Essential vs discretionary expenses, Part I

[ziggy29]

I put pets in discretionary because I know more than one person who said "Pets are essential", but when push came to shove, they gave up their pets in order to make the mortgage payment and to eat.

Nevertheless, as a pet owner myself, I understand where other pet owners are coming from.

IMO, the decision to get a pet is entirely discretionary. But once you have them, it becomes a responsibility and providing them with food and vet care become essentials just as they are for human members of the household.

 

[DeborahB]

I've never bothered to budget formally or figure out exactly where the money goes. I know when I was w*rking I was saving a lot and living on the rest, and had some to spare. Now I'm retired and just kind of keeping an eye on my overall investment portfolio total (and the individual investments). Since it keeps staying about the same, I don't worry about it unnecessarily.

I think the essential expenses are pretty obvious. I know for me I could cut Netflix (but not the computer unless I was destitute...) and the premium cable channels, definitely. I would stop going on cruises - but my father is 1500 miles away and 90 y.o. so travel there isn't optional, generally.

We already eat out infrequently, and frugally. We buy a lot of food at Costco. We don't drink much so that's not an issue - but I'd rather have good beer than no beer!

Most of us already live below our means. In lean times you just have to cut where you can. More beans, less steak?

 

[Midpack]

IMO, the decision to get a pet is entirely discretionary. But once you have them, it becomes a responsibility and providing them with food and vet care become essentials just as they are for human members of the household.

+1

 

[Khan]

Basics: less than $1000/month
Could possibly even go lower
Do enjoy giving away money

 

[W2R]

Absoutely. If we were not, we would not be married ...

Of course, you have those on the forum (not saying who they are, but they reside in the "Big Easy") that may not be married, but still acting sort of like they are ... (now, if only I could get my DW to live in another house...)

Hey, picking on me when I'm out enjoying weekend-before-Mardi Gras festivities? Actually living in another house pretty much means that our financial concerns are separate, and that is one reason we like it. It isn't a perfect arrangement in that respect, but very near.

As for essential vs discretionary expenses, I probably spend twice what I would call a bare bones budget that I have lived on before, and more than that when compared with what people who are destitute (or live in poor countries) live on.

 

[MBAustin]

I'm surprised no one has yet stated that some fundamental amount of charitable donations is "essential" in any case beyond major financial emergencies. To me, sharing some part of what we have with those who need it more is a basic need of humanity (widow's mite, etc.).

 

[freebird5825]

Essential...to me that means things I have to have to exist and have a "normal" life in modern society, i.e. food, shelter, transportation, fuel, communications, household furnishings, etc

Discretionary means things that support and enhance a basic state of living, i.e. flowers and vegetable seeds & plants and grapevines for my garden, good steaks, lobster, chocolate, beer, wine, artwork, nice new fluffy bath towels, satin sheets, etc

I have no idea what my essential/discretionary spending ratio is. It is a moving target. All I am 100% sure of is that my month end bank balance (after all essential expenses are satisfied) dictates my discretionary spending allowance. That net balance is very stable, but I do not bother to pin it down by line item.

Some months I do not engage in any discretionary spending at all. Saving "extra" money to use toward a larger goal is a lifelong habit.

 

[Moemg]

So I'll suggest that essential expenses are:

• Shelter - a place to live, a home. One could be mortgage-free or not. This would include property taxes, insurance, maintenance, but not remodelling. Some folks might need to pay for maids or yard work if they are feeble, but others need to do their own yard work and interior cleaning.
• Utilities - Electricity, natural gas, phone, water, sewer, internet (?), but not cable TV (!)
• Food - Eating at home, not much eating out. Nothing extravagant, but not red beans and rice every day either
• Transportation - a car or two, insurance, gasoline, maintenance, replacement
• Health care - doctor visits, prescriptions, eye glasses or contacts, regular dental care, insurance premiums, co-pays, etc. But not lasix, etc
• Clothing & shoes - as they wear out
• Taxes (just to be complete )

I would have to add haircare & travel to visit my daughter & grandson as essential.

