Imagine a life without payments. No student loan payments. No credit card payments. No car payment. No mortgage payment. Maybe not even a life insurance or disability insurance payment. How would that affect your budget? What would it look like?
Regular readers will recall we paid off our mortgage a few years ago. Most doctors agonize over the “pay off debt versus invest” issue. We no longer do. While we're relatively frugal, we're not absolutely frugal. Not since we loosened the purse strings. Although we only spend a small percentage of our income, we still spend gobs of money by any but the most ridiculous standards. We're not going to address the income side of our budget today, nor the largest outflows, which are investments, taxes, and charity, in that order. Today we're just going to discuss our spending, and what that looks like without payments. Because to us it looks pretty awesome and helps to explain what I mean by “the good life” that is available if you “take care of business” early in your career.
The WCI Family Budget
Utilities: $400 per month
This includes gas, electric, cable, internet, phone, water, wastewater, and garbage services. That's actually a really good month for us. It can often be a couple of hundred bucks higher in the summer (A/C) or winter (heating.) It is also less than many docs spend because the lion's share of the internet and phone bills run through the business.
Insurance: $1,800 per month
Most of this (almost $1200) is health and dental insurance. I always laugh when I hear people complain about the $200 their employer is taking out of their paycheck for their health insurance. Go buy it on the open market without a subsidy and you'll realize that $1200 isn't exactly a Cadillac plan, especially if you're over 50. This category also includes life, disability, liability, and property insurance.
Trips and Travel: $2,500 a month
You may have noticed that we like to go on trips. This portion of our budget acknowledges that we spend a lot on it. While we don't spend $2,500 on travel in most months, this is really a “sinking fund” for when we spend a lot more than that. We mostly only reach into this sinking fund when we are doing something more expensive than a simple road trip for a few days.
Short Term Savings: $2,500 a month
Feeling squeezed by payments? Get rid of them!
New vehicles, boats, and expensive repairs and home upgrades come out of this sinking fund. This fund allows us to pay cash for these items.
Living Expenses: $5,000 a month
Everything else comes out of this fund. That includes groceries, gasoline, restaurants, road trips, family activities, kids' clothing, kids' activities, medical costs, and anything else you can think of. Whatever is leftover at the end of any given month goes into our “allowances” (the money we spend on whatever we like without having to account to our partner — generally our own activities, clothes, and toys.) If we overspend the $5K (as we do occasionally) the difference comes out of our allowances. But where the money in this fund actually goes in any given month is highly variable. In February we spent $4,318. $526 on gas, $1477 on groceries, and $628 at restaurants. Apparently, nobody is starving in this family and yes, that grocery bill is a little higher than usual, but the pantry is pretty full right now.
Property Taxes: $300 a month
Again, this goes into a sinking fund and gets paid once a year, just like life and disability insurance.
Total: $12,500 a month ($150K a year)
5 Things to Learn From Our Budget
There are a few things that can be gleaned from a quick perusal of this budget.
1. No Interest
As my daughter taught you so eloquently a few months ago, interest is something you receive, not pay. Look at all the amazing things you can do on a doctor's salary if you don't have to make any payments. No mortgage payment. No student loan payment. No car payment. It's a nice way to live. Interest in our life is always a positive number.
2. 80% Variable
80% of our spending is what I call variable spending, i.e. money that doesn't have to be spent in any given month. What actually has to be paid in any given month? Well, the utilities and the insurance. The sinking funds ($2500 to travel and $2500 to large expenses) don't HAVE to be funded. In fact, those funds can be sources to fall back on for basic expenses in the event of an income shortfall.
The living expenses can also be dramatically reduced. Obviously, everything you cut there has a direct impact on your lifestyle, but when a family of six is spending $2K on food, there's a lot of room for belt-tightening, especially when the pantry is full. The point is that if we had to, this $12,500 could be cut back to $5,000 very rapidly. That's the benefit of limiting your fixed expenses.
