My Life Costs $220 a Day. A Realistic Budget for a Post-FI Family of Four.
Or could we?
While I may not be handing over eleven $20 bills to someone every day, or charging $220 on our credit cards on a daily basis, expense tracking has shown us that, as a family of four, our burn rate is in the neighborhood of $220 a day.
While these numbers may seem low, keep in mind our properties were paid off, our healthcare has been employer-subsidized, and nearly all of our donations come from a separate Donor Advised Fund.
While our expenses were on the order of $170 to $200 a day, that didn’t include the portion of health insurance paid by my employer or a slush fund to replace our vehicles or perform home maintenance. The true budget for our family of four has been closer to $220 a day.
My Life Costs $220 a Day. A Realistic Budget for a Post-FI Family of Four.
I stopped tracking our spending toward the end of 2018. Personal Capital does a reasonable job, as does Mint, but they do require some fine-tuning. Three years of tracking told me all I needed to know — that our spending was consistent and would give us a very safe and low withdrawal rate if we were to cease earning money completely.
Consistency is key, but we will soon embark on a period of relative uncertainty. I’m leaving my job in August of 2019, and we will have something I’ve never experienced before: location independence.
We plan to experience slow travel much of the year, returning home to visit family and friends every summer and presumably around the holidays most years, as well.
Budgeting for that sort of existence can be difficult. The costs will depend a lot on where we’re living. If we spent 2/3 of the year visiting Iceland, New Zealand, and Singapore, the budget might break into the six-figure range.
Swap those destinations with budget-friendly places like Central America, Southeast Asia, and Eastern Europe, and we might not spend half as much.
Given the uncertain nature of our future budget, I can only do the best I can with the data I have. In today’s post, I’ll review what life at $220 a day might look like for a globetrotting family of four.
Health & Fitness Costs: $55 a day
Not surprisingly, healthcare figures to be tied for the highest line item in our post-FI budget. I’m assuming that even if the ACA survives in its current state, we won’t qualify for subsidies.
We have not yet determined what healthcare plan we will use, but I’ll definitely be taking a close look at the healthcare sharing ministries. We are fortunately quite healthy with no serious pre-existing conditions, making these a potentially viable option.
I’ll also look at catastrophic policies and traditional insurance via the exchange and the open market. We will also want some kind of travel insurance plan for emergency care and/or evacuation.
Planning to spend maybe 8 months away from home each year, I don’t anticipate belonging to a gym, which will save us $2 to $3 a day compared to our previous spending.
For this budget, I’m planning on about $20,000 a year for our health and fitness needs. If we opt for a sharing ministry, it will likely be lower. If we go with a higher-end traditional plan, there’s a real chance we could end up spending significantly more than $55 a day, especially if we have significant healthcare needs and associated out-of-pocket costs.
Travel Costs: $55 a Day
This is a tricky one when you’re planning to spend the majority of the year traveling. What is travel, exactly? Is it the same as a vacation budget?
In our case, we’re not counting food and drink in this category. We’re going to eat and we’re going to drink no matter where we are in the world. Our slow travel plans will involve staying in places with kitchens; we’ll be able to prepare most of our meals in the places we call home.
It’s not entertainment, either. We’ll have a separate budget for that. When you’re in no rush to squeeze in a bunch of activities in one short week, the entertainment costs are more spread out.
The travel costs I’m thinking about our transportation and lodging while away from home. We may spend up to 8 months vagabonding, and this budget gives us $2,500 a month. There will definitely be months where we spend more and others where we’ll spend less.
We could spend a month traveling the states in an RV we own for half of that $2,500 allotment. The same goes for spending time in Latin America and other affordable locales. Time spent at home won’t result in any travel costs, obviously.
We’ve also gotten pretty good at earning and redeeming miles and points for free flights and hotel stays. I anticipate saving thousands of dollars annually by continuing to take advantage of these opportunities.
Additional cost savings could come from home swapping and/or home sitting. Both are attractive options for people with the flexibility we’ll have and without the nightly cost of a hotel or Airbnb property.
Depending on the choices we make, this could be a generous or inadequate budget. Time will tell!
Grocery, Restaurant, and Drink Costs: $40 a Day
In recent years, our costs in this category, which includes meals cooked at home, eating out at restaurants, and both alcoholic and non-alcoholic beverages, has been in the range of $30 to $35 a day.
