Underestimating Living Expenses

[24601NoMore]

I have found that by shopping at Costco, ethnic markets and outlet stores I can get the identical foods and brands for an average of 1/3 the cost of my neighborhood supermarkets - just by driving 10 - 15 minutes further. To me that is worth it to save $6K or more a year on groceries.

That's pretty compelling. I shop at Costco as well, but haven't seen that big of a delta over say, Kroger - so would love to hear more on your tips and tricks for those big savings..

Fortunately, we have an Aldi opening by us soon - so hopefully that will help in further lowering our already pretty aggressive grocery savings. (For example - I usually buy "authentic" Worcestershire sauce by Rea and Pilpin or whoever the heck made the original..at Kroger today, and it was $5.99 for a fairly small bottle. Kroger brand is regularly $1.99..but they had French's for $1.99 down from $2.59 as well. So, I bought the French's - because we're probably not going to notice the difference). We buy a heck of a lot of Kroger brand items including butter, cereal, crackers, peanuts, ice cream..the list is long. But if Costco can do even BETTER than Kroger brand, I'm all in..

$6K/year would buy us a pretty nice vacation for sure.

PS: had to chuckle at the "ride to the store on a bike in the rain" example. Crazy how hard-core some ER'ers get in saving a few pennies. All things in balance, IMHO. (I can't imagine that bike ride in the rain will add much to savings..)

 

[brett]

We do the same. And we are eating healthier and better for it.

Just made a decision to keep one of our cars. Not because we cannot afford to buy a replacement but because we like the one we have and I cringe at the thought of going through the auto purchase hassle.

 

[daylatedollarshort]

That's pretty compelling. I shop at Costco as well, but haven't seen that big of a delta over say, Kroger - so would love to hear more on your tips and tricks for those big savings..

Fortunately, we have an Aldi opening by us soon - so hopefully that will help in further lowering our already pretty aggressive grocery savings. (For example - I usually buy "authentic" Worcestershire sauce by Rea and Pilpin or whoever the heck made the original..at Kroger today, and it was $5.99 for a fairly small bottle. Kroger brand is regularly $1.99..but they had French's for $1.99 down from $2.59 as well. So, I bought the French's - because we're probably not going to notice the difference). We buy a heck of a lot of Kroger brand items including butter, cereal, crackers, peanuts, ice cream..the list is long. But if Costco can do even BETTER than Kroger brand, I'm all in..

$6K/year would buy us a pretty nice vacation for sure.

PS: had to chuckle at the "ride to the store on a bike in the rain" example. Crazy how hard-core some ER'ers get in saving a few pennies. All things in balance, IMHO. (I can't imagine that bike ride in the rain will add much to savings..)

I can make another thread for sharing grocery tips this week, but most of the savings for me is from living in a HCOL metro area and not having been price aware enough in the past. I just didn't realize quite how high the local prices were until we started comparing our budget to the Consumer Expenditure Survey and saw that other households across the U.S. were spending much less on groceries. If you are already shopping at an Aldi kind of store that is probably the bulk of what reduced our grocery expense.

99 Cents Only in our area has name brand Worcestershire sauce for $1 in a regular size bottle. But only off and on. I stock up on sauces like that when they are available for $1 and have probably hundred stockpiled in a cupboard. Today for lunch I made a curry stir fry with a curry sauce I bought for $1 that otherwise costs $4 at Walmart and $7 on Amazon.

$6K a year is worth it to me to change where I shop and stockpile the bargains. Over a potential 40 year retirement that is $240K. Our energy rates are much higher here than other parts of the U.S. which prompted us to cut our electric bills from $3k - $4K a year to under $1K (even with more expensive kwh rates lately). We didn't change the temperature settings or make any expensive improvements, again it was all just a lot of small changes that added up and really didn't impact our overall lifestyle.

 

[GenXguy]

100% correct, I could have retired earlier. I would guess that every year I have a lot more than $5K in expenses that were not expected. $5K can go really fast in life, and it can happen every year.

