By Dr. James M. Dahle, WCI Founder
Katie and I do our budget/spending plan monthly, so it has been years since we actually totaled up our spending on an annual basis. Being inspired by WCI columnist Margaret Curtis' post last year about frugal living, I decided to actually see what we're spending. I knew within $50,000 or so, but it was interesting to add up the exact amount—and even more interesting to see where it was going.
What We Didn't Include
Remember, Katie and I are both financially independent and debt-free. That means there are no payments in this amount. No student loan payments. No mortgage payments. No car loan payments. The balance on our credit cards is automatically paid off in full each month, so while credit card payments are included, there is no interest being paid. None at all. It's amazing what an awesome life you can have on not all that much money when you have no payments.
We are also only looking at spending today. Our monthly financial planning really isn't budgeting; it is cash-flow planning. That's because our three biggest categories are savings, taxes, and charity. We are leaving all of those out of this exercise as well. We're just talking about the money we spent.
We are also leaving out health insurance and, of course, HSA contributions (there weren't any HSA withdrawals). While we buy our own health insurance and know precisely what it costs, it is purchased through The White Coat Investor. Technically WCI pays 80% and we pay 20%, but it's all the same really. If you care, we pay $15,751 per year in health insurance for our healthy family of six on a high deductible plan. That's with pre-tax dollars, so the real after-tax cost is $9,136 ($6,112 if you also count the deduction for the HSA contribution).
2021 Spending
So, how much did we spend in 2021? We spent $206,544.32, an average of $17,212 a month. While that seems like a lot of money to the average American family, it probably does not seem like all that much to most of our audience of high-income professionals. It is definitely less than the average single physician income of around $275,000 and completely reasonable for an emergency physician. Given the average EM income of $375,000, if you put 20%-25% toward retirement and 20%-25% toward taxes, that leaves something around $200,000 to spend. You can never really spend much more than about half of your income as a doc.
However, considering what it does not include (savings, taxes, charity, or any payments), we consider it to be spending with wild abandon. In fact, we do not put any sort of constraint on our spending at all. These days, if we want to buy something or some experience, we just buy it. You might say, “Sure, but this was a COVID year; how much could you have really spent? You can't travel and can't get a car even if you want one.” Don't forget that I was immunized and traveling by January 2021, and by the end of the year, the entire family was immunized.
There were two trips to Europe in 2021, including one with the entire family. I did order a truck in December, but given the 9-12 month period between ordering it and actually getting it (they still haven't even started building it as this goes to press), 2021 spending only includes a $1,000 down payment on it. The bottom line is that we apparently could not think of anything else to spend money on that would have made us any happier. We had the money to spend but didn't.
More information here:
Multi-Millionaire Family Tracks Spending for a Year: They Spent How Much?!?
Spending by Category
We track our spending meticulously for cash-flow purposes but not really by category. The total amount of spending is very accurate, but the amount in each category is less so. Nevertheless, we did the best we could. This section is always fun for blog readers because they get to compare and contrast their own spending with ours. They may say, “How can you spend so little on —–?” or “How could you have possibly spent so much on —–?” We really don't care. Spending is a personal thing, but people are always a little hesitant to reveal it because it tells a lot about them and what they value. You'll get to learn a little bit more about us today, but hopefully, it inspires you to spend less, to spend more, or to spend more deliberately—whichever may be most appropriate for you.
Our text for this sermon will come from our main credit card. For convenience's sake, we tend to put as much of our spending on credit cards as possible. We get a little “reward” money back for doing so, and it also helps me to be less of a cheapskate (since it makes spending less painful for me). The credit card company conveniently totals up and categorizes all of our spending for us. Our total spending on this card was $138,690.38, or about two-thirds of our spending. Here are the main categories for that spending:
If you prefer a graphical format, they offer that too:
While the largest category is “other merchants” (not very helpful), it says we spent $26,000 on travel, $20,000 on office services and merchandise (beats me what that was), $18,000 on dining and entertainment, $18,000 on vehicle expenses (what?), and $5,000 on lodging. Not sure I believe any of that honestly, but thankfully, the end-of-year credit card statement provides a much more detailed breakdown. Let's take a look:
This goes on for several pages, but it seemed silly to get much beyond the first one or two. I mean, by the end of the second page, the categories represent less than 1/1000th of our spending. Let's see what we can learn from what we have.