I’m upping the budget to $40 a day for a couple of reasons. One, we plan to be exploring new places, and that means eating out more. That doesn’t necessarily mean spending more; restaurant meals in Guanajuato, for example, were wonderfully inexpensive.
The second reason is that we’ve got growing boys. In a few years, we’ll have a teenager, and two years later, we’ll have two teenagers. I might have to double the food budget by then, but $40 a day seems realistic right now.
Automobiles: $25 a Day
As I mentioned, our prior spending reports did not include a sinking fund for the eventual replacement of aging vehicles. In the last ten years, we’ve picked up two late-model used vehicles for $20,000 and $28,000 apiece.
If we continue to own two vehicles, I anticipate replacing one about every five years (keeping each vehicle ten years) and spending maybe an average of $25,000 apiece. A big chunk of this budget is setting aside $5,000 a year (or about $13.70 a day) to cover that vehicle turnover.
The remaining $11.30 a day will cover gasoline, oil changes, tires, repairs, and insurance. We won’t have to budget in depreciation since I’ve already budgeted for replacement; in fact, any money gained from selling a used vehicle will supplement this portion of the budget.
There may be occasions where we need a rental car, but I envision many of our slow travel experiences to occur in places where we can rely on our feet and public transportation to get around.
The budget may seem low, but we’ll likely have our car(s) idle for most of the year, and we could suspend insurance coverage at those times.
Also, notice I used parentheses when describing cars in the plural form. Right now, we have a “beater” ’06 Chevy HHR that gets pretty good gas mileage, and a ’17 Nissan Armada that gets pretty terrible gas mileage, but can haul a good-sized travel trailer.
We may decide at some point that it makes no sense to have two automobiles, and could be down to one. Eventually, we’ll be adding a third and fourth driver and we can expect both our auto and umbrella (currently ~$170 a year) insurance rates to rise dramatically.
Still, I think $25 a day for a family that won’t be using an automobile at all most of the year is a reasonable projection for the next several years.
Shopping, Gifts, and Miscellaneous: $16 a Day
This is a bit of a catch-all, and I’m basing this on past years with a moderate increase for unknown and unforeseen expenses while away from home.
Kids’ toys, Christmas and birthday gifts, gadgets, and random stuff like the aforementioned umbrella insurance, household goods, and tax preparation fall under this category.
We’ve got nearly $6,000 a year in this poorly defined section, which should help cover some “one time” odd expenses.
Like the others, I can envision being over budget in this category of randomness some years, and well under in others.
Primary Home: $12 a Day
Hold on. Twelve dollars a day for a home?
It could be true. We’re selling our current home and the tentative plan is to keep our second home as a landing base for several years. We’re also considering buying a larger but affordable place so we would have less stuff to store and more space to stretch out when we are home.
If the cabin is our only home, it costs us about $4,000 a year. That covers association fees, property taxes, home insurance, and utility bills. We own it outright, so the only additional costs would be the occasional repair. There’s only so much that can go wrong with a 700 square foot space, so those costs have been minimal.
If we end up with a different, larger place, I would expect our costs to go up between 50% to 100% in this category, but $12 a day will work for now.
Entertainment: $12 a Day
Like the catch-all category above, I’m basing these expenses on recent years with a modest increase. Most days, our entertainment budget is next to nothing, but other days, we go to places like Disneyland Paris or Disney World, and The Mouse is not a cheap date.
Depending on how we travel and where we go, I could see where we could spend more than we’ve budgeted here.
Are you detecting a pattern? I am.
Education: $5 a Day
Last, and least only in the monetary cost of it, is education.
Between piano, guitar, and ukelele lessons along with various activities, we’ve spent about an average of $4 a day in recent years.
We’re not going to abandon the instruments, but our kids will be using them less, and there may be a way to get some free musical education via a public school with an outreach program.
Something new for us will be homeschooling, or in our case, roadschooling or worldschooling, and I expect to have some costs associated with that. There are plenty of free resources like Khan Academy and online options via public schools, but there are also curriculums and workbooks for sale.
I think $5 a day, or nearly $2,000 a year, is a fairly generous budget for our kids’ education in the coming years.
Everything Else: $0 a Day
It may seem foolish to call “everything else” $0 a day when I’ve already got a grab basket “miscellaneous” category to capture the random expenses that don’t fit tidily into one category. However, there are some notable missing categories that ought to be addressed.
