Since joining Instagram (@_tonfire), I’ve found a huge community of individuals attempting to achieve FI and/or FIRE. It’s very reassuring to see that so many people think this is a good idea! Also it’s very interesting to see the different methods and approaches that people are using to reduce monthly expenses.
One trend I’ve noticed is people who are posting their monthly expenses for informational purposes. I’m not sure what is motivating this trend but I find it extremely interesting! What do other people spend on life stuff? As part of the “calculation” to determine how much I needed to achieve FIRE, I was forced to determine my monthly, then annual expenses. If you are interested in calculating your own FIRE requirements, read my post about it here.
Calculating Monthly Expenses
The process of calculating monthly expenses wasn’t easy. You really need to think long term, and make sure you include a portion of your monthly expenses for all of your sinking funds. A sinking fund is defined as “a strategic way to save money by setting aside a little bit each month.” If you’d like a more detailed explanation and why you need sinking funds in your budget, check out this post by everydollar.com. The key is to make sure you are funding things every month that you know will happen down the road.
We now have sinking funds for ALL THE THINGS. Mind you, most of the budget line items are empty at the moment (Due to living one paycheque behind…we just don’t have the $ to fund all of the sinking funds. Read more about my situation here). But we’re working to change that! Some common things to create sinking funds for include:
- Home maintenance. Experts recommend setting aside 1% of your home’s value per year to address maintenance costs if you own your own home.
- Vacations. This is a high priority for me. Seeing new places, making special memories, and broadening our first-hand knowledge of the world are very important to me and my family.
- Vehicle maintenance, licensing, and registration costs. For example, where I live I need to register my vehicle every year. This costs $109. Therefore I need to ensure I’m saving roughly $9 a month to cover the cost, and including it in my monthly expenses.
- Replacement vehicles. Eventually, they just aren’t worth keeping anymore once the repair value gets too high to maintain, or they are beyond repair.
- Gifts, and other holiday expenses. For my family, Christmas and Birthday gifts are probably the biggest expense. But then there’s also special occasions like Thanksgiving, where we might have a big meal that includes an expensive turkey, or Halloween where if we don’t buy treats for the neighborhood, our house will be egged. I mean, probably. I’ve never risked it to be honest.
- Mobile phone repair/replacements. They are only built to last for so long, and only built to be dropped from very small heights. I speak from experience. Otterbox Defender all the way!
- And, some other stuff.
In an effort to be transparent and make myself accountable to lowering my expenses, I wanted to document what we “budgeted” pre-FIRE efforts (I use the term budgeted very loosely here…more like what we spent with no regard to costs). These expenses are for a family of 3 in smallish-town Canada. Hopefully by this time next year, I will be able to report a much lower number! Every reduction we can manage means not only more money for savings, but also less we need to save because we know we can live on less. Double-bonus!!
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A couple of things I came to realize after doing this exercise.
One, it’s no freakin’ surprise we’ve been living 1-2 paycheques behind and using credit to cover the gaps. It’s most likely that we were spending even more than this per month and I just haven’t included everything…unfortunately I don’t have great historical data to draw from.
Two, we spend a ridiculous amount on transportation. Both cars are paid off, but I was rather surprised at all the additional costs of owning 2 vehicles when I added it all up.
Anyway, this post MAY be a total bore-fest for you. For that, I apologize. If it was not a bore-fest and you’d like to see future expense reports, please let me know! I’ll probably post them anyway to prove to myself that we can improve our situation greatly. I’d LOVE to say we can cut our expenses almost in half, however I’m not sure if that’s possible with the mortgage. However once we reach FIRE it should be paid off and we can probably live on a lot less. Also, chances are when my 5 year old is 20, he won’t require paid childcare 😛
That’s it for now…going to try to get a bit more regular with the blog posts. It’s great fun but sometimes also hard to find the time. Peace!
3 Replies to “Pre-FIRE Monthly Expenses Unleashed!”
I didn’t find this a bore-fest at all! Thank you for sharing.
I notice comments were closed on some other posts so I’ll add some thoughts here.
I’ve been using YNAB for over a year now. It’s incredible and has helped me so much. I’ve had some bad WAMing months but I’m starting to get a handle on things. It definitely feels like things aren’t progressing but every little bit counts. As Brad (ChooseFI) says, it’s about getting 1% better. I’ve made minor changes to my habits in over 100 different ways and YNAB has been a big contributor to that.
Keep up the great work! It’s a system of living, not a goal for FI.
Thank you for your feedback, Sterling! I’m unsure why comments were closed on posts…I’m still figuring out the blogging thing so I’ll try to fix that. So glad you’ve had a positive experience with YNAB. Even after 2 months I’ve seen a big difference in how well I’m managing our money. Although my age of money hasn’t increased drastically, I’m not living paycheque to paycheque anymore, and that is a huge win. I also WAM every month…a couple of times a month usually…did it today actually, haha. Keeping on the 1% improvement track will help us all. Thanks again for your comments.