Burn Rates and Disposable Income
Changing the fuel mix in my best-self spaceship.
As some readers may remember, toward the end of 2015, my living situation changed dramatically. After five years of living with my extended family in a rambling Massachusetts mansion, my husband and I went nuclear with a two-bedroom apartment at the center of a midsize central-Italian city. Add in a few months of moving expenses and set-up costs, and I started 2016 with no baseline for a normal month’s household expenditures.
My big goal for the year was to nail that down — to know my burn rate, both so that I could set forward-thinking savings goals, and so I could look at my bank balance and guess how soon I’d be in trouble.
I think it’s around $2,100 per month, post-tax, on average. It breaks down about like this:
- Rent (including water bill and maintenance fees) on a two-bedroom, one-bathroom, 750ish square foot apartment in the city center= €600
- Student Loan = $276
- Subscription Services (Google Drive, Dropbox, Amazon Free Play) = $16
- Internet (reimbursed by employer) = €0 [but I get a €60 bill alternate months]
- Phones = €25
- Prescriptions = €17 [of which I can reclaim about €3 on my taxes]
- Food and other household consumables (toothpaste, moisturizer, detergent, toilet paper, etc.) = approximately $850 [I’m buying this in €, but it’s easier to figure it out by looking at my credit card bill which is denominated in $]
- Other bills = ~€200 [variable or semi-annual bills, and the replacement of things that wear out or break down — most recently recently the coffee pot and my husband’s only pair of casual shoes]
- Notably absent from this list: taxes I have to withhold myself (if I had no income, I would not withhold them, and part of what I appreciate about my burn rate is knowing how long I could last with no income), transportation (I pretty much walk everywhere), and health insurance (my taxes pay for that).
The key line item is that “other bills” theoretical construct that doesn’t represent a single real month; it simplifies a fairly tumultuous standard deviation. A lot of our bills come every few months instead of once a month, and some of them, like the gas bill, come at times which are partially dependent on when the meter man’s schedule lines up with ours. (One of us has to let him into the kitchen so he can look inside a white-painted aluminum box next to the vegetable caddy.)
I have discovered from experience that if at the end of a month, we haven’t hit $2,100 in spending, I just have to wait. We’ll need the leftover bit in another month or two. This is particularly critical when a run of late spring and summer “underspending” thanks to stuff like low gas bills will make some people think I’m hoarding money in my checking account. The truth will out in September. It’s the month of the year we moved into this apartment, so it’s when a raft of once-annual bills hit: renter’s insurance, Skype phone, and a handful of piddly things that are cumulatively voluminous. If I want to amortize that stuff, €200/mo is what I need to allocate.
Close readers of last year’s essay may have noticed that even though I said the dream was to use an Italian bank account (which does now exist) for Italian bills, I’m still mostly running things from my U.S. bank account, and I’m using a (paid off in full monthly) credit card to do a lot of that, even though I previously said most places here wouldn’t take credit. Half of the explanation is prosaic: more places have started accepting credit cards, and that’s an easy way for me to transfer money intercontinentally. The other half is that my husband’s and my incomes have swapped places again.
For the vast majority of our marriage, I’ve been the breadwinner while my husband did things like get degrees, pursue art projects, and look after family members who needed round-the-clock care. Though he occasionally had income, we treated it as discretionary and lived off of my wages. When we moved to Italy, that flopped for about a year; he worked full time while I freelanced, experimented, and studied Italian.
Turns out? We both hate that. As of mid-September, I’m back to working full time plus side gigs, and he’s pulled back to teaching around ten hours a week.
But the end result is about what I’d hoped: we’re finally making enough, combined, to have a little bit of discretionary income; I make around $2,400 post-tax most months (plus an extra $1,400 in three-paycheck months), and my husband makes around €500 (around $550). So that’s $850 of “extra” money a month, or around $13,000 annually (three-paycheck month paychecks included).
Frankly, we could use a bit of lifestyle inflation; if you look back at my expenses breakdown, you’ll notice there are zero dollars allotted for things like entertainment, charity, date nights, newspapers, haircuts, etc. January through August, some of the only “frivolous” purchases I made were a €3 bottle of periwinkle nail polish and £4 to get somebody at a small British historical archive to send me a scan of a letter from 1805 in which a crochety lady complained about riffraff in her opera box. We eat at home almost exclusively (which I don’t mind because we’re great cooks), my secondhand sweaters are patched beyond recognition (which I don’t mind because I perhaps delusionally think it looks cool), and we don’t run the radiators as warm as I’d like (which I don’t mind because climate change isn’t halting itself, after all, and although I am a hothouse flower my husband doesn’t like being sweaty even though glistening skin looks great).
Discretionary income is therefore both a relief (there’s a point at which you have to spend a little something to engage in the culture around you in order to keep your brain awake and alive) and an unusual burden. There are so many places the money could go, and all of them seem critically important — there are refugees to help, political action committees to support, the next film I keep saying I’m going to make, and oh yes my eventual retirement, assuming I live that far. There’s a spinet piano I could rent for €34 a month, assuming I can figure out a place to fit it. (Maybe the entry hall?) I miss playing.
Slightly simplifying matters, since I don’t have any U.S.-taxable income, I can’t legally contribute to an IRA of any kind. (The major difference between IRAs and other investment vehicles is a tax advantage, which is moot if you’re not taxed.) I think that knocks out my company’s 403(b) too — not much of a blow, since they offer no employee match. I’ve done a little bit of research into what else is out there, but nothing comprehensive yet.
For at least the rest of 2016, I’m letting money accumulate in my savings account. It’s a classic response to uncertainty; in a global political climate that could head south quickly, you don’t want to lock your assets away from yourself. But for the most part, it’s a reflection of the fact that I’m busy and tired and would rather not think about it right now.
There comes a time in any mathy person’s life when she wonders whether, just maybe, she is a master of the universe who could get above-market returns through sheer cleverness.
Every friend of mine who has tried this, whether “this” means stock picking or day trading or online poker, has lost money and decided an ETF is a better choice. I have thus far not fallen victim. But. We all know I can plow through disclosure documents. I read The Wall Street Journal, watch Bloomberg at 3 a.m. Eastern, and follow the press releases from major research universities. Plus I beat those friends at board games.
Maybe I’m different. Maybe this is something I need to know about myself. Maybe this is my marathon, my sword in the stone.
But now isn’t the time for me to find out. Something I know from experience is that trying to predict the future and trying to change the future are different mindsets; it’s a little like the way you have to turn off your inner critic to brainstorm. Active investing is about deciphering what is likely; it’s dispassionate.
I’m writing the day after Hillary Rodham Clinton’s concession speech in the U.S. presidential election, and let me tell you, I am not dispassionate. I feel like I’m thinking clearly, but my body is sending me some pretty clear signals that I’m in shock — constant shivering and gastrointestinal distress that suggest most of my blood has retreated to my internal organs. It’s like I’m trying to soothe a claws-out cornered animal, but it’s my body, the same one that carries my brain around, the same brain that thinks it’s got a handle on this.
So, long-term forecasting is out of the question. For moral and existential reason, that kind of reserved remove would be abhorrent at the moment — if it were possible. My adrenaline shakes suggest it is not, so I’m going to be hanging tight, badly karaoke-ing Kenny Rogers until I have a clearer idea of whether to:
- hold ‘em
- fold ‘em
- walk away
I will also try to figure out whether I’m currently sitting at the table or not, and what that implies about when I should count my money.