Wow, I'm in my mid 50's and haven't had anywhere near that high of "unexpected" expenses in any year of my life, and I think most of the unexpected expenses that I have seen still fell within my budget parameters. This year, I started off with a $550 exhaust repair on my car, and even that wasn't really unexpected because I had first noticed a slight exhaust noise a year earlier which progressed very slowly, plus I have a monthly average in my budget for short and long term car maintenance, so it's already in the budget. My roof is 20 years old and will need replaced in the coming years, same with my 20 year old central air and 20 year old water heater, so I won't consider any of that to be "unexpected", either, plus I budget for short and long term maintenance/repairs on my home as well, and I'm way ahead in my sinking fund vs. what my maintenance costs have been over the last 17 years, so I have built up a surplus for future maintenance. It pays to budget wisely and include long term maintenance in the budget by averaging out the cost over time. If "unexpected" expenses can be budgeted for as I have done, you're financially prepared for them within your existing budget when they finally hit.

 

[Dtail]

Had to get a car replacement this year which was not planned due to the existing car being totaled.
Took the funds from the Emergency account. The 29k didn't derail our retirement.

 

[mountainsoft]

Hold on, you do have a line for home upkeep that should include things like a new water heater. FWIW our well suddenly and with no warning blew-out last fall. We only had to drill to 75 feet and it still cost 7500.

And if you drive used cars that cost under 4K I have a hard time believing repair and upkeep of each one cost only 60 bucks a month.

My point is this is a bare bones not covering replacement and upkeep budget. Do you have a largish pile of cash set aside for this purpose only.?

Essentially the majority of our savings portfolio "is" our emergency fund for these types of unexpected expenses.

My wife will receive a 27K pension when we retire, I'll get about 5K SS a couple years later, and wifey will get 12K SS five years later (both assuming a 25% "haircut"). That's 44K of income that should cover our regular expenses. Our personal savings really only needs to supplement her pension until we can start withdrawing SS, then it will mostly just be used for unplanned expenses.

As for the cars, we spent 3500 last year on maintenance, mostly because we bought new tires for all three cars as well as a new catalytic converter for mine. That's not typical. So far this year we've spent 700 on repairs, which includes a new windshield for my wife's car. So yeah, we averaged about $230/month over the last 18 months but there were several big ticket items that are not regular monthly expenses.

 

[mountainsoft]

A replacement HVAC system, the city issuing a corrective order or assessment, a used car will cost more when new car prices go up. A possible funeral expense, a kid coming back begging for money, even a legal expense can make a huge difference. A leaking toilet flapper can cost hundreds on a water bill. I would guess that every year I have a lot more than $5K in expenses that were not expected. $5K can go really fast in life, and it can happen every year.

A great way to see how much you spend, is to subtract the amount you saved from your annual income. Everything you did not save was spent, by definition.

We have always been able to find a decent car under $4000. Actually, we rarely spent more than $2000 on used cars until recent years when we decided to "splurge" on newer cars.

A leaking toilet flapper is about $3 and 5 minutes of work. I would never let it go long enough to be an issue. Heck, I could install a whole new toilet for about $200 and 30 minutes of work.

We don't have any complicated HVAC systems, just simple wall heaters that would only cost about $150 to replace if we had to (we actually have unused heaters I could swap out if we didn't have the money at the time. I planned for redundancy when we built our house).

I took a look at our savings for last year (2018). We had 57K of income, 6K went to my IRA, 6K to our regular savings, and another 5K to our taxable brokerage account. According to your rough estimate, that means the remaining 40K went to our living expenses. That's basically what I've been estimating all along.

 

[mountainsoft]

Most banks and credit cards will let you download a years statements as a csv file which you can import into a spreadsheet, sort it and ensure your spending is what you think it is.

Reading thru this thread makes me wonder if you might not be as FI as you wish or hope you are.

Yep, I've been downloading the CSV files from our various accounts at the end of the year, manually sorting and adding them up to see our actual expenses. In my first post in this thread I thought I had underestimated, but I looked at my records and they were accurate. I think we've just spent more this year due to unusual circumstances. It certainly won't derail our retirement, but I am adjusting our expense estimates with a little more cushion.

The Alzex program I found looks like it will work well to help automate the organizing of the CSV files I download for my accounts.

 

[mountainsoft]

MS, if your grocery budget is 800 and doesn’t include eating out that’s huge. Ours is 400 and we have a lot of company for dinner. You also have 6k for fun which leaves wiggle room. Since we bought a Toyota and Honda we have not had one repair despite them being 11 and 8 years old.

