EPI's "Modest" Family Budget Calculator

[DoubleDown]

I have no idea what the Economic Policy Institute (EPI) is, although I could quickly guess based on the information highlighted on their website. But their so-called "modest" standard of living calculator is laughable for anyone on this site practicing a frugal, actually modest lifestyle.

http://www.epi.org/resources/budget/

Example:

For my family of 5 (2 parents + 3 kids) in the DC area of Northern Virginia, we supposedly need to spend a minimum of $107,663 annually just to get by. Here's their breakdown:

Two Parents, Three Children
Item   Cost
Monthly Housing   $1890
Monthly Food   $921
Monthly Child Care   $2162
Monthly Transportation   $607
Monthly Health Care   $1638
Monthly Other Necessities       $720
Monthly Taxes   $1035
Monthly Total   $8972
Annual Total   $107663

I would call spending $107,000 annually in this area living lavishly. Also according to the first bullet point in the calculator's description, the minimum cost of living for a family of four in the least expensive cost of living area is $48,144 annually.

"The basic family budget for a two-parent, two-child family ranges from $48,144 (Marshall County, Miss.) to $93,502 (New York City). In the median family budget area, Newaygo County, Mich., a two-parent, two-child family needs $63,238 to secure an adequate but modest living standard. This is well above the 2012 poverty threshold of $23,283 for this family type."

Have fun seeing what you need to spend just to get by where you live!

[TLV]

Looking at my area...it might be a bit high, but it's not laughable, at least not all of it.

Seattle-Bellevue, WA HUD Metro FMR Area (WA)
Two Parents, One Child
Monthly Housing $1104
Monthly Food $598
Monthly Child Care $719
Monthly Transportation $607
Monthly Health Care $1385
Monthly Other Necessities     $436
Monthly Taxes $360
Monthly Total $5209
Annual Total $62507


Rent is low (Actual cost is at least $200  more for all family sizes, though high for singles or if parents/children share a bedroom)
Food is high ($200-400, gets further off for bigger families)
Childcare is low for infants, but high with school-age kids or stay-at-home parent
Transportation seems high, but it would be easy to hit this with an unreliable used car, or even if both parents commuted via public transit.
Healthcare - given that this includes employer-paid amounts and is an average across the population, it seems about right. Young, healthy people can certainly get by with less, but older people and those with chronic conditions average it out.
Other necessities - this isn't too bad for small families, but scales up ridiculously for the larger ones.
Taxes - seems about right.

We beat the numbers significantly because my wife is a stay-at-home parent and I commute by bike, but if you take those factors out the total is pretty close (underestimates in some areas countered by overestimates in others). It does seem to add way too much marginal cost for additional family members though.

[Gen Y Finance Journey]

My fiance and I don't have any kids yet, but apparently once we have one, we'll suddenly need to double our (already not-very-frugal-by-MMM-standards) spending just to get by!

[Joet]

I have no kids and spent more last year than what is posted in the OP, and my health care costs, childcare were right around zero

[KS]

Joet- but I've seen some of your other posts and you've admitted yourself you and your wife are big spenders! I live in the same general area as you and spend much, much less than that (also no kids, and income is lower than yours so it's necessary to maintain our preferred savings rate). But, at least you and your wife have the incomes to support your lifestyle and still maintain a pretty large savings rate. I know plenty of people here who spend like you do and make salaries closer to or less than mine... that's where it gets scary and I wish there was a way to intervene without being rude or a busybody!

Anyhoo for SJ/Sunnyvale/Santa Clara area the two parent/one child numbers (why not a kid-free option?) are:
Monthly Housing   $1610
Monthly Food   $598
Monthly Child Care   $720
Monthly Transportation   $607
Monthly Health Care   $1406
Monthly Other Necessities       $565
Monthly Taxes   $648
Monthly Total   $6154
Annual Total   $73851

Based on what I hear from parents I know, the child care value is about half the reality in this area... housing seems on the low side too if you want the kid to have its own bedroom. (And this is definitely assuming rental or maybe a small condo, there is NO owning a single-family home with that kind of monthly payment if you didn't buy it years ago.) We're pretty frugal but splurge in some areas like travel and gifts, and still come in just abovehalf that annual total... We wouldn't want to have a kid in our current apartment though so that and other kid-related expenses would bump things up, not sure if it would be ~30k worth though!

[Joet]

I think I'm having decent success bringing spending down tbh!

Monthly Housing $2600 (100 yr old 3br,including property tax+ins)
Monthly Food $900
Monthly Child Care $600 [substituted pets]
Monthly Transportation $1100 [historical, no car payment any longer]
Monthly Health Care [$25? Or probably similar implicit]
Monthly Taxes $7000/0 [not sure how this is tabulated? probably should go with zero]
Monthly Other Necessities $0 [with that clever word choice I have to go with zero]
Monthly Other $hit $4-5K
Annual Total: $100k+

It would be a huge score to get it down to 100k [8333/mo]
Cringe worthy perhaps, but from my perspective thats a ~20-30% improvement

I dont include taxes in my budget, I just subtract it from income

[Zamboni]

I actually didn't think it was too far off for where I live.  The food was only a little more than I spend, and I shop the loss leader items and cook at home most of the time.  Looking at the overall estimate for my situation, I spent $500 less in my spendiest month this year and $1800 less in my thriftiest month.  My housing costs are more than the estimate, but I have a bigger house than we really need.  Where I really beat it is transportation, child care, and healthcare.

[Joet]

I wonder if the healthcare isn't actually technically correct, I imagine those of us thinking we are 'doing better' are ignoring our employer costs related to our healthcare

[Rural]

Our area (there's actually a 'rural category, yay!) comes out to only a little more than twice what we actually spend.



