Is anyone here still actually aiming for under MMM's original 25k a year figure?

[Ron Scott]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

[former player]

Living a life of FIREd luxury with a paid off house, £15k a year for me and my dog last year.  Should be less this year I think, what with the pandemic and all.

[snowball]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

Choosing to limit your spending to the poverty level, with substantial savings for emergency expenses, all the time in the world to insource tasks, and the ability to easily move to cheaper locales...is very different from living on full-time employment income at that level with no emergency fund and crappy benefits.

[never give up]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

There’s a huge difference between choosing to live at a low level of expenses and actually having to. Most of those at the lower level of expenses have no mortgage or rent costs to worry about, have an emergency fund, and can flex to increase their income should they need to. My expenses are below “comfortable” levels here in the UK but I wouldn’t claim for one moment I’m in poverty. I have a roof over my head, heating, access to clean water, electricity, the internet, more home comforts than I dare mention and access to beautiful countryside. I just am currently not spending very much.

Edit - whoops cross posted with snowball.

[snowball]

Edit - whoops cross posted with snowball.

Such synchronized brilliance, lol.

I think I would also point out that the FIRE folks who do this are self-selected people who are generally really, really good at optimizing expenses and making their money go farther.  It's a bit unrealistic to expect the same of the general population.

[MasterStache]

Nahh, everyone's situation is unique. We are talking about 2005 as well.  Even MMM's spending increased significantly. Our family of now 3 could live on roughly 25K/year but that would require telling my daughter she cannot compete nationally in gymnastics or play competitive volleyball.     

[Morning Glory]

Last year we were at 33k + mortgage for a family of 4 in US midwest. 6.5k of that was health insurance and medical bills.

[jim555]

It isn't difficult at all with free and clear housing to come in very low.  Low income and medical is free, car and gas use is minimal, taxes are minimal to zero.  Food is cheaper because you have time to prepare it yourself.  No need for work clothing, time to shop for bargains goes up.  I will probably be $13k this year, same as last year.

[BookLoverL]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

There’s a huge difference between choosing to live at a low level of expenses and actually having to. Most of those at the lower level of expenses have no mortgage or rent costs to worry about, have an emergency fund, and can flex to increase their income should they need to. My expenses are below “comfortable” levels here in the UK but I wouldn’t claim for one moment I’m in poverty. I have a roof over my head, heating, access to clean water, electricity, the internet, more home comforts than I dare mention and access to beautiful countryside. I just am currently not spending very much.

Edit - whoops cross posted with snowball.

Yeah, a deliberate FIRE/ERE "poverty" level spend is not the same as your average person earning the same amount. Many of the people in actual poverty are caught in debt traps with loan sharks and such like because they had no emergency fund to replace some critical item, etc., they often have decision fatigue causing them to make worse decisions, etc. The reason a FIRE person can spend at a low level is because they've taken the time to develop skills required to spend less money for the same standard of living.

Many people who end up pursuing FIRE have various non-monetary advantages such as "intellectual capacity to read and understand sites like MMM", "lack of extremely toxic relatives they haven't been able to cut off", and such like. While people who've grown up in traditional poverty *could* learn the skills needed for advanced frugal spending, if they're unlucky there may be situational factors that mean they actually can't take advantage of many things that a person with a strong emergency fund and a supportive family background can.

The vast majority of people reading this forum are at least privileged enough to have found their way to this forum in the first place. For instance, even though I'm now disabled, I grew up middle class and can take advantage of appearing to be middle class.

[jfer_rose]

Both me and my significant other are FIREd but we keep our finances separate. My spend has been between 18-24K since 2013, the only exception being this year in which I bought my first vehicle to allow me to run a retirement business that requires hauling lumber. I expect to be back in that range again for 2022 and as long as I can thereafter!

[Morning Glory]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

There’s a huge difference between choosing to live at a low level of expenses and actually having to. Most of those at the lower level of expenses have no mortgage or rent costs to worry about, have an emergency fund, and can flex to increase their income should they need to. My expenses are below “comfortable” levels here in the UK but I wouldn’t claim for one moment I’m in poverty. I have a roof over my head, heating, access to clean water, electricity, the internet, more home comforts than I dare mention and access to beautiful countryside. I just am currently not spending very much.

Edit - whoops cross posted with snowball.

Yeah, a deliberate FIRE/ERE "poverty" level spend is not the same as your average person earning the same amount. Many of the people in actual poverty are caught in debt traps with loan sharks and such like because they had no emergency fund to replace some critical item, etc., they often have decision fatigue causing them to make worse decisions, etc. The reason a FIRE person can spend at a low level is because they've taken the time to develop skills required to spend less money for the same standard of living.

