← BiggerPockets Money Podcast
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- [00:00]
A
Is your spending actually reasonable? Today we're diving into data that compares spending in high cost of living and low cost of living areas. And we'll answer one of the biggest questions on the path of financial independence. Should you spend more because you live in a high cost of living area or are you just making excuses? Hello, hello, hello and welcome to the BiggerPockets Money Podcast. My my name is Mindy Jensen and with me, as always, is my high quality co host Scott Trench.
- [00:32]
B
Thanks Mindy, it's great to be here. I'm looking forward to spending a great hour with you here talking about budget benchmarking and spending. A few months ago we had a Financial Independence in New York City series where people are achieving FI or have achieved FI in a very high cost living area in downtown Manhattan. So we know it can be done. Today, however, we're going to be using data to ground the discussion about how average people or median people in given geographies actually spend spend and how that should ground the assumptions we have around financial independence.
- [01:02]
A
Scott, what tool are we going to use to look at this?
- [01:03]
B
Oh boy, we're going to use another BP money tool. These are all free, of course. You can check them out@biggerpocketsmoney.com resources this one is specific URL findable from the resource library is biggerpocketsmoney.com budget this is a beast of a data set. I think it's a beast of a data set that I've assembled with my AI companion and painstakingly checked. Although there's going to be of course deviations, there's a lot of estimates and guesswork in here in the first place. But this basically takes people based their household type and composition, what income quintile they're in, top, you know, 20%, bottom 20%, middle 20%, that kind of stuff. And then their location. And it takes government spending data, actual government spending data, and modifies it for geography. This is not aspirational. I think a lot of fire and financial independence content talks about aspirational like what spending ought to be in a given situation. This is not trying to do that. This is just saying here's what I believe spending actually is per Bureau of Labor Statistics data, per hud, fair market rents in a given area, per regional pricing adjustments. Right. It's more expensive in Santa Cruz, California than it is in, you know, certain towns in West Virginia. And then I also did did a lot of work to get daycare costs in there because that's particularly relevant to my household. And I'm sure it is to a lot of people who listen to the BiggerPockets Money podcast. So combining those four data sets, adjusting for inflation, I had to make some some estimates and adjustments there that you know, because this data, some of the data is a year too old. But I think it's a pretty powerful tool and we'll give you a good starting point, especially as we go on Finance Fridays with with guests on the show and they give us a budget and they're spending, we can compare it to a household of four people making a middle 20th percentile income in Denver. Right. And say your spending is actually right in line with what we estimate the averages to be here or you're way above or below some of these categories. You may want to be more conservative in your spending assumptions in early retirement or you may want to focus on bringing this spending down.
- [03:01]
A
I think this is great, Scott. Including all of these different things. Now, if I wanted to go in and play with this budget calculator, could I go in and mark childcare at zero since my kids are no longer in childcare?
- [03:13]
B
Yeah. So I have child care off by default. But if you do use childcare, it will default to having them in full time. You can also toggle it to be part time here. Childcare. And adjusted for your area, it's much more expensive to get daycare, for example, in Denver than it is in many places in the Midwest. People are just shocked at the differences in costs around these things. And this is attempting to fairly present that data.
- [03:33]
A
I think this is great, Scott. So let's look at the what did you say that was the most expensive?
- [03:39]
B
One other thing I want to caveat here before we get into most expensive. Least expensive is there's this concept of affordability. And this calculator is not talking about affordability. Affordability is a relative metric. Right. So if incomes are very high in Denver and expenses are higher than, for example, counterparts in Memphis, I don't know the answer right now. Denver may be more affordable than Memphis when you adjust for incomes. Right. It's certainly not the least affordable area in the country and it's not less affordable than places that are lower cost. So that's a big nuance in this. This calculator is just talking about expenses in a raw sense based on the best available government data and the fairest adjustments I could make to bring it current to 2026. Some of these studies are two years old and they needed to be adjusted for inflation. For example, the most expensive market in the United States of America That I can find is actually Santa Cruz, Watsonville, California. And for a couple with kids that's not using daycare, I'm estimating you're going to spend about $12,600 per month at the median. That includes $5,300 a month in rent and fair market rents for a three bedroom apartment or house. That includes 1,300 for food, which is probably pretty tight feeling for that family. That includes 1,600 for transportation. That's the one that I think that the fire community bulks at the rightfully so it's very easy, relatively Speaking, to avoid $1,600 in transportation costs. But that is my best guess of what the spending level of a median household in Santa Cruz looks like for two vehicles.
