Did Your Spending Surprise You?

[TromboneAl]

Can't do much about insurance till last child graduates college, and is off of our car insurance (will be one less car then, too).

We got DD off of our insurance the day she left for college. That will only work if the college is far away, I guess.

 

[Khan]

We got DD off of our insurance the day she left for college. That will only work if the college is far away, I guess.

There might be a special rate for occasional use by college student on break.

 

[AltaRed]

we were blown away when we figured out just for the 2 of us eating out and food for the house was costing us over 1,000 a month here in nyc.

We were beyond even that figure while I was still working. For all our household stuff we'd buy at the supermarket including cleaning supplies and personals, and our Visa charges for eating out, we were in the $1700/month range. We were quite frugal in most all other areas, so it wasn't a huge drain, but the eating out got trimmed back going into ER.

 

[Billy]

As most of you know, Billy and I are Perpetual Travelers. When we are on the road, unless we rent an apartment or condo, we eat out most of our meals.

Since we travel a good deal of the time, when we do finally get home, we tend to stay at home and cook. In the way we track our expenses, we do divide between groceries and dining out, with some dining out considered to be entertainment and not just 'food.'

In our piece Priceless Retirement http://www.retireearlylifestyle.com/motley_fool_article_6.htm, we list our net spending in all categories.

I recently did an update to June of 2006, and the net annual spending was still $24,000 but the categories shifted a little. That only makes sense.

Best all ways,
Akaisha
Author, The Adventurer's Guide to Early Retirement

 

[Sheryl]

Akaisha,  you guys amaze me!  (In a good way).    If I recall correctly, you also maintain a small condo or some sort of "home base" here in the US, right? 

We were working last night again on our ER budget.  There seems to be a huge disconnect between what I read here - comfortable lifestyles for $50,000 and less - and my calculation of needing $70,000 to live in a way that actually seems frugal....  Where have I gone wrong? 

I know we've discussed budgets ad nauseum around here, but I'm interested in any specific comments about where I may be off base.

Mitigating factors - 
*Still paying $430/ mo. on a 4.75% mortgage

*About $2,500 a year net cost to maintain S.O.'s house as a rental

*$600 a month budgeted for health insurance etc.,

*A travel and recreation budget many might consider excessive.  I know as we become more experienced in finding low-cost travel options this may not really be necessary, but I also know we've blown $3,000 - 4,000 on a two-week trip before....and we want to try out the RV lifestyle with a rental for a few months... Travel is the most important part of ER for us.

Here's where we're at:

$8,700.00   House and utilities
$17,400.00  Insurance and taxes
$7,800.00    Food and restaurants
$11,300.00  Misc. Household (everything from clothing to pet food to charity and gifts)
$2,400.00    Home(s) maintenance, repair, remodel
$3,600.00    Vehicles
$6,000.00    Recreation, entertainment (scuba, classes, sports events, etc.)
$10,800.00  Travel
$2,000.00    Major expense fund

$70,000.00

 

[haha]

I too am amazed. I took their published total of $24, 000 pa, and their category breakdown, and turned it into per person, per month expenses. I know that some of it, esp. housing is cheaper for two, the rest should be basically per person. Also, since they maintain two homes, (one floating and one stationary, the per 2 people figure should be useful there also. Looked at this way, their achievement is even more amazing.

(pp, pm): Housing $270; transportation $210; Food $120; Entertainment $100; Medical $120; Communications $30; All else $150.

And this with world travel, and a home base! Amy Daczyn, gnash your teeth!

Ha

 

[astromeria]

Here's where we're at:

$8,700.00 House and utilities
$17,400.00 Insurance and taxes
$7,800.00 Food and restaurants
$11,300.00 Misc. Household (everything from clothing to pet food to charity and gifts)
$2,400.00 Home(s) maintenance, repair, remodel
$3,600.00 Vehicles
$6,000.00 Recreation, entertainment (scuba, classes, sports events, etc.)
$10,800.00 Travel
$2,000.00 Major expense fund

$70,000.00

It's hard for me to tell where you may be high (relative to me anyway) without more detail, but my travel budget is worse bigger than yours, recreation smaller (cultural events can actually be cheaper than sporting events--helps to be near a college town), we don't have pets any more and have scaled WAY back on charity and gifts as well as clothing and other personal items & services--I consider my volunteer work as being in lieu of donations.

 

[haha]

Regarding Sheryl’s totals, I don't think that the maintenance on the rental home, or any income taxes should be counted. These should be offsets against income, not counted in living expenses, as they will change with income. Presumably Sheryl and BF are making a net profit on the rental; if not they will soon sell it. And the income taxes will go down when/if they retire or partially retire.

Ha

 

[Sheryl]

Regarding Sheryl’s totals, I don't think that the maintenance on the rental home, or any income taxes should be counted. These should be offsets against income, not counted in living expenses, as they will change with income. Presumably Sheryl and BF are making a net profit on the rental; if not they will soon sell it. And the income taxes will go down when/if they retire or partially retire.

