I wish it were this easy to run the yearly numbers.
I haven’t done one of these types of posts in a while but I feel it’s worthwhile to capture our spending picture for 2015.
The numbers this year are a bit uneven. This is because we moved during the year, and the monthly expenses look pretty different when comparing across residences, i.e. before and after the relocation.
And of course there were a few 1-off expenses, some of which were related to the move. These will be accounted for.
Note 1: I will not be including any costs associated with the actual RE transaction. They don’t count as part of yearly spending.
Note 2: In all of my financial posts, this one included, I list my half of expenses and net worth. My wife and I function as fully autonomous money-handling units.
Enough blabber. Let’s get to it.
Pre-Move Housing (Jan-May 2015 Inclusive, 5 months)
|
Category |
Monthly |
Total |
|
Mortgage (Note: Full Payment Listed – Yes, I know some of this is principal and therefore paid “back” to me, but that comes out in the Net Worth wash in a separate section.) |
793 x 5 = 9516 |
3965 |
|
Taxes |
335 x 5 = 1675 |
1675 |
|
Home Insurance |
206 | |
|
Home Improvement |
180 | |
|
Utilities |
5 months of Elect + Oil |
890 |
Pre-MH Total: 6,916
Post-Move Housing (Jun-Dec 2015 Inclusive, 7 months)
|
Category |
Monthly |
Total |
|
Rent |
950 x 7 |
6650 |
|
Electricity |
variable x 7 |
233 |
Heat and Hot Water are included in rent.
Post-MH Total: 6,883
Everything Else
|
Category |
Monthly |
Total |
|
Groceries |
variable |
2377 |
|
Restaurants |
variable |
1418 |
|
Cable |
Cable/Phone/ISP 74 x 12 |
888 |
|
Cell |
variable |
249 |
|
Medical+Pharmacy |
variable |
142 |
|
Gifts/Donations |
variable |
1880 |
|
Moving Expenses |
Rental Truck, some packing materials, 1-week really really large temporary storage unit rental, and readers, don’t you dare ask me about this if you value your life. (ha. ha.) |
214 |
|
Cafe/Coffee Out |
variable |
128 |
|
Gas |
variable |
784 |
|
Other Auto |
variable |
1290 |
|
Vitamin A(lcohol) |
variable |
0 |
|
Misc |
variable |
504 |
|
Clothes |
variable |
216 |
|
Vacation |
Multiple trips out of state via auto, one r.t. airfare to CA, includes food, restaurants, the whole shebang |
1440 |
|
Fitness/Entertainment. |
No shame here: I ran more than a few expensive races in 2015. On the gaming side of things, I bought a used Sega Saturn and a few discs for about $120, and a half dozen Steam games for 50ish. Saw a few movies in the theater, went to a handful of concerts, and there you have it. |
1027 |
One category you might notice is not making an appearance this year is “Work Gifts.” Hooray! I’m no longer compelled to buy stuff for co-workers because someone has produced a baby or gotten married!
Three cheers for not having to purchase social or managerial approval at the office anymore.
EE Total: 12,557
Post-Quit Medical
My job covered me through April. Immediately following that I jumped on my wife’s insurance plan.
But when my wife left her employer in September of 2015, we had to get on an Affordable Care Act (ACA, AKA Obamacare) plan.
It was a pretty simple process. We used the MA state connector to find the least expensive bronze family plan and signed up for it. This ended up being 382/mo for the entire plan (for the both of us.) Tack on another $50/mo for dental, bringing the total to 432.
We could call this $225/mo for myself, for 3 months, October through December.
It remains to be seen what, if anything, I’ll get back on tax breaks. For the purposes of the 2015 evaluation I’m going to assume nothing since I earned some money. (This probably isn’t accurate — I’ll probably get something, since I didn’t earn much this year, but I want to keep this analysis simple.)
Next year, though, that will change, big time. Without much income to report, I expect the subsidies to be pretty good.
Also note that in December we switched to a high deductible silver plan for 2016 — a better plan, one that costs $550 a month — precisely because we expect to be reimbursed for most of it, at least, according to the Kaiser Permanente ACA Subsidy Calculator.
