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My $18K/Yr Basic Expense Budget
Old 11-13-2013, 06:35 PM   #1
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My $18K/Yr Basic Expense Budget

My $18K Annual Basic Expense Budget

A lot of people have a hard time accepting that I can actually have a basic living expense budget of $18,000 a year. They read ď18,000Ē and they think I must be living in a hovel or in government-subsidized housing. I must be eating beans and rice 7 days a week. I must be letting my car, (he has a car?), my house (what house??!!) and my health fall apart. And I must be limited to spending my days in front of the boob tube sipping cheap Old Milwaukee beer.

OR -- I must be cooking the books to come up with that $18,000 a year figure. It must actually be something like $36,000 a year for my wife-and-I household. I must not be accounting for my health care being provided by my wifeís employer. Or something. Or all of it. But the $18,000 a year figure CANíT be real.

Well, it is. And weíre going to go through it line by line. But first, we have to establish a context for my basic living budget -- and in the process (hopefully) answer some questions and lay to rest some misconceptions before they start mucking things up.
 
What About That Wife?
Am I married? Yes. Does my wife work and earn an income? Yes. Does her employer cover my health insurance? No. Do my wife and I share household expenses that otherwise would jack up that $18,000 number of mine? Nope. Thatís right. No.

You see, due to business and job circumstances, my wife and I maintain separate households 102 miles apart. Separate houses. Separate electric, internet and satellite radio services. Separate household expenses right down the line.

We also have separate vehicles, for which we each take separate responsibility.

There are two line items in my budget that do benefit from marriage. Although I donít know the actual amount, I know that our auto and long-term-care insurance carriers give each of us premium breaks for having bought 2 policies. And thatís the only marriage effect that I can see on my annual basic living budget.

Of course, itís a whole Ďnother story when it comes to our entertainment and travel spending. Two can travel by car and stay in hotels just as cheaply as one. Two can get restaurant discounts a single diner canít. And so on. But like I said, thatís another story.

This story is about my $18,000 a year basic expenses budget.
 
What About That Hovel -- and the Rice and Beans?
I live in a two-bedroom, one-bath non-subsidized 1150 square foot brick house set on 1.25 acres near the Shenandoah River. The house also has a full walk-out basement and an attached 500 square foot garage and workshop. Some might still say thatís a hovel, but itís home-sweet-home to me. And itís paid for.

I drive a very well maintained 1996 Dodge Dakota -- also paid for -- with 128,000 miles on its odometer. I like it very much, and it covers that 102 miles to my wifeís house every weekend just fine.

I never eat rice and beans as a main dinner dish. My dinner preference is to go heavy on meats and vegetables. My (monotonous sounding to some) breakfast most days is oatmeal with milk and fresh strawberries. A sandwich and apple cover my lunch. Snacks throughout the day could be yogurt, nuts, fruit or a bowl of cold cereal and milk. Oh, and my beer is Becks, my scotches are Chivas Regal and Speyburn, and my bourbon is Old Crow. (I know, Iím not too picky about bourbons.)

Anyway, you get the picture. (I hope.)
 
Okay, Alex, So Letís See That Budget Already!
(my apologies but I don't know how to make it go into columns)

Cost Per Month

Housing
mortgage 0
(paid off)
r. e. taxes 49
home insce 47
home warr. 52
Repairs fund 150
(leveled at $3k)

Utilities
internet 57
land line 10
cell phone 10
electricity 100
(12-mo. avg)
heat oil & gas 50
(12-mo. avg.)
netflix 7
pandora 0
(free service)

Auto
auto loan 0
(paid off)
auto insce 28
maintenance 100
(accrued in a fund)
basic gas 35
(200 mi @ 20mpg)

Health Care **See Note 1 Below**
medicare (A & B) 105
supplemental 51
(medigap)
medicare (D) 18
(prescriptions)
ltc insce 176
(long term care)
dental insce 20
out-of-pocket 35

Groceries ďPlusĒ
groceries 210
liquor 20
pet food 50
(3 cats, 1 dog)

Monthly Total $ 1380 x 12 months = $16,560
Annual Total $ 16,560 (post-tax)

Income Tax ďOverheadĒ 740
**See Note 2 below**

Error Allowance 700

Pre-Tax Annual Total Budget $18,000

Note One: For a detailed look at my health care finances, please go to Taming my healthcare cost monster.

Note Two: Factors in a $7100 standard deduction and a $3800 exemption for federal. Additional cushion "fudged in" for state.


My Discretionary Spending Pay-Off
Of course, every dollar I donít spend on basic living expenses is another dollar added to my discretionary spending fund. Thatís my pay-off for basic budget vigilance. By keeping my ďhave toĒ expenses lower, I have that much more money for my ďwant toĒ activities and purchases. More money for travel. More money for day trips, events, eating out, whatever. And if I donít end up spending that money, my discretionary fund just keeps growing and growing.

