How A Family Of 3 Happily Lives On $25,000 Per Year

When we say we spend under $25,000 CAD per year for our family of 3 and are perfectly happy and content many people don’t believe it let alone can’t fathom how we do it.  Last week we covered MANY line items that come at no cost and to be honest, this post is a lot lighter than that previous post as we keep the things we do spend money on to a minimum.  It’s all about figuring out what YOU value and cutting out the fluff.  Let’s dig into the nitty gritty examining what we DO spend our money on.

Please remember, this is in no way a competition nor are we judging you if you spend over $100,000 per year.  There is no right or wrong way of living life.  As long as you are on the pursuit of happiness, contentment, & gratitude while also maintaining a high savings rate you’re winning in my books.  We are simply illustrating our lifestyle to anyone is interested.

We’ve split this post up between the bare-bones fixed expenses and cushy discretionary expenses that we could carve out if need be.  All figures below are in CAD.

Let’s dig in!

Fixed Expenses

• Housing: $9,316/yearMortgage: $0/year
  • • We explained our misnomer mortgage in the past so we won’t go into crazy details here.  Short explanation is we house hacked back in 2012 by purchasing a short sale townhouse and had 3 roommates live with us to pay way more than the mortgage.  This allowed us to pay off our mortgage in 2.5 years.  We then rented that townhouse out for 2 year after we left Florida.  We then sold the property and the gains from the sale when converted from USD to CAD fully funded the purchase of our brand new Canadian townhouse just outside of Calgary.  Rather than pay in cash upfront, we decided to put the funds in a high interest savings account for “just in case” since our interest rate is low (2.59%) with the plan to get rid of the mortgage within 5 years, which will be May 2021.  We could have paid the mortgage off in full but since we were actually making money having it parked in a high interest savings account (earning 2.8% vs the 2.59% of the mortgage) we decided to hold off. Check out our housing post if you want to read all the details including the numbers.
  • Home Insurance: $1,300/year
    • This sucker jumped up from $900 last year to $1300 this year for the same coverage.  Annual insurance rate increases were capped at 5% when the NDP government was in power in Alberta but as of August 31, 2019 that has been lifted with the new UCP government in place.  So rather than a 5% increase to say $945 we instead took a 44% jump to $1,300.  Pretty crazy!
    • Note that we recently discovered a home insurance company that allows you to customize your coverage that we will be switching to and lowering our rates back below $1,000.  Stay tuned for a future post with more details there.
  • Taxes: $2,100/year
    • We pay less than 1% of the assessed value of our townhouse in property taxes each year.  To us, this is money well spent.  It keeps our schools, urgent care, RCMP, fire station, etc funded.  It keeps our roads cleared of snow in the winter.  It provides funding for events that our town puts on.  In essence, it helps to create a community we want to live in. Our annual property taxes are a little bit lower but we’re rounding up for this exercise.
  • HOA: $184/month
    • This includes all exterior maintenance including landscaping in the summer (including mowing our lawn) and snow removal in the winter.  I cannot rave enough about the snow removal practices here.  Not only is the service prompt, but they remove the snow on the road + our driveway + our front porch – literally right up to our door step!  It also includes maintenance of the general area, roofing replacement, and reserve funds.  I feel like we are getting more than our money’s worth here as most townhouse communities near us have HOA fees in the $300-350 range for similar services.
  • Water, Garbage Removal, Eco Center, etc: $75/month
    • This fluctuates a few bucks a month.  It’s $2-4 more in the winter when we take “hot tub baths” each evening.  We talk about getting a hot tub in the future but when we compare the costs of our hot tub baths to the costs of actually owning a hot tub, it’s hard to take the plunge when we get the same satisfaction of the relaxation time but at a fraction of the cost.  Our sports center pass that we purchase over the winter also has a large hot tub so we get multiple soaks a day.  This also includes weekly pick up of our garbage, recycle, and compost bins.  As well as having access to an eco-centre in town for one off items such as car seats, bikes, computers, tvs, appliances, etc.
  • Internet: $34/month
    • Thanks to discovering the low price internet service providers out there we were able to reduce this down from $79/mo with Telus to $34/mo with Lightspeed.
  • Electricity/Gas: $190/month
    • This one fluctuates monthly too but this is the average monthly amount we’ve been paying for the past few years.  It’s a bit higher in the winter when we have the heat on 20 C and lower in the summer as we do not have AC in our home.  It’s about $240 in the winter and $140 in the summers.  More than $100 of this monthly bill is fixed transmission and distribution costs, which is insanely high for me to comprehend but I suppose it’s because there is a large geographic footprint across Alberta where the power plants and population are located and only a few million people to account for these costs (aka low population density + large distance to connect the grid).  From what I’ve read, most other provinces subsidize the infrastructure costs whereas in AB the cost is born by the users.  We’ve also been introduced to another smaller low cost energy marketer in Alberta which has helped to provide lower rates and a future blog post is coming on that too.
