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.

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?

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.