“Oh you live on $40,1000 per year? Guess you like camping in the van underneath the freeway bridge huh? ?Still enjoying those rice and cocoa beans? ?Three kids cost $40,Thousand per year right off the bat so it’s clearly impossible!”. ?That complainer plainly doesn’t know how we spend cash.

Living well on $40,000 each and every year is possible and I’m here to explain exactly how by discussing all of our expenses during 2016. ?Later in the article I’ll explain why our spending provides us a lifestyle?that costs many other people $100,000 per year. ?And I don’t think many would probably argue that a $100,000 annually lifestyle is a tough solution to live.

2016 was the first time that Mrs. Root of Good and I didn’big t have a full time job all year long (other than that one month of regular employment in January 2016 designed for Mrs. RoG). ?Now we have essentially a full 12 months of early retired bills recorded. ?At a high level I’m able to summarize our 2016 spending by means of saying “We nailed it!”. ?Some of our 2016 budget totaled $40,000 despite the fact that our expenses came in just a couple bucks under $39,000. ?With that low budget we managed to bring several international vacations and purchase a 2009 minivan for cash.

 

Where do the money go?

At the beginning of 2016 I laid out our $40,000 budget?for the year. ?We greater the 2016 budget to $40,000 after acknowledging that we may just be spending a lot more than the $32,1000 or $32,400 that we allocated for 2014 and 2015, respectively.

Our wasting tracked closely to our budgeted amounts in almost all groups with the only really well known deviation coming from the $8,300 most people spent on the new (used) minivan. ?This expense plus?other typical auto-related expenses reached 369% of our budgeted amount for autos.

Education as well as taxes were between 100% plus 120% of budgeted amounts. ?Other expense categories were 100% and also less than the budgeted quantities.

 

 

Housing

$8,200 budgeted vs. $6,031 specific spending

First off allow me to celebrate some of our complete lack of a mortgage repayment. ?We paid off the last smaller chunk of mortgage in 2015. ?Eliminate mortgage!

Our housing expenses will be fairly predictable year to year. ?A repairs and maintenance resources of $2,500 covers high price items plus smaller improvements. ?It also covers lawn maintenance supplies and equipment such as gas for the lawnmower, fire ant bait, and coloring for the house. ?We used up $866 in this category which is merely 35% of the $2,500 budgeted. ?We intentionally budgeted plenty because of this category because I wanted the pliability to call a repairman pertaining to tasks I don’t might like to do (like plumbing).

During the year we a few plumbing issues, several preventative like replacing the many toilet shut off vales, and some vehicle repairs (I broke a torpedo drain P-trap while trying to fix it; the shower faucet sprung a leak and had for being replaced). ?I also did a bit of DIY plumbing repair and also saved a few hundred money that way. ?I needed to replace the pressure regulator valve. ?It was an “remove the old one, screw rear on the new one” repair thankfully. ?That is about the limit regarding my plumbing expertise.

Had for the little dirty in the spider space to replace this beauty.

For house insurance and taxations we spent $2,203 against a budget of $2,200. ?If only I could truthfully get all our expense groups within $3 of budgeted amounts!

Utilities are also fairly predictable since rates are regulated for the most part. ?Most of us spent $2,809 out of the $3,000 price range. ?The almost $200 cost savings as opposed to the budget was due to benefits on the water bill thanks to that pressure regulator valve substitution and the fact that we are on vacation a couple of weeks during any given 12 months.

Our Home Furnishings / Furniture spending plan of $500 was way more compared to enough to cover our $153 true spending. ?We’ve owned the house for over 13 years so we don’t really need to replace lots of household items. ?We picked up a fresh couch from the thrift retail outlet and a few other odds and ends. ?My partner and i probably make enough through random craigslist sales to hide our actual spending on fixtures but I don’t keep track of craig’s list sales that closely.

 

Auto

$2,Nine hundred budgeted vs. $9,428 actual spending

This is a one area where we blew within the budget with our new (used) minivan purchase. ?But it’s fine because we intentionally budget for these “one time” expenses by means of allocating $1,000 per year to our own car replacement fund?to be able to account for the depreciation in time.

