Your Lifetime of Expenses
AI art by Midjourney
What does a lifetime of expenses look like?
During my conversation with Mitchell Baldridge, he dropped an obvious-yet-overlooked idea: Taxes are most people’s single largest expense.
Suddenly, a question popped into my head: What % of my entire life’s expenses go to taxes?
Then, a string of curiosities: Education? Gifts? Sandwiches?
On the day I die, if I got a report with a pie chart of every dollar I ever spent – what would it look like? Would I be happy with it?
We spend a lot of time looking at our short-term budgets, but what about the big picture? Would you be upset if you found that 10% of all your life’s money went to interest payments? What about 2% to education?
To avoid making this a posthumous post, we did some research to see if we could put together a reasonable approximation.
There are a lot of different takes on this.
I tried to summarize them faithfully in this graph:
Though there is no such thing as average, it at least serves as a basis for doing your own mental math.
Rough Rules of Thumb for this data:
The Average Person spends about $3m in their lifetime.
But… The Average Person only earns $1.8m in their lifetime. I’m still confused by this.
(The estate covers the debt to the extent possible… but then I guess it’s just unrecovered? I wonder how much. Another rabbithole, not today.)
You’ll spend about $400-$500k on food… unless you live in Hawaii, then it’s like $700k.
Housing is the biggest category at ~24% of lifetime spending, which includes mortgage, utilities, and furnishings.
Observations:
We don’t put enough attention on taxes. For most people, it is the single largest expense of your entire life. We tend to overlook this because it feels outside our control, but there are things we can do to optimize our tax burden, and it can be high-return work. Check out my podcast episode with Mitchell Baldridge about “Defeating Taxes” for more. It was the inspiration for this post!
If you’re an addict, you’re a sucker. Drinkers and smokers spend more on their habits than they do on their education. And you’ll notice the profit margins are much higher on drugs than, say, broccoli. Smoking your whole life costs around $1 million dollars!!
One big decision can outweigh thousands of little decisions. Lattes? It takes years of skipped lattes to overcome the cost of one additional move, vacation, or broken transmission.
We don’t spend enough on Education. Holy shit The Average Person only spends $30k on education in a lifetime. Let’s be above average.
I still wonder how different these charts are for much lower or much higher income. I imagine the % paid in interest is MUCH higher for lower-income people (pawn shops, payday loans, worse credit scores) and higher-income people take much less debt and with better terms. (Though those playing the buy-borrow-die game would show up very different.)
It could be helpful to set up a spreadsheet or other tool to slowly build this pie chart for me throughout my life. I’d love to know that I was spending at least 1% of my money on “silly adventures” – life is short. Let’s spend wisely!