During my first several years of staying below the federal income tax line, I would double-check my spending against my budget by keeping track, down to the penny, of how much I was spending during a sample month each year. Since I was deliberately keeping my income low, I wanted to make sure I was also keeping my spending low enough that my income would cover it. But eventually I got lazy, and haven’t done this precise budget check since 2018. This year I figured I was overdue for a recheck, especially with all the inflation headlines I’ve been seeing, so last month I did another month-long spending audit. Today I’ll summarize what I found.
First, some caveats: By taking a one-month sample and trying to extrapolate that to a year’s budget, I invite some inaccuracies to slip in just due to peculiarities of the sample. For example, I spent exactly nothing on transportation or clothing in . But over the course of the year I’ll certainly spend some money on that sort of thing. To really throw things off, last month I redirected $4,031 to charity. If I naively averaged my charitable giving this month over the whole year, I’d be donating my entirely yearly budget and then some. But in reality, $4,031 is about all I expect to give this year, so I should spread that out over the whole year to be more accurate.
Also: I’m not counting any medical spending, because I do that via a tax-exempt Health Savings Account. Similarly, I don’t count my savings for retirement as budgeted spending, as I do that in tax-deferred accounts and so can do that with pre-tax money. And I don’t count anything that I can take as a business expense, since such spending also ultimately will not come out of my taxable income.
In the table below, I’ll give both my actual spending numbers for and an estimate of how much I’ll likely spend in a typical month this year, based on those numbers and some guesswork.
|Category||Actual May spending||Estimated typical month|
|Utilities & internet||$52.28||$52.28|
|Food (eating out)||$51.95||$51.01|
|California state taxes||$16.55||$16.25|
The takeaway from all this is that my current spending is not sustainable given my below-the-tax-line income-based budget. To be sustainable it would need to stay below $1,645 per month (equivalent to $19,750 per year, my maximum Adjusted Gross Income if I want to stay under the income tax line). I’m not as concerned about this as I might otherwise be for a couple of reasons. One is that I’m still coasting a bit on all that stimulus money the government was throwing around during the onset of the plague. Two is that I save about 40% of my yearly income in retirement and health savings accounts. Now that I’m over-the-hill I have a better idea of whether I’ve saved enough and adopted frugal enough habits to feel secure about my old age, and yeah, I do: secure enough that I feel okay about dipping into my savings a little bit extra to cover the extra cost of a large charitable contribution, for instance.
If I take my charitable contribution out of the pile and pretend it doesn’t count as part of my budget but is a gratuitous extra, though, that only brings me down to about $1,756/month. That’s still too much. The government isn’t showering cash on us any longer, and I should really tighten my belt a bit. The big surprises from my spending this month were coffee (I’d underestimated how much it was adding up) and groceries (price increases had apparently snuck up on me without my noticing).
Why am I spending so much on coffee? Well… I have a pretty good home espresso machine and I’ve been shelling out for some nice coffee from a local roaster who does it just how I like. But it costs a lot more than grocery store coffee. I had been underestimating how much I was going through, and how much more expensive it is than other options. So I’m going to start trying some store brands to see if I can find one that’s a reasonable substitute.
Grocery-wise I have not been a very careful shopper lately. I do prepare my own food for the most part: I don’t eat out much or eat a ton of junk food or pre-prepared meals. I’ve been leaning on that as my technique of food frugality and neglecting to also bargain shop. I tend to do my ingredient shopping at the farmers’ market, which is fun and fresh but not necessarily cheap. And I’ve been buying ingredients more based on what seems like it would be fun or delicious to cook than on what’s well-priced this time of year. With meat especially, I’ve become one of those people who turns up his nose at factory-farmed stuff, so when I get meat it’s the much more expensive varieties. I think I need to give more attention to stretching my dollar when it comes to groceries.
On the plus side, every time I pass a gas station and look at the prices I think how nice it is to be car-free these days.
Rent, of course, is the elephant in the room. I live in one of the least affordable towns in the country. Eventually maybe I’ll have the sense to pack up and go somewhere else, but that’s not an option at the moment. My rent is actually on the low end by local standards, and it’s a modest apartment in the student ghetto adjacent to the local university. Even so, it’s very expensive, and the rent will probably rise when our original lease runs out later this year.
It’s a bit of a pain to do all this accounting, and the results can be a little discouraging and humbling, but it’s good to know where things stand and where I might most effectively look for ways to tighten my belt.