After the subsidy, I’ll likely be paying $75-100 a month for a nice plan next year. My wife will pay the same.
Anyway, you can see I’m getting side-tracked a bit here. I do that sometimes. I would also like to take this moment to discuss my thoughts on the new Star Wars movie and countless other non-finance topics, but instead I’ll exercise some restraint and get back to business. Never say I don’t look out for my readers.
Here’s the bottom line for 2015 insurance costs:
3 months of Post-Quit Medical Coverage: $775
Summary
So we have some data. And it’s common knowledge that Data Must Be Converted Into A Chart.
When we do that, we come up with this:
Total in 2015: $27,131
For comparison, here’s the same summary from last year.
Total in 2014: $27,068
What struck me is how surprisingly similar the charts were, despite the fact that I’d just sold a home, become a renter, gone on some expensive vacations, started up an ACA plan, and increased my yearly charitable donation from 1,000 to 1,500.
A few additional notes:
- Back when I created the drawdown series of posts to detail the financial plans, my wife and I were anticipating buying a new place — a condo. And my targeted spending was much lower: 18K. I’m 50% over my target at 27K! What happened?
- Thankfully, there’s a simple explanation. In my 2014 projections, we were going to own a condo outright, making housing costs about $375/mo for myself. Instead I’m paying $950 in rent — that $600 monthly difference accounts for about 7,200 of the difference between 18K and 27K just by itself.
- I’ll also point out that since we pulled equity out of our home when we sold it (200K each) that this 200K should cover the 7K year difference between renting and buying. 200K in invested assets should theoretically allow you to spend around 1/25th of it yearly (8K) which works out to an awesomely evil $666 a month.
- I’m also a little higher on groceries, entertainment, charitable giving, and restaurant spending. But by and large my actual spending lined up with the projected totals – I don’t see anything in the numbers that has caused any great alarm.
I anticipate similar spending next year. Maybe 2K higher on the vacation spending as my wife and I finally engage in some long-overdue international travel, but housing will actually come down a bit — as will, I suspect, restaurant and entertainment outflows.
And maybe this is too forward-looking, but I am going to guess that our expenses will fall in the following year (2018) as we calm down and settle into grooves. This is common trend for retirees, after all — to have a short spending spike in the years immediately following retirement, only to then see declines in spending.
Only time will tell.
Net Worth Update
- At the end of last year I listed my NW as 890K
- The inflation adjusted, dividend reinvested return on the US Stock Market (S&P 500 or similar) was insanely close to 0% (flat) over this duration.
- The inflation adjusted, dividend reinvested return on my bond holdings (30% of my AA) is about negative .5%, resulting in a loss of approximately 2K
- I managed to save an additional 32K into various accounts prior to moving
- We ended up selling our home for 110K more than the value I’d estimated for the residence last year. This increase resulted in a real-world individual gain of about 50K for both me and my wife.
- But of course I spent 20K or so over the 9 months I wasn’t working so this takes the ‘ol net worth down a notch.
End Result: Though the markets were more or less flat and I spent 2/3 of the year not working, my NW went up by about 60K to 950K.
Math:
890K – 2K (bond loss) + 32K (savings), + 50K (Real Estate Value Increase) – 20K = 950
Give or take, you know. I haven’t factored in taxes. But it’s close enough.
If you’re interested in reviewing my entire savings and investment history, work through the Job Experience set of posts on this site. The last page of every post contains a financial update.
Year’s End Retirement Checkpoint
When I was still in the planning phases of early retirement, I decided to perform a fairly complete financial reckoning every year in mid-December. (Full steps are detailed in the ‘strategy‘ section of the Drawdown series.)
Here’s what I ended up doing:
- Market Evaluation. Given the flat markets, I will not be dipping into my cash reserves to fund living expenses next year. Instead I will pull 28K out.
- tIRA to rIRA conversion. I’ve been planning to use the Roth Pipeline method of converting assets from my traditional IRA into my Roth slowly over a number of years as a way to reduce my tax burden. However this year I earned over 20K since I worked 3 months of the year, so it no longer makes much sense to begin the conversion process in 2015. I expect 2016 will be the first year that I begin to move money from one account to the other.