Many people who end up pursuing FIRE have various non-monetary advantages such as "intellectual capacity to read and understand sites like MMM", "lack of extremely toxic relatives they haven't been able to cut off", and such like. While people who've grown up in traditional poverty *could* learn the skills needed for advanced frugal spending, if they're unlucky there may be situational factors that mean they actually can't take advantage of many things that a person with a strong emergency fund and a supportive family background can.

The vast majority of people reading this forum are at least privileged enough to have found their way to this forum in the first place. For instance, even though I'm now disabled, I grew up middle class and can take advantage of appearing to be middle class.

I'd like to add that a fire person has the capacity to save by buying in bulk or taking advantage of discounts for paying utilities a year ahead,  whereas a poor person with similar lifestyle wouldn't have that advantage.  In other words we can buy the $50 boots.

[Tasse]

My personal expenses, averaged over three years in which my living situation has admittedly changed a lot:

$20,000 / year total
$9,100 - rent
$3,600 - charity
$2,000 - groceries
$1,100 - car
$1,700 - misc obligatory ish expenses
$2,400 - misc luxury expenses (entertainment, restaurants, travel, gifts, etc)

There is a $100 rounding error in there somewhere.

Current expenses are higher than this average, and with my partner we spend ~$51k / year now. $29k of that is rent, $22k is everything else. No kids. We can't wait to leave Southern California and spend less on housing.

To summarize, it seems plenty of us are still spending frugally but needed the opportunity to brag about it. ;)

[KarefulKactus15]

My wife and I spent <$18k combined last year......whilst traveling more than half the year.

PS; been reading your journal over on ERE for a while now. This forum's definitely gotten soft and the demographic has changed a LOT over the past 3-5 years. There are still some outliers here, but it's mostly upper middle class folks patting themselves on the back for........I'll stop there before this turns into a rant.

I'd like to know your secret for travel on such a budget.   From Aug 2020-2021 it took me $72 a day just to be alive and have food, shelter and utilities.  $26,280 for a 1 year period.

Any travel would certainly be a big spike on the budget for any given month.

[Pinch of salt]

With no mortgage, I would still pay $600/month for taxes, insurance and utilities. If I don't have any government assistance for health care, I think I would budget $1,000/month for the monthly health insurance and another $500/month for actual health costs. Add another $800/month for a basic food budget and another $200/month for gas, insurance and repairs for 1 car. We currently spend $1200/month on food, so $800/month would be cutting back quite a bit.

$800 a month for 1 person seems pretty high for food tbh - I'm paying £20 a week (so about £80 a month or apparently $107 per month) for food at the moment. That's a compromise with my mum who I live with (should note here: we are both paying 50% of all household bills. Her money did most of the buying of the house, but in terms of the future I am not being subsidised by her moneywise). If I were buying just my own food then I could get it down to £15 per week per person by shopping at budget supermarkets only. This is all for a nutritionally balanced diet btw, I don't eat junk food.

The health costs seem like a reasonable thing to have as extra cost, though.

Food costs are very different between the U.K. and the US. I moved to the US from London U.K. and where previously I was able to buy £20 worth of groceries for a whole week from Lidl, in the US I can barely do $130/week (£100).


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[the_fixer]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

As someone that grew up in poverty including living in shelters and being bounced around from place to place trying to survive I think you are missing part of the big picture.

Having a paid off house, million + in the bank and living off 22k is much different from living off 22k, bouncing checks, having to decide between food or paying the utilities.

In one scenario you have little to no room to breathe, every little unexpected expense or emergency kicks your ass because you are scraping by day to day and do not have the same opportunity to get ahead.

Poverty and being poor bring their own set of difficulties that can make it brutal to get ahead or even survive, it can be like a cloud is hanging over your head or you have chains with concrete blocks around your feet it is hard to break out and easy to get dragged further down.

The other scenario you have an amazing amount of resources, backup, opportunity and freedom of choice. Your behavior and choices are not driven by survival but by what you want it to be, with that comes peace of mind and or freedom.

Example -
Riding a bike in winter to your 2nd crappy job minimum wage job on a shitty bike that breaks down because you have to make rent VS hopping on the fancy fat bike in your comfy winter close on a nice day to go for a FUN ride because you do not HAVE to go to work.

—————-

As a couple our spending is 56k including mortgage payments in a HCOLA we plan on paying off the house at FIRE and that will drop our combined spending to 40k and we live a luxurious life and have everything we could ever want or need (excessively so at time).

