Do you budget? If you're already retired, do you still? Let us know in the comments! (yes, we know Jason's side gets dark. there was a sudden bad storm)
Financial Planning is possible without a budget? 😬 I've estimated mine for pre-pension, pre-SS, and post-SS. Have you seen a recommendation for % reduction going from go-go to slow-go to no-go?
I will never retire, this is worse than a hard drug addiction for me. Hard drugs kill you fast but architecture is slow torture; pleasure and pain to the end.
Put the 2 million into BlackRock Municipal Trust fund and earn 3 to 6% in dividends paid MONTHLY. That's on average over $6,000 a month nearly tax free!!!!
I am eyeing retirement at 55. Currently budgeting with YNAB. It’s a game changer (YMMV) and puts us in a strong position of knowing where our money goes. Will we continue to budget? Do you ever look at the gas gauge in a car? 😊 To me the budget is a tool. It supports the 'skill of spending' in Mr Money Mustache’s vernacular. There will be times we are in the budget more heavily (eg seasons of a lot of financial activity or planning) and other times we can glance weekly.
You guys really hit it on the head. I do think having someone to bounce your thoughts off of is an often looked over key in planning, especially when going at it solo. The biggest asset for me is often "I've been there and done that and here's what I found out..." from other people's experience. It is such a time and ultimately money saver.
Thanks, Ray! Indeed, you've hit on something important. Irrespective of one's expertise - and naturally neither of us are CPAs, CFPs, etc. - there's always another viewpoint to consider and we largely operate with blinders on; it's just how we're wired. Learning from others is such a valuable thing. Thanks for watching
Wife and I are on the Wing It plan. We've been retired for a few years and our spend rate is between 2.2 and 3 percent. We are a little older than you guys at 55 and 58 so a bit closer to SS. We put everything on a credit card which we track every month. We have enough cushion to cover the lumpy expenses. We are really enjoying the freedom of doing whatever we want.
Sounds like you’ve got a process that works for you and that’s what matters, right? Particularly with lower WRs you gain a lot of flexibility. Best wishes to you
I have been budgeting and tracking my spending on a Google sheet for years now. For me it is like turning on the headlights while driving. It gives me the magic ability to see (ok, at least to predict) the future. This gives me a lot of comfort.
Great episode. I’m making some changes to my budget categories based on this model. Appreciate you guys sharing via this wonderful channel. Please keep it coming.
Great analysis,thank you. At the 60k withdrawal range,some buffer needs to be built in for ‘tax expenses’, assuming at least some of the 60k is coming from tax deferred accounts. At the extreme,if the entire 60k needs to be drawn from a tax deferred account, then on average, the pre tax withdrawal will need to be around 80k, pushing the withdrawal rate to 4%.
Well, we haven't done it yet ourselves so we're no experts, but it is indeed a very common area of interest among the community - and for us. Thanks for your suggestion and the support!
Ok, I never thought I’d hear Steel Pole Bath Tub mentioned on a FIRE podcast! Another reason you guys are one of my favs. Thanks for sharing your info. This was a great episode!
Another great episode. I really appreciate the work you guys put into these. I was curious about how my numbers would compare, especially with a higher monthly spend. So here they are ($140,00 annual spend, relatively LCOL area, mortgage, good sized travel budget): Fixed 30% Variable 31% Discretionary 13% Sinking 27% I track expenses pretty closely and would argue that some granularity is helpful, especially initially, to identify opportunities to cut. Some cuts can be pretty painless and a modest decrease in one's burn rate can have a huge impact on one's FIRE number. Thanks again for all you do.
Jason here - Thanks for sharing, Jerry! I agree 100% about the value of granularity particularly earlier on. That visibility is worth a lot, and as you wrote, can help one identify areas where you're spending more than you'd like / need. Thanks for your support!
This episode was super helpful guys! We do budget, every single month, and it’s granular. I like these broader categories, I think as long as we’re honest with our averages it’s a good way to look at it. Thank you!
Thanks! So glad you found it helpful. To be sure, for me it was definitely an evolution to get down to the broad categories. I spent almost two years with more granular categories until I got comfortable enough to back off. Since I use YNAB I can still easily trend by Payee, but most of the time I don’t need to do so. -Jason
Jason, zero regrets about seeing Billy Joel. He talked about not touring a few years ago and decided against it so see him while you can; you never know when he will change his mind again!
Thank you for the detail's gentlemen. It is nice to see it from both your perspectives. Debt always wins no matter how much one has saved. Yes, more helps but living with no or little debt makes such a huge difference. Thanks again.
Great episode. For some reason, I can’t get my head around using fixed/variable/sinking as the top level categories - I end up just playing games in my head with what’s what. In using Mint for the past 10 years, I’ve kind of settled on using 5 top level categories: food, medical, housing, travel and everything else (shopping,car,kids,entertainment, etc). These are just the categories that make it easiest for me to get my head around our current and future spending for some reason. They also happen to work out to round numbers (each of those is between 15-25% of our total). And each one could be pared back by about $500/month if necessary.
Im struggling with this as well. I use Quicken and it doesn't even have these top level categories. I had to go create them and then try to figure out where to put everything. Its very confusing because in most of my spending in retirment, 90% of everything Im spending could be concidered variable and discretionary. with the exception of a few bills on insurance and food and some utilities, everything else is variable and to some degree discretionary.
Jason here - Thanks, Richard! For sure there's no one "right" way. For me, I did this from the start (18 mos pre-RE) to ensure I truly understood must haves from two perspectives: fixed costs (mortgage, insurance, etc) and variable (you've got to buy groceries and clothes but there is flexibility to be had here), separate from the wholly optional (but really fun) stuff, which could be readily cut back in crisis. That's why I set it up this way. That's certainly not saying it's the only way! I think it's a rather YNAB-oriented approach, and maybe I watched too many of those Nick True videos on UA-cam when teaching myself how to budget? :) If what you described works best for you then it is the right approach for you! Best wishes to you
If your variable and discretionary truly are that high of a % you have a lot more flexibility than me, which could be super useful in times of needed belt-tightening - great! As I commented to Richard, there is no "best" way, just ones that are right for you.
Thanks for another great vid guys. Watching this makes me appreciate where I live, a lot.. Approaching FI, hopefully RE in next couple of years. Mortgage paid off; where I live, medical insurance is zero, no property taxes, no capital gains tax, so budgeting is relatively simple.
@@TwoSidesOfFI most of Europe has no or minimal property taxes. Usually a few hundred $/year. British overseas territories like Channel Islands, Gibraltar (little bit of England in Spain) and Isle of Man have no property tax and no CGT. Many other European countries have no CGT. Also pretty much all of Europe has socialized health care so no charge at point of use. You pay in while working out of your taxes, that’s it.
UK has the win on healthcare, for sure. Personal income tax rates and pre-tax incentives are quite different though and for HENRYs that's a massive win for the US tax system. Top bracket caps at 37% (540k+) vs 45% (over 150k) in the UK...and, on the drawdown it's all tax favored 0/15 depending on how you fill the brackets. No free lunch as they say...
@@TwoSidesOfFI yes, mainland UK. In those British territories, income tax is capped at 20% and 0% corporation tax for most businesses. They also recognize US ROTH IRAs and 401ks and withdrawals are tax-free. You can withdraw 30% lump sum tax free from their domestic pensions too, at 59. Those are pre-tax on way in and you get 30% tax free on way out.
