A Look Into Our Monthly Expenses

How can you plan to retire early if you are not in tune with your spending? In order to understand what your FIRE number will be, you have to know what your annual expenses are!

Not just your current annual expenses, but more importantly what your projected annual expenses will be once you FIRE.

Of course there are many unknowns as to what the future might hold but you have to do the best you can to estimate these future costs.  The last thing you want to do is estimate a FIRE number based off your current spending, only to realize it looks much different once you reach FIRE!

This week’s post will focus not only on our current monthly costs, but also what we expect the future to hold.

What are our current monthly costs?

Below are our current monthly expenses for 2019:

Our misnomer mortgage expenses

This comes out to a total annual expense of $55,030.  This is MUCH higher than what is reflected in our FIRE number.  This is mostly due to all the of money we are shoveling towards our mortgage.

When we bought our Canadian townhouse in June 2016, we purchased it for $315,000 and put $63,000 down upfront (20%).  This left us with a mortgage of $252,000 with a 2.59% interest rate for a 25-year term.  This means a monthly payment of $1,141 and by the end of that 25-year timeframe our house would be paid off but we also would have contributed $89,963 towards interest to the bank.  No thanks!

Thanks to house hacking our previous home, we have ALL the funds for the remainder of our mortgage sitting in a high interest savings account earning more than the interest rate on our mortgage (winning!). By paying off our Florida townhouse mortgage in 2.5 years (thanks to house hacking) we never have to worry about housing expenses again.

We could have bought our brand new townhouse in cash upfront but we decided against that since the interest rates were so low. The plan from the get-go was to pay the mortgage off quickly, within 5 years, before the interest rates would change as this aligns perfectly with our FIRE date. While some people may have chosen to pay for the house upfront to not have to deal with a mortgage, we decided to go a different route which allows us some flexibility with this cash if an emergency happens to arise.

Therefore, the mortgage expense is a bit of a misnomer as we are not having to put any earned income towards it, the payments are coming directly out of our high interest savings account that was funded by our previous home in Florida.

Our bank allows us a few methods to pay off the mortgage early so we can stick to our 5-year payoff timeframe.

• We have the option to increase our monthly payments by 15% which we are doing which bumps it up to $1,321.  If we only did this, we would shave 4.5 years off our mortgage timeframe and “only” have paid the banks $72,531.  No thanks!
• We also have the option to pay double up payments each month which we are also implementing as well.  This now reduces our payoff date by 8.91 years and a total of $30,273 in interest.  Not bad, but we can do better.
• We also have the option of throwing lump sum payments of up to 15% of the original mortgage amount towards the remaining balance each year.  This comes out to just over $37,000/year of additional payments that we can make in addition to the extra payments above. In the first calendar year we threw ~$26,000 extra towards the mortgage, the second calendar year we threw the full $37,000 towards it, the third year we also threw the full $37,000 extra towards it, and this year we decided to hold off in case the markets took a dip.  The plan is to throw the last large chunk of $37,000 at in 2020.  This allows us to pay off our mortgage within a 5-year timeframe and we will have only paid $16,314 towards interest on the mortgage (again our high interest account has made more than this so we don’t view this as a bad thing).  Having that money on hand to decide where to put it (either into stocks, bonds, or our high interest savings account) was worth it to us.

Since the mortgage is a bit of a misnomer, here is what our current monthly expenses look like without the mortgage:

We are sitting closer to $2,000/month or ~$23,000 in annual expenses which is what we actually are spending from our earned income each year.

Let’s review

Housing Costs

The rest of our monthly home related costs come out to $727/month.