For me, itís a win-win.

What about you? How do you approach your budgeting? Are you squeezing your basic living costs to have more money for fun spending? Or are you opting to be more laid back about your basic living costs because you are comfortable with them?


Alex in Virginia

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Old 11-13-2013, 06:43 PM   #2
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No water & sewer? You have a well & septic tank?
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Old 11-13-2013, 06:48 PM   #3
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No water & sewer? You have a well & septic tank?
No trash service? No clothing or shoes? No stamps, no gifts, no miscellaneous expenses? I am surprised that in your lengthy post, you didn't even mention so many types of expenses.
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Old 11-13-2013, 06:48 PM   #4
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Alex, this is impressive. If you and your wife shared a household, what do you estimate the total budget would be?
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Old 11-13-2013, 06:50 PM   #5
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Originally Posted by W2R View Post
No trash service? No clothing or shoes? No stamps, no gifts, no miscellaneous expenses?
He is apparently lumping this into discretionary spending. He is only accounting for his basic living, barebones budget.
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Old 11-13-2013, 06:53 PM   #6
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I just burned 10k this week on a new roof and Christmas present ring for SO, and I am not even a rich guy.. Car going into shop this week and nervous I may be attending its wake after a 12 year life. By next week, I may have blown through Alex's yearly budget, and still don't have any rice and beans to eat yet.
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Old 11-13-2013, 06:54 PM   #7
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How does the home warranty work and what does it cover?

JDARNELL
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Old 11-13-2013, 06:55 PM   #8
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Looking good so far, though we may be able to help find some other items.

Does your wife pay for the gas for conjugal weekly visits?

Quote:
Originally Posted by Alex in Virginia View Post
...
I drive a very well maintained 1996 Dodge Dakota -- also paid for -- with 128,000 miles on its odometer. I like it very much, and it covers that 102 miles to my wife’s house every weekend just fine.
...

Cost Per Month

Auto
auto loan 0
(paid off)
auto insce 28
maintenance 100
(accrued in a fund)
basic gas 35
(200 mi @ 20mpg)
But generally, I think people can live on a lot less than what they are spending now. A lot of things or recreational activities that we pay for are not really essential. I am setting my WR to 3.5%, and if my stash goes down to 1/2 of what it is now, I think I can still manage with 3.5%.

It would require a bit of work to redesign the lifestyle, and I believe it can be done if I have to. But even with Medicare, that $18K will take some hard work. For me that is.
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Old 11-13-2013, 07:01 PM   #9
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Previously, you posted you spent 15K on your half of living expenses -

"I am married and my wife still works and covers half of our joint living costs. That’s the way we’ve run our finances for the last 20 years, each of us having to cover our half of those joint expenses."

My FI Ducks Are All in a Row!

So when you lived together you shared the costs and your household expenses were $30K? Was that the same house?

In one post your house is 1500 sq ft on 2+ acres shared with your wife, and the next it is 1150 sq ft on 1.25 acres and you live by yourself. Did you move to a different house from your last post or did your wife move out? I am not really following what is going on from your other post to this one.


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Old 11-13-2013, 07:03 PM   #10
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Quote:
Originally Posted by Letj View Post
He is apparently lumping this into discretionary spending. He is only accounting for his basic living, barebones budget.
I guess, there sure seems to be a lot missing.

Seems I went through this exercise years ago, and when I tried to put things in buckets, I missed about half of what I spend. There is a lot of 'misc' in my life I guess.

What about a 17 YO car? It will need to be replaced - there should be a 'replacement car fund' at least.

I guess I'm not following this 'fend off' comment:

Quote:
And I must be limited to spending my days in front of the boob tube sipping cheap Old Milwaukee beer.
Well, I see $20/month for liquor, and only TV services for entertainment. Of course different people drink different amounts of beer, so $20 will buy craft beer if you drink one about every other day, but I don't see any other entertainment there. So it seems that your budget only allows for 'days in front of the boob tube'?



-ERD50
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Old 11-13-2013, 07:15 PM   #11
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Originally Posted by ERD50 View Post
...
Well, I see $20/month for liquor, and only TV services for entertainment. Of course different people drink different amounts of beer, so $20 will buy craft beer if you drink one about every other day, but I don't see any other entertainment there. So it seems that your budget only allows for 'days in front of the boob tube'?
-ERD50
Alex could be doing hiking, fishing, or planting to occupy his time with little or zero cost. Or since he has Internet access, he can spend a lot of time on this forum, like I do now.