The first and largest category is “Delta.” What's that? That's airfare on Delta Airlines. Yup, we spent $19,000 on airplane tickets on a single airline. I guess that explains why our newest credit card is a Delta card. I guess we value travel.
The next largest category is groceries. When I told Katie what that total was she said, “No way; you're leaving something out.” What was it? Well, if you scroll down a little more you'll see it: “Wholesale Clubs.” That's Costco. Add the two together for a more realistic appraisal of how much the six of us spent on groceries. Plus, another $1,100 at “specialty stores and vending machines,” and the total is over $16,000.
Next is “Book Stores: $7,754.” We apparently really like to read. Just kidding. The only explanation for that is that it includes everything we ordered on Amazon. No further breakdown is available without going through it item by item.
The next category, depressingly, is Boat Dealers. You've heard the old phrase that a boat is a hole in the water that you throw money into. They're not kidding. I don't think that $7,000 was for anything fun either—just maintenance and repairs.
The next category was “Sporting Goods Stores.” I can't really explain this one. I did buy some expensive weightlifting items and a hockey stick or two at the end of the year, but I'm not really sure what the rest of that was. Some of it might have been something Katie was reimbursed for by the soccer organization for which she volunteers.
Next was automotive service shops. Yup, $6,000, plus another $3,700 in parts, body shops, and tires. Keep in mind that all three of our cars now have over 100,000 miles on them, but most of that expense was actually in the least valuable car through an unfortunate set of events when a relatively minor repair that wasn't properly fixed resulted in a much more expensive repair.
Tax Preparation was next. That wasn't actually the final amount, which was discounted after our Form 8606s were messed up and had to be refiled. But it turns out that paying someone else to do your taxes when you have 20 K-1s and you file in nine states isn't cheap.
Recreation Services is next: $5,741. I have no idea what that was. Some sports league fees, for sure. Who knows what else?
Restaurants are next at $4,300. But don't forget the “Fast Food Restaurants” category that comes in later for another $3,100. Plus $500 for catering. That's $8,000 total for someone else to feed us. Could we cut down on that? Absolutely. Do we need to? Nope. We can afford it. Obviously, a large part of that is while traveling, and as you already learned, we apparently value traveling pretty highly.
Speaking of travel, lodging is next. More than $4,000 (for some bizarre reason, Best Western and La Quinta get their own categories later). Plus another $3,200 in tours. All those little things can really add up! I have no idea how the pre-paid heli-skiing trip was categorized, but it's in there somewhere.
We spent about $5,000 on physicians, dentists, optometrists, and pharmacies.
Here's a fun one. We spent about $1,600 on clothes, but we spent $2,400 on used merchandise (mostly clothes). Maybe we still have some frugal bones in there somewhere.
We blew $1,500 on theater tickets, too. Did I mention we spend with wild abandon?
These are pretty interesting. I suggest you pull out your credit card statements and see where your money goes.
More information here:
Life After Financial Independence: Two Perspectives
The Other 1/3
If that's where 2/3 of our money went, where did the rest go? There's still about $70,000 unaccounted for.
Some of it is easy to pin down. Gasoline goes on its own card. At least $9,500 went into gasoline, a big chunk of which went into the boat. I guess that figure will be higher this year since we're not planning to drive any less.
About $6,600 went toward finishing up our home renovation. Here's some more:
- $15,000 went toward estate planning costs (I wish that was the total).
- $7,900 went toward insurance.
- $5,500 went toward utilities.
- $5,000 went toward property taxes.
- Another $10,000+ went to the 529 “match” for our nieces and nephews (the big chunk of money we put in there each year doesn't get included, but the matching funds for their earnings come out of this “budget” amount).
That still leaves $15,000 (other credit cards, Venmo, Paypal, checks, cash), but we've figured out where almost 95% of our spending went, so that's close enough for our purposes today.
Lots of Waste
As you can see, there's a lot of fat on that bone. It would not be unrealistic at all for us to reduce that spending by 25% or even by 50%. But that's the whole point. Variable spending is way easier to cut back on than fixed spending when times are hard, and a huge percentage of this is, obviously, variable spending.
What do you think? How does your spending compare? Do you spend more? Less? Which categories are bigger or smaller for you? What surprised you the most? Comment below!
