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Reviewing My Necessary Expenses (October 2011)

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In the past, I used to go through and publicly list my necessary expenses. These are expenses that I consider necessary. There likely is a debate to be had about what qualifies as necessary, but for the most part, I'm including things that are necessary for living and/or protecting my income. This means that an internet connection for me is necessary. However, a Netflix subscription is not.

One thing to note is that these expenses represent my portion of what we pay per month. In cases of shared expenses like rent, groceries, and utilities, that's half of what both me and my wife use. Why half? The idea is to come up with a number for my expenses and use this to compare to my income. My wife has an income as well. I'm not at liberty to discuss that income. Due to that, isolating the example to myself helps illustrate the value of calculating necessary expenses. So as you read this, pay note that your families costs may be double or more (especially if you have children).

  • Housing: $1500 - Our rent is nearly $3000 a month. Silicon Valley is very expensive, but my wife's salary is adjusted for that expense. If it weren't, we wouldn't be here.
  • Transportation: $200 - I pay around $76.41 a month for insurance. Since I work from home, I drive very little, usually just to the dog park about 3 miles away and back. At 6 miles a day, I can get nearly a month on 1 tank of gas, which costs me about $50 (California gas is expensive). My 2001 car has been paid off for 7 years now, so there's no cost there. What's the other $75 for? Let's call it sundry expenses: when I need to drive more, when I need car maintenance, when I take public transportation, etc.Since this is for my car and my wife has her own car this is a personal expense for me and is not divided like some of the other costs.
  • Groceries: $150 - I had previous had this as $50 for the month back in 2007. At the time, my work was providing me lunch and dinner most of the time. Now that I work from home, I lose that perk. In addition we've added on more hungry mouth feed - our 75 pound Huskador (husky - labrador mix).
  • Internet: $25 - This is simply half of our Comcast bill for the Internet. It is somewhat of an estimation because without cable television it might be more expensive (it wouldn't be part of a package)
  • Gas and Electricity: $75 - In Northern California we use a lot less gas and electricity than we did in Boston. That's what happens when you don't need AC and only need heat about 3 months of the year. Though this cost varies, the $75 is probably as good an estimaion as any.
  • Water: $20 - This is a pure guess. My wife actually pays the water bill and she's not available to ask at the time of this posting.
  • Cell Phone: $25 - I'm on a grand-fathered Virgin Mobile plan that costs me just $25 for 300 minutes, unlimited data, and text. Since this is my phone and my wife has her own phone this is a personal expense for me and is not divided like some of the other costs.
  • Home Phone: $3 - I picked up free lifetime Ooma service for $150. What's the $3 a month for. There's still some taxes that are necessary (911 service for example). I didn't even bother dividing this half to represent my half of the taxes.
  • Property Insurance: $30 - This is just my half of the property insurance. It's possible that we could potentially save some money on this expense. It's time to look into what coverage we have here.
  • Dog Care: $50 - Once again, I'm doing a little guessing. I've included his food in the groceries. This would cover vet visits, heart worm pills, flea medication, etc.

You'll notice more than a few things are estimates. For me, that's good enough, because in general they are fairly close. It establishes a benchmark for comparison. For example one were to do these expenses a decade ago, they might find that their home phone bill was $45 a month. Some people doing this now will have a cell phone bill over $100.

Some ask why one would want to review their necessary expenses. I have three reasons:

  • Keep lifestyle inflation in check - There is a temptation to spend more money when you make more money. I don't want to be caught up in that. I want to keep my necessary expenses down even if it means making some compromises on my cell phone selection.
  • Gives me a view into how close I am to financial freedom - This blog currently makes more than all these expenses put together. What this means is that in some ways I have a sense of financial freedom by being my own employee - as long as business continues to stay the course. That's always a question mark.
  • Prepare for disaster - Most people say that they want to have a 6 month emergency fund, but it's hard to know how much money that is without knowing what your necessary expenses are. This gives me a very good figure to go on for that.

Final thoughts: When you add it up, I have about $2,078 in necessary expenses each month. The biggest one by far is the rent. I'm sure that's true of many people. It's a particularly high number for us, but our plan is to move to an area of lower cost living which would likely reduce the number significantly.

Posted on October 18, 2011.