Once we FIRE I expect that 40k to go down even more due to not having 2 people doing the work thing and everything that goes with it.

Honestly I think we could (and probably will) live happy fulfilling lives (and healthier) on ~30k a year many of the activities we enjoy are very low cost such as kayaking, biking, camping and just hanging out with friends. My wife would be happy as hell to go ride her bike every day for entertainment and that costs very little since all of the trails are just out our back door and we already have everything.


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[CheapScholar]

I was aiming for a traditional lean FIRE MMM level of around 25k per year and a paid off house. My spouse and I just recently hit those numbers. I’ll just say, when you hit that level (inflation aside), it’s a very liberating feeling. I’ll keep working but only because I really like my work, and the stress level is quite low. It’s great knowing that I could FIRE whenever I want, and when I factor in the money I would make by working part time jobs that excite me, I see how 25k per year plus the paid off house is still very doable. (We have very low property taxes at $1,500 per year.)

I think a lot of people that had the original MMM numbers in mind probably have children that will be going to college in the coming years. That’s the case with us. We have enough in 529s to send our child to an in-state university, but I guess I’d feel guilty quitting my high paying job at 41 and not stockpiling more money in case my child needs the cash to attend an expensive school.

[bmjohnson35]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

We don't have kids at home, own our house/cars and no debt.  When you are debt free, live in a low cost area, cook most of your own meals, and reasonable about your spending, $25k provides a very comfortable lifestyle.  It's also helpful to perform your own home and car maintenance/repairs. 

The circumstances of the "great resignation" varies from person to person and probably can't be generalized as you have done. 

[cannotWAIT]

I think that people accustomed to spending more imagine that spending less will result in a life of deprivation. I know because I was one of them. When I was married our spending was much, much higher and I when I was getting divorced I was sure my postdivorce life would be one of miserable penny pinching. My standard of living feels almost the same though--mostly I've just stopped throwing money away on things that don't make my life any better. It's hard to comprehend until you experience it yourself.

And also, yes--as a kid we lived on approximately this same amount of spending, actually a little higher (the equivalent of about 30K today), but everything was shitty and precarious because there was no financial cushion at all. The two situations are vastly different. It is really hard to understand how I am living anywhere near the poverty level but I assure you, my life is very pleasant. The main thing I'm lacking is a feeling of security about paying for help in my old age.

[Zikoris]

I think that people accustomed to spending more imagine that spending less will result in a life of deprivation. I know because I was one of them. When I was married our spending was much, much higher and I when I was getting divorced I was sure my postdivorce life would be one of miserable penny pinching. My standard of living feels almost the same though--mostly I've just stopped throwing money away on things that don't make my life any better. It's hard to comprehend until you experience it yourself.

Yep. In my own experience, most people who spend a lot more than I do are not putting the difference into things that greatly upgrade their quality of life. For example, people who buy coffee and takeout all the time - they would be running around so much half the time they'd forget to even drink their expensive coffee, and whenever I asked people what they thought of the places they got lunch from, I don't think I ever heard acclaim better than "ehhh.... it's okay".

[American GenX]

These figures are a little low because they are from last year before the big increases due to inflation.

Single working adult household - paid off home - no kids - no pets

Approximate 2020 actual spend vs. estimated 2022 FIRE spending/budgeting based on stache.

2020 $14655 (FIRE $90000) Total spending
     
                      (FIRE $8000) Income tax (state & federal)
                      (FIRE $4600) Sinking funds for replacement car, home/car maintenance
                     (FIRE $3000) Home maintenance/updates - currently planned/needed (avg. over 17 years)
                     (FIRE $6150) Relocation cost possibility (averaged out over 17 years)
2020 $4870  (FIRE $5200) Housing (tax and insurance)
2020 $2700  (FIRE $2700) Food
2020 $1160  (FIRE $4000) Medical & dental premiums/deduct/co-pay
2020 $2925  (FIRE $3240) Electricity, natural gas, water, internet, cell
2020 $850   (FIRE $1500) Gasoline, car insurance, registration
2020 $400   (FIRE $600)  Misc required expenses
2020 $1750  (FIRE $51,200) Discretionary (or unexpected) - Charity, Entertainment, Travel, Dining out, etc.

I will add that I do drink coffee.  It was free at work through the 90's, then for about 15 years, it only cost me 20 cents per cup to buy it at work.  Then it started going up very quickly to over a $1 per cup beginning several years ago, so I took in my own coffee maker and just brew low cost coffee which I often buy on sale.

