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Annual Expense Trends
Old 01-08-2013, 07:09 AM   #1
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Annual Expense Trends

Like many at the end of each year, I spent several hours summarizing our budget results yesterday. Along the same lines as the recent 'how much did you spend in 2012' thread - I thought I'd start another 'I'll show you mine if you show me yours' thread showing a little more history. Getting better or getting worse?

What my history tells me is we have a really good handle on what we spend, very steady if not improving slightly from year to year. And that our ultra conservative WR lets us sleep well at night - at least until the next market meltdown.

I separate non-annual expenses such as purchasing cars, major home repairs/renovation, furniture/appliance/consumer electronics replacements into unusual expenses. I plan unusual expenses at $10K/yr (coincidence, not arbitrary) on average, knowing they will flucuate considerably. I've also shown 'boat' as a separate category simply to see how we're doing with all the other typical expense categories we all face. If you've ever owned a boat, you know they're more expensive than most people expect.

DW was laid off in 2008, so we really took a hard look at spending then. I retired in 2011, and we've continued to find ways to reduce spending without sacrificing quality of life at all. We cut out some non-value added spending, and just reduced frequency on some value added spending categories. The details have appeared in other threads. I'd argue we're actually living better, while spending less, it's immensely satisfying.

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Old 01-08-2013, 07:20 AM   #2
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Wow, this looks like w**k.

For me experiences are not good or bad, just different
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Old 01-08-2013, 07:29 AM   #3
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I started keeping a detailed spreadsheet of expenses 10 years ago and it's interesting to look back and compare the years. I haven't made a nice graph but my expenses have been rising about 1% a year as my income rises faster. 10 years ago I my expenses were 75% of my income and last year it was down to 61%.
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Old 01-08-2013, 07:39 AM   #4
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I have to wait until I get my final credit card statements for 2012 due in a few days.

But I already know from a budget check a month ago that we are way below 2011 spending, even with some generous gifting.

I agree - focusing on getting the most bang out of your buck is the "true game" in retirement - using your funds for the "best result". This is highly personal as it depends on each person's priorities and what brings them the most enjoyment in life.
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
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Old 01-08-2013, 08:09 AM   #5
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Definitely on the right track, and I'd agree that planning ahead rather than just looking back, is the right way to go. Also... the "unusual" part of the budget is important, and cushions the blow when the air, conditioner, furnace, roof, or car has a problem. The $12,000 new roof, $3000 transmission repair, or a $5000 a/c failure were the things that used to throw us into shock.

Our spending leveled off about five years ago, and now tracks inflation. We're now well into our 77th year.

One of the major differences that we have... different from most people here, who are under age 65... is that instead of relying on "return", we look at our assets as being finite... with rates of return nearer to 2%... in lowest risk treasury bonds, money market, IRA's, annuities, and property. Because we've been on SS for 14 years, we DO count it as an asset. It has provided us with about $350k since we began, and if we look ahead 10 years, another $250k. YMMV

The other part of expenses, is the stability of medical costs... again, not having to adjust between employer paid, spouse benefits that change, or the shift from private insurance to Medicare. Our medical expenses are almost stable from year to year @ about $9k to $10K.

It is much easier to plan for 10 more years of retirement than for 30 years.

To determine our annual expenses, we simply determine our net worth difference between years. The natural slowdown due to age, goes a long way towards stabilizing expenses.

Sounds strange, but we don't even think about money in terms of security, but more of a nuisance of paperwork in paying bills.

This is not to suggest that what we do is correct. It's just easier now that we don't have to do long range planning. For the first 15 years, we went through the more involved budgeting and planning process.