- Expense Check-in. Yes, I roughly hit yearly targets, see above.
- Rebalancing in Tax-Advantaged Portfolios: Unnecessary, given relatively stable markets.
- Loss Harvesting: I added 200K to my portfolio as a result of selling our house. 140K of this (70%) was added directly to taxable US-DOM Vanguard mutual funds, which promptly took a 4% dump (about 7K). So I swapped out VTSAX for VLCAX, realized the loss right after the dividend distribution, and I’ll get a percentage of this back when I file taxes. I also set a reminder to move VLCAX back into VTSAX after 31 days, at which point it’s legal to go back in as per wash sale rules.
- Tax Code: No changes in tax code that will prompt any changes to the plan
- Re-Execution of Simulators: Re-Execution of cFIREsim with updated values.
Input Variables:
950K portfolio, 28K/yr spend, 8% cash, 66% stock, 26% bond, 30 year retirement.
Looks fine to me.
The results don’t look much different with longer windows.
Re: Cash. If you want to understand why we carry so much, please read the full details of my personal retirement plan, listed in the drawdown section of the blog. Long story short, I’m perfectly aware of the drag risk that cash imposes on a portfolio. But I also value the security that it provides against potentially steep market drops.
Bottom line: I have enough built-in buffer on my asset sheet to “afford” this allocation, so it’s safe for me. Theoretically a 100% stock allocation beats all other options over the long haul (and can therefore be argued to be the least risky), but I’d personally rather be diversified (read: have a reasonable bond exposure) and somewhat hedged against alternate risks than positioned to make the greatest possible returns on my investments over the course of my life.
Put another way, I’ve stated in multiple posts that that my wife and I “oversaved” for retirement.
But the truth is that we are spending that extra money — on a financial plan that will, in theory, still result in overall retirement success while reducing volatility and helping us sleep at night. If we were cutting it close and going with a 4% withdrawal rate with absolutely bare-bones expenses, we’d probably need to be in 100% stocks to make up for the lack of buffers. And that’d be a potentially rockier ride.
Just my preferences — Though it’s right for us, I do not recommend this precise plan or allocation for everyone. What I do strongly recommend, though, is for people to understand their choices to the point that they can make decisions that they are personally comfortable with, blah blah blah insert standard disclaimer and statement that people must take full responsibility for their own actions/plans.
The Last Word(s)
I didn’t expect much growth this year given current market valuations, so the flat conditions didn’t surprise me in the slightest.
Our spending was in-line with our projections.
Finally, I’m happy with the amount of additional saving my wife and I were able to do via the home sale and some final earnings from our respective jobs.
Nothing else to see this year — just a nice, easy passing grade on the 2015 financial picture.
All the best to everyone in 2016!
So glad I finally got to work in a Star Wars reference. Loved the new film, btw.
Living a FI 
Thanks for the post. I’m excited to read about your international excursions next year!
Thanks for the note – but I will take this opportunity to remind readers that this is isn’t a travel blog and I likely won’t be writing all that much about the trip itself, other than a sentence or three high level summary.
Great summary, and thanks for indulging us with a voyeuristic view into your financial soul.* 🙂
No surprise you’ll continue to do well with a ~3% withdrawal rate. That’s about what we are pegging at, and it seems to do well in virtually all scenarios in cFIREsim. Though I’m thinking about setting an upper limit of 4% of portfolio value each year (haven’t ran detailed calcs on that yet).
* My existential side asks “does Dr. Doom have a soul”?
>>* My existential side asks “does Dr. Doom have a soul”?
Heck yeah he does. I mean, it’s tarnished by evil and all, but he’s just a human dude in the end.
Good to know. Stay Evil, my friend.
I enjoyed the post. It is interesting that your spending was so similar as to the prior year. And since healthcare is definitely one of my early retirement concerns, your ACA numbers gave me some reassurance that it won’t be so bad. So great that you can retire early and then get subsidies for cheap healthcare — what a FIRE win. Any thoughts on where you might do your international travel yet?
