Revealing Rich Frugal Life’s 2024 Budget and FIRE Number Update

We may already be well into the new year, but I’m finally ready to share Rich Frugal Life’s 2024 budget!

Why the delay? Well, life for one reason. But also, because we’ve been tinkering with our annual budget more than usual this year. I’ve only recently finalized it.

Spoiler alert: Despite coming in $10,000 under our budget for 2023, we’re making room for more splurges this year.

I’m also sharing an update we’re making to our FIRE number (and why).

Budgets aren’t your enemy

Budgets seem to have a bad reputation, but I think they’re just misunderstood.

When used properly, a budget can help you reach your financial goals and prevent uncontrolled spending. Rather than causing deprivation, a budget actually gives you freedom to spend lavishly on the things that are important to you…guilt-free!

I love budgeting and I know that our budget will help us achieve these things.

Like most plans we make in life, our 2024 budget will serve as a “loose plan.” We’re flexible with budgets, always making sure to include some “fun” money so we don’t feel deprived and plenty of buffers.

I think that the greatest value people get from budgeting doesn’t come from the budget itself, rather, it comes from the discipline of tracking expenses.

What we track, we can control.

However, setting a budget for each category does provide some additional benefits. Having an expected number in mind keeps us from going too crazy in any one area. It also reminds us of the areas we value, helping us to avoid underspending on things that we know bring us joy.

Here’s a little more about our budgeting process, along with our 2024 spending budget and reconciliation of that budget to our FIRE number.

Our annual budgeting process

We perform a detailed comparison of our actual spending to budget multiple times a year, including at year-end.

Reviewing spending helps you see exactly where your money is going so you can make the financial decisions that align with your values going forward.

Because I’m obsessed with personal finance, and because I share our finances regularly on the blog, I review our budget to actual every month. You could easily do this quarterly or annually if you preferred and still obtain most of the benefits.

I typically use our November YTD data to create a draft budget for the upcoming year, considering where money went, where it will change, and where we want it to change.

Mr. RFL and I review and make changes to budget drafts together before finalizing the budget. While the expense side of things can be completed before year-end, we finalize the income side in January, once actual pay raises and bonuses are known. This year we continued to make changes to our budget through February, so you’re getting this post later than usual.

You can check out our 2024 spending budget below and our Year-end Budget Update for 2023 HERE.

Rich Frugal Life’s 2024 spending budget

Where is charity?

You won’t find a line item for charitable giving in our public budget for two reasons.

The first being that we don’t share this number publicly. Frankly, I believe that charitable giving is personal. Sharing our number just feels like a lose-lose proposition.

The second reason you won’t find charitable giving above is that we don’t treat charity as an “expense” in our budget. I’m constantly looking for ways to manage and reduce our expenses, and this is one area where I don’t want to be tempted to cut back. In an effort to give away more, we’ve reframed the way we view charitable giving.

That said, giving is still something that we plan for each year after setting our budget. In 2022, we contributed $40,000 a Donor Advised Fund (“DAF”) to allow for more tax-efficient charitable giving. The account is already excluded from our net worth, and as such, it’s also excluded from our budget. Approximately half of our annual giving is now paid out from the DAF, with the remainder paid out of our normal cash flows. It just isn’t counted against our expenses or savings rate.

How does this compare to 2023 spending?

Although we set our 2023 budget at $70,000 in December 2022, we ultimately came in $10,000 under that budget.

We spent approximately $60,000 during 2023, which included $12,000 in travel expenses (and excluded income taxes).

You can see exactly how we spent that money last year in my 2023 year-end update post.

What’s changing in our 2024 budget? 

Once again, we’re boosting our budget to encourage more spending.

Mr. RFL continues to bring in a healthy income and we expect to cross our “Fat FIRE” target this year. As such, we don’t need to be saving money aggressively to reach our goals anymore. We’re already there.

Despite my lingering feelings of guilt when spending money, we’re trying to loosen the purse strings to buy back more of our time, travel comfortably, and enjoy a few more splurges (like the occasional spa day!) while Mr. RFL is still working.  

Will we actually spend it all this year? Only time will tell.

We set our travel budget at $12,000 this year, which is the amount we spent in 2023 (and likely more than we need for our planned trips in 2024).