NOTE:  I use REAL expenses that I actually have to pay, not imaginary ones such as rent that I don't actually pay. lol  And I don't try to hide any of my long term expensive home repairs by saying they are covered by an emergency fund.  And if I had a mortgage or rent, I would certainly include that because it will need to be paid for from my draw down.

[PDXTabs]

I, personally, plan to work through 2029 for family/legal reasons. At that time I have no idea how much I will have saved, but it should be enough for me to live on $12-17k/yr with sufficient geoarbitrage while only drawing (at most) 2% of my stash per year. But I probably won't do that forever. In particular in retirement I might want to buy some real estate which would push me out of that range, perhaps substantially so.

[lutorm]

I think it's false accounting to equate "paid off car/house" with "zero expense". You still need to eventually replace the car and maintain the house, and many of those expenses come in rare but large chunks. A $10,000 that lasts 10 years still costs $1k/year, replacing the roof on your paid off house likely still costs tens of grand, etc.

It's also false accounting to count insurance as an expense but "self-insuring" as free, because taking on that risk isn't free (although it's arguably on average cheaper.) The trouble with budgeting that is that you might be fine and not suffer a major health expense or have your house be flooded/flattened by hurricane, or you might. If you trust that the insurance rates are set appropriately (ie, not national flood insurance program) than arguably you should at least include some fraction of the insurance premium cost as expenses, even if you're self-insuring, because probabilistically that's an expense you're deferring that will eventually come due.

[BookLoverL]

I think it's false accounting to equate "paid off car/house" with "zero expense". You still need to eventually replace the car and maintain the house, and many of those expenses come in rare but large chunks. A $10,000 that lasts 10 years still costs $1k/year, replacing the roof on your paid off house likely still costs tens of grand, etc.

It's also false accounting to count insurance as an expense but "self-insuring" as free, because taking on that risk isn't free (although it's arguably on average cheaper.) The trouble with budgeting that is that you might be fine and not suffer a major health expense or have your house be flooded/flattened by hurricane, or you might. If you trust that the insurance rates are set appropriately (ie, not national flood insurance program) than arguably you should at least include some fraction of the insurance premium cost as expenses, even if you're self-insuring, because probabilistically that's an expense you're deferring that will eventually come due.

I mean, I have house insurance and this is included in my budget.

[Freedomin5]

I think it's false accounting to equate "paid off car/house" with "zero expense". You still need to eventually replace the car and maintain the house, and many of those expenses come in rare but large chunks. A $10,000 that lasts 10 years still costs $1k/year, replacing the roof on your paid off house likely still costs tens of grand, etc.

It's also false accounting to count insurance as an expense but "self-insuring" as free, because taking on that risk isn't free (although it's arguably on average cheaper.) The trouble with budgeting that is that you might be fine and not suffer a major health expense or have your house be flooded/flattened by hurricane, or you might. If you trust that the insurance rates are set appropriately (ie, not national flood insurance program) than arguably you should at least include some fraction of the insurance premium cost as expenses, even if you're self-insuring, because probabilistically that's an expense you're deferring that will eventually come due.

Also, that’s assuming you engineered a life that requires a car. We live a 10-minute walk from school and work, and a 5-minute walk from the subway station. No car required = no car-related expenses.

Some people are able to do something similar with their living situation. Expenses are not static throughout life and may shift according to changing circumstances. I can’t predict what my expenses will be in the future; I can only provide a snapshot of current expenses.

For car/roof replacement type of expenses, I account for them in my emergency fund rather than having one line item for “eventual potential purchase of car” or “eventual replacement of roof that I currently do not own” because those funds may never be used.

[jim555]

One advantage to a condo is large items like roofs or boilers are spread out over all owners in a special assessment, which is a lot less than owning a house. 

[dandarc]

One advantage to a condo is large items like roofs or boilers are spread out over all owners in a special assessment, which is a lot less than owning a house.

Theoretically sure, but with condos it depends heavily on the condo board's competency in management. Worst case, you're owning a unit in the Surfside building when it collapses. Obviously that is the extreme low end of possible outcomes - most of the time you just get told for years that the fees are building adequate reserves and then wind up with a special assessment because they weren't actually saving enough money along the way to replace the roof when the time came. Anyone who owned during the good times but sold before the assessment becomes necessary gets an extremely good deal, while owners at the time the repairs happen get soaked.

Sometimes you have a good board that manages and plans for the future well, but that can change pretty quickly.

[PDXTabs]

I wanted to get on this paid-off-house thing. I think that it is disingenuous to live in a paid off house without adding the cost of the house to your monthly calculations in some fashion. Either owner equivalent rent or some sort of opportunity cost value. That's the only way to try to reconcile a $25k renter budget with a paid-off-house budget.

