How the pandemic changed our spending

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Today, I’ll show you how the pandemic changed the Darwinian Doctor family’s earning and spending.  

One of the more practical reasons why I pursued a career in medicine was the perceived job stability.  I never wanted to run the risk of my kids experiencing the kind of financial scarcity that marked my childhood.

I guess you could say that this gamble has paid off, because I still have a job right now. This isn’t true for millions of people right now.

In May 2020, unemployment hit 15% in the USA, which is far worse than than what we saw in the Great Recession.

But even though I’m still employed, things definitely aren’t the same as they were prior to the pandemic.

Doctors are not immune to unemployment

So far in the USA, this pandemic has sickened 2.4 million people and killed 122,238, according to Johns Hopkins. Ironically, it’s also furloughed many doctors and put some hospitals and clinics on the brink of financial ruin.  Without patients coming in for routine medical care, even the most profitable medical practices quickly run into issues.

In my own medical group, there’s a lot of belt tightening taking place.  Surgeries and doctor visits are way down, and my work hours are limited to the bare minimum.  This has led to an 18% drop in my paychecks.  

This has led me to take a critical eye once again at our spending, to make sure the pandemic isn’t sickening our finances also.

How our spending has changed

Back in late 2018, I broke down the Darwinian family expenditures. When I tallied it up, I realized that we were going through about $340,000 a year.

This shocking figure really set the tone of this blog, and thankfully generated surprisingly little bad press. (This was mainly due to the fact that no one was reading my blog at that time.) 

Now with the pandemic changing our lives, I went through the last few months of spending and compared it back to that post.  

This chart below shows how our current spending (in red), compares to our spending in late 2018 (in blue).

Again, please refer back to this post for some more background details about these categories.  

Beach Club:  $750 → $300 a month

Yes, despite ostensibly being a personal finance blogger, we’re part of a beach club.  

It’s been shut down ever since the stay at home order went into effect, and has only just started to open up for small groups.  

We haven’t been back yet, so this cost has fallen to just our monthly membership dues.  Without these dues the club likely won’t survive the pandemic, so we’re happy to pay this cost. 

Car Payment (unchanged):  $930 a month

The White Coat Investor writes that you should pay cash for your car, and also buy something cheap and affordable.  I’ve had a Tesla Model 3 for the past two years.  I financed the purchase with a loan from a local credit union at 1.9% interest over 5 years.  I believe that I can end up wealthier in the long run if I invest the money that would have gone towards the lump sum purchase of the car.  

But the monthly payments are huge, and it’s expensive to insure.  The car loan doesn’t care that my paychecks are down 18%.  It still demands to be paid every month. I can still afford the payments, but I see the WCI’s point a bit more clearly now.  

Groceries:  $1100 → $1260 a month

Our grocery budget feeds two boys and three adults (including our au pair).  The Dr-ess and I have been spending significantly more time working from home, so we’re eating more of our food out of the fridge.  I’ve written before how we also spend more to buy organic food, because of studies that show a lower cancer risk with organic diets.

I actually thought our food costs were going to be higher, so I was relieved to see that it’s only gone up 14% compared to our pre-pandemic costs.  A lot of this increase is from delivery costs, since we now order groceries almost exclusively from Amazon.  (That company is totally going to take over the world.)  

Insurance:  $780→ $1167 a month

We’ve got a lot of insurance.  Here’s the full list, in no particular order:  Life, disability, homeowner’s, earthquake, auto, and umbrella.  The earthquake policy is new, which explains most of the difference here.  Interestingly, our auto policies have refunded 20% of their premiums during the pandemic due to lower car usage.

Live in nanny (Au pair):  $2240 → $1633 a month

I wrote recently how we solved our childcare problem by welcoming an au pair into our home.  She’s actually significantly cheaper than the full time nanny that we employed when I last tallied our monthly costs. 

But this is an expense I really hoped to eliminate at this point. Prior to the pandemic, we were getting by just fine without full time childcare.  My parents were able to help out a few hours a day, and we used occasional babysitters to help with gaps.

But COVID-19 thew everything for a loop. The impossibility of working full-time while homeschooling two boys led us back to another live-in nanny within weeks of the lockdown.

Mortgage and Property tax:  $7900 → $7860 a month

Our primary residence is by far our biggest expense.  In 2018, 28% of our spending went to the mortgage and property tax payments.  This is still true.

