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Our 2023 Expenses – Millennial Revolution


FIRECracker
Latest posts by FIRECracker (see all)

How much does it cost to raise a child?

According to the USDA, it costs on average $310,000 USD (adjusted for inflation) to raise a child from birth to the age of 17. That’s $18,235 per year or an extra $1520/month to procreate.

No wonder birth rates are plummeting. If you choose to have a mini-me, you can bet that you’ll lose not only your sleep and sanity, but a big chunk of your net worth too. So your Poopy McPooperPants better be adorable as hell or he’s out the door!

Luckily our Little Matchstick has now progressed beyond the 3 modes of cry, crap, and nap and I’m starting to see why all my hard work is worth it.

That being said, as much as it’s worth it emotionally, is it worth it financially? Or are kids a financial dumpster fire like the USDA says it is?

If the USDA number was to be applied to last year’s expenses, that should add $18,235 to that number, on top of our normal expenses.

Let’s see if that actually happened, shall we?

Based on our 2022 dividends, we set our 2023 budget to $50,000 before we knew we were going to have a kid. And now that we’ve had a kid for 4 months, we should add 1/3 of the USDA yearly child raising costs, which are in USD. So that would give us an estimated 2023 spending of $50,000 + $6078 USD x 1.33 (Exchange Rate) = $58,083.74.

So, did we do it? Were our kid expenses in line with what the USDA predicted?

Looking at my fancy-pants spending spreadsheets, I can see that in 2023 we spent a grand total of…

$47,013.91 CAD or $35,087.25 USD

So, while our expense did go up due to having a kid compared to the previous year, it was nowhere near the USDA predicted $1500 USD/month. It was on average, more like $250 USD/month.

This includes the fact that I decided to have an epic baby moon which meant that I travelled for 4.5 months of my pregnancy and as a result had to pay out-of-pocket for prenatal scans in Bangkok and Sydney. This amounted to $1304.89 CAD or $973.80 USD, which is a one time pregnancy-related expense we will only have this year.

I also ended up buying a lot of kid gear second hand from Facebook marketplace and have since sold some of them as my kid grows out of it so some of that money has even been made back recently. I also think the costs will change (from formula to solid foods, baby gear to extra-curricular activities, etc) as he grows so this is only a tiny snapshot of kid expenses. I’ll be keeping meticulous records so we can keep tracking kid expenses going forward.

Here’s a monthly breakdown of our 2023 expenses:

Month CAD USD
Jan $3,899.17 $2,909.83
Feb $4,702.47 $3,509.31
Mar $4,359.53 $3,253.38
Apr $4,844.00 $3,614.93
May $4,119.16 $3,074.00
June $3,300.04 $2,462.72
July $3,783.70 $2,823.66
Aug $3,368.29 $2,513.65
Sept $3,257.23 $2,430.77
Oct $3,208.08 $2,394.09
Nov $3,459.03 $2,581.37
Dec $3,408.32 $2,543.52
Pregnancy expenses $1304.89 $973.80
TOTAL $47,013.91 $35,085.01



Feb-May ended up being our most expensive months because we were in Australia and New Zealand, while still paying rent back home. But thanks to Home Exchange, we didn’t have to pay any additional rent. Which made Australia and New Zealand much more affordable than expected. We did have to pay double rent in Thailand and Vietnam due to the lack of Home Exchange in those countries, but accommodations were extremely cheap at less than $400 USD/month.

Oddly enough, once kid expenses started in Sept, our costs actually went down compared to the beginning of the year. This is mainly because even though we had new expenses that we never had before, like diapers and formula, since we no longer had the time or ability to go to restaurants, spas, boardgame café, movie theatres, or escape rooms. So, while our baby costs went out, our entertainment and eating out costs plummeted. From example, in Feb, we spent $943 that month eating out, but in Oct, only $328!

It also helped that my sister-in-law gave me a lot of hand-me-down baby stuff so I didn’t have to buy that much baby crap. And of the baby crap that I did buy, I was able to score some amazing second-hand deals like $30 for an entire Chicco Bravo Travel System that retails for over $500 new! Or a Halo swivel bassinet for $30 that costs $300 new that my son outgrew in 1 month and I resold for $65 because demand for it was so high. Essentially, I got paid $30 to use that bassinet!