Here’s an excerpt through my?“$50 car payment pertaining to life” car replacement strategy:

Here’s the math behind my $50 car payment. ?Buy a gently used six?in order to eight year old car having low to moderate fuel consumption rate for around $8,000-10,000. ?Run your vehicle almost into the ground and selling it after nine?and also ten?years when it’s 15-16 yr old for $3,000. ?The net depreciation (cost of new(er) automobile minus sale proceeds from mature car)?for those nine?to 10 years is $5,000 so that you can $7,000 or about $50 per month ($6000 divided by 120 many months = $50/month).

$50 per month is under $1,000 per year but I want to keep plenty in the price range in case we need to replace the auto more often (and odds are we’ll be in an accident or maintain damage to the van eventually). ?We are our own insurance company?given that we carry no comprehensive or simply collision coverage on your minivan. ?We’re saving hundreds per annum and can easily afford a rapid $8,000 to $10,000 deprivation.

Great for hauling lots of people along with loads of stuff. And 2000+ kilometer road trips.

I’ll probably released a full article on it afterwards, but so far we are 7 months into owning just one car. ?And there have been exactly two situations where it might have been nice to have only two cars (but we went about getting by just fine with just one). ?No uber or riding on the bus required so far (though I did take the bus downtown after for a day of museums with this four year old).

It’s value mentioning that we didn’t identical to spending our $400 gasoline budget. ?We only spent $191 for the duration of 2016. ?I planned the gas budget assuming 4,A thousand miles of driving about at 30 miles per gallon though paying $3 per gallon pertaining to gas. ?It turns out all three presumptions were wrong.

We drove a smaller amount than 4,000 mileage during the year (I count journey related expenditures such as propane gas in the “Vacations/Travel” category). ?We supplanted the 30 mpg Ford sedans we owned at the beginning of 2016 with the minivan that probably obtains 19-20 mpg in the city. ?Together with gas prices were better $2 than $3 throughout 2016.

 

Food

$8,000 allocated vs. $6,330?actual spending

We budgeted $7,000 for groceries and $1,500 for dining out. ?By year or so end, we spent accurately everytime $5,753 on groceries (82% of resources) and $577 on dining out (58% connected with budget).

We manage to save on food without Extreme Couponing?(hint: Aldi as well as grocery store loss leaders can be your friends). ?We eat pretty much with a variety of fresh fruits and also vegetables (and meat certainly) plus purchase a ton of Oriental and Latino ingredients throughout the year for making some tasty ethnic plates (here’s what a month involving grocery shopping looked like for us?2 years ago). ?We love cooking and enjoy the challenge of making awesome meals out of whatever random information is in our fridge.

Pho, from the beginning. Maybe a buck per jar.

 

(Mostly) fresh fruits and vegetables and fruits mostly from Aldi. And all of that had been probably under $40 (about what you would spend for a small basket involving produce at a fancy jeans grocery store).

 

When dining out, we tend to frequent the same few dining establishments. ?For those restaurants that bring them, we?buy discounted gift certificates from Raise.com (and you may get $5 off your first gift certificate purchase at Raise on this link). ?But we really don’t visit eat very often.

 

Other Core Existing Expenses

$6,300?budgeted vs. $5,378 real spending

We spent about $1,000 not as much as budgeted in this catch all category that includes phone, web, medical and dental, garments, education, and taxes.

For mobile phone, cell phone, and internet, most people go the extremely cheap path. ?The $422 per year that we finance phone, cell, and web is less than some families pay in one month!

Our telephone is hooked up through a $50?Obihai World-wide-web protocol adapter using Google Style for free monthly service. ?My smartphone service is free by means of Freedompop. ?Each month I get 200 express minutes, 500 texts along with around a gigabyte for 3G/4G data for free. ?I never come near to any of those limits.

Our net is 50 mbit/5 mbit service through Time Warner Cable at $35 per month (therefore we bought our own cable cable box?for $30 to avoid the $10 monthly cable modem rental charge). ?The regular rate for online world is $40/month but I call or perhaps go online each year and pull at the an extra $5-10 discount by requesting politely.

We have a prepaid T-mobile idiotic phone on a legacy approach that costs $10 per year. We rarely use it, but keep it stimulated for convenience and for urgent matters. ?It?has saved us several times while overseas because it works worldwide (for large per-minute rates).

