By Dr. Jim Dahle, WCI FounderI fell off a mountain once, so Katie and I didn't hold our monthly budget meeting for a while. When we did, we had to do a little catching up. My part of our monthly budgeting spreadsheet is to add up all the sources of our income. Katie's portion is to add up all the sources of our spending so the total can be used on that spreadsheet to help us plan our cash flow.
We don't really “budget” anymore in the strict sense most people mean when they use that word. We don't stop spending when we hit some sort of arbitrary limit for a category. This is because our income is far more than we spend. While we've been VERY strict with budgets in past years, we don't have to anymore, so we don't. Nevertheless, from time to time, we do look at our spending, but it's been a while since we did so with any sort of detail.
When Katie gave me the totals for four straight months (this was from 2024, mind you), they looked like this:
- July: $20,690.58
- August: $36,835.77
- September: $28,248.60
- October: $32,809.49
I was a little bit shocked. I thought we spent about $15,000 a month, and maybe $20,000 was kind of a big month for us. But here were four months in a row over $20,000. Maybe $20,000 doesn't seem like a lot to you. But keep in mind what is NOT in this total:
- Income and payroll taxes
- Most charitable giving
- Financial advisory fees (being your own financial planner and investment manager might be the best-paying hobby out there)
- Saving for retirement or anything else
- Mortgage payment (we don't have one)
- Car payments (don't have those either)
- Student loan payments (nope)
- Any other payments
Does it seem like a lot? This is just what we spend on regular old stuff. Meanwhile, the average American household is living on <$80,000 a year. They have to pay taxes, give, pay their debts, and save for retirement on that. We blow their entire annual income in just three or four months of mostly discretionary spending.
Where in the world was all our money going? We decided we probably ought to find out, so Katie went back to the credit card, bank, and Venmo accounts to categorize the spending a bit. Just for the month of October, when we spent nearly $33,000, this is what she found:
- Food: $2,750 ($1,000 of which was spent on restaurants, mostly during two short trips)
- Gasoline: $750 (the garage might be wired for electric cars, but there aren't actually any in there)
- Clothes: $875 (this was actually pretty unusual for us; it mostly included a bunch of shoes for various family members)
- Vacation: $8,200 (No, that doesn't even come close to covering the entire upcoming family trip to South Africa)
- Tax prep: $5,875 (20+ K-1s have their costs)
- Healthcare: $1,800 (Pro tip: Don't fall off mountains)
- Gifts: $1,100 (Actually, it was a pretty low month for us as we put our “matching dollars” for the niece/nephew 529s in this category)
- Utilities: $500 (We like heat and light)
- Insurance: $730 (Teenage drivers = bad)
- Household: $1,380 (Subscriptions, cleaning, repairs, and the installation of Google Fiber)
- Car registration: $234 (Part of the cost of not driving a beater in Utah is a much more expensive registration fee)
- Property taxes: $6,921 (Big, fancy house, but at least it's in Utah)
- Kids' activities: $300 (Not bad considering how much they're involved in)
- Other: $1,400 (We got sick of categorizing all the other stuff; how long do you want this budget meeting to go?)
- Total: $32,815
Katie almost didn't want me to publish that list. “People are always making value judgments.” She's right about that. If you don't believe me, read the comments section below this post. Everyone likes reading about other people's budgets and pointing out how they're different from their own and how much money is being wasted. But I told her, “Hey, there's a video of me topless on my first day in the ICU on our YouTube channel; I think it's OK to reveal one month's budget.” She admitted that I had a point.
Know What You're Spending
My point is that I thought we were spending about $15,000 a month, and we weren't. If you don't track it in some way—at least in the crude way we normally do it just for cash flow purposes—you could make some big financial mistakes. What kind of mistakes? Cutting back at work when you can't afford to do so. Or thinking you're saving for retirement when you really aren't. Or projecting a totally inaccurate FI number.
So, have an occasional budget meeting (include your partner, if any) and see where you actually stand. It makes planning your financial future a whole lot more effective.
More information here:
How Much This FI Physician Family Actually Spends in a Year
When Is It OK to Start Enjoying Your Money?
