I've referenced my potential low monthly burn rate a few times, and people keep asking me questions about it, so I'm going to go into more detail using real life numbers.
It's important to note that I don't actually spend this little every month, most months, or really even any months. The point is that I could if I ever needed to, and also that by having as little as possible mandatory spending every month, I'm able to direct my money towards investments or discretionary purchases. You could correctly say, "Well, I couldn't do this because of _____" and it would be true. I'm only writing this because people always ask about it and because looking at the financial decisions I've made my be interesting.
Most of the reason I can have such a good burn rate is because I've put up a lot of money in advance to buy things that most people rent. I like doing that because it's very easy for me to determine what I can afford now, and not as easy for me to determine what I'll be able to afford later.
I bought my place in Vegas for under $50,000 including fees and renovations. I don't have a mortgage or insurance, so my fees there are very low. Taxes, HOA fees, and utilities are approximately $300 per month. They're less than that in the winter and more in the summer, but that's about average.
Budapest and the Island cost me roughly $40 each per month. That number depends on how many projects we do, but it's a good estimate.
$380 a month
I have 1.5 cars (I share one with my neighbor) and a motorcycle. All of them are paid for and my insurance is about $70 a month for all three. I'm not counting gas because if I really wanted to save money I would probably just drive the motorcycle or ride my electric skateboard.
$70 a month
I have a cool grandfathered health plan that costs me $100 per month. I really wish I could pay less and have a plan that only covered total disasters. I think if I had to switch to the new plans I would have to pay $150-200.
I also pay $20/mo for life insurance to cover being cryogenically frozen when I die.
$120 a month
I pay $32 for my cell phone (family T-Mobile plan), $20 for internet (shared with neighbors). Water, trash, and sewer are included in the HOA fee. I pay $22/mo for a non-business server (personal email, scripts, etc).
$74 a month
Realistically if I was really in a position where I had to batten the hatches, I would just make giant batches of lentil, quinoa, and vegetable stew and eat for about $5 per day. I used to eat that every day for dinner and I really liked it. Right now a typical day for me is $10.32 at Chipotle and approximately $7 for my two lunch sandwiches. So, call that $500 a month for luxury eating (I love my food) or $150 for the basics.
$150-500 a month
I'm sure there are things I've forgotten. I don't have any subscriptions, any debt, or any other insurance policies. But if we total it all up, assuming the low food cost, that's $794 a month to live a pretty awesome (in my opinion) life. Call it $1150 with Chipotle every day.
Again, I don't want to give the impression that I ever only spend $800 a month. I spend more than that on travel alone many months. And, obviously, I had to save a lot more money than that to be able to spend so little. This is just an illustration of what it looks like when you're frugal and invest in assets that save you ongoing cost. Having such a low monthly burn gives me a ton of freedom and eliminates all stress. I've also built enough mostly-passive income (books + cruisesheet) that I would never have to worry about coming up with that $800.
Sometimes I find myself struggling to explain why it's important to save money, but I think this post demonstrates it well. If you constantly finance stuff, your minimum monthly cost is high and never goes down. If you save money and buy durable assets, it keeps going lower, which makes it easy for the cycle to continue.
I appreciate that a lot of people have asked about this, and I hope that the breakdown is interesting. Definitely let me know what other topics you'd like to hear me write about.
Photo is the amazing flower display at the Bellagio. This is one of my top few favorite things in Vegas!
Heading back to the island tomorrow, then Budapest with my family, and a cruise! Basically my dream month.
Great post, as someone who thinks a lot about these things too I really enjoyed reading this. Another category along with "burn" that I also pay a lot of attention to is "runway" (how many months I have at no income). I find just knowing this, and how it changes depending on how much I spend, relieves a lot of stress and helps me live frugally.
Which companies do you use for your health plan and vehicle insurance ? I understand you may be grandfathered in but still would like to know.
Also, for the cryonics Insurance you have to name a cryonics organization like CI, as the beneficiary ?
I normally don't comment (I so enjoy your posts though, Tynan!) but this dovetails very nicely with another interest of mine, the FI/RE movement. FI/RE stand for financial independence / retire early.
I only mention this since I didn't see it in any of the comments. Sorry in advance in case this is old hat to you folks!
There is a LOT to it, but the basic idea is to do what Tynan is doing -- live well below your means and save enough money so you can live completely or partially off of the investment income. Savings rates over 50% are common in this community!
Here are a few of my favorite sites about the topic (and I'm happy to answer questions about it):
I always hear advertisements for How to bump up your credit score fast. Is there a way to do that?
Not really. To be very frank: the only times your credit rating should ever matter is to be able to rent a place, to get a car/home loan, possibly for certain jobs (requiring a specific security clearance or a particular level of background check), or to start travel hacking. There are probably some other edge cases, but in general your credit rating doesn't really matter.
I didn't really explain this in my first comment but the KEY thing to work for if you are interested in FI/RE is to spend less than you earn and then work to grow the difference to 50% or more. If you're spending more than you earn, you need to fix that first! :)
There is a LOT to all of this! Start reading, pick an action and most importantly GET STARTED. Keep reading and add other actions as your time/energy/focus allow. Things will compound and you'll be in better shape before you know it!
One reason I want my credit score to be higher is to obtain a Sam's Club credt card account that pays me 5% cash back on gas purchases and other cash back for purchases I routinely make for the basic items I buy each week.
I have had a bad history on repaying my student loans. Which, I have been current on the payment for several years, but the credit history goes back 7 years and shows the time when I missed payments during a rough financial stretch. It would be so nice to completely pay off the student loan (16K). It seems that most of my payment simply goes to interest.
Gotcha! I definitely understand the 'every little bit helps' mentality, but maybe your time/energy/focus will be better spent on something that gives you a better return, especially since there isn't much you can do to fix your credit rating short term (any service that claims otherwise is almost certainly a scam).