Our medical and dentistry expenses were?$2,162 for the yr which is 72% of the $3,000 allocated. ?Our health insurance premiums (with major subsidies from the Affordable Caution Act) were about what people expected at $125 per month. ?All of us planned on $440 in healthcare expenses and didn’t invest all of that. ?Dental expenses were being budgeted for $1,000 given that Mrs. Root of Good and I don’to have dental insurance. ?We were blessed and didn’t have any highly-priced dental procedures in 2016 (just regime cleaning and exams).

What are you going to do when the Affordable Care Act / Obamacare goes away?” people will ask. ?Check out my dialogue and the comments in my January 2016 Financial Update post for more information regarding my thoughts and our ideas.

Clothing purchases totaled $452 for the calendar year. ?How do we do it with a group of five? Some hand people downs, some thrift shopping, as well as some retail store purchases. ?Since the people in the house are no longer working, your wardrobes are pretty fundamental. ?Swimming attire and shoes are probably the largest clothing subcategories today.

Marathon thrift shopping

Education expenses of $267 were 107% of the $250 budgeted with regard to 2016. ?Now that our oldest toddler is in middle school, the field trips are getting more expensive. As are the specified graphing calculators.

We paid a total of $2,075 throughout taxes during 2016 versus your budgeted $1,750. ?This largely comes from rounding up when shelling out quarterly estimated state taxes to spend in even $100 increments. ?North Carolina charges $2 per $100 anytime paying with a credit card and so i try to get as many elements or miles as possible. ?Shelling out taxes with a credit card is a fantastic way to meet minimum paying out requirements from new?credit card bonus offers. ?And who actually doesn’t love free vacation? ?(Check out Jeremy at Go Curry Party cracker – he graciously allowed Uncle Sam to order him a free family trip to be able to Hawaii!).

For those curious about some of our tax liability in 2016, we’ll owe a couple of thousand $ $ $ $ in federal tax due to self employment tax I personally pay on blog income (partially offset by $3000 within child tax credits). ?We’re also in the strange situation to hand over higher taxes during very early retirement than we were any time working full time and making $150,000 per year while spending only $150 in taxes. ?My spouse and i still think our entire 2016 tax burden is very sensible considering I took quite a few capital gains and transformed $4,000+ from a traditional IRA to a Roth to get started on my Roth IRA Conversion Corporate.

 

Purely Discretionary Expenses

$14,600 budgeted or. $11,812 actual spending

This is where the fun is usually. ?Vacations, entertainment expenses, as well as electronics primarily.

I bumped the entertainment and toys price range up to $2,500 from the $1,000 in 2015 and previous years. ?For $522 total entertainment spending to your year we still didn’testosterone levels spend the $1,000 aside from the $2,500 “new and improved” budget. ?What can I say? Many free or cheap amusement options mean we don’testosterone spend a lot in this kind. ?Most of the $522 is outdoors/sports related charges like bike tires/tubes, rollerskating admission, in addition to city swimming pool passes. ?Alcoholic beverages ($176) is included in this category. ?There’s a miscellany of computer/video games, products to build crazy things, along with half of a netflix request.

Boat rental – not free however worth every penny of the $4. Also cheaper and more fun than a workout room membership. And we saw some sort of bald eagle.

 

Vacations represent the bulk of each of our discretionary spending. ?We in some way managed to come in just $43 under our $10,000 budget by using $9,957 total vacation spending in 2016.

In 2016 we did some serious traveling:

  • Three Caribbean cruises (most of the cost was incurred inside 2015)
  • 3.5 week, 2,4 hundred mile road trip through Tennessee, Kentucky, Detroit, Toronto, Niagara Falls, and Washington D.C.
  • Purchased many airfare and all lodging for the 9 week summer 2017 holiday to Europe

We stretch a buck till it hurts. ?Travel hacking assists a lot. Check out credit card sign on bonuses and get you many free travel too. ?The eu lodging is all through Airbnb (help save $35 on your first trip!). ?For cruises we usually publication through Expedia but click through Ebates to secure a 10% cash rebate (and you get an extra $10 when you sign up for Ebates by way of this link).

We took a brief 2 night pit stop in Niagara Falls on our drive home this past summer.