- [05:10]
A
Okay, so we know that Santa Cruz is the most expensive city. What's the least expensive city?
- [05:15]
B
Yeah. So of the places that I compiled data for Beckley, West Virginia, which is in southeastern West Virginia, is the cheapest market in terms of raw dollar costs to live in the country for this type of household. So for a couple with kids age 35 to, I estimate that the median spending is about $6,500 for this household, a middle income household in that area. And that includes $1300 a month in rent. Literally $4000 cheaper than Santa Cruz. A little bit cheaper on transportation, much cheaper in basically every category here across the board that's a drastically different fire portfolio that you need to sustain this lifestyle for this family than it is in Santa Cruz. Now whether it's more affordable, I don't know. I actually think that that's an open question and I'm looking forward to combining this with the tax projection tool I've built and a future income percentile band calculator to kind of see where you sit inside the income spectrum. And I think that once you get those three data points together, we can actually tell which one is the most affordable between those two markets. But those are the two extremes. The most expensive and the least expensive market to live in and raw dollar costs that my tool computes right now.
- [06:21]
A
Okay, so for those listening who are like, why isn't the cheapest also the most affordable? Can you define what most affordable means to you?
- [06:30]
B
Well, it depends on income. Right. So in raw sense we have, if one area's median income is 60 grand and it costs 60 grand to live there, then, you know, there's, it's, it's basically very challenging to save for the median household in there. If another area has $100,000 median income and the average cost is $85,000 to live there. That place is more expensive to live, but that that household has a better chance at saving money or accumulating wealth. And so that's the challenge here. The, the economic opportunities have to be better in Santa Cruz than they are in Beckley, West Virginia for the median income earner. But whether that allows them to save more or less, I don't know. My guess is yes, you can probably save more in Beckley, West Virginia than Santa Cruz as a median income earner. But that changes when you get into the top 20 income quintile or the next one down in there, those two top two quintiles. I actually bet that that may change when we do that math. So that's the fun part of this, right? The data is going to be very interesting here. And then of course you have to also compute that after taxes, when spring hits, some people suddenly just want to declutter the garage, clean out the closets, and get everything all organized. Whether or not that hits you, Monarch will do your financial spring cleaning for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins. Just accounts, investments, property, and more all in one place. One of my favorite parts is the Sankey diagram. Every month I open it up and literally watch the flow of money. It shows exactly where every dollar is going from income to all of my spending categories. It makes it so much easier to spot what's working and what needs tweaking. Get your first year of Monarch for half off, just $50 with the promo code POCKETS. Use the code pocketsonarch.com to get your first year half off at just 50 bucks. That's 50% off your first year at monarch.com with the code Pockets. I'm skeptical of a lot of financial products, but life insurance isn't one of them. At least not term life. For the vast majority of you listening, term life is simply the right answer. And the smartest way to buy it isn't one big policy, it's a ladder. Your need for coverage isn't flat, it declines over time. You've got a 30 year mortgage, a couple of young kids, maybe a spouse, mid career. In 15 years, the mortgage is going to be smaller and the kids are almost launched. So Instead of buying one giant 30 year policy, you'll overpay for it. You stack a few, say a 10 year, a 20 year and a 30 year layer. So your total coverage steps down. And as your actual obligations step down, you only pay for what you actually need when you need it. Ethos is a platform that helps you find life insurance 100% online. You can get a quote in seconds and apply in minutes. There's no medical exam. You just answer a few health questions. Online, you can get up to 3 million in coverage. Some policies are as low as $30 a month. That makes building a ladder genuinely fast. Get your free quote@ethos.com bpmoney that's et h o s.com/bp money application times may vary and rates may vary when you're
- [09:17]
A
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- [11:28]
B
So I actually looked up just now because we were talking about it, but it looks like Beckley is actually a poster child for exactly what you're discussing. Where it used to have very large employers in one dominant industry in the coal mining space. And those employers have largely kind of left or kind of receded to some degree is I think, the right word, and education and health care has replaced it. So I wonder if Beckley actually suffers from exactly what you've described here, and that's one of the reasons why costs are so low in that area.
