This entry is for the numbers people. Get ready. By the end of this entry you will see that we are continuing to report our budget and expenses, but we are totally revamping our budget and will be reporting expenses completely on a cash basis for clarity. No more spreading expenses incurred in one month over the year. Hopefully, we will not confuse you too much. :)
<B>December Results</B>
Campground Fees $638.74 ($20.60 per day)
*RV Clubs $10.58 ($0.34 per day)
*RV Insurance $74.72 ($2.41 per day)
Propane $0 ($0 per day)
Cell Phones $80.11 ($2.58 per day)
*Satellite Internet $94.05 ($3.03 per day)
RV Taxes/Registration $0 ($0 per day)
*Satellite TV $62.00 ($2.00 per day)
RV Maintenance $0.00 ($0.00 per day)
Diesel $166.71 ($5.38 per day)
Truck Maintenance $115.37 ($3.72 per day)
*Truck Insurance $60.78 ($1.96 per day)
Truck Taxes/Registration $0 ($0 per day)
Groceries & Dining Out $340.84 ($10.99 per day)
Laundry, Clothing, Hair Care $23.46 ($0.76 per day)
Entertainment $118.00 ($3.81 per day) (Category includes golf)
*Insurance - Life, Health, Etc. $293.24 ($9.46 per day)
Miscellaneous $495.86 ($16.00 per day) (Includes $297.51 for airfare for Linda to fly to Louisville for dental repairs)
Total $2,574.46 ($83.05 per day)
* - These are items paid for a year in advance, monthly breakdown shown here
Basically, we were over budget by the expenses in our Miscellanous category which included Linda's airfare to Louisville and some amounts that we did spend to make the few Christmas gifts we sent out. Without those items, we would have been very close to our $70.00 per day. By the way, since we did not go through with the Florida Dental School plan and got a refund on our deposit, I went back and adjusted November expenses on the web page of our actual expenses (but I did not adjust the November month-end Journal entry).
<B>2005 Monthly Averages (For five months starting in August)</B>
Campground Fees $553.74 ($18.10 per day)
*RV Clubs $10.58 ($0.35 per day)
*RV Insurance $74.72 ($2.44 per day)
Propane $6.00 ($0.20 per day)
Cell Phones $104.79 ($3.42 per day)
*Satellite Internet $94.05 ($3.07 per day)
RV Taxes/Registration $0 ($0 per day)
*Satellite TV $62.00 ($2.03 per day)
RV Maintenance $13.00 ($0.42 per day)
Diesel $206.45 ($6.75 per day)
Truck Maintenance $23.07 ($0.75 per day)
*Truck Insurance $60.78 ($1.99 per day)
Truck Taxes/Registration $0 ($0 per day)
Groceries & Dining Out $382.56 ($12.50 per day)
Laundry, Clothing, Hair Care $25.29 ($0.83 per day)
Entertainment $129.62 ($4.24 per day) (Category includes golf)
*Insurance - Life, Health, Etc. $293.24 ($9.58 per day)
Miscellaneous $212.22 ($6.94 per day)
Total $2,252.11 ($73.60 per day)
So what did we learn in our first five months? We learned that our $70.00 per day goal was very tight and did not allow any room for unexpected expenses, overlooked expenses, and expenses such as vehicle property taxes that we have not yet paid for while full-timing. I am concerned that the $70.00 per day, while a very doable budget, is just a little too tight for our lifestyle. So I think we will make some adjustments for 2006. We may reverse those adjustments before 2007. :)
<B>2006</B>
Actually, we are going to do things completely differently. For 2005, our goal was to have monthly expenses of $1,500 which would translate into an annual budget of $18,000. That's where we got our original goal of $50 per day ($1,500 divided by 30 days). But we realized that plan did not take into effect the amounts we paid up front for insurance, satellite, etc. To cover those other expenses of about $7,000 and make sure we were not misleading anyone, we upped our daily budget to $70 and our monthly to a little over $2,100.
But with intense scrutiny at year-end, it was clear that the $70 per day did not cover our RV & truck taxes, nor did it allow any room for unanticipated expenses like ... major dental work. So, I went back over everything and developed a budget that should easily cover everything with a little leeway. Yikes!! That came out to be $35,000!
Well that's what we are going with, and I am putting the entire budget by month up on the website. But rather than dividing the $35,000 by 12 to get a monthly budget, we are doing a month by month budget that reflects the actual month that our large expenses will be due. I have built in a 10% increase in insurance premiums (just in case), contributions to our Health Savings Account, and cushion for the unexpected.
Now, do I think we will need that much? No. The $35,000 is the maximum we should need. What we will be shooting for is $30,000 a year for every single expense, every single dime spent. That is a compromise between the $25,500 in 2005 and the $35,000. It gives us some breathing room, but still requires us to count our pennies.
<B>Income To Produce $30,000 In Living Expenses</B> - You might want to leave this part to the real analytical types :)
Some of you have questioned (rightfully so) our income plan of workamping and working to generate living expenses and still pay the taxes that come with earning income. So with some additional painstaking analysis, we have determined that the magical income number for us is $3,000 per month, $36,000 a year.
In fact, I am now convinced that $3,000 a month is a pretty magic number for just about anyone, although there is definitely room to live on less. Furthermore, I am more and more of the belief that it is best if you have at least a portion of that amount in some type of "supplemental" income in the form of retirement, social security, or something else (which we will not have in three years).
Why do I have that belief? Well because working 40 hours a week, 52 weeks a year, (which no one wants to do) at $7.00 per hour is only $14,560. So if you want to work 40 hours a week for $7 an hour and you workamp for a free site all year, you can get by on the road - but there is obviously less room for enjoyment of the lifestyle and money will be tight. I don't want to promote living on the road under those circumstances, although it still may be a lot better than what some folks are doing now. :)
I have done the math based on the 2006 federal and Kentucky state income tax rates. We will need $36,000 in income, but it will be income earned as independent contractors or sole proprietors. Since it will be earned income, we will be subject to Self-employment tax which is the biggest tax problem. We will have to pay 15.3% of self-employment net income (actually it is 15.3% of 92.35% of the self-employment net income - gotta love the tax code), so we will need as many legitimate business expense deductions as possible.
You see, for federal income tax purposes, we will start with income earned from a business. Then, the federal income tax laws will allow us to deduct 1) contributions to our Health Savings Account, 2) health insurance premiums we pay as self-employed individuals, and 3) 1/2 of the Self-employment tax we have to pay to get to Adjusted Gross Income (AGI). After the Standard Deduction for married couples of $10,300 (for 2006) and the additional $6,600 deduction for our personal exemptions (for 2006), the federal income tax is relatively insignificant. And the Kentucky income tax calculation starts with federal AGI, so ultimately the Kentucky tax is not too big a deal either.
So the goal is to earn as much money as possible, but be able to classify as much of our expenses as legitimate business deductions as possible. That way we keep the Self-employment tax low and can come close to having no federal or state income tax at all. It's all very complicated.
Hope we aren't bursting any bubbles out there, but I do think that our new approach is a little easier to follow and does a better job of including everything. Are we saying that it takes a minimum of $36,000 a year in income to full-time? Absolutely not! We are saying that is what we need to full-time fairly comfortably. But we can lower expenses and live on the road for less if we need to - and we will do whatever it takes to keep the RV Dream alive!
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