Does that $100 a month on restaurants actually costs $24,000 a year?

As my husband and I strive toward financial independence, I'm becoming more conscious of what it would be like to live without a salary. If we are living off savings, how much savings does each of our monthly expenses require?

Let's take a $100 a month expense. That might be dinners out for some or new clothes or excess groceries that are not really needed, i.e. treats.

And one hundred a month or $25 a week does not seem too crazy for "fun" money. But let's look closer at that number.

Assume a five percent withdrawal rate. Some would argue this is too high and you should really be looking at a three percent withdrawal rate. But we'll be optimistic and go with five percent. To spend $100 a month or $1200 a year, you would need $24,000 invested, "spinning" off that interest.

And if your superfluous expenses are closer to $500 a month, or $6000 a year, you would need $120,000 to fund them.

My husband and I have seen a major upward creep of expenses in the past ten years. We've had kids, done some major home repairs, and become less focused on money saving strategies. The spike got higher five years ago, which correlates directly to the kids being born;-). It is not only the added expenses of their needs, but also the accompanying time crunch. Where I might have spent time looking for the best deals on things before, I now tend to factor in time pretty heavily and "just get the job done." If you've ever gone grocery shopping with a five and two year old, you know leisurely price comparisons between canned goods is tough....

In addition, as our income has grown, we've found ourselves getting more complacent with expenses. "We can easily afford this" is something we've both said. But then I look back over 10 years or so of record keeping and our expenses are almost five times higher than they were in our super frugal mode.

And importantly, I don't think our quality of life is five times better. We had a wonderful life then and a wonderful life now. It's nice not to feel we "have" to stress about how much the electric bill costs, but if it turns to laziness about unplugging appliances not in use and eating out at will and more big screen televisions (private aside to my sweet husband;), we're setting ourselves up to work a lot more years to pay for this luxury lifestyle.

So my goal in the coming month or so is to do some simple math as we go along. For every dollar we spend, we would need $20 in the bank to spin it off. Now that bagel and iced tea at Panera that I so love ($3.95) - is probably not worth $80....and my favorite Friday night pizza place ($20) - is probably not worth $400 - but whether the mind will be strong when the stomach is weak, remains to be seen.

Happy interest computing as you go about your day! The Frugal Millionairess.