A few examples: Can you come up with a side hustle? Can you come up with a way to cut $20 out of your spending every week?
As for your student loan payment, yup, most of your payment likely goes to interest. You can get around that by paying more than the minimum (perhaps with your side hustle income or $20 a week savings).
If you want, PM me and we can discuss further.
Thanks for sharing Tynan. The 2 biggest expenses in most (USA) budgets are health insurance and housing. Food costs are highly variable, but can be a major expense. Your insurance is really, incredibly low so that throws things off. Your housing burn is low but that is because you've basically spent cash to keep your monthly burn down. Same with your auto in a way. My burn is much higher but much of that goes to investments / assets that compound.
What you leave out is that your housing assets might be appreciating in value, maybe even enough to offset what little you do pay (so your net burn might be lower yet). You also leave out the possibility of renting your vacant places which is why many people (myself for one) own multiple properties.
A very interesting spending breakdown. I have 2 teenage Daughters. My car insurance is $3,600.00 a year to cover all of us. I pay $750 a month in health insurance premiums. It is the normal cost of raising kids, unless a parent decides to not let their children get their drivers license till they are in their 20's.
I pay $230.00 a month for our cell phone bill.
In a few years, hopefully, my children will be self sustaining adults, and all these expenses will drop dramatically for me.
It's not much in comparison to your other expenses, but you'll probably save at least $100/month on your cell phone if you switch to Ting. My average monthly bill for the past 12 cycles has been under $30/month (for 2 lines, including taxes).
I researched Ting and compared the rates. The data is where I get hit. I use about 25 GB a month for 3 phones. Which when I compared Ting to my current AT&T plan, I would actually pay more for Ting.
Thanks for sharing this information with me. I am always looking for ways to save.
Just wondering why you do not carry any home owners or contents insurance on your 3 properties?
I'd rather self insure for anything that wouldn't really hurt me. No point in paying for a company's profits.
Tynan, I'm only asking this because I'm really interested in living this kind of low burn lifestyle. When you say self insure, does that mean you just have savings in case of a home disaster? What if your vegas property burned down? Would you be fine with starting from scratch there and paying to rebuild it? I'm not super familiar with home insurance so it would be great to hear your take!
Several years ago I was sitting with a bunch of friends at a restaurant. Dinner was winding down and we were all stuffed.
My friend next to me asked me how I made so much money. I always had the money for everything, she said, and she was always struggling.
The bill came and everyone went down the list adding up their stuff. Before tax and tip mine was around $7. Hers was $30, more than four times what mine was.
Our company PointAbout, Inc has been researching health insurance options for over 6 months now. I've always understood health insurance to be a complicated mess, but the more I dig into it, the more I wish I didn't have to.
Several of the executive staff at PointAbout have evaluated various health insurance options, but we haven't been able to find a plan or provider that gives us what we want. So, I'm turning to my blog with my wish list for company-provided health insurance to see if anyone has any suggestions or ideas.
First, some setup: We have about 25 W2 employees, and another 12 parttime to fulltime independent contractors doing work on a project basis. Of that total, we have 12 people in California, and the rest are in the DC area (DC/MD/VA). Everyone has different needs/wants: Some have families, some have their own personal healthcare at good rates and want to keep it, some have personal healthcare but want to move to a corporate plan because it would be cheaper.
So here's what we're looking for, ideally. Does this exist? Or a variation of this?
Offer employees a monthly bucket of money (start at $100 per employee per month and increase it as we grow) and let them choose how to spend it... health insurance, life insurance, disability insurance, dental, vision, etc. Have the employee pay 30% of the health insurance plan so they have skin in the game-- that encourages them to choose the HDHP plan. Also, put a certain amount of Health Savings Account (HSA) money in annually (maybe $500?) for each employee who chooses HDHP.
Our company PointAbout, Inc has been researching health insurance options for over 6 months now. I've always understood health insurance to be a complicated mess, but the more I dig into it, the more I wish I didn't have to. Several of the executive staff at PointAbout have evaluated various health insurance options, but we haven't been able to find a plan or provider that gives us what we want. So, I'm turning to my blog with my wish list for company-provided health insurance to see if anyone has any suggestions or ideas. First, some setup: We have about 25 W2 employees, and another 12 parttime to fulltime independent contractors doing work on a project basis. Of that total, we have 12 people in California, and the rest are in the DC area (DC/MD/VA). Everyone has different needs/wants: Some have families, some have their own personal healthcare at good rates and want to keep it, some have personal healthcare but want to move to a corporate plan because it would be cheaper. So here's what we're looking for, ideally. Does this exist? Or a variation of this? Offer employees a monthly bucket of money (start at $100 per employee per month and increase it as we grow) and let them choose how to spend it... health insurance, life insurance, disability insurance, dental, vision, etc. Have the employee pay 30% of the health insurance plan so they have skin in the game-- that encourages them to choose the HDHP plan. Also, put a certain amount of Health Savings Account (HSA) money in annually (maybe $500?) for each employee who chooses HDHP. Since the HDHP is cheaper for the company, encouraging the employee to choose it by having them pay 30% of the health insurance premium and putting some cash towards the employee's HSA (that rolls over annually) while paying $100/mo for anything the employee wants to spend it on feels like it's strike the best balance for all parties involved. And it would be ideal if the employee could put that $100/month towards their own, or their spouse's healthcare costs -- i.e., they don't have to go with our plans if they didn't want to, but could put that money towards the healthcare they're already buying (pre-tax, if possible). (Thanks, by the way, to Michael T. for suggesting this approach -- I won't post his full name unless he's OK with me doing so) Anyone know if this can be done? Any suggestions about alternate approaches that have worked well for others?