Review Family Spending -- Budget mid 30s with kids

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Topic Author
LoveTheBogle
Posts: 188
Joined: Tue Aug 13, 2019 5:53 pm

Review Family Spending -- Budget mid 30s with kids

Post by LoveTheBogle »

Boglehead Friends,

I'm looking for some feedback on our family spending. I've tried to keep categories to a minimum but feel free to ask for clarification.

My main concern is whether any category is wildly high or low as well as if anything is missing. My feelings on a day to day basis is that we don't spend a lot but then when it comes down to actually downloading transactions and organizing it there seems to be an incredible amount of spending that is totally unaffordable to an average American family of 5. Maybe this is normal spending and why so many American's have so much consumer debt but alas this is why I'm asking for some feedback. Please note that we can easily afford this budget with our household income; it isn't about affordability but rather if you spot anything that seems off or worse completely missing!

DETAILS:
Mid 30's Married Couple
Three children under 10 years old
MCOL
Below does NOT include income taxes, property taxes, mortgage payment info or charity giving as I feel like these things are controllable with major life changes (make/earn more income, move to more/less expensive property, give more/less to charity each year, etc)

Below is what we've spent the past 12 months rounded to nearest 100 dollars and displayed as monthly.

Code: Select all

CATEGORY......      MONTHLY	DESCRIPTION
Auto.................	500	Gas, Maintenance, Repair
Auto Depreciation	700	Two new vehicles every 7 to 10 years
Beauty..............	400	Clothes (mainly, blasted growing kids!), spa, haircuts
Education..........	100	Hands on activities, books, supplies for school
Entertainment..........	200	Movies, electronics
Food Dining Out		300	Takeout, restaurants, smoothies, donuts, etc
Food Groceries		1,000	Eat/Prep at home food, school lunch
Hobbies...........	500	Gym, sports, kids activities
Home..................	500	Maintenance, repairs, HOA dues
Household Items		400	Cleaning supplies, organizational supplies, small furniture
Insurance – Auto	200	Auto Insurance
Insurance – Health	1,000	Health Insurance
Insurance – Home	200	Property Insurance
Insurance – Life/Umbr	200	Life & Umbrella Insurance
Legal................	100	Attorney review contracts, misc
Medical Dental		700	Medical, dental
Miscellaneous......	100	Small subscriptions or annual fees, once a year smallish stuff
Pet....................	100	Pet food, vet visits, pet toys
Travel...............	1,300	Airfare, gas, rent a car, hotel, food while traveling
Utilities.............	500	Electricity, sewer, gas, garbage, internet, phone
TOTAL MONTHLY: $9,000
TOTAL ANNUALLY: $108,000

This seems ludicrous to me because we don't drive fancy cars, don't buy fancy clothes, don't go to the store everyday, etc. We do vacation fairly frequently but only when we get a crazy good deal on airfare and hotel.

Your comments, suggestions, feedback and questions are appreciated.

EDIT 1:
I replied in this thread to address some comments. Thank you!!
viewtopic.php?p=6372946#p6372946
Last edited by LoveTheBogle on Wed Dec 08, 2021 5:16 pm, edited 1 time in total.
Colorado14
Posts: 1792
Joined: Thu Apr 07, 2011 4:58 pm
Location: Colorado

Re: Review Family Spending -- Budget mid 30s with kids

Post by Colorado14 »

In some ways, I think you're asking the wrong question. Without knowing your income and how much you are investing/saving every month it is difficult (but not impossible) to comment on your spending.

If you're saving 15% or more of your income, then your spending may be reasonable. You mention that this post isn't about affordability, I would challenge you to ensure that you are meeting your long term investment goals and to consider whether or not your spending supports those goals.

However there are national averages online for family spending amounts that may be of use to you. I'll try to find a link.

These categories seem worthy of review: auto, food/groceries, health insurance and medical/dental. The last two may be fixed and not be eligible for reductions (maybe you have kids in braces?), but all of these seem high to me.
sailaway
Posts: 8215
Joined: Fri May 12, 2017 1:11 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by sailaway »

Three seem very high to me: auto depreciation (although, maybe for two newer cars?), beauty and travel. Although there are only two of us, your annual spend is about what we will spend on travel in 18 months, including a two week RV rental (with a week on each side to visit other family members that didn't go with us), two months for the holidays (some family time, but plenty of hotels and inviting other people out) and a cruise that we don't at all consider a great deal, but hey, family.

As said above, if this is affordable for you, not sure it matters. Take time to figure out if your spending is in line with your own values.
ThankYouJack
Posts: 5704
Joined: Wed Oct 08, 2014 7:27 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by ThankYouJack »

LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by pizzy »

ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
I thought he meant auto depreciation = a monthly contribution to a car buying sinking fund.
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by pizzy »

LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am Boglehead Friends,

I'm looking for some feedback on our family spending. I've tried to keep categories to a minimum but feel free to ask for clarification.

My main concern is whether any category is wildly high or low as well as if anything is missing. My feelings on a day to day basis is that we don't spend a lot but then when it comes down to actually downloading transactions and organizing it there seems to be an incredible amount of spending that is totally unaffordable to an average American family of 5. Maybe this is normal spending and why so many American's have so much consumer debt but alas this is why I'm asking for some feedback. Please note that we can easily afford this budget with our household income; it isn't about affordability but rather if you spot anything that seems off or worse completely missing!

DETAILS:
Mid 30's Married Couple
Three children under 10 years old
MCOL
Below does NOT include income taxes, property taxes, mortgage payment info or charity giving as I feel like these things are controllable with major life changes (make/earn more income, move to more/less expensive property, give more/less to charity each year, etc)

Below is what we've spent the past 12 months rounded to nearest 100 dollars and displayed as monthly.

