In the last post I wrote about the experiences in 2016 and how they have enriched the lives of me and my family. While I do believe that the best things in life are free, many things do cost money and one needs to plan for it and also keep track of it. I have now done an expense audit for 2016 and some of the results were definitely surprising.
To begin with, this has definitely been the most expensive year of my life so far. While that by itself was kind of expected, I did get jolted by the extent of the spending. As you can see from my 2015 audit, last year was significantly more expensive than other years, therefore a high growth on that already elevated level is a little worrying. A closer look at the expense categories and my earlier assumptions reveal some rather interesting highlights.
My assumption that Rinki would finish her Graduation in 2016 and subsequently join a job did not hold true but I was quite happy to be wrong here. On the balance, I had always wanted to do an MBA from a good B school immediately and this was probably because I had taken the same route 3 decades back. Her excellent result in CAT and the superlative result in XAT, were kind of an icing on the cake. She was very happy to join XLRI over IIM Kozhikode or a job in Accenture which she had got. XLRI is the most expensive B school in India today and the overall costs for 2 years would come to about 24 lacs. We went through a lot of discussion about how to fund it and, while our initial plan was to take an education loan for the entire amount, I finally decided to part fund it. This would leave her free to choose her own path without being burdened by the entire loan. Thus we took an Education loan of 12 lacs from the SBI branch at XLRI, and decided to use it in the second year largely to mitigate the interest costs.
The upshot of this was my having to spend about 12 lacs in this year for Rinki’s education, which was completely out of the earlier estimates. For Ronju the costs were lower at about 4 lacs and this was part of the spending plan. If you look at the total spending it will be about half of our total expenditure in 2016. I am quite liberal about what my children spend in college as long as they are having fun in a responsible manner. After all, these are the best years of their lives and there is no point in not enjoying them.
Rent was the next highest category in terms of expenses, it did increase a little as compared to 2015. However, that was not much of a concern as it gets covered by what our Chennai apartment rental earns. Travel was the next category – we had been to a lot of trips in 2016, some for pleasure others for needs like Rinki’s admission etc. I always consider this as money well spent and such experiences enrich your living , not to speak of broadening your mind. If you are interested you can read about my travel experiences in other posts of the blog.
Insurance was the next category – I have an LIC policy, one ULIP and one Pension policy apart from the Health and Car insurance. Have never had Term insurance as I did not see a point in my situation. Subscriptions to our Timeshare, where we got ourselves upgraded to the next category, along with services such as Library and internet etc was the next one.
Our discretionary purchases for the home was fairly high this year. The furniture we had was age old, though of very good quality. After the uncertainty of the past couple of years where we vacillated about moving from Hyderabad, we decided to bite the bullet this time. Replacing our Sofas and Dining table along with buying some Balcony chairs and Table set us back by about 75000 Rs. I went ahead and bought an Android TV from Sony too, the deal being sweetened by the cashback from credit card and the exchange of old TV. We also bought a new phone for Lipi and replaced our Tata Sky set top box with the HD variety.
So, on the whole it was a great year full of good events and experiences along with some asset replacements. The cost of all this in terms of our total expenses would be as below:-
- Children’s education + other expenses : 50 %
- Rent : 9 %
- Travel : 8 %
- Memberships + Subscriptions : 5.5 %
- Insurance : 5.5 %
- Cash expenses : 4.5 %
- Asset purchases : 3 %
- Taxes : 3 %
I did end up spending a whole lot more than my plan for 2016, much of it due to changed assumptions and discretionary purchases. Fortunately, my earlier plans of keeping a separate account for the higher education of my children came in handy and I did not need to redeem any of my investments.
But more of that in the next post, when I talk about my income audit.