Let me start by saying that I’m not an expert on FIRE or the flavors of FIRE. Physicians on Fire does a pretty good summary of the various “waistline sizes” of FIRE. But it’s really not that complicated. You figure out how much you spend every year and multiply it by 25. That’s the amount that you need to be able to fund those expenses, indexed at inflation, for an indefinite period of time. You may want to add a bit of a buffer. Whether you spend $20,000 or $200,000 a year in expenses then determines whether you are Lean FIRE or Fat FIRE.
Personally we fall into the Fat FIRE category. For two reasons. First, my wife is not willing to eat garden zucchinis every day (see Mr. Tako Escapes, a great blog). She buys whatever she wants, basically. I mean, she’s not a huge spender, but she’s definitely not willing to eat ramen for dinner at this stage in our lives. Second, I don’t have any handy skills. Unlike Mr. Money Mustache, I can’t fix hardly anything. So any time a pipe breaks or a roof leaks or the pool is making a weird sound, I have to call in help. Also I don’t know anything about cars. So I’m basically helpless. That means that our FIRE level has to allow for some extra expenses.
Here are our major expenses (monthly) excluding health insurance which is still being deducted from wife’s paychecks for now:
- Mortgage and property taxes: $6,050
- Groceries: $800
- Eating Out: $500
- Utilities: $400
- TV and Internet (ugh): $150
- Phone Service: $15 (thanks, Mother-in-law)
- Gas: $50
- Insurance: $300
- Miscellaneous: $600
Total: $8,865, or around $106,400 per year. In the near-term, we also continue to have our nanny come two days a week, which runs about $1,000 per month.
Those are the basics. I’ll try to track a much more detailed analysis going forward. Our biggest spending areas, by far, are the mortgage and property taxes. However, we made the decision to live in a more expensive neighborhood in order to access a pretty good school district. So this payment is, in some ways, a substitute for a school tuition payment. We aren’t getting any value for that now but we will when our oldest starts school next year.
At $105,000+ budget per year, I think we are pretty firmly in the Fat FIRE camp according to the blogs. But we have young kids and we haven’t paid our house off yet. So of course our expenses are going to be higher. The good thing is that 68% of our cost base (the $6,050 mortgage and property tax payment) is fixed. Every year our dividends go up and up, and most of that cost stays the same. After a couple years we should enter comfortable surplus territory. And then, I guess, even bigger surplus territory.