On the plus side, we recently refinanced our mortgage at a 3.5% interest rate, which dropped our monthly mortgage payments by about $500.  But our property taxes went up significantly when we built an ADU in the backyard. (ADU = accessory dwelling unit).

All in all, we’re paying only slightly less every month for our house than we previously did.  We’re appealing the huge property tax increase, so hopefully this will come down further if we win our appeal.

Other:  $3200 → $3090 a month

This is the mysterious category that encompasses everything from birthday gifts and bedsheets to new pajamas and windshield wiper fluid.  It’s always a few thousand dollars a month, and has stayed remarkably constant over the years.  

Parental support:  $1600 → $3080 a month

Since our last spending report, my parents have moved into our backyard ADU.  They loaned us $150,000 to help fund the construction, and I repay them every month plus interest.  So half of this expenditure is the loan repayment, and half is to help them cover living costs.

Private school:  $1740 → $3830 a month

You can see from the graph above that our private school costs have skyrocketed.  This is because our second child is now in an “early education program” (AKA fancy daycare).  His older brother’s in kindergarten, so now we pay two private school tuitions.

Over the past year, I’ve waged a campaign in our household to move our kids to public school. I was making good progress on this front, but COVID-19 killed this campaign dead.

So despite a pandemic which has kept our boys home for the past few months, we are still paying through the nose for private school.  This debate probably deserves its own dedicated post, so I’ll leave it at that for now. 

Restaurants:  $1120 → $219 a month

This is one silver lining.  Since we’ve been eating at home so much, our restaurant spending has gone way down.  We’ve still occasionally been getting take out to support our favorite local restaurants, but it’s still nowhere near what we used to spend on dining out.  It’s going to be a long time until Sunday brunch and date nights are back on the menu, so I see this cost as staying low for the foreseeable future.

Savings:  $4000 → $2000 a month

This has been one sad casualty of the pandemic.  We’re still saving $1000 a month into 529 educational savings accounts for both boys, but we’ve stopped our extra savings for the time being. 

For a little while before the pandemic, we were saving a ton of money each month to put towards real estate.  I had set a glorious 5 year SMART goal to partial financial independence, and was rapidly accelerating towards this goal.

My lower paychecks have put a damper on this, but we still have capital to invest. Stay tuned for a report on what we’re doing in my next Anno Darwinii report.  

Student loans:  $2100 a month (same)

Like my auto loan, my student loan payment has not changed.  I’ve got another 10 years of loan payments at my current rate, and still owe $220,000 at a 3.5% interest rate with First Republic.

I can’t wait to pay this off, but my stubborn analytical mind won’t let me spend extra cash on this.  I still firmly believe that I’ll come out ahead in the long run if I continue to aggressively invest my extra capital.  

Only time will tell if I’m right.  

Utilities:  $900 a month (same)

As far as I can tell, our utility bills haven’t changed very much.  I’m charging my car at home now.  This used to add about $200 in electricity costs a month, but we still came out ahead due to the fact that electricity is cheaper than gas.

Now that I’m spending more time working from home, my charging costs have gone down.  The net effect is that our average utilities aren’t too different compared to a year and a half ago.  

Total monthly expenditures:  $28,000 → $28,360 a month ($340,320 annually)

I had to check my math a few times, because I’m amazed at how consistent this number is when compared to 18 months ago.  

This translates to $340,320 a year of spending.

Yes, this is still a ton of money, and I feel both blessed and embarrassed to have this figure out in public.  Thanks goodness the Dr-ess’ salary has stayed the same, so the only major sacrifice we’ve had to make is less post-tax savings.

Conclusion

So to summarize, the pandemic has caused a few major changes.  My pay is down about 18% and our childcare costs are way up.  Our monthly private school cost and parental support have both doubled since the last time I tallied our spending in 2018.  To balance this all out, we’re saving less money and spending less on restaurants.  

But we’re still spending a massive amount of money every month.  It’s truly a frightening number.  

Roughly 37% of our spending goes to paying back loans (car, private loan, student loan, and mortgage).  While the Tesla will be paid off in a few years, my student loans are going to be around for another 10 years still.  And the mortgage?  I bet we’ll move long before that’s paid off.  

I can fairly easily rationalize the wisdom of investing our extra money, rather than paying off all the debt. But does the debt keep me handcuffed to my job for the near future? You bet it does.

Stay safe out there, dear readers.

–TDD

How has your spending changed due to the pandemic?  How much of your money goes towards paying back debt?  How does that make you feel?  Comment, share, and subscribe for more!

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