I write a lot about personal finance, but how well do I practice what I preach? For the most part, I follow my own advice. Much of what I write here is based on personal experience. But my financial life is not without weaknesses. Last January, I tallied my discretionary spending to see exactly how much these weaknesses cost me. This year, I’ve done the same.

Looking at the Big Picture, 2007 was an amazing year for me financially. I not only increased my income, but also severely reduced my expenses. Last year I spent half of what I spent in 2006. It was my lowest annual spending since 2002. With such a tremendous positive cash flow, I was finally able to get rid of my non-mortgage debt.

Although the Big Picture was rosy, it was not without flaws. I’m still spending plenty (perhaps too much?) on certain aspects of my life. Most of these will come as no surprise to regular readers. Here are my biggest sources of discretionary spending:

Books (2005: $1049.91, 2006: $692.96, 2007: $702.73)
My book spending is down significantly from five years ago. I used to spend $200/month on books. Now I’m spending about $50/month, and even this number is inflated. Many of the books I purchased in 2007 were personal finance and self-development titles. Though I now realize these are a legitimate business expense, I often forget to use business money to buy them. Just last week I bought $80 worth of personal finance books with money from my regular checking account. My spending for non-business books is very low right now. My secret? Used book stores and the public library!
Comic Books (2005: $2810.52, 2006: $3202.91, 2007: $897.08)
Will you look at that? Although I use comics as a prop for laughs here at Get Rich Slowly, I’ve genuinely struggled with my spending on them in the past. I seem to have overcome this. Last year, I only spent $900 on comics, and $525 of that came during the first three months of the year. Since October, I’ve only spent $100 on comics, which is half of what I’d budgeted. This is a huge personal victory.
Entertainment (2005: $479.31, 2006: $610.55, 2007: $1175.25)
This number ballooned last year despite reduced spending on CDs, DVDs, and movies. I went through a bowling phase early in the year; Kris and I attended the opera; I bought some concert tickets (The Black Angels and my favorite band, The Decemberists, who play in Portland tomorrow night). But the real culprit was my Nintendo Wii. I’ve only purchased a few games so far, but “a few games” add up. This gives me additional incentive to keep my video game spending low.
Food (2005: $5290.06, 2006: $5060.04, 2007: $4108.55)
which includes Dining out (2005: $1648.63, 2006: $2018.81, 2007: $2051.93)
Kris and I worked hard to reduce our grocery bill last year, often putting to use the techniques I describe at Get Rich Slowly. We know that we spend a lot of money on food, especially for a two-person household, but we’re trying to improve. We actually dined out less last year than in 2006, but we were undone by our new favorite restaurant. An evening at Gino’s costs us $60, and we go there once a month. As usual, this category needs some work. (See also: How much do you spend on food?)
Pets (2005: $397.76, 2006: $471.03, 2007: $625.52)
Many personal finance writers view pets as an unnecessary expense. But to me, $50 a month to keep four cats is a bargain. It costs me only fifty cents a day for each animal, and they bring much more joy than that to my life. If Kris would let me, I’d be the “crazy cat lady” on the block. (Are there “crazy cat gentlemen”?)
Sin (2005: $1055.33, 2006: $768.95, 2007: $431.89)
This includes wine, liquor, pipe tobacco, poker nights, etc. Looking at this category, you’d think I was a chain-smoking lush! It’s not true. I smoke a pipe maybe a dozen times a year. We serve alcohol at dinner parties and social gatherings. Because we like to entertain, we serve a lot of alcohol. I reduced my own alcohol intake sharply this year. (At one point I went three months without a drink just to test myself.) This made a huge difference in my spending.

For those keeping score, my 2005 discretionary spending was $11,082.89. It was $10,806.44 in 2006. Last year, it fell to $7,941.02. That’s $2,865.42 I was able to free to apply directly to my outstanding debt. Though I’m pleased to have done so well with my spending in 2007, I’m worried that this sets me up for disappointment in 2008. My expenses almost have to increase.

Please note that there’s nothing inherently wrong with purchasing things that bring you joy. But problems come when you finance these purchases with debt. If you’re meeting your other financial goals and have money left over, it’s good to indulge your interests and passions.

Addendum: How does my spending compare to others? Checking this thread about annual living expenses from the discussion forums, the numbers seem fairly typical.