Hi novice hoping to learn

[ERD50]

A different outlook from some here - I've never tracked individual expenses, and that sound tedious to me, and of questionable value for the effort.

I do the big picture view, which should be very accurate and simple and take far less time. Since almost all our spending came from one account (credit cards, etc were paid from that account), all I did was look at the total debits on the monthly statement, and add them up for the year.

Now also remove any items that were reimbursed, or were transfers to another of your accounts (IRA contributions, any money moved to savings, etc. And of course, if any spending came from another account, add that in.

From there you can dig down into details if you think it would help. Maybe remove some non-annual expenses,but be sure to account for future big expenses, a new car, roof, HVAC, etc. Amortize those out over the years - I did a simple spreadsheet for that, with estimates of the replacements times and cost, you can smooth it to come up with a decent annual amount to add to your spending..

Does it really matter if you spent money on a movie or dinner - or does the gas to get there go into 'entertainment' as well? I just don't see much value in the detail. Is beer and wine 'groceries' if you got them at the grocery store? I have to break those out? Heck, at Costco we buy things in many categories, I'm supposed to go through each and every receipt line item by line item? I'm gonna miss stuff. I don't see it. And on and on.

edit add: What RobbieB said!

-ERD50

 

[ivinsfan]

ERD in the now,
if your spending level comfortable that's fine. Heck I track way less then you do.


But if you are trying to project into the future and possible ER it's probably helpful to dig a little deeper. It can't hurt and it might help.

 

[kgtest]

1.4(.76) = 1.064MM after tax in that 401k. Healthcare is always the X-factor. Kids? Grandkids? Roth conversions during low income *lower tax bracket years. Or even roth contributions to lessen the tax blow.

4% SWR over 30 years of retirement means ER at 60 gives me a back of the envelope number of $42,500 / $52,200 with 7yrs of 7% gains. to live on each year with just the IRA. Going into that budget with a paid off home, healthy seems like the best case scenario. Any SS raises coming at 62? Pension income raise?

Three legs to the stool, 401k, Social Security, Personal savings. Its old school but a good first start. I group Roth IRA and Broker returns in that personal savings along with cash.

I would try to eliminate any interest bearing debt within the next 6 years while understanding your tax situation better. FireCalc and i-orp.com can we scay but its easier than building out a mammoth spreadsheet.

Tracking expenses YOY will be key. Will your expenses be higher or lower than that 4% baseline? My guess would be higher.

 

[HI Bill]

I will put everything down in a spreadsheet to find actual. Question Do I include every dollar like dinners out and nominal items like going to the movies, groceries etc?

I was always too lazy to track every $. I just did it the other way around. Start with your take-home pay, and subtract what you've saved and invested. The rest you spent. [I was able to eventually get my savings rate up to 48% of my gross income, just before FIRE. Now, I spend >100% of my working income in ER.]

Then, take a deep dive into what you're spending on, and how much. If you need to cut $, this can be enlightening. Try to take advantage of the after-50 catch-up contributions, and try to get some $ in taxable accounts...ER is easier and more feasible if you don't have everything in a 401(k) or IRA. When you do RE, leave your 401(k) $, or at least a portion of them in your 401(k), as you can use the "Rule of 55" to withdraw penalty-free (not tax free) if you retire between 55-59.5. Cheers!

 

[MRG]

I don't go with the "every penny" thing, but you should know what you spent.

Easy for me, everything cycles through my checking account, and I just download the statements and add them up.

+1
I was involved in collecting data for other people for a living. For my own I allowed myself to be lazy. Rather than miss a bunch of stuff I didn't remember I choose to get everything. Might not have it categorized but I can do this if I care. Right now I don't and it's been 8 years since I retired.

 

[ERD50]

ERD in the now,
if your spending level comfortable that's fine. Heck I track way less then you do.


But if you are trying to project into the future and possible ER it's probably helpful to dig a little deeper. It can't hurt and it might help.

Yes, another area I should have mentioned is figuring out from there, what expenses might change in retirement. To do that, you might need to dig a little deeper.

But I still feel it's best to start from the top, get the big number, then dig. Starting with the small ones, I'm afraid I'd get lost and miss something.

Or, as HI Bill just posted,

Start with your take-home pay, and subtract what you've saved and invested. The rest you spent.

For us, our expenses didn't really change. We didn't do a ton more travel, commuting wasn't a big expense, so all pretty close. And we were shedding kids, so fewer expenses there, which we now spend on the g-kids!

-ERD50

 

[NgineER]

1.4(.76) = 1.064MM after tax in that 401k. Healthcare is always the X-factor. Kids? Grandkids? Roth conversions during low income *lower tax bracket years. Or even roth contributions to lessen the tax blow.



4% SWR over 30 years of retirement means ER at 60 gives me a back of the envelope number of $42,500 / $52,200 with 7yrs of 7% of gains.

I would suspect that st 4% WR they would not be paying 24% in taxes would they. Or is the WA state tax that high?