3. A Lot of Fat
Without a doubt, there is a lot of fat in this budget. We have designed it purposely that way. If your budget feels tight or restrictive, you might try making some changes in your financial life that will get rid of that for you. That might mean earning a little more money. It might mean saving a little less for retirement (perhaps just 20% instead of 25 or 30%.) It might mean getting rid of some of your payments by paying debts off. It might mean living in a less expensive house, driving less expensive vehicles, or moving to a lower cost of living area. Get some fat into your budget and you'll find it a lot easier to stick with.
4. Zero Financial Worries
Does this budget look like it comes from a couple who fights over money? Do we worry about our house being foreclosed on? Nope. Do we worry about making those student loan payments? No, sir. Do we worry about putting food on the table? Not with a full pantry. Do we worry about an emergency popping up that we couldn't cover? It would have to be quite an emergency for us to even get to our emergency fund given the amount of fat in this budget. What do we have to worry about; whether we're going to go to Paris or Bhutan? Whether we buy a new SUV or upgrade the kitchen this year? Those worries don't even qualify as first world problems. We don't have to choose between braces and piano lessons; we can do both!
5. A Lot of Fun
Most importantly, this budget to us represents “the good life.” In my book, I defined that as
“a life free from financial worries, a career where you make a real contribution to society, a few luxuries along the way, the ability to help others financially throughout your life, and a comfortable retirement at a time of your choosing.”
Although one can never discount the value of some good fortune, we mostly arrived at this point by making smart financial decisions throughout our life- we chose to go to inexpensive schools and work our way through them. We maximized our income whenever the possibility presented itself. We “lived like a resident” for four years after residency. We paid cash for cars, boats, vacations, and everything else (other than a house, which we paid off in just over 6 years.) We elected not to live in Manhattan, D.C., or The Bay Area.
Did we make some sacrifices along the way? Sure. But here we are at mid-career with $30K a year to blow on trips. You can have an awful lot of fun for $30K. $10K was two weeks of reckless spending in France. A week in Belize bought at the last minute was only half that. A week of Canadian heli-skiing costs even less. $30K a year for short-term expenses adds up to two $60K cars, a $90K boat, and a $90K home improvement project every decade. You've got to have pretty expensive tastes for that to not be “enough” for you.
The Naysayers
The only thing keeping most of them from achieving it is the fact that they spent money before they had it, i.e. they have payments. Do what it takes to get rid of your payments early in life and you'll be amazed how quickly you find yourself living the good life. Lots of doctors make $300K by themselves. They can put 30% toward taxes, 20% toward retirement, and still have a budget with this much fat in it.
The only difference between this budget and that of most doctors is the absence of payments. Get rid of your payments! Your 45-year-old self will be eternally grateful to your 35-year-old self! You don't have to have student loans! You don't have to have a mortgage! You don't have to have a car payment! You can “be done” saving for college or even retirement! Get rid of your payments!
What do you think? What would your budget look like without payments? What changes in your life would you have to make to be rid of your payments? Comment below!
A life without payments is definitely living the dream. We are completely debt free with no car, credit card, or student loan payments. However, we have not yet purchased a house. Once you are debt free it is difficult to ever want to go back there. I’m tempted to save up cash for a modest house and avoid ever having payments again.
All right you freaking Alaskan. You’re cheating on getting the first comment in on every post. Everybody else is asleep and there you are, cherry picking off the first comment before you go to bed. 🙂
Seriously though, I wouldn’t worry too much about taking out a manageable mortgage to buy a house or a manageable amount of student loans to pay for a medical school education. Both can be great investments. Just have a plan to get the debt paid off quickly, less than 5 years for an education and less than 15 for a house.
I don’t know about your comment to the freaking Alaskan. I think he knows what he’s doing. I was very impressed with how quickly he paid off his student loans. With his financial acumen he can probably easily save and pay cash for his house in a few years. I like his idea. No debt is awesome!
