2011 Expense Categories and Amounts

[Midpack]

What a wide spectrum among members, nothing wrong with that...

 

[lhamo]

Monthly averages to date (a bit off since we are only 1/3 of the way through December, but this does include our mortgage and a year's worth of management fees/heating fee which I paid yesterday). Family of four with two young kids in private school (largely employer subsidized) in Beijing:

Monthly to date

Food In (food eaten at home) -- 443.70
Food Out (food eaten outside the home, not incl home-prepared lunches) --179.54
School Meals (kids eat lunch at school daily) --181.52
Transportation (taxis and gas when we visit family in the US) --135.35
Medical (incl our share of employer-subsidized insurance) --165.65
Clothing -- 41.77
Entertainment (movies, DVDs, trips to fun places for the kids-- 86.68
Books/Reading (set this up as a separate category when I got my Kindle, to track related expenses better. Home public library now lends books for kindle, so this will drop considerably next year) -- 69.55
Household (includes stuff for the house as well as toiletries, personal care items/services, etc) --100.21
Pets (1 cat, several goldfish -- bulk of expense was shots for the cat) --16.83
Communications (land line, my cell, postage) --12.91
Computer -- 4.94
Vacation (includes two trips to the US/year to visit family) -- 1310.33
Childcare/housekeeping --375.83
Housing (incl management fees) --1581.85
Utilities (water, electricity, annual heat fee for central heating) --176.15
Furniture --66.68
Education (kids school and summer camp fees) -- 320.86
Health (gym for everyone, vitamins, sports equipment, etc.) -- 115.07
Cigarettes -- 15.28
Gifts and charity -- 47.20
Banking and investment (mostly wire transfer fees) -- 3.48
Local taxes -- 389.87
Misc --0.00

Total all categories (after taxes, retirement and college) -- 5841.25

Looking at projected expenses for the rest of the month, we'll probably come in around $6000/month, which is a little lower than I budgeted for this year and quite a bit lower than last year's expenses, especially when you consider how the depreciating dollar and considerable local inflation have played into these costs.

We're still living on roughly 1 FT salary and saving most of the other one. I'[m mostly happy with the spending choices reflected above -- except for DH's smoking habit -- and don't see a lot of places where it would be worth it to decrease spending, except maybe the books category, which should drop considerably now that I am getting most of my kindle books through library loan.

 

[beowulf]

I've seen a few of these threads before and one thing I don't understand is that very few people seem to include federal and state income taxes and FICA. For us, they are the single largest expense - running approximately at 38% of total income. When you are paid a salary, there is virtually no way to control these (other than reducing your income, which is somewhat self-defeating). You can reduce the first two by contributing the max to 401Ks, but not much beyond that. Part of FICA stops at about $106K, but that's still significant.

Do most people earn very little/not work/or are retired? My last day at the funny farm is Dec 31, so FICA will become a thing of the past. But our taxes will still be in the combined 30% range and that's not counting a $5K a year hit for property tax. We live in Northern VA, which is a fairly high cost area. For the last 20 years we have been able to save a fair amount, but now we will have to start drawing on that, so we will have to take a lot more care with expenses.

I admire those who can get by spending so little, but I don't think that's in the cards for us.

 

[lhamo]

I don't include FICA in my calculations above because it never really hits my bank account -- out of sight, out of mind. Although I suppose I could do the same with the portion of health insurance that I pay. Anyway, that just isn't how I have things broken out in my spreadsheet. I don't have a line item for US federal taxes as with the exception of the year I left paid employment for 6 months and had a taxable fellowship as income during that period, we haven't owed US federal taxes for nearly a decade -- we are exempt from paying taxes on our foreign-earned income as long-term expats.

 

[Ronstar]

I'm still working a little, and I don't include any payroll deductions or qtrly tax payments in my expense calcs. That would just serve to depress me. And I'm charting only those expenses that should be present in the first few years of retirement where we should be living off post tax investments with hopefully no income tax burden.

 

[arebelspy]

I've seen a few of these threads before and one thing I don't understand is that very few people seem to include federal and state income taxes and FICA. For us, they are the single largest expense - running approximately at 38% of total income. When you are paid a salary, there is virtually no way to control these (other than reducing your income, which is somewhat self-defeating). You can reduce the first two by contributing the max to 401Ks, but not much beyond that. Part of FICA stops at about $106K, but that's still significant.

I didn't include taxes because we're just talking about spending, which I count as any money I get that I don't save.

Or, to put it another way, my spending is based on net pay. What comes in, then how I spend it.

If we were talking about percentage of gross pay saved vs spent, etc then taxes would count in there.

I admire those who can get by spending so little, but I don't think that's in the cards for us.