• Our home insurance is through a broker who ensures we get the most competitive rate each year.  This year it comes out to $979/year for our townhouse which is about 1,000 square feet above ground with a finished basement which adds another 400 square feet.
• Not much we can do about property taxes.  We are fine paying property taxes as it helps improve the town we live in.
• Not much we can do with the HOA either unless we decide to move elsewhere where there wouldn’t be an HOA fee.  This HOA is less than half of what we were paying for our HOA in Florida so I think it is quite reasonable.  It includes coverage for all exterior items including the roof as well as landscaping in the summer and snow removal in the winter (right up to our doorstep, it’s actually impressive!).
• The water bill is really more than just water. It’s our Town Utilities bill which includes water, sewer, waste/recycling/organics (I love that we have a weekly compost pick up and that our recycling bin is larger than our waste bin), storm sewer, and the eco center (where we can bring one-off items like TVs, batteries, Styrofoam, etc.).
• We use Telus for our internet and we recently learned about Lightspeed and TekSavvy but unfortunately we can only use fiber optics cable since we are in a newer townhouse but neither of these providers can operate on fiber optics.  If you’re in Canada and don’t have fiber optic cable, check these companies out as you can likely cut your internet bill in half.
• We cut the cable TV cord years ago and haven’t looked back so no cable TV expense for us.
• Electricity/natural gas rates in Alberta are ridiculously high (compared to our Florida rates at least) due to the high fixed transmission and distribution costs in our bill that come out to ~$100/month right off the bat.  The cost of energy used is actually quite low (we pay 6.49 cents per kWh).  We thought of installing solar panels but if we couldn’t rely on them 100% of the time to live off grid we’d still be paying this minimum $100 in monthly charges to be connected to the grid so unfortunately it’s not worthwhile for us.

Food Costs

As for food, we dove into our food costs already, so check out that post if you missed it.

Car Costs

Let’s dive a bit deeper on the monthly car costs which total $234/month.

• By having two older, low-mileage, reliable cars we are able to keep our car insurance low (~$67/month/vehicle).  Being females also helps, I think this is one of the few areas where it’s actually a blue tax instead of a pink tax! These cars were also paid in cash upfront so there are no monthly car payments.  We used a broker (Surex Direct) to identify the best/cheapest rates for both our home insurance and car insurance that we have bundled.  We contact him each year to look for the best rates and have no issues switching if another provider has a better rate for the same coverage.
• As for gas, we pay ~$1.00/liter or $3.78/gallon which is low for Canada thanks to living in the province with the majority, if not all, the oil & gas production for the county (not saying we are oil & gas fans) but it’s still much higher than what we were used to paying at the pump in Florida. Neither of us currently have a commute for work as my wife is a stay at home mom and I work remotely from my basement when I’m not travelling for work.  When I do need to drive to the airport for a work trip, my company reimburses me for the gas.
• Car maintenance is low which accounts for a couple oil & filter changes a year and then any maintenance that may pop up.  We spent ~$400 on a repair for my wife’s car earlier this year and we likely will not need to spend on anything else major this year since our cars both have under 100,000 kilometers/60,000 miles on them.

Travel Expenses

As for travel, this is slightly lower than our running average of $125/month ($1,500/year) due to only one international family trip this year to Florida using points for ½ of it (3 one way tickets with points + 3 one way tickets in cash), a trip to Barcelona mainly paid for by points (round trip airfare and 2 out of 3 hotel nights with points), and a few trips out to the cabin in the summer where we spend about $100 on gas round trip. Did I mention we are really big into travel hacking too?? We will get into that at another time in the future…

Miscellaneous Expenses

Miscellaneous is for ANYTHING else not listed on here.  I have been tracking our expenses to the penny since 2009 and this is the average monthly amount for random shit we buy be it an annual sports center pass, new glasses, going to a concert, clothes, stamps, art exhibits, gifts, a speeding ticket, etc.

All Things Baby

The three Finn line items are all of our baby related costs so far this year.  We are maxing out her RESP (Registered Education Savings Plan which is like a 529 in the states except for the awesome bonus of the government matching 20% up to $500/year which equates to us contributing $2,500/year or $208/month which is what we are doing – immediate 20% gain, go Canada go!).

