Well, summer is over and I have enjoyed my time with the kids. I try and read a little each day on this forum and few others (MMM, etc) as I have learned a lot from my peers and gained perspective in my new normal. However, one thing that has me perplexed is reading about what others proclaim are their budgets and expenses, especially the ERE and MMM folks who proclaim to live on less than 40K per year. It is my opinion that a lot of these people do not factor in capital expenditures with their typical annual expenses. Let me give a simple example. A small family (3 kids or less) in America is going to have housing, transportation and maybe college expenses. As such, they need to have reserves for replacement for housing components, cars and some college costs. In my case, I have banked enough in college funds for my kids already, but I put about 5k a year in there for over 15 years. As to housing, I assume around 4K per year as a reserve which covers Roofing, Paint, HVAC, Water heater, Appliances and Maintenance equipment (lawn mower, etc) for a 20 yr cycle. Lastly, I buy a new car to me every 4 to 5 years (We drive our cars for 8 to 10 years). This means I need around 25K (today's dollars) each 5 years, so 5k per year.
Thus, if one is being realistic, this small family needs around 14k for cap ex or in my case at least 10K. My insurance costs are running around 24K and my housing costs (taxes, utilities, etc) less insurance and cap ex is running around 6K.
So, what I am saying is I find it hard to believe people are being realistic when they say they can live on less than 40k per year "all in" when I need at least 40K to cover insurance, housing and cap expenditures for large ticket items. My current budget is 70k net and it's tight. Remember, I have no mortgage, college funds banked and no other debt.
I feel compelled to drop in on the MMM and ERE crowd and point out that they may not be realistically factoring in all of life's costs. However, I brought this up here because most of you in the Early Retirement forum are the more experienced group and would like your thoughts and comments.
A couple of thoughts first of all if you look at household income in the US, literally 1/2 the country is living on less than 55K, and the 36% are living on less than 40K. Presumably most of those people have either rent or a mortgage so obviously plenty of people are doing it,not just the LYBM crowd here or on MM.
As to your larger point, that it is easy to under budget for capex expenses. I completely agree. I have had my house, (built about 58) for about 12 years and bought my ex GF 1/2 ownership out 10 years ago. During last 10 years I've transferred $4K/month (from accumulated dividends and interest) from my brokerage account into my checking, in a few years I've actually ended transferring some money back to my brokerage account and few years sold some stock to fund expenses.
There have been additional income from rental properties, and other investments, but it was relatively small no more than $500-$1000/month less expense. So I figure I've been spending about $54K/year, certainly not frugal but considerably less than any sane SWR rate.
This last couple of year has seen an insane spike in home maintenance expense, to the point where I feel I've been hemorrhaging money lately.
I've budgeted 50K for kitchen remodel for many years, and also 3K year in general maintenance. I actually averaged only $1K a year so I had in some ways, $20K of unspent maintenance, but I don't actually have a separate labeled house repair fund. But still the list of house expense the last two year has been ugh
New energy efficient water heater $1200
Electrical system upgrade $3,000
New metal roof $21,000
PV System $12,000 (20 year pre paid lease)
Kitchen Remodel 58K -50K budgeted $8,000
Replacing plumbing with copper lines $7,000
New Fence $2,500
Flooring and cabinets for downstairs $3,000 so far probably $7,000 total
A grand total of $61,700 even after subtracting the $20k that should have spent it is still an extra $4200/year. I have lots of cushion but for people on tighter retirement budget this could spell trouble.
I would expect this just as I might expect you to increase giving as your income increases.
