Understanding Increase in Spending Better

I wanted to understand why spending in the 2018 calendar year was up 28% on 2017. The first step was computing a spending breakdown for the 2017-18 financial year. The period is different and the definitions of income and spending are different than in my usual accounts to make it more comparable with other income and spending breakdowns on the web. I now computed the spending breakdown for the second half of 2018 and we can compare monthly spending in this period to that in 2017-18:

Spending was up by 7.5%. So not as dramatic a growth rate. The biggest difference between the two periods, is that in the first period we spent a lot on travel and in the second on health. In fact, the travel spending was mainly in the second half of 2017-18 - i.e. in the first half of 2018. So, 2018 had high spending because of both travel and health spending being up strongly on 2017. The way I usually compute spending and income is to include any refunds for medical spending as income rather than reducing spending by the amount of the refund, which I am doing here. So, that pushed up spending even more. I'm glad I now understand why our spending increased so much.

Another major change is that cash spending was down in the second half of 2018. That was because I had access to the statement for my Qantas Cash card – only the last 13 months is online. In the previous period, I treated all spending on the card as cash spending.

Going forward, I expect medical expenses to be lower this half year and travel expenses to be much lower than in the first half of 2018. Given that, 2019 calendar year spending might be lower than 2018 spending.

Gold

Put my toes into the water by buying a small 0.5% position using the IAU ETF. I've posted about gold previously and it is in our long-term allocation to allocate 6% to gold.

Spending Breakdown

After a discussion with friends at lunch yesterday and some blogposts I read recently, I decided to try to find out what we are spending on. I haven't done this in more than two decades I think. I looked at the 2017-18 financial year so that I can also easily include official income and tax figures in the total. It's all in Australian Dollars of course:

Income is gross income from our tax returns plus employer superannuation contributions which which don't enter taxable income. Income includes salaries and investment income etc.

Next we deduct taxes. As franking credits – tax credits for corporation tax paid by Australian companies are included in taxable income, they need to be deducted as we don't actually get the cash.  Then there is 15% tax on superannuation (retirement) contributions. In total tax is 26% of gross income. Next I deduct some financial costs that are deducted from gross income to get to taxable income. There are more of these deductions actually, but some I have included in our spending.

Of the AUD 216k of net income half was spent and half saved.

The big spending items are mortgage interest, supermarkets etc, cash spending, mail order, childcare etc, and travel (flights, accomodation etc). Cash spending includes both spending actual cash and spending using our Qantas cash cards. I haven't gone into the accounts for the latter, though maybe I should. Some of the other spending categories very low compared to the actual amount spent on these because a lot of the spending is in cash. Possibly the most important of these is restaurants. Yes, there is a lot of fuzziness in these numbers because we don't budget and spend a lot in cash.

Am happy to get feedback on how we can save money, though I'm not really into "frugality" for it's own sake. Or maybe you would just like to compare the differences with other posted spending breakdowns.

P.S.
Qantas only provide online statements for the last 13 months. So, I can't now do a breakdown of those accounts for 2017-18. Maybe next year.

New Investment: Santander UK

Bought my first US corporate bond - a Santander UK bond maturing on 14 March. This supposedly gives a yield per annum of about 2.85%, which is more than treasuries of the same maturity. The original coupon on the bond is 4.2575%, so it is trading at a price of above 100. It pays quarterly interest. Fees for trading corporate bonds are higher than for treasury bonds at Interactive Brokers, but I still figured it was worth it.

Santander UK is the result of the merger of three former UK "building societies" - a bit like credit unions. It is owned by Spain's Banco Santander group but is managed separately. The maturity date is before the scheduled Brexit date on 29 March, so I figure Brexit shouldn't affect getting paid when the bond matures. The bonds are denominated in US Dollars not Sterling.