We’re closing on our lot out in Canyon Lake this Friday and we’ve been doing a lot of reviewing of the numbers and seeing if we can make them work to start our Lifestyle Change. It’s difficult to know what will come of all of this, and how accurate they will be, because they are all estimates based off of our current house/utility usage, current lifestyle, and some moving forward assumptions. We have tracked our spending for over 2 years now, so we have that to go off of, but again, they’re all just estimates. Since that’s the best we have to work with, it’s what we’ll move forward with in our planning scenarios. The short answer is that we’ll be right around break-even or living paycheck to paycheck. We’ll only need to draw off of investments for travel and unplanned items that pop up, assuming I make zero money.
Looking at our spending tracking sheet we have some pretty good idea what most things average out to be on a per month cost basis. We’ve used those as estimates for our utilities, insurance, gas, groceries, etc… to get to what our total monthly and estimated yearly spend categories are. Below are the charts showing those costs as well as some categories that we just have to WAG (Wild Ass Guess). These categories are items like kids school and clothes (who knows what the cost will be, probably a bit lower on a per month basis, but that includes school activities and clothes estimate. Allowance is another one that is super flexible. We’ve reduced our allowances from $400/mo each to $250/mo and this is essentially to help make this budget work. Our allowances cover all sorts of things, a lot of which aren’t necessarily applicable anymore, like work clothes, lunches out with colleagues, and other things. I’m sure I may still spend my allowance as Amazon is only a click away, but I don’t see it getting spent like it has been over the past year, where the majority is going towards lunches out.
Ugh, Property Tax Assessment
Another big assumption is property tax and estimated house value. Texas loves to jack up the property values every year that they can, one of the few things I hate about this state. I’d rather pay state tax than be subject to a 10% property tax hike every friggin’ year. So who knows what they will assess the house value the house at, but I know whatever it is, we’ll be protesting it every single year. Thanks Texas…
True Work Costs
Since Mrs. SSC will still be working, we had to come up with her job costs and see how that factors in to the spending. Current assessments put it at about negative $10k per year once you factor in parking pass, gas, tolls, hotels, and supplies. This is a pretty big line item on our budget but we’ve taken that into account. We also realized we were estimating her taxes too high initially because she was being taxed as if I was still making 6 figures. Using the right tax rate helps in more accurately assessing her bring home pay.
We do have some items that are estimated at $0, these include gym – no biggie there, blog – need to get it to break even eventually, travel – we’ll use investments as needed, and college. College has already been funded to the point that we’re funding it so this was an assumption we had in our plans way back when we first started out FIRE (Financial Independence/Retire Early) planning. We’ve been working hard at topping that off so when we do pull the plug on work, the kids don’t get screwed on their college funds.
Right now with all of these assumptions we’re basically treading water and making it paycheck to paycheck. This might seem a little scary, except that our emergency cushion is way bigger than most families living paycheck to paycheck. We’ll still have to dip into investments for any overages and any travel, as you can see the line item is $0 in this scenario. We’re aware of that and are fine with it. The main reason is that this will let us ease into our Lifestyle Change scenario a little bit and see how we like it without jumping in feet first and needing to start withdrawing from our investments to cover everything. Plus, when Mrs. SSC does quit her job, we’ll already be accustomed to this spending lifestyle and it should be a pretty easy transition.
Extra Side Income?
All of this assumes that I won’t be bringing in any income, and that Mrs. SSC won’t be able to bring in any extra income thru research, grants, industry funding. Both of those things are not likely to stay that way as Mrs. SSC has some extra funding in the works for 2018 and I plan on getting some sort of side income coming in, even if it’s just $200/mo kind of money. If I could cover our allowances (yes, I know they’re more than $200/mo) that would provide a nice cushion to our spending assumptions. Another way we plan on “bringing in income” is by stopping the DRIP (Dividend Re-Investment Program) on our dividend stocks and actually get that paid out to us. That will also provide a little buffer in our spending, but we’re not sure how much because we may reallocate some investment funds to be more income generating oriented versus growth oriented. Look for those numbers and assumptions in a separate post where we discuss more long term plans, assumptions and what those numbers look like.
That’s about it for our current iteration of our Canyon Lake Spending assumptions review. This is the most current one, however, they tend to get adjusted and tweaked fairly regularly. We think it is workable, even with Mrs. SSC being gone a few nights a week for half of the year. Some sacrifices will be made, but we don’t think there is anything that isn’t worth it or out of line on these spending assumptions.
Let us know what you think. We’d love to hear about anything we may have missed or didn’t think to take into account.