Another great discussion guys. You made me go back and re-run my annual budget and WOW was I off from what I projected pre-retirement. Even just an annual budget review is worth the effort. I realize now that taxes make up a huge portion of my budget and cannot leave them ignored (working part-time). Do you think it best to just write it all down and then find the income to pay for your FIRE life? They don't make training wheels for this stuff. Jason, it would be interesting to know what a year in your financial life looks in retirement like as you move through the year; re-balancing, budget review, tax planning, vacation , school and end of year. Are your guesses close?
Jason here - I don't think there's any best practice for budgeting that works for everyone. Quarterly reviews is perhaps the best compromise point for many people. For me, I like having a quick look monthly to see if I'm on track. End of year is for bigger picture review, and naturally is an opportunity to look at taxes and do planning for the next year. The right system for you is the one that brings both confidence in the numbers and feeling calm knowing that you have it under control. Stay tuned as we have an ep coming soon on this topic! Best wishes to you, Steven.
Great video!! I have a short attention span but watched this one until the end! I could have made this video myself actually as my budget for retirement is almost exactly the same. I have some of Eric’s and some of Jason’s situation so it was interesting to see how you both put it all together. I feel the same as you Eric about mortgage. I had a struggle with my financial advisor with that but obviously I won. It turned out to be a great investment as it’s up 20% and we’re selling in May, preparing for our Portugal move. So looking forward to joining you in retirement Jason!!
I'm curious how do taxes fit into the budget. Practically speaking Jason do you take out your entire budget and then set aside a certain amount as a sinking fund?
Jason here - it’s easy in my case as my income is low enough that income taxes are also low. Therefore I don’t take any special steps to set aside money. It comes out of my cash allocation if any taxes are owed. Property taxes are escrowed in my mortgage.
Lamb of God would be a bucket list show for me. Talking about high power rocketry, it's a great hobby but can be expensive. I have a Tripoli Level 3 certification and can say for a fact it's a safe hobby. High power rockets are launched at specific events with strict safety guidelines.
Great video guys, thank you for sharing as it gives us pre Firee's lots to think about and plan for! I would love to know more about the houses you currently live in, and whether you're planning to downsize at a future time to release more money to invest, or are you going to stay in them long term? For example are your houses large 4 or 5-bed family homes worth $1m plus, or more modest 3 bedroom places? You may have covered this in past videos so happy to be re-directed to those. All the best !
Jason here - Thanks, Ian! We presently have a 3BR house around 1800 sq ft. My wife and I talk about downsizing at some point - though we may well keep + rent out our current house and get an apt down the road. It's still too early to know! As you might suspect, there's a lot more info available about Eric's house, which he designed + lives in today: thirtybyforty.com/portfolio#/the-longhouse/
Thanks for sharing this. I don't really budget - I am basically fixed expenses and everything else. Right now taxes are a variable expense because I plan to do Roth conversions for three years - but that will go away.
You're welcome! If that's working for you and you have the oversight needed to understand changes to expenses + spending without a budget, there's nothing wrong with that!
This was an interesting episode even for a Brit, just in terms of making me consider what the right amount of time is to be spending on budget refinement. I think I'm probably more in Jason's camp, and kinda need an Eric to gradually move me towards a more sensible place. I'm still a couple of years from really feeling FI, but planning a "Coast FI" few years as a financial coach, so feel like I need to watch the numbers for now. The only problem with scaling things for a different budget is that some variable costs, fixed costs and sinking funds are likely to scale less well. Of course people can choose cheaper brands, and maybe have smaller houses, but for most people if you gave them an extra £1000 per month they wouldn't scale everything equally. Most of it would go into discretionary and vacations, unless they'd undercooked some of the other sinking funds. This scaling was particular marked when Eric was talking about using $550/mo of college funds to be able to live somewhere else for some of the year! Did you scale your costs purely mathematically, to keep the percentages broadly right, or maintain a minimum level for some costs?
Jason here - Thanks for sharing, Alastair. Very glad you found it interesting. For sure you're right that there is a balance to be struck. And as I've mentioned in earlier eps too, early in RE I was a bit too focused on budgeting. I've come more towards Eric's side lately but I think there's still room to move. And you're absolutely right re: scaling. For both of us, we scaled linearly in order to ensure we didn't skew the percentages. There are certainly plusses and minuses to employing that approach vs. establishing minimum floors. However we felt for simplicity's sake (i.e. relatability) it was best to maintain the percentages.
@@TwoSidesOfFI thanks for the reply, and extra insights, Jason. I think the main cause of my being quite budget-conscious is indicated by my "not feeling FI" comment too. The secret to being able to be more relaxed about budgeting is probably just to add some more slack into the FI number. To pad the starting numbers to build some contingency into the ones we have less confidence in. We've been living to our RE budget for 18 months now, so confidence is rising, but only when we're actually living the RE lifestyle will I feel we've really proved the budget. I appreciate you guys continuing to share, and I look forward to hearing about Eric's transition to RE when the time comes. Your collective openness and honesty is so refreshing, rather than simply trotting out defensive self-justifications or trying to appear wise after the fact.
Good content…..I luv doing my budget…. Once in a while I exceed but at least I know where I overspent. When ‘surprise’ expenses pop up, I usually have a category already designated.
Fabulously instructive episode. Obviously Jay has considered his mortgage payoff and I’m confident you’ve both considered the implications of Social Security, but I didn’t hear that covered anywhere in the discussion. All else being equal, ending “fixed” expenses and collecting Social Security would imply a larger initial SWR than the 3% presented here. Eric discussed the ending of college expenses are a placeholder for expenses living abroad, but other than that, are you just purposefully being ultra conservative with your initial SWR?
Thanks, David! We've touched on both of these topics at times in the past, but you're right we didn't tackle them here. Both of us model collecting 50% of current SS projections as a conservative approach. So you're totally right that while our overall consumption rate may well be consistent over time, what we actually withdraw from the portfolio will decrease once SS (or for some people, pensions too) comes on line. If you've not seen our recent eps on SWR, check out these: ua-cam.com/video/CClhsaBbTm0/v-deo.html ua-cam.com/video/rapSolx37gY/v-deo.html
We are tracking our spending now, 6 months out from retirement, making sure to accounts for all our pennies. So, we'll know where we can cutback or spend, as needed.
Great! I tracked for about 1.5 yrs before RE to really ensure we understood our needs and wants, and could do any trimming (or adding) we felt was needed. Best wishes to you! -Jason
We are at 2 million, but without a house/mortgage. The plan is to travel anyway and probably live abroad, but a paid of house + 2 million is very different than just 2 millions.
@@TwoSidesOfFI My spouse still works and we currently pay 2700/mo to rent in Southern California. With a 3% WR at 2 million it would be significantly different from your fixed expenses since rent would be so high.
Great content. Question - what length of time are you spending the $2M? Assuming this accounts for a longer than 30 year retirement to death time horizon. if I retire at 62 and live to 90, I could perhaps use 4% vs 3%? Also, would be interested in your food budget - things are outrageously expensive right now and if you add eating out it gets even more challenging. Thanks
The way I look at it is 3% over 30 years is 3*30= 90%. So you only then need to keep it up with inflation. 4% will be 120% over 30 years so you’ll need inflation plus 20% over that time. Both seem doable to me. You can always vary when the total amount you have drops then cut spending temporarily and that would help.
