# Living better than your neighbors on 75% less

## By Mr. Money Mustache

## Thu, 14 Jul 2011 14:35:07 +0000

In one of the earliest articles on this blog called “If you Try Sometimes…“, I briefly described my goal of living life at a cost of 75% less than “normal”. Since then I have received many questions:

What is Normal anyway?
Where did I get this 75% number?
Is it ridiculous or is it easy?

First of all, there are three major reasons that I set the target at 75% off:

- After measuring my own spending compared to others in the same income/assets group, I found that my own family seems to spend about 75% less overall, and yet we still seem to have a happier and healthier life than average, and plenty of material comforts as well. We have mostly cut out only the Wasteful Bullshit like cable TV and diamond rings and such, while keeping the things like a nice place to live, good food and health, good times with friends, etc.
- When reading books about the Earth’s climate and ecosystem, I find the general estimation is that rich-world residents are consuming natural resources at 400-500% the rate that the planet can regenerate them for us. So to be decent citizens of the Earth and use only our fair share, we need to cut our average consumption by at least 75%.
- Since the default US household saves juuuust about 0% of its income, you will end up saving about 75% of your income if you can reduce your spending by 75% below these defaulters. For each year you save at this rate, you have bought three years of retirement. With compounding, you will have 25 years of living expenses saved in about 7 years, which will generate enough passive income to pay for your lifestyle forever, even assuming only a 4% annual dividend/withdrawal rate.

Now to get into some interesting specifics. An MMM reader recently sent me a link to an eye-opening spreadsheet at the US Bureau of Labor Statistics. It is called the 2010 Consumer Expenditure Survey. You can check out the whole spreadsheet at this link, and for casual readers we’ll dive into a fun column from it right here.

My favorite column is the “$70,000 and above” one, since it turns out to represent an average household income of $129,528 before taxes. The solid well-to-do middle class two-income working family that Mr. Money Mustache hears from so often. The people that complain that they need two incomes to put food on the table, and that President Obama claims are suffering so dearly due to 8% unemployment and $3.75 gasoline. The same people that could be retired in 5-10 years if they could grow themselves a Money Mustache.

So let’s go through the annual spending of our high-income compadres and see where we can make fun of them:

Income before taxes $129,528
Income after taxes $123,705 <-Admittedly an odd number – probably includes clever use of loopholes and excludes state and FICA taxes.
Age of reference person 47.3

Average number in consumer unit:
Persons 3.1
Children under 18 0.8
Persons 65 and over 0.2
Earners 1.9
Vehicles 2.7 <-W ow, an average of almost 3 cars for a 3-person household. Nice!

Housing tenure:
Homeowner 86
With mortgage 68
Without mortgage 18
Renter 14
Average annual expenditures $82,060

Food $9,761
Food at home $5,236
Cereals and bakery products $701
Cereals and cereal products $235
Bakery products $467
Meats, poultry, fish, and eggs $1,125
Beef $301
Pork $204
Other meats $158
Poultry $210
Fish and seafood $199
Eggs $53

Holy Crap! $1125 of Meat! My pricey cage-free organic eggs do add up to $200 per year, but the rest of the meat and fish is only $250 at most. Our total grocery spending was about $3800.

Dairy products $577
Fresh milk and cream $189
Other dairy products $388
Fruits and vegetables $928
Fresh fruits $320
Fresh vegetables $304
Processed fruits $162
Processed vegetables $142
Other food at home $1,904
Sugar and other sweets $203
Fats and oils $138
Miscellaneous foods $1,014
Nonalcoholic beverages $455

Food prepared by consumer unit on out-of-town trips $95
Food away from home $4,525 <-Whoa – their restaurant budget is more than my whole combined food budget! MMM family restaurant spending was $525 last year.
Alcoholic beverages $765 <-Surprisingly, this is within the $9/week/person MMM drinking limit :-)

Housing $26,386
Shelter $15,916
Owned dwellings $12,306
Mortgage interest and charges $7,171
Property taxes $3,231

Maintenance, repairs, insurance, other expenses $1,904
Rented dwellings $2,098
Other lodging $1,511

Utilities, fuels, and public services $4,849
Natural gas $683
Electricity $1,729
$1729 in Electricity is an interesting number. Even for 100% wind power, I’m still comfortably burning less than $300 per year.