Item   Cost
Monthly Housing   $621
Monthly Food   $598
Monthly Child Care   $395
Monthly Transportation   $717
Monthly Health Care   $1210
Monthly Other Necessities       $312
Monthly Taxes   $173
Monthly Total   $4025
Annual Total   $48302

We don't have children, so cut out the childcare and cut down the groceries by a couple hundred and that leaves 43302 annually or $3525 a month. We spend right at $2000 a month because of my long commute.

[rosaz]

Mine actually looks fairly legit...

Boston-Cambridge-Quincy, MA-NH HUD Metro FMR Area (MA)

One Parent, One Child

Monthly Housing  $1444
Monthly Food  $369
Monthly Child Care $1019
Monthly Transportation  $480
Monthly Health Care   $1037
Monthly Other Necessities    $464
Monthly Taxes  $722
Monthly Total  $5535
Annual Total $66419


Rent listed here is a couple hundred too high, and food maybe $70 too high, but higher childcare costs more than make up for it (and thank goodness little on is in preschool now - infant care much more expensive!) Transportation budget here is hefty, but I'm used to my bus pass, so may not be the best judge. Other Necessities seems a bit high, but counting utilities, clothes for the little one (who grow like a weed), student loans (which ok, maybe shouldn't be counted in this category) - it's a bit higher than mine, but not laughably so.

As I understand it, health care costs, including employer contribution usually run around $10000 for a family like mine, so the cost here is only about 20% too high.

All in all, modest might not be the best word, but excluding transportation (as I said bus pass, which I know many folks in my area consider a few rungs below modest!) and healthcare (not sure of exact figures), I'm probably within a couple hundred or so, so this seems like a fairly reasonable estimate.

[arebelspy]

I have two issues with this, neither of which have to do with the accuracy of it compared to actual spending in my city (i.e. most people's complaints).

1)  It's just my wife and I, no kids yet.  Apparently we aren't a family though, as the only options include kids.  You have to have at least 1 kid to be a family.

2) Their amounts between kids are quite inconsistent.  Here in Vegas, it says:
2 parents 1 kid: $58,553 annual
2 parents 2 kids: $66,343 annual
2 parents 3 kids: $84,272 annual

So 1 kid to 2 kids jumps $7,689 for the second kid.  But then 2 kids to 3 kids jumps $17,929 for the third kid.  WTF?

I can see how going from 0 to 1 kid would be a significantly higher jump than 1 to 2 (due to childcare for 2 being incrementally higher, food and clothes being efficiently scalable, etc.), but going from 2 to 3 should cost you less than 1 to 2, not more than double it.

How could a second kid add 7.7k to your budget, but a third one adds another 18k to your budget on top of that?

[TLV]

How could a second kid add 7.7k to your budget, but a third one adds another 18k to your budget on top of that?

The biggest change is their methodology assumes you'll move from a 2-bedroom to a 3-bedroom apartment when you have a 3rd kid. ($6k)

Also, the tax expense goes down when going from 1 to 2 kids (because the credits/deductions more than offset the tax on the additional required income), but go up from 2 to 3 kids ($2.5k; higher tax bracket means the credits/deductions aren't enough to offset anymore.) This isn't realistic for someone working, of course - it would only be appropriate for someone living off tax-deferred accounts, who has to increase withdrawals/taxable income in order to meet the kid-related expenses.

[arebelspy]

How could a second kid add 7.7k to your budget, but a third one adds another 18k to your budget on top of that?

The biggest change is their methodology assumes you'll move from a 2-bedroom to a 3-bedroom apartment when you have a 3rd kid. ($6k)

Also, the tax expense goes down when going from 1 to 2 kids (because the credits/deductions more than offset the tax on the additional required income), but go up from 2 to 3 kids ($2.5k; higher tax bracket means the credits/deductions aren't enough to offset anymore.) This isn't realistic for someone working, of course - it would only be appropriate for someone living off tax-deferred accounts, who has to increase withdrawals/taxable income in order to meet the kid-related expenses.

Ah.  I still disagree (17k for the 3rd kid!?), but it at least makes a little more sense than the complete randomness I was assuming. 

I appreciate you taking the time to enlighten me.

[Megatron]

whoever programmed the calculation logic probably used a random number generator.

[infogoon]

Apparently a family of five in my city needs nearly $100k/year to get by. But my city has a median household income of under $25k.

I think the tool is well-meaning but using some bad premises.

[mpbaker22]

St. Louis, MO-IL HUD Metro FMR Area (MO)
Two Parents, One Child
Item   Cost
Monthly Housing   $830
Monthly Food   $598
Monthly Child Care   $551
Monthly Transportation   $607
Monthly Health Care   $1397
Monthly Other Necessities       $366
Monthly Taxes   $305
Monthly Total   $4653
Annual Total   $55836

Hypothetical potential expenses
Monthly Housing   $600
Monthly Food   $598  (I'm always a big food spender)
Monthly Child Care   $0
Monthly Transportation   $300 (we'll even assume 2 cars)
Monthly Other Necessities       $366  (well this is hard to compare) - we'll reduce it to 0.

So we're at $1800/month before health care.
Monthly Health Care     $1397
I've heard children's healthcare is expensive, but could it really be this much?  This is equivalent to several years of my historical healthcare spending in each and every month?  I imagine you have to be going to the doctor several times a month to hit this number, even after amortizing hospital costs for delivery.

Final point - You can make anything look difficult by tagging unreasonable costs to it.