[nereo]

I wanted to get on this paid-off-house thing. I think that it is disingenuous to live in a paid off house without adding the cost of the house to your monthly calculations in some fashion. Either owner equivalent rent or some sort of opportunity cost value. That's the only way to try to reconcile a $25k renter budget with a paid-off-house budget.

I’m confused why people are including rent or mortgage in these calculations at all.
MMM’s $25k/year family budget very clearly included a paid-off home.  Yes, there’s maintenance, and that can average a few thousand each year, but no mortgage payment.  There can also be a big difference in what a family spends vs what their take home pay is, and a big reason why is taxes.

One of our largest expenses is our mortgage, which we are definitely not in a rush to pay off.  It’s about $18k annually.  Investment contributions is somewhat larger, at $20-22k.  Neither of those are included in what we spend for obvious reasons. Beyond that and after taxes we are on track to spend about $21k this year, and we live a rather ridiculous life of luxury.

[cannotWAIT]

I don't think there's any disingenuity as long as everyone is comparing apples to apples. The original question and first few answers assumed a paid-off home, so I did too. But if I add owner equivalent rent, it would add $9,600 to $12,000 to my spend and I would back out my property insurance, homeowners insurance, and sinking fund for home maintenance. That would leave me right around $27-30K.

[bmjohnson35]

I wanted to get on this paid-off-house thing. I think that it is disingenuous to live in a paid off house without adding the cost of the house to your monthly calculations in some fashion. Either owner equivalent rent or some sort of opportunity cost value. That's the only way to try to reconcile a $25k renter budget with a paid-off-house budget.

I’m confused why people are including rent or mortgage in these calculations at all.
MMM’s $25k/year family budget very clearly included a paid-off home.  Yes, there’s maintenance, and that can average a few thousand each year, but no mortgage payment.  There can also be a big difference in what a family spends vs what their take home pay is, and a big reason why is taxes.

One of our largest expenses is our mortgage, which we are definitely not in a rush to pay off.  It’s about $18k annually.  Investment contributions is somewhat larger, at $20-22k.  Neither of those are included in what we spend for obvious reasons. Beyond that and after taxes we are on track to spend about $21k this year, and we live a rather ridiculous life of luxury.

Annual Spend is Annual spend?  I agree investments probably shouldn't be included, but actual costs should be.  Even with a paid off home, our total spend includes taxes, insurance and HOA and maintenance/repair costs.

[dandarc]

I wanted to get on this paid-off-house thing. I think that it is disingenuous to live in a paid off house without adding the cost of the house to your monthly calculations in some fashion. Either owner equivalent rent or some sort of opportunity cost value. That's the only way to try to reconcile a $25k renter budget with a paid-off-house budget.

I’m confused why people are including rent or mortgage in these calculations at all.
MMM’s $25k/year family budget very clearly included a paid-off home.  Yes, there’s maintenance, and that can average a few thousand each year, but no mortgage payment.  There can also be a big difference in what a family spends vs what their take home pay is, and a big reason why is taxes.

One of our largest expenses is our mortgage, which we are definitely not in a rush to pay off.  It’s about $18k annually.  Investment contributions is somewhat larger, at $20-22k.  Neither of those are included in what we spend for obvious reasons. Beyond that and after taxes we are on track to spend about $21k this year, and we live a rather ridiculous life of luxury.

Annual Spend is Annual spend?  I agree investments probably shouldn't be included, but actual costs should be.  Even with a paid off home, our total spend includes taxes, insurance and HOA and maintenance/repair costs.

Yeah - when you're deciding if today is the day you can actually quit forever that's critical, albeit there is some nuance if we're talking about a mortgage - when you screw up the math on the P&I, you paint a picture that the mortgage is a detriment to your safety margin in FIRE, which is usually exactly the opposite of the truth - if you own, a long-term fixed rate mortgage, even post-FIRE is normally good for your prospects. That's how low interest rates have gotten.

But hitting MMM's $25K annual spend target is not the same thing, as MMM has made abundantly clear over the years. Housing costs are a lot more variable than many other items in the total annual spend, so deliberately excluded from the analysis. Is it too-hand-wavy? I don't think so if you come into it looking to see that this really can be done and open to the idea that it is actually pretty reasonable.

[ericrugiero]

At $25K per person with a paid off house we are way under that spend level and we don't live particularly frugally.  If it was $25K total for a family of 5, we would have to cut back a good bit.  It's definitely possible but we would need to reduce travel, sports, amazon purchases and food spending.   