- [11:58]
A
That could be. I mean, the reason that an area is a low cost of living area is because there's not a lot of demand to live there. It's kind of like the coasts, like the parentheses of the country is this is where everybody wants to live. So that's where everything is really super expensive. And then the interior isn't quite so expensive.
- [12:17]
B
Mindy, what do you think are some of the most common places in the fire community that people want to retire to?
- [12:24]
A
You mean besides Longmont?
- [12:26]
B
Well, let's do Longmont. My tool says that Longmont is going to move. We're going to associate it with the Boulder metro area, which is more expensive than Longmont.
- [12:34]
A
Significantly more expensive.
- [12:36]
B
So because Longmont's a smaller town, I'm mapping it to the nearest region. Not crazy, but also you're going to have to make some reasonable adjustments there. The headline number is that A family of four in the middle 20% in Longmont, Colorado is likely to spend around $9100 per month, and that's going to include $2800 for housing. Note that you can toggle this. There's two different sources for that data. So the 50th percentile is around 3000. The 40th percentile is around 2,800 for rent for that family. They either can spend 550 bucks on utilities, 1300 on transportation, 1100 on food, 600amonth on healthcare, 300amonth on entertainment, recreation, 183 on apparel and services, and 1200 bucks on other. This also includes an estimate for FICA of about $922, which is typical for a median income household in that area. You can obviously toggle that off if you want to see your expenses in an early retirement, for example, in that area. So does that sound about right?
- [13:28]
A
Well, let's look at my specific situation. My house is probably worth 750800 and my taxes are 3200 a year. My insurance is $2000 a year. My utilities are about $150 a month. But I do have a full roof of solar panels, so that helps offset it.
- [13:51]
B
So you're even lower than the 800 number that I have here. But I think without solar panels, you're probably looking at somewhere in the $800 a month ballpark if your house is paid off. And so that leaves you with, you know, the headline number is your peers in Longmont are probably spending 9,600 bucks a month that are working full time, that have a mortgage and have two cars. And your household spending could look more like $6,300 a month if you took care of those big two, the transportation and housing budget. And that still leaves you with median spend everywhere else. And that's where I think this tool can be very helpful for folks that are planning on this stuff. Now. Healthcare is an average. And if you want to map healthcare costs specifically have a different healthcare tool, which I plan to merge all of these over time, but for now, I'm building them as standalone components. But the healthcare tool is available@biggerpocketsmoney.com healthcare costs. You can check that out. I think that, that that's where this tool can be very helpful. As you can see, hey, these are these, these places can be very expensive, but a lot of it is driven by housing and transportation averages in your local area. And if you map those to more reasonable numbers, sometimes these places look a lot less scary. So if we go back to Santa Cruz, for example, Santa Cruz, Watsonville, and you're spending, I bet you, you can, you can live there if your house is paid off for somewhere closer to $1,200 a month in housing. Right. That's just property taxes, insurance, and utilities, maybe more. Let's call it 1500. I don't know how much utilities are in that area. And I bet you you can do transportation for closer to 300, 400 bucks. Now all of a sudden, you're really not. You're only looking at like another thousand to fifteen hundred bucks over the cost of Longmont. So that can help you as well when you're looking at these areas.
- [15:17]
A
Yes. And the median home value and listing price in the city of Santa Cruz is between 1.35 and 1.49.
- [15:28]
B
Yeah. So you just need an extra 1.35 to $1.49 million to buy your house outright, and then you're good to go. In Santa Cruz, the fire portfolio can be the same Anyways, so yes, of course it's like that's a drastically different challenge, but that's the point, right, Is where's the best place to retire to? You know, it's where you want to be. And I think cost is also a factor, right. So if it's going to take you an extra, you know, 2 million bucks or an extra 1.5 million bucks to retire and live the lifestyle of other people in a given area versus another, that may change your decision on how you want to think about this stuff. And I think that again, this tool is my best attempt to accurately reflect the reality of spend in various areas. And then of course, I think you should adjust your budget based on your values, right. If you want to drive a Corolla and everybody else is driving a Maserati, then you know, you can drop down your transportation costs. There's.