 

Our electronics budget of $1,000 was large enough to accommodate our $885 in computer gadget purchases. ?The majority of the consumer electronics spending was?a pair of brand-new HP ProBook 430 g3 ultralight computers?for $350 each individual (Black Friday special charges). ?They have similar specs to help macbook pros that fee 3-4 times as much (except our bait came with no Apple trademarks). ?We mainly bought them all for our 9 week summer trip since we’ll be shipping nothing more than regular size bookbags for our trek across Europe. ?A lot of these new toys are speedier, smaller, and almost half the excess weight of our old 15″ laptops.

Our $1,A thousand gift budget went generally unused. ?We spent merely $381 throughout the year on various presents for Christmas and birthday parties. ?Our families aren’t enormous gift givers fortunately and then we get by without much financial expenditure. ?We’re also opportunistic gift acquirers, so if we come across a nice deal on a gift for someone then we’ll pay for it months ahead of time.

A “free” X-mas gift. Random unused college supplies found around our home repurposed into an art kit. Our kids both loved receiving all these for Christmas gifts and use all of them the time.

I’m going to get many nasty comments for this, yet here it goes. ?We gave very little away to charity in 2016 and also I’m totally okay from it. ?We only spent $67 out of our already scrooge-like $100 budget. ?Maybe we’ll give?hundreds, thousands, or perhaps millions to charity at some point. ?We still have three youngsters to take care of and several other personal unknowns. ?Health care costs in the future are usually uncertain. ?In the meantime we are mixed up in community and volunteer our own time in various ways.

2016 was a enormous year in the Personal Fund blogging community. It?seemed to be pretty awesome when Mr. Money Mustache gave away $100,1,000 of his loot so that you can charity. ?Then Physician amazing did the same thing. ?I believe these people received some decent tax breaks from making these good sized donations (in some cases to their own contributor advised funds), and I aspire to one day turbocharge the value of my supplying by finding some regulations and tax breaks too. ?That time is not at this time.

I’m a big fan involving letting each person choose the way that they spend their money and not shaming many others into giving it away. ?I understand at least one other major Flame blogger feels the same way nevertheless I’ll never tell exactly who!

A quick note on optional expenses: over one third of the annual budget falls inside the discretionary category. ?And that’ersus a great situation to be in considering we can very easily slash optional spending if we enter an extended period of poor stock market returns. ?Cheap vacations or passing up them altogether combined with deferred toy purchases would reduced?our total annual charges to roughly $30,000.

 

Living nicely on less than $40,000 each year

So that’s the story of our $40,1,000 per year budget and how it played out in practice over the past calendar year. ?Sometimes I’ll hear from high spending folks that there is no way any individual could live on $40,000 each and every year, and certainly not with three children.

However if we gross up our $40,000 per year budget for you to account for things we don’capital t pay for, it’s easy to see precisely how we’re living a $100,1000 per year lifestyle only minimal sacrifices:

  • +$20,000 mortgage payment
  • +$5,1,000 new car payments
  • +$10,000 further tax bill
  • +$5,000 dumb personal moves (credit card interest, prolonged warranties, investment management service fees)
  • +$10,000 rough annual property value travel hacking free rooms and free flights
  • +$10,000 operate related costs (lunches out; fancier wardrobe)

So if you’actu like me and spend around $40,000 per year, realize that you may well be living a luxurious six figure chosen lifestyle without even knowing it! ?And thank you for visiting the club.

 

How to track spending like a pro

When I was working We kept track of spending nonetheless never budgeted. We continually had a surplus of capital and spent like most people wanted to. ?I used a simple spreadsheet to keep track of our payments.

Total 2016 Spending (screen cap out of Personal Capital)

 

Then a?number of years ago I switched to Personal Capital to track all of our expenses (full review). ?Personal Cash also tracks all our revenue (including dividends and fascination), and summarizes a couple dozen investment accounts into one screen. ?It is completely free to use Personal Funding whether you have $10,000 as well as $1,000,000 or more. ?When you don’t already track charges, try?Personal Capital, mainly because it only takes 10 minutes to join and link all your consideration.

 

 

How was your 2016 spending? ?Who’verts going to win the biggest spender accolade? ?And the?tiniest spender award? ?Make an impression on me with your numbers!

 

 

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