Very interesting! Thank you so much for sharing this.
Thanks for sharing. Based on your current income and NW which I’m sure are pretty high, the annual expenses isn’t jaw dropping . (If I have to take a guess, your annual expenses are <30% of your gross income and <2.5% of NW). That is quite impressive!
You seem to be splurging (carefree) on few things (eg. Vehicle/ boat) while your travel expenses and dining out ( for a family of ?4) is still quite modest.
That was the point: that once your payments are gone, you can have a pretty awesome life on a lot less than most think. So any additional wealth can be used to improve the world around you and doesn’t have to be hoarded for your own use.
Thanks for the transparency, Jim. Now I feel super frugal lol.
Another voyeuristic look into the Dahle household. I love it. These posts are what keep me coming back.
Is the increase in tax compliance costs worth it? That might be a good topic for a future post. After making one of those syndicated real estate investments and having to deal with all the state taxes I have decided that with my lowly net worth it is not. Once this one goes round-trip I am out. I have continued to do taxes myself on turbo tax, but I’m not sure I have been doing it correctly. I guess we’ll find out when the IRS steps up audits and enforcement with this new $80 billion dollars they are getting.
I think we have enough invested to make it “worth it”, but totally understand your concern. It probably isn’t worth it for small investments.
What’s the all time greatest place that you’ve traveled to?
Beauty is in the eye of the beholder, but it would likely be a location in Utah, in British Columbia, or in Europe.
Over $3,000 for fast food?
For a family of 6, fast food can easily cost $50 each time, go 5 times a month, that’s already $250, so 3k a year
My point really was not math. I have 5 kids. But when you’re that well off, why are you eating that much fast food?
As opposed to spending 2 hours having someone cook, serve, and clean up for you? Or as opposed to going home and spending 2 hours cooking, serving, and cleaning up for yourself? People don’t go to fast food restaurants because they love the food. They go because they’re busy.
Never said I was comparing to home prep. I get the busy, we’re all busy. My point was why eat so much garbage food when you have the means to eat better? Plenty of healthier quick options out there. And I like Chick Fil A, but that doesn’t make it good food.
I’ve never been accused of being a foodie. Or even a particularly savvy eater. I don’t recommend you come to this blog for nutrition advice. Unless you want to ask our Director of Digital Marketing:
https://www.whitecoatinvestor.com/getting-rich-and-ripped-how-wci-principles-help-build-wealth-and-improve-your-physical-fitness/
I bet 90% of it went to Chick-Fil-A. Two working parents, 4 busy kids, lots of travel? No, that $3K figure doesn’t surprise me one bit.
Via email:
Wow envy that property tax and utility costs. Ours is $12k each in York PA.
Hear! Hear!
I can’t wait until the kids finish school so I can shed the property tax cost.
Nearly $10k for maintenance for the older cars? Yikes. I’m guessing that won’t show up on one of those “driving a beater until you’re 45 is the absolute best” articles.
It was definitely a bad year. We’re also at a particularly “old” period of cars (278K, 118K, 150K) as we wait for a new one to be built to replace our oldest. Divide it by three and it doesn’t seem so bad. What’s the depreciation in year one on three new cars? It’s got to be more than $10K. These guys claim 20-30% in year one, but that seems a little high to me:
https://www.nerdwallet.com/article/insurance/car-depreciation#:~:text=New%2Dcar%20depreciation&text=Your%20car's%20value%20decreases%20around,more%20of%20their%20initial%20value.
Dave Ramsey says 20% too: https://www.ramseysolutions.com/saving/car-depreciation
Agree new cars are a ripoff. That’s why I like 2-3 year used. The worst of depreciation is out of the way, but you still get a solid 5-8 years of very low maintenance.
> Given the average EM income of $375,000, if you put 20%-25% toward retirement and 20%-25% toward taxes, that leaves something around $200,000 to spend.
This is probably a dumb question, and you likely have other posts which would serve me better than a direct answer, but I’m curious why the assumption for taxes is so low? By default I’d expect taxes to be around half (though I live in a high-tax state), and putting 25% of 375k towards retirement you’ll well exceed the amount you can put into pretax accounts.