Code: Select all

CATEGORY......      MONTHLY	DESCRIPTION
Auto.................	500	Gas, Maintenance, Repair
Auto Depreciation	700	Two new vehicles every 7 to 10 years
Beauty..............	400	Clothes (mainly, blasted growing kids!), spa, haircuts
Education..........	100	Hands on activities, books, supplies for school
Entertainment..........	200	Movies, electronics
Food Dining Out		300	Takeout, restaurants, smoothies, donuts, etc
Food Groceries		1,000	Eat/Prep at home food, school lunch
Hobbies...........	500	Gym, sports, kids activities
Home..................	500	Maintenance, repairs, HOA dues
Household Items		400	Cleaning supplies, organizational supplies, small furniture
Insurance – Auto	200	Auto Insurance
Insurance – Health	1,000	Health Insurance
Insurance – Home	200	Property Insurance
Insurance – Life/Umbr	200	Life & Umbrella Insurance
Legal................	100	Attorney review contracts, misc
Medical Dental		700	Medical, dental
Miscellaneous......	100	Small subscriptions or annual fees, once a year smallish stuff
Pet....................	100	Pet food, vet visits, pet toys
Travel...............	1,300	Airfare, gas, rent a car, hotel, food while traveling
Utilities.............	500	Electricity, sewer, gas, garbage, internet, phone
TOTAL MONTHLY: $9,000
TOTAL ANNUALLY: $108,000

This seems ludicrous to me because we don't drive fancy cars, don't buy fancy clothes, don't go to the store everyday, etc. We do vacation fairly frequently but only when we get a crazy good deal on airfare and hotel.

Your comments, suggestions, feedback and questions are appreciated.
What is your gross income ($) and savings contributions ($)?
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
abracadabra11
Posts: 408
Joined: Sat May 01, 2010 2:09 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by abracadabra11 »

You probably have older kids. Because monthly daycare costs tops our list at ~$3k/m.
User avatar
winterfan
Posts: 826
Joined: Mon Jan 05, 2015 10:06 am

Re: Review Family Spending -- Budget mid 30s with kids

Post by winterfan »

Are you contributing to a college plan for your children? The hobby category seems high to me, but I do know how expensive youth sports can be. Your home and auto insurance seem high to me too. Ours is quite a bit less than that in a MCOL area.

Is the legal fee for a retainer? Is this used enough to be necessary?
MathWizard
Posts: 6560
Joined: Tue Jul 26, 2011 1:35 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by MathWizard »

The auto depreciation is high.

My guess is that with 5 in the family, you have 2 minivans or more likely SUVs.
Either that or you are financing/leasing the cars.

An SUV is crazy expensive, and consumes a lot of gas.

If you want to cut expenses, have one of the cars be a "boring" sedan for when you all
are not going to be traveling together.

You also do not have to buy new. I have 2 comfortable sedans (which can handle 5 adults,
though cramped in back) which cost $25K each at 2 years old that I plan to keep for 10 years.
These are by far the most expensive cars that I have ever owned.

Cars can destroy a budget.

I self insure for comprehensive, just having liability. You cannot do that when you finance the car, and
likely not when leasing either. In the past, with cars that were not expensive, that was not a huge potential
self-insurance cost.

I also saved with older cars on registration. It was something like $45/year on a car older than 10 years,
vs. hundreds for my newer cars.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by KlangFool »

LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am
DETAILS:
Mid 30's Married Couple
Three children under 10 years old
MCOL
Below does NOT include income taxes, property taxes, mortgage payment info or charity giving

[/code]
TOTAL MONTHLY: $9,000
TOTAL ANNUALLY: $108,000
LoveTheBogle,

1) Yes, you are spending incredible amount of money since this 108K per year does not even include your mortgage payment and property taxes.

2) The more important question is whether you can afford it. If you save150K to 200K per year, the answer would be yes. If not, why do you think you can afford it?

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
FraserFir
Posts: 68
Joined: Sun Dec 05, 2021 9:07 am

Re: Review Family Spending -- Budget mid 30s with kids

Post by FraserFir »

Given that you've stated this spending is affordable for you and your savings goals, I think the next reasonable question to ask yourself is does the spending in each category reflect the relative value you ascribe to each category?

E.g., my family places a high value on food and walkability, so our housing and food budgets are relatively high but our transportation budget is relatively low.

Budgets aren't about getting the lowest possible number, it's about making sure your actual spending and saving reflects your desired spending and saving based on your values
mw1739
Posts: 1147
Joined: Mon Mar 21, 2011 5:44 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by mw1739 »

Honestly our situation isn't terribly different and we probably spend a comparable amount. I think you are right with the fact that's why so many people are in consumer debt. Most people don't budget for vehicle depreciation and use tax refunds or stimulus checks to pay off accumulated debt.
slicendice
Posts: 564
Joined: Tue Sep 22, 2020 12:08 am

Re: Review Family Spending -- Budget mid 30s with kids

Post by slicendice »

LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am Boglehead Friends,

I'm looking for some feedback on our family spending. I've tried to keep categories to a minimum but feel free to ask for clarification.

My main concern is whether any category is wildly high or low as well as if anything is missing. My feelings on a day to day basis is that we don't spend a lot but then when it comes down to actually downloading transactions and organizing it there seems to be an incredible amount of spending that is totally unaffordable to an average American family of 5. Maybe this is normal spending and why so many American's have so much consumer debt but alas this is why I'm asking for some feedback. Please note that we can easily afford this budget with our household income; it isn't about affordability but rather if you spot anything that seems off or worse completely missing!

DETAILS:
Mid 30's Married Couple
Three children under 10 years old
MCOL
Below does NOT include income taxes, property taxes, mortgage payment info or charity giving as I feel like these things are controllable with major life changes (make/earn more income, move to more/less expensive property, give more/less to charity each year, etc)

Below is what we've spent the past 12 months rounded to nearest 100 dollars and displayed as monthly.

