The date is set. Our FIRE location has been in place ever since we purchased a home in the mountains and knew that was our calling. The investment portfolio along with other income sources should sustain a healthy way of living as we embark on our new journey in just over two years.
For us, the “money in” has been the easier side of the equation to get a handle on. It generally is for most folks. What is inherently harder to get to grips with is the “money out”. As we project a future lifestyle where many things will look different, the expenses, by default, will look much different.
What do we mean by “looking different”? What’s that all about?
Select Areas of Current Spend
Here are a few facts on areas of current spend to frame the data that comes later:
- We currently run two homes – a primary residence and a vacation (mountain) home. For many reasons, we have elected not to generate a secondary source of income from renting out the vacation home. Yes, that would off-set some costs for sure but we have absolutely no spare time to handle the hassle of doing that, even with a property manager. Don’t get us wrong, absolutely no complaints about running two homes. That is our choice and part of the grand plan we set in motion three years ago.
- We will sell our primary home and relocate family to a new state and our mountain home. Saying good bye to the home we made for our family will be truly gut-wrenching for us. Saying good bye to the mortgage, real estate taxes (boy, they are enormous in our state!!) and primary home insurance will be a cork popping moment. Perhaps a frugal Prosecco as opposed to the pricy champagne.
- The cost of working. Ah, that little nugget. Don’t even get me started on the experiences or other opportunities we lose by working. That for us is the most important consideration but the practical aspects (i.e. $$’s, ka-ching) also find a way of spoiling the party. Whether it is running two new or nearly new cars – gasoline, maintenance due to lengthy commuting wear and tear, toll costs on the highway or the plethora of other expenses we need to incur because of two working parents. See points #4 through #10 next.
- Before and after-school care are costs we currently need to incur. Our respective work locations and schedule demands military style planning and a war chest reservoir of dough when it comes to out of school care.
- Summer camp costs provide a welcome hello to each New Year. The schedules are out by January. The subsequent negotiation with the children that the opulently priced robotics /electronics camp is not really necessary. The choices are then made, the check mailed in and we proceed about our business. A big fat check to provide a summer of educational fun and growth for our children. Yay!
- Cleaning the primary home. We get help on an every other week basis. We have cut back from weekly. We just don’t have the physical energy or available time such that we can remove it completely from the expenses list. Thank you Christiana and Mr. Dyson.
- Landscaping– although Mr. PIE enjoys the therapeutic aspect of cutting his own lawn every week (don’t worry, it’s a British thing!), there is no way he is lugging 12 yards of bark mulch about the property or devoting endless hours to spring and fall tidy up. We get a shit-load of leaves on our tree-lined property and every single weekend from late September to middle of December would be occupied clearing those bad boys. Snow removal – a long and sloped driveway – anyone joining me at 4.00am in sub-zero conditions for a lung bursting snow-blowing exercise before Mrs. PIE hits the road at 5.15am? No, didn’t think so. $30 well spent in my opinion for the snow-plough guy who hits our driveway ~3am. For the brutal winter we had in the Northeast during 2014/2015, that was a lot of greenbacks.
- Convenience eating. A little glimpse into the stuff going on currently will provide an example of what we mean – we need NASA style planning to be able to pick up two kids at 5.00pm, drive them to baseball (at different town locations I may add) and feed them both before game-time at 6.00pm. Four nights out of every five. Yep, that rules out preparing the grilled fish, oven-roasted cauliflower and wild rice in the confines of the home kitchen. Our convenience is Panera pre-ordering, pick-up and sandwiches / drinks in the car on the frantic drive to baseball. Mrs. PIE is Chief Scientist for the Department of Pre-baseball Planning. We don’t do Panera every baseball night but need to do it some nights for the sanity of everybody. Valium anybody? Throw in lunches now and again at work (we are awfully good with brown-bag lunches 4 days out of every 5) and the monthly costs start to creep north.
- Parking costs incurred by Mrs. PIE in the city. Her company subsidizes most but does not cover all.
- Work appropriate clothing – PIE has business engagements where jeans, Hawaiian t-shirt and flip-flops just won’t cut it. San Diego biotech start-up maybe, not Eastern Seaboard conservative big pharma. I won’t care to look at another single e-mail in my in-box that recommends “business casual” attire. What is “business casual” anyway?
- Gym membership. The mountains will be our stair-climb, the cool valley rivers our refreshing post-exercise bath and hitting the winter slopes exactly when we want to, our ski-master. Nothing more to add.
- Certain utilities – we have well water in our mountain home and solar paneling. Combined with no need for air conditioning, some aspects of our utility bills will simply disappear (water) or drop a little (electric).
OK, but what about the future expenses? We’ll get to that, hang in there. This pile of stuff above is currently running at $4750 per month, $57,000 per year. As described by other bloggers, mortgage and child-care are also our big ticket items. And it will all go away in July 2018. Sobering.
The two tables below are our best projection for our future expenses. Our investments support a withdrawal rate some way beyond these expenses. As we have mentioned before in a few of our posts, Mr. and Mrs. PIE are a conservative couple. We embrace safety nets and the built-in flexibility to absorb increases in spending for items we can’t easily project for.
