2020 Dollar Diary
Personal Finance

2020 Dollar Diary – Spending and Expense Report

2020 has come to an end as quickly as it started. We all wish that it’ll be over, together with the pandemic that took up the whole part of the year.

For me, 2020 marks the first full year of work. It’s also the year I finally created this blog during the pandemic lockdown circuit breaker. There’s a lot of things that I did not get to do this year, but also a lot of things that I did as a result of having more freed up time.

I want to specially use this year-end opportunity to do some stock taking, especially for those of you who have been following my financial independence journey thus far.


2020 Dollar Diary – Passive income earned

In this article, I’ll talk specifically about my spending and expenditure for the year.

There are 2 components to financial independence. The first is increasing income, and the second is decreasing spending. We can only truly reach financial independence when the amount of passive income generated is able to sustain my expenses.

In a bid to preserve privacy, instead of stating the dollar amount, I’ll be stating everything in percentages. On top of privacy, there are several reasons why I believe this way of displaying the information is better.

  1. I believe this will be more relatable to my readers as everyone’s financial situation is different. Spending should be proportional to everyone’s income.
  2. I’m a firm believer in MrMoneyMoustache’s savings rate rule. To achieve financial independence, you just need to make sure to follow your own savings rate. You can use the savings rate calculator here to figure out your ideal savings rate.
Credits: MrMoneyMoustache

With that said, let’s dive right into it!

My overall savings rate

Drum roll….

My savings rate for the year is 74.9%! Given that my annual target is 65% as I want to retire in 10 years time, this year’s savings performance is incredible.

This lower-than-expected spending is likely due to the pandemic induced shut down when we were all forced to stay at home. Travel has also been made moot this year. Therefore, I was able to direct all these large expenditures into my savings/investments.

Do take note that this amount is calculated from my take-home pay. This means the base amount for my salary is calculated after CPF deductions. I very conservatively see CPF as a bonus/tax scheme. When it’s deducted from me, I see it as a tax. When it’s returned to me in the form of CPF LIFE, I see it as a bonus for my retirement.

Family

Living in an Asian society, it’s customary for children to give parents an allowance after starting work. Since I’m still living in my parents’ home, I see this as paying my parents for rent and utilities.

This category is currently my largest spending component, likely due to the relatively lower spending from other categories. It is also because I do not have many responsibilities yet.

I’m also glad that my parents do not rely on me financially for their retirement. Whatever amount that I give to them now is just a bonus for them.

I predict that this component will slowly decrease in my spending percentage (not absolute numbers) as my other components increase over the next couple of years.

Family Spending: 27%

Food and Drinks

Following allowance given to my parents, this is my next highest expenditure of the year.

As I’m still living with my parents, I still have most of my meals with my parents at home. Home-cooked food in Singapore is incredibly affordable!

Dining out in Singapore is also significantly cheaper as compared to other developed countries. A meal out for 2 will usually set me back $20~$30. Compared to the UK or US where it easily goes beyond $50 with taxes and tips, it is considered a steal!

I also actively make use of food discount applications such as Burpple to help lower my dining cost.

For lunch, even though I work in the CBD, I do takeaways from a nearby hawker centre for almost every meal. An average meal will cost between $3 – $7. Due to the lack of time for lunch, I currently don’t see a point in spending too much to dine in a restaurant. Moreover, my office has a nice pantry for me to socialise with my co-workers.

Food and Drinks Spending: 23%

Shopping

Well, this was unexpected. I did not expect shopping to be the 3rd highest category.

As a non-shopper, most of my spending revolves around the small necessity purchases on Shopee or Lazada. I also do not find pleasure in purchasing clothing. Most of my clothes are basic shirts from generic retail outlets.

However, a large purchase in the middle of the year significantly skewed the proportions. It’s not time to reveal it yet, but I see it as an investment that will bring me more income in the future.

Shopping Spending: 13%

School loans

Yes, I’m in debt! (Sorry Dave Ramsey)

My parents paid for my university tuition fees with their CPF money under the CPF education scheme. Therefore, I’m obliged to pay them back for their retirement. This amount is deducted monthly through GIRO from my bank account.

As I’ve already worked for a year, the loan’s repayment has started to kick in as of the middle of this year.

I see school loans as a form of good debt. Rationally, we can categorise debts into 2 forms, good debt and bad debt.

Bad debts are spent on liabilities and tend to carry high-interest rates. Examples are credit card interests and payday loans.

Good debts are spent on assets and tend to carry lower interest rates. Examples are mortgage and education loans. With my education loan, I’ve already gained way more in dividends than the loan amount in the form of a career and knowledge.

The interest rates on CPF education loan is also incredibly low at 2.6% pa (0.1% higher than prevailing CPF OA rates). I currently have no incentive to pay it back quickly and intend to stretch it out over its maximum allowable period which is 12 years.

Education Spending: 12%

Insurance

Insurance, the thing we all know we need, but hate to pay for.

There’s nothing much to say about this. I’m just continuing to pay for the life insurances that I bought previously.

Insurance Spending: 11%

Gifts

Gifts are mainly spending on other people. This can be in the form of cash gifts (red packets) or presents during special occasion such as birthdays.

This is a fairly regular amount and should not be changing much over the years. However, as I’m at the age where most of my friends would be getting married, I foresee myself giving more red packets in wedding banquets.

Gift Spending: 4%

Transport

I mainly travel using public transport. Singapore is very well-connected with its public transport infrastructure. I am able to reach most places that I want using the bus or MRT system.

Moreover, I stay very close to my workplace. This makes my daily commute incredibly affordable if I’m not going anywhere apart from work.

I also do not use private hire services like taxi or Grab frequently. It’s only usually used as a last resort due to late timings or when I’m feeling really tired.

Therefore, I am able to keep this spending component really low.

Transport Spending: 4%

Others

I have spendings in many smaller categories. The categories individually contribute less than 3% to my overall spending.

For charity, I’ve contributed a very small sum to support the migrant workers during the circuit breaker period. There were also small pockets of spending in Entertainment for my regular Netflix/Spotify subscription and hanging out with friends. Groceries for when I do the occasional grocery run for my family.

These do not add up to much over the course of the entire year.

Others Spending: 6%

Summary

Despite everything that happened in 2020, spending has been great for me this year. As a result of widespread lockdown, most people would have seen a much-reduced spending for the year.

I’m glad that as a result, I’m able to achieve that high of a savings rate. I guess this is the silver lining for me in an incredibly bad year for everything else.

Even though I hope for this to continue, I think it’s highly unlikely that I’ll be able to achieve it in the next couple of years. This is because my goal is a more sustainable 65% savings rate. I am also not in a rush to retire in 7 years.


If you would like to share your experiences with money, spendings and savings for the year of 2020, feel free to email me at [email protected] or leave a comment at the comment section below!

I will love to hear your stories!


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