Yes that’s 2005, not 2014! I’m slowly working my way through my old financial records (more emphasis on slowly than working) to discover what I did with my money when I wasn’t paying attention. So speed your deLorean up to 88 mph or slip into a magical hot-tub if you’re fresh out of flux capacitors, and journey back to 2005 with me!
What’s gone before
I arrived in the US to work in Michigan at the beginning of the millennium with a carry-on bag for belongings and a small balance in a German bank account. I stayed in Michigan for the subsequent couple of years until 2004 when my job relocated to Alabama, so I went with it and bought both a house and a small car.
In 2005 I was living alone as Ms. DivLife was still getting her immigration application sorted out. I had a largely uneventful year enjoying the thrills that is “home ownership”. Work wasn’t too stressful for once as the major project I was working on had ended.
2005 year summary
|Average Living Expense $||5,017|
|Security Ratio %||0|
|Wet Worth $||-125,521|
This is represents both mandatory expenses (rent, utilities etc.) and discretionary expenses (movies, music etc.). I spent just over $60,000 in the entire year which is way more than I spend these days.
The percentage of living expenses paid for by my dividend income portfolio. This number was easy to calculate as I had no investments.
I was living without any budget or financial plan and it shows – I spent almost 90% of my income which is awful! Aside from basic living expenses, I spent most of my income on ‘discretionary’ purchases – computing / electronics, movies, compact discs (remember those?). One of my larger purchases was a sofa set (which we still use nearly 10 years later) so that was one of my better uses of money!
I had no investments nor even the idea that investing was possible except for my contributions to the company’s 401(k) plan. I don’t include retirement accounts in these financial reports which is fortunate as I have no records about what my 401(k) was doing that year.
The fact that I managed to save even 11% of my income was more luck than judgment on my part. My ‘Savings’ consisted of a ‘high-interest’ savings account earning 0.55% interest at Chase bank.
My personal finance journey in 2005
The wet worth number is negative because it includes my mortgage debt but not the value of the house. However there’s still a largely upward trend to the numbers as I was regularly paying off my car loan and mortgage in addition to the 11% savings rate that I attained.
Here’s the long-term view, showing the progression from 2000 through to 2014 as I work to fill in the gaps in the middle.
Here’s a summary of my expenses in 2005. Due to a couple of missing bank statements (*), I have no idea on how I spent about $8,000 dollars that year, so I cleverly named that spending category “No Idea”.
It’s a little alarming to see the “Electronics” and “No idea” categories ranked second and third highest – these are what I now call discretionary expenses as they represent “nice to haves”. I’ve since managed to curtail upgrading my PC every year with the latest hardware.
I suppose in hindsight it makes sense that Home Improvements was fairly high as I had to buy some furniture after buying the house as I had almost none in the apartment I rented before. Although I only ended up with a bed, dining table, chest of drawers and aforementioned sofa – I won’t be getting any calls from Martha Stewart to come view my interior design skills.
The Groceries category probably includes a lot of CDs and DVDs as I grouped any spending in my bank statement from Walmart as Groceries. I’m fairly sure I was buying one or two DVDs a week there.
The Others categories is a collection of everything else to simplify the diagram. It includes Video Games ($400), Cash ($300), Books ($300), Car Service ($240), Tax Filing ($210), Gifts ($150), Clothing ($135), Music ($100), Home Repair ($60), Utilities:Gas ($50) and Bank Charges ($38).
About the year in 100 words
January: 5 million people start the new Year homeless after the Tsunamis at the end of 2004. February: YouTube was founded. April: Pope John Paul II dies, Prince Charles gets married and the Airbus A380 makes its first flight. May: The identity of Watergate’s Deep Throat is finally revealed. July: London was attacked by terrorists killing 52 people. August: Hurricane Katrina makes landfall in the US with over 1,836 deaths. November: A British man is reportedly the first to be cured of HIV and the first face transplant is performed in France.
Business news from 2005
Interest rates increased again over 2004 levels to 3.75%. The US economy grew at 3.3 %, a slight reduction from the previous year despite the impact of Hurricane Katrina. The S&P grew 3%, the Dow Jones lost 0.6% and the Nasdaq gained 1.5%.
Some of the larger corporate mergers this year: Citigroup [C] acquired MetLife, Bank of America [BAC] acquired MBNA (the nation’s second largest bank), eBay [EBAY] acquired Skype, Cisco [CSCO] acquired Scientific Atlanta, Seagate [STX] acquired Maxtor, Proctor & Gamble [PG] acquired Gillete, Whirlpool [WHR] acquired Maytag, Adidas [ADR] acquired Reebok and SBC [T] acquired AT&T but continued using the AT&T name.
Largest companies in 2005
Here are the ten largest companies in 2005 by market cap.
|Rank||Change||Company||Ticker||Market Cap ($B)|
|1||–||General Electric||GE||382 (+28%)|
|2||+1||Exxon Mobil||XOM||380 (+44%)|
|5||+4||British Petroleum||BP||221 (+26%)|
|7||NEW||Royal Dutch Shell||RDS.B||210|
|8||NEW||Johnson & Johnson||JNJ||199|
|10||NEW||Bank of America||BAC||178|
HSBC, Intel Corporation and AIG lost their places in the list, replaced by newcomers Royal Dutch Shell, Johnson & Johnson and Bank of America. Exxon overtook Microsoft to claim the number 2 spot.
(*) No bank statements were intentionally destroyed in the making of this report – I’ve just managed to lose them in the last 9 years.
Quote of the day
Security depends not so much upon how much you have, as upon how much you can do without.