Inflation Is Real
I wondered how much of this was due to inflation. Back in 1996, when I was an undergrad, I could get by for a month on about $100 of groceries. Admittedly, I wasn't eating very tasty or even very healthy food. But now our family of five is spending $1,800, or over three times as much per person. That doesn't include any eating out either. Your financial plans need to assume inflation will happen, and sometimes at rates much higher than 3%.
There Are ‘One-Time Expenses' Every Month
You might look at what we spent money on in October and argue that a lot of those were “one-time expenses.” That's true. We only pay property taxes once a year, and I only register my truck once a year. That ridiculous $8,200 for vacation presumably doesn't happen every month. Right? Well, it probably does for us, actually. We really like going on vacations. In fact, the phrase we use around here is, “It's not vacation; it's a lifestyle.” I sometimes explain further that we set up our lives this way on purpose. We're not taking a break from anything; this is just how we live. If you want to take your kids to the other side of the planet for a few weeks, you might be surprised by how much you might spend.
Even our healthcare expenses are pretty unusual one-time expenses. I mean, I hope I don't start falling off a mountain every year. And you only have to install Google Fiber once. But “one-time” and “once-a-year” expenses cannot be left out of an effective budgeting process. You cannot ignore expenses just because you don't have them every month. In fact, if your budget is particularly tight, you might have to set up “sinking funds” that you pay into every month to cover big annual expenses like property taxes.
More information here:
Doctors Need to Budget, Too (with a Few Examples)
Value Judgments
The main reason why most families should itemize their spending from time to time is so they can get all judgey. Judgey with themselves, not each other or anybody else. You want to ask yourself questions like:
- “Is this really what we value?”
- “Would we rather spend this much on vacation or retire a little earlier?”
- “Did you really enjoy eating out more than you would have enjoyed spending that $1,000 on gear for your favorite hobby?”
- “Is it time to shop around for insurance again?”
- “Are you sure you don't want to go back to just using TurboTax?”
Expect Your Spending to Rise
Most people tend to spend more over time for various reasons, not all of which are related to inflation. You'll probably be the same. Assume so as you make your plans and projections about the future. Yes, $4 million might be enough for you to retire today but maybe not in 15 years when you actually retire. Our initial FI number when we drew up our first written financial plan back in 2004 was $2.7 million. Even adjusted for inflation, that's only $4.6 million today—or enough to support an income of about $15,000 a month. We've still got kids at home, but that wouldn't cover our expenses lately. And we're not even including taxes and a bunch of other stuff.
All those luxuries you add in along the way can really add up.
The White Coat Investor community is a place where high earners can get help with their “champagne problems.” Clearly, all of our “budgeting problems” fit into that category, but I bet a lot of you can still relate to them. Track your spending and make sure the way your money and your time are being spent is in alignment with your values.
Have you been surprised by how easy it is to spend a lot more money as your income rises? Why do “one-time expenses” throw off so many budgeters? What is your budgeting process? Does it make you feel better to know you're not the only one spending a ridiculous sum of money each month or year?
No judgement here.
Like my buddies always say, “Enjoy yo’self”
I do wish my credit card would start turning a different color or vibrate when it sensed a frivolous or overpriced purchase. Maybe an AI sensor will do this in the near future.
Until then, I’ll continue to hindsight budget in a similar fashion. At least the balance always returns to zero before statement time.
The whole point of using a credit card is to help you spend more money. If you need to spend less to reach your goals, I’d suggest “plastic surgery” on the cards.
The flipside of this is that many expenses will dramatically decrease once kids are off the payroll and tuition is no longer in play. In addition, a lot of insurance will go away, including things like disability and life insurance once those are self-insured.. Also, work related expenses will obviously be eliminated once retired. If downsizing occurs, this will be a huge savings in maintenance and taxes. Well, I would not budget based on it, I actually think some travel could become cheaper in retirement with the added flexibility that one would have as well as the increased time and bandwidth for travel hacking, credit card, reward travel, etc..
I agree that all those factors apply to most people when they retire. They really don’t apply as much to us. Only two kids left at home now, tuition gets paid from 529 accounts not current earnings, and the insurance that’s going to go away is already gone. I don’t have much in the way of work expenses either that aren’t paid by the company already. Nor do we plan to downsize any time soon. And we keep spending more on travel, not less, not to mention my interest in travel hacking keeps falling as wealth builds.