Well, I am still waiting for my health to recover, then in Spring I will be gone for RV'ing again. Can't refuel that little gas guzzler with a $18K budget, that I know.

And to please the missus, I am thinking about doing Alaska with a cruise, and not driving the RV. Do not want the Alaskan experience to become a nightmare for her.
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Old 11-13-2013, 07:41 PM   #12
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Alex isn't claiming this is his only spending, just the mostly non-discretionary spending. I guess the weekend visits are discretionary with that monthly mileage allowance.
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Old 11-13-2013, 07:53 PM   #13
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Old 11-13-2013, 07:57 PM   #14
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Well, I'd be much more interested in what Alex's real expense profile looks like. Any of us could come up with a spartan, bare bones, survival budget. But since that's not how any of us actually live, it would be little more than an accounting curiosity.

My own experience - and I'm not even retired yet - is that after killing your debt, including your mortgage, all those miscellaneous and "discretionary" costs become a much larger piece of what you spend.
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Old 11-13-2013, 08:01 PM   #15
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I am impressed. Heck, we spend about $2k / yr on my 7 year olds gymnastics classes!
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Old 11-13-2013, 08:05 PM   #16
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Originally Posted by Mulligan View Post
I just burned 10k this week on a new roof and Christmas present ring for SO, and I am not even a rich guy.. Car going into shop this week and nervous I may be attending its wake after a 12 year life. By next week, I may have blown through Alex's yearly budget, and still don't have any rice and beans to eat yet.
Darn! If I had to stick to a budget, I would make sure I have my rice and bean containers all filled and stacked first before I even think about the roof. Yes, even if the roof looks like this. A guy's got to know what his priorities are.

Oh, and the Xmas ring should be before the rice and beans, I forgot.

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Old 11-13-2013, 08:07 PM   #17
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On those categories that Alex is reporting, I spent $18,336 last year. That's more than Alex, but a lot less than I would have guessed because I am not especially trying to be frugal any more and pretty much spend what I want, within reason I guess. The categories listed comprise less than 55% of my total spending.

Some differences are that I don't have a pet or LTC insurance, but I do have cable TV, and my home insurance is $192/month. I haven't seen a phone bill as low as $10 for probably 20 years. I need to ditch that evil device.

Quote:
Originally Posted by Alex in Virginia View Post
What about you? How do you approach your budgeting? Are you squeezing your basic living costs to have more money for fun spending? Or are you opting to be more laid back about your basic living costs because you are comfortable with them?
Alex, I don't really squeeze either basic or discretionary these days. There have been utterly miserable times in my life when my luck was rotten and I was hungry and so poor, but the last few years things have changed and have become quite the opposite. I ended up with a bigger nestegg than expected, due to over-planning, few catastrophes or unexpected big expenses other than hurricane repairs and a dental implant, a windfall (that I haven't yet touched), and a massively booming market pushing my net worth ever upwards since my 2009 retirement. Despite my best efforts I have only been able to spend 2%/year, and I haven't claimed SS yet. Seems like a crazy, insane dream and I know I am very fortunate. Sometimes I feel like fate is setting me up for a big fall one of these days. But if/when that happens, I still remember how to live on very little. I just don't have to, right now.

I really need to cancel some services that I am getting very little from. I am not getting much from my landline, I would be just as happy with a dumb phone as my iPhone, and I am paying for a DVR that I don't even use. In fact I would be just as happy with basic cable TV so should return to that. But, I just haven't got around to doing any of this for some reason.
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Old 11-13-2013, 08:08 PM   #18
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Plenty in the budget I don't understand such as all the liquor and beer you list, so I guess you buy a bottle a month as basic and the rest is discretionary.

You say your basic car expenses includes 200 miles a month so as was mentioned above I guess that covers grocery shopping only and the weekly visits to your wife are discretionary?


Quote:
I drive a very well maintained 1996 Dodge Dakota -- also paid for -- with 128,000 miles on its odometer. I like it very much, and it covers that 102 miles to my wifeís house every weekend just fine.
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Old 11-13-2013, 08:12 PM   #19
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I think there is value in looking at what our bare bones expenses are before adding discretionary items into the budget. If I know I can live on $20K discretionary, but I'm comfortable spending $50K per year, that gives me $30K of money to play with. I suspect that is what Alex is really doing here. As he stated in his post, he can spend more on discretionary items if he chooses to, or not do so and put it away for the future. I don't see anything that unusual here. My expenses are about the same except for property taxes, which are significantly higher due to living in Southern California.
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Old 11-13-2013, 08:16 PM   #20
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Makes sense. It's similar to mine, except you're on Medicare and I (will) pay for my own health insurance, adding about 5K/yr, bringing my total to 23K/yr. It's a nice freedom, to have so few expenses to cover.
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