A Spending Finish Line Guards Against Empty Consumerism

Annual personal spending limit accelerates saving and giving

I’ve been a devout Mint user since May 2010, which means I have a complete history of my personal finances dating back almost a decade. Sometimes the aggregate view of spending shocks me with unwanted revelations – like the fact that I have spent $44,000 on restaurants over the past nine years. (I know, I know. Here’s my justification.). But the record of 14,100 transactions also provides a gold mine of data that I can use to improve my money situation.

With a higher current income now, I use Mint less for budgeting these days and more as a master ledger. A few times a week, I spend a couple minutes categorizing transactions from across my credit and bank accounts. It’s a discipline that helps me make smarter financial decisions.

While I use Mint as a system of record, it falls short on long-term insights. Without the ability to manipulate the data, I find it difficult to see trends. So, when I wanted to introduce an annual spending finish line — a self-imposed consumption cap — I needed a better way to set a baseline.

In January 2017, I started pulling Mint data into a spreadsheet every month. This has proved to be a much more effective way to track spending over time. I now have 21 months of transactions by category stored in one place for easy analysis. After almost two years of meticulously tracking expenses down to the penny, I’m ready set a personal spending limit for 2019.

Spending Finish Line Definition

Before diving into my numbers, let’s start with a definition of a spending finish line. In the book “God and Money,” which I have referenced a couple times before here and here, the authors advocate for the idea of financial finish lines, including a lifestyle spending limit. They discuss the importance of a “life-giving budget” that limits consumerism, and focuses spending on basic needs and “human flourishing.” The result is a personal spending limit, above which extra money is saved or given away.

“Funds available to give or save can increase to infinity, but personal consumption is capped by a carefully considered limit,” they write.

Based on research, the authors conclude that a post-tax salary of $100,000 to $150,000 annually allows a family to “fully enjoy an American life.” That means funding a “universally desired lifestyle” on par with Old European nobility, “consisting of the ability to travel, to dress and dine well, to become educated, and to pursue the arts.” That equates to $120,000 to $200,000 in gross income.

The authors cite this number as a logical maximum limit above which spending most likely should be considered excessive. They don’t necessarily recommend that amount; in fact, they both chose $100,000 as their upper-limit budgets and express a desire to come in lower.

“Although our finish lines are $100,000 per year in spending, we have ambitions to see whether we can live more modestly and experience abundant life that is not reliant upon high levels of cash flow,” they write.

Armed with my Mint data, I was curious how my own spending aligns with this research.

My Annual Spending Baseline

In my Mint-powered spreadsheet, I organize transactions into 60 categories that fall into three buckets: necessary spending, discretionary spending and spending from savings. The first two master categories include mostly recurring expenses from monthly cash flow. The third master category includes large purchases from short- and long-term savings.

Here a look at what’s included in each master category:

• Necessary spending: Transportation, utility bills, groceries, insurance and benefits, mortgage and home maintenance, property taxes, child care and essential shopping
• Discretionary spending: Restaurants and alcohol, entertainment, kids’ activities, gifts, appliances and electronics, cash spending, and fun or miscellaneous shopping
• Spending from savings: Home improvement projects and vacations

In 2017, my expenses lined up almost exactly with the “God and Money” research. My necessary and discretionary spending totaled $90,560. If you add in vacations (short-term savings) and home improvement projects (long-term savings), the number jumps to $109,000.

My 2018 numbers won’t be much different. My necessary spending numbers are similar, and my discretionary spending has jumped a bit more than I would like. Spending from savings stayed relatively high, due to a 15-year wedding anniversary trip to Hawaii and new kitchen cabinets. (This isn’t normal in most years.)

If you want to see all my spending, check out this spreadsheet.

One thing that strikes me about my family’s spending is that we came in on the low end of the “God and Money” recommended range, without realizing it. We practice frugality when it comes to most “consumer” purchases, but we spend freely in areas that bring us joy. Honestly, I’m not sure how we would spend much more than $100,000 without feeling wasteful. But I can see how we could still spend much less.

My Personal Spending Finish Line

For now, I’m setting an annual spending finish line of $100,000 in post-tax dollars (excluding home improvement projects from long-term savings accounts). Anything my wife and I earn above that amount will be saved or given away in our dual pursuit of financial independence and radical generosity. And we will constantly look for ways to spend less so we increase saving and make charitable giving a growing percentage of our budget.

As I examine my spending, two numbers jump out at me: the mortgage payment and child-care costs. Together, these two items accounted for about 37 percent of my total expenses in 2017. If I could get rid of them both, I would free up $40,000 a year. My recurring expenses would drop to $5,000 a month ($60,000 annually), and we would still live a fulfilling lifestyle.

Our child-care costs will drop dramatically in 2019 when my youngest child starts kindergarten, but they won’t disappear completely. And our $325,000 mortgage will take some time to pay off, but we’re making it a bigger priority. Assuming I can eventually cut those two expenses, I’m setting an aspirational spending finish line of $75,000 a year in today’s dollars.

A Money Guardrail That Increases Giving

The primary reason I plan to introduce a spending finish line is that I want to limit lifestyle inflation and direct my extra income into higher saving and giving rates. It’s a money guardrail that focuses spending on needs and joy-filled expenses, and it leaves less room for empty consumerism.

If I’m serious about letting my faith rule over my finances, a spending finish line is critical. Every dollar I spend recklessly is a dollar I can’t give to my church, a charity or someone in need. Consumption comes at a high cost when you consider the philanthropic trade-offs.

A spending finish line essentially sets a maximum “salary” for living.

“In economic terms … there is an income above which a Christian’s marginal propensity to consume should fall to zero,” according to “God and Money.”

That idea has emerged as a central tenet of my personal finance philosophy. The same principle guides me as I set other financial finish lines, including a retirement finish line and a net worth limit, to avoid turning into the rich fool.

Eventually, I hope to reach all my financial finish lines, and I can give away all excess wealth. A personal spending limit will get me there faster.