> I will be waiting until I receive 2015 W-2s from my employer before I perform my conversion as per Roth Pipeline strategy. The amount I move will depend on my taxable income for 2015 and I’m not exactly sure what that is yet.
Question on this. Is the deadline to do a 2015 conversion of traditional to Roth not December 31st, 2015?
Happy New Year to you and your wife!
Travel will be Portugal. You’re right about the conversion deadline. Have to do it during the taxable calendar year. It’s not a big deal, this is not a good year for me to start the pipeline since I worked a third of the year. Glad to assuage your concerns about health care. All the best–
Can’t wait to see what 2016 has in store for you! May the force be with you, Jedi Master of early retirement.
Thank you 😀 It’s gonna be a good year. Hope the same for you.
Like “Seeking FI in Boston”, I also think that it might be too late to do a Roth conversion for 2015. I think (the Mad Fientist would probably know more) that you can do a “re-characterization” to undo a conversion even after the tax year, but I don’t think you can do the conversion after the year has ended. But I’m also not an expert.
You’re right, I just checked this. The point of confusion is that you are allowed to do a recharacterization for the prior tax year up until filing date. However, conversions are treated differently, and must be completed during the calendar year. I’ve adjusted the post to reflect this. In the end it doesn’t matter – I made over 20K so it doesn’t make a ton of sense for me to start the conversion process in 2015.
Thank you.
I miss the posts where you were complaining about your job. Can you get back to work life just so you can post more of those?
I’ve been thinking about doing a post about the modern state of work, which appears to be getting worse overall. In fact, I’ve collected a series of articles that seem to back up my anecdotal observations. (One of them is the now infamous Amazon.com Work-Is-Hell story on the nytimes, which would up being their #1 most commented upon article in 2015… clearly hit a nerve with the general public. When I read that article I was just like: So what? The kind of crap documented there has been my life in software/IT for the duration…) Anyway, possibly this will satisfy your insatiable and inexplicable need to see me agonize over the general crappiness of office work, at least for a while? Here’s hoping.
> I’ve been thinking about doing a post about the modern state of work, which appears to be getting worse overall.
FWIW, I’m already excited about this post.
If you want some extra background reading on the topic of how people feel about work from 60-70 years ago, check out Studs Terkel’s classic “Working: People Talk About What They Do All Day and How They Feel About What They Do”. Very interesting read if you’re into non-fiction.
TL;DR: Basically, most people don’t care that much for work and it gets tedious quickly. Some like it for social reasons and/or because it fills the day and they can’t imagine what else they would do (those are mostly the creative or autonomous types of workers).
I’ll check it out of the library today, that sounds right up my alley in terms of interests. This is one of those rare TL;DR summaries that makes me want to read the whole thing.
Nice summary! Health care seems to be our biggest unknown, whereas we’ve been able to get a pretty good idea of the rest of our spending and biggest spending pitfalls. Recently, we realized this year we spent about $1k/month in home repairs, if you split it up that way. That makes it tempting to look at renting vs buying. Only time will tell.
The health care subsidy is yet another good reason to keep your spending down in retirement.
BTW, the great thing about renting: You can always try it for a year and see how you feel about it. It’s virtually risk free, doesn’t tie you down. If you change your mind, you can buy. Buying a place where you’re unhappy or, alternately, need to move in only a couple of years, is the bigger risk.
Your spending is very stable so far. No wild and crazy world domination activities (yet) – those can be expensive! But, you have shifted categories a bit – this year housing + utilities is all in one category (52%), but last year it was PITI (= housing?, 52%) + utilities (11%) = 63%. If I am correctly understanding the pie parts, that is a significant difference. Since your rent includes some utilities, I understand why you had to lump them together.
I haven’t done a comparison of my work / FIRE months for 2015 yet – I need to do it! Since the first 5 years seem to be critical to FIRE plans, I am still tracking expenses. And it appeals to my anal retentive / control freak tendencies. Friends that retired last year went on a travel spending spree! Coupled with very conservative investments (bonds) and a moved to a new house they had built – it made me nervous. But, they retired in their 60s, and they need to be comfortable, not me!