Code: Select all

CATEGORY......      MONTHLY	DESCRIPTION
Auto.................	500	Gas, Maintenance, Repair
Auto Depreciation	700	Two new vehicles every 7 to 10 years
Beauty..............	400	Clothes (mainly, blasted growing kids!), spa, haircuts
Education..........	100	Hands on activities, books, supplies for school
Entertainment..........	200	Movies, electronics
Food Dining Out		300	Takeout, restaurants, smoothies, donuts, etc
Food Groceries		1,000	Eat/Prep at home food, school lunch
Hobbies...........	500	Gym, sports, kids activities
Home..................	500	Maintenance, repairs, HOA dues
Household Items		400	Cleaning supplies, organizational supplies, small furniture
Insurance – Auto	200	Auto Insurance
Insurance – Health	1,000	Health Insurance
Insurance – Home	200	Property Insurance
Insurance – Life/Umbr	200	Life & Umbrella Insurance
Legal................	100	Attorney review contracts, misc
Medical Dental		700	Medical, dental
Miscellaneous......	100	Small subscriptions or annual fees, once a year smallish stuff
Pet....................	100	Pet food, vet visits, pet toys
Travel...............	1,300	Airfare, gas, rent a car, hotel, food while traveling
Utilities.............	500	Electricity, sewer, gas, garbage, internet, phone
TOTAL MONTHLY: $9,000
TOTAL ANNUALLY: $108,000

This seems ludicrous to me because we don't drive fancy cars, don't buy fancy clothes, don't go to the store everyday, etc. We do vacation fairly frequently but only when we get a crazy good deal on airfare and hotel.

Your comments, suggestions, feedback and questions are appreciated.
I've got some bad news for the OP. Once your kids hit teenage years the food, activities, car insurance, dining out budgets are going to get much worse.

As others have indicated, $84K per 10 years for car depreciation seems to be generous. Unless you need a second large vehicle like a truck for a business, you only need 1 big car for hauling the whole family. Second car can be a smaller less expensive to maintain workhorse commuter/errands car that can shoulder a majority of the miles. Another thing that I have found puts a big dent in car ownership costs (gas/milage/maintenance/replacement interval) is to walk/bike/take public transportation to work daily if that is an option. In particular a significant walk/bike commute is also a good way to save on gym costs if that is an option. $2400 a year for car insurance seems a bit steep for 2 adults have you shopped around recently? 4800 dollars a year (every year) on cleaning/organizational supplies/small furniture seems rather extravagant. 2400 dollars a year (every year) on movies electronics seems a little steep but if you really enjoy going to the movies a few times a month as a family, I guess it's worth it. $15,600 a year on travel seems significant, if you enjoy and can afford it then it is worth it. As others have indicated, if you can save 15+% of your gross income you can afford this. The question is, do you feel you are getting value for these expenditures or are some of them just habitual?
mw1739
Posts: 1147
Joined: Mon Mar 21, 2011 5:44 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by mw1739 »

Don’t let everyone beat you up over the car fund. The average new car price this year is $45,000 which will certainly increase over the next 10 years. An upper middle class family having 2 $40,000 cars is completely reasonable assuming you’re meeting other financial goals.
BrklynMike
Posts: 87
Joined: Wed Oct 05, 2016 1:38 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by BrklynMike »

I'm at a similar stage of life, and these expenses are all in line with what we spend (after all our savings goals and mortgage payments, etc.). I also noticed the lack of daycare, which runs over $3k / month if you have more then one kid nowadays. Like we, we also live a relatively modest life (or at least think so) without vacationing or spending on luxury cars or clothes. It's just very expensive to live near urban areas and have a family and save for retirement and their college education.
"In a world of uncertainty, one should focus more on the consequences than the probabilities." - Benjamin Graham
ScubaHogg
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Joined: Sun Nov 06, 2011 2:02 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by ScubaHogg »

Almost $16k a year on travel. Is this for work? Cause that is an obvious place where you could likely trim some fat if you wanted
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dukeblue219
Posts: 4074
Joined: Fri Jan 29, 2016 11:40 am

Re: Review Family Spending -- Budget mid 30s with kids

Post by dukeblue219 »

Your naming is a bit odd (Beauty is the name of your clothes category? OK...) but the overall amount isn't awful if you can afford it. I'm mid 30s with two young kids and that's not out of line with our spending though ours includes the mortgage which is a big difference. On the other hand you have significant medical and health insurance costs that we don't carry.

The travel number feels a little high and I don't know what you're getting for $1200 worth of annual legal consultations but if you're living within your means, so be it.
stoptothink
Posts: 15368
Joined: Fri Dec 31, 2010 8:53 am

Re: Review Family Spending -- Budget mid 30s with kids

Post by stoptothink »

You spend more than 3x what our family of 4 does and several of your line items are things that don't even exist in our budget, but if you can afford it, who cares? I am always confused by these threads, is other people telling you you are spending too much on food, travel, hobbies, etc. going to change your actions?
pizzy
Posts: 4339
Joined: Tue Jun 02, 2020 6:59 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by pizzy »

stoptothink wrote: Wed Dec 08, 2021 1:31 pm You spend more than 3x what our family of 4 does
You may need more budget help than OP :P
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dukeblue219
Posts: 4074
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Re: Review Family Spending -- Budget mid 30s with kids

Post by dukeblue219 »

ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
If OP called it "savings for new cars" would that make more sense? We put about $700/mo into a Car Replacement category on YNAB every month. The idea is that it funds $35k worth of car for each of us every eight years. We drive an Outback and a Camry, both of which cost in that range new.

That not frugal, no, but it's FAR from reckless.

Edit to add we don't budget separately for car maintenance. Both of these cars are so low maintenance than it doesnt really matter.
Jags4186
Posts: 8198
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Jags4186 »

Not 100% sure what your question is. Here's some questions for you to answer:

Are you saving enough to retire when you want to?
Are you saving enough to pay for your children's college tuition?
If you either of you lost your jobs, how easy would it be to replace with an substantially similar role?

If you can answer yes to the first two questions questions, and say "easy" for the 3rd then it doesn't really matter how much you're spending.
ThankYouJack
Posts: 5704
Joined: Wed Oct 08, 2014 7:27 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by ThankYouJack »

dukeblue219 wrote: Wed Dec 08, 2021 1:40 pm
ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
If OP called it "savings for new cars" would that make more sense? We put about $700/mo into a Car Replacement category on YNAB every month. The idea is that it funds $35k worth of car for each of us every eight years. We drive an Outback and a Camry, both of which cost in that range new.

That not frugal, no, but it's FAR from reckless.
Budgeting $700 would make sense to me if the cars were worth $0 after 7 years or if they were more expensive and depreciated faster. But it seems overly conservative assuming the owner is not giving the 7 year old cars away.