- [16:14]
A
So Scott, do you think that a high cost of living or a low cost of living area is best for financial independence?
- [16:23]
B
Obviously, a low cost living area is going to reduce your fire number. A high cost living area is going to theoretically increase it and delay it. But I think in practice you're going to find that many people who pursue fire end their five journeys with a very high income. This is a common complaint. We get on bigger pockets money. Where's the median income earner who became a millionaire at 35? Well, that's pretty rare. And we get a bunch of stories and they're all real estate guys. Okay, I bought like 10, 10 properties and flipped them or you know, or built those businesses while earning a median income. Great, that's possible. You will find the median millionaire who, who never earns more than a median income and invested traditionally, but typically those folks are getting there in their late 40s or 50s or a little later than that. I think that the advantage of the high cost living area is that in many cases there's a higher income that goes along with it and folks move into that income bracket, especially in the last few years of their fi journey, whenever those hit. And that's a massive compounding advantage. Without being an entrepreneur or a real estate investor, I think it might be fairly hard to hit financial independence very early in life in some of these places that are not near to large metros with those elite job opportunities. I'm sure there's plenty of exceptions, you know, in military and in certain industries. But on average, I think that the higher cost of living areas will actually result in a faster timeline to phi. And I think that in the early years, if you can keep the housing and the transportation costs low. The differences between even the most expensive and the cheapest markets in the other categories is really not that large. It's almost all driven by that housing cost. That's the lion's share of the difference in affordability.
- [17:58]
A
Yeah, the higher incomes can be gamed a little bit. You know, you change your housing costs by having a bunch of roommates. You change your transportation costs by biking to work or even using public transportation. In the case of our New York City five people, I think one of them had a car. And most of them just relied on the amazing public transportation system that New York City has. There's a lot of ways to just, in general, live below your means and take advantage of that higher income. But with the low cost of living areas, like you said, it's more of a. That's where you retire to, not where you grow your phi number. And I'm. I'm. As soon as I say that, I can hear people yelling at their radios. I live at a low cost of living area, and it's fine. And I'm pursuing fi. Yes, that's great. You can pursue FI in any cost of living area. But I think the higher cost of living area, especially when you're younger, can just help accelerate your journey so much.
- [18:55]
B
Yeah, I mean, this is the challenge with the financial independence world is, is there's not good data. Right. This is a fairly new concept. We don't have, like, you know, huge samples of data. We have a lot of anecdotes. We have a lot of very certain opinions that conflict from various sources about how to invest and all that kind of stuff, which is fun. So what I'm trying to do is I'm just taking the averages of American households in here and then letting you map the differences in your situation to those averages. And so, you know, but, you know, here's an interesting one. If I'm 25 to 34 in Denver, the median expense is 5,000 bucks. But if you're house hacking and get that close to zero and you're biking to work and driving a Corolla, maybe 250amonth in car costs, all of a sudden, your expenses can be as low as 3,000 bucks a month, and you're not living anything any differently than the median in every other category. Right. And that's the fun part about this. It kind of helps you with that. The lion's share of the budget is always the housing area here. One other note here is that Bureau of labor statistics spending includes savings and pension contributions, so you can exclude those from your actual spending targets because that's not really a spending category as we think about it in buy and you can mark that to zero in a lot of cases. In fact, I will ship a toggle following this now that I've said that to allow this to turn off. If you're computing your savings rate, for
- [20:11]
A
example, that is good, Scott, because I don't consider your saving for retirement as part of your expenses. I don't want anybody cutting that out unless they have a good reason.
- [20:20]
B
One practical application of this potentially is, you know, use your favorite AI and what I do is I use Monarch money. By the way, if you want to track your expenses and you want a good expense tracker and net worth Tracker, check out monarch.com if you're going to use Monarch. We would be grateful if you supported BiggerPocketsMoney.com by using the code pockets P O C K E t s@monarch.com and you'll get 50% off your first year if you use that code pockets and then you can download your transactions or your spending and upload it to your favorite AI if you're comfortable with sharing the data with the AI. I am. I understand that there's a risk that comes with it, but there's also great advantages and you information I get. And I figure when the AI becomes general AI and takes over, they're going to be able to hack my data anyways. So the advantages of that is is is going to be fairly low. So but I you download that and then you can, you know, insert it and compare it to other households of your type by looking at the average spend by income quintile or whatever from this tool and say Claude, where, you know, where do I differ? Where's my spend higher or lower? Where am I spending more or less than people like me in my area and where the opportunity is to cut my budget. This is an exercise I, I've done regularly and it's made a hu of my annual spending without actually impacting my, my happiness.