BTW... re: "the boat"... know you'll understand that we have experienced the two greatest days of our lives. Wouldn't trade that for anything.
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Old 01-08-2013, 08:30 AM   #6
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I left megacorp in 2008, prior to that I just did the big picture look monthly income, monthly expenses, I was always saving more than I spent but probably wasting some. Starting keeping more detailed budget in 2007 prepping for exit. I have been relatively flat 2009 - 2012 at 16k/yr total. Makes me wonder if trying to account for inflation is over inflating expected needs.
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Old 01-08-2013, 08:31 AM   #7
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spending 2008-2012.JPG

2008 includes 11K in remodeling of the ranchhouse.
For me experiences are not good or bad, just different
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Old 01-08-2013, 08:49 AM   #8
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I don't track spending at all. I did before I retired so I could estimate expensives to calculate our "number" beyond my pension. Since retirement our total spending has been very consistent and well below our withdrawal rate of 3.5%. This includes lots of travel, eating out, etc. We have not yet made unusual large purchases (e.g. New car, roof, replace central air, etc). But the excess we have saved is far beyond anything we can foresee. So far, so good.
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Old 01-08-2013, 09:27 AM   #9
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Looking at the graphs above, all I will say is that I spend significantly more. But then, I have two homes to maintain.

Originally Posted by donheff View Post
I don't track spending at all. I did before I retired so I could estimate expensives to calculate our "number" beyond mypension investment returns. Since retirement our total spending has been very consistent and well below at our withdrawal rate of 3.5% 4%.
I just borrowed another poster's words to describe my situation. Been retired for only 7 months or so, but when taking out past expenses like children education and one-time gifts, our expenses for 2012 look about the same as in 2011 and 2010. Somehow I expected them to decrease, but that was too optimistic on my part.

Plan for 3.5%WR, but slowly feel OK with 4%. FIRECalc says even 5% is safe when future SS is considered. Heh heh heh...
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Old 01-08-2013, 07:22 PM   #10
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I don't really track expenses in a detailed manner, although I do have a handle on how we are doing in relation to what I anticipated we would spend, prior to my retirement three years ago. The first two years were fine......spent slightly less than anticipated. This year, we had to put a new roof on our lake cottage, and also buy a new truck. Yes, I had been budgeting for both of those, but they both came 3-4 years earlier than expected (long story on the roof, and the old truck developed some issues this year that made me get rid of it early, as I need a reliable vehicle). So, we took a bigger hit this year than expected, and I was concerned for a while, but we just shifted to our "low expense budget" for a while (which really doesn't mean giving up anything critical), and by the end of the year, we were pretty close to being back on track with expenses (slightly over, but no big deal). So, this year gives me confidence that we can deal with a few unexpected large expenses in any given year and still be okay.
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Old 01-08-2013, 09:48 PM   #11
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I keep a summary of my expenses in a spreadsheet going back to 1985, my first year on my own. My expenses were higher back in the 1990s due to 2 reasons: income taxes and home mortgage expenses. When I exclude income taxes, the trend line flattens out a lot but still declined once I paid of the mortgage in 1998. Since 1998, and excluding income taxes, the only significant bumps in my annual expenses were buying my new car in 2007 and a few big loans to friends (who paid them back or are in the process of diong so). Not even switching to an individual health insurance policy in 2009 after I ERed in late 2008 caused a big bump although I ended up switching to a less broad plan in the middle of 2011, bringing those expenses under control again. (They were partly offset by the elimination of commutation expenses.)
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

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Old 01-09-2013, 01:44 AM   #12
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After joining this website a couple of years ago I became aware of the importance of understanding my annual personal expenses. These expenses have been between $30k-$40k each year. Targeting $50k this year.
Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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Old 01-09-2013, 08:12 AM   #13
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Interesting thread. I broke out 'housing' and 'son' from the rest to help explain the variance.

Housing costs - I paid off my mortgage so they went down dramatically. Of course 'son' picked up much of the slack.

As I mentioned in another thread, we're moving to the burbs (public schools!) and I'm retiring (no nanny!) so the 'son' costs will drop dramatically, and won't see 2012 levels until college.

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Old 01-09-2013, 01:43 PM   #14
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In keeping with my policy of only showing percentages:

P.S. I posted our real percentages on another very recent thread.

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