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You’ll have these costs even if your mortgage is paid off. Big ticket costs will be property taxes and maintenance. My caution here is to make sure that you include all costs associated with owning a home if that’s your plan. Housing prices have a direct influence on rent, so the more expensive houses are in a city, the more rent will be as well. According to Zillow, the median home price in San Diego, CA is $644,000 as of August 2020. While San Diego is rated as the 7th most expensive city, in terms of median home price, it stands at 15th. You’re going to pay to live here!īy far, the largest cost you’ll have to bear is housing cost. San Diegans call this the “sunshine tax”. You can argue with their methodology but I suspect they’re taking account not just raw cost but also income. According to Kiplinger in July 2020, San Diego is the 7th most expensive city in the United States, ahead of cities like Los Angeles, San Francisco, Boston & New York. The main reason that I need a comparatively large nest egg is that I live in a High Cost of Living Area (HCOL) in San Diego, CA. Suggested Budget Categories Downtown San Diego Skyline – Raychel Sanner I would suggest these major categories and sub-categories: Main Category As a single person, I put food in the “Other” category and kept travel as a separate category altogether so I can easily track it. How you group these expenses is completely up to you. I would personally suggest Personal Capital over Mint as I’ve had issues with linking & syncing on Mint.įor most people, their expenses will naturally fall into several big categories: housing + associated expenses, utilities & recurring monthly bills, insurance (auto, life insurance, long term care insurance, and most importantly health insurance), food costs, and lastly other expenses.
#REASONS WHY YOU NEED A BUDGET FREE#
Of course, you can pay for budgeting tools that may alleviate any privacy concerns you may have but for me, the free tools are fine. Yes, you do give up some privacy for this but I think it’s well worth it. Then it’s a trivial matter to build a budget off it. They allow you to link up your checking account & credit card accounts and pull in transactions automatically. Two free tools to help you here would be Personal Capital or Mint. I highly recommend that you take advantage of tools that allow you to do this automatically. You can certainly do this by hand or in an Excel spreadsheet, tracking and categorizing where every expense goes. To start budgeting accurately, you’ll need to track where your money is going. You won’t be able to achieve FIRE without a budget. At least, not easily since you’re just guessing and that’s no way to plan. If you don’t have a budget and rely on “mental accounting” to get you by, I’m afraid I have bad news: you won’t be able to achieve FI.
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It also allows me to identify unnecessary spending and identify areas that can be cut. XP – But how did I actually know my expenses would be about $7,000/month? By budgeting of course! Budgeting allows me to track my expenses so I know exactly where each dollar is going and allows me to make an accurate forecast of what I’ll need in retirement. This is a rate I feel will be able to sustain me for a long retirement as compared to the traditional 4% SWR, especially in this low interest rate environment. This equates to $7,000/month in today’s dollars at a 3.75% Safe Withdrawal Rate (SWR). In a previous post, I mentioned that I need just over $3 million in order to achieve Financial Independence and maintain my current lifestyle.