- [21:32]
A
Oh, what did your AI tell you to cut out, Scott?
- [21:36]
B
Well, it just looks at the transactions. Here's the recurring ones. Do you really use that? Here's the, you know, the areas for consideration are here, you know, you've really got to pay attention to Amazon Shopping, for example. That was a big one for us, you know, eating out. There probably should be some constraints here, here and here. Like it's just very helpful with those things. And you can look at it and say okay, My food away from home is this much. And that's more than, you know, most people spend on both in that particular month. I got to cut back here. That's, that's a little unreasonable. I'm going to be more, more reasonable next month. So that, that's the kind of thing this can be helpful with, I think, in terms of benchmarking you against other households of your type.
- [22:10]
A
I love that. You know, I want to remind our listeners, and I probably don't even need to remind them, because who hasn't read the shockingly simple math behind the early retirement post from Pete? But he says in that post, your expenses are the number one predictor of how long your timeline is going to be. Pete's got a chart in the middle of this article that says if your savings rate is 5%, it will take you 66 working years to get to retirement. If your savings rate is 80%, it will take you five and a half years to get to retirement. There's every number in there between 5 and 100. If your savings rate is 100%, you have zero years to retirement. But you can see how this affects your timeline to retirement. And this is, it's pretty exponential. 5% savings rate, 66 years, 10% savings rate, 51 years. You've shaved 15 years off of your retirement just by saving 5% more.
- [23:08]
B
Yeah, and it's free. Like, it's amazing how people will work 40 to 50 hours to earn the next dollar and then they won't put in the four to five hours of work a month needed to save, like many, many, many, many times their hourly rate and costs in that month alone. And I think that this exercise hopefully will be a good starting point of, hey, what does a household like mine spend? What's my actual spending? Let's beat it up. And by the way, if the AI bulks at the data set doesn't understand it, there's a methodology section here you can copy and paste right into the AI to get it comfortable with it or get yourself comfortable with all that. So, but I think this is powerful. It's meant to be used with the AI, and I've used it personally. And so like this last month, after several months of other exercises and cutting spend in various other areas, I focused on my electricity bill. And so I made certain changes to the biggest single change was how I set my thermostat over the course of the year, which is silly and whatever, but I was cooling it to a lower temperature in the summer than I was heating it to in the winter, for example, like, very silly, just basic thermostat setting there. Fix that. And I should probably save like 30 bucks this month. And that compounds each month over the course of the year. So that's a big deal when you make those types of changes, changes, and they take just a few minutes.
- [24:20]
A
And do you feel uncomfortable now that you have cranked up your thermostat?