  • Home Repairs: $10/month
    • Random stuff like replacing new light bulbs, installing light dimmers, things we can’t figure out ourselves, etc.  Our home is 4 years old so only minor repairs at this point.
• Transportation: $2,495/yearCar Payments: $0
  • • Low mileage used cars all day baby.  I drive a 2009 Toyota Corolla with 130,000 kms or ~80,000 miles (she’s a grandma named Carol and I love her).  Nic drives a 2013 Subaru Legacy with 165,000 kms or ~100,000 miles.  Check out our post on transportation if you want to read more.
  • Car Insurance: $1,510/year
    • Like our home insurance above, our car insurance increased as well.  It actually jumped from $1,607 to $2,458.  This pissed me off and confused me so you bet I dug into this further.  The main reason for this spike is that I received a ticket a few years ago for checking GPS on my phone while stopped at a light.  This ticket will be wiped from my records next year.  Combo that with the UCP lifting the annual limits and poof we get a 50% hike in price!  Because I shifted to part time and am now home 292 days of the year (80% of the time) we have been testing out only having 1 vehicle fully insured and the other vehicle under garage/parking insurance ($10/mo).  We insure the Corolla in the warmer months and the Subaru in the winter since it has AWD, crazy good winter tires, heated seats, and a 2 mile radius remote start.  Because of this set up, the annual bill dropped down to $1,510.  We also are saving some money by not paying to have the winter tires on the Subaru taken off and on each year.  An argument could easily be made that we are losing money by having a vehicle sit unused as well but we are trying it out this year and so far we are liking it.
  • Gas: $50/month
    • Since I only drive into downtown Calgary 6 times a month for work, I spend less than a tank of gas commuting each month.  The rest of the days we are mostly doing short trips within town to a park, grocery store, library, or friends house.  We will also do a few longer trips (20-40 minutes) to some of our favorite hiking spots nearby.  In the summers we drive out 5 hours to Nic’s family cabin but the gas is accounted for below in our travel section.
  • Vehicle Registration Renewal: $85/year
    • The price you pay for the silly tin box outside your home.
  • Oil Change, Misc Repairs: ~$300/year
    • Oil changes in Canada are much higher than what I was used to paying in Florida ($60 vs $25) so this is something on my “learn to do once retired” list.  Let’s be honest, this will be on Nic’s “learn to do list”.  We strategically buy cars that are built to last so even with the higher mileage, we have yet to spend any significant amount on repairs since purchasing them.
• Food: $6,300/yearCourt & Nic: ~$450/month
  • • This figure accounts for spending on dining out as well as grocery stores for food & household items such as laundry detergent, toothpaste, dish soap, etc.  I don’t care to split it all out.  The main reasons we are able to keep this figure low is that we buy in bulk and store items in our deep freeze and only eat out 1-2 times a month.  Check out our post on mastering your food costs if you want to read more on this topic.
  • Finn: ~$75/month
    • The little monster eats more than me some days.  She has pre-breakfast, breakfast, snack, lunch, snack, supper, snack.  Her favorite food you ask?  Olives. And seaweed.  Yup…  We are estimating this will go up to $100/mo in the future.
• Baby Items: $1,290/yearDiapers: ~$220/year
  • • This has been coming down year over year and we’re now spending less than $5/month on diapers so this figure above is clearly now outdated.  We started potty training in March just before she turned 2 and she’s now fully potty trained!  We still put a diaper on her for naps and bedtime just in case but they have been dry for over a month now and we reuse them until the sticky part wears off.
  • Medicine / Hygiene: ~$120/year
    • Sooooo much camilia, tylenol, & ibuprofen for this poor kiddos teeth plus items like lotions, shampoo, sun screen, bubble bath, etc.  Thankfully we are almost done with teething so this should come down.
  • Clothing: ~$50/year
    • The large majority of her clothes are hand me downs from random strangers thanks to Varage Sale or from our neighbors next door who have 2 boys slightly older than her.  It’s insane how quickly kids outgrow their clothes.  The majority of the items we get are nearly new and in great condition.
  • Activities: ~$550/year
    • The large bulk of this is our family pass to the sports center during the winter months with the remaining costs an annual zoo pass for the family and drop in gymnastics classes about once a month.  This should really fall under discretionary spending below as none of this is absolutely necessary but I wanted to keep all kid related costs together.
  • Random Baby Shit: ~$350/year
    • Biggest items this year have been a slumber pod and new monitor, totaling $250 combined.  The rest were all smaller items $10 and under.  Toys and books get lumped into this section too.  The majority of these items too would be discretionary kid items vs fixed.
  • Note – in two weeks we will be digging further into the costs we incurred during Finn’s first year.

