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January 17, 2011


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What spending category is that new car in? :)

Roy --

Out of savings.

It's not really "spending" (at least how I account for it) since it's the transfer of one asset (cash) for another (a car) with no net expense or change in net worth. The expense comes as I depreciate the car over the course of a few years (as well as car repairs, insurance, etc.)

We pay less taxes but we make a lot less too. Congrats on another high giving year!

Gotta love the tax man! Let's make it a goal to reduce them taxes this year! Even California 10%, + 35% Federal only equals 45%!

Financial Samurai: His taxes weren't 63% of his total income -- it was 63% of just the 30.9% he considers spent money. That would be an outrageous rate!

Effective tax rate is about 18.9%

Thats a pretty good tax rate for FMF's income level. Of course he does give away the 23% which is deductible and most of his savings looks tax sheltered.

Seems like you spend quite a bit on gasoline. Do you and your wife drive a lot? I don't recall if you've ever said how far your commute to work is.

I would say this is probably the best budget I've ever seen. I don't know anyone who hits >40% savings and >20% giving. Bravo.

Jim --

I drive about 18,000 miles a year which includes work, 3 or 4 long trips to see family, and 2 or three long trips for work (I get reimbursed for the work trips.) My wife drives another 7,000 miles or so.

So for 2010 alone you saved 4 years worth of living expenses, and have consistantly done than for at least 5 years. Please tell me this means you've already surpassed the "retirement number" you've spoken of (if not, I may just give up.... ;-)

Strick --

Yes, I could probably retire very soon, but I like to be very conservative, so I'll keep at it at least a few more years.

Amazing job, FMF! (Are the living expenses only for you, or for your entire family?)

After taxes and giving, you roughly spent 25% and saved 75%. That is a real accomplishment.

Also, I think it would be a real eye opener for a lot of people if they converted the percentages in the post to dollar amounts. No need to even use FMF's salary, people. Just use a ballpark salary for a typical senior manager.

correction: I should have said 20% and 80%

My own breakdown for 2010 is: 18% tax, 59% spent, 23% saved. I didn't save much in dollar terms because I only worked half of the year. My nest egg on the other hand, grew more than handsomely, thanks to respectable savings in the past few years, and being in the right investments.

Wow! What an impressive money management. How do you keep your tax that low, FMF, especially with your high income? For us, our tax -federal, CA state, property tax, took a lot of chunks from our income. Aside from giving, is there any other way to minimize taxes?

Maria --

Giving is the big one for us (as a tax deduction.)

The most effective way to minimize taxes is to earn less. ;-)

Concojones --

The expenses are for the whole family.

I have the same ratio 1/3, 1/3, 1/3, but mine are for saving, spending (including giving) and taxes. Yay for saving! Of course if I were smart like FMF and bought a house and paid it off, my expenses would go down a lot. A lot of the 1/3 spending was for rent. But I like my apartment and it is relatively cheap.

Very well done, FMF. This is a great model to follow in terms of your income minus expense gap.

>The most effective way to minimize taxes is to earn less. ;-)

He.he.he... not something that we'd like to experience.
Thanks for the input FMF, I'm going to see how we can approach your saving percentage. :)

A little late commenting on this post, but can you please explain, how do you keep track of the expenses per category basis?

Viral --

I use Quicken...

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