Instead of using a budget, I simply track what comes out of my checking account and paycheck each month. Takes about 2 minutes a month. Not saying everyone should do it, but I have a running monthly history of about 8 years on a spreadsheet, including lumpy purchases like cars. It’s great in terms of getting a precise feel for annual expenses. Much better than trying to estimate things IMO.
Robdac
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Robdac »

The expenses are what they are. It's how your family chooses to budget money. It's only ludicrous if you make $50K per year. It's miserly if you make $500K per year.

For reference, we spend a little more than that annually and it feels about right to us given the amount we make and invest.
aristotelian
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Re: Review Family Spending -- Budget mid 30s with kids

Post by aristotelian »

$1,000 monthly insurance premium is a lot, especially when you are still having $700 monthly medical expenses. What kind of plan is this?

Buy used cars and drive them longer.

$400 is a lot for cleaning supplies.
jackb1117
Posts: 77
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Re: Review Family Spending -- Budget mid 30s with kids

Post by jackb1117 »

Family of 4 here making more than $500k/yr while spending less than $100k/yr; I certainly wouldn't characterize how we live as 'misers'. $100k of spend, even in a HCOL area, can give you a very nice life imo.

Robdac wrote: Wed Dec 08, 2021 2:07 pm The expenses are what they are. It's how your family chooses to budget money. It's only ludicrous if you make $50K per year. It's miserly if you make $500K per year.

For reference, we spend a little more than that annually and it feels about right to us given the amount we make and invest.
Tal-
Posts: 544
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Tal- »

My short comment is: If you're going to spend $108K/year, this plan looks as good as any. If it aligns with your plans, income, and priorities, that's a clear win.

With that said, I think that you were looking for reactions. So, I'll share mine - though please understand that this these are via my seat, and it's only your seat that matters.

$500 on gas/car maintenance feels quite high. That's either a lot of gas, a lot of repairs, or extreeeeeemly expensive upkeep.

I'm going to combine beauty, hobbies, entertaining, electronics, and eating out into a category that I'll call "Monthly fun." These are all small and regular luxuries. When combined, this is around $1500/month. This is a high number, but also likely a large source of enjoyment.

$500 for home maintenance is actually lower than I expected. For me, $6000/year feels reasonable for eight out of ten years, but those other two years will include large capital expenses.

$400 for household items struck me as high, and among the bigger surprises on this list. If you're spending this on nick-knacks, I'd almost include this with the new "monthly fun" category.

All of your insurance premiums look higher than expected. Our rates are around half of what you listed for home, auto, and life.

$1700/month on medical is also higher than expected. Though I don't have a good understanding for how you get insurance, or what that plan is, or what your family look like. This may be perfectly reasonable. I work a W2 job, and I pay around 1/5 of that.


When combining small luxuries, big luxuries like travel, and what I'll assume are decent cars, around 1/3 of your expenses are highly discretionary. If these are brining you joy and you're on track, I say that this is great. But, if you're looking for places to cut back, these may be some places to start.

Hope that helps,
Debt is to personal finance as a knife is to cooking.
jharkin
Posts: 3469
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: Review Family Spending -- Budget mid 30s with kids

Post by jharkin »

Take this for what its worth - which is not much as I am just a stranger on the internet.

Only you can really answer if your spending is "too much" as we don't have any context to your question. We don't know what % of income this is, we don't know how much you are saving, we don't know what your life goals are.

Is your spending high? Compared to the median US family that makes 60k you bet its high. But if you are a 500k dual-MD household it may be totally reasonable.

If you are still reading I can offer some thoughts compared to my own budget (250k household in a HCOL):
  • auto maintenance and repair is very high. We drive Hondas and I spend about $100 a year to DIY oil changes
  • Depreciation is a little high, but I do allocate $500/month to the "replace the cars" fund.
  • I have no idea what our beauty spending is. The mrs. doesn't tell me what she spends at the hair salon ;) But clothing the kids IS expensive so your number is probably average to low
  • Entertainment, eating out, etc seem reasonable. Probably low for city dwellers.
  • Groceries is about what we spend for 4. But we splurge at Whole Foods
  • Hobbies - we probably spend a lot on hobbies and activities. multiple club memberships, etc so this doesn't seem crazy to me but is probably higher than many others spend.
  • Insurance - all your numbers look high to me. We spend $1400/yr for a 700k house and $1000/yr for 2 cars with max coverage. Maybe shop around ?
  • Your medical costs also seem very high. If you are buying private insurance, or your employer doesn't subsidize, or you are dealing with chronic illnesses that have high ongoing costs you may not have much choice. But fwiw my employer plan is heavily subsidized and I pay only a fraction of these numbers
  • travel - this is the big one. $15,000 a year on travel is close to double what we spend and we are not super frugal travelers. But if this is something that brings joy and you can afford it who am I to judge?
  • Utilities - We are higher if I add up heat and hot water (4-5k/yr), electric (was 2k, now free with solar), internet, landline, TV ($2k/yr) and cell phones ($1.5k/yr).
  • Pet sounds right - thats about what we spend on dog food and vet visits
  • legal - where is this going? Ive hired lawyers 3 times in the last decade, twice as part of real estate contracts and once to do the will. Not an ongoing expense. Maybe if you run a business it is?
Wannaretireearly
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Wannaretireearly »

All seems reasonable OP. These items below are likely higher for our family of 4:
Education.......... 100 Hands on activities, books, supplies for school
Entertainment.......... 200 Movies, electronics
Food Dining Out 300 Takeout, restaurants, smoothies, donuts, etc
Food Groceries 1,000 Eat/Prep at home food, school lunch

Travel budget is in another stratosphere most years :oops: :mrgreen:

Our discrectionary spending is large. Which is why i actively try to keep my fixed costs low. Mortgage paid off, cars paid off & reasonable spend (no luxury). No HOA. Property tax ($12K) which is reasonable in a VHCOL. Added Solar last year, which should control energy spend.

As others have said, it is all about saving. We are (finally) back to saving close to our spending per year. DINK phase likely the last time this happened.
So 1/3 taxes, 1/3 saving & 1/3 spending....is my goal. I think i'm close. I don't track the details.
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
Robdac
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Robdac »

jackb1117 wrote: Wed Dec 08, 2021 2:19 pm Family of 4 here making more than $500k/yr while spending less than $100k/yr; I certainly wouldn't characterize how we live as 'misers'. $100k of spend, even in a HCOL area, can give you a very nice life imo.