You expect to pay half your income in taxes? We only pay 33-34% on a 7 figure income. Docs don’t pay half their income in taxes. Run the numbers.
https://www.whitecoatinvestor.com/doctors-dont-pay-50-of-their-income-in-taxes/
Man if you trim some of the waste, you’d have enough for a pretty decent golf simulator.
I think we probably have enough anyway so I guess that means we don’t think having a golf simulator would make us any happier.
Impressive degree of transparency and honesty. Thank you for your service.
Was illuminating for me that you didn’t track every dollar. I guess that’s because you are FI and no longer in pure accumulation phase? I check expenses every day and manually categorize them. Probably I’m overly attuned? My significant other thinks so! But I am planning on a much narrower margin in early retirement than WCI.
We track every dollar of spending, but don’t categorize it if that makes sense. If we wanted to spend more, I suppose we’d just give or save less.
Thanks very much for sharing such interesting amounts of detail.
My reaction reading through this was that you spend shockingly low amounts of money on many things! A simple example that stood out to me was $1600 on clothes ($4K including used). For four people?! I think one pair of jeans cost me $250 alone this year and sunglasses (clothes?) the same again. That isn’t enough clothing for one person for one day and we’re at $500 for one person. Special clothing like sports gear adds up a lot too.
Are all monthly bills like cell phone, TV services, yard maintenance, cleaning etc etc all excluded from the analysis here?
Well, it’s six people and it helps that I don’t spend anything. I already have twice as many clothes as I need to cover my body for the next 50 years. Now I’m sure I’ll still buy more and have more bought for me, but you get the point. I’m not a “clothes person”. Katie buys more than me, but she’s certainly no recreational shopper. I’d guess the kids get a normal amount, dunno. Whitney was buying her own from her allowance, but she’s out of the house now. So I guess that wasn’t included in the $4K figure (but is in the overall figure.)
My sunglasses don’t cost $250 either. More like $20.
And yes, cell phone, TV, and cleaning is all included. The kids do the lawn these days.
Well that’s some admirable frugality that matches your approach to cars! clearly you have the ability to spend more, so it’s interesting to read how often you don’t. Really interesting article thank you.
I probably do need another pair of jeans. Are they really $250 now? It’s been so long since I bought any I don’t really know. But climbing pants are < $100.
Jim, given that you have 4 kids that are still relatively young, are you doing any type of college savings? I don’t see a category for that. Rock on!!
Savings wasn’t included in this. Lately we’ve been putting $16K a year into the Utah 529 for each of them plus a couple thousand a piece for 34 nieces and nephews. We save LOTS of money. We pay LOTS of taxes. We give LOTS of money away. Those are definitely the 3 biggest categories of our budget. None of that was included in this.
This was just an exercise about how much we actually spend. In some ways it seems like a lot. In other ways, like not that much.
Thank you for making it real for us.
Only issue I see, your spending on bicycles is way too low!
My 2015 still feels new to me. I could use a new road bike though. I just don’t bike enough to be able to justify storing and maintaining a quiver, even if I can afford one. I’m up to 4 boats though.
Are you including inflatable or non-motorized ones in that 4?
That’s a yes. LOL.
Jim, thanks as always for your insight and transparency in these unique articles and for all you do at WCI now and over the years.
I am in a similar boat and that my spending is not all in one place, thus making budget/spending calculations a bit messy.
Some of my spending goes on credit card (really mainly one credit card) some comes from a checking account for things that dont allow auto-payments with credit cards. Since that one main credit card is paid in full monthly from the checking account, I mainly add up my spending from the checking account to calculate my annual spending. However, this unfortunately does not break it down by category or into specifics without me having to manually go through each spending amount.
You would think there would be a better service out there that would weed through these multiple accounts such as checking accounts, credit cards etc. to consolidate all spending into one amount and eliminate redundancy for the same charge. For example, if I pay an insurance payment with my credit card, then pay my credit card with my checking account this charge would be counted twice. I have found issues with both mint.com and personalcapital.com in trying to do so and for that redundancy issue. I’ve stopped using them for the most part as they were providing limited value. Not sure if there are any other services out there that do a better job of this spending allocation across checking accounts, credit cards etc. without that redundancy/inaccuracy?
I don’t know of anything that would work any better doing that automatically.
Check out tillerhq.com. Not free, but the ability to see what’s going on and the customization is worth it.