100% correct, Johnny. We've touched on this in earlier episodes as well. That said, planning as best you can for the knowns and leaving ample buffer for unknowns is how we are trying to account for this. If you've not seen it, check out this ep ua-cam.com/video/i9HeJbChVsI/v-deo.html
I use Mint for expense tracking which feeds into my retirement budgeting. It helps to semi-automate the tracking of expenses via cards and checking account. By the way, I think 3% SWR is ridiculously low if you are not taking into account any future social security benefits. I retired last year at 55. I earmarked approx one-third of my portfolio to be a "bridge fund" to replicate my future social security benefit and will spend that down over the time between now and claimingsocial security at FRA. Much of this amount is invested in TIPS for safety and to protect from inflation. The other two-thirds is the "permanent portfolio" which is a balanced bond/stock allocation, withdrawing at roughly 4% annually. The overall withdrawal rate on the full portfolio is just shy of 6%, but will fall below 3% once SS kicks in.
Thanks, Michael. We intentionally chose a low WR for this exercise given the diversity of retirement duration (trends long with our viewers) and the range of conservative to aggressive rates out there. For more on our own WRs, check out part 2 of our recent SWR series: ua-cam.com/video/rapSolx37gY/v-deo.html
@@TwoSidesOfFI I think conservative WR is fine for long retirements, but future social security benefits and any future pensions NEED to be accounted for somewhere in the math. Otherwise, you end up with far too conservative of a spending plan IMO.
@@michaelfriedman2221 No disagreement there! In Part 1 of the SWR series we cover how we use Karsten's tool to ensure SS is modeled as a future cashflow. ua-cam.com/video/CClhsaBbTm0/v-deo.html
Very good review. The good news is you left out social security as income which should be about $4k per month for a person who save $2 million. My categories are house, car, food, medical and other. Items I have on my list that I did not see were gas, home/car repairs, clothes, personal items, gifts and giving.
Thanks, David. Yes, while we've talked about SS before (and as talked about in our SWR episodes does reduce the need for withdrawals from the portfolio once you're claiming), we left it out here for simplicity.
Just a note I decided on mortgage payoff for financial peace. I invest 15% as for yhe Ramsey plan but once the mortgage is gone the level we overpay will give us 60% of our take-home pay to invest if we want. In the UK mortgage rates are starting to equal investment %s so scary times.
It’s a choice like anything, of course. I view it as another expense for which I’ve budgeted. Naturally you are right that mathematically, your total portfolio size needed will be smaller without a mortgage or tent. It all depends what kind of timeline you want and housing flexibility options. -Jason
Have you planned for your old age such as long-term care insurance or nursing home? You want to have a good end for yourself. This is an unpleasant subject, but a reality.
Have you guys ever given thought to geo arbitrage? Your expenses would drastically drop if you were to move out of the US. Health Care especially is a place where you could save a huge amount. But for sure, it’s not for everyone. One of our goals of FIRE was to be able to travel months at a time. We’ve learned that slow travel outside of the US is vastly cheaper than the months at home in the US. We still maintain our small home in the Adirondacks where we spend a portion of the year but after eight months away last winter, we’re shocked at prices at home. Just a thought. I love your channel and love budgets myself. We’re at a similar budget to both of you.
Yep! And we've mentioned it in earlier episodes. That said at the time being, our thoughts are around long travel, not necessarily relocation. As you point out that slow travel _can_ (and for us almost certainly will) be quite a bit less expensive than the same months back home. Thanks for your support of the show!
I have sinking funds but I'm still building up the emergency fund. I will likely not max out my 401k this year for the first time in 6 years so I can build up the savings accounts with the cash needed. I'm still 5 years out from my retirement date.
Love hearing both of you talk about your planned life styles. Great video! So with SS and your spouse's SS, which would be material compared to your $5k/month budget, you are definitely not withdrawing enough and hopefully have addressed RMDs.
It seems like my best opportunity to check spending with my spouse is to present where we are and what leverage we have built. Then bring in how we can do even better. Attacking specific spending decisions is a path to conflict and finger pointing.
The things that work best for your own relationship are for sure the ones to pursue. No two couples are the same and it's yet another example of respecting the "personal" in personal finance.
Unless you have a right to live in a universal healthcare country you may find that the universality does not extend to non-citizens. And many countries are not keen on admitting ‘non-productive’ ie retired individuals to the rights and benefits of citizenship since they didn’t contribute to the infrastructure and tax base in the first place and are essentially a potential drain on the country. You will really need to do your homework on where this would actually work as a plan .
@@NekonataVirino Yes. Homework required. I have found that there are countries that allow temp residents + perm residents access to their public healthcare system. However, in general one still needs to buy private healthcare to guarantee access and quality. These private plans of course exclude/limit pre-existing conditions, but can be much more affordable than the US.
Wow some things really stand out here. Even with full ACA subsidy, out of pocket max in NC is $19,000 per year including premiums, which we are very likely to hit at least 2/3 of this every year with medications, so at least $1,000-$1,500/month for healthcare. Right now we are spending $8k/year on healthcare and my spouse is still working full time. $200 seems really low especially as we get older. Also my power/heat/water/cell phone/internet is around $500/mo. even with cell phone at $50/mo. Food also seems low. know these are examples are with $2 million and I'm sure your budgets are higher - thanks for the great videos, always good to put these items out there so we can all learn. I am comfortable with a 5% withdrawal rate, but won't need it yet until spouse retires.
Jason here. Thanks, John. You're preaching to the converted! If you've seen our older eps, you'll know I moved from a VHCOL area to one closer to MCOL. Even so, my budget is well above what I've shared here. If I'd not invested in solar, my utilities would be in the range (or above) what you've stated. That said, $2MM is such a common FIRE number - and workable in most of the US, I might add - it just made good sense for us to use it here as it will be much more relatable. I'm sure you're doing this already, but be sure to model which ACA metal tier makes the most sense. If you are certain you will go that high on your OOP max, maybe even a Gold plan will be most sensible despite the high premiums. Best wishes to you
@@TwoSidesOfFI if I read the IRS rules correctly, you can only claim the silver plans if you want to pay first and get your ACA subsidy at tax time. This may be a specific MA pain point, we have a very restrictive exchange. I did notice that some plans are gold plans dressed up as silver plans, so dig in and do your reading
@@cryan1627 Perhaps your state as this is most definitely not the case in CA. I have a (true) Silver plan and pay the subsidized premium rate each month. -Jason
I enjoyed this episode , but I really cautioned your viewers that $60 annual budget is really tight depending on where you live . In Miami this would not be possible as our property taxes and homeowners insurance our ridiculously high. Cable/internet services are also very high. Thanks for video, Rick
I have a request.. If I'm not mistaken, you have never given any specific funds, or stocks that you are invested in. Since the show is for entertainment purposes only, I would like to get some details... Not about how much money you have, but how you invest it, and what percentage in each fund. It would be nice to compare your portfolio to what I have
Jason here - we have numerous episodes on our asset allocations, Eric's decision (later backed off) to add more bonds, and most recently my IPS: twosidesoffi.com/ips/ But you're right that we don't go too much into specific funds. Both Eric and I invest largely as Bogleheads as you'll gather from these eps so not the most "exciting" portfolios.
Hi Danny, it's not actually a tool. We each just made a quick summary in Excel for the episode. If you'd like a closer view at it, there's a full size screenshot in the show notes for the episode: twosidesoffi.com/fire-budget/
Jason here - I'm retired so there's no work-related income anymore barring the once weekly "fun jobs" my wife and I each have. Both Eric and his wife are professionals working full time-plus contributing to their budget + savings goals.