Robdac wrote: Wed Dec 08, 2021 2:07 pm The expenses are what they are. It's how your family chooses to budget money. It's only ludicrous if you make $50K per year. It's miserly if you make $500K per year.

For reference, we spend a little more than that annually and it feels about right to us given the amount we make and invest.
As long as that works for your family that's all that matters. Didn't mean to offend.
pizzy
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Re: Review Family Spending -- Budget mid 30s with kids

Post by pizzy »

jackb1117 wrote: Wed Dec 08, 2021 2:19 pm $100k of spend, even in a HCOL area, can give you a very nice life imo.
I think you could add "basic" before life

Not that there is anything wrong with that. And basic can be nice.
Vanguard/Fidelity | 76% US Stock | 16% Int'l Stock | 8% Cash
Wannaretireearly
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Wannaretireearly »

pizzy wrote: Wed Dec 08, 2021 3:05 pm
jackb1117 wrote: Wed Dec 08, 2021 2:19 pm $100k of spend, even in a HCOL area, can give you a very nice life imo.
I think you could add "basic" before life

Not that there is anything wrong with that. And basic can be nice.
If mortgage, college are taken care of & housing costs are minimal (no hoa, low property Tax), $100k a year is solid middle class living. Not basic ;)
“At some point you are trading time you will never get back for money you will never spend.“ | “How do you want to spend the best remaining year of your life?“
Topic Author
LoveTheBogle
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Re: Review Family Spending -- Budget mid 30s with kids

Post by LoveTheBogle »

OP HERE WITH REPLY
Thank you for all who have participated.

I understand the concept that fundamentally I should care more about whether or not our spending provides satisfaction to us while also meeting our long term goals. Yes, we are more than meeting our long term goals for retirement. We've been very blessed to have high income that has been plowed into investments over the last 15 years which has done very well. The purpose of the thread is to get another set of eyes on a budget for a young family of 5 living in America in 2021 to see how it compares to what you experienced or know of others experience. I want to be clear that we aren't looking for savings, I'm just trying to wrap my head around how in the world middle class Americans make it work considering all of the spend is after-tax money. We are a highly educated and highly compensated household in the top 2% of income and I still scratch my head at our lifestyle because it is NOT EXTRAVAGANT AT ALL. I assure you that people that know us well would be shocked at our income and net worth because it is absolutely not displayed at all and yet we still spend over $100k a year which is more than most people gross at work in their 30's.

Below are my comments in return of other comments about categories specifically.

AUTO - Includes GAS (300 /mo), REGISTRATION/LICENSING (75 /mo)), MAINTENANCE such as oil changes and tires (125 /mo). TOTAL: 500. Maybe the maintenance part of AUTO is high because we just got new tires but we've had the car for a few years so maybe it should be half of 125 so a total of AUTO of $425. If this seems high I'm not sure how it can get lower. Two SUVs. School and work is 10+ miles away.

AUTO DEPRECIATION - Thank you everyone that mentioned this is high and I agree. The idea was $700 a month times 12, times 7 is $58,800 which is about what we spent on two SUVs. However, in 7 years our two SUVs won't be worth zero. They will probably have 150k miles on them and still worth over $10,000. So AUTO BUYING EARMARKED category should probably be closer to $400 to $500 in reality after taking into consideration spending $60,000 every 7 years but then selling what we have for $20,000. Maybe not, maybe it is spot on. I'm with everyone though that auto is a huge blunder for most people because if we buy something used instead of new or wait 10 years instead of 7 years then the fund on a monthly basis changes drastically. We also have to keep in mind in the next 6 to 7 years we will likely obtain a 3rd vehicle for the kiddos. First world problem, I know, but where we live is not walkable and we aren't going to be full time taxi drivers for our kids once they turn 16.

CLOTHES BEAUTY - I combined this because they are related. Someone could have one pair of pants and wear them day in and day out just the same as someone could cut their own hair at home. We have growing kids and we buy them clothes from Target, Kohls, Walmart, Gap, etc. Us parents are a little bit more spendy on individual pieces of clothes but nothing crazy (highest price shirt we have is probably $50 and highest price pants is probably $100 and those are far and few between). We have zero handbags over $50. Zero watches over $50. Zero ear rings over $50. Fairly middle class clothes, grooming, etc. We even cut the kids hair at home.

HOUSEHOLD ITEMS - This is basically a catch all bucket for things that are in the house that are used. Everything down to things like tooth brushes. Basically most stuff that is obtained at Target is NOT food so I toss it into Household Items. Besides my original description of "cleaning supplies, organization supplies, small furniture" it will include things like toothbrushes, toothpaste, hair spray down to bowls, cups, paper towels, toilet paper, hand soap, etc, etc, etc. There is a billion tiny small $ amount items that are used. I haven't gone receipt by receipt to be super granular here so I'm sure some will be in food or somewhere else but the fact is that if it isn't here it is somewhere so the overall spend last 12 months is accurate in total.

INSURANCE ITEMS - I don't know what to say about the comments how they seem high. I shop my home owners and auto insurance every 2 years like clockwork and I have no options for health insurance because no subsidies exist for me (self employed and high income). We do have a fairly substantial, much more than minimally necessary life insurance but it is peanuts if the unfortunate happens.

LEGAL - $100 a month is probably high over long periods of time. It should probably be closer to 25 when looking over a course of 5+ years but I am pulling this data from past 12 months and we had some real estate contracts reviewed and legal document drafted.

MEDICAL DENTAL - We had a bad medical year. Nothing chronic. I bet if I organized all medical/dental spending over the past 10 years then it is probably a fraction of what we've spent in the past 12 months. We have the highest deductible plan possible and we hit it this year and also had quite a bit of dental stuff done as both parents and kiddos. This is realistically closer to $250 a month in a normal year instead of $700 a month.

TRAVEL - We traveled a lot in the last 12 months; much more than normal but not substantially more. Basically every school break that is more than 3 days we try to leave the state. We are big on experiences over "things". We do travel by air (coach, we don't even pick seats if they charge for it) and stay at $80 to $150 a night Hilton/Marriot's.