- [24:24]
B
Well, I didn't crank the thermostat. I just had it set to like a preposterous. I probably was frustrated one day with how it was working at some point a year or two ago and jacked up my system settings, my defaults, and so I just put it to the right numbers. That's all it was. But you know, that AI kind of checks it and it's like, hey, for your household, you're kind of a little over spending for electricity in these, in these areas. Does that seem right? Well, I have an electric car. Okay, well, you know, let's adjust for that. You know, we can fix this and this. And so that's the power of, I think, having these tools and data sets and comparing them against your own personal data. Everybody's spending is different, but benchmarking, I think is valuable. When the change in season hits, some people suddenly just want to declutter the garage, clean out the closets and get everything all organized. And that's great if that's you or if it's not you. Either way, let Monarch do the financial spring cleaning this year for you. One dashboard gets your entire financial life organized. No more clutter, no more mess, no more scattered logins. Just accounts, investments, property and more all in one place. Another feature I love about Monarch is the weekly AI recap. It catches spending spikes before they become problems and flags big net worth shifts or upcoming expenses. It's like having a quick personal check in every week so nothing sneaks up on me. Get your first year of Monarch for half off just 50 bucks with the promo code pockets. Use the code pockets@monarch.com to get your first year half off at just $50. That's 50% off your first year at monarch.with the code pockets. P O C K E T S. If you've been putting off life insurance, I get it. The old process was miserable. Phone calls with an agent, a nurse coming to your house for a blood draw, then waiting weeks to find out what you'd pay for. That friction is exactly why so many people who should have coverage don't. Here's what I most BP money listeners need. Term life and the right move is to build a ladder. A few term policies of different lengths stacked together so your coverage steps down as your mortgage shrinks and your kids get closer to being financially independent. Or you can get closer to hitting your financial independence number. The thing that makes that practical now is Ethos, a platform that helps you find life insurance all 100% online. Same day coverage, no medical exam. You just answer a few health questions online. Up to $3 million in coverage. Some policies as low as $30 a month. So building a two or three layer ladder that used to take a month of appointments is something you can knock out before your coffee gets cold. Get your free quote@ethos.com bpmoney that is as E-T-H O S.com bpmoney Application times may vary and rates may vary.
- [26:52]
A
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- [28:49]
B
Why are you embarrassed to cool your house to 73? I have to sleep in the 67 to 70 range, so.
- [28:54]
A
Oh, okay.
- [28:55]
B
We keep the upstairs where we sleep down in that range year round for sleeping.
- [28:59]
A
Okay. I thought that was a little low.
- [29:01]
B
No, but anyways, so we spent too much time on the thermostat here. But it's, it's one of those categories that I think, you know, after you go through and knock out the other ones you, that you can get to in the right order. And the AI and these data sets will help you find where those big leverage, leverage points are in your budget and categorize in the way other people do. So I think that's the power of the tool here. And then one, one risk factor I'll call out here that I think is fairly acute in the FI community is let's say that you are comparing your spend to the middle quintile of income earners in your city. That's great. But if you've spent your entire career earning in the top 20% or the, you know, the fourth 20%, you may find that you want or that you're spending in some categories regresses towards the spending of your peers, the people that you've, you've worked with, maybe your friends, depending on how that looks. And so you may want to play around with those and think about, hmm, I'm currently spending, you know, for my household for a thousand bucks a month on food. But in my early retirement in five, seven years, I may want to be prepared that that spend may want to jump to 1400 bucks a month if I have that option. And that that can just change some of the ways you think about these things. I think you should be open to that possibility over time as your wealth grows, you know, and depending on your peer sets there. So a risk that's just there. And again, you can play with the data and figure out if that's something that you think is, is realistic for you.
- [30:20]
A
Yeah, Scott, I think a lot of people don't take into consideration how much they're going to actually be spending in retirement. They're like, oh, this is what I'm spending now. Therefore, that's what I will be spending in retirement as well. I think this Budget calculator is a fun way to compare yourself to what other people in your area are doing and look at other areas available to you and see if there's any place you might want to move during your five journey or after your fight journey is over. I know someone who moved from a very high cost of living area on the east coast to middle of Kansas, loves their town. It's a very small town, very low cost of living. I want to say they paid less than a hundred thousand dollars for their house and they're completely fine with this. They do a lot of traveling, but they do come back to their house. They love their little house. It's just, it's a nice small town to live in.
- [31:13]
B
Where do they move from into?
- [31:15]
A
They moved from one of the Carolinas to a town in Kansas. You've never heard. There's like 19 people that live there. It's a really, really tiny town.
- [31:23]
B
Okay, so we're going to compare Charlotte, North Carolina, they have kids.
- [31:27]
A
No kids.
- [31:27]
B
No kids. So couple without kids. They're 35 to 44.
- [31:31]
A
I would say they are my age. They're probably 50.
- [31:34]
B
Okay, 45 to 54. So Charlotte, North Carolina, we're looking at like 9,000 bucks in spending if they're renting and driving, you know, the, the two cars with leases or whatever in there. And if they move to Manhattan, Kansas, the Little Apple, I know that place well because that's where my brother in law lived. There's a big army base there. The spending would drop to about $8,000 a month. Mostly dropping off the housing set up
- [31:59]
A
there from 9,000 to 8,000. I think 8,000 is grossly over budgeting.
