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Live And Learn 08-04-2012 09:42 AM

Why is my budget so high ??
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I keep reading threads where people can live on $30 - $50k per year. My budget is $84k and I think its pretty bare bones.

Home is fully paid - 1600 sq ft. No car payments (cars are 3 and 10 years old). Boat is a 16 ft jon boat - nothing fancy. Dog expenses are high - even tho she's only 6 yo she has some health challenges.

"Future one time purchases" budget includes big ticket items - car replacements, applicance replacements. Ongoing purchases includes replacements of smaller items (televisions, small appliances) and purchase of new things (towels, books, etc).

I could probably take 10k out of this budget (dog 2k, vacation 3k, boat 1k, cellphones 1k, entertainment 1k, pocket money 2k) but thats all I see.

What am I doing wrong ?

rescueme 08-04-2012 10:01 AM

Heck, ours is multiples of yours.

Does that make you feel better? :facepalm:

Few people have the same wants and needs - and the assets/income that can supply their desires with exactly the same "numbers", regardless of time of life.

As in all things in life (including retirement expenses/income), there is no "singular answer". If your income (from whatever source) meets/exceeds your expenses? That's all that matters.

I/DW seem to spend much more than those that share their budget/expenses on this forum, but then again, we don't need to match their numbers (and you will never see our "numbers" on a public forum). As long as things work out in "our universe", that's all that counts IMHO :coolsmiley: . What others do? That's their life...

Meadbh 08-04-2012 10:09 AM

It seems like a reasonable expenditure except for the health insurance. I guess you are stuck with that.

JOHNNIE36 08-04-2012 10:10 AM

Wow! You have to have great income to handle a budget like that. Without knowing somethings about you and where you live, analyzing your budget is difficult. Example: your budget of $20750 for health insurance is hard to grasp, but if you are both in your 40's it may not be out of line. We have a Medicare Advantage plan and our monthly cost is just the Medicare cost of $105 each per month or $2520/year total. We have some out of pockets but no more than $1000/year. Each of your line items could be critiqued but your life style would have to change I guess. How about your house? If it's a large, expensive home your insurance might be OK. Based on your property taxes it might be similar to ours but our insurance is $1750, in hurricane country. You know, it just depends.

REWahoo 08-04-2012 10:11 AM


Originally Posted by Meadbh (Post 1218808)
It seems like a reasonable expenditure except for the health insurance. I guess you are stuck with that.


Live And Learn 08-04-2012 10:17 AM


Originally Posted by rescueme (Post 1218806)
Heck, ours is multiples of yours.

Does that make you feel better? :facepalm:
If your income (from whatever source) meets/exceeds your expenses? That's all that matters.

An 8k / year annual reduction is the difference between a 95% success rate and 85% success rate. Or put another way, its the difference between retiring in 1 year vs w*rking another 3 years.

Katsmeow 08-04-2012 10:24 AM

I don't think you are doing anything wrong exactly but there are a lot of things that affect budgets including where you live, what your lifestyle is and what standard of living you want. I've looked at many of the really low budgets around here and sometimes those budgets leave out expenses that are more irregular in nature such as your one time expenses.

All that said - a few comments:

FWIW, your house taxes are low for my area and your household insurance is high (does that include an umbrella policy)? By way of comparison on my $300k house, I expect annual taxes to be almost double yours but my house insurance (not including umbrella) is less than half yours.

A pool adds a lot to maintenance costs and insurance costs (we used to have a pool).

Your spending money is a significant part of the budget. I don't know what expenditures that coverages (apparently not clothing but perhaps does include personal care items since I don't see them on the list).

Your health insurance costs are really high. Many people who are retired here either have subsidized retiree insurance or are on Medicare. Your costs for health insurance are undoubtedly necessary but expensive.

Your car insurance seems high to me as well. DH and I have 3 cars including one car less than a year old and until we added our son to our policy our insurance costs were under yours. On your really old car it would probably make sense to only have liability coverage. Overall, your house and auto insurance seem high so you might get that quoted to see if you can do better.

I don't know what the $150 a month for ongoing purchases is for. Your tax number seems high but I guess it depends on what your actual income is.