Thank you again all! :sharebeer
stoptothink
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Re: Review Family Spending -- Budget mid 30s with kids

Post by stoptothink »

pizzy wrote: Wed Dec 08, 2021 1:34 pm
stoptothink wrote: Wed Dec 08, 2021 1:31 pm You spend more than 3x what our family of 4 does
You may need more budget help than OP :P
Very odd comment, we save over 60% of our gross income. Yes, our total household expenses are <15% of our income and it is very easy for me to confirm. Our lifestyle hasn't changed at all in the past 6yrs while our income has more than tripled. Wife and I grew up in abject poverty, we and our kids live a fabulous life and want for nothing.

OP clearly has a higher standard of spending for pretty much everything compared to us, but who cares unless they are facing financial issues :confused These threads are completely pointless; just a platform for judgement - posters calling some frivolous spenders and others cheapskates.
Last edited by stoptothink on Wed Dec 08, 2021 5:34 pm, edited 1 time in total.
Triple digit golfer
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Triple digit golfer »

You spend too much on auto depreciation, beauty, groceries, hobbies, household items, car insurance (unless you have teenagers), homeowners insurance, medical/dental, miscellaneous, travel, and utilities.

There, you have my opinion. What are you going to do with the feedback you've received?
delamer
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Re: Review Family Spending -- Budget mid 30s with kids

Post by delamer »

My guess is that your travel, auto depreciation, medical, household items, legal, and home categories are either non-existent or way out of line for a couple with 3 kids earning around $100,000/year.

Those are $3,700/month.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
finite_difference
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Re: Review Family Spending -- Budget mid 30s with kids

Post by finite_difference »

mw1739 wrote: Wed Dec 08, 2021 12:56 pm Don’t let everyone beat you up over the car fund. The average new car price this year is $45,000 which will certainly increase over the next 10 years. An upper middle class family having 2 $40,000 cars is completely reasonable assuming you’re meeting other financial goals.
If you buy two $30,000 cars instead of two $40,000 cars, that saves $20,000/10 years or $167/month.

If you shop around following denovo’s method, you can probably get the same $40,000 car for $10,000 less.

Kids are expensive. I’m guessing you’re going through braces with those dental bills.
The most precious gift we can offer anyone is our attention. - Thich Nhat Hanh
Jags4186
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Jags4186 »

LoveTheBogle wrote: Wed Dec 08, 2021 5:15 pm OP HERE WITH REPLY, I'm just trying to wrap my head around how in the world middle class Americans make it work considering all of the spend is after-tax money. We are a highly educated and highly compensated household in the top 2% of income and I still scratch my head at our lifestyle because it is NOT EXTRAVAGANT AT ALL.
OP,

Your lifestyle is extravagant and it’s okay to admit that. Sorry you feel it is “NOT EXTRAVAGANT AT ALL” but the numbers tell another story.

The reality is that everyone who isn’t ultra wealthy wants to consider themselves middle class. You have a top 2% of income, and I’m sure if we were to include your mortgage and property taxes you’d be spending close to 3x what the median family earns pretax in this country every year. You are wealthy and spend like it. Nothing wrong with it.

Consider someone who has a family of 5 to feed on “median” $65k income probably doesn’t buy new clothes, doesn’t drive new cars ever, doesn’t spend $2400/yr going to the movies, and doesn’t spend close to $5000/yr on “beauty”—they’ve never been to a spa and there probably isn’t one in the town they live in. Mom and dad cut all the kids hair. They don’t carry millions in life and umbrella insurance. They don’t spend near $5k/yr on “cleaning supplies”. They probably spend half what you spend on groceries. Vacation is a day trip to a local lake or beach or a visit to a family member’s home who lives close to an attraction…
CletusCaddy
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Re: Review Family Spending -- Budget mid 30s with kids

Post by CletusCaddy »

ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
Auto depreciation is absolutely an expense. When you buy a car you don’t lose the purchase price from your net worth, you’ve just converted it from cash to auto equity. It’s what happens to that equity over time that is the real cost of the car, not the purchase price.

$350/month, $4k/yr is reasonable depreciation for a new non luxury SUV. As the cars get older the annual depreciation should decrease, so it’s not 700 * 12 * 10.

Although OP should run his VINs through Carvana, auto depreciation recently has come to a standstill and even reversed.
Last edited by CletusCaddy on Wed Dec 08, 2021 6:05 pm, edited 1 time in total.
delamer
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Re: Review Family Spending -- Budget mid 30s with kids

Post by delamer »

CletusCaddy wrote: Wed Dec 08, 2021 5:58 pm
ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
Auto depreciation is absolutely an expense. When you buy a car you don’t lose the purchase price from your net worth, you’ve just converted it from cash to auto equity. It’s what happens to that equity over time that is the real cost.

$350/month, $4k/yr is reasonable depreciation for a new non luxury SUV. Although OP should run his VINs through Carvana, auto depreciation recently has come to a standstill and even reversed.
But given that the OP is comparing her/his family budget to the average, most families aren’t going to have auto depreciation as a budget item.

So yes, it’s an expense. But no, it generally isn’t accounted for when people report their budgets.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
CletusCaddy
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Re: Review Family Spending -- Budget mid 30s with kids

Post by CletusCaddy »

delamer wrote: Wed Dec 08, 2021 6:05 pm
CletusCaddy wrote: Wed Dec 08, 2021 5:58 pm
ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
Auto depreciation is absolutely an expense. When you buy a car you don’t lose the purchase price from your net worth, you’ve just converted it from cash to auto equity. It’s what happens to that equity over time that is the real cost.

$350/month, $4k/yr is reasonable depreciation for a new non luxury SUV. Although OP should run his VINs through Carvana, auto depreciation recently has come to a standstill and even reversed.
But given that the OP is comparing her/his family budget to the average, most families aren’t going to have auto depreciation as a budget item.

So yes, it’s an expense. But no, it generally isn’t accounted for when people report their budgets.
That says more about the lack of financial literacy among most people than it does about OP’s budget.
delamer
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Re: Review Family Spending -- Budget mid 30s with kids

Post by delamer »

CletusCaddy wrote: Wed Dec 08, 2021 6:06 pm
delamer wrote: Wed Dec 08, 2021 6:05 pm
CletusCaddy wrote: Wed Dec 08, 2021 5:58 pm
ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
Auto depreciation is absolutely an expense. When you buy a car you don’t lose the purchase price from your net worth, you’ve just converted it from cash to auto equity. It’s what happens to that equity over time that is the real cost.