Where would we put State and Federal taxes? Does that sort of sit outside of these categories? I've historically left it separate but now that Im retired and needing to budget for and pay quarterly taxes, not sure where it would go. It's somewhat fixed because I've calculated a rough estimate of what we'd owe based on cap gains from previous years but it can certainly fluxuate from year to year.
I want to know where you guys are getting your medical coverage. I am single, and I pay more for my medical coverage than Jason budgets for all insurance, and more than Eric budgets for medical. And I don't have a plan with a lot of perks. I am a decade older than you and still working, so I don't have any state subsidy on my medical. Is that the difference? Or is this all just made up? As far as budget goes, I have spent the last year tracking my current expenses (at a fine granularity), and need to make a budget based on that. The problem is that I am planning a change in living conditions in retirement, so some parts get difficult to budget. I think creating a budget is easier if you just keep on with the same life post work.
Couple things: 1) This isn't all just made up, as we mentioned in the video, we scaled our **actual** budgets to this $60K spend. 2) Medical coverage costs are highly dependent on personal context: where you live (even within the US, state costs vary widely), your age, your health, and in the US, your MAGI. Try playing around by entering your figures in your state's healthcare exchange and you'll see what we mean. Once the subsidy cliff kicks in (400% FPL) and you earn $1 over, all premium tax credits vanish for the year which means these costs can vary wildly if you're not managing / tracking your MAGI. Huge difference between pre/post FI.
I’ve been following your channel for over a year now and always find it really inspiring and informative. Maybe not the most cheerful subject to cover but you should maybe do a video on how should someone factor in the possibility of a relationship breakdown/divorce and the impact on retirement. Given the high divorce rates these days, one cannot discount this scenario happening in the run up to or post retirement...
Thanks so much for your support, Adam. We truly appreciate it. Thanks also for the topic idea. You're 100% correct that divorce is indeed one the largest potential negative impacts to one's financial plans.
This might be a silly question but what does $2MM mean? It’s on the thumbnail and I keep looking at it and it looks like ‘two mega million dollars’ to me (which isn’t a thing where I’m from) but what do I know? 🤷♀️
@@TwoSidesOfFI how interesting - clearly we don’t use that overly much on my side of the Atlantic. K for thousands, M for millions and B for billions. You learn something every day.
It’s not. It’s merely a very common target to which we’ve scaled our own portfolios. We’ve shared our FIRE number ranges before, most notably in an earlier episode: So, What's Your Financial Independence (FI) Number? ua-cam.com/video/WMzya-HU8tU/v-deo.html
What continues to surprise me, as a European, is how crazy cheap things are in the us (besides health care). At current price levels here, utilities are easily $600-800/month and if you want to eat healthy here, we’re forking out at least $1000/month (for 2 adults) without any frivolous spending. Not to mention gas at $8/gallon. Greetings from Belgium 😂😂😂
Utilities in higher cost of living areas in the US are in the range you listed as well. Recognize that this budget is scaled to a common $2MM target, and not our exact numbers. But for sure you are right about the price of gas in Europe vs. anywhere in the US. I’d still move to Belgium in a heartbeat!
@@RubbingPotatoes As we said at the beginning of the episode, we scaled our actual budgets to a $2MM portfolio. So yes, actual costs for that insurance are indeed higher. See our earlier episodes on health insurance to learn how my medical premiums with subsidy are quite low - much lower than my auto insurance. -Jason
The title of this is ridiculous. I don't believe that even the average person who is a candidate for FIRE has that much money/investment. I was forced into early "retirement" with 18K in a 401k and 20K cash on hand. 2K monthly mortgage, no other debt. That's an above average retirement at 58...now 60, totally debt free but very little cash on hand, 80K invested. That's who you should be talking to. If people like me can make it work, there's hope for the people in the next lower tier.
Budgets reflect what kind of FIRE a person is living. They've acknowledged they are fortunate to be able to live "Chubby FIRE" (The backstories say there weren't silver spoons/trust fund.) There are other levels/types: traditional, lean, barista. Have you spoken to a financial planner?
@Doug B Hey, thanks for responding. Yeah, I'm sure there are different levels. No, I haven't engaged a financial liar. I'm actually doing great by myself, especially considering how I started. 60% of success with money is not doing the WRONG thing. I'm really good at that. I just wanted to vent at the notion of retiring with 2M. If I had 2M I could live the rest of my simple life without investing any of it. Because I have everything I need and want; just need to maintain it and stay healthy. Cheers!
In fact 2M is a very common FIRE target - it’s why we chose it. It’s also true that many people would elect a higher withdrawal rate, like 3.5% ($70k / yr) or some perhaps 4% ($80k / yr). Naturally this is a combination of expected longevity as well as risk tolerance. Best wishes to you.
Do you budget? If you're already retired, do you still? Let us know in the comments!
(yes, we know Jason's side gets dark. there was a sudden bad storm)
Financial Planning is possible without a budget? 😬 I've estimated mine for pre-pension, pre-SS, and post-SS. Have you seen a recommendation for % reduction going from go-go to slow-go to no-go?
I will never retire, this is worse than a hard drug addiction for me. Hard drugs kill you fast but architecture is slow torture; pleasure and pain to the end.
Put the 2 million into BlackRock Municipal Trust fund and earn 3 to 6% in dividends paid MONTHLY. That's on average over $6,000 a month nearly tax free!!!!
I am eyeing retirement at 55. Currently budgeting with YNAB. It’s a game changer (YMMV) and puts us in a strong position of knowing where our money goes.
Will we continue to budget? Do you ever look at the gas gauge in a car? 😊 To me the budget is a tool. It supports the 'skill of spending' in Mr Money Mustache’s vernacular. There will be times we are in the budget more heavily (eg seasons of a lot of financial activity or planning) and other times we can glance weekly.
@@steveb2346 We're on the same page! -Jason
You guys really hit it on the head. I do think having someone to bounce your thoughts off of is an often looked over key in planning, especially when going at it solo. The biggest asset for me is often "I've been there and done that and here's what I found out..." from other people's experience. It is such a time and ultimately money saver.
Thanks, Ray! Indeed, you've hit on something important. Irrespective of one's expertise - and naturally neither of us are CPAs, CFPs, etc. - there's always another viewpoint to consider and we largely operate with blinders on; it's just how we're wired. Learning from others is such a valuable thing. Thanks for watching
Wife and I are on the Wing It plan. We've been retired for a few years and our spend rate is between 2.2 and 3 percent. We are a little older than you guys at 55 and 58 so a bit closer to SS. We put everything on a credit card which we track every month. We have enough cushion to cover the lumpy expenses. We are really enjoying the freedom of doing whatever we want.
Sounds like you’ve got a process that works for you and that’s what matters, right? Particularly with lower WRs you gain a lot of flexibility. Best wishes to you
I love that you guys gave your actual numbers at the very end…. Thanks!
You’re welcome!
I have been budgeting and tracking my spending on a Google sheet for years now. For me it is like turning on the headlights while driving. It gives me the magic ability to see (ok, at least to predict) the future. This gives me a lot of comfort.
Well put!
Great episode. I’m making some changes to my budget categories based on this model. Appreciate you guys sharing via this wonderful channel. Please keep it coming.
Glad it was helpful!