We are spending about $50/month on additional baby related food (mostly on berries, no joke).  And the last line item of $50/month on activities includes everything from consumables like diapers and wipes to activities like our annual zoo pass.

Luckily, we have learned kids don’t need to be expensive and we are spending less on her now than compared to her first year of life.  Don’t worry, there will be a future post covering in detail our baby costs to date.

What’s up next in 2020?

Here’s what we are anticipating 2020 to have in store for us:

Ouch $92,562 down the drain in 2020!

As mentioned above, we plan to throw an additional $37,000 towards our mortgage, so that comes out to an extra $3,083/month.  That’s a total of $68,704 going towards our mortgage in 2020.  But, by the end of 2020 we will only have $8,885 left on our mortgage so it will be wiped out for good in April 2021.

Since again the mortgage is a bit of a misnomer, here is what we have in store for 2020 without the mortgage:

This comes out to an overall increase in expenses of 4.98% year over year. How so?

• We’ve bumped up gas by $50/month if I decide to switch jobs and work part time downtown. This would entail ~1 tank of gas extra per month which is likely closer to $35-40 but we made it $50 just to be safe.
• We also bumped up travel back to our running average normal of $125/month which is also impacted by me potentially switching jobs.  If I switch to part time it will free up more time for more trips, not a bad thing in my books!
• We plan to spend a bit more on the monster’s monthly food costs although if she oddly decides berries are no longer her thing, we may be over projecting (highly unlikely).
• We estimate all other items to increase by 3% for inflation hence the slight difference in costs elsewhere.

What’s up in 2021?

Here is what the start of 2021 looks like with the remainder of the mortgage:

Still high, sitting at $5,068/month!

This of course is due to the mortgage again. We are still dealing with the mortgage and double up payment through April, but after this the mortgage is gone and we are officially debt free! No annual lump sum needed this year either!

Additional changes:

• Accounting again for 3% inflation year over year for most items.
• We expect travel to remain the same thanks to our awesome balance of over 1 million travel points accumulated over the years.
• Expectation that Finn costs will go up slightly as we may need to pay for more activities at this age.  Hopefully not? Note that we are not concerned about child clothing costs as we have received enough free hand me downs in really good condition until she is 5 years old at this point – thank you Varage Sale!
• We also are hopeful for babes 2 in 2021 (who knows, may be sooner may be later but we have to pick a random date for these calculations).  We think $60/month is very realistic for babes 2 to start off since we’ve averaged less than $100/month with Finn so far and for babes 2 we would only need consumables like diapers, wipes, cream, gas drops, teething medicine, etc. since we will reuse all other items that Finn used at that early age.

What You’ve All Been Waiting For (if you’re still reading…)

Ladies and gents, boys and girls, the moment you have all been waiting for…  May I present to you our projected FIRE annual expenses!

Here is what we are projecting for the remainder of 2021 (and beyond) which is our goal FIRE date:

Ta-da! Our total annual expenses are projected to be just shy of $35,000 per year.