No judgement here. Thankful you could meet your expenses. We are not doctors. I do use sinking funds for the yearly expenses like property taxes and insurance. And Christmas too. They were a game changer for us when I learned about them.
Appreciate the tip on falling off mountains. Right there with pickup basketball, can confirm Achilles tendons are best left intact. One suggestion for those that have them is to record the interest portion of your monthly payments in your expense budget, not just the total payment amount. I don’t have any and keep a zero interest placeholder in mine.
This kind of post is great and balances out all of those “oh look at my nice lean budget” posts back when FIRE was first taking off. I’ll admit those posts had utility in drawing someone like me in (aka poor resident). But now as a mid career attending it feels validating to see content like this validating that yeah…stuff has gotten expensive! If you’ve got a good plan going, debts are paid off, it is in fact okay to loosen the purse strings. Thanks for showing us it’s okay to have big lumpy expenses as long as the overall picture is going according to plan!
I’m in a large single specialty group with a broad range of ages. After watching my partners, I’m not so sure counting on kids being off the family payroll after college is what actually happens. My father has a strong desire to help his kids financially during his retirement and he is not a high net worth individual. To expect a massive drop in expenses may require a change in expectations that many of us aren’t going to be willing to do when the time comes.
When you look at the total, it does seem like a lot of money per month, but when you break it down each category, unfortunately it seems very familiar to me. I wonder how we are spending this much money. I think it has to do a lot with inflation. Over the last five years our net worth has went from 1,000,000 to 6,000,000 I don’t feel any richer.
Agreed with you! We in our mid to late 30s, have a net worth around 3.9 mil but do not feel rich at all! Still making those costco runs, packing our own lunches etc.
Same Costco runs around here, always looking for deals. I’m not saying we’re not blessed because we are. But it’s not like I have gold plated toilets around here either.
I’m a bit opposite of this- my NW is maybe 3mil, in mid 40s. I grew up kinda poor and watched money concerns cause enormous stress and family drama for my parents. I told myself as a kid I’m never going to let money stress me out as an adult.
Now as an adult, I feel rich because if I want to buy lunch at the Cafe instead of packing my lunch, I don’t give it a second thought. Blow money at whole foods instead of Costco- why not? Uber eats myself some dinner tonight? No worries. I probably blow through tons of money on stupid wasteful small purchases and I’m adding a few years to my work career, but I feel enormous pride and happiness that I’ve lived up to my childhood promise of not letting money concerns destroy me. I truly feel rich.
I just save 25 to 30 percent toward retirement, and blow through the rest of my money each year without concern. It helps quite a bit to live in lcol city with dual doc income.
Is gold particularly hygienic? 🙂 At least it polishes nicely when scratched.
Pretty nice five year run though, with or without inflation. Inflation over that time period is only like 20-30% cumulative, not 500%.
While I’m definitely NOT in the “white coat investor” category, I have no judgements to make. If you have it to spend, live your life the way you wish. Were I in your position, I’d be making very similar choices. And you’re also putting money into 529s for kids who aren’t even yours! As far as the vacations… again, if you got it, why not? The life experiences you are giving your children can’t be quantified monetarily. Memories are much more important than money. Years later, the kids aren’t going to say, “Hey, remember that time we went to Africa and dropped a couple thousand on a hotel room?” All they will remember is time spent with their parents and how great it was. And another comment mentioned how the budget changes as kids grow up and leave the nest. It will ASTONISH you at the drop in expenses with each child moving out after college graduation. But again, it’s the memories, not the money. Once they move out, you’re willing to give up all the money you have to spend more time with them.
Tell your wife it doesn’t matter what others think of you. They have zero effect on your day-to-day life and if you are happy with your choices, then… You do you. Safe travels!
Thanks, I love the real life example, appreciate you sharing.
These are some of my favorite posts as opposed to the generic stuff. Great to see specific case studies like this especially about the white coat investor himself.
Honestly, the most surprising thing to me is you don’t spend more. If you want to see what someone values just look where their money goes. I can see for you it appears to be a beautiful big house and vacations. Exact same as me.
One thing to appreciate is your house is not located in New England. As if you are paying $6,921 per month on property tax in Utah, the equivalent house in New England would be like triple that.
