Our $50,000 Spending Plan

Wat Arun - Bangkok
Travel will remain our largest expense.

Forgive me while I stay on the numbers game for a minute here.  This is the time of year I spend a healthy portion of time evaluating our finances from the previous one.

I must say, I feel like a bit of a schmo as I browse all my favorite personal finance blogs.  Many of which are posting their yearly budgets.  Mr. Money Mustache famously spends $25K per year, the 1500’s are shooting for a cool million to support their $30K of yearly expenses and Justin at Root of Good published his $32K retirement budget.

So who the heck are we that we need $50K?  I’m not sure, so let’s dig into this a bit.

Below is my pie-in-the-sky yearly spending goals once financially independent and represents the type of spending that is driving the numbers behind The Goal.

Just to level-set, we are a family of four that includes two, primary school aged kids.

Our $50,000 Spending Plan

CategoryYearly ExpenseComments
Total$50,000
Auto Expenses$2001 car - registration, oil changes, and cleaning
Auto Fuel$670Assumes ~5,000 miles
Charitable Giving$5,00010% of spending
Clothing / Shoes$1,200$100 / month
Entertainment$400Occasional movie, waterpark or other attraction
Gifts$500
Groceries / Household Consumables$8,200
Healthcare / Medical$6,000Quotes on healthcare.gov ~$500 / month
Hobbies$4,000Includes playing sports, sporting events, and things like camping, outdoor activities and gear
Home Improvement$500
Home Maintenance$500Includes Homeowners Association fee ($120) and other maintenance
Insurance$10001 car + House
Internet Connectivity$660$55 / month
Personal Care$250Mainly periodic haircuts for entire family
Property Taxes$6,720
Restaurants / Dining$1,800$150 / month
School Expenses$800
Telephone Services$400Straight Talk (x1) + some Skype
Travel$9,200Includes transportation, food, lodging, and activities for all travel away from home
Utilities$2,000Includes electricity, gas, and water

The Good News

  • The biggest differences in our plans seem to be in the costs associated with Charitable Giving, Healthcare / Medical, and Property Taxes.  Those 3 line items alone account for $12K in differences when compared to those other budgets.
  • This budget still leaves plenty of room for those boulders in our lives that I deem are the most important.  We have a huge extended family that we like to visit all over the country (and globe).  We also love to participate in organized sports which explains why the Hobbies and Travel buckets are so prominent.
  • There is still plenty of fat within these guidelines from which we can cut expenses further.  We’re on a never-ending journey to becoming more efficient with our spending.

The Bad News

  • Our current spending is quite a bit greater than this and we haven’t been as low as $50K since our boys were born.  It is obviously higher these days paying for operation of two cars, one long work commute, work clothes, and child care costs associated with two full-time working parents.
  • This plan assumes no mortgage payment.
  • I have not included any state or federal taxes.

After going through this exercise, I don’t think we’re as bloated as I originally thought.  We spend significantly more in property taxes but that is the price we pay for living where we do.

So loyal readers of mine, where does your yearly spending lie?  A trim $25K per year or maybe a more plump $100K?  Any suggestions for sprucing up our spending?

12 thoughts on “Our $50,000 Spending Plan”

  1. I think this looks pretty good, Buck. You have identified the categories that have led to higher expenses than the $30k-ish spending in the online early retirement community. Charity, hobbies, property taxes, and travel are the main ones, and you could make changes to reduce those buckets (but it might not be worth it to you).

    Medical might be lower if your income goes down (Obamacare subsidies are based on your Modified AGI). But then again, I didn’t see dental expenses called out in the “medical” line item, so you might have another $800 or so per year for that (unless you get free dental insurance somehow).

    Otherwise, your specific line items are pretty close to mine. I might pad the auto expenses a bit more, since things break occasionally (although infrequently when you drive very little). And new tires every 7 years or so is a good idea. I also added in $1000/yr to cover car replacement every 7-10 years (selling the old one, buying a new(er) one). Just food for thought if you haven’t explicitly addressed large capital replacement items elsewhere in your spending plan.

    Along the same lines, you may want a small line item for periodic replacement of household capital items like roof, major appliances, water heater, etc. I put $1500/yr extra in my budget to cover the rough annual average cost for these items. I’m thinking about a full blog post on how I developed that $1500/yr figure because it’s based on the methodology used on big billion dollar projects I worked on (ie – rather sound!).

    I’m curious, is the picture in Thailand you and Mrs. Buck?

    Thanks for linking to my $32,000 per year retirement budget, by the way!

    1. Haha. Yes, that is the two of us from about 10 years ago. I’d like to think we haven’t changed, but my boys commented about how young we looked when they saw that picture recently.