I guess I’m not quite that extreme. I definitely used a mortgage to buy the house we are in now. Although if we ever upgraded, I would probably do so with cash + the home equity in this house. I really don’t want to go back into debt again either.
Living in Alaska definitely has its advantages. Like being the first commenter on your new posts. Conversely, those 7am east coast CME conferences (3am AK time) are brutal.
It’s tough to buy ETFs from Alaska too. By the time you get up and get going the market is about to close.
Hey awsum blog,keep up the good work.
We only have our mortgage left but it’s a good chunk of money (we live in a high cost of living area) and I’ve been debating with my husband paying it off sooner. He thinks it’s a “good debt” to have but my goal is to be debt-free in a few year. Student loans got paid off this year so we will tackle the mortgage next. Thanks, WCI.
Congratulations! I love hearing about your success.
Thank you for the look behind the scenes at the Dahle family budget. I like how you note that you could drop it from $12,500 a month to $5,000 a much pretty easily. That second number is right about where we are, living our life without payments.
It doesn’t seem like we live that differently, but I can see where the big differences are in the budget.
1. You’ve got 4 kids compared to our 2. Kids cost money!
2. You pay for life, disability, and health insurance out of pocket. My employer currently covers most of our health insurance and I’ve dropped life and disability after being comfortably FI.
3. The travel budget. I don’t heli-ski. We love to travel, but find ways to keep the budget in check. We also do most of our summer travel to our cabin. This weekend, the four of us head out on a three-week Spanish immersion trip. The flights were paid for with travel rewards points, the apartment is a nice AirBNB that costs less than most Americans pay for rent in a month. It’s a different kind of travel.
4. The slush fund. We don’t budget; we track spending. Most years, our expenses will look “artificially low” if we don’t incur a large expense. Next year or the year after, we’ll probably purchase an RV and a vehicle to pull it, and that will be a more expensive year.
I agree with the spam comment above. “Awsum blog.”
Cheers!
-PoF
I like that one too so I’m going to leave it! It’s weird to get spam on a post that just got published, so maybe it isn’t.
General Peds with sahd hubby. Married 21 years. We are 45&46. House paid off in 7 months. Vacation condo paid off in 12 months. Student loans paid off since 2003. Cars paid off. Never had credit card debt. 2 kids in private middle school. A ton of savings- so close to financial freedom. It can be done on a pediatrician salary. We don’t have many exotic trips
But we DO have a chef!!
What about the mortgage interest deduction? I always thought it made sense to keep mortgage because rate is low, asset appreciating (probably), and get to deduct the interest. In fact, some seem to be seeking another mortgage on land or 2nd house after the first is paid off for just that reason.
Run the numbers for yourself. You may find yourself paying $10K in interest for a $3K tax benefit. Calculate your net gain there and see if that make sense to you.
This is a frequent discussion on this site. It is true that you can leverage your home with a mortgage and put the money into investments that you anticipate having a higher yield than your mortgage interest, particularly given the interest is tax deductible (at this time). The risk depends on the what investments you put the money instead of paying off the mortgage. Others prefer the security of having the house paid off and the flexibility of the monthly budget without a mortgage payment. As long as you are not keeping the mortgage to finance an excessive lifestyle you should be fine.
I don’t have an issue with justifying a mortgage by balancing the opportunity cost of investments. If you can make 10% consistently with investing and the mortgage is 3% and you are comfortable with some risk, that is fine. The part I think is ridiculous is going out and buying bigger and bigger houses just because of some alleged “tax benefit.” Paying ten dollars to get three back isn’t that great an investment.
I agree completely. I am in the payoff the mortgage camp.
Andrew,
I spend a good deal of real estate discussing this issue in my book “The Doctors Guide to Eliminating Debt.” The tax benefits are not very beneficial and can almost be ignored. The bigger question is this: Would you borrow money against your house, put it at risk, to make an investment in the stock market? Most people would say no to this question. That is exactly what you are doing when you keep your mortgage and invest in the market. You could have paid it off, but you used the money to invest in the stock market instead. You can’t imagine how much better you sleep with no mortgage payment over your head.