Nice catch on the PITI versus “Housing” chart update and you are correct on the reasons for combining rent+utilities — it was because some were included in rent already. But yes, the bottom line is that we are paying less for housing and utilities now that we’ve moved. The money that became freed up went into a variety of buckets that give us increased day-to-day satisfaction — a bit of an uptick in grocery spending, some vacationing, some gift giving. All good trades.
I don’t blame you for tracking expenses at least the first several years, that’s smart. I can’t seem to help myself either — as you can see, I’m still doing it too.
I know what you mean about getting nervous about people that seem to be making questionable spending decisions. Travel can be a huge expense if you want it to be, easily running tens of thousands of dollars if you’re really doing it up.
>>they need to be comfortable, not me!
I suspect you are already pretty comfortable, G. 🙂 Maybe even more comfortable than your spendier friends.
Have fun doing your own 2015 breakdown!
Thanks, dude. Glad “stealth ER” still allows for annual transparency.
Maybe next year there’s some band income?
Absolutely, the beauty of Stealth ER is that my anonymous blogging alter-ego can share whatever he wants without any fear of RL consequences.
Hold up… bands can make money?? 🙂
Haha… What’s the conversion rate on bar tabs?
I finished 2016 spending about $32k in Manhattan which makes me feel great that I can keep my expenses low in any US local. Love the details as it gives me comfort in my plan for the future. Keep on keeping on.
Congrats, those numbers are awesome considering NY’s COLA. Keep up the great work, FF!
Always great to see an update from you 🙂
And always nice to see you on the site, GC. Hope all is well, and happy 2016!
Happy new year to you too! Things are going okay here 🙂
great post as always, but more importantly, what ARE your thoughts on the new star wars movie??
Though you might be joking around by asking this question, I will answer it the only way I am able: With deadly seriousness, and zero spoilers.
It’s very, very good, despite the fact that it doesn’t introduce a whole lot of new elements into the Star Wars universe. New characters are likable, action scenes are well shot, move fast, and portray a sense of urgency that I felt was mostly lacking in the prequels.
Really slick and extremely fun. I have some small complaints but they’re honestly pretty nitpicky. It’s definitely #3 on my list, just below New Hope and Empire. (I’m in the camp that would have liked Jedi a lot more if the Ewoks were Wookies and some of the silliness was removed, which mostly accounts for the #4 ranking in my book. But hey, no Jar Jar!)
Perhaps best of all, it’s got me excited for what comes next. This is the opposite of how I felt after Phantom Menace, which was: Dear god, what if the next two movies are as mediocre and lifeless as this one? (They weren’t, thankfully — Menace is just terrible, Darth Maul scenes notwithstanding, IMO. Yippeee!) Still, I wouldn’t label my anticipation of either II or III as “excitement”.
Happy New Year Dr. Doom!
Same to you, Carlos!
MOAR VITAMIN A!!! I’m enjoying a little brandy tonight in your teetotaling honor.
Awesome. I continue to list A even though it’s 0 mostly as a reminder to myself how far I’ve come in that category. During my more problematic years, I was sometimes spending $300/mo on booze. So I’m flossin’ when I drop the big zero in that field. Got no problem with other adults enjoying adult beverages, though…
so Cheers, FV.
Nice overview (especially like the cFIREsim graph), great to see you have done well in 2015.
Enjoy 2016!
Thanks for sharing! Out of interest what are those other car expenses? And why is your cable bill so horendous, assuming that’s only half of it and your partner is paying the other half?
Sure, let me shed some light on your questions:
In 2015, cable was actually cable + land line + ISP. The monthly package after taxes and services was close to $140 and we also use netflix and I embedded that expense in this line item as well. The land line was necessary due to work from home requirements (which are no longer a requirement, obviously.) We’ve recently changed our package and reduced this cost to $105 (no land line and a more basic cable package). If I were the only one making decisions, I’d move to ISP only but when I discuss things in committee, we find cable is necessary. This is real life, what can I say?