Overall you have a lot of money in discretionary expenses:

Cable (not sure how much that it is when broken out from the phone)
Him and her spending money (the portion that doesn't include necessities)
Dining out/Order in

I don't how much those total but it is probably closer to $17000. I'm not saying those are unnecessary expenses -- just that they are more than expenses that many people where would spend on those categories. If you can afford it then there is no problem. If you want to cut expenses you could look at those categories to perhaps cut some of them.

rescueme 08-04-2012 10:25 AM


Originally Posted by Live And Learn (Post 1218811)
An 8k / year annual reduction is the difference between a 95% success rate and 85% sucess rate. Or put another way, its the difference between retiring in 1 year vs w*rking another 3 years.

My bad ;D...

I/DW are both retired (me, over 5 years).

You tend to forget what "number" you need, when that number was achieved many years ago :facepalm: ...

Back in "the day", DW/me cut our expenses and saved/invested 33% of our total gross income for retirement, over many years.

Don't forget that there are two sides to the retirement income equation in order to reach your number - not only expenses, but how much you are saving/investing. You can't just concentrate on one side of the equation.

You can LBYM all you want, but it also is a question on how you are saving/investing your income for the future.

wanaberetiree 08-04-2012 10:28 AM

I would try to separate discretionary vs non discretionary spending and then analyse.

W2R 08-04-2012 10:28 AM

You have a large health insurance bill, which is a necessity but some have a better deal on that as part of their retirement package from work.

I think that whoever is in charge of your food budget is doing a fantastic job! That is a very reasonable amount for food for two people, IMO. That is about the only category I could say that about.

Almost every one of your larger categories seems to be many times what I spend for the same category. Yet, I see no category that includes gasoline. It blows me away to see that you are spending so much on house expenses - - my house is also 1600 square feet (built in 1972), and my equivalent house expenses last year, for example, were just slightly over 1/3 of yours.

I'd say that with the boat, pool, sick dog, health insurance situation, vacations, and everything else, you are living a more expensive lifestyle than some others prefer. It's all up to you, and what you want and need!

Also, some of us are single and live alone!! That's cheaper, too.

For me, a single person living alone, this year's monthly spending (with monthly average amounts for items billed less frequently like property tax, insurance, and so on added in) looks about like this:

$244 miscellaneous (iPad, my "Amazon habit", gifts, and other stuff! :))
$488 food (groceries and eating out)
$204 Car (gas, insurance, maintenance)
$459 house (property tax, insurance, maintenance, upgrades, lawn guy)
$368 utilities (cable, electricity, natural gas, water, phone, iPhone)
$53 fitness (gym, heart rate monitor, etc)
$22 clothes
$266 medical (insurance, prescriptions, co-pays, deductible)

$2104 total ($25,248)

Usually I do the same as Audrey, and don't count the income tax so you would have to add income tax into that.

audreyh1 08-04-2012 10:29 AM

If you take out the budgeted taxes on dividends and interest of $12,000, your living expenses drop to $72K a year. There - does that make you feel a lot better? Clearly you can only trim this "expense" by making less money.

I only look at my income as after income taxes, and thus my expenses/budget is also after taxes. Kind of like when I had a paycheck and my income was after payroll taxes.

NW-Bound 08-04-2012 10:46 AM

Yes, other than the med. insurance, I do not see anything that sticks out either. It's amazing how these little items add up. It is the same for all of us.

Being LBYM, we never had to track expenses, and never bothered to. It was only when I realized that my "means" will be severely curtailed once I completely stop working that I paid more attention.

Where all that money go? I was shocked to see it adding up to a lot more than I would guess. Once I factored out the children college costs, it made me feel a lot better. It bothered me a bit to have to stay within the limit of 3.5% WR, but I guess I will have to get used to it. A lot of people live well for less, so why can't I? If I want to spend more, I guess I will have to go do a bit of work. Hmm...

donheff 08-04-2012 10:47 AM

There are lots of folks here spending far more in ER. You look pretty tight to me other than health care.

FIREd 08-04-2012 10:52 AM

You could probably save a bit of money in many of those categories, but overall I don't find your budget unreasonable.

Mulligan 08-04-2012 11:00 AM

Live and Learn, when I saw your total yearly expenses and you asked how to cut, I immediately started thinking this will be easy as I live on under 4k a month comfortably . However, that is not so. Take away the taxes as mentioned earlier, the budget is less. That health insurance bill is out of my realm of understanding. Going by your expenses, your medicine is small so I am assuming you are healthy and are just stuck with high insurance premiums. I pay around $75 a month for a $5500 deductible. My budget would be blown to pieces if I had to pay the premiums you do! Once you deduct those 2 items from your budget, it seems very reasonable. After all I am one to believe a person should have a little fun with their money if they have it to spend. Filling up the pool with dirt to eliminate the pool expenses is never part of my budget cutting process unless it was absolutely necessary.

