Every year, this annual report seems to come out a little bit later – mostly because I’m no longer all that interested in how much money we spend. And Mrs. Money Mustache, my faithful assistant in creating these reports in past years, has disappeared completely from the blog – justifiably more interested in her Etsy Shop than family finances. Such is the nature of retirement.
If you are early on in your journey to financial freedom, you should not do what we are doing. Until you have your finances on auto-pilot so that you are saving 50-75% of your income, you should absolutely be reviewing every piece of spending and adding up all the categories.
But we’re all done saving for retirement. Our cash outflows feel both luxurious and reasonable, and they are well below the retirement income budget, so it seems less and less necessary to measure them.
After all, if you are happy with your body composition, do you still need to keep measuring every calorie you eat? If your breathing is clear and uninterrupted, do you track your annual number of breaths?
But our Supposedly Low Spending has kind of become my brand. And because of that, there are even conspiracy theories that form around this spending:
“Oh, looky there.. Mustache bought an electric car as an “experiment”. I wonder if that will show up on their annual spending!” “How much of his [travel/entertainment/home renovation/marijuana] expenses is he hiding from us as business expenses?”
“Oh, looky there.. Mustache bought an electric car as an “experiment”. I wonder if that will show up on their annual spending!”
“How much of his [travel/entertainment/home renovation/marijuana] expenses is he hiding from us as business expenses?”
So I thought I could do things a little differently this year. I can share the normal family expenditures as well what our businesses spent, and everything in between.
The Basic Expenses
Here’s the familiar chart, updated for 2016, complete with last year’s numbers for comparison.
|Mortgage Interest||0||0||If we had a $400,000 loan at 4%, we would have paid $16,000 in interest (!)|
|Property Taxes||1411||1895||Massive house price increases in my neighborhood come at a cost (prices have doubled in 4 years).|
|Food and Dining||7,400||6,807|
|Groceries||6,232||5,980||A warehouse store opened up in town, within biking distance of home. This reduced grocery costs a little as I shifted more purchases there. See article: Killing your $1000 Grocery Bill|
|Wine/Beer||627||321||Fewer large parties this year (boo), plus we cut down our glass-of-wine-or-beer-with-dinner habit (yay!). But many people have been giving me free boxes of beer in exchange for helping them with stuff, which probably makes this cost artificially low.|
|Restaurants, Coffee Shop||541||506||Mrs. and Little MM started ordering fancy pizza deliveries every time I'm out on a trip.|
|Medical||3,733||10,868||Here's where the costs went way up this year.|
|Doctor Visits||0||3807||My poor little lad broke his arm on December 30th (fell from a play structure while playing with me!)|
|Health Insurance||3,000||6720||A new Kaiser health insurance plan. (A downside of the ACA for those with higher incomes)|
|Pharmacy||42||0||Aspirins, bandages, toothbrushes, and such included under "groceries". Thankfully no prescriptions for any of us this year.|
|Auto and Transport||945||490|
|Gasoline||332||105||1 snowboarding trip, plus assorted errands in the van.|
|Insurance||357||449||Cost increased in September due to newer car (Nissan Leaf).
Still fantastically cheap thanks to Geico
|Registration & Testing||169||75|
|Express Tolls and Uber/Lyft||0||70||Still taking Uber/Lyft to the airport instead of driving. Much cheaper than driving/parking, especially if you have some referral credits.|
|Service & Parts||88||0||Both vehicles in top shape this year, no scheduled maintenance intervals reached. I'll definitely be buying some windshield wiper blades in 2017 though.|
|Public Transportation||0||0||Nothing against the bus, Bikes are just faster|
|Utilities||1652||1,575||Electricity, Gas (heating, cooking), trash/recycling, city park fees, etc.|
|Cell Phone||539||600||2 smartphones with data on Google Fi and Republic Wireless|
|Internet Access||692||540||I negotiated a lower rate for part of the year, then ditched Comcast for Longmont's amazing Gigabit Fiber service ($50/month for 1000 Mbit/S access! - Nerdvana!)|
|Home Renovations||120||1696||Finish materials for my house and the homes of some friends/family. Does not include the $30k detached Studio I built.|
|Home Insurance||0||0||Still self-insured for the primary house. Please don't complain about this in the comments section ;-)|
|Gifts/Donations||1,747||2000||Does not include donations made by the business.|
|School Tuition||0||0||Little MMM was back to 100% public school this year, due to increased confidence/toughness in getting over anxiety. Go little man! But we also do a shitload of learning at home, because it's fun.|
|Shoes & Clothing||754||622||Lots more fancy stuff for the gang from Gap, Old Navy, etc.
