Thursday 11 January 2024

2023 budget review - plan vs actuals

Back in January I switched from using my NAB credit card (paid off in full each month) for most daily expenditure to instead using a Debit card linked to my main bank savings account that receives my after tax wage income. This was due to the requirements of the mortgage for my investment apartment (I had to close my credit card accounts to reduce my credit utilization). I also make direct bill payments for utilities etc. from this savings account, so from 20 Jan onwards I had most of my standard income and expenses flowing through the one main account, making it easy to load the transaction data into a spreadsheet and categorize all the items during the year. I had estimates of various spending categories from previous years, so I did a budget plan and started tracking actual expenses vs. expected during the year. Now that 2023 has ended, I thought I would do a quick review of my budget 'plan' vs actual expenses for last year (since 20 Jan).

This review doesn't include all income (eg. rental income, superannuation income, share dividends, share trading gains, gig income from doing some Doordash etc.) or all expenses (eg. my financial planning business fixed costs, rental property expenses, income taxes etc) but does give a view of my after-tax salary income and bulk of my day-to-day expenses. The after-tax income was higher than usual during 2023 as I put in a withholding tax variation based on the investment property expense, rent income and depreciation data, so my income tax rate was adjusted to 11% (so I won't get much of a tax refund when I lodge my FY2023-24 tax return).

The main budget categories, estimated amount and actual amount (monthly averages) for 2023 were as follows:

budget item              budgeted     actual     % budgeted  Notes

                         (monthly)    (monthly avg)

salary (after tax)       $6,550       $8,287      127%       [1]

medical (out of pocket)  $  124       $  128      104%

entertainment            $   81       $   71       88%       [2]

eating out               $   36       $   40      112%       [3]

savings                  $  650       $  940      145%       [4]

GFP business (variable)  $  350       $  307       88%       [5]

DD business              $  320       $  556      174%       [6]

children (misc)          $  300       $  167       56%       [7]

fitness                  $   80       $   92      115%       [8]

council rates            $  365       $  314       86%       [9]

household items          $1,000       $  382       38%       [10]

gifts                    $   60       $    8       13%       [11]

utilities                $  220       $  406      185%       [12]

citibank                 $  550       $  535       97%       [13]

groceries                $1,097       $1,372      125%       [14]


[1] As mentioned, actual after tax income was higher than budgeted, due to putting in a withholding tax variation form in June. For 2024 I use to current after-tax monthly income as a starting point. I also didn't allow for the annual bonus, as this is not guaranteed and can vary significantly.

[2] entertainment was basically just the cost of the NBN internet and Netflix and Amazon Prime subscriptions.

[3] eating out is just the occasional takeaway when I have to go into the company office and buy lunch. I also included the occasional roast chicken bought for the family dinner (this is usually lumped together with groceries if bought during a shopping trip).

[4] doesn't include pre-tax retirement savings (SGL) but just my after-tax monthly deposits into an online savings account (theoretically an 'emergency' or 'holiday' account, but basically just an extra cash stash I can forget about until I need it for something unplanned/unusual). The actual amount was a bit higher than planned due to making a few one-off cash transfers to my share trading apps during the year

[5] this was misc annual fees (eg ASIC levy) and advertising, website renewal etc. The biggest regular (fixed) expense for AFSL fee and the software required by the AFSL comes out of another account that I setup with a lump sum. I hoping I actually get some paying clients so the business will at least cover running costs before all my seed capital is used up. Currently my business is effectively a very expensive hobby.

[6] As I mostly use my car for doing Doordash a few hours each week, the rego, insurance, and petrol can be claimed pro-rate based on mileage. I keep a logbook of mileage, so decide at tax time whether to claim actual expenses or the standard 'per km' deduction against the gig income. Petrol costs were higher than expected, and I also earned a bit more (but that gets deposited into a different account).

[7] this was just miscellaneous school expenses (books, pens, school excursions etc) and was lower than expected as Year 11 didn't do many excursions. I also didn't make some of the 'voluntary' contributions I had made in previous years. DW paid some uniform costs and DS2 paid for his own new computer (for gaming) from his part-time job earnings, so my expenses were lower than expected in this category during 2023

[8] club fortnightly membership fee went up, so cost more than I had budgeted. I also didn't go to the gym very often, so not very cost effective. I plan on going at least twice a week in 2024, so should be better value-for-money

[9] includes council rates for both our home and my lake house (holiday home). Was lower than expected as DW sometimes paid half of the rates on our home (as it is half hers and she is now working FT again).

[10] lower than expected as nothing major broke (eg washing machine, water heater etc) during the year. The unused budget should probably go into a sinking fund, as there are some items that will need fixing fairly soon (eg. rusting gutters, some defective light fixtures). We might just 'knock down and rebuild' in a few years though, so not sure it is worth spending a lot on renovations, non-urgent repairs, or remodelling.

[11] what can I say, I a cheapskate. The actual spending on gifts was lower than budgeted mostly because I earned some 'free' gift cards doing online surveys, shopping scanning etc. which I gave DW during the year in place of birthday, xmas, valentine's day gifts etc. We tend to stop 'exchanging' gifts amongst adults in my family, as it seems an inefficient xfer of funds with no net change in assets, and often the gift wasn't really wanted. so this amount was bascially just gifts for the kids.

[12] utilities cost a lot more than projected. Aside from electricity, water etc. all rising considerably, I also ran the pool filter continuously after cleaning it up for the summer. I need to buy a decent 'timer' to automatically turn the pool filter on and off each day.

[13] as expected, the 0% personal loan used for part of the investment property purchase continue to have the expected repayment automatically paid each month.

[14] grocery spending was a lot higher than I'd planned. Not sure if this is due to buying extra snacks/desserts etc, prices just going up in general due to inflation, or the fact that DS2 is a 17 year food disposal unit set on 'high'.

I'll tweak the budget for 2024 to reflect the actuals from 2023 and have a look every month to see if things are going more-or-less according to plan.

The budget doesn't include DWs income, or her eating out, entertainment spending, clothes etc. so isn't a reflection of 'household' income and expenses, although it does include some household spending used by DW, DS2  (eg. groceries, utilities etc).

The total expenses don't match the total income, as any surplus accumulating in the savings account get transferred out to my investment property loan offset account to save a bit of mortgage interest. This would probably be categorised as 'savings' if it was included as a budget line item.

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