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Annual Expenses

Since October 2016, I’ve been meticulously tracking all the family expense. I now have a complete year of tracking. What does it look like? What surprises will we see? Is transport the highest expense as people like complain? Am I buying full of crap? Probably. Let’s see the breakdown.

ExpenseMonthlyAnnualComment
Mortgage Interest225527060Holy crap this is expensive
Property Taxes141116932 
Groceries96811616Family of 5
Mortgage Principal86610387Minimum required principal payment. I paid more.
Mortgage Credit Margin5616732Same as ^^
Travel5246288We travel a lot!
General Merchandise4014812What am I buying?
Restaurants2793348Wow.
Utilities2593108AC is 50% of this
Home Improvement2222664 
Electronics1972364We are a nerd family
Children1762112 
Fees1712052We had certain legal issues
Home Maintenance1641968 
Car Loan Principal1591908 
Insurance1051260House + cars
Clothes961152 
Entertainment891068 
Car861032 
Gift67804 
Pets57684 
Phone53636 
Gas50600Look where gas is!
Education45540 
Internet37444 
Health Care31372 
Car Loan Interest21252 
ATM (Cash)19228 
Hobbies14168 
Personal Care10120 
Postage10120 
Charity896 
Online Services784 

We know about the 4% rule. You need 25 times your annual expense money in your stash to live up for 30+ years of your investment. What happens when we convert each of our family expense as part of the required stash?

ExpenseAnnualRequired StashLCOL AnnualLCOL Stash
Groceries11,616290,4008131203,280
Mortgage Interest27,060676,5006765169,125
Travel6288157,2006288157,200
General Merchandise4812120,3003368,484,210
Mortgage Principal10,387259,6752596,7564,919
Property Taxes16,932423,3002539,863,495
Restaurants334883,7002343,658,590
Utilities310877,7002175,654,390
Home Improvement266466,6001864,846,620
Mortgage Credit Margin6732168,300168342,075
Electronics236459,1001654,841,370
Children211252,8001478,436,960
Fees205251,3001436,435,910
Home Maintenance196849,2001377,634,440
Car Loan Principal190847,7001335,633,390
Insurance126031,50088222,050
Clothes115228,800806,420,160
Entertainment106826,700747,618,690
Car103225,800722,418,060
Gift80420,100562,814,070
Pets68417,100478,811,970
Phone63615,900445,211,130
Gas60015,00042010,500
Education54013,5003789450
Internet44411,100310,87770
Health Care3729300260,46510
Car Loan Interest2526300176,44410
ATM (Cash)2285700159,63990
Hobbies1684200117,62940
Personal Care1203000842100
Postage1203000842100
Charity96240067,21680
Online Services84210058,81470
     
Total113,0112,825,27551,8011,295,024

This is enlightening! From this, I know that pets ownership is going to require $17100 of additional networth. Our family restaurant habits require us to get $83700 more! We can improve there. Our current travel requires us to keep $157200 – another large amount. Many of these expenses are easily compressible. Finally, our food is costing us $290,000 – wow, three kids. To keep up with our current property taxes, we need $423,000 – double wow.

I need to expand General Merchandise into better sub-categories. It represents 8% of my retirement budget. It currently includes items such as home supplies, but also gifts and worthless craps that I buy on Amazon.

The last puzzle piece is the LCOL (Low Cost of Life) move before retirement. The cost of housing will drop by 75%. The cost of everything else should drop by about 30% according to numbeo. To be conservative, we kept the cost of travel exactly the same since these are not affected by local cost of life or currency.

This gives us the needed amount of 1.3M. If we cut the unneeded expenses, which include legal fees, entertainment, restaurants and travel, we end up with 1M. We went from 2.9M needed in our current HCOL area to 1.3M, 1.0M if lean, in a LCOL area. The difference is significant, less than 50% of the original amount.

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