Total Annual Fixed Expenses: $19,401

Discretionary Expenses

• Travel: $1,500/yearThank you travel hacking for allowing us to go on multiple trips per year at a very low price.  Typically, we go down to Florida as a family once each winter, we fly my mom up 1-2 times per year from Florida to visit us in Canada, we go out to Nic’s family’s cabin which is 5 hours from our home as much as possible over the summer, and likely one other trip.  One year it may be to Colorado to visit my brother, another year a road trip to Vancouver, the next a trip to Hawaii, or a 3 week trip to Europe. Of course this year has been much different / lower due to COVID-19.  For example, we had a trip to Vancouver Island planned for this past April which we canceled due to COVID.  These Florida flights cost about $70 per person round trip to pay for the associated international taxes + points and we stay with friends and family while down there (so ~$350 for our family of 3 to travel down once a year and 2 round trip flights for my mom up here). Trips to the cabin cost gas money (around $300 per year for ~5 trips out there – we were out there a record amount of 60+ days this summer now that I shifted to part time).  Other trips within North America cost anywhere from $500-$1,000 total depending on the trip and international trips tend to cost $1,000-1,500 total getting us to an annual average of $1,500 per year.
  • We have been travel hacking since 2010 and have been able to travel all over the US, Canada, and 25+ countries for a fraction of the cost.  We have over 1 million travel points in our bank.  We will be writing future posts on Travel Hacking 101 so stay tuned for that.
• Phone: $3/moThank you Public Mobile for continuing to amaze us with your excellent coverage and extremely low plans.
• RESP Contributions: $208/moWe contribute $2,500/year into our daughter’s RESP education account in which we also receive the governments 20% match of $500 each year.  By investing this money in low fee stock index funds she should have ~$100,000 for her education which should be more than enough in Canada.  Check out our two guest host podcast episodes on the Explore FI Canada podcast that digs into many RESP topics.  
• Miscellaneous Expenses: $125/moThis is for all the random items we buy throughout the year be it new glasses, stamps, clothes, shoes, a speeding ticket, candles, filing my US taxes, board games, etc.

Total Annual Discretionary Spending: $5,532

Total Annual Expenses

Overall, we currently spend a total of $24,933 CAD per year for our family of 3.  If for whatever reason things got tight, we could shave off $5,000 of our spending if needed to be close to $20,000 for the year.

There we have it, it’s pretty simple really and thus why we do not budget.  Everything is pretty much on autopilot at this point and well under control.  I do still track all of our expenses in a spreadsheet which I log into monthly at this point and started in 2009 when I started by first “big girl” job.