Other auto included a new set of tires for the vehicle at close to 450 after install and other calibration, registration expenses, license renewal (mine was due last year,) excise tax (very modest on our 10-year old Corolla), insurance @450ish, two oil changes and windshield wiper spline cleanout + new blades, necessary after a recent ice storm gummed things up. Chalk it up to standard yearly maintenance and paperwork costs. Owning a car ain’t cheap — it’s one of the reasons so many people angling for early retirement do a lot of biking. I’ll also add that auto expenses are the only thing listed on this chart that I pay 100% of the costs — the vehicle is considered “mine” and she rarely drives it. I probably should have mentioned that earlier 🙂 We are a 1-car family, though.
Why do you bother spending the $50/mo on dental instead of self insuring? Unless you have horrible teeth, cleanings and an exam shouldn’t cost $600 a year per person.
I generally have good dental health but I will need a root canal this year — it’s looking like Feb/March. Once that’s over we will re-evaluate this decision, likely dropping it. Appreciate the comment. Dental is certainly optional and doesn’t make sense for many people.
Ahh that makes sense! I’ve been researching dental health plans and they seem almost a rip off.
As always, loooooooooove the long posts. The detail is incredible. I found your plan to continue renting for the time being interesting. I have just made this decision as well- you can’t beat the flexibility. And with extremely high cost of housing in Australia, it seems a no brainer.
Nice 2015 closepout post. I like that you had to re-adjust your budget significantly upward, did the yearly math, everything looked good and moved on with living. For your 28k living expenses, do you pull a lump sum at the beginning of the year, or draw some monthly?
Lump sum.
Good for you! Unfortunately, we didn’t do so good in 2015 and spent $118,000…
Dear Doom,
First time, Long time! Love the blog, your transparency and your writing style. And I especially appreciate the guideposts you have provided of your own journey and the way they help illuminate the path of myself & many others on this same journey.
I’m also married (though with 2 kids) and although I earn almost all of our combined income, I always think of & calculate our net worth, spending, etc as a combined unit. I would be curious to know if your wife’s share of your combined estate mirrors the details that you provided for your own side of the equation. Does her spending also roughly match yours?
There are obviously many advantages of being a married couple who can share living expenses, etc. and I guess I would like to confirm for my own situation what your ‘total’ picture as a couple looks like to better compare it to my own FIRE journey.
Thanks in advance and please keep up the good work!!
Mike
Mike – thanks for the comment. Let me address your question.
>>I would be curious to know if your wife’s share of your combined estate mirrors the details that you provided for your own side of the equation. Does her spending also roughly match yours?
It’s close but not exact. Both her NW and spending levels are about 15% higher than mine. She’s earned more income throughout her career, mostly because she didn’t downsize employment the way that I did about 4 years ago. My last 3 years of employment I was earning about 85K (down from 120) whereas she was still pulling that 120(ish) and that accounts for most of the difference in NW between the two of us.
I won’t tell you exactly how her spending patterns differ though, aside from offering that 15% figure.
Just got through reading the Drawdown series, then came here. Bravo on both counts! Glad to see it working out for you. I’ve crunched numbers scores of times and think I’m golden (and truly, with a pretty sizeable pension, I won’t go hungry unless the federal gov. defaults on its obligations), but of course there’s always that nagging little doubt. Reading your posts help to assuage that doubt. Also, greetings from a fellow Bostonian (okay, Somervillen, but close enough).
I just found your blog and I love it. I am also FI and almost ready to retired early, but keeping putting it off due to “unknown/fear”. So your blog really resonates with me and I find it incredibly helpful, easy to read and quite funny.
Please continue to update your “retirement” life and check in once in a while. I’m particularly interested in your “discovery” ACA and all the “hidden/unexpected” expenses/lessons learned during the first few years of early retirement. Thank you.
Just curious if you could provide the ACA update. Are you all getting insurance subsidized. If so, how much are you paying, is it the $147/month like in the graphic above?
Hi Mike
Too lazy to create a full post on it, but we are currently paying $322 a month on a Blue Cross Blue Shield Silver plan in MA. That’s for a family plan that covers both myself and my wife, and is post-subsidy. So it’s not quite 147 — it’s about 161 each.
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