Best of luck to you,
Dr. Cory S. Fawcett
You know, I hear that one a lot. But here’s what I know–I don’t have payments and it makes me feel really rich. Everybody else that I know that doesn’t have payments also feels really rich. It’s not that the math does work (i.e. borrow at 3% and earn at 6%.) It’s probably just that people who use that argument to not pay off debt don’t tend to put as much of their income toward building wealth as someone who paid off their debts.
Obviously it’s important to realize that many people don’t get the full mortgage interest deduction (and some don’t get it at all, much more if the House tax bill goes through) and many docs are phased out of part of it and that even if you do get it, at best you’re spending $1.00 on interest to save $0.50 on your taxes. Not exactly a winning formula. I assume you know all that.
It’s so nice to eliminate fixed expenses from the budget. If we upgrade our house, it would be a hard pill to swallow to take out another mortgage. I’d probably just pay cash for a nicer house – take the money from the first sale and kick in some cash.
The biggest reason that I moved into the “payoff the mortgage” camp is behavioral. I’m not aware of any studies specifically examining this, but anecdotal evidence like yours seems to strongly suggest that being completely debt free enhances people’s life satisfaction and encourages them to save even more. I suspect that the savings rate for those with no debt is higher than for those who still have debt. I also wonder whether many of the “keep the mortgage interest deduction” crowd are using that as an excuse to get a far larger, more luxuriant home than is really prudent.
Unless you’re in the bottom quartile of income earners in the U.S., the biggest reason people fail at personal finance isn’t because the numbers don’t work; it’s because their behavior doesn’t work. And it sure seems easier to get the behavior right when you have no debt.
I don’t know that having no debt causes you to have the right behavior. I think it’s more that people with the right behavior are less likely to have debt. The people paying off their debt are also the people saving a lot of their money. And once the debt is gone, they save even more.
This year we made it into the no payments category by selling our old house (long story). It frees up cash and therefore options for our family. I think you budget is generous “fat” and I like that. Like PoF we don’t budget but do track spending. Travel is huge and your sinking fund idea is great, just pay into that fund regardless and make travel a part of life. I also like the allowance portion. It’s sort of like a bundled medical payment for a doc in that you get to keep what you don’t spend after treating the patient. Motivation to keep costs low. Very nice. The large variable portion allows you to cutback at work easily and possibly permanently if you choose, for the FIRE doc in me????
Yup it is pretty awesome. I’m trying to remember the last “payment” I had for debt. It had to be at least 10-15 years ago! I probably don’t even have a credit score at this point. I think it is a worthy goal for those who are not there yet. Most of us who have arrived say it just “feels great.” It is more emotional than intellectual – at least for me.
I’m sure budgeting would be easier too…. but we just don’t budget and never have. I realize we are in a small minority there and I’m not necessarily recommending that approach.
I have never budgeted either. I do track expenses. I have not had Payments for 15 or so years either. If you can swing paying everything off by mid-forties it really removes a lot of stress.
much younger and earlier career than you but we also don’t have anything the looks like a budget. our montly expenses generally shake out to about 50% of our takehome (after maxing 401k/457b) so I’ve never felt the need.
Yes, in a lot of ways the budget is just the training wheels.
A budget of $150k a year without a mortgage or other loans is clearly a life of luxury. The thing is, based on your wealth (not income) you can live this way. You’ve earned that wealth and are entitled to enjoy it. I like that you pointed out where you can cut down as well. It’s good to have a plan to save if you need to.
Man you are killing it, but you deserve it. Hard work, smart, spending, and more hard work on something that’s not even our job (the blog). Easy recipe, but not so easily executed.
