Extreme frugality blogger Mr. Money Mustache and his family famously live on less than $25,000 a year. Of course, it helps to have a paid-off home and live in a relatively affordable town in northern Colorado. Getting around by bicycle or on foot also saves money on gas and keeps the family car-payment free. It’s an amazing example of frugal living which has inspired legions of followers called Mustachians.
I also track my family spending and Mustachians would be shocked to learn that the Engen’s will spend more than three times the amount of MMM’s typical family living expenses this year.
Where does all the money go? Let’s take a look at our anti-Mustachian family spending summary:
| HOME EXPENSES | $ | Comments |
| Mortgage/Rent | 15,362 | Mortgage balance of $244,000 |
| Property Taxes | 4,282 | |
| Utilities | 3,437 | Electricity, gas, water |
| Cell phone | 895 | |
| Cable/Internet | 1,666 | |
| Furnishings/Appliances | 665 | |
| Lawn/Garden | 151 | |
| Maintenance | 392 | |
| Total HOME EXPENSES | 26,850 | |
| DAILY LIVING | ||
| Groceries | 13,210 | Includes household items such as toiletries |
| Clothing | 1,421 | |
| Dining/Eating Out | 3,078 | |
| Haircuts | 640 | |
| Pet Food | 657 | |
| Alcohol | 1,252 | |
| Miscellaneous spending | 3,500 | |
| Total DAILY LIVING | 23,758 | |
| CHILDREN | ||
| Preschool expenses | 1,265 | |
| School supplies | 100 | |
| Sports | 482 | |
| Piano lessons | 750 | |
| Ballet | 490 | |
| Total CHILDREN | 3,087 | |
| TRANSPORTATION | ||
| Vehicle payments | 8,263 | Will be paid off this fall |
| Fuel | 2,246 | |
| Maintenance | 421 | |
| Registration/License | 169 | |
| Parking | 49 | |
| Total TRANSPORTATION | 11,147 | |
| INSURANCE | ||
| Auto | 1,328 | Two vehicles |
| Home | 1,400 | |
| Total INSURANCE | 2,728 | |
| CHARITY/GIFTS | ||
| Gifts | 2,050 | Birthdays, Christmas, etc. |
| Charitable donations | 755 | |
| Total CHARITY/GIFTS | 2,805 | |
| ENTERTAINMENT | ||
| Netflix | 110 | |
| Google Play Music | 96 | |
| Photography | 53 | |
| Movies/Theater | 50 | |
| Books | 30 | |
| Total ENTERTAINMENT | 339 | |
| SUBSCRIPTIONS | ||
| Amazon Prime | 83 | |
| Credit card annual fees | 219 | |
| Costco membership | 116 | |
| Library | 15 | |
| Total SUBSCRIPTIONS | 672 | |
| Vacation | ||
| Travel | 6,031 | Kelowna, Vancouver, plus misc. day trips |
| Total VACATION | 6,031 | |
| Total 2016 Expenses | 77,417 | Estimate |
We’re on track to spend an estimated $77,417 this year. Keep in mind this amount does not include any contributions toward my pension, RRSPs, TFSAs, or RESPs, and does not include any extra amounts we might pay towards our mortgage.
Turning around this anti-Mustachian budget
How can we reduce our spending down to a more respectable Mustachian level? Paying off the car this year will bring our total annual spend below $70,000 and free up nearly $10,000 to put towards our savings goals. PS – I can’t wait for the last car payment to go through in October!
Total spending could then be reduced to just $53,792 by paying off our mortgage – but that goal is at least eight years away. Besides, I prefer to steer any extra income into our savings and investing vehicles rather than using it to pay down our mortgage at 2 percent interest.
Next we have to look at groceries and household items – a category that will need to be cut in half to be on par with the Mustachian annual budget. Let’s take carve off $6,000 for groceries, and take $2,500 out of the anti-Mustachian dining out and booze budget to bring our total family spending down to $45,292 a year.
Now it’s time to get creative. I live close enough to work that I can walk, so by selling our second vehicle we can save $1,400 a year in gas, insurance, maintenance, and registration fees. So this is what Mustachianism feels like!
Miscellaneous spending can be reduced by $1,500, while cutting the cable cord can save an additional $900 a year. Scaling back on gifts and kids’ activities might put another $1,500 back into our wallet.
This would bring our family spending down below $40,000 ($39,992 to be exact!).
Vacation costs are rather high this year so we can either skip travel altogether or cut our budget in half. This takes our family spending down to between $34,000 and $37,000 a year.
Earning more vs. Spending less
I’m just going to stop right here because this is getting ridiculous and depressing. I’d have to use a scalpel to trim the rest of our expenses down to the bone and get to $25,000 a year.
Frugality can only get you so far, and even the most frugal people like Mr. Money Mustache, Sean Cooper, and Derek Foster started their journey from a position of strength. It’s easy to preach living the life you want when you already have a paid-off home, six-figure income, or made a lucky bet in the stock market.
The question is, can you live this way on your path to riches, or does it only work once you’re already there?
You can’t frugal your way to early retirement. That’s why in the debate about earning more versus spending less; I stand firmly in the ‘earn more’ camp.
Yes, we need to be prudent and watch our expenses. Believe me, I can’t wait to be car-payment free in a few months and start using that money to help reach financial independence faster.
But I’d much rather find ways to earn more money than cut out the things that make life more enjoyable.
Some extra time and effort spent on my side business this year will allow us to take out additional income of $6,000. We’ll spend a bit of that money on a trip for our 10th anniversary and save the rest. Doesn’t that sound better than cutting $6,000 from your family spending?
Readers: How much are you willing to cut from your budget in order to reach your savings goals faster? Can you live on $25,000 a year?