 

[Khan]

Personally:
No haircare
No relatives

 

[yakers]

You try telling my wife that visiting the grandchildren is not essential.

 

[chinaco]

This is likely to be somewhat individualized. Even for a certain item... some consider Internet access a communication utility (e.g., email and voip)... others consider it discretionary entertainment.

This is a difficult topic because it is not just a category of spending or even a specific item.

For example: House - One person has a $750k - $1M McMansion and the other person has a $250k house. Both of them are houses. Yet they are above the $100k condo someone else owns. I suspect a part of that McMansion or even the 250k house might be considered discretionary. The home often dictates (and how much) furniture and interior design costs. The home tends to be a one time cost... but prop taxes, heating bills for it, furniture/furnishings, maintenance, etc recur. The same goes for an automobile... Mercedes vs Ford Focus.... move that category to transportation and a third person is using the Bus System. Each thinks the one above is an unnecessary luxury.

One could almost make a differentiation in (size, quality/luxury, etc) on each specific good or service.


It is worthwhile to see what people describe as discretionary and non-discretionary.


I believe the key part of this discussion is managing it (as it pertains to the individual)... one actually goes through the exercise of understanding what they really need versus what could be cut or reduced if the need arises. Or just to establish a more efficient budget and cut wasted spending or spending on things that are less important.

 

[SecondCor521]

For me, I divide stuff up by whether they are above or below the "need vs. want" line, which I set at the level of basic existence, so "essential" for me includes:

air
water
food
shelter (home and clothing)
basic medical care

everything else is a "want" or "discretionary".

2Cor521

 

[W2R]

Determining essential expenses can involve chasing a moving target, too. For example, one nice thing about being retired is that the nice, more expensive work clothes that really ARE essential at least to some extent for most working people, are no longer essential.

Despite my attempts to spend more money in general, my average monthly clothing expenditures since retirement are less than half what they were during my working years. Since retirement, most of my clothing purchases have been underwear, or else shorts (unacceptable at work) for our hot summer weather.

When I need long pants or a nice shirt, I still have plenty left over from my working days that I can call into service.

 

[Katsmeow]

I always find the discussion of essential v. non-essential or need v. want somewhat unsatisfying.

That is, I don't find it all that helpful to create a hard line between the two that is never moving.

If we define as essential (need) as what one must have for a bare subsistence level then most things are wants and non-essential. It might be an academic exercise to determine this, however, for most people they aspire to a bit more.

What is more helpful for me is to try to reduce my committed expenses. Unlike most here, I once had substantial debt. Some of it was child related and I would do it again. Some of it was just silly behavior on my part and that of my husband. But, one of the things that made it hard to cut expenses was all the committed expenses. We had a mortgage (that actually was not too high for our income but was still something that was committed), we had X miles to drive to work (and DH and I worked 50 miles apart so it wasn't possible to live close to both), we had clothes we needed to wear for work (as W2R refers to), we had 3 kids with their needs and so on.

I would endlessly go through the expenses and it was hard to cut stuff because so much was already committed and couldn't be easily changed quickly. (In our case, we actually sold that house so we could get traction on debt and it was a great decision).

We've spent much of the past several years trying to get to as few committed expenses as possible. To make it where we could end an expense immediately if we wanted to. We are trying to sell our current house and will have one that is much less expensive (will probably have a mortgage but could pay it off if we chose). As kids get older, their expenses have lessened and in a few years will be gone entirely. We have no debt (except the current mortgage).

Living in a relatively expensive home we've learned that many expenses come with it and you can't just turn them off by wanting to reduce expenses. One of the main reason for the less expensive home -- but built to be energy saving -- is to make it where we can limit expenses when we want to.

 

[travelover]

I wonder how many angels could dance on the head of a pin?

 

[MasterBlaster]

Esssential Expenses Illustrated

Esssential Expenses

The rest is just for personal comfort.

So based on my analysis, your nestegg is certainly big enough to retire now.

Do you want to work for the man the rest of your life ?

So stop wurkin' and start livin' now.

The good life awaits you