- [32:05]
B
Sorry, I'm in the fourth income quintile. Let me redo this. So Charlotte, North Carolina, we got 6,700 bucks for the middle quintile. And for Manhattan, Kansas, for that same middle quintile, we've got $5,900. So what is that, 59 versus 67? Mostly driven by housing and a slight drop in transportation costs. But I think you'll find that like the groceries are not necessarily that big of a change. Change. The healthcare costs may not be that big of a change. Your entertainment budget may not be that big of a change. On average, in some of these places, clothing is not that big of a difference. Utilities may not be. It's going to be housing, transportation, and some of the miscellaneous categories that are going to be different in many of these areas. Right. So you know, like even when we adjust groceries for like Beckley, West Virginia, you know, for this, this couple with no kids, we got $784 for groceries. Santa Cruz, we've got 1100 dollars for groceries. Right. $400 more. That's a real difference. That's like a 40% increase in food costs. But it doesn't seem like that much relative to the enormous jump several, almost, almost 2,000 bucks jump in housing costs for this couple. So where a lot of that is
- [33:15]
A
located, I think their expenses are a lot less than 5,000amonth.
- [33:19]
B
But I bet you if you could buy a house for a hundred grand in Manhattan, Kansas and you compare that to the cost of buying a house for 600 grand in Charlotte, North Carolina, I don't know what it is, but let's, let's call it 600 grand for the same type of house. That's the ball game right there for that, for that couple.
- [33:35]
A
Yeah.
- [33:36]
B
That is the housing costs here all use rent, which is housing is just a crapshoot, right? Because if I, what am I going to put in there? If I put in rent then I have this problem where people who have paid off housing are going to have vitally different numbers. But how can I possibly know when you got your mortgage what your cost basis was in your home purchase for all that? So that's why I swapped the BLS data with the HUD data for rents.
- [33:56]
A
I think that's fair because yeah, like you said, my mortgage is sixteen hundred dollars a month and the new mortgage on the new house is going to be something like $4,000 a month.
- [34:07]
B
And a couple with kids renting a three bedroom house in Longmont is going to pay somewhere in the ballpark of 2,800 bucks. That's valid in the middle quintile. And if you're in the next one up, you're going to pay 3200 bucks or 3300 bucks. And if you're in the top, top income bracket, you're going to pay somewhere in the $5,000 mark for really nice fancy house for rent.
- [34:25]
A
I would say all of those numbers
- [34:26]
B
track, that's for the renting piece. If you're going to buy, then all bets go off the window because it's however much you put down what your mortgage cost is all that kind of stuff. Anyways, I had fun with this. You can tell I thought about a lot about the data. Hopefully it's helpful to people that are trying to just get a gauge of is my spending reasonable in these categories? I think the best thing you can do is track your spending, make Those decisions yourself, pay attention to every transaction and do the slog of work needed to actually know where your money is going. I think you should also plug it into an AI if you're comfortable with that. I was informed by a listener recently you can actually set up a connection between Claude and your Monarch account so it can have a real time feed into your transactions. I have not done that yet. That's a great suggestion. I probably will set up some kind of agent or project to help me with helping with that to manage my spending spend and then of course hopefully this data set is a useful companion to that to compare your spending as it as it comes out to what other people in your area are actually spending with households like yours.
- [35:22]
A
Yeah, Scott, I'm glad you had fun creating this. You said you spent a lot of time thinking about it. Is that what we're calling obsessing now?
- [35:28]
B
I'm having fun. You can like all of these are components, you know, like again, I need an income one, I need a tax one, I need a Monte Carlo sim. That's going to be the real beast of a project is can I can build all this up to income expenses accumulation and decumulation engine. One nice thing that's going to take me at least a year. But for now the components are hopefully useful block by block as we as we release them here@biggerpocketsmoney.com so again, you can find all of that at biggerpocketsmoney.com resources and you can find this specific tool at biggerpocketsmoney.com budget all the tools are free, there's no email required. I'm not storing any data. This is actually a single HTML file, so it just runs in your browser. I don't collect anything. There's no login or whatever. It doesn't persist. So save it or screenshot it if you want to store it because we're not storing it for you over here at BPMoney.
