Friday, June 02, 2006

Cost of Living part 2

A comenter on "Blown Budgets" asked about our current cost of living details, comparing them to his own. I went into more detail last month in "Cost of Living".

In that post, I went through our BUDGETED expenses in some detail, coming up with these numbers:
Rent is a little less than $1300
Food for a family of four is about $600
Gasoline is about $300
Electric is about $200
Water (including sewer and garbage)is about $100
Insurance is about $200
Natural Gas is about $100
Cable and internet is about $100
Phone and Cellphone is about $100
Other random monthly bills run up to about $200 (water delivery, memberships, news paper etc...)
Everything Else is about $250
That works out to a total of $3500, which other than the odd months of January and february is about correct. We seem to be spending more on food, and less on some other things, but it's pretty much balancing out. Our electric is also going up a bit, but gas is coming down etc.. etc...

Early last year, long before I met Mel, I wrote this about the absolute minimum I would need to make to maintain my current lifestyle:
I'd be able to get by pretty cheaply, but I'd still need to make about 3.5 times the minimum wage (assuming I keep doing the job I do now, same home, car, lifestyle etc...).

I'm single with no kids, I own my car outright, I have zero debt, and I primarily work from home, or while traveling on the clients dime.

So breaking it out:

1. Rent - $650 (2 bed condo in scottsdale)
2. Food and beverages - $200 (minimum, I spend more like $400 now)
3. Insurance - $140
4. Cable, phone, internet (1 bill) - $175
5. Gas - $160
6. Electric - $100
7. Cell - $50
8. Assorted small bills - $150

So my monthlies end up a bit over $1600 x 12 = $19200. Add three months worth of expenses (for emergencies) at $4800 to bring it up to $24,000 and then multiply by 1.4 for the governments cut (I'm self employed, no kids, no mortgage), and I come out with $33,600 gross, so let's call it $35k, or $27k without any reserves.

Of course looking at what two people make at minimum wage, assuming a 1940 hour work year (standard average work year), it works out to about $20k. They won't be paying any taxes in most states, but you'll still have to take 12% off that for the various social insurance programs, leaving a bit under $17,600. Add EITC, of $800 (assuming no kids), and you have a total of $18,400.

That's pretty tight.
After Mel and the kids moved in, our monthly expenses went up from $1600-$1800 to about $2300-2400 a month; but that was in our old apartment, where rent was half as much (literally), water was included, and nat gas wasn't an issue (actually, Mels expenses would have been about $1200-$1400 a month, and mine were about $1600-$1800, so we combined went DOWN to $2400 from about $3200). As I said above our current expenses in the new house run $3200-$3500 a month.

Basically the difference in our current expenses works out to the difference between the cost of living in the apartment, and the cost of living in the house; or something like $1100 or $1200 more a month (well... mostly. the rent is $600 more, utilities etc... are about $400 more. I guess the other $100-$200 is the increased cost of incidentals.)

Of course the difference between single "me", and married with kids, a house, and a dog "us"; is something like $1400 to $1900 a month more. Basically about twice what it costs to live alone in an appartment.

We've done the numbers for income, while we were looking at wheterh or not Mel would be a stay at home mom (both of our preferences); and we figured out that just for us to break even on her working (taxes, insurance, extra expenses, child care), she'd need to make more than $40,000 a year. Then we looked at my earning potential, and our expenses, and made the decision, which we in fact celebrate, never mind regretting.

When we were still at the old place, I needed to gross $27,000 - $30,000 minimum to maintain lifestyle, and $35,000 to $40,000 to be reasonably comfortable. After Mel and the kids moved in, she and I worked out we had to gross a minimum of about $45,000 to maintain that standard of living, and $60,000 to be comfortable. As it is now, we need to gross a minimum of about $60,000 to maintain it, and about $80,000 to be comfortable.

Yes, we could do it with two much lower incomes (to be realistic $60k on my part and $20k on hers), but since I can earn that (and a lot more) by myself, we are much happier doing it with one.

So yes, a wife, kids, and a house are expensive; but believe me, they're worth every penny; and a thousand times more.