[Zikoris]

I wanted to get on this paid-off-house thing. I think that it is disingenuous to live in a paid off house without adding the cost of the house to your monthly calculations in some fashion. Either owner equivalent rent or some sort of opportunity cost value. That's the only way to try to reconcile a $25k renter budget with a paid-off-house budget.

I’m confused why people are including rent or mortgage in these calculations at all.
MMM’s $25k/year family budget very clearly included a paid-off home.  Yes, there’s maintenance, and that can average a few thousand each year, but no mortgage payment.  There can also be a big difference in what a family spends vs what their take home pay is, and a big reason why is taxes.

One of our largest expenses is our mortgage, which we are definitely not in a rush to pay off.  It’s about $18k annually.  Investment contributions is somewhat larger, at $20-22k.  Neither of those are included in what we spend for obvious reasons. Beyond that and after taxes we are on track to spend about $21k this year, and we live a rather ridiculous life of luxury.

I don't exclude things because people already get mad at me for my current expenses being "too low". If I take out housing and say "Yeah, minus housing we spend 14K for two people and live in downtown Vancouver and travel a lot" people will start throwing things at me.

[PDXTabs]

I’m confused why people are including rent or mortgage in these calculations at all.
MMM’s $25k/year family budget very clearly included a paid-off home.  Yes, there’s maintenance, and that can average a few thousand each year, but no mortgage payment.  There can also be a big difference in what a family spends vs what their take home pay is, and a big reason why is taxes.

I'm mostly just confused by the premise. I don't care if MMM does it, it doesn't make any sense to exclude your housing from your yearly budget.

One of our largest expenses is our mortgage, which we are definitely not in a rush to pay off.  It’s about $18k annually.  Investment contributions is somewhat larger, at $20-22k.  Neither of those are included in what we spend for obvious reasons. Beyond that and after taxes we are on track to spend about $21k this year, and we live a rather ridiculous life of luxury.

I would argue that at the very least your principle payments are savings while your interest, taxes, insurance, and upkeep are expenses.

[cannotWAIT]

But why would you include it if it's already bought and paid for? I already own my furniture--should I also include what I would pay to rent it if I didn't? I already own my car--should I also include what I would pay to lease it?

[Abe]

I’m confused why people are including rent or mortgage in these calculations at all.
MMM’s $25k/year family budget very clearly included a paid-off home.  Yes, there’s maintenance, and that can average a few thousand each year, but no mortgage payment.  There can also be a big difference in what a family spends vs what their take home pay is, and a big reason why is taxes.

I'm mostly just confused by the premise. I don't care if MMM does it, it doesn't make any sense to exclude your housing from your yearly budget.

One of our largest expenses is our mortgage, which we are definitely not in a rush to pay off.  It’s about $18k annually.  Investment contributions is somewhat larger, at $20-22k.  Neither of those are included in what we spend for obvious reasons. Beyond that and after taxes we are on track to spend about $21k this year, and we live a rather ridiculous life of luxury.

I would argue that at the very least your principle payments are savings while your interest, taxes, insurance, and upkeep are expenses.

I think people who aren’t including it (like myself) assume they will be either paying off the mortgage at retirement or selling the house and buying a much smaller one in cash. Otherwise yes, doesn’t make sense to exclude an expense that’ll still occur. Unless one is comparing non-housing expenses only, which I guess people are doing on this thread.

[PDXTabs]

But why would you include it if it's already bought and paid for? I already own my furniture--should I also include what I would pay to rent it if I didn't? I already own my car--should I also include what I would pay to lease it?

I'm going to say: it depends.

But let's look at the car example. There is both the opportunity cost of keeping your capital tied up and also depreciation. Strictly speaking, yes, I think that's a monthly expense.

[PDXTabs]

But why would you include it if it's already bought and paid for? I already own my furniture--should I also include what I would pay to rent it if I didn't? I already own my car--should I also include what I would pay to lease it?

I'm going to say: it depends.

But let's look at the car example. There is both the opportunity cost of keeping your capital tied up and also depreciation. Strictly speaking, yes, I think that's a monthly expense.

But that's the case for everything from food to sports gear to clothes. I don't count the underwear I bought a couple of years ago as an ongoing monthly expense just because I they are paid for (although underwear...?...profit ;-)) that was part of my expenses at the time of purchase. I feel the same for buying a house whether I paid cash to buy or paid it off over time. That was a purchase and expense at that time not now.

Yes?

Seriously, how should I account for my monthly budget if I pay for $3M worth of food, cars, houses, sports gear, and clothes right before I FIRE. Look at me, I only spend $1,200/month! $12k/yr. Don't look at that $3M worth of goods I have.

