Family of Four: One Year Budget in Spain Less Than $40,000

We are going to take a look at what we are forecasting our spending to look like for our first year of FIRE (financial independence retire early) / early retirement.

This example is based on the idea of moving to Granada, Spain for 10 months out of the year and then coming back stateside for 2 months to visit family and friends.

One of the things that I did in order to figure out how much money will easily sustain us in retirement is to look at our current spending (which really hasn’t changed much over the last 5 years or so).

We currently have about $3,200 per month in expenses so we can conclude that we will need $38,400 to sustain our current lifestyle in early retirement.  We can then take the $38,400 and multiply it by 25 in order to get the amount of money we need to be able to live off of the 4% rule.  

$38,400 * 25 = $960,000 (We plan to have more than this.)

But you’ve never been to Spain, how can you possibly have any idea how much it will cost to live there?

Research!  Luckily for us there are others that have done what we are planning to do.

For example, a family of four from Wisconsin (Bucking the Trend) was able to live in Granada for two years on a similar budget to ours. 

We have also been able to get a very good understanding of how much a home will cost to rent based on Your Year In Spain.  And Your Year In Spain can help us rent any of the properties that they have listed.  

There will be 6 main expenses for living in Spain:

• Rent / Utilities
• Groceries
• Medical Insurance
• Travel (Within Europe)
• Travel To / From US (And Within US)
• Variable Expenses / Spending Money

Lets go over each of these in more detail. 

Rent / Utilities

We are planning to rent through Your Year In Spain.  We have a goal to keep our rent / utilities expense the same as what we pay in the states ($1,750).  We also have to factor in currency exchange which is currently not in our favor so we want to stay below $1,750.  We are thinking between 1,100 - 1,250 euros (rent and utilities) per month which would be $1,280 - $1,450 USD (as of 9/2018).  

We are estimating that our utilities will be between $200 - $300 per month (based on Bucking the Trend, for example).  This is significantly more than we pay in the states, and this will be the only aspect of our budget that will increase when compared to our US budget.  Keep in mind the homes in the city are literally thousands of years old so some still don’t have gas connections (use electric instead).  But we feel confident that we can stay below $1,750 for rent / utilities.

Groceries

There isn't a great way to estimate how much groceries will cost because the cost is connected to the types of food a person eats, and everyone likes different things.  We have been a plant based family for a long time (approaching 10 years).  Our meals tend to revolve around rice / potatoes / beans / lentils / fruit / veggies.  From everything I read, Granada has lots of markets that sell fresh produce, and I think we will be able to stay close to our current grocery budget of about $300 per month.  300 Euros would mean about $350 USD.  

Medical Insurance

One of the prerequisites for our non lucrative Visa is that we have to have proof of medical insurance (for a year).  Luckily the medical system in Spain is fantastic and cheap! After doing some research, I was able to get a quote from this company Sanitas Expat.

The plan recommended would cost $233 USD per month (200 Euros) and would cover all of this. 

If you don’t want to read through that (I don’t blame you) here are a few highlights:

• 100% primary care coverage in Spain 
• 100% coverage for dental cleanings
• Worldwide Emergency Healthcare: Up to 12,000 Euro per person.  This covers expenses from doctors, surgeons, hospitals / clinics from medical services received outside of Spain (like when we come back state side for 2 months).

I think we will quickly learn that people don’t worry about health care in other countries like we do in the US because their health insurance is affordable.  We are planning to pay for annual checkups out of pocket.  The insurance will just be for emergencies and to qualify for our Visa.

We also have a little Health Savings Account (HSA) hack that we plan to use for our insurance expense for the first year or two of early retirement.  My employer currently deposits $1,500 to my HSA account each year.  We have been paying for our current medical expenses out of pocket so that we will have around $4,500 sitting in our HSA (deposited free of charge by my employer) that we can then take out during early retirement. 

Travel (Within Europe)

On to the fun stuff!  A big selling point of moving to Spain is so our kids (and we) can be immersed in the Spanish culture and language.  It also opens up the door to some great travel opportunities within Europe.  It's super cheap to travel from city to city or country to country (compared to what we are use to in the US).  We used GoEuro to run some hypothetical trips that we plan to take.  

A 1:45 minute round bus trip from Granada to Malaga is less than $100.  That is not per person, that’s total for a family of four!  Malaga is the birthplace of Picasso and home to many great beaches.

After beach bumming and visiting the Museo Picasso Malaga for a few days we could then either fly ($375 total for a 1 hour flight) or bus ride ($147 total for a 6 hour bus ride) to Madrid round trip.  We could then fly from Madrid to Paris for $316 (these numbers are total for four people).  

In this example, we would go from Granada to Malaga by bus, Malaga to Madrid by plane (or bus), and then Madrid to Paris by plane for between $563 - $791 total for a family of four.  We would use Airbnb for lodging with averages of $50 - $70 per night in most cases.  Unbelievable, right!? 

Travel To / From US (And Within US)

We have budgeted $3,500 to travel to / from the US once per year.  We will fly in and out of NYC because flights to Europe tend to be cheaper from this hub.  We'll also spend time with family / friends in the US before heading to our next adventure.

Spending Money

We currently have $800 allocated to spending, and we don’t plan to change it for Spain.  In fact, my guess is that we will be able to stay under budget on this for most months.  

Now that we have come up with some educated estimates for our six main expenses (we also threw in a cell phone expense below), we can start to put together our budget for Spain to make sure that it falls within our current spending of $38,400 per year. 

We came in well below our target of $38,400.  This example leaves us under budget for the year by $6,300!  We could apply these funds to another trip within Europe (Germany? Italy? Portugal?) and still stay well below our annual budget.  If we kept spending as shown above at the $32,071 level, this would put us at a 3.34% withdrawal rate (assuming the $960,000 net worth that we mentioned at the beginning of the post).  Not too bad for year one of FIRE!

What do you think?  If you could ... would you spend a year or more in a different country?  What do you think of our Spain budget?

-Erik