So for a more apples-to-apples (though it never will be, because of different number of family members, areas of the country or world, stages of life, etc) comparison, look at your budget of expenses except for taxes, to see where you compare on food, housing, etc. (what I assume you're interested in based on your post in this thread, but unsure about taxes).

 

[Mulligan]

Thats why I enjoy reading these type of threads. A simple concept of expenses and categories actually bring out a multitude of varied interpretations. Concerning taxes, I recieve a pension, and the taxes come off the top ( actually in excess). I just treat my take home as the starting point of my budget. In reality the biggest expense though of my budget is the federal incomes tax and yet I treat it budget wise as if it was no expense at all. To top it off, my excess tax withholding that I file and receive, I treat as a " savings" when I collect it. I certainly wouldnt be hired anywhere as a bookkeeper.

 

[REWahoo]

To top it off, my excess tax withholding that I file and receive, I treat as a " savings" when I collect it.

Uncle Sam treats it as a free loan. I worked hard at withholding only what I was expecting to pay and tried to get the 'savings' into an investment account as soon as possible rather than months later when I got a refund.

 

[scrabbler1]

I've seen a few of these threads before and one thing I don't understand is that very few people seem to include federal and state income taxes and FICA. For us, they are the single largest expense - running approximately at 38% of total income. When you are paid a salary, there is virtually no way to control these (other than reducing your income, which is somewhat self-defeating). You can reduce the first two by contributing the max to 401Ks, but not much beyond that. Part of FICA stops at about $106K, but that's still significant.

Do most people earn very little/not work/or are retired? My last day at the funny farm is Dec 31, so FICA will become a thing of the past. But our taxes will still be in the combined 30% range and that's not counting a $5K a year hit for property tax. We live in Northern VA, which is a fairly high cost area. For the last 20 years we have been able to save a fair amount, but now we will have to start drawing on that, so we will have to take a lot more care with expenses.

I admire those who can get by spending so little, but I don't think that's in the cards for us.

Beowulf, I did include income taxes in my list of expenses. Being ERed, I have no FICA taxes. I split my income taxes into 2 tiers. The first is on my normal dividends whether they are monthly or quarterly. Those I include in my regular budget. The second is on non-recurring, irregular cap gains from distributions and sales of mutual fund shares, usually the former. If my income tax bill rises from cap gains distributions then the money to pay them can always come from those distributions, so I will always have the money to pay those taxes. Compared to working, I would compare the former to a regular salary and the latter to a bonus.

 

[Mulligan]

Uncle Sam treats it as a free loan. I worked hard at withholding only what I was expecting to pay and tried to get the 'savings' into an investment account as soon as possible rather than months later when I got a refund.

I agree with you a 100%. But with me, it was a "in theory and reality thing". I wont waste a big refund and will invest it, but I have the unique ability to spend away monthly smaller amounts and have nothing to show for it. A more practical way would be to increase my monthly investment contributions and reduce tax withholding, but Im mindlessly stuck on the " winning the lottery of my own money" yearly in March.

 

[REWahoo]

I agree with you a 100%. But with me, it was a "in theory and reality thing". I wont waste a big refund and will invest it, but I have the unique ability to spend away monthly smaller amounts and have nothing to show for it. A more practical way would be to increase my monthly investment contributions and reduce tax withholding, but Im mindlessly stuck on the " winning the lottery of my own money" yearly in March.

We all have to play games at times to protect ourselves from us!

 

[Bestwifeever]

I do our budget with an after-tax income amount, so don't include taxes as an expense. I guess I could zero taxes out by adding that amount back into the income side and showing it as an expense on the expenses side.

The only person who has to okay it is DH and he doesn't mind that the accounting isn't 100 percent GAAP--but then he believes anything I tell him

 

[beowulf]

I understand the logic of using your actual take home pay as a starting point for your budget, but that only works if you are paid a salary that's pretty fixed each month/2 weeks, etc. If you are are on commission or other variable payment schedule where taxes are not withheld (I am not), this does not work. And, if we are using actual take home, then why include medical, life insurance, etc., if they are taken out automatically? I just don't think it's a real picture of what you spend - and taxes are an expense. How can you include property tax, car tax, etc. and not other taxes?

In our case, nearly all our savings are tax deferred - either through 401K (now converted to IRAs), I bonds and other vehicles where you are ultimately responsible for taxes after withdrawal. If I take, as an example, $40K a year from an IRA, I really only have $30K to spend (assuming a real 25%, not marginal bracket, tax burden). Yes, I can budget that way and will, but, no matter how you parse it, I still have to pay the taxes and they are an expense. Plus, we will pay taxes on 85% of SS (when we collect), which further complicates what we "really" have available to spend. Pensions (and eventually SS) have taxes withheld, so that makes life a bit more predictable.