Great analysis,thank you. At the 60k withdrawal range,some buffer needs to be built in for ‘tax expenses’, assuming at least some of the 60k is coming from tax deferred accounts. At the extreme,if the entire 60k needs to be drawn from a tax deferred account, then on average, the pre tax withdrawal will need to be around 80k, pushing the withdrawal rate to 4%.
Would love to see an episode on geo arbitrage. Please record one on this topic. Love your work guys. Keep it up!
Well, we haven't done it yet ourselves so we're no experts, but it is indeed a very common area of interest among the community - and for us. Thanks for your suggestion and the support!
Great job, gentlemen, consistently top-notch content produced!
Thanks, David! We really appreciate it 🙏
@@TwoSidesOfFI You are most welcome!😀
Very helpful to hear how you break things down and when and how you refill the "buckets" over time.
Great! Have you seen this one? ua-cam.com/video/HXeCHpFo8Ps/v-deo.htmlsi=bfVgOD3kON_mAvml
Ok, I never thought I’d hear Steel Pole Bath Tub mentioned on a FIRE podcast! Another reason you guys are one of my favs. Thanks for sharing your info. This was a great episode!
Another great episode. I really appreciate the work you guys put into these.
I was curious about how my numbers would compare, especially with a higher monthly spend. So here they are ($140,00 annual spend, relatively LCOL area, mortgage, good sized travel budget):
Fixed 30%
Variable 31%
Discretionary 13%
Sinking 27%
I track expenses pretty closely and would argue that some granularity is helpful, especially initially, to identify opportunities to cut. Some cuts can be pretty painless and a modest decrease in one's burn rate can have a huge impact on one's FIRE number.
Thanks again for all you do.
Jason here - Thanks for sharing, Jerry! I agree 100% about the value of granularity particularly earlier on. That visibility is worth a lot, and as you wrote, can help one identify areas where you're spending more than you'd like / need. Thanks for your support!
This episode was super helpful guys! We do budget, every single month, and it’s granular. I like these broader categories, I think as long as we’re honest with our averages it’s a good way to look at it. Thank you!
Thanks! So glad you found it helpful. To be sure, for me it was definitely an evolution to get down to the broad categories. I spent almost two years with more granular categories until I got comfortable enough to back off. Since I use YNAB I can still easily trend by Payee, but most of the time I don’t need to do so. -Jason
Once numbers are shared it's real
I love budgets
I'm with Eric as far as concerts and bands go :). Pantera this October!!!
\m/
Jason, zero regrets about seeing Billy Joel. He talked about not touring a few years ago and decided against it so see him while you can; you never know when he will change his mind again!
Thanks for sharing, gents
Thank you for the detail's gentlemen. It is nice to see it from both your perspectives. Debt always wins no matter how much one has saved. Yes, more helps but living with no or little debt makes such a huge difference. Thanks again.
Glad you enjoyed it, Ray
Great episode. For some reason, I can’t get my head around using fixed/variable/sinking as the top level categories - I end up just playing games in my head with what’s what. In using Mint for the past 10 years, I’ve kind of settled on using 5 top level categories: food, medical, housing, travel and everything else (shopping,car,kids,entertainment, etc). These are just the categories that make it easiest for me to get my head around our current and future spending for some reason. They also happen to work out to round numbers (each of those is between 15-25% of our total). And each one could be pared back by about $500/month if necessary.
Im struggling with this as well. I use Quicken and it doesn't even have these top level categories. I had to go create them and then try to figure out where to put everything. Its very confusing because in most of my spending in retirment, 90% of everything Im spending could be concidered variable and discretionary. with the exception of a few bills on insurance and food and some utilities, everything else is variable and to some degree discretionary.
Jason here - Thanks, Richard! For sure there's no one "right" way. For me, I did this from the start (18 mos pre-RE) to ensure I truly understood must haves from two perspectives: fixed costs (mortgage, insurance, etc) and variable (you've got to buy groceries and clothes but there is flexibility to be had here), separate from the wholly optional (but really fun) stuff, which could be readily cut back in crisis. That's why I set it up this way. That's certainly not saying it's the only way! I think it's a rather YNAB-oriented approach, and maybe I watched too many of those Nick True videos on UA-cam when teaching myself how to budget? :) If what you described works best for you then it is the right approach for you! Best wishes to you
If your variable and discretionary truly are that high of a % you have a lot more flexibility than me, which could be super useful in times of needed belt-tightening - great! As I commented to Richard, there is no "best" way, just ones that are right for you.
Thank you guys!!! You are doing a great job. And thanks for the belly laugh at the end😂
Thanks, Gillian! We appreciate your support. Sometimes sticking around until the end really pays off :)
Thanks for another great vid guys. Watching this makes me appreciate where I live, a lot..
Approaching FI, hopefully RE in next couple of years. Mortgage paid off; where I live, medical insurance is zero, no property taxes, no capital gains tax, so budgeting is relatively simple.
Congrats, sounds like you and I are closing in on RE on a similar schedule. Where is this magical land without property or cap gains taxes? -Eric
@@TwoSidesOfFI most of Europe has no or minimal property taxes. Usually a few hundred $/year. British overseas territories like Channel Islands, Gibraltar (little bit of England in Spain) and Isle of Man have no property tax and no CGT. Many other European countries have no CGT. Also pretty much all of Europe has socialized health care so no charge at point of use. You pay in while working out of your taxes, that’s it.
UK has the win on healthcare, for sure. Personal income tax rates and pre-tax incentives are quite different though and for HENRYs that's a massive win for the US tax system. Top bracket caps at 37% (540k+) vs 45% (over 150k) in the UK...and, on the drawdown it's all tax favored 0/15 depending on how you fill the brackets. No free lunch as they say...
@@TwoSidesOfFI yes, mainland UK. In those British territories, income tax is capped at 20% and 0% corporation tax for most businesses. They also recognize US ROTH IRAs and 401ks and withdrawals are tax-free.
You can withdraw 30% lump sum tax free from their domestic pensions too, at 59. Those are pre-tax on way in and you get 30% tax free on way out.
My favourite episode yet :-)
Thanks, Richard! Glad you liked it
Another great discussion guys. You made me go back and re-run my annual budget and WOW was I off from what I projected pre-retirement. Even just an annual budget review is worth the effort. I realize now that taxes make up a huge portion of my budget and cannot leave them ignored (working part-time). Do you think it best to just write it all down and then find the income to pay for your FIRE life? They don't make training wheels for this stuff.
Jason, it would be interesting to know what a year in your financial life looks in retirement like as you move through the year; re-balancing, budget review, tax planning, vacation , school and end of year. Are your guesses close?
Jason here - I don't think there's any best practice for budgeting that works for everyone. Quarterly reviews is perhaps the best compromise point for many people. For me, I like having a quick look monthly to see if I'm on track. End of year is for bigger picture review, and naturally is an opportunity to look at taxes and do planning for the next year. The right system for you is the one that brings both confidence in the numbers and feeling calm knowing that you have it under control. Stay tuned as we have an ep coming soon on this topic! Best wishes to you, Steven.
Great video!! I have a short attention span but watched this one until the end! I could have made this video myself actually as my budget for retirement is almost exactly the same. I have some of Eric’s and some of Jason’s situation so it was interesting to see how you both put it all together. I feel the same as you Eric about mortgage. I had a struggle with my financial advisor with that but obviously I won. It turned out to be a great investment as it’s up 20% and we’re selling in May, preparing for our Portugal move. So looking forward to joining you in retirement Jason!!