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17 Responses to “Reviewing My Necessary Expenses (October 2011)”

  1. Laurie Pysczynski says:

    Do tell how you keep groceries to less than $400 a month including feeding a dog?

  2. Why could not you move elsewhere, i.e. by driving extra 30-50 minutes will save you handsome amount of money. I would agree it is not worth when we are talking about extra $100, but when it is $400+…?

    Tell me more about nutrition – I published our budget and over four years it is almost 1000 a month….
    I think whenever you eat out you should include part of it in the expenses, you could hardly survive without food.

    I think it is great that you managed to keep your expenses so low. This is really hard thing to do.

  3. Lazy Man says:

    I’m not an extreme couponer, but I take advantage of a lot of the supermarket deals. It also helps that my wife is military and I can shop at commissaries.

    When you break it down, $300 is about $10 a day – is it that too usual? Some people are extreme and eat on a dollar a day: http://well.blogs.nytimes.com/2008/11/03/the-dollar-a-day-diet/.

  4. Lazy Man says:

    In the San Francisco area moving 30-50 minutes would not work for us. Theoretically we could live in Oakland or under a constant smog in South San Francisco, but it isn’t worth the trade off – quality of life. Some places would limit my business opportunities. Other places are just not as safe.

    I would put eating out in a category outside of “necessary expenses.” It’s in the entertainment area, unless we are talking about fast food or something necessary to get to a meeting (a rare necessity to support my business).

  5. “I would put eating out in a category outside of “necessary expenses.” It’s in the entertainment area, unless we are talking about fast food or something necessary to get to a meeting (a rare necessity to support my business).”

    Nonetheless, if you weren’t eating out, you’d be eating something. Let’s say a $25 meal out saves you $5 on the grocery bill. This means there’s a “necessary” expense of $5 that’s not accounted for.

    So, you live in a nudist colony? Or would you consider clothes to be a necessary expense? :)

  6. Lazy Man says:

    We don’t eat out enough to effect things the estimation that much. I’d estimate it at 3-4 times a month and the replacement meals would like be very cheap.

    I haven’t bought any “necessary clothes” in probably close to 10 years. If I buy new clothes it is to show my allegiance to a sports team (the Patriots for example) rather than to have something to wear. If necessary, I could probably not buy clothes for the rest of my life and still have enough to be banned from a nudist colony.

  7. Rent always compose 1/3 of our expenses so we try to keep other expenses to a minimum, including electricity, water, transportation, and clothing.

  8. […] an original idea for a scary-looking spider that will keep the kids busy for a while.3. Reviewing my necessary expenses[Lazy Man and Money] I have no idea why this blog is called Lazy Man, because the gent who writes it […]

  9. […] Man and Money presents Reviewing My Necessary Expenses (October 2011) posted at Lazy Man and Money, saying, “Some ask why one would want to review their necessary […]

  10. Dan says:

    We really started using coupons. We just buy the things we normally use, at a much lower price. There was a big cereal sale a few months ago. They were all BOGO Free and we had coupons. We bought 6 months worth of cereal for about $20. We’re starting to get low, so we’ll do it again soon. We’ll end up spending only about $40 for an entire years worth of breakfasts.

  11. Victor says:

    All I can is *damn* things in the US are cheap (yes, even in Cali). I live frugally in Norway (originally Canadian) and everything is at least double of what you’re paying (not housing, but as you said, 3000 is a lot for the US too).

    I don’t know if you realize how good you have it, but I have a feeling you (as a country) will realize it soon.

  12. […] week, I detailed my necessary expenses. These are expenses that I need to cover to live and protect my income. There's always a little […]

  13. Hola LM, any entertainment expenses or travel? Gotta live it up once in a while no?

  14. Lazy Man says:

    Que Pasa Financial Samurai,

    Entertainment and travel expenses are not “necessary” expenses.

  15. Gotcha. Glad you’ve got some fun stuff you’re spending money on! I just put all expenses into one bucket. Kinda all the same for me.

    Did you read about Carl Richards? If so, you too can buy a mansion and live for free, and then profit from it! No need to rent no more :)

  16. […] Necessary Expenses – It's been far too long since I've reviewed my necessary expenses.. over two years. I should be doing this quarterly. For those who are new to this (or need a […]

  17. […] been far too long since I've reviewed my monthly necessary expenses. For those who aren't well-versed in the term, it's expenses that we have to spend every month… […]

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