Fuel oil and other fuels $199
Telephone services $1,556
Water and other public services $681
Household operations $1,873
Personal services $794
Other household expenses $1,079
The following section is a good candidate for some serious chopping without compromising quality of life. A thousand dollars of housekeeping supplies? I am more in the zero-to-ten dollar annual range here.
Housekeeping supplies $1,018
Laundry and cleaning supplies $214
Other household products $583
Postage and stationery $221
Household furnishings and equipment $2,730
Household textiles $214
Furniture $611
Floor coverings $67
Major appliances $314
Small appliances, miscellaneous housewares $153
Miscellaneous household equipment $1,371

Apparel and services $2,850
Men and boys $644
Men, 16 and over $511
Boys, 2 to 15 $133
Women and girls $1,156 <-Dang.. lots of independent runway models in the average household I guess.
Women, 16 and over $966
Girls, 2 to 15 $189
Children under 2 $127
Footwear $460 <-Six pairs of $75 shoes every year? Wowee. My $75 Timberlands from 2003 are still going strong after over 2500 miles of walking, thanks.
Other apparel products and services $464

Transportation $12,603 <-My whole debt-free vehicle fleet, including a year worth of gas and insurance, is worth less than this.. and it will be about ten more years before I need my next car at current driving levels.
Vehicle purchases (net outlay) $4,775
Cars and trucks, new $2,712
Cars and trucks, used $1,953
Other vehicles $110
Gasoline and motor oil $2,881 <-MMM family this year: $650 because of major road trips.
Other vehicle expenses $3,976
Vehicle finance charges $477 <-You borrowed money for your car even while buying six pairs of shoes?
Maintenance and repairs $1,162
Vehicle insurance $1,503

Vehicle rental, leases, licenses, and other charges $833
Public transportation $971 <- This includes plane tickets. Unfortunately we are probably up near the average here.

Healthcare $4,393
Health insurance $2,380
Medical services $1,212
Drugs $621
Medical supplies $180

Entertainment $4,733
Fees and admissions $1,363 <-Hint: Forests and Mountains are usually free!
Audio and visual equipment and services $1,416
Pets, toys, hobbies, and playground equipment $1,146

Other entertainment supplies, equipment, and services $809

Personal care products and services $991

Reading $182

Education $2,257

Tobacco products and smoking supplies $371

Miscellaneous $1,351

Cash contributions $3,176

Personal insurance and pensions $12,241
Life and other personal insurance $607
Pensions and Social Security $11,634

Sources of income and personal taxes:

Money income before taxes $129,528
Wages and salaries $111,256
Self-employment income $7,408

Social Security, private and government retirement $6,155

Interest, dividends, rental income, other property income $3,343

Unemployment and workers’ compensation, veterans’ benefits $400

Public assistance, supplemental security income, food stamps $123
Regular contributions for support $489
Other income $355

Personal taxes $5,823
Federal income taxes $4,187
State and local income taxes $1,317
Other taxes $321

Income after taxes $123,705

Addenda:
Net change in total assets and liabilities -$10,318 <-So somehow, this average wealthy family still ended up in the red this year?
Net change in total assets $15,608
Net change in total liabilities $25,926

Other financial information:

Other money receipts $845
Mortgage principal paid on owned property -$4,552
Estimated market value of owned home $274,601
Estimated monthly rental value of owned home $1,413

Gifts of goods and services $2,119
Food $189
Alcoholic beverages $17
Housing $353
Housekeeping supplies $50
Household textiles $17
Appliances and miscellaneous housewares $29
Major appliances $8
Small appliances and miscellaneous housewares $21
Miscellaneous household equipment $80
Other housing $178
Apparel and services $392
Males, 2 and over $95
Females, 2 and over $145
Children under 2 $71
Other apparel products and services $82
Jewelry and watches $27
All other apparel products and services $54
Transportation $177
Health care $39
Entertainment $173
Toys, games, arts and crafts, and tricycles $62
Other entertainment $111
Personal care products and services $18
Reading $1
Education $626
All other gifts $134
———————

All silly comments aside, it is a very useful spreadsheet that the BLS has created here. Even the first column in their online version, describing the overall nationwide median which turns out to be roughly a $60,000 family income, contains lots of stuff with room for chopping. Rather than doing an across-the-board chop, I find that my own spending ranges from close to 100% in several areas, all the way down to 0% in a large swath of expenditures. All told, we currently live on $20-25k per year, plus a mortgage-free house, as described in the Exposed! article. We consider this our Luxury Retirement spending level – if we were still saving for retirement the level would be considerably lower, as yours should be on a per-person basis if you are not yet financially independent!