Sometime around the middle of this past year, we began to discuss what our 2024 budget should look like. While that may seem a bit obsessive and far earlier than necessary to consider such things, consider our position: we had just returned from nearly a year of on-and-off travel; we were jobless and without a permanent home; and we were looking to re-design our ideal lives as we prepared to re-enter the workforce. That’s a lot of uncertainty. What we came up with is unlike any previous year’s budget before. That’s why I’ve dubbed our 2024 budget “The Spending Experiment.”
Background
In previous years, our budgeting process included a review of the past year’s expenses updated for known or likely changes in the year ahead. Top priority was generally to maximize our savings and investments. Our budget was designed to be forward-thinking, gratification-delaying: dreaming of our future lives and all the money we would have then. And up to this point, that strategy has served us extremely well. By no means did we live like paupers over the years and we still managed to save enough take 15+ months off of work and travel the world. Not too many complaints here.
But in a period of transition, we were looking for something different in our 2024 budget. We assumed (maybe naively, but ultimately correctly) that we could secure reasonably well-paying jobs at some point in 2023. We had padded our retirement accounts for years and the growth should be enough to live extremely comfortably once we hit that magical age of 59.5. So what should we do with our earnings now?
The Spending Experiment
I posed an exercise to Mrs. FIby35: what would an ideal (though not entirely exorbitant) year of spending look like to us? The $50,000 spending goal we initially set for early retirement was doable, but would it be comfortable? Enjoyable? Over the past several years, we set budgets in that $50,000-$60,000 range and achieved mixed results. Each year seemed to end in a December spending embargo as the budget dwindled, resulting in a January spending spree and starting the cycle all over. What if we just gave ourselves permission to spend more?
The results of the exercise were actually pretty surprising to me. Having completed it independently, our proposed annual budgets actually ended up really close. After sharing and discussing, Mrs. FIby35 and I agreed upon a new annual spending target: $75,000.
Breakdown of Our 2024 Budget
As you may recall, our 2023 budget was set at $52,500, which we overspent by over $9,300 (though additional income offset that overage).
Here are the details of our 2024 budget by category and the increase or decrease from last year:
| CATEGORY | MONTHLY BUDGET | 2024 YEARLY BUDGET | 2023 YEARLY BUDGET | INCREASE/ (DECREASE) |
|---|---|---|---|---|
| Home | $2,124.42 | $25,493 | $13,539 | $11,594 |
| Utilities | $136.67 | $1,640 | $0 | $1,640 |
| Automotive | $790.80 | $9,490 | $5,397 | $4,093 |
| Groceries | $500.00 | $6,000 | $3,700 | $2,300 |
| Dining Out | $150.00 | $1,800 | $1,625 | $175 |
| Health & Beauty | $487.33 | $5,848 | $6,820 | ($972) |
| Cell Phones | $41.67 | $500 | $400 | $100 |
| Travel & Entertainment | $1,174.67 | $14,096 | $14,820 | ($724) |
| Pets | $154.17 | $1,850 | $1,050 | $800 |
| Merchandise | $175.11 | $2,101 | $1,628 | $473 |
| Other | $515.17 | $6,182 | $3,521 | $2,661 |
| TOTAL EXPENSES | $6,250.00 | $75,000 | $52,500 | $22,500 |
Home/Utilities
The largest increase in our 2024 budget of course, since we intend to rent for the entire year. This also includes renters’ insurance and an umbrella policy. In 2022 and 2023, we only had home/utility costs for part of the year and traveled the rest. Our current lease ends in September so the final 3 months of 2024 are up in the air, but I anticipate some sort of rent payment through the end of the year.
Automotive
In an unfortunate bit of foreshadowing, last year’s budget reveal intimated that our car at the time wasn’t getting any younger. Less than a week later, it died and we had to buy a new one.
For our 2024 budget, we plan on continuing the one-car-life with our fully remote jobs not requiring a daily commute. That freedom currently comes with a monthly payment but we shouldn’t have any costly maintenance this year. Car insurance in Florida continues to be expensive, but there’s not much we can do about that.