Thanks for sharing, Rick! Glad you liked it and stuck with it. Best wishes to you in your Portugal move and retirement! Be sure to keep us posted
I'm curious how do taxes fit into the budget. Practically speaking Jason do you take out your entire budget and then set aside a certain amount as a sinking fund?
Jason here - it’s easy in my case as my income is low enough that income taxes are also low. Therefore I don’t take any special steps to set aside money. It comes out of my cash allocation if any taxes are owed. Property taxes are escrowed in my mortgage.
Lamb of God would be a bucket list show for me. Talking about high power rocketry, it's a great hobby but can be expensive. I have a Tripoli Level 3 certification and can say for a fact it's a safe hobby. High power rockets are launched at specific events with strict safety guidelines.
Nice! 🚀
Great video guys, thank you for sharing as it gives us pre Firee's lots to think about and plan for!
I would love to know more about the houses you currently live in, and whether you're planning to downsize at a future time to release more money to invest, or are you going to stay in them long term? For example are your houses large 4 or 5-bed family homes worth $1m plus, or more modest 3 bedroom places? You may have covered this in past videos so happy to be re-directed to those.
All the best !
Jason here - Thanks, Ian! We presently have a 3BR house around 1800 sq ft. My wife and I talk about downsizing at some point - though we may well keep + rent out our current house and get an apt down the road. It's still too early to know! As you might suspect, there's a lot more info available about Eric's house, which he designed + lives in today: thirtybyforty.com/portfolio#/the-longhouse/
Thanks for sharing this. I don't really budget - I am basically fixed expenses and everything else. Right now taxes are a variable expense because I plan to do Roth conversions for three years - but that will go away.
You're welcome! If that's working for you and you have the oversight needed to understand changes to expenses + spending without a budget, there's nothing wrong with that!
This was an interesting episode even for a Brit, just in terms of making me consider what the right amount of time is to be spending on budget refinement. I think I'm probably more in Jason's camp, and kinda need an Eric to gradually move me towards a more sensible place. I'm still a couple of years from really feeling FI, but planning a "Coast FI" few years as a financial coach, so feel like I need to watch the numbers for now.
The only problem with scaling things for a different budget is that some variable costs, fixed costs and sinking funds are likely to scale less well. Of course people can choose cheaper brands, and maybe have smaller houses, but for most people if you gave them an extra £1000 per month they wouldn't scale everything equally. Most of it would go into discretionary and vacations, unless they'd undercooked some of the other sinking funds. This scaling was particular marked when Eric was talking about using $550/mo of college funds to be able to live somewhere else for some of the year! Did you scale your costs purely mathematically, to keep the percentages broadly right, or maintain a minimum level for some costs?
Jason here - Thanks for sharing, Alastair. Very glad you found it interesting. For sure you're right that there is a balance to be struck. And as I've mentioned in earlier eps too, early in RE I was a bit too focused on budgeting. I've come more towards Eric's side lately but I think there's still room to move.
And you're absolutely right re: scaling. For both of us, we scaled linearly in order to ensure we didn't skew the percentages. There are certainly plusses and minuses to employing that approach vs. establishing minimum floors. However we felt for simplicity's sake (i.e. relatability) it was best to maintain the percentages.
@@TwoSidesOfFI thanks for the reply, and extra insights, Jason.
I think the main cause of my being quite budget-conscious is indicated by my "not feeling FI" comment too. The secret to being able to be more relaxed about budgeting is probably just to add some more slack into the FI number. To pad the starting numbers to build some contingency into the ones we have less confidence in. We've been living to our RE budget for 18 months now, so confidence is rising, but only when we're actually living the RE lifestyle will I feel we've really proved the budget.
I appreciate you guys continuing to share, and I look forward to hearing about Eric's transition to RE when the time comes. Your collective openness and honesty is so refreshing, rather than simply trotting out defensive self-justifications or trying to appear wise after the fact.
I'm 52. Saw Duran Duran last year in Lancashire UK. White lines was the best song.
Very cool, thanks
Good content…..I luv doing my budget…. Once in a while I exceed but at least I know where I overspent. When ‘surprise’ expenses pop up, I usually have a category already designated.
Sounds like you’ve got strong budgeting practices in place, Ann. Well done!
Fabulously instructive episode. Obviously Jay has considered his mortgage payoff and I’m confident you’ve both considered the implications of Social Security, but I didn’t hear that covered anywhere in the discussion. All else being equal, ending “fixed” expenses and collecting Social Security would imply a larger initial SWR than the 3% presented here. Eric discussed the ending of college expenses are a placeholder for expenses living abroad, but other than that, are you just purposefully being ultra conservative with your initial SWR?
Thanks, David! We've touched on both of these topics at times in the past, but you're right we didn't tackle them here. Both of us model collecting 50% of current SS projections as a conservative approach. So you're totally right that while our overall consumption rate may well be consistent over time, what we actually withdraw from the portfolio will decrease once SS (or for some people, pensions too) comes on line. If you've not seen our recent eps on SWR, check out these:
ua-cam.com/video/CClhsaBbTm0/v-deo.html
ua-cam.com/video/rapSolx37gY/v-deo.html
We are tracking our spending now, 6 months out from retirement, making sure to accounts for all our pennies. So, we'll know where we can cutback or spend, as needed.
Great! I tracked for about 1.5 yrs before RE to really ensure we understood our needs and wants, and could do any trimming (or adding) we felt was needed. Best wishes to you! -Jason
DD back in 86. I still hope they are worth the trip.
I saw them in 2008 and they were really great! They sounded good on the NYE show this year too. -J
Great show again. Billy Joel - one of my favorites, but I am about 10 years older than Jason.
Thanks! He’s the best, right? -J
Time for a Spotify playlist.
We are at 2 million, but without a house/mortgage. The plan is to travel anyway and probably live abroad, but a paid of house + 2 million is very different than just 2 millions.
Thanks for sharing. Any areas in which your budget differs substantially from the ideas we shared?
@@TwoSidesOfFI My spouse still works and we currently pay 2700/mo to rent in Southern California. With a 3% WR at 2 million it would be significantly different from your fixed expenses since rent would be so high.
Great content. Question - what length of time are you spending the $2M? Assuming this accounts for a longer than 30 year retirement to death time horizon. if I retire at 62 and live to 90, I could perhaps use 4% vs 3%? Also, would be interested in your food budget - things are outrageously expensive right now and if you add eating out it gets even more challenging. Thanks
The way I look at it is 3% over 30 years is 3*30= 90%. So you only then need to keep it up with inflation. 4% will be 120% over 30 years so you’ll need inflation plus 20% over that time. Both seem doable to me. You can always vary when the total amount you have drops then cut spending temporarily and that would help.
Difficult to plan: helping out relatives, serious illnesses, ACA health insurance premiums
100% correct, Johnny. We've touched on this in earlier episodes as well. That said, planning as best you can for the knowns and leaving ample buffer for unknowns is how we are trying to account for this. If you've not seen it, check out this ep ua-cam.com/video/i9HeJbChVsI/v-deo.html
I use Mint for expense tracking which feeds into my retirement budgeting. It helps to semi-automate the tracking of expenses via cards and checking account. By the way, I think 3% SWR is ridiculously low if you are not taking into account any future social security benefits. I retired last year at 55. I earmarked approx one-third of my portfolio to be a "bridge fund" to replicate my future social security benefit and will spend that down over the time between now and claimingsocial security at FRA. Much of this amount is invested in TIPS for safety and to protect from inflation. The other two-thirds is the "permanent portfolio" which is a balanced bond/stock allocation, withdrawing at roughly 4% annually. The overall withdrawal rate on the full portfolio is just shy of 6%, but will fall below 3% once SS kicks in.