We have friends over for supper.  We get out to the beautiful Canadian Rockies.  We spend weeks out at the cabin.  We travel multiple times a year.  We soak in the community hot tub as much as possible in the winter.  We constantly learn by reading books and listening to podcasts.  We cook hearty meals.  We access free resources such as the library, walking paths, parks, and science center passes.  And best of all?  We spend time together as a family.

Expenses are everything when it comes to reaching FI.  In order to reach FI, you must know what your current and projected expenses will look like.  And the lower you can keep this figure, the faster you’ll get to your goal.  However, it’s also important to note that we are not suggesting that you obsess over your FIRE number.  You must enjoy the journey along the way.  Figure out your balancing point and work towards your personal goal.

Thanks to our low annual spend and our diligent savings over the years, we’ve been able to shift from two full time employees to one retired parent and one part time parent for our little monster. And with a family of 3 living on this one single part time income, we’re still able to save and invest half of this income.  It’s been such a great transition to the RE part of FIRE.

We became wealthy by not caring about looking wealthy.

I Could Never Do That!

Now, before you start screaming “there’s no way I could do that” let’s take a look at some reasons why you may think you can’t lower your expenses:

• I live in a high cost of living area!
  • We understand that there are cities with much higher costs of living than where we are located.  If you absolutely have to live there, your expenses likely naturally be higher.  But really, this likely is a choice.  And you (hopefully) negotiated for a higher salary to accommodate for these higher living expenses.  You likely could find a job in a lower cost of living area for a few years, really boost up your savings rate, then move back if you really love that high cost of living area.  Look into remote employment opportunities. Out of all the COVID related impacts, working from home is likely the biggest “pro” to come from this pandemic.  House hacking can be applied anywhere, look into getting a roommate or two, renting out a basement suite, or buying a duplex and renting out the other side.
• I have kids!
  • So do we. Kids CAN be expensive.  Oh yes they definitely can.  But kids definitely don’t HAVE to be expensive.  You, the parent, are making the choice to spend money on brand new items your child has no clue that they are missing out on if you didn’t purchase it.  They can especially be expensive if you are throwing childcare into the mix.  Is it possible for the lower earner to stay at home or shift to part time for a few years?  Do you have a family member near by that could look after the little tornado for a day or two a week?  If this is something you’re considering, check out this insanely detailed post from my friend Chrissy that she wrote as a guest blog post over at Tawcan.
• I need to have some fun!
  • Hopefully from last weeks post you were able to see that we are not depriving ourselves during this process.  A low annual spend does not necessarily mean we are not doing anything with our lives.  We’re trying to fix that misconception!  We hang out with friends, travel a lot, enjoy good food, and explore new trails.  If you listen to the Millionaires Unveiled podcast, you’ll hear from many millionaires (us included) that they value building community and relationships more so than the fancy luxuries along the way.  Many of the free / low cost items we partake in make us healthier (walking, hiking, biking, cooking) and smarter (reading, learning a new language, learning a musical instrument) too.
• I’m trying to pay off debt!
  • We were right there with you – I was saddled with $70,000 in student loan debt and Nic had $40,000 of her own.  Prioritize paying that off ASAP!  But the key is to remember that when you pay down the principle of a loan, this really is a backwards way of saving money.  Instead of throwing that money at consumer spending, you’re paying off a liability.  The key is that once the debt is paid off, put this money towards saving and investing so it can work for you NOT towards more spending to get right back into debt!

If your spending looks very different from ours, I hope you didn’t take this post as judgmental!  The main goal here is to demonstrate that it is possible to design a happy life on less money that the typical North American consumer spends a year.  By figuring out that our society overall consumes WAY too much, you’re able to lower your expenses, and thus able to reduce the amount of time spent at your cubicle – and that’s the goal most of us are chasing!

How much do you spend per year?  Do you think you (and your family, if you have one) could live on $25,000 a year or does it seem to extreme / bare bones to you?  How do your fixed expenses compare to your discretionary expenses?  Are there items on your list you couldn’t imagine living without (no judgement!)?

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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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