Also reminds me how atrocious my property taxes are, I pay way more than you and my house is a grand total of 1450 sq. feet with a small yard. Ugh.
Yes, Utah property taxes aren’t too bad. We do have state income taxes too though and the combination adds up, especially since it looks like I won’t be able to pay them with pre-tax dollars any more starting next year.
$300/month in property taxes? Where do u live?
WCI lives in a very nice house in Utah (I’ve been there!) I was surprised the taxes were that low, too.
I pay similar property taxes in Minnesota, but I pay about $2,500 a month in state income tax.
Utah. And it’s $306 a month next year. 🙂
We got out of debt when we were broke. We had credit card debt, no savings and my husband was unemployed–crazy to think about now! It took us 2 years to pay off all our debt. What an amazing feeling. Back then we would go on free vacations by going to timeshare presentations (makes me shudder now). Now we go on “free” vacations on miles and points. Living on so little years ago has made us appreciate where we are now. And we know that we could survive on much less–because we’ve done it. It’s very empowering.
I agree. It does feel good to know how little we used to live (and live well) on.
So with the $150K/year (with “fat” built in), does that mean your “squishy” FI goal is ~$3.75M?
We’re pretty similar with around $5-6K of true monthly expenses (minus payments) to run the household (with a couple more kids in the mix). But like you, I want to keep some fat in the budget. $120K/year feels about right for us without a boat (we’re lucky to have generous neighbors with boats) or expensive hobbies (groomed ski runs are enough for me), but with some travel.
Getting mortgage paid off is within sight (a couple of years).
So $3M is your “number” Firsthabit?
I think so. Depending on which way the winds blow. It started at $2.5M, but has crept up as I’ve seen the value of a little more “fat” in the budget. 😉
OK.
I will check in with you when you hit $3M and see how you feel. Things change over time… and usually upward 🙂
They certainly have for us. Our initial financial plan called for $2M in 2006 dollars. That’s like $2.7M now and we’re probably 50% higher than that.
Aw, common, guys. Don’t burst my FI bubble with all this talk of lifestyle inflation! Actually, I’ll likely keep working, but I want to do it more on my terms (leaning toward PoF and WealthyDoc style of 0.5 FTE). So even $60-80K per year of earned income will “buy” me out of many years of full-time labor. So maybe $3M won’t be full FI, but it will likely get me 95% of that good FI feeling.
You are too funny, FirstHabit.
I don’t want to tell you how many times I have increased “my Number.” At some point though you realize it is really more for discretionary spending. If you reach $3M and decide not to retire you know you could if you wanted to or had to.
I think PoF and I are at 0.6 FTE currently. For me 0.5 would not allow benefits. 0.6 will.
I love your blog, BTW. Keep writing! You have a great and necessary perspective on the important things in life.
Thanks. Next post should be out this weekend. 🙂
Well, at those levels of net worth and income you’ve got to add in a tax factor too, so our “number” is probably between $4-5M, which we don’t have without selling WCI, LLC. Barring major market or business catastrophe, that can’t be more than a couple of years away though.
Our monthly budget for a family with two young kids, one working physician and one currently SAHM (looking to return to work within the next year) is between $6500-$7000, not including loans/debt for the student loan, mortgage and life insurance, or $4500 per month budgeted for savings. We used to do more forecasting or a very loose budget, but I started using Personal Capital and YNAB to save even more and to have a better idea of where our money is going. We have plenty of reserves for larger spending or going over budget, but I like the details of knowing where my money has been spent as of now, or to be able to know exactly where I am in a specific category before deciding to make purchases. My favorite part is being able to break down and customize categories groups to break down and itemize which are automatic/fixed payments, what spending has some but little flexibility or ability to be reduced (groceries, lawn care) and what is truly discretionary spending. It also allows the ability to accurately budget for annual and one-time expenses that are often overlooked, such as camps for kids, credit card membership, auto insurance, Christmas gifts, etc.