[jim555]

Expenses are out the door dollars, actual dollars/pounds, all in, including housing.  Very simple.

[PDXTabs]

Expenses are out the door dollars, actual dollars/pounds, all in, including housing.  Very simple.

But your home equity isn't out the door (well, it's complicated, houses depreciate while the land that they're on usually appreciates). Saying that the principle payments on my mortgage are out the door is pretty close to saying that my 401k contributions are expenses.

[the_fixer]

But why would you include it if it's already bought and paid for? I already own my furniture--should I also include what I would pay to rent it if I didn't? I already own my car--should I also include what I would pay to lease it?

I'm going to say: it depends.

But let's look at the car example. There is both the opportunity cost of keeping your capital tied up and also depreciation. Strictly speaking, yes, I think that's a monthly expense.

But that's the case for everything from food to sports gear to clothes. I don't count the underwear I bought a couple of years ago as an ongoing monthly expense just because I they are paid for (although underwear...?...profit ;-)) that was part of my expenses at the time of purchase. I feel the same for buying a house whether I paid cash to buy or paid it off over time. That was a purchase and expense at that time not now.

Yes?

Seriously, how should I account for my monthly budget if I pay for $3M worth of food, cars, houses, sports gear, and clothes right before I FIRE. Look at me, I only spend $1,200/month! $12k/yr. Don't look at that $3M worth of goods I have.

Well, I would think most people look at past years expenses leading up to FIRE and base their withdrawal amount off that amount. Then make rational / reasonable adjustments for what they know will change.

Bike replacements, car replacements, property taxes, insurance , home repairs should be accounted for and part of your expenses.

For example I know my housing expenses will drop ~17k when I pay it off but my taxes and insurance will still need to be paid and are factored into my expenses. Repairs and things like that are also part of my expenses just as they are now that does not change.


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[American GenX]

Expenses are out the door dollars, actual dollars/pounds, all in, including housing.  Very simple.

But your home equity isn't out the door (well, it's complicated, houses depreciate while the land that they're on usually appreciates). Saying that the principle payments on my mortgage are out the door is pretty close to saying that my 401k contributions are expenses.

401K is savings - money not spent.   Mortgage payment is an expense.  Apples and oranges.  If I had a mortgage, I would still include it in my expense budget.  And if I had it after I FIREd, it would have to come out of my draw down.

And it would not make sense to make up some figure for rent when your house is paid off.  None of my draw down goes to a mortgage payment or rent, and all the maintenance, taxes, etc. are figured into my expenses.  I don't get why people are always trying to make it more complicated than it is by adding stuff that doesn't exist or removing actual expenses from their expenses!  lol

[2Birds1Stone]

I'd like to know your secret for travel on such a budget.   From Aug 2020-2021 it took me $72 a day just to be alive and have food, shelter and utilities.  $26,280 for a 1 year period.

Any travel would certainly be a big spike on the budget for any given month.

I journaled about it and have posted a monthly spending breakdown for the past 7 years here. Before this year of travel my individual spending in a HCOL area has averaged ~$18k/yr (individual) or $36k/yr (household). The key has always been focusing on the big three, specifically housing.

During our travels we spent time in LCOL countries in Europe where a monthly rentals were really cheap and sometimes leveraged social capital to reduce housing to nearly nothing besides utilities and some barter of maintenance/cleaning/cooking for a place to sleep.

Flights and sometimes hotels were travel hacked with CC miles. And we would often acquire things like bicycles in a location, used, and later resell for low/no cost ownership.

Here was a final breakdown for 2020 (individual spending).

$1,143   Housing
$1,506   Grocery
$298   Transportation
$1,986   Entertainment
$1,305   Travel
$453   Insurance
$380   Health/Hygiene
$584   Misc
$676   Gifting
$8,331   Total Spent

[nereo]

It’s in the thread title, folks!

“ MMM's original 25k a year figure?
MMM had and was using a paid off home in his figure. To live “like him” you exclude housing payments (but include taxes and insurance, though in later years MMM self-insured)

Like most things, it’s possible to live in even less or way more. Family specifics and region will absolutely make this easier for some and impossible for others. But spending a similar amount remains within reach for many of us in many different regions.

[tooqk4u22]

The back and forth about what is and isn't.  The OP simply asked if anyone is aiming for MMMs $25k figure and then someone pointed out, correctly so, and clarified that MMMs had a paid off house so for Apples to Apples comparison one should exclude their mortgage expense (not taxes, insurance, HOA, etc....just the P&I).