$350/month, $4k/yr is reasonable depreciation for a new non luxury SUV. Although OP should run his VINs through Carvana, auto depreciation recently has come to a standstill and even reversed.
But given that the OP is comparing her/his family budget to the average, most families aren’t going to have auto depreciation as a budget item.

So yes, it’s an expense. But no, it generally isn’t accounted for when people report their budgets.
That says more about the lack of financial literacy among most people than it does about OP’s budget.
No argument from me . . .
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
CletusCaddy
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Re: Review Family Spending -- Budget mid 30s with kids

Post by CletusCaddy »

delamer wrote: Wed Dec 08, 2021 6:09 pm
CletusCaddy wrote: Wed Dec 08, 2021 6:06 pm
delamer wrote: Wed Dec 08, 2021 6:05 pm
CletusCaddy wrote: Wed Dec 08, 2021 5:58 pm
ThankYouJack wrote: Wed Dec 08, 2021 11:13 am

What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
Auto depreciation is absolutely an expense. When you buy a car you don’t lose the purchase price from your net worth, you’ve just converted it from cash to auto equity. It’s what happens to that equity over time that is the real cost.

$350/month, $4k/yr is reasonable depreciation for a new non luxury SUV. Although OP should run his VINs through Carvana, auto depreciation recently has come to a standstill and even reversed.
But given that the OP is comparing her/his family budget to the average, most families aren’t going to have auto depreciation as a budget item.

So yes, it’s an expense. But no, it generally isn’t accounted for when people report their budgets.
That says more about the lack of financial literacy among most people than it does about OP’s budget.
No argument from me . . .
This is why I prefer leasing. Not because it’s cheaper, it’s usually not, but it does force you to be honest with yourself about the true cost of a car (including the opportunity cost of the equity expressed as the lease money factor / interest rate), and list it in your budget appropriately.
Jags4186
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Jags4186 »

I think it’s kind of silly to consider vehicle depreciation as a budget line item. Record expenses when they happen and then you don’t need to worry about depreciation.

If I spend $30k on a car by writing a $30k check I record a $30k expense for a car that year. If I take 60 $500 payments instead I record $500/mo expense for 60 months.

I’ll capture whatever equity in the car when I eventually sell it/trade it in. I mean, do you track depreciation of a computer or cell phone? Depreciation of bath towels? Depreciation of your clothing?
Triple digit golfer
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Re: Review Family Spending -- Budget mid 30s with kids

Post by Triple digit golfer »

Jags4186 wrote: Wed Dec 08, 2021 6:30 pm I think it’s kind of silly to consider vehicle depreciation as a budget line item. Record expenses when they happen and then you don’t need to worry about depreciation.

If I spend $30k on a car by writing a $30k check I record a $30k expense for a car that year. If I take 60 $500 payments instead I record $500/mo expense for 60 months.

I’ll capture whatever equity in the car when I eventually sell it/trade it in. I mean, do you track depreciation of a computer or cell phone? Depreciation of bath towels? Depreciation of your clothing?
Agreed, unless of course he wants a GAAP accounting budget, which I don't believes serves any purpose for an individual or family whatsoever.
jsapiandante
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Re: Review Family Spending -- Budget mid 30s with kids

Post by jsapiandante »

A lot of your spending is discretionary. Nothing wrong with that since you clearly make enough to live that kind of lifestyle. Are you trying to lower your expenses? Or just want to compare? Not sure how much you'd get out of comparing with everyone else.

We are late 30's with one 4 year old in HCOL Socal. We live very comfortably on $120k/year all in (this includes taxes, mortgage, insurances, etc.). We spend almost as much as you on vacations but spend a fraction of what you spend on eating out and groceries. We only have 1 car that's paid off since my wife works from home and will buy another brand new car every 10 years in the 30k range. I do almost all the maintenance in the house and car so that keeps costs very low.

If you're saving and meeting your goals (retirement, college education, etc.), it shouldn't matter how much you spend since you're living below your means, albeit with a high income.
Ron Ronnerson
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Location: Bay Area

Re: Review Family Spending -- Budget mid 30s with kids

Post by Ron Ronnerson »

LoveTheBogle wrote: Wed Dec 08, 2021 5:15 pm
The purpose of the thread is to get another set of eyes on a budget for a young family of 5 living in America in 2021 to see how it compares to what you experienced or know of others experience. I want to be clear that we aren't looking for savings, I'm just trying to wrap my head around how in the world middle class Americans make it work considering all of the spend is after-tax money. We are a highly educated and highly compensated household in the top 2% of income and I still scratch my head at our lifestyle because it is NOT EXTRAVAGANT AT ALL. I assure you that people that know us well would be shocked at our income and net worth because it is absolutely not displayed at all and yet we still spend over $100k a year which is more than most people gross at work in their 30's.
If you're not looking to find savings, then there is nothing to worry about. Regarding how everyone else manages, we all find a path that works for us.

I'll try to address some points you mention in your comment above. You assume after-tax money is very different from pre-tax money. Half the country doesn't pay income taxes. So if you look near the median income (middle class folks, if you will), most people are paying little to no income tax. I pay roughly 0.3% of my gross income in federal taxes and 0% in California income taxes.

You said your lifestyle is not extravagant. Extravagance is a matter of perspective and what you're comparing to. Since you're not wanting to save more money, I'd just move on and not think about this much. However, if you have goals such as wanting to retire sooner or being able to spend more time with your young children, reducing costs can definitely help make that happen.

You're spending more than what most people earn so, by definition, you're living more extravagantly than most people. It seems like you don't think of it as extravagance but if the point is to compare to others, than just accept the truth about your level of consumption.