Live And Learn 08-04-2012 11:05 AM

Cash includes gas, personal care items (cologne and other non essentials), lunch out / lunch with friends, the equivalent of bingo money (I don't play bingo, but wanted to give a sense of what I spend on), alcohol ... basically anything that I would consider discretionary ongoing spend.

Thanks for the kudos on the food budget. I do all the grocery shopping and meal planning. I arrange the weekly menu based upon what is on sale, stock up when the sales are great (but never more than 3 months worth of an item to ensure that I actually use it up !).

The health insurance also includes co-pays etc. I have no idea what it will really cost but I think my estimate is close to reality (was hoping someone would tell me that the amt is crazy but I guess not !).

Split of Phone/Cable is 150 for cable+internet+IP phone service and $20 for two pay as you go phones. Cable TV is ridiculous ($80) and I keep toying with the idea of giving it up, buying a blu-ray player that I can connect to the internet and watching Hulu and Redbox movies instead. But I'd need to buy a new TV for that since my 2 TVs are 15 years old and don't have an HDMI connector.

The category that says "pool" is misleading as once we downsize later this year the pool is gone (gets replaced with HOA fees for the community pool).

W2R - I'm going to go back to the threads where you talked about your home expenses. I'd love to figure out how to trim that bill.

Great idea on the Car Insurance - once I retire I'll drop the collision but right now the 10 year old car gets me to work and home everyday. Once I retire I'll be biking for all local trips (which is what I do on the weekends now). I think I'll also start getting quotes on combining all my insurance with one company and get an umbrella policy.

One other thing I thought of was that once I retire I can move my money to Vanguard and get lower cost funds (I work for a Bank and can only use certain brokers - Vanguard isn't one of them). Right now I'm mostly in ETFs with fees of approx .45%.

Tax estimate was based upon a what-if using H&R block software so the 12k is a solid number.

dmpi 08-04-2012 11:05 AM

OK, It's just me and my wife. We are one of those people who can live on 30K/year. Looking at your budget I see your health insurance is so large everything else is in the noise. There's not much you can do about that. But let's through the other parts:
1. Insurance - I pay about $500/year for homeowners insurance + umbrella policy and $500/year for liability only on two cars.
2. Electric - Do you have electric heating? I don't and I pay about $80/month for power and about $100/month for natural gas.
3. Phone & Cable: I don't have cable but I have one phone line at $24/month + one prepaid cell phone $8/month + Internet $30/month.
4. Food: Our cost is about $200/month. But we eat cheap stuff and we are good at finding deals.
5. Order in /Dinner Out: Here one place were we spend more that you. I know we spend at least $200/month here.
6. Car maintenance: We spend about $400/year. We've been lucky that we've never been socked with a mega-repair.
7. Taxes on dividends and Interest: We pay a lot here ($5000), but not even close to what you pay. However I don't count this as a expense. Just like I don't count my income tax as a expense.

Everything else looks normal. You have more expenses that we do because you simply have more stuff. Bottom line is take away you Health Insurance + Taxes on dividends & Interest and you are around $50K/year which is not bad.

Moemg 08-04-2012 11:13 AM

At first glance I thought the electric and insurance were high so I checked your location .I also live in Florida and my electric bill is the same as yours but my house is twice the size . My insurance including flood comes out to be almost the same but my house is larger and sits on Sarasota Bay so I would look into those two items .The rest of the budget looks fine .If you really needed to save more you could cut the vacations to less and trim some other items.Lots of the forum members live in low cost areas and practice extreme LBYM's .

Live And Learn 08-04-2012 11:15 AM


Originally Posted by Mulligan (Post 1218829)
Live and Learn, when I saw your total yearly expenses and you asked how to cut, I immediately started thinking this will be easy as I live on under 4k a month comfortably.....

Was hoping I'd hear from you as your budget is one that I've thought about often.

I guess I'm not as far offbase as I thought I might be.

JustCurious 08-04-2012 11:17 AM

You pay 10 times as much on health insurance as I do. Also, I have no dog, no boat, and I don't pay any taxes on dividends, and I don't pay for a house alarm or homeowners. You also pay more property taxes and insurance than I do. Those differences get your budget down to below 50k, which is close to mine, and, close to the average household budget, according to BLS.

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