Our expenses, in decreasing order of magnitude are:

Federal Income Tax
Housing
Entertainment to include vacation travel
Food to include meals out
State Tax
Property Tax (including car tax)
FICA
Medical (to include premiums and non-covered expenses)
Miscellaneous Household to include all utilities except communications
Communications of all types
Charity
Miscellaneous

Some of these categories include many sub items that others have broken out individually and that I track, but are rolled up to show how high the burden taxes are.

Of course, there is a way to solve this dilemma - as stated by a radio commentator whose name I have forgotten - "Want to pay less taxes? Just stop earning." Not a realistic solution, IMHO.

 

[FIREd]

As long as DW keeps her job, we spend more on FICA and income taxes than we spend on ourselves. I don't include those taxes in our budget at the moment because it would be depressing.

When DW retires, though, our income/FICA tax bill should drop from 6 figures down to 4 or less based on the current tax code. I will start including income taxes in our budget at that time, because they will have to be paid from portfolio withdrawals and I will have to plan for that.

 

[NW-Bound]

I'm still working a little, and I don't include any payroll deductions or qtrly tax payments in my expense calcs. That would just serve to depress me. And I'm charting only those expenses that should be present in the first few years of retirement where we should be living off post tax investments with hopefully no income tax burden.

+1

I am also having some earned income from part-time work, but that may go away anytime if I no longer enjoy it, or nobody needs me. Along with that income will also go all the associated taxes. I will also be cruising on my after-tax savings for a while, whose tax liabilities should be minimal. Even when I need to draw from pre-tax savings, I have not bothered to figure out the taxes, because they should not be anywhere as high as when I was working full-time.

The other taxes, such as real estate and vehicle licenses etc..., are a function of my lifestyle, something that I have some control over, and those may continue into my true retirement. Those need to be monitored so that I can be sure that I can afford them.

I never tracked my spending that closely until I joined this forum. Seeing how people really prepared for their retirement gave me a wakeup call. I was alarmed at first that my expenses were that much. But then, separating out what will be sustained expenses vs. what will end soon such as my children's college costs calmed me down again. Well, that was true until the health care cost raised its ugly head.

 

[FANOFJESUS]

I've seen a few of these threads before and one thing I don't understand is that very few people seem to include federal and state income taxes and FICA. For us, they are the single largest expense - running approximately at 38% of total income. When you are paid a salary, there is virtually no way to control these (other than reducing your income, which is somewhat self-defeating). You can reduce the first two by contributing the max to 401Ks, but not much beyond that. Part of FICA stops at about $106K, but that's still significant.

Do most people earn very little/not work/or are retired? My last day at the funny farm is Dec 31, so FICA will become a thing of the past. But our taxes will still be in the combined 30% range and that's not counting a $5K a year hit for property tax. We live in Northern VA, which is a fairly high cost area. For the last 20 years we have been able to save a fair amount, but now we will have to start drawing on that, so we will have to take a lot more care with expenses.

I admire those who can get by spending so little, but I don't think that's in the cards for us.

I guess the way some people look at it is that money does not ever hit their hand. That is how I looked at it. Our taxes would only change our budget about $45 a month. Others have a low income that would cause no taxes. A couple could make about 60k and still pay no taxes if they were both on SS at 40k and earned 20k in instrest. A couple could also earn 80k if both were on SS at 40k and another 40k came from qualified dividends and pay no taxes. Provided they are both 65 or older.
I could make a million dollars and my taxes would go nuts but my budget might not change that much. Other than using some wise tax moves which help that is uncle sam's money.

 

[Midpack]

I view these threads as a way to compare expenses with others, to see where our opportunities to trim or conceivably increase spending may be, in some categories. Operating expenses if you will. If I am spending 50% more than others on utilities with similar overall monthly spending, it's probably an opportunity for me. Or if i am spending much more than some others overall, maybe i can figure out how by seeing their breakdown.

Taxes aren't going to be comparable, especially here where the audience is a mix of retired and others still working. I guess you could also suggest members show what they save each month too, but not sure what purpose that would serve.

 

[FANOFJESUS]

I view these threads as a way to compare expenses with others, to see where our opportunities to trim or conceivably increase spending may be, in some categories. Operating expenses if you will. If I am spending 50% more than others on utilities with similar overall monthly spending, it's probably an opportunity for me. Or if i am spending much more than some others overall, maybe i can figure out how by seeing their breakdown.

Taxes aren't going to be comparable, especially here where the audience is a mix of retired and others still working. I guess you could also suggest members show what they save each month too, but not sure what purpose that would serve.