Thank you again for sharing
who ever wrote this… and what they were trying to show… failed miserably. first most americans… as in 98% have no idea what a 30,000 a month budget looks like. second 98% of americans have maybe 2 or 3 sources of income… not 10 or 12…. finally if you don’t know what you are spending money on until you review it and see it’s 36,000 for a month you budget 15,000 for… then your budget is a joke.
A little jealous, are you? This blog is for highly compensated professionals, with many of them earning between 250k and 1 million per year. Seems like and example of someone spending 360k per year is, well…. Right on the money!
Thanks for the feedback. It’s me that wrote this one. I don’t know how long ago. Might be a year ago or so.
I agree that we’re very fortunate and only discussing first world problems…just like the rest of this website. And yes, our “budget” is a joke. We only track spending these days to know how much of our cash flow to transfer where.
Enjoyed this post! No judgment here. We’re a non-physician household; my husband continues to work into his retirement years because he likes working. In the early years of our marriage, I tracked expenses carefully using Quicken. That led to a lot of arguments about specific purchases. Over the years, I dropped that kind of budgeting and just worked to hit our yearly savings targets. Then we spent whatever was left of the paycheck. As we approached retirement a few years ago, I felt a need to have a better idea of how much we were spending. Started using Tiller a few years ago. I track and categorize most of our expenses through it. It’s a fairly quick process. When needed, I can use the reports to quickly see how much we’re spending in a given category. I mainly use Tiller to see how much we spend on average each month and each year. There are a few categories Tiller doesn’t pick up: 1) pre-tax paycheck deductions for medical, dental, and vision and 2) Apple card transactions. Using Tiller helps me to know that we’re fine whenever my husband finally decides to hang it up.
You can split a tiller transaction to separate out everything that came out of the paycheck! Set the first split to the positive gross amount on the paystub and put all the deductions in as negative amounts (you’ll need categories for each if you don’t already have them).
We’re in the same boat, and I really appreciate you sharing the detailed numbers—they’re always helpful. Living in California, our monthly expenses have skyrocketed over the past three years with rising insurance costs, college spending for our daughter, and everyday essentials like food.
We’ve always followed the “pay yourself first” method, but in the past two years I noticed there was a lot less left at the end of each month. When I dug into it, I realized our expenses had crept up by nearly $6,000 a month. The creep is real, and it often goes unnoticed when a healthy salary cushions the bank account.
I have been tracking my spending since 1981 when I used a small tablet and a budgeting ledger. The numbers don’t lie, my friend. It is always more than you thought. For years when I heard how other people budgeted, I thought, Wow! I spend too much.
Now when I go to the Bogleheads forum and I see other’s budgets, I really don’t believe that a family of 4 or 6 is living off of 2k a month in discretionary spending. They are not tracking every penny. Or their definition of discretionary spending is different than mine. Or, just maybe, 2 really is cheaper than 1.
I often wonder if the single individual still has to pay more in discretionary spending for being single than the single earner in the family.
I think the most valuable thing you could share more information on with the least judgement is your grocery monthly expense. Everyone says varying amounts without much explaination. Was this month typical? For how many people in the house? I struggle with coming up with a limit I need to impose on our family. I want to eat good food and not worry about how much things cost, but this expense is just going wild for us over the years and it needs to be limited somewhat.
If it’s really that interesting, maybe we can dive into it for a future post.
I can relate to this. Paid off my mortgage several months ago and I thought I’d be swimming in dough. Not so fast, everything, I mean everything is just more expensive. Food, entertainment, travel. Utilities are out of control! It’s somewhat depressing that as soon as we make a move to cut expenses in one area, another quickly takes its place
Came to the exact same realization lately – spending double each month what I thought I was spending. But a smaller scale – $4000/mo instead of $2000/mo. the past 3 months (but much smaller income and the big expenses – taxes, insurance, etc I don’t include since I save separately for those.) Chase does a nice breakdown of spending categories. Tried to cut back this month and so far failing miserably… Thanks for the post – glad to see I’m not alone.
Pretty amazing that five things — vacations, tax prep, healthcare, gifts, and property taxes — make up about two-thirds of the monthly amount.
Yes, you spend a ton on vacations, but other than that you are not big spenders in my opinion!
