I wrote my Pillars of Single FI article so that I could go through the iterations on three different levels of Financial Independence (FI). Reason being is that there is a level of uncertainty as to whether I will remain single in the future or not. I have three FI numbers:
- Single FI – enough to retire and support me
- Joint FI – enough to retire and support me and a theoretical husband
- Family FI – enough to retire and support me, a theoretical husband and two theoretical children
When I came to the latter two numbers, I did not take into account that this man will most likely have assets to contribute to retirement. I wanted to see how long it would take me to get to these numbers on my own.
Well, I had someone ask me how I came to these estimated costs for these three scenarios and hence the inspiration for this post.
I budget. I know a lot of people in the Financial Independence (FI) community do not budget but rather hit their savings goals and use the rest for discretionary spending. That is great if that works for you.
When I was first gaining control of my finances, getting on a budget became the key to unlock the door to success. It helped me to acquire discipline with my giving/spending/paying off debt/savings goals. Now that I’m debt free (yay!), I only need to focus on giving/saving/spending. I love doing my budget each year and it’s basically turnkey except I do glance at it twice a month (when I get paid) or adjust it if something changes such as a raise or a bonus 🙂
Sharing Is Caring
Since I was asked, I decided to share my budget iterations. I created a post-retirement budget based on what I know now. I realize these expense estimates can change with cost of living adjustments but I am comfortable with these a general goal. Click here to view my google spread with three tabs:
- Sample Month Single
- Sample Month Married
- Sample Month Family
Sample Month Single
Okay, let’s start here. Each of my sample months is broken down into 8 categories:
- Charitable gifts
These are the categories I use in my current budget and don’t anticipate them changing when I retire; however, the amounts in certain line items will.
I am a Christian and believe in tithing (10%) of my gross income to my home church. I started doing this when I was still in debt. It ended up being one of the things that help me become disciplined with my money. Anyways, I plan on continuing to tithe in retirement as I live off the growth of my investments.
I met a woman at CampFI Mid-Atlantic who told me about her random giving fund. I liked the idea so much that I’ve adopted it. You never know who’ll you meet along the way that you will want to help. Having money in my budget for random giving allows me the freedom to help when I feel called.
This is really a much bigger portion of my current budget compared to my post-retirement budget. I figure the only thing I’ll most likely be saving for in retirement is future cars.
My hope is to have any mortgage I may acquire in the next few years, paid off by retirement. I realize if I do that I’ll still have property taxes and insurance to pay. Just to be safe I factored in a mortgage payment too.
These are the obvious things: phone, electric, gas, internet, water, and sewer. Just maybe I’ll be fortunate to retire in a rural community (love that thought!) and won’t need to pay for city water and sewer. However, I do know that wells and septic tanks have expenses associated with them but it is my understanding that they are a fraction of the cost of city water and sewer.
Groceries and eating out. Pretty basic. Another part of my retirement plan is to garden. If that be the case, I expect my grocery budget to go down in my later years 🙂
I think many people leave out items here so it’s crucial to think of all the components of how you get around. I don’t have car payments because I plan on paying cash for all future cars; hence, that line item being in my savings category. So this includes gas, car insurance, oil changes, automotive repairs, bicycle repairs, and license plates. Enough said here!
Here is where I budget for health insurance, something I currently don’t have to budget for as my boss pays my premium. I went on Liberty Health Share for some quotes.
Additionally, I include Christmas savings which is not a big line item. I don’t believe in spending exorbitant amounts on stuff we don’t need. I do like giving thoughtful gifts which often include homemade items or just the gift of time. Neither of these things cost a lot.
I also have a line item for hair/make-up/toiletries/vitamins which don’t account for much. Lastly, I include clothing here but I rarely buy new clothes so this expense is small.
This is the fun stuff and I have increased it in my post-retirement budget for obvious reasons. I only include three items here: recreation (a catch-all for random fun), skiing (I plan to do more in retirement) and travel. I do use travel rewards cards but know there is still cost associated with travel. Plus having this category padded will give me the freedom to travel anytime, not just when I have points.
I anticipate some of my post-retirement traveling to be for mission trips.
Adding More People
The next step for me was to come up with a post-retirement budget that included a spouse and then one that included a spouse and some children.
If you review the tab titled, “Sample Month Married” you’ll find highlighted expenses in blue that I presume would double or at least increase with another person:
- Random Giving
- Car Savings
- All Food
- All Transportation
- Health Insurance
- Life Insurance – this is a new line item since as a single I only have my employer-sponsored life insurance. I obtained a free quote from Zander Insurance.
- All Recreation
Being able to share my life with another person has a ton of advantages but since this is budgeting post, we’ll talk about the financial ones. Housing expenses don’t typically increase from a one to a two-person household. And while other expenses increase, I imagine the addition of a second income far outweighs this.
A lot of the same line items increase when I factored two theoretical children into the picture. You can see what I increased (highlighted in green) on the tab titled, “Sample Month Family”. The biggest increase I accounted for is a college savings fund. I calculated this by taking the average cost of tuition at a state college times two.
I didn’t increase transportation, other than insurance, as I would expect the children to pay for their own automotive expenses if they wanted a car.
So much is uncertain about the future but I found this experiment useful. I will be tweaking my post-retirement budget as my life circumstances change but I like having a baseline to work with.
How about you? How do you plan for future uncertainty in retirement?