Maybe add four categories how much they made, what they paid in taxes, how much they spent and what they saved. That would give us a good overall picture.

 

[Midpack]

Maybe add four categories how much they made, what they paid in taxes, how much they spent and what they saved. That would give us a good overall picture.

Maybe it's just me, but where I don't see any harm in sharing expenses, I don't see any need to share the other three numbers you're suggesting. YMMV.

 

[FANOFJESUS]

Just a suggestion if a person wants a better overall picture. Some of us pay taxes and some pay none at all legal I might add.

 

[FANOFJESUS]

Maybe it's just me, but where I don't see any harm in sharing expenses, I don't see any need to share the other three numbers you're suggesting. YMMV.

Don't worry you have the anonymity of the internet.

 

[NW-Bound]

I will admit to being a bit curious about other people's "numbers", but after being here a while, it significantly lessened. It's because I have come to see that most posters' spending habits are similar to mine, particularly people with comparable income, as far as I can guess. Because this forum has been (or perhaps was?) about the LBYM philosophy, which enables many of us to achieve FI, a complete picture cannot be formed without knowing more about the person financial stats. But most people are not comfortable with giving out such details. I am not.

While some expense info is useful, for example the health care cost, or even the grocery bills, some other expenses such as heating cost for those snowbound places, or the higher RE taxes for some states are just to satisfy my curiosity regarding how the rest of America lives. That's all. The discretionary spending would vary based on the person's net worth. One has more, so he spends more. After the basic needs are satisfied, it is all fluff anyway.

What I have found more interesting are the expenses of the full-time RV'ers. I first read some blogs to get ideas of interesting places for my own itinerary, but then got interested in reading about their lifestyles and expenses. They surely spend a lot less than I do, yet lead interesting lives, travel places, with lots of healthy physical activities. Yes, many are early retirees too, with no pension.

It was an eye-opener for me, who has been having such a conventional life. It is not for me, well not yet anyway, but knowing that one can live happily with less money makes me feel good.

 

[Koolau]

I still plan to post my numbers for the year as it's the first year I've done this type of tracking. Unfortunately, we still have some significant numbers to add to the spread sheet as we plan to "titrate" our charity numbers for the year.

Unfortunately, even though I could tell you what I've sent to the various taxing agencies, I don't know what our 2011 taxes will actually be (until next April). Our taxes vary (almost wildly) depending upon how much we take from the 401(k) and how much we convert to Roths. So, I may just throw in an estimate based on what %age tax we usually pay on our income. We'll see when the time comes. Of course, if this thread becomes inactive by then, who knows.

Very interesting topic in general. Difficult to fathom how some folks can live on so little - and that's a compliment, not a criticism. If I didn't pay taxes or have medical insurance (payments) and out-of-pocket, I suppose mine COULD be managed significantly lower. However, we do have "voluntary expenses" which are significant that we will continue to pay as long as we are able (mentioned elsewhere, charity and gifts to kids, etc.). Our other "manageable" expense is living in a relatively high cost area. I know (from 60 years experience) that there are much less expensive areas to live. I'm certain I could find a modest yet comfortable apartment in some areas of the country for what I pay in HOA/maintenance dues. So far, I'm willing to pay the freight to live where I want to. YMMV

 

[Grainiac]

This thread has been very good education to me. While I have been aware that many members here have achieved very low monthly spending levels, this thread has truly helped me understand what it takes.

As long as DW keeps her job, we spend more on FICA and income taxes than we spend on ourselves. I don't include those taxes in our budget at the moment because it would be depressing.

Same situation here with our taxes over 2x our spending. Our monthly spending for two people averaged $5348 the last 12 months. Over 40% of our total was spent in clearly discretionary stuff like travel, hobbies, or pricey food, but we have not (yet) felt too much pressure to reduce it since we were still able to keep on our aggressive savings plan with target to achieve FI in 2014 at age of 50 & 49.

Here is our breakdown:
Cats 27
Charity 300
Clothing 210
Dining out 207
Gifts 121
Food & household consumables 585
Hobbies & travel 2139
Home improvements 247
Home insurance 413
Other household expenses 139
Medical 57
Property tax 463
Utilities, tv, phone, security 440

Most of the medical and all transportation is paid by employers.

 

[palomalou]

We've tracked for over 20 years. It's great to be able to look back at what has happened to our spending long term.
Our categories are:
food
household
clothes & personal
reading and entertainment
utilities
taxes
home maintenance
medical
a professional account for each of us (books, journals, conferences, etc.)
auto
insurance (some of this goes under auto)
misc. (things like postage stamps)