- [36:15]
A
Okay, well Scott, thank you to you for creating this and all the other fun calculators on our website. And a note to our listeners. This episode is ending, but that doesn't mean that you have to stop learning. You can hop on over to biggerpocketsmoney.com and find more of these resources in the resources tab. We have a blog, we have a newsletter, we have a ton of calculators and templates. All of this is designed to help you accelerate your financial independence journey. And what was that cost? Again, scott free.
- [36:45]
B
We'd give you a money back guarantee, but there's currently no way for you to pay us here over at BiggerPockets Money. So there's no opportunity to refund you any money. So. But I will say, you know, these are data sets, these are complicated. I, I'm checking them a lot and I'm going through these situations like here with Mindy. But I just got great feedback the other day on my tax projection tool that, you know, hey, you're not really stating the potential burden for self employment taxes unless you add in a new component here, a new field for each earner. Right. Because each earner can get taxed on fica like Social Security and Medicaid. I didn't build that into the tool and someone asked me to build that. That's an easy thing for me to fix these days. So I think I actually responded within an hour to this person and got that, got that live. But that's the kind of feedback that really helps these tools get a little better. So please email me, Scott pickerpocketsmany.com if you have any suggestions like that, that that can increase the accuracy or, or usefulness of the tools here as we're building them out.
- [37:38]
A
Yeah, please email scott@biggerpocketsmoney.com and let him know if you find any mistakes, any suggestions you have, what can make it better. That would be fantastic. Scott has nothing to do all day except listen to your emails, right? Is that how you characterize your day, Scott?
- [37:52]
B
Well, a lot of my day is making changes to these apps and I vibe code them. Right. So I'm using the AI and then I'm going through many rounds of traffic checks alongside that to try to make sure that it's actually presenting the way I want. And in between those, I have plenty of time to respond to emails. Yes. So following the discussion with Mindy, I made one update to the calculator that I wanted to highlight here, which is one of the interesting use cases for this tool might be to compare geographies and see how your spending in Denver, Colorado might compare to if you moved picked up a move to Santa Cruz or Beckley, West Virginia. And so this comparison tool shows the differences estimated on average from the data sets that we've compiled in those areas and allows you to toggle that maybe your situation will result in lower expenses in one area versus another because you have family nearby or what have you. So go ahead and play with that. Maybe it'll help you at least get an idea of some of the costs of areas that you might be considering living in at a directional view.
- [38:47]
A
All right, that wraps up this episode of the Bigger Pockets Money Podcast. We will see you again on Tuesday. He is Scott Trench. I am Mindy Jensen Saying bye for Brown Cow when you're ready to start your business, Northwest Registered Agent helps you do more than just file paperwork. You get all the tools to build a real business identity from day one. A business address, website, phone number, operating agreement, free guides and more at no extra cost. Northwest Registered Agent has been helping small business owners and entrepreneurs launch and grow businesses for nearly 30 years. They are the largest registered agent and LLC service in the US with over 1500 corporate guys guides. These are real people who know your local laws and can help you in your business every step of the way. With Northwest, your business is set up to stand on its own from day one. That means your home address, personal email and phone number. Stay private. Don't pay hundreds or thousands of dollars for what you can get from Northwest. For free. Visit northwestregisteredagent.com money free and start using free resources to build something amazing. Get more with Northwest registered agent@northwestregisteredagent.com moneyfree
- [39:58]
B
There's a reason most big wealth management firms don't like talking about flat fee planning. It's because it puts the power and the profit back in your pocket. I've been working with David Jackson at Domain Money because I wanted a fiduciary who didn't care about selling me products or making asset under management fees that grew as my portfolio grew. I wanted a partner who would look at my whole financial picture with all of its complexity and give me a personalized step by step roadmap to reach my goals faster. If you want a plan that's built for your benefit, not your advisors, you need to check out biggerpocketsmoney.com CFP this is a promotion for Domain Money, a registered investment Advisor with the SEC. BiggerPockets money may receive compensation if you choose to work with Domain Money as a client. I, Scott Trench, am a current client of Domain Money and receive non cash compensation related to this promotional activity. This is not personalized investment advice. For the full disclosures, visit biggerpocketsmoney.com CFP.