We are relatively frugal (basic package cars that are paid off, we shop with coupons and mostly on sale, no expensive brand labels, only two trips a year including one to fly back home to see family), but we still have one nice dinner a month and some casual meals, lunches here and there, memberships and activities for the kids, etc. There are some months we spend more on clothing, car maintenance or travel, but overall we feel that we do a pretty good job of not spending excessively and leaving below our means.
It seems that $80,000 a year is hard to decrease further without severely budgeting ourselves or becoming truly frugal or cheap, and that was not the point of working hard or all of the years of advanced education. It makes me wonder how so many people live on much less when you look at the average middle class income is only making around $64,000 per annum nationally. When we exclude debts and savings, it is interesting to see how much we really do spend while living moderately.
You didn’t really break down that $6500-7000/month that you are spending here, but for a “frugal” coupon-clipping budget with no car payment, this seems extremely high. If you think it would be hard to decrease further, look at where the money is going, and I think you will find that most of the 64k/yr average middle class are not spending money on those things (or at least not to the extent that you are). If needed due to financial troubles, I don’t think it would be that difficult for you to decrease your monthly spend.
I apologize if I was not more specific in my last comment, but we are definitely not struggling financially, quite the contrary, we have just been trying to do more precise budgeting to find ways to save further. We have no debt other than the student loan and mortgage, which are both at rates under 4%. It is just eye opening to see how much little things truly do add up in a budget when you track every dollar of spending.
Yea, we get killed $30-50 at a time.
I like those three categories-
Fixed
Reducible
Discretionary
I might have to work that into our budget somehow.
I am in the same boat as you. I have an academic EM salary and wife is SAHM (for now) with 2 young kids. Given kids activities, we spend about the same as you do, but that includes one car payment. I do the same thing you do. I periodically look at “fixed” expenses, like car insurance, internet/cable, cell phone, etc, to see if any new deals have come out or where I can save, but I agree with you, car insurance is unavoidable and living without a car is not an option so those are fixed. Certain things are flexible, like groceries, but I also didn’t work hard to be frugal on what groceries we buy, though we will buy meat that is on sale and take advantage of weekly. I think being active in looking at your spending is the way to you, and seeing where you can cut down in discretionary funding. For us, we have a 3 year old and 1 year old, so a vacation in a VRBO cabin near a public lake in the summer is just as much fun for them as taking them to club med, so why not take the cheaper option? That’s where we stay frugal.
We do Air BnB and VRBO as well. With our 2 and 4 year old, it helps to have a suite or small house versus all being crammed into a hotel room, and nice hotel restaurants are out of the picture with two tired kids, and it saves money as well.
Nice post. We have been living a life without payments since 2001, eight years out of residency. We made a decision one day to eliminate our debt of around $500,000 and six years later we were debt free. The giving, saving and entertainment portions of our budget went up after that. I eliminated parts of my job I didn’t like as well and that increased my happiness factor. This year I retired from the active practice of medicine at age 54 and dropped my life and disability insurance payments.
I have lived both ways, with and without debt payments. Without debt wins hands down. It’s not about how much money you make. It’s about deciding to live your life without debt. Make that decision today and a few years from now you will be there. Keep going with debt payments and you will always have payments. You will probably still have a home mortgage when you are ready to retire, and it may push back you retirement date.
Stop trying to manage your debt and start eliminating it.
Dr. Cory S. Fawcett
At age 54, where do you purchase your health insurance? Thanks!
yes he bought a plan through a Christian Mission group.
“…and my husband is just an engineer.”
As an engineer and husband of a pediatric resident, this felt more than a little condescending.
Sorry to offend, that wasn’t the intent. The intent was to demonstrate that even relatively poorly paid professionals such as pediatricians and engineers (when compared to plastic surgeons and radiologists) make enough to live a very nice life if they get rid of their payments.