It's not about one's FIRE expenses

Another way to phrase the question would be "MMM spends $25k (or like ($32k inflation adjusted 😄) excluding a mortgage, what do you spend excluding your mortgage?"

Also nevermind that MMM didn't include irregular expenses, health insurance, phone, travel, and so on.

[Dicey]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man person I must walk a mile in his their shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

It's 2021. Fixed that for you.

[Metalcat]

In 2021 the US government considers household of 3 with an income below $22,000 to be in poverty. For a 4-person household it is $26,500.

I know to understand another man I must walk a mile in his shoes. But if healthy, employable, family breadwinners are voluntarily quitting their jobs forever to support their families at the poverty level that’s a head scratcher.

As someone that grew up in poverty including living in shelters and being bounced around from place to place trying to survive I think you are missing part of the big picture.

Having a paid off house, million + in the bank and living off 22k is much different from living off 22k, bouncing checks, having to decide between food or paying the utilities.

In one scenario you have little to no room to breathe, every little unexpected expense or emergency kicks your ass because you are scraping by day to day and do not have the same opportunity to get ahead.

Poverty and being poor bring their own set of difficulties that can make it brutal to get ahead or even survive, it can be like a cloud is hanging over your head or you have chains with concrete blocks around your feet it is hard to break out and easy to get dragged further down.

The other scenario you have an amazing amount of resources, backup, opportunity and freedom of choice. Your behavior and choices are not driven by survival but by what you want it to be, with that comes peace of mind and or freedom.

Example -
Riding a bike in winter to your 2nd crappy job minimum wage job on a shitty bike that breaks down because you have to make rent VS hopping on the fancy fat bike in your comfy winter close on a nice day to go for a FUN ride because you do not HAVE to go to work.

—————-

As a couple our spending is 56k including mortgage payments in a HCOLA we plan on paying off the house at FIRE and that will drop our combined spending to 40k and we live a luxurious life and have everything we could ever want or need (excessively so at time).

Once we FIRE I expect that 40k to go down even more due to not having 2 people doing the work thing and everything that goes with it.

Honestly I think we could (and probably will) live happy fulfilling lives (and healthier) on ~30k a year many of the activities we enjoy are very low cost such as kayaking, biking, camping and just hanging out with friends. My wife would be happy as hell to go ride her bike every day for entertainment and that costs very little since all of the trails are just out our back door and we already have everything.


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Agreed. I've been poor and I've been rich and frugal and actually spent less than when I was poor. It's a TOTALLY different experience.

The experience of being rich and choosing not to spend in no way translates to the experience of being poor. That's comparing apples to space ships.

As for us, we live an obscenely luxurious lifestyle on about 45-50K, but that includes a mortgage payment and a lot of out of pocket medical expenses. So if you account for that and inflation, we're at a pretty similar spend to MMM, which makes sense as we live an extremely similar lifestyle, which he also describes as obscenely luxurious.

My life was decidedly NOT luxurious when I was poor.

[Tinker]

When referencing the original figure, inflation would need to be figured in, but right now i'm still aiming way lower.

There's been a great influx of people with huge footprints in HCOL areas. American IT professionals, lawyers and doctors from certain areas might just as well live on another planet.
Aside from the monetary figures being thrown around, there's also a lot more ivory tower politics talk from these same sources.
combined with lack of meaningful new blog content, this shifts the impression newcomers get, and down the spiral we flow towards a community for california+some select city and suburb dwellers.

[GodlessCommie]

Re: accounting for opportunity cost and such... Ideally, it should be done. But it makes calculations less straightforward, so we mostly don't.

A lot of it is also US-specific, as people try to keep expenses low to qualify for ACA subsidies or Medicaid. There is opportunity cost to keep the house paid off, but for many it is offset by lower health insurance costs.

[ChpBstrd]

Yes, the forum has gotten soft. Stock indices are going to the moon and people are raising their consumption rates and expectations for future stock market returns. The prophet MMM has gone relatively quiet and so of course the disciples are wandering about and creating new denominations for 4-car families, 40 mile commutes, and $700k mortgages.

I'd hate to think we're migrating to the midpoint between ERE and Bogleheads.

I appreciate a good "par" number so I will take the OP's $13,400 and see how I'm doing in terms adjusted to my circumstances:

Family spending: $56k/year
Mortgage: ~$10k
Insurance: ~$3k (employer subsidy is generous)
Divide by 3 people in household: $14,333 per person, which is 7% over par.

We could probably reduce our grocery waste, reduce impulse purchases of futuretrash, reduce our cars from 2 to 1, drop full coverage car insurance, and make a few other adjustments to get down to par. Thanks for the nudge to do so!