Home and Shelter
The first table is the expenses relate to home and shelter. Many of these are relatively fixed such as property taxes and home insurance. We have zero mortgage on the mountain home. Utilities are hard to predict as we have not lived in the mountain home for extended periods. We have calculated this number based on what we are spending now (in our current home), subtracting a % since we have solar panels and will not need air conditioning. That may be off-set by requirement for increased winter heating. Our future home is ~30% smaller on a square footage basis compared to our current home. That may play into overall reduced heating costs. To be very honest we just don’t know. Keeping this line item similar to our current spend seems a reasonable place to start. We will soon see how close to this number we really are.
Home improvement expenses are obviously dynamic. Having just performed some significant upgrades to the mountain home with new roof and new siding, we don’t anticipate incurring more of those specific (and large!) items for a long time, thanks goodness. But “other stuff” happens, even with regular maintenance. The septic tank may need an over-haul, the windows may need replacing, and more.
Internet is essential for obvious reasons and minimal cable TV can be reduced a bit further. We are not spending more on this one in FIRE, that’s for sure.
The second table here is the expenses mapped out for food, healthcare, entertainment, transportation and miscellany. Note zero dollars assigned to financial advice services
Future Food Expenses
Our food expenses (both dining in and out) is an area we choose to spend more. We enjoy cooking all sorts of dishes (Mexican, French, Indian, British pub-style) and look forward to having even more time to do so. Lazy summer days where three healthy meals are prepared in tandem with the outdoor grill – that’s our little bit of heaven. With more time available for planning meals, we actually think our grocery budget will drop by 10-20%. Eating out is also something we will continue to do. Dinner events at local farmer tables is on the list for exploring.
Future Entertainment Expenses
Entertainment expenses is composed primarily of vacation(s) and our main hobby, skiing. A family of 2 adults, 2 kids and covering 4 season passes with periodic equipment refresh for all goes into this line item. Other expenses in here are necessary sporting equipment for the kids, family cinema trips, day trips to museums etc.
For vacation, we already do a lot of travel hacking and expect to do even more going forward. We are going to relish the opportunity to travel on a flexible schedule certainly over the summer months and not be constrained by work commitments. That flexibility will surely also bring some budget favorability. Specifically, traveling on a Tuesday afternoon and returning on a Thursday evening (as an example) is one of many options beyond our typical and more costly Sat –Sat vacation planning. Award availability for flights through travel hacking is much greater if you can be super flexible with travel dates. Free time, indeed. Here are the specifics of what we have secured so far this year with travel hacking:
- 4 free economy return flights on United to Jackson Hole for February 2017 (admittedly part of that was helped by Mr. PIE building some of those miles through work travel)
- Majority of hotel costs for our stay in Jackson Hole covered by cash back credit cards
- 4 free nights in a family suite at Chateau Frontenac in Quebec City between Christmas and New Year
- 1 economy return flight to the UK for Mr. PIE to travel for a long weekend reunion in the fall with university friends.
A total of nearly $7,000 in free travel. This is good but we would certainly not classify ourselves as experts. The following sites were instrumental in getting us started with travel hacking.
The introductory free course provided by Brad and Alexi at Travel Miles 101 is excellent for the beginner.
Future Healthcare Expenses
We are not going to go into any detail on healthcare. Suffice to say, a solid silver plan under ACA with workable deductible puts us in this range. Also factored in here is that this number considers income from Mr. PIE pension at age 55. The 51-55 years will cost us much less than this. We have not researched extensively dental plan options and have a placeholder in here for $200 per month. If there are good tools out there to assess dental plan options, we would love to hear about it. It is one area that is often overlooked as much of the focus is on Obamacare which rarely incorporates dental coverage into the health plans. At least for the plans we have been looking at.
Future Transportation Costs
Regarding vehicles, we have made a decision to not pursue running two brand new vehicles. As we described above, both of us have decent sized commutes and it is not an option to have poor reliability of our vehicles mess things up any more. Thus, we each have a new or nearly new car. This is the price of safe and reliable commuting to work. In FIRE, we will still have two used cars although we are discussing the pros/cons of a single car. Not landed on that one yet, but leaning strongly towards two. Our FIRE home will certainly not have the shiny Lexus or high-end BMW parked outside. Not that it does today – we own a Jeep and a Subaru Impreza. The monthly expense for owning is our estimate for two used cars amortized over a 8-year period. Gasoline use should drop considerably without that dreaded combined 13 hours per week of commuting.
Our total expenses are projecting for ~$68,500 per annum. We have room in our investment portfolio + pension income (plus whatever SS brings for both of us) to support a run-rate higher than that. In our minds, that is how it should be. We are realistic that there needs to be ample room for significant up-tick on certain items. Rising healthcare costs, necessary and urgent home maintenance, extended travel to assist siblings with the care of aging parents. The list goes on. We can’t predict but we can prepare.
As former Secretary of Defense Donald Rumsfeld once famously said, “there are known knowns. There are also known unknowns – that is to say we know there are some things we do not know”. He used it in the context of lack of evidence related to WMD in Iraq, which is a million miles from what we are heading towards. We will work our way through our known unknowns with a sense of adventure, no doubt with some trepidation and a nervous smile at times. This is just part of the deal with FIRE, isn’t it?
As you project your future living expenses in either an existing location or new location, what categories are the most taxing to estimate? Which areas do you just find impossible to accurately predict? How are you planning to navigate your known unknowns?