Good point, Ha. I am still not sure how to figure that in the budget. It is actually not a net profit now, but we are assuming that the net expense of $2,500 is more than ofset by the growth in value of the home. Or we could move there, and rent my house. Or sell them both and build something. Many options.

Thanks for the thoughts. Astro - glad to hear my travel budget isn't so crazy after all.

 

[AltaRed]

Here's where we're at:

$8,700.00   House and utilities
$17,400.00  Insurance and taxes
$7,800.00    Food and restaurants
$11,300.00  Misc. Household (everything from clothing to pet food to charity and gifts)
$2,400.00    Home(s) maintenance, repair, remodel
$3,600.00    Vehicles
$6,000.00    Recreation, entertainment (scuba, classes, sports events, etc.)
$10,800.00  Travel
$2,000.00    Major expense fund

$70,000.00

Agree you should not include income tax in your budget as it is not a living expense and is not comparable with any one else's budget.

The big component still here that many people don't have in their $30-40k budgets is mortgage payments.

If you take those 2 items out, you might have something to compare against.

Also not clear to me whether the vehicle category is for current auto payments or the reserve fund to replace vehicles. If the latter, you are quite short shy of your needs, e.g. 2 vehicles @ $25k each replaced every 10 years would be $5k per year excluding repairs and gas. Your major expense fund won't cover the difference.

 

[Scrooge]

$2,400.00 Home(s) maintenance, repair, remodel

Unless you guys are extreme do-it-yourselvers, $2.4K/y on home maintenance and remodeling (!) sounds very low, especially given your stated spening levels elsewhere. Are you sure that number will survive collision with reality as your house ages?

 

[youbet]

Agree you should not include income tax in your budget as it is not a living expense and is not comparable with any one else's budget.

So far in RE, I've found that local, state and federal thugs all insist I pay taxes.  So, rather than get beat up, I budget for and pay them.   

 

[Sheryl]

Unless you guys are extreme do-it-yourselvers, $2.4K/y on home maintenance and remodeling (!) sounds very low, especially given your stated spening levels elsewhere. Are you sure that number will survive collision with reality as your house ages?

Well, "we" ARE extreme do it yourselfers - S.O. is a contractor. If he's not working he's always building or repairing something. And his son is an electrician. But even tool and material costs could be an issue. Something to examine more carefully. Thanks.

 

[Sheryl]

Also not clear to me whether the vehicle category is for current auto payments or the reserve fund to replace vehicles. If the latter, you are quite short shy of your needs, e.g. 2  vehicles @ $25k each replaced every 10 years would be $5k per year excluding repairs and gas. Your major expense fund won't cover the difference.

The $3,600 is just for gas and regular maintenance (plus a few brake and muffler jobs). You make a good point about the major expense fund not covering replacements. My plan is to buy a new or lightly used vehicle with "extra" (i.e. not FIRE) cash just before we ER. SO has a Toyota pickup. Then we will drive them forever.

I have been making a maybe not so smart assumption that if our spending is less than we have allowed (4%, roughly), and the market does better than we have allowed for, and maybe I inherit a little from my family, there will be something there to buy another car in another ten years. Not the most rational plan I ever heard. But at some point you need to "wing it."

Thanks to all for the consideration an input.

 

[TromboneAl]

Here are our actual expenses (two people in household). 

This excludes college expenses, including a trip to visit DD ($1700 total). Taxes are low due to a larger than usual refund. Housing includes prop taxes, insurance, and utilities.

Note that we do not feel at all deprived with this level of spending.

Spending Pie Chart for 9/11/2005 - 9/10/2006		

Health Ins / Medical	6066	23%
Groceries		5169	20%
Housing		5086	19%
Transportation	3729	14%
Income Taxes	2839	11%
Other		2600	10%
Travel & Entertain	 810	3%

Total		26290	100%

 

[Telly]

............. Housing includes prop taxes, insurance, and utilities.

Housing 5086 19%

Wow, just my prop taxes, house insurance, and utilities are > 2.5 times your whole housing bucket!  I don't think I could live in a tent here with your low numbers 

 

[haha]

Here are mine, for one person living alone. This is only cash expenses- I have several fairly large house maintenance items coming due, and I have a new car which doesn’t cost much to maintain yet. Realistically, I think $.40 x 12,000 miles/year, or $4800 is a better estimate of car expenses. And housing should have at least $2000 a year added
for a sinking fund for even bare bones maintenance-well, septic, paint, etc.

Total: $26,258 100%
Auto $2,499 10%
Housing 4897 19%
Communications $866 3%
Clothing $540 2%
Electronics $828 3%
Groceries $4,697 18%
Gifts $528 2%
Healthcare $3,959 15%
Ins (other than health) $2,108 8%
Leisure $3,430 13%
Pers Care $196 1%
Pet $1,200 5%
Travel $510 2%

 

[mickeyd]

It is quite interesting to see how everyone seems to have arrived at a different method to figure out that time honored question of "How much is enough?".