      Good comments. My random thoughts:
      – You are absolutely right. There are definitely things we could to bring this down further. All about priorities 🙂

      – Yeah, I anticipate health insurance to go down with our income. It’s just hard to plan right now since our income will be unreliable so I thought I’d plan on the worst case. Thanks for calling out dental, I definitely missed that.

      – I like the way you think about buffers for incidentals. Ideally you are right, I should have a dedicated bucket for those things. In light of this, my feeling is we also have enough discretionary money in the budget (primarily in the Hobby and Travel budgets) that if (when) we need to replace the roof, etc – we’d probably adjust by taking one fewer trip that year (as an example). There is definitely a lot of wriggle room when we incur larger, unexpected expenses.

      I’m looking forward to your methodology post.

      1. Methodology post in progress right now. 🙂

        When I was putting together my budget, I tried to figure out “what do things cost, all inclusive”. So I wanted to arrive at an annualized cost for our house, and our car, and anything else we consume. This includes the ongoing operations and maintenance expenses you have highlighted in this post, plus the long term capital replacement costs (or “depreciation”).

        The reason why I’m so curious about the question of “what does a house cost” is because I’d like to know what the impact of toggling off the “house” switch (for example) in my life might be. If I went to Spain for a year (just another example! 😉 ).

        In the case of my house, I arrived at $6,700 per year just to keep the house going in perpetuity (not including any mortgage payments). Or $560/month or $18/day. Getting to a total bottom line cost lets me compare my house and the costs and benefits to say, renting a house elsewhere in the country or world. Or perpetual travel and staying in hotels, airbnb, and/or longer term rentals. Maybe I could be just as happy in a $560/month apartment in Thailand or Mexico?

        I don’t mean to imply your methods are wrong or better or worse than mine, just food for thought. And since you are open to the idea of location independence (and actually doing it), I figured it might be a useful metric to think about.

        You’re definitely right that you have enough of a discretionary buffer that you can cash flow a roof replacement or HVAC replacement without really denting your long term finances. I have the same “trick” in my budget (to a lesser extent than you!) if costs run higher than budgeted in the less discretionary categories.

        Now back to writing my “run your house like a billion dollar project” post! 🙂

      2. I finished my Budgeting for Home Repairs: Lessons Learned Running a Billion Dollar Project. Enjoy!
        http://rootofgood.com/budget-home-repairs-billion-dollar-project/

        A short synopsis: Identify all components in your house. Determine their service life and replacement cost. For each component, divide replacement cost by service life to get annualized replacement cost. Add all annual costs to get a total annualized replacement cost for your house. And budget for this!

        P.S. Hope you don’t mind me posting a link directly to my site!

        1. Strong article, Justin. It helps put a little more thought into the estimate rather than just having a slush fund for such things that may hold too little or too much. Well done. Good lookin’ table too 🙂

          1. Glad you liked the article. That table does look pretty spiffy, doesn’t it? A very kind and generous fellow blogger tipped me off on a good tool to create tables.

            Your taxes are crazy! Not quite northeast USA crazy, but still a certain degree of crazy. We pay $1400/yr here in the dirty south. Although if my house were 2 miles west of us in a nicer neighborhood, we would pay closer to $3k due to higher land prices. Our local services are pretty decent (libraries, community center/parks and rec, schools).

  2. Man, I love the land of cheese. However, I don’t love the taxes. The services the community offers are better, especially if you have children, but I didn’t think they justified the taxes (both property and income).

    1. Yeah, taxes are definitely brutal in WI. I think you get used to it living here as everyone is in the same boat. It isn’t until you see other people’s published property taxes in other states that makes you say “Uff-da. Why are we paying so much?”.

      I can’t imagine what your taxes were for that house on the lake.

      1. My taxes were more than 2x what yours are. If it weren’t for that, we probably would have stayed. It was almost worth it just for the sunsets after a storm. Almost.

  3. I really appreciate this article, Buck. We feel like we’re doing most of the right things but like you are still in the $40-50k non-mortgage spending range, in large part because we live in Seattle with two kids and have family around the country that we like to visit. It’s hard to see the $25k MMM-style budgets and not feel a little inadequate 🙂

    It’s definitely an evolving process. Trim a little off of your car insurance here, pass up buying something there, and slowly you grow your frugality muscle and figure out what’s worth it and what’s not.

    1. Yes, if you live in a high property tax area and build-in recurring charitable contributions, those two things alone can inflate the budget quite substantially. It’s all about priorities, as they say. Thanks for stopping by, Eric.

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