(my clothes are mostly free stuff, thrift shop or included in grocery receipts from Costco)
|Sporting Goods||0||98||Sweet Compound Bow and arrows!|
|Shopping Misc||1,274||1000||Mostly at Amazon - household/kitchen goods and computer parts|
|Books, games, gifts||488||383|
|Other||580||422||Stuff I am too lazy to sort out. If something is not listed, assume it is here.|
|Travel||2,376||2,335||Flights to Florida in January, Canada in July and December,|
|TOTAL||$23,941||$30,193||Adding in our artificially high medical costs is what did this budget in.|
|Subtracting Tuition, Donations||22,194||28,196|
|Subtracting travel, crossfit||19,588||25,861|
|Subtracting organic/luxury food||17,531||23,614||Assuming a 33% increase on groceries due to organic + meat.|
|Subtracting home renovation expense||17,411||About $22,000||This is what our "no frills" living cost would be (although you could subtract another $6,000 if we had a lower income and qualified for the health insurance subsidy)|
So What is Mr. Money Mustache Hiding From Us?
In a word: Nothing – this is my best guess at what our true expenses would be, if we lived a normal, retired life.
But here are the exceptions and special situations, which you can account for however you like:
- Higher Income is forcing me to pay full-price for health insurance. Health insurance pricing comes on a sliding scale from “nearly free” below $25,000 in family income, up to full price for incomes over $80,000 (see subsidy calculator)
- But then again, our family business (of which we are employees) pays these premiums on our behalf, so they are pretty painless
- I built this nifty studio, spending about $30,000 in the process. Is it spending, or investment? Since it increases the value of the house by much more than that amount, and I will be selling this house and moving somewhere else eventually, I chose to treat it as investment. On the other hand, spending money on repairs, changing paint colors, gardens, or swimming pools would count as spending to me, since these items are more likely to be recurring and/or not recouped at the time of sale.
- I bought a Nissan Leaf for roughly $14,000 after all costs. This was $9,000 more than I got for selling the old Scion xA. Is this spending? Well, I definitely would not have bought it if it weren’t for the blog (it served as a strong form of advocacy) and I think it may have actually made a noticeable difference in US Leaf sales numbers – which was my main purpose. Sure is a nice car, but we barely use cars for personal purposes (I had to become an Uber driver in order to even get enough drive time to properly test the car!)
- In late 2016, I gave away $100,000 of this blog’s income to various charities, with much more to come. Having a business that makes and gives away money probably reduces the need to give away my real retirement savings.
- Travel as Mr. Money Mustache (trips to Ecuador, Los Angeles, Portland, Seattle, and a couple of other places) added up to about $4,000 between flights, hotels and food. None of this is stuff I would have done for personal fun, but it may have burned me out enough that I skipped or missed other personal trips (camping, etc) that would have increased my travel spending.
- Mrs. Money Mustache’s Etsy shop spent more than $20,000 on materials, shipping, tools, etc. Most of this went right back out the door and earned a profit, but you could argue that both of our business expense accounts satisfied our “spending desire”, displacing personal spending in some way. In fact, writing for you consumes so much of my limited free time, that it may prevent me from expanding into other, more expensive hobbies (like upgrading my mountain bike or snowboard gear).
Overall, it looks like another fairly reasonable year. The biggest lesson that I try to emphasize is that spending does not have to scale with income. We spent less than 10% of our taxable income this year, and still cannot see any reason to inflate the lifestyle any further than it is already.
It’s a beautiful life!
Unrelated but Special Thanks to a Reader: Over the last few months, a lot of technical stuff has gone on behind the scenes here. If it weren’t for some serious help from skilled tech people, this blog’s heavily used forum would no longer be functioning.
I wanted to thank Kevin Clack – aka Clack Consulting for stepping in to upgrade the forum and continuing to help me with necessary fixes to this day. And if you have a well-established business with technical and web presence needs, you may even be able to become one of his clients as well.