About 4 yeras ago I found myself between jobs and 58 years old. After calling on all of the folks that "owed me a favor" and realizing that no new job was going to be produced that would generate the money that I required in exchange for the talent and experience that I had, I arrived at the realization that I was retired, ERd as it were.

As I did not want to begin drawing on my stash or pull the string on the pension plan(s) that I had coming to me,  I decided to try living on DW's pay from the school disrtict. Up to that point, we had mostly saved her pay and lived high on the hog on mine.

Even though she contributes to a pension plan and contributes $500/mo to her 403b plan, her take-home pay has been adequate enough for us to live on with the exception of about $4K in property taxes. So, 4 years later, we have an excellent idea of what it will actually cost us to live when we are both retired. 

I can not imagine any mathmatical calculation that I could have made 4 years ago  that would have produced a more accurate prognostication! 8)

 

[youbet]

You're damn right my spending has "surprised" me!  I always knew that spending it would be more fun than earning it was, but, wow!  It is much, much more fun.  I'm surprised at how much fun it is!   Even more fun than I thought it would be!

From a more quantitative point of view........  Through the first 12 weeks of ER expenditures are about as expected.  We do what we want, when we want.  No real concern about what others think we should be doing.  That's the real blessing of FIRE and makes the earlier sacrifices well worth while.

 

[Billy]

Sheryl:

Akaisha, you guys amaze me! (In a good way). If I recall correctly, you also maintain a small condo or some sort of "home base" here in the US, right?

Thanks, Sheryl... We do maintain a place in the states that we own outright. We lease the land (which suits us fine - no property taxes, for one) and we have all these amenities -- swimming pool, tennis courts, fitness room, computer room, social events, etc.

Carrying no mortgage and having entertainment options within walking distance really helps keep the expenses down.

Also, our transport costs include airtickets, taxis, car repairs and gasoline, etc. We try to live in places where we can walk to restaurants, grocery stores, etc. Once we travel somewhere, we stay for a while. The costs amortize out that way.

Also, we know how to cook, and cook well. Much of our entertainment for friends surround the food area of our lives. It's social and it beats waiting in line to pay $75.00 for a meal, when we can cook better than most places. Still, when we travel, we eat out  most of our meals.

HAHA

Looked at this way, their achievement is even more amazing.

Again, Thanks, guys! 

Astromeria

we don't have pets any more and have scaled WAY back on charity and gifts as well as clothing and other personal items & services--I consider my volunteer work as being in lieu of donations.

Not to step on anyone's toes, but pets are very expensive. With food, grooming, medical care and kennels when one travels, it all adds up. Yes, it is a lifestyle choice... Also, we consider volunteering entertainment, social connection and charity donation as well!

Telly

Wow, just my prop taxes, house insurance, and utilities are > 2.5 times your whole housing bucket! I don't think I could live in a tent here with your low numbers

Exactly.  8)  Where one chooses to live is verrrrry important. It can impact your numbers in a significant way.

Best,
Akaisha
Author, The Adventurer's Guide to Early Retirement

 

[maddythebeagle]

dont track expenses and probably never will....I am closer to the unclemick approach.....just keep shrinking expenses until you are 12k/year and declare victory and pay yourself first until it hurts

 

[Billy]

I'd love to get down to $12K a year... We did hit $10K one year while in Mexico, but that was a special circumstance.

Normally we are in the $24K annual net spending, but have had years from the $10K mentioned above to $36K depending on how much we live it up.

Even if you don't track much of any spending, it is wise to watch your housing, transportation, and taxes. Those are large contributors to the minus column!   

Best,
Akaisha
Author, The Adventurere's Guide to Early Retirement

 

[unclemick]

Even if you don't track much of any spending, it is wise to watch your housing, transportation, and taxes. Those are large contributors to the minus column!   

Best,
Akaisha
Author, The Adventurere's Guide to Early Retirement

Yep - you nailed my big three post Katrina other than one off remodeling. Suprisingly 5k deductible health care insurance at age 63 is under 3k/yr here in MO including adding in my BP pills and two checkups/per year.

Have no idea where my budget will settle in my 2nd yr in MO - may start looking at places to cut some to free up more travel/entertainment $.

SWAG - 35-40k plus the fun stuff.

We'll see.

heh heh heh heh - unfrugally yours, er so far.

 

[Billy]

Hi Unclemick!

Heck, if you are having fun and don't mind the expense, just take your time to find the right balance of spending and fun.

Life is for living, and you can't take it with you... Better to have memories that make you smile than those which make you pucker!

Are you adjusting to MO fairly well? This will be your 2nd winter there, right?

Best to you, Unclemick...

Akaisha
Author, The Adventurer's Guide to Early Retirement

 

[unclemick]

Yep - I think I'm starting to get the hang of this four season climate stuff. We'll see how hard the snowbird itch hits come jan/feb - got my passport renewed should the urge to go someplace warm hits.

heh heh heh heh heh - heck - might even do a left handed manuever - go ski lodging although haven't snow skied since 1974 - could be dangerous?