Groceries, Dining Out
Each year, we tend to overspend these categories. Each subsequent year, I set a budget hoping that our behavior changes and our spending reduces. What’s that quote about doing the same thing and expecting different results?
For 2024, we’ve increased the grocery budget pretty substantially to encourage ourselves to buy healthier, higher quality ingredients even if they’re a bit more expensive. We also increased the dining out budget slightly since we still want to get out and explore restaurants and breweries in our area.
Health & Beauty
Though this category actually shows a decrease from last year, if you look under the hood you’ll see the most change in this area. Gone is our monthly ACA health insurance premium, replaced with employer-provided insurance that just gets deducted from our paychecks (I don’t count that as spending). In its place is what Mrs. FIby35 has named the “Year of Health and Wellness.”
In addition to healthier eating, our 2024 budget has far more room for spending on our overall wellness. Mrs. FIby35’s exercise membership will continue and we’ve introduced several other regular wellness treatments throughout the year. Because what good is a pot full of money in our old age without the good health to enjoy it?
Cell Phones
No anticipated changes in this area other than Mrs. FIby35 upgrading to an unlimited data plan. It’s likely that her phone bill will be reimbursed by her employer, so we will probably see some savings here by year-end.
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Travel & Entertainment
For the past two years, our Travel & Entertainment budget has had an inverse relationship with Home/Utilities. No home/utilities = more travel & entertainment. That trend ends in 2024 as the budget for travel & entertainment will stay pretty similar to last year despite having a semi-permanent residence again.
Traveling the world is a huge part of our lives and we will continue to do so as much as we can. For the time being, we will have to plan more around work schedules. This will likely drive the cost of travel up a bit since we’re pigeonholed into certain windows of the year and lack complete flexibility. Exact plans in this area are always under development, but we have some pretty great trips on the books already.
Pets
We’re hoping to avoid the trips to the vet that plagued us in 2023, but still increased our dog’s budget for the year. It’s only fair, right? We’ve committed to better food and a more robust grooming schedule to help him look and feel his best.
Merchandise
I truly hope we’re just about done buying the “stuff” that consumed the final 3+ months of our 2023 budget. Upon moving into our new apartment, we spent about $7,000 furnishing it and replenishing all the things we needed. Our 2024 budget includes minimal material possessions, other than continuing to refresh our wardrobes to be more Florida-appropriate. It also includes a slight bump in the category of gifts.
Other Expenses
The main culprits in this category are income taxes, credit card annual fees, and a contingency buffer. We received an income tax refund in 2023 for our 2022 taxes, but my Spreadsheets are suggesting that won’t be the case this year. We continue to review our open credit cards and their annual fees, though we’ve received significant value out of these in the past. Even with full-time employment, I kept the contingency line item at $2,500 for this year. Any other one-off expenses that don’t fit into another category should be minimal.
The Kitty
A knockoff of a budgeting trick of some good friends of ours, the Kitty is essentially a slush fund created by income that wasn’t anticipated. There’s a Kitty for Mr., a Kitty for Mrs., and a shared Kitty. Basically, it’s a way to encourage additional income generation to allow for splurges on things that were not in the original budget. This additional income can then be applied to our 2024 budget and increase the acceptable spending if necessary.
The kitty netted over $10,000 in unanticipated revenue last year, well over what I expected. The main source of income in 2024 should be interest from our high-yield savings account and redeeming the last of our I-bonds.
Conclusion
This year should be a return to a more traditional lifestyle for us and our 2024 budget seems to reflect that on the surface. What has changed from previous years is the overall level of spending – a 43% budget increase! That’s just a little more than inflation.
The hope is that the added emphasis on health and wellness will set us up for long, healthy lives to be able to fully enjoy the nest egg we’ve accumulated thus far. Lest you think we’ve completely gone off the rails, we still plan on maxing out each of our 401Ks, HSAs and Roth IRAs this year as well as contributing a significant chunk to savings and our taxable brokerage account. Early retirement is still a goal – we might just spend a little bit more along the way. Let the Spending Experiment begin!
How does your 2024 budget look? Any major changes, financially or otherwise?