If you're looking for insight through comparison, I'll provide a little info on my family. We spend around $7k/month in the Bay Area and that includes mortgage payment and all taxes. We drive Corollas that we intend to keep for 15 years so our car depreciation is under $200/month, churn credit cards so that we can travel using reward points, have low health insurance costs as we qualify for the premium tax credit on the health care exchange through the ACA since our AGI is around $60k, pay almost nothing in income taxes, spend almost nothing on hobbies, spend almost nothing on beauty, and just about all our spending categories are less than yours except for groceries and eating out (which are similar).

For what it's worth, I feel like we live sort of extravagantly. I have a fancy car with a backup camera and side airbags! I eat out at restaurants where someone actually serves me food! I have cable TV and several streaming services so endless entertainment awaits at my fingertips! I have someone come in to clean my house two times a month! I feel incredibly fortunate to be able to have so much abundance. In short, it's your mindset as to what is extravagant and what isn't.
ThankYouJack
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Re: Review Family Spending -- Budget mid 30s with kids

Post by ThankYouJack »

CletusCaddy wrote: Wed Dec 08, 2021 6:06 pm
delamer wrote: Wed Dec 08, 2021 6:05 pm
CletusCaddy wrote: Wed Dec 08, 2021 5:58 pm
ThankYouJack wrote: Wed Dec 08, 2021 11:13 am
LoveTheBogle wrote: Wed Dec 08, 2021 10:47 am

This seems ludicrous to me because we don't drive fancy cars
What are the cars and how much do you drive each?

I'm not sure I would consider auto depreciation an expense and $700/month seems high. That adds up to $700 * 12 * 10 = $84k (just in depreciation, not cost) every 10 years for 2 basic cars.

It's either an overestimate or I bet you could trim that a decent amount if needed
Auto depreciation is absolutely an expense. When you buy a car you don’t lose the purchase price from your net worth, you’ve just converted it from cash to auto equity. It’s what happens to that equity over time that is the real cost.

$350/month, $4k/yr is reasonable depreciation for a new non luxury SUV. Although OP should run his VINs through Carvana, auto depreciation recently has come to a standstill and even reversed.
But given that the OP is comparing her/his family budget to the average, most families aren’t going to have auto depreciation as a budget item.

So yes, it’s an expense. But no, it generally isn’t accounted for when people report their budgets.
That says more about the lack of financial literacy among most people than it does about OP’s budget.
I get what you both are saying, but think there are more ways to look at it.

First, it seems like the OP wants to estimate expenses more than stick to a strict budget. That's a big difference

Second, I don't factor in auto equity into my net worth. Seems pointless to me unless my auto equity was a significant percentage of my net worth.

Third, I like my way of calculating monthly and annual expenses more for accuracy and especially the very minimal amount of time it takes. Before I would run estimates similar to what the OP is doing and I would over estimate most things and underestimate others never really painting a clear picture. I also don't need to try estimating or looking up how much my two cars are going to depreciate this month. Seems like that would be a waste of time.

I also don't factor in depreciation for expensive hobbies that I have. I simply add whatever comes out of checking account to my expenses spreadsheet. Works well for me but let me know if I'm missing anything.
CletusCaddy
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Re: Review Family Spending -- Budget mid 30s with kids

Post by CletusCaddy »

Jags4186 wrote: Wed Dec 08, 2021 6:30 pm I think it’s kind of silly to consider vehicle depreciation as a budget line item. Record expenses when they happen and then you don’t need to worry about depreciation.

If I spend $30k on a car by writing a $30k check I record a $30k expense for a car that year. If I take 60 $500 payments instead I record $500/mo expense for 60 months.

I’ll capture whatever equity in the car when I eventually sell it/trade it in. I mean, do you track depreciation of a computer or cell phone? Depreciation of bath towels? Depreciation of your clothing?
My bath towels and computer don’t cost $30k+.

You don’t have to account for auto depreciation in your budget but then you will have crazy high expenses in certain years and then zero expenses in other years. It’s not a true reflection of your cost of ownership and inhibits creating a true budget that reflects your actual expenses.

Ignoring depreciation also actually hides the true cost of a car. $50k cars are not created equal, they don’t all cost the same. But you wouldn’t know that if you ignore depreciation.
ThankYouJack
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Joined: Wed Oct 08, 2014 7:27 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by ThankYouJack »

Jags4186 wrote: Wed Dec 08, 2021 6:30 pm I think it’s kind of silly to consider vehicle depreciation as a budget line item. Record expenses when they happen and then you don’t need to worry about depreciation.

If I spend $30k on a car by writing a $30k check I record a $30k expense for a car that year. If I take 60 $500 payments instead I record $500/mo expense for 60 months.

I’ll capture whatever equity in the car when I eventually sell it/trade it in. I mean, do you track depreciation of a computer or cell phone? Depreciation of bath towels? Depreciation of your clothing?
Well said. Glad I'm not the only one :beer
Jags4186
Posts: 8198
Joined: Wed Jun 18, 2014 7:12 pm

Re: Review Family Spending -- Budget mid 30s with kids

Post by Jags4186 »

CletusCaddy wrote: Wed Dec 08, 2021 7:08 pm
Jags4186 wrote: Wed Dec 08, 2021 6:30 pm I think it’s kind of silly to consider vehicle depreciation as a budget line item. Record expenses when they happen and then you don’t need to worry about depreciation.

If I spend $30k on a car by writing a $30k check I record a $30k expense for a car that year. If I take 60 $500 payments instead I record $500/mo expense for 60 months.

I’ll capture whatever equity in the car when I eventually sell it/trade it in. I mean, do you track depreciation of a computer or cell phone? Depreciation of bath towels? Depreciation of your clothing?
My bath towels and computer don’t cost $30k+.

You don’t have to account for auto depreciation in your budget but then you will have crazy high expenses in certain years and then zero expenses in other years. It’s not a true reflection of your cost of ownership and inhibits creating a true budget that reflects your actual expenses.

Ignoring depreciation also actually hides the true cost of a car. $50k cars are not created equal, they don’t all cost the same. But you wouldn’t know that if you ignore depreciation.
My budget is tracking money in vs. money out. Depreciation doesn’t effect that until you sell the car…and when you do sell the car you’ll know to the penny how much your car depreciated.

Experience tells me that cars that depreciate heavily are cars that sell deeply discounted new. Cars that don’t depreciate much sell much closer to MSRP. It’s probably a wash if you track actual prices paid vs resale value.
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