Yeah, we spend a lot on groceries. Expensive meats, wine, and frozen dinners are probably our worst offenders. We like to eat! Unfortunately healthier options tend to cost more too. Hopefully we'll eat fewer frozen dinners when we have time to make our own lunches.

Our VW's rarely need repairs either, other than routine maintenance like tires, brakes, shocks, etc. We probably have a few more expenses because we drive old cars. So I spend money fixing things previous owners just lived with.

 

[Rantey]

I refuse frozen foods, most frozen foods lose the taste of the food itself.

 

[DeborahB]

When I was estimating my living expenses before I retired, I didn’t expect that I’d lose the ability to grocery shop comfortably. I’ve had significant back pain issues. Luckily a lot of online buying has become available. I order from Costco on big non-perishable items like toilet paper. Anything I can get from them, I do. But I have groceries delivered from the local market. It eliminates impulse buying, and I don’t think it’s costing me a lot more, if anything. It means someone else brings the milk in, and bottled water (used infrequently) and puts it in the kitchen for me. I also use Grubhub to get restaurant food - I usually get enough for at least 2 meals at a time. It’s generally pizza or ethnic food and salads. Living alone, it actually makes some sense. I also use amazon to buy many many things. The good news is that I think this is not costing me a lot, really. I don’t track it, just keep an eye on my bottom line in investments. So far -despite $9K in property taxes - I’m fine and not worried about money. But I don’t cook much any more - standing hurts - and seem to be okay.

 

[jeroly]

Essentially the majority of our savings portfolio "is" our emergency fund for these types of unexpected expenses.

My wife will receive a 27K pension when we retire, I'll get about 5K SS a couple years later, and wifey will get 12K SS five years later (both assuming a 25% "haircut"). That's 44K of income that should cover our regular expenses. Our personal savings really only needs to supplement her pension until we can start withdrawing SS, then it will mostly just be used for unplanned expenses.

As for the cars, we spent 3500 last year on maintenance, mostly because we bought new tires for all three cars as well as a new catalytic converter for mine. That's not typical. So far this year we've spent 700 on repairs, which includes a new windshield for my wife's car. So yeah, we averaged about $230/month over the last 18 months but there were several big ticket items that are not regular monthly expenses.

The point that was being made is that these are NOT unexpected expenses.

You KNOW that, at some point in time, your cars will need new tires.

Your KNOW that, at some point in time, your cars will need big ticket maintenance items like a new catalytic converter.

Same for hot water heaters, the roof, the refrigerator, etc. You KNOW that you will need to fix it replace these. You just don't know when.

What one needs to do, unless you're living way below your SWR, is to establish sinking funds for each of these items, based on the estimated time to making the outlay. If it turns out that you're way off in your estimates, then modify how much you're provisioning for the expense the next time around. Treat it much the way your bank does/did on the escrow account for a mortgage.

 

[Teacher Terry]

We have a Winco which has good food at great prices. I would cut back on the grocery bill and save the extra money. At home we drink box wine. We save the good stuff for company. I also keep some convenient frozen food in the freezer for when I am tired or busy.

 

[PatrickA5]

Like other one time expenses (water heater, new roof, etc.) I factor that into our overall savings and don't include it as a yearly expense.

Of course, we only buy used vehicles and have never spent more than $4000 on a car (I paid $1900 for my current 2000 VW Jetta).

To me anyway, an expense is something that I pay out of my funds to someone else. So, I include a new roof as an expense in the year of the expenditure. If I excluded big ticket items from my expenses just because I saved up for it, I'd likely get my yearly expenses down to a more reasonable number. Our expenses over the years have ranged from $75K to $200K and everything in between. Hopefully, once the kids get off the payroll we can get down to the lower end on a more consistent basis.

I should note that we don't budget. We do keep track of expenses and have for years.

Every year we have "one time" expenses. They never seem to go away - just different each year.