Well you would know Ryan, you see a lot of people’s finances. I just paid my annual tax prep bill this month. The business pays for its own tax return, but between the trust and the personal return I think we spent $9K on tax prep and advice this year. And I’m down to 7 states now. I think it peaked at 12 states. No wonder I was a DIY tax preparer for so many years. If one can save $10K on a financial advisor and another $5K on tax prep, that can really add up over time.
Re Tax prep: $5,875 (20+ K-1s). Another advantage for Vanguard’s REIT index etf/fund vs a more complicated REIT strategy. VNQ has an expense ratio of 0.13%. Even if you had $500k in REITs, that $5,785 is slightly over 1 percent before even getting to the fees of the individual reits. You might have 10x that amount invested so it drops to a more reasonable 0.1%, but for the average physician tax prep fees are a significant drag to private REITs.
I’m impressed with only $2750 a month in food and restaurant spending, particularly with a family of teenagers. I could easily see how one could spend double. When my family of four goes out easy to spend $150-$200 per meal.
For sure. It’s a good argument that investing tiny amounts into K-1 partnerships, especially multi-state partnerships, does not provide good after tax returns. You really need to already be wealthy to bother with private, passive real estate investments. Costs matter.
Inflation certainly is very real. CPI is a psy op. Your grassfed beef gradually gets replaced with grain-fed factory produced slop meat, and its price STILL goes up like 10% a year. If it gets too expensive and people just replace it with soy products, it gets dropped from CPI entirely like it was never there to begin with!
Stack sats and protect yourself against the fiat cancer sucking away your life energy insidiously a few percentage per year.
The pigs will steal from Us as much as they can every year until We can’t take it anymore.
With love,
Your friendly Bitcoin Maximalist
Works great as long as those sats keep skyrocketing in price and never go to zero. Wish I felt more comfortable believing that. Classic example that all roads lead to Bitcoin for the Bitcoin Bros, just like all roads lead to whole life for the agents selling it.
Being thrifty and watching every cent gets old after the portfolio grows to a certain number (comfortable level varies person to person), unless one truly enjoys wealth accumulation. Otherwise, money is a tool to get the experience you want. So if one does not have to make money in ways they don’t like (aka burnout), then it is free to spend however much they feel comfortable with. It is amazing that so many working Americans are doing this well while so many more working Americans are still struggling to come up with a few hundred bucks to pay the basics.
Just curious how much others spend per year on travel? We take 3 to 4 weeklong international trips per year plus numerous shorter weekend trips per year— about $50-60k annually for two adults and the two children left at home. (we are saving ~40% of gross income for retirement)
I created a budget for the downsized house and part time work in about 2019, anticipating the move to lower expenses in “early retirement.” It was about 70% of our prior budget.
I completely forgot to index the budget to inflation, which had been fairly tame for years. I remember the monthly expenses with all the kids at home in the McMansion.
Partly due to inflation and our decision to help our kids in grad school with room and board, our expenses are still in this same range with added costs for renovations in the smaller home.
Our biggest expenses used to be taxes, retirement savings, the kids tuition and college savings, and the mortgage. These three accounted for half of our pretax income. These days our top expense categories are taxes, renovations, retirement savings, and recreation/vacation. New ones have come in to make things interesting: kids grad school room and board ($24K a year) and health insurance ($16K a year that was free when I was full time).
The retirement house was inexpensive, but we have put quite a bit of money into it since purchase. A few decisions can really affect the budget and not adjusting for inflation was a foolish oversight.
I’m looking forward to children with full time jobs, Medicare, and the last renovation…
Wow. Thanks for sharing real numbers. Very helpful and relatable. In retirement thought we would spend 15-20k/month. In the run up to retirement started keeping track of spending and realized 20k was the floor at best. Taxes, insurance, fees and just life in general add up. Recent Medscape survey showed physicians think they can retire on 4 million but only have 1.6 saved. Luckily we are well above that figure. Highly recommend tracking spending prior to retirement. If you think you can live on 160k/yr you may be surprised. The progeny drag to your portfolio may also be more than you think. Have highly educated kids with good jobs but rarely do we go dinner or on vacation where the bill doesn’t end up at the head of the table. Grandkids will be a whole other line item in the budget. I did reach the milestone of getting my kids off the cellphone bill though 😉