Changes We Foresee Once We Reach FIRE

• Eliminated Mortgage and Annual Lump Sum Payments
  • Boom! See ya NEVER!
• New Item: House Repairs
  • Our townhouse will be 5 years old at this point and unfortunately things aren’t built like they used to be in the past so we are planning for repairs ahead of time.  If they don’t happen until year 10 even better!
• Lowered Car Insurance
  • Once we FIRE we will transition to a single car home, woo hoo!
• Steady YoY Gas Costs
  • No more work = no more commute so we will be saving on gas there.  However, we likely will go on more trips out to the mountains so we are keeping this the same as our pre-FIRE gas costs.
• Lowered Car Maintenance
  • Same as above for why our car insurance will be lower.  Half the number of vehicles means half the estimated maintenance.
• New Item: Phone
  • Right now my employer pays for my phone and my wife pays $13/month through Public Mobile (which is part of our Miscellaneous category for now – PS use code M4O794 for a $10 credit when you sign up).  We’ve carved out an additional $50/month for future phone plans although I do not foresee us getting this high in the near future.  I like the idea of having Wi-Fi only on my device to be disconnected as much as possible especially since I am currently glued to my work phone and constantly need to be checking emails regardless the time of day.  We would have one phone that would go with us whenever we leave the house in case of an emergency. Or I may cave and also get the same $13/month plan that my wife has and we would both be connected. And then if/when kiddos need a phone they too can get the cheap plan as we never want unlimited plans and become robots to our devices.
• New item: Supplemental Medical Insurance
  • While most health related items in Canada are free there are a few items that are not: vision (although free for kids under 18), dental, and prescriptions.  We are going to do a cost analysis to see if we find it will be worthwhile for supplemental insurance for these items or to pay them outright per visit.  We looked up a plan that would suit us well if we do decide to go with insurance and its listed for just under $100 so we put in $125 as a hedge. Right now we are healthy so we may opt out to start but may want this down the road.
• Increased Travel
  • The main increase (albeit a small increase of $300/year) is due to our thoughts of heading somewhere warm for 4-6 weeks in the dead of winter each year.  We will aim for a low cost of living country and do slow travel either at an Airbnb or dip our toes in a homestay where housing would be free.  Or we may road trip somewhere down south in the states and camp for a month (we love camping and disconnecting from it all).
  • We also plan to spend all summer at our family cabin so this will reduce our travel expense as we currently account for gas to and from the cabin a few times over the summer instead of just once.
  • We also plan to head to Florida once a year to visit family like we always do.
  • We also will have more free time to dig into our side passion of travel hacking to scope out the best point sign ups available and travel hacking advice from the pros.
• Increased Finn & Baby 2 Miscellaneous/Activities
  • We have no clue what we will be spending on the babes in the future so this is really just a guess at this point and likely the one to throw us for a curve ball.  Any FIRE parents out there that can give us a ballpark figure of what to expect once the kiddos get older?  We know if travel hockey comes into play we will likely be working part time to fund that insanely expensive sport while they are in school (which we are totally ok with and realize we likely will be doing something part time once they are in school anyway). Our thought is no child care costs, no before school costs, no after school costs since we will be home to take them to and from school each day.  We don’t want to be too busy that we can’t enjoy life so maybe an after school activity once or twice a week max.  Weekends out in the mountains exploring, doing arts & crafts, going for walks, and partaking in the many free activities offered by our town.  And then summers at the cabin where the most expensive item is ice cream.  Maybe a week long summer camp?  The nice side here is that we are projecting this into our annual expenses forever so once we kick the kiddo(s) to the curb this will mean more travel or leisure activities for us down the road.

There you have it! Phew, this was a LONG post but hopefully it provides insight as to how we are calculating our annual expenses once we reach FIRE. As you can see it’s not as simple as looking at what your expenses are today.

How do your monthly expenses compare?  Is there anything you can think of that we are missing?  Any suggestions for how to lower our projected FIRE annual expense figure?  Comment below and thanks again for following along!

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We believe in stacking up life hacks to keep your enjoyment levels to the max without depleting your bank account.  Here are some ways to further educate yourself and save thousands of dollars over your lifetime by making some simple adjustments:

• Investing Newbies: Check out our free Investing 101 Series.
• How much are you paying for your phone plan?  Canadians, learn more about Public Mobile, and see how we are paying $3/mo for our cell phone plan.
• How much are you paying for internet?  Canadians, learn more about the various Independent Service Providers out there to see who services your area so you can lower your monthly bills.
• How much are you paying for home insurance?  We were able to reduce our rates by 25% by switching over to Square One Insurance.  If you live in BC, AB, SK, MB, and ON, check out Square One for your home insurance, landlord insurance, and/or tenant insurance.  Use this link to receive an extra $15 off your quote.  (Note that you must use this link to start the process to get the $15 off even if you prefer to pay over the phone.)
• How much are you paying for your monthly utility bills?  See how you can likely save on this monthly expense.

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