TB: You are spot on. It should feel condescending. Jim was channeling the “voice” of a naysayer/complainypants (https://www.mrmoneymustache.com/2011/10/07/how-to-tell-if-youre-a-complainypants/), not his own voice. Engineers on average don’t make as much as physicians on average, but I bet you’d agree that this fact shouldn’t stop you from the goal of eliminating payments.
The richest person that I know well is an engineer. He confounded a company that employs 4000 people.
Didn’t know this comment section would turn into a pissing contest about who knows the wealthiest or poorest engineer. Can we stick to the main issue here? We are all on here seeking financial advice . I’m tired of listening to everyone’s insecurities.
With the ability to pay for almost everything in cash, can we assume that WCI has his (and Mrs. Dahle’s) credit frozen with the major bureaus? Sometimes I wonder what the point of having credit, other than cards, is for those who can cash flow expenses.
Great post. We’re almost there – no payments here other than mortgage for a few more years!
Whether you have debt or not, freezing your credit is a good idea.
Great post. I just retired (early) with no debt and a large portion of our expenditures being discretionary (our travel budget in the near term is significantly larger than yours). Very nice psychologically to have no mortgage or other debt. We spend more than you do and I’m sure it’s excessive, but we plan to vary our spending to keep it under 4% of our portfolio value each year, so we don’t plan to spend down the portfolio.
How early did you retire? How’s that working out? I think not having debt is a key for the early retiree for sure.
Early 50s. So far, so good, but I’m still in the first year. Nearly 25% of our spending for 2017 is on travel. We can cut that back if needed, and we have other areas where we frankly spend excessively and can cut back if needed. I don’t want to cut back, but I also don’t want to be working any longer. Freedom to travel and spend time with family while we’re still relatively young is very valuable to us.
Thanks for another great post and sharing your experiences with us.
I am a physician in Canada and my spouse works for our corp. We have two kids.
I moonlighted with locums and nightshifts during my fellowship years and we had our debts paid off by the time I finished. We had our modest home paid off a couple years later. Living without payments was really liberating. We have since built on a country property where we live now and have a mortgage again. The difference in cashflow was huge, but we had that mortgage down by about a third within 5 years.
At that point, we remortgaged at a low rate and my wife invested the difference as an investment loan. We don’t get taxed as couples in Canada, so having investment income in her name helped to reduce our tax bill considerably. Our biggest monthly expense here is still tax ~45% of my gross income. Investments are next at 40% and we live on the other 15%. We are fortunate in that my income is large enough that that 15% is still living in luxury. Our monthly costs are somewhere between you and POF. We can also take solace in only paying about $500/month for extended health insurance since we have universal healthcare here – although $1200/month for that seems a bargain compared to our tax bill.
Great post, WCI! A life without payments sounds awesome. Like you said, little to worry about financially and a lot to have fun with. Looking forward to joining the club!
Could you have your family expert do a column on your pantry? Especially if you do the LDS ‘prepping’ storage of supplies and if you keep any special equipment for using your stores that some American kitchens might not use? Personally we have a grain grinder- got hooked on fresh ground- and lots of 1 and 5 gal buckets of grains and beans. Partly for frugality, partly for unable to find them locally except through our co-op (Breadbecker’s). Only other ‘odd’ kitchen device I have then is the tool for opening vacuum seal lids. (Where my parents grew up; SD, and now here in AL a deep freezer, a pressure cooker, and canning gear are not unusual.)
Nothing too hard core. It’s mostly just extra of the stuff we eat. I keep the water jugs I take camping full down there too. I guess my wife does a little canning every now and then, but that’s really the only hard core food storage thing we ever do. No 5 gallon buckets of grain that I ever see, but we do buy rice at Costco.
We have tried to balance out the previously given advice of 1 year food supply from the Mormon church with 3 mo of food we actually eat (freezer and canned items) and another 3 mo of typical Mormon food storage. Additionally 1 week of MREs and a 72 hr kit.