Thanks, Michael. We intentionally chose a low WR for this exercise given the diversity of retirement duration (trends long with our viewers) and the range of conservative to aggressive rates out there. For more on our own WRs, check out part 2 of our recent SWR series: ua-cam.com/video/rapSolx37gY/v-deo.html
@@TwoSidesOfFI I think conservative WR is fine for long retirements, but future social security benefits and any future pensions NEED to be accounted for somewhere in the math. Otherwise, you end up with far too conservative of a spending plan IMO.
@@michaelfriedman2221 No disagreement there! In Part 1 of the SWR series we cover how we use Karsten's tool to ensure SS is modeled as a future cashflow. ua-cam.com/video/CClhsaBbTm0/v-deo.html
Very good review. The good news is you left out social security as income which should be about $4k per month for a person who save $2 million. My categories are house, car, food, medical and other. Items I have on my list that I did not see were gas, home/car repairs, clothes, personal items, gifts and giving.
Thanks, David. Yes, while we've talked about SS before (and as talked about in our SWR episodes does reduce the need for withdrawals from the portfolio once you're claiming), we left it out here for simplicity.
Too funny, your top level categories lined up exactly with mine (and using YNAB)
Awesome!
You had me at Duran Duran ❤ I’ve seen them twice, once when they opened for David Bowie when I was 16! And again a few years ago, they’re awesome 🎉
DD forever! -J
Eliminate the mortgage prior to retirement and you'll need a lot less than you think
I'd include consideration of opportunity cost versus investing and creditor exposure of paid-off home with this suggestion.
That's our plan!
Just a note I decided on mortgage payoff for financial peace. I invest 15% as for yhe Ramsey plan but once the mortgage is gone the level we overpay will give us 60% of our take-home pay to invest if we want. In the UK mortgage rates are starting to equal investment %s so scary times.
Taxable and non-taxable accounts to maximize ACA subsidies with paid off home and no debt equals lean fire for the win!
It’s a choice like anything, of course. I view it as another expense for which I’ve budgeted. Naturally you are right that mathematically, your total portfolio size needed will be smaller without a mortgage or tent. It all depends what kind of timeline you want and housing flexibility options. -Jason
Have you planned for your old age such as long-term care insurance or nursing home? You want to have a good end for yourself. This is an unpleasant subject, but a reality.
Have you guys ever given thought to geo arbitrage? Your expenses would drastically drop if you were to move out of the US. Health Care especially is a place where you could save a huge amount. But for sure, it’s not for everyone. One of our goals of FIRE was to be able to travel months at a time. We’ve learned that slow travel outside of the US is vastly cheaper than the months at home in the US. We still maintain our small home in the Adirondacks where we spend a portion of the year but after eight months away last winter, we’re shocked at prices at home. Just a thought. I love your channel and love budgets myself. We’re at a similar budget to both of you.
Yep! And we've mentioned it in earlier episodes. That said at the time being, our thoughts are around long travel, not necessarily relocation. As you point out that slow travel _can_ (and for us almost certainly will) be quite a bit less expensive than the same months back home. Thanks for your support of the show!
I have sinking funds but I'm still building up the emergency fund. I will likely not max out my 401k this year for the first time in 6 years so I can build up the savings accounts with the cash needed. I'm still 5 years out from my retirement date.
Best wishes to you. You got this!
Love hearing both of you talk about your planned life styles. Great video! So with SS and your spouse's SS, which would be material compared to your $5k/month budget, you are definitely not withdrawing enough and hopefully have addressed RMDs.
Thanks! Again, these are scaled (down) from our actual budgets. Yes RMDs are all set.
❤❤❤
It seems like my best opportunity to check spending with my spouse is to present where we are and what leverage we have built. Then bring in how we can do even better. Attacking specific spending decisions is a path to conflict and finger pointing.
The things that work best for your own relationship are for sure the ones to pursue. No two couples are the same and it's yet another example of respecting the "personal" in personal finance.
My hope is to have universal healthcare by the time I retire. If it doesn't exist. I will move out of the U.S. for retirement.
Do you have a specific place in mind, or have chosen this generally as your plan B?
Unless you have a right to live in a universal healthcare country you may find that the universality does not extend to non-citizens. And many countries are not keen on admitting ‘non-productive’ ie retired individuals to the rights and benefits of citizenship since they didn’t contribute to the infrastructure and tax base in the first place and are essentially a potential drain on the country.
You will really need to do your homework on where this would actually work as a plan .
@@NekonataVirino Yes. Homework required. I have found that there are countries that allow temp residents + perm residents access to their public healthcare system. However, in general one still needs to buy private healthcare to guarantee access and quality. These private plans of course exclude/limit pre-existing conditions, but can be much more affordable than the US.
Wow some things really stand out here. Even with full ACA subsidy, out of pocket max in NC is $19,000 per year including premiums, which we are very likely to hit at least 2/3 of this every year with medications, so at least $1,000-$1,500/month for healthcare. Right now we are spending $8k/year on healthcare and my spouse is still working full time. $200 seems really low especially as we get older. Also my power/heat/water/cell phone/internet is around $500/mo. even with cell phone at $50/mo. Food also seems low. know these are examples are with $2 million and I'm sure your budgets are higher - thanks for the great videos, always good to put these items out there so we can all learn. I am comfortable with a 5% withdrawal rate, but won't need it yet until spouse retires.
Jason here. Thanks, John. You're preaching to the converted! If you've seen our older eps, you'll know I moved from a VHCOL area to one closer to MCOL. Even so, my budget is well above what I've shared here. If I'd not invested in solar, my utilities would be in the range (or above) what you've stated. That said, $2MM is such a common FIRE number - and workable in most of the US, I might add - it just made good sense for us to use it here as it will be much more relatable. I'm sure you're doing this already, but be sure to model which ACA metal tier makes the most sense. If you are certain you will go that high on your OOP max, maybe even a Gold plan will be most sensible despite the high premiums. Best wishes to you
@@TwoSidesOfFI if I read the IRS rules correctly, you can only claim the silver plans if you want to pay first and get your ACA subsidy at tax time. This may be a specific MA pain point, we have a very restrictive exchange. I did notice that some plans are gold plans dressed up as silver plans, so dig in and do your reading
@@cryan1627 Perhaps your state as this is most definitely not the case in CA. I have a (true) Silver plan and pay the subsidized premium rate each month. -Jason
I enjoyed this episode , but I really cautioned your viewers that $60 annual budget is really tight depending on where you live . In Miami this would not be possible as our property taxes and homeowners insurance our ridiculously high. Cable/internet services are also very high. Thanks for video, Rick
Thanks, Rick. You’re also in a high COL area, just like where I used to live. In the end, budget is the product of where you live and your lifestyle.
I do want to see you two on vacation together!
You may get your wish, Heath!
I have a request.. If I'm not mistaken, you have never given any specific funds, or stocks that you are invested in. Since the show is for entertainment purposes only, I would like to get some details... Not about how much money you have, but how you invest it, and what percentage in each fund. It would be nice to compare your portfolio to what I have
Jason here - we have numerous episodes on our asset allocations, Eric's decision (later backed off) to add more bonds, and most recently my IPS: twosidesoffi.com/ips/ But you're right that we don't go too much into specific funds. Both Eric and I invest largely as Bogleheads as you'll gather from these eps so not the most "exciting" portfolios.