 

[Rianne]

Expenses we had working, no longer have:
-House cleaning service (every 2 weeks). I clean now
-Landscape service (lawn, tree trimming, leaves, weeding) we do that now

-Snow removal (could not live without in MI)
-Mortgage (gone)

-Expensive dog sitting services (no longer need, we have a great service for $15/night on a beautiful farm)
-Charities (all in our trust. According to FIREcalc, they'll get a nice chunk of change when we die)
-Gas and clothes
-Home decorations and new furniture (almost nil now)
-entertainment and eating out

I cringe when I think about this spending.

 

[mountainsoft]

Every year we have "one time" expenses. They never seem to go away - just different each year.

Agreed, that's why I'm trying to figure out what our "average" spending is in each category. We may go over that average some years, and be under that average in other years.

We can also pull from other categories when needed. For example, if I budget 2500 for home repairs and we have a big expense like a new roof, we could simply spend less on recreation or other miscellaneous costs that year.

I only started tracking our expenses in detail last year so I don't have a good average yet. We spent more this year on some items, and less on other items. So, I'm adjusting my estimates accordingly. We still have a few years before retirement so I should have a fairly good picture of our typical spending by then.

I'm not sure how far back I can download records from my bank accounts, but I might be able to look back retroactively a few years too.

 

[ncbill]

The point that was being made is that these are NOT unexpected expenses.

You KNOW that, at some point in time, your cars will need new tires.

Your KNOW that, at some point in time, your cars will need big ticket maintenance items like a new catalytic converter.

Same for hot water heaters, the roof, the refrigerator, etc. You KNOW that you will need to fix it replace these. You just don't know when.

What one needs to do, unless you're living way below your SWR, is to establish sinking funds for each of these items, based on the estimated time to making the outlay. If it turns out that you're way off in your estimates, then modify how much you're provisioning for the expense the next time around. Treat it much the way your bank does/did on the escrow account for a mortgage.

Plenty of retirees lease...especially if they've downsized to one vehicle...so no four or five figure lump sum required, just a fixed monthly payment, always in warranty.

 

[Senator]

We have always been able to find a decent car under $4000. Actually, we rarely spent more than $2000 on used cars until recent years when we decided to "splurge" on newer cars.

A leaking toilet flapper is about $3 and 5 minutes of work. I would never let it go long enough to be an issue. Heck, I could install a whole new toilet for about $200 and 30 minutes of work.

We don't have any complicated HVAC systems, just simple wall heaters that would only cost about $150 to replace if we had to (we actually have unused heaters I could swap out if we didn't have the money at the time. I planned for redundancy when we built our house).

I took a look at our savings for last year (2018). We had 57K of income, 6K went to my IRA, 6K to our regular savings, and another 5K to our taxable brokerage account. According to your rough estimate, that means the remaining 40K went to our living expenses. That's basically what I've been estimating all along.

Great point. If you only have $57K in income now, $40K - $45K should be enough. I have had a toilet flapper go bad and my water bill on a rental went up $500+ over the quarterly billing amount on the previous bill. If you are not afraid of doing the work, and understanding how things work, it makes a lot of difference.

Some people would call a plumber to replace the flapper.

Great job on the savings reconciliation. Often, by doing that calculation, there is a bunch of money that went MIA...

 

[mountainsoft]

If you only have $57K in income now, $40K - $45K should be enough.

Great job on the savings reconciliation. Often, by doing that calculation, there is a bunch of money that went MIA...

I just downloaded the CSV records for all my bank accounts going back to 2015. I'm still working my way through them, but it looks like I was accurate on our income, almost exactly 57K.

Unfortunately, it looks like our expenses have been significantly higher than I thought, averaging around 47K-50K per year. Granted, we've had some unusual expenses because I was restoring my old car, and lots of eating out and gas after my mom's stroke and MIL's heart issues.

So far, this year is showing far lower expenses than previous years, and I'm not sure why. We've only spent 13K so far, which should translate to somewhere around 26K for the year. That seems oddly low to me, despite having already paid our largest bills (insurance, property taxes, etc.). I don't feel like we've cut back on our lifestyle at all, so I guess I'll just have to wait till the end of the year to see what the final tally is. I changed the way I pay bills earlier this year so maybe I'm missing something with my calculations (everything gets billed to our cashback credit card, then I pay that off each month).

For now I've bumped my retirement estimate up to 45K, but I'll keep a close eye on our spending the next few years to make sure I'm still not underestimating.

