balances at the end (or beginning) of each year so you can make these comparisons and track your financial progress.

The figures below are based on a comparison between 2009 and 2008 (I’ve just taken the difference between the two balances and shown that difference as a percentage of 2008) and answer the questions: are we better off or worse off? Are we working towards our financial goals? How are we going?

Income

Not surprisingly, as I didn’t work this year and only worked part of last year, our overall income dropped by 26%. Thanks to good ol’ Kev, we got a little stimulated this year which was a bonus and I got some tax back, so this buoyed our income and kept us going, otherwise things were quite tight in 2009. We’re not high rollers: this year our regular household income was less than $45,000 a year gross (before tax and including overtime etc), if that gives you a sense of where we’re coming from and our level of spending.

Expenses

When I stopped working, I looked at our budget and said it was impossible to drop our expenses any further. Well, in 2009 we reduced our expenses by 21%. We basically cut every expense we had. The only area where we spent more was on the house (rates and body corporate fees went up). We also paid out a personal loan which is recorded here in expenses because I keep a cash flow budget, so technically not an expense, but I feel it’s more beneficial to track cash flow.

A few other examples: we shaved $560 off our yearly grocery bill (which is about $45 a month or $12 a week – by shopping smarter!), $600 off our utilities and saved $1,200 by eating out less. There were also some saving graces: our car engine didn’t blow up in 2009 like it did the previous year, I had finished studying so no more study fees, and DH bought a new computer in 2008.

A few interesting facts that come from our budget:

We used 216 rolls of toilet paper in 2009 (4 a week – we don’t buy tissues or paper towel so occasionally the odd dunny roll fills other needs)
We used 5 tubes of toothpaste
We spent $25 on washing powder ingredients
We bought takeaway 87 times so 1.6 times per week on average – this is our budget downfall really
We ate out in a restaurant (ok, the local RSL –good grub, good price) 5 times
Our cat ate 20kgs of kibble
We ate 35 tins of tuna…
and 22kg of butter (it’s not that much – I do my own baking! it ends up about 30g a day each on average)…
and DH drank about 45ltrs of cordial and soft drink (ok, I helped drink some, but not much)
We spent $6.38 on cleaning products (bi-carb and vinegar) for the home for the whole year.

Cash Flow

Overall, we spent more than we earned by $563 in 2009. It would have been less, but I bought a cot at the very last minute Dec 31. Negative cash flow is not something that is sustainable, but considering that we paid out our personal loan early and the debt repayments are recorded in our cash flow budget, it’s not too bad. If we hadn’t paid the loan out early, our cash flow might have been positive, but then we probably saved $200 in interest so it works out better in the long run. Of course, if we hadn’t bought so much takeaway…

Compared to 2008 though, our cash flow changed from positive to negative by a whopping 105% – in 2008 we were actually saving money.

Savings

Correspondingly, the balance in our savings account dropped by 21%. We used some savings to pay off our loan, some to pay off 2008 credit card balances (not recorded in the 2009 cash flow budget) and some to help pay for expenses. Thank goodness for emergency funds.

Debt

On the plus side, we reduced our short term debt (not the mortgage) by 56%. This is mostly due to paying out the personal loan and keeping the credit card spending down. We decreased our mortgage by 2% (we pay just a little extra than we have to on the mortgage and pay it fortnightly so we also pay an extra month’s repayment every year). Our mortgage accounts for 47% of our net income.

Liquidity

Despite the drop in savings balance our liquidity increased by 140% mostly due to paying out the personal loan and a rise in the share market. We can now cover short term debt with our liquid assets nearly 7 times over. If we hadn’t been savers before I quit work, this wouldn’t have been achievable.

Net Worth

Our net worth dropped by 10%. This is mostly due to the fact that I re-valued our house much lower on my spreadsheet due to the global financial events and based on the sales value of some of the units that sold around us in 2009. I also took off about 5% for sales expenses. I’m not sure if this is the right approach, but if we were to sell, we wouldn’t actually be getting the full sales amount. On the other hand, if we were to access any equity for investment, then that would be based on the full value (although the bank valuation would probably be less anyway).

Investments

We have an investment plan (index fund) where every month, we buy more units, so it’s kind of like a savings plan. Even if our savings dropped, we’re still technically saving money because of this monthly investment plan and the return is generally better. Overall, our investments went up by 5% on 2008. We still haven’t broken even after the share market crash, but we’re really close.

Conclusions and Plans for 2010

Considering that I didn’t work much in 2009, I don’t think we’ve done too badly. There’s a reason that they say cash flow is king, because if you don’t have spare money at the end of the month, then you can’t increase your savings, and it makes it difficult to invest. So the negative cash flow for 2009 is a bit of a bummer.

In 2010 we’re going to have a new addition to our family, so higher expenses. On the other hand we’ll get the baby bonus (not that I feel entitled, but it’s going to come in handy) and when I get my butt into gear, I want to launch an eBook or two.

We’re also planning to increase our debt. We’ve applied for the government’s green loan programme to buy a solar hot water heater. With the rebates and the interest free loan (and the fact our old heater is about to blow anyway), it just makes sense to take advantage of the interest free offer. Installing solar should also reduce our electricity bill by around 50%, which will help offset the repayments.

There are a few other expenses that I’ve put in the budget for 2010 that didn’t appear in 2009, like study for DH, so we’ll have to do a whole lot more stretching this year.

How did you fair in 2009?

Have you read these posts?

Category: budgeting and finance · Tags: personal budgeting