Where is food in these budgets? did I miss something? That is almost as much as my house payment
10:33
Do you budget for Federal and potentially State income tax?
could i have the expenses excel/calculator you are using? curious to see what my future number is
the one from the screenshot you shared on screen
Hi Danny, it's not actually a tool. We each just made a quick summary in Excel for the episode. If you'd like a closer view at it, there's a full size screenshot in the show notes for the episode: twosidesoffi.com/fire-budget/
If I may ask a sensitive question... Are all the expenses paid for by you gentlemen ? Do your wives contribute any funds to the household budget ?
Jason here - I'm retired so there's no work-related income anymore barring the once weekly "fun jobs" my wife and I each have. Both Eric and his wife are professionals working full time-plus contributing to their budget + savings goals.
Ideally you and your wife should marry finances and hence have a single budget. That's what my wife and I do, but we aren't retired as yet.
Where would we put State and Federal taxes? Does that sort of sit outside of these categories? I've historically left it separate but now that Im retired and needing to budget for and pay quarterly taxes, not sure where it would go. It's somewhat fixed because I've calculated a rough estimate of what we'd owe based on cap gains from previous years but it can certainly fluxuate from year to year.
See my response to Alexandria MD. In my case I don’t set aside anything extra
I want to know where you guys are getting your medical coverage. I am single, and I pay more for my medical coverage than Jason budgets for all insurance, and more than Eric budgets for medical. And I don't have a plan with a lot of perks. I am a decade older than you and still working, so I don't have any state subsidy on my medical. Is that the difference? Or is this all just made up?
As far as budget goes, I have spent the last year tracking my current expenses (at a fine granularity), and need to make a budget based on that. The problem is that I am planning a change in living conditions in retirement, so some parts get difficult to budget. I think creating a budget is easier if you just keep on with the same life post work.
Couple things:
1) This isn't all just made up, as we mentioned in the video, we scaled our **actual** budgets to this $60K spend.
2) Medical coverage costs are highly dependent on personal context: where you live (even within the US, state costs vary widely), your age, your health, and in the US, your MAGI. Try playing around by entering your figures in your state's healthcare exchange and you'll see what we mean. Once the subsidy cliff kicks in (400% FPL) and you earn $1 over, all premium tax credits vanish for the year which means these costs can vary wildly if you're not managing / tracking your MAGI. Huge difference between pre/post FI.
@@TwoSidesOfFI Ah, I didn't realize that was a subsidized number, but I did figure that the budget was scaled. Thanks for the input, and the channel.
@@TwoSidesOfFI The ACA subsidy cliff has been suspended for tax years 2021-2025. So you don't currently have to worry about going $1 over.
Your pet budget is going to start an argument with my dog 😅🐶
Lol! It’s definitely lumpy spend given our many animals and a few that are aging. But an important one nonetheless -Jason
@@TwoSidesOfFI, on the contrary, my spending is significantly higher for a single pet 😅 She's a princess 👑
I’ve been following your channel for over a year now and always find it really inspiring and informative.
Maybe not the most cheerful subject to cover but you should maybe do a video on how should someone factor in the possibility of a relationship breakdown/divorce and the impact on retirement. Given the high divorce rates these days, one cannot discount this scenario happening in the run up to or post retirement...
Thanks so much for your support, Adam. We truly appreciate it. Thanks also for the topic idea. You're 100% correct that divorce is indeed one the largest potential negative impacts to one's financial plans.
This might be a silly question but what does $2MM mean? It’s on the thumbnail and I keep looking at it and it looks like ‘two mega million dollars’ to me (which isn’t a thing where I’m from) but what do I know? 🤷♀️
M is the Roman numeral for thousand and MM denotes one thousand-thousand - or million. It's standard in finance to abbreviate it that way, that's all!
@@TwoSidesOfFI how interesting - clearly we don’t use that overly much on my side of the Atlantic. K for thousands, M for millions and B for billions. You learn something every day.
I can't believe how low your utilities outgoings are !
How do you retire with kids in college with 5k/mo? Interesting.
As we said, we scaled our portfolios to $2MM
Is $2MM your respective FIRE number? Not sure where that number came from?
Pretty sure it’s not their number. This number is scaled down from their number.
It’s not. It’s merely a very common target to which we’ve scaled our own portfolios. We’ve shared our FIRE number ranges before, most notably in an earlier episode:
So, What's Your Financial Independence (FI) Number?
ua-cam.com/video/WMzya-HU8tU/v-deo.html
Why 3%? I would live a little and pull 4%.
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What continues to surprise me, as a European, is how crazy cheap things are in the us (besides health care). At current price levels here, utilities are easily $600-800/month and if you want to eat healthy here, we’re forking out at least $1000/month (for 2 adults) without any frivolous spending. Not to mention gas at $8/gallon. Greetings from Belgium 😂😂😂
Utilities in higher cost of living areas in the US are in the range you listed as well. Recognize that this budget is scaled to a common $2MM target, and not our exact numbers. But for sure you are right about the price of gas in Europe vs. anywhere in the US. I’d still move to Belgium in a heartbeat!
Lamb of God and Pantera 😂😂
Going to Cannibal Corpse this weekend, $45 😂
\m/
How much $$$ did you budget for health insurance?? it was not mentioned, kind of an elephant in the room.
06:04
@@TwoSidesOfFI there's no way auto umbrella and medical insurance is only $167 per month.
@@RubbingPotatoes As we said at the beginning of the episode, we scaled our actual budgets to a $2MM portfolio. So yes, actual costs for that insurance are indeed higher. See our earlier episodes on health insurance to learn how my medical premiums with subsidy are quite low - much lower than my auto insurance. -Jason
4k/month. Not enough. Keep working.
We mentioned this in the video but these are not our real budget numbers, percent only.
The title of this is ridiculous. I don't believe that even the average person who is a candidate for FIRE has that much money/investment. I was forced into early "retirement" with 18K in a 401k and 20K cash on hand. 2K monthly mortgage, no other debt.
That's an above average retirement at 58...now 60, totally debt free but very little cash on hand, 80K invested. That's who you should be talking to. If people like me can make it work, there's hope for the people in the next lower tier.
Budgets reflect what kind of FIRE a person is living. They've acknowledged they are fortunate to be able to live "Chubby FIRE" (The backstories say there weren't silver spoons/trust fund.) There are other levels/types: traditional, lean, barista. Have you spoken to a financial planner?
@Doug B Hey, thanks for responding. Yeah, I'm sure there are different levels. No, I haven't engaged a financial liar. I'm actually doing great by myself, especially considering how I started. 60% of success with money is not doing the WRONG thing. I'm really good at that.
I just wanted to vent at the notion of retiring with 2M. If I had 2M I could live the rest of my simple life without investing any of it. Because I have everything I need and want; just need to maintain it and stay healthy. Cheers!
In fact 2M is a very common FIRE target - it’s why we chose it. It’s also true that many people would elect a higher withdrawal rate, like 3.5% ($70k / yr) or some perhaps 4% ($80k / yr). Naturally this is a combination of expected longevity as well as risk tolerance. Best wishes to you.
@Two Sides Of FI Hey guys, I love your channel, please don't think I'm hatin on you! Just my 2 cents. Cheers!
@KayKay0314 I'll look into it, thanks. It's certainly a full time job being retired, I can tell you that!