 

[tb001]

We found the process of budgeting and checking spending very illuminating as well. We were spending far more than I expected on some things. And those recurring ‘unexpected’ expenses can be a big problem. Food and Helping with aging parents are two areas we’ve been spending more than expected as well. Our home owners insurance just *doubled,* which is a big chunk as well. Lots of areas to potentially shift dollars, but you need to have a good grasp on where they’re going to know if you’re on track! If you can get a better handle on historical spend, it sounds like you’ll have much better information to use in making your decision.

 

[Teacher Terry]

Can you shop around to lower your home owner insurance? Even though my parents had limited means they never cost us any money. We intend to follow that example.

 

[tb001]

Can you shop around to lower your home owner insurance? Even though my parents had limited means they never cost us any money. We intend to follow that example.

R.E insurance, that’s the shopped around rate! In suburban CA, which in many areas now equates to high fire risk. Only a few insurers left who will even provide insurance for us at this point.

As to parents, both sets live far away and we’re the ‘responsible’ kids. So while they’re all ok financially so far, the increased trips to and from to check on things add up. It sounds like the OP has a version of this. I would rather work a little longer than cut back or have to ask our parents to help with gas money or airfare. DH has been flying cross country every other month for over a year. Add in hotel costs, airport transport, etc... and it’s not insignificant. He’s so far been able to piggy back most trips on a w*rk trip, but still an expense we need to account for if we RE.

 

[mountainsoft]

Our home owners insurance just *doubled,*

Ouch. Ours was $910 this year, which is only $188 more than we paid in 2015. A big expense to be sure, but a tiny portion of our overall budget.

We found the process of budgeting and checking spending very illuminating as well. We were spending far more than I expected on some things

I tracked down my "missing" expenses for this year, property and income taxes that come directly from our savings account. When I add those in my estimate for the year comes in around 42K. Of course, I'm still guessing the second half of this year, but that's more in line with what I was thinking.

I'm finding it a lot more difficult to track spending than I imagined. The new Alzex financial software is helping visualize things, but I still have to pay attention that I'm not double counting some items. For example, adding the credit card payments from checking and the charges on the credit cards. Sometimes I've paid off the card from checking, sometimes from my business, and other times from savings. So far it seems to work best to ignore the card payments and just add up the charges on the cards. I've run into a few situations like that, but I'm slowly figuring out the best way to track them accurately.

There are also many items we have purchased for our parents or daughter that they repaid us for. Sometimes in cash, sometimes with a bank transfer. I haven't found a good way to account for those, so I'm just factoring them in as our own expenses.

Groceries and property taxes are our two largest expenses. There's not much I can do about the taxes, and despite my efforts to spend less on groceries I haven't noticed any significant reduction in our food costs.

Miscellaneous costs are our next largest expense. Some of that is "fluff" that could be reduced, but much of it is random stuff we need around the house.

Restaurants, Gas, and Recreation come next. We can't do much about gas at this point, but it should go down in the future. We could cut back on restaurants and recreation, but it's nice to have a little enjoyment now and then.

The remainder is utilities and home/auto maintenance. There are a few things we could cut if we really had to (netflix, home phone, etc.), but it doesn't amount to much in our total budget anyway.

It's really kind of amazing how much it costs to live considering we have a small house (1456 sq/ft) with no mortgage, drive old cars we paid cash for, and no debts of any kind.

 

[Montecfo]

MS, if your grocery budget is 800 and doesn’t include eating out that’s huge. Ours is 400 and we have a lot of company for dinner. You also have 6k for fun which leaves wiggle room. Since we bought a Toyota and Honda we have not had one repair despite them being 11 and 8 years old.

Hi Terry. Hey I respect your decision to buy Hondas and Toyotas. I like them too, though quality has slipped. Having said that, no repairs in 19 years of owning them seems a stretch. In that amount of time virtually every vehicle will have a few, no?

 

[Teacher Terry]

M, my husband did brakes on each of them. I forgot about that. The 2008 has 53k/miles and the 2010 80k/miles. We live in town and often walk to places. We don’t drive a ton being retired. Last year when we were getting ready to take the Honda on a 4K trip we had the dealership check the car out and they literally didn’t find anything wrong.