I got SO SICK of helping other Mormons move in dental school and orthodontic residency and trying to move 10,000 lbs of #10 cans of wheat…
I think it’s a good idea, but you need to store things you will actually know how to prepare and eat – this zombie apocalypse stuff is a luxury expense. We will over time build up to a year just because my wife wants to be “compliant”, but I want to make sure it’s stuff we can use and rotate.
I suspect the most commonly used reason to raid the food storage is job loss.
The barrels of wheat might be cheap, compact, and last a long time, but if you never actually eat it, it’s not cheaper than just storing a little extra of the regular food that you actually eat.
Hi Jim. Nice Post.
I was wondering how you split up disability, life, property insurance and presumably an umbrella policy into $600/month? I assume you have level term for a few million, a
group disability policy at work in addition to an individual policy, property insurance with a high deductible and an umbrella for a million or two. Can you break down the premiums and coverage amounts? Thanks.
Not sure why that’s interesting, but sure, no big deal.
Life: $95 $1.75M
Individual Disability: $274 $7500/mo
Group Disability: $138 $10K/mo
Property/Umbrella: $120 $2M umbrella but most of that premium is property
Where do you keep these various short term savings accounts? Is it all in one account and you know what it is earmarked for? Is it separate accounts and you transfer to it? I’d like to set something up like this after I pay off my debt but it’d have to be automated if I’m going to stick to it…
One account and a spreadsheet
Great work – will be there pretty soon, but just moved into a new house and need to resupply our emergency fund before we start paying off this mortgage.
I’m curious as to your decision to NOT sell WCI. If you were able to sell and up your semi-liquid net worth up to the $4M-$5M range, why wouldn’t you? Do you not subscribe to William Bernstein’s philosophy of “quitting when you’ve won the game”? What if there is a 75% drop in equity prices next year?
A 75% drop in publicly traded equity prices would cost me something like $1M. It would suck, but probably wouldn’t affect how I live my life or plan to live it the next 10 years.
I’ll talk a little more about it in the State of the Blog this year, but mostly it just comes down to a question of “What do you want to do with your life?” My wife says I can’t sell until I know what I’m going to do next. But even aside from that, as you build wealth, money has less and less of an effect on your life. I can’t say it has zero effect at this point, but it has dramatically less to do with my life than even 2-3 years ago. Money is like oxygen, you only need “enough.” When you don’t have it, you can’t think about anything else. When there is plenty around, you don’t even think about it.
I guess that if you sold it, and it wouldn’t change anything that you’re doing, then maybe I could understand. But on the other hand, if you could sell it now, cash out, and still keep writing for the blog….
A bird in the hand and all that crap…
I just don’t think it would be as fun to write for WCI if I didn’t own it and didn’t control how it did business. Because most of the people buying would want me to stay on and write for as long as I was willing to do it. There was a blog/site called Get Rich Slowly sold a few years ago for a seven figure amount. The original blogger recently bought it back for less than he sold it for. That’s a pretty cool trick, but it reflects the risk of buying blogs as a business when you can’t keep the original writer around.
Since websites are generally sold at 2-3X trailing twelve month profits, sometimes it makes a lot more sense to just keep it for a couple of more years, get the same amount of money, and still own the asset! If the going rate was 6-10X, it would be a different story. Then selling would make a lot more sense.
Any suggestion of a short term savings vehicle? We have money saved for the short term like you have listed in the blog post, but we basically gain no interest in it.
I’m currently using the Vanguard tax-exempt Money Market Fund. Previous to that, I used the Ally High-Yield Savings. I think that’s currently yielding 1.25%. It’s not a lot, but it’s better than 0%.
Ok thanks
I’ve been using american express high yield savings (1.25%) but I wanted to see what others were using.
(Also my first comment but a long time reader, great book and blog)
That’s about as good as it gets these days if you’re looking for zero risk type investments.
Awsum post from the awsum blogger, once again sharing your finances. Inspiring!