Second hand baby gear is so prevalent on FB marketplace and so easy to sell, there’s rarely any need to buy anything new. One of the few new things I ended up splurging on that’s baby-related is a $311 Travelpro suitcase that was on sale from $429. Totally worthwhile investment in my opinion now that we can no longer travel with just carry on so we need something with extra good wheels and lifetime warranty. Spending on ergonomic travel gear is always worth it in my opinion.

Here’s how our costs averaged out per month, broken down into categories.

Category Cost (CAD) Cost (USD)
Airbnb $100.37 $74.90
Rent (utilities and parking included) $1,538.00 $1,147.76
Eating Out $536.23 $400.17
Groceries/Booze $411.95 $307.43
Transportation $390.03 $291.07
Entertainment $199.68 $149.01
Clothing $27.02 $20.16
Cell Data + Internet $72.13 $53.83
Travel Insurance $35.67 $26.62
Other (person items/gifts/donations) $259.66 $193.78
Pregnancy + Baby $262.48 $195.88
Total $3,833.22 $2,860.62



This image has an empty alt attribute; its file name is 2023_spending_1-1024x743.png

Dividend FIRE

In last year’s expense post, I mentioned that we are now Dividend FIRE—meaning that our yearly expenses are less than the passive income (dividends and interest) generated by our portfolio, so we no longer need to sell any assets to cover costs in retirement. So that’s a 100% success rate of never depleting our portfolio, even during recessions. Kind of like having an apple orchard where you eat the apples and never cut down any of the trees.

But that was before Little Matchstick came along. Now that the little poop monster is here and filling up mountains of diapers and guzzling rivers worth of formula, have we lost our coveted dividend FIRE status? Did he just take a dump over all our carefully planned FIRE spreadsheets?

Well, due to a minor tweak made to our portfolio last year of adding swapping out bonds for Preferred Shares that pay a 6% dividend, our portfolio yield has gone up 33%. Wanderer will give more details about this in his investment update, but this means that so we can now spend $62,811 in 2024 and still be Dividend FIRE!

Year Spending (CAD) Portfolio Yield
2015 $40,000 $35,000
2016 $40,143 $35,000
2017 $33,016 $37,695
2018 $40,519 $38,124
2019 $43,053 $39,879
2020 $33,965 $38,284
2021 $39,029 $43,880
2022 $42,916 $46,985
2023 $47,014 $62,811



This image has an empty alt attribute; its file name is 2023_spending_2-1024x742.png

This means that I’m $62,811 – $47,014 = $15,797 under the yield, even with the new baby and pregnancy expenses factored in. We’re still Dividend FIRE’d!

Portfolio B

Ever since this blog was created back in 2016, in order to keep our retirement experience pure, we’ve reported on 2 separate portfolios: A and B. We live off of Portfolio A, which is the original $1 million portfolio we retired on, while segregating all the income we made post retirement into portfolio B. We do this mainly for the benefit of you, the readers, because as long as our base costs remain within the 4% rule of our original portfolio, that means that FIRE works even if you don’t end up making money on a post-retirement side hustle like we have.

Portfolio B spending is luxury and donation spending that isn’t part of our original expense that we call “fun money” and is taken out of Portfolio B, which is the money we unexpected made in retirement.

Portfolio A is currently worth $1,403,204, that means a safe withdrawal rate of 4% gives us $56,128.16, which means this years $47,014 yearly spending, even with pregnancy expenses added, is significantly under that spending limit!

Here’s how much we spent from Portfolio B this year:

$5752.13

This year, we spent this money on non-essential things like massages and on family, friends, and additional donations. 

So, even if we add together the base expenses, pregnancy, and luxury expenses, we get a total yearly spending of $47,014 + $5752.13 = $52,766.13!

This is still somehow less than the safe withdrawal rate of 4% of Portfolio A, the original $1 Million portfolio that we retirement with (and have been withdrawal from since 2015), without making a single cent in retirement, even with a baby.

So far, we’ve only been parents for a short 4 months, so child expense could change a lot going forward, especially if we upgrade to a bigger place. But for now, because we have very little time for eating out, movies, etc, new baby expenses have been offset by our previous entertainment expenses. I thought I would hate the late nights and poopy diapers, but to my surprise, I’m enjoying parenting so far and finding it very rewarding despite the sacrifices.

What do you think? Do you think the USDA estimated child expenses are reasonable? Out of curiosity, how do your yearly expense compare to ours?

Stay tuned for next week for our investment summary for 2023!


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