Donations: $0 a Day
Will we be selfish with our money when I leave my high-paying job? Of course not. A reason that I’ve worked one more year several times over and continue to work hard on this site is to have the ability to give generously despite retiring early.
We’ve built up our donor advised fund (DAF) to allow for five-figure donations annually with a sustainable 4% withdrawal rate.
In fact, the income from this site will continue to increase the flow to and from our DAF, and I anticipate donating six-figures annually for the foreseeable future in accordance with our charitable mission to donate half of my profits.
The reason I say $0 a day is the fact that nearly all of our donations will come from a DAF rather than our retirement funds. There will be the random $20 raffle ticket or $1 lollipop here and there, but we can categorize those in the miscellaneous category above.
Financial Advisor: $0 a Day
If we were working with a financial advisor charging a typical flat 1% to 1.5% AUM fee, our initial costs would be in the range of $30,000 to $50,000 a year.
In other words, by managing my own investments, I’m avoiding a cost of around $110 a day, or 50% of the outlined budget.
If we actually stick to this budget (and never earn another penny), we’ll have a withdrawal rate of under 3%, and I anticipate our assets to grow, meaning the cost of a financial advisor charging a percentage of assets under management would only increase over time, as well.
This would clearly be the most expensive line item in the budget, and it’s not hard to imagine a scenario where the cost could eclipse all other retirement expenses combined. Of course, this would only happen if the withdrawal rate becomes lower than the AUM fee, but it’s not out of the realm of possibility.
I think it’s a great idea to learn enough to do your own financial planning and investment management, and it’s my goal to give you the tools to do so. The White Coat Investor’s signature course is a great way to jump-start that process.
For those not interested in going it alone, you can find flat-fee and hourly advisors who commonly work with physicians on my short list of recommended financial advisors.
Beer: $0 a Day
A belated April Fool’s! Beer’s a part of the Grocery, Restaurant, and Drink budget.
Higher Education: $0 a Day
Our kids have well-funded 529 Plans. As long as I’m earning some online income, I’ll continue contributing to them, but I don’t feel that we need to, and it doesn’t need to be a part of this budget.
If the state of Michigan wants to give me an instant 4.25% boost on money invested in their 529 plan, I’ll continue building up those balances.
Income Tax: $0 a Day
I’ll have some earned income, so we will have to pay some income tax, but if we were fully retired instead of retired not retired, our federal income tax bill on this kind of budget could easily be zero. See The Taxman Leaveth for details.
When my online income is my only income, I expect to pay something less than ten percent. I recently projected the distribution of a hypothetical million dollar revenue year. The breakdown looked something like this:
- 1/3 to expenses and profit sharing
- 1/3 to charity
- 1/3 to me and the tax man, with a better than 4:1 ratio for me, or about 26% of the total pocketed, with 7% going to pay FICA and income taxes.
Is This Truly a Realistic Budget?
I’d like to think we can live a good life, doing the things we want to do, with a budget of $220 a day, or $80,300 a year ($80,520 in 2020, a leap year). I’m familiar with a physician family larger than mine doing extraordinary things all over the world on a smaller budget. Their adventures chronicled in Big Family Small World are inspiring.
To summarize, here’s the proposed budget in table format.
|Health & Fitness||$55|
|Grocery, Restaurants, and Drink||$40|
|Shopping, Gifts, & Miscellaneous||$16|
A family abiding by the 4% Rule could do this with just a hair over $2 Million. $2.5 Million would give you a very safe 3.2% withdrawal rate with this budget.
It may be that we feel a need or desire to spend more. If that’s the case, that’s what we’ll do. I say we’re further on the spectrum towards fatFIRE as opposed to leanFIRE, and if the budget stretches to closer to $300 a day or $100,000 a year, we’ll still be in good shape with a withdrawal rate in the low 3% range.
That’s assuming all income-generating opportunities are abandoned for life. Readers of my newsletter know that this site generates a decent income for me, my shareholders, and our charitable mission. I’ll be sharing those numbers with my email list only later this week.
I’ve chosen to stop tracking every expense for the time being, but when I do retire from medicine, I think it would be wise to begin tracking spending once again. I’d like to see how close we actually are to this proposed budget.
Could this be a realistic budget for you and your family? Where would you spend more? Where would you cut back? I look forward to your thoughts in the comments below.