This year, we also increased the following categories:

• Restaurants for more spouse dates;
• Clothes to buy Mr. RFL a new suit and for me to finish replacing my dated wardrobe with clothes that make me feel great;
• Self-care for guilt free spending to support physical, mental, and emotional health;
• Hired services around the house to buy back time; and
• Medical – not fun, but expecting some additional dental/ortho expenses for the kiddo and me this year

Finally, you may have noticed a chunk of change in the “Other” category. Typically, this category is small and includes miscellaneous expenses. However, we completely failed our goal to set up a formal will & trust last year, so I included $3,500 for that this year (one-time charge).

While there are certainly other changes in the budget this year, these represent the biggest.

Check out any one of our monthly financial updates to learn more about what we include in each category.

How does our 2024 budget compare to our FIRE Number?

We certainly seem to have moved away from our original FIRE budget of $40,000!

But that’s okay. Our FIRE Number was determined over three years ago and we never actually began withdrawing money from our portfolio. According to the Bureau of Labor Statistics’ calculator, inflation alone would have caused this number to increase to $47,200.

Since setting a FIRE number is meant to be an iterative process, I reconcile our annual budget to our desired FIRE lifestyle each year to see if any updates are needed.

I also do this because our current budget doesn’t necessarily reflect what we expect expenses to be in early retirement. Some of our expenses will decrease in retirement, while other increases in this year’s budget are intentional and discretionary. 

Reconciliation of this year’s budget to our intended FIRE lifestyle:

Yep, seems like it’s time to revise our FIRE number! Perhaps $52,000 is a good number to set as our new base.

That said, we can cover this new amount with a withdrawal rate below 3%, so I’m still feeling good about where we’re at… especially since we’re still adding money to our portfolio.

Adjustments to get from our 2024 budget to our FIRE budget

There are several items within this budget that will go away with little to know effort after retirement. Others we plan to pare back once we begin withdrawing from our investment portfolio.

Automatic reductions

As a part of our 5-year transition plan, we plan to move once retired and limit our next home’s cost to the equity received from selling this one. Or at least be close to that amount, using any excess cash to cover the difference. We won’t have any debt. Currently we estimate our home equity to be around $850,000 (after real estate commissions).

With a lower income, we might actually save money on our health insurance! That is, as long as the Affordable Care Act remains intact. My recent search for silver-tiered plans cost about half what we’re currently paying per year, including dental, and after subsidies at our expected income level. Even though we could save money under the ACA if we retired right now (which would bring our FIRE number lower), I decided to exclude these decreases from our adjustments this year. There’s just too much uncertainty with this one, so we’re going to consider insurance costs a wash for now.

We also expect to see reductions in several other categories once Mr. RFL retires. Without a formal job or the need to go into an office, we’ll naturally spend less on clothing, gas, car maintenance and office gifts.

Discretionary spending reductions

Discretionary spending makes up 46% of our 2024 budget.

Keeping your needs and fixed costs low is the one of the best ways to ensure you have the financial flexibility needed in early retirement.

While we’ve built some extra fun money into our current budget, most of these items could easily be lowered.

One category we plan to spend less on in retirement is Travel.

We’ve never spent $12,000 on travel before last year. And even then, it was intentional, paying for a family vacation and getting out of the blazing Arizona summer heat as often as possible. We certainly don’t plan on spending that much every year. For our next home, we want to move somewhere we love, so that we can enjoy our local community more without feeling like we have to escape. Our target travel budget for retirement is currently $5,000 per year.

It’s fun to splurge a little while we’re still earning money, but we don’t think we need to spend more on these things to be happy.

For example, we expect to do most of our own household cleaning and maintenance in early retirement, even though we’ve budgeted extra money to pay for some of those things this year. Mr. RFL and I enjoy DIY and take pride in caring for our things.

The reality is that we may not use all the money we are budgeting for these things, but I wanted the freedom to spend it if we so chose.

Overall, I think the adjustment made for discretionary spending is reasonable, and we could save more if needed.

We’re still financially independent even with a FIRE number of $52,000. However, we’ll keep monitoring and adjusting this target as we get closer to full early retirement.

What big changes have you made to your budget or FIRE plans this year? How’s 2024 going for you so far?

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