My startup life budget

Lowering monthly burn at the start of the adventure

10 days ago, I gave notice at my employer, officially ending my professional career in private equity. After a year of tangentially living the startup life, attending hackathons, working on a side project, and taking regular trips to the Bay, I am determined to give it a good run — right now when my aspirations are high, responsibilities are limited, and financial padding is enough for at least a few years of freedom. In part as a way of extending the “runway” that I have and in part to develop discipline for managing startup finances, I’ve gone through the exercise of budgeting out the first 6 months of expenses in an effort to reduce my monthly burn as much as possible. Here are the major categories of expenses and how I ultimately figured out the numbers:

Rent:

Probably the biggest overall category when it comes to spend. Life in the Bay area can get really expensive simply on rent alone. Fortunately for me, I’m not tied to living in San Francisco and quite frankly appreciate the quite and focus that comes from living outside of the city. Having dated a Berkeley girl for the last year, I’ve gotten to know the downtown Berkeley area really well and really enjoy the atmosphere. There are some major advantages of living near the Berkeley campus:

• Cheaper rent — studios can be as low as $1K per month, with shared apartments ranging closer to $700-800 per month
• Access to awesome people— having met a number of Berkeley students and alumni over the past year, I know that the campus holds a community of talented, ambitious engineers and entrepreneurs to collaborate with
• Low cost of living — Aside from rent, the other aspects of living are quite cheap as well, especially food (college campus-esque dining locations), public transportation, and supplies
• Proximity to SF — Best of all, Berkeley is a 15-20 minute BART ride from downtown Berkeley. The commute isn’t quite as convenient as living in SOMA, but the cost savings along with distancing myself from the distraction of SF city life is likely an overall win

Overall, I’m budgeting my rent to be $1,000 per month, which I plan on sticking to. In the first few months, I’ll be staying with a friend, which should also help limit my rent expense.

Food:

If you know me in real life, you’ll know that this is a very real expense for me — quite likely even greater than my NYC rent expense. I’m an avid food appreciation-ist, often traveling 2-3 times per year to far away destinations just to try the cuisine. However, both as an effort to lower expenses and eat healthier, my goal in living the startup life is to depend much more on cooking and eating wholesome foods and less on dining out and junk foods.

To help enforce the habit of eating both healthy and low cost, I set my daily food budget to $20 per day, intending to spend ~$5 each for breakfast and lunch and $10 for dinner. Realistically, those kind of numbers are only doable with shopping and cooking, allowing for the occasional eating out. Still, even on what I consider a tight budget, food expense comes out to $600 per month, eventually upped to $900 per month as hopefully things get busier and revenue starts coming in.

Phone:

Ah — parting with my corporate cell phone plan is definitely one of the more heartbreaking parts of my new life. For the last 5 years (including my last year and a half of college), I’ve had an employer sponsored phone plan, spending on average probably $100-120 per month. Overages? Didn’t care. Calling from overseas? Put it on my tab. Roaming? No problem. Now that I’ll be paying for my own plan, I’ve suddenly become very aware of just how expensive plans are.

After spending a night looking up cheaper phone plan options, I’ve found a plan through SIMPLE mobile that provides unlimited talk, text and data (throttles at 3GB) for only $50 per month — definitely a win compared to the my current plan.

Local transportation:

Getting around was a tough one to figure out in advance. Initially, I thought getting a car would be a good idea because of convenience, especially since I’ll be living outside of SF. However, the economics of owning car made it difficult to accept. Including insurance, the amortized cost of a used car, and gas, owning a car meant a $700-1000 per month spend.

Instead, I’m going to initially see how well the BART + bus + Uber systems can take me around. Although I intend to spend most of my time in Berkeley, I do plan on going to SF 3 times per week, which will likely cost ~8.50 per trip. At 12 trips per month, transportation I would expect comes out to $100 per month plus another $50 for extra buses, Ubers, etc that come up as needed.

Flights:

Some background: My side project that I’ve built over the last year is a government tech application that is currently used across New York City’s Financial Empowerment Centers. We recently closed a deal to provide the service to Financial Empowerment Centers across the country, which for me means that although I will be moving to San Francisco, I will have to make regular trips out to New York City in order to maintain the relationship and grow the business.

Along with the need to maintain my side project, flying back to New York City gives me the opportunity to visit my parents in Pennsylvania regularly as well. All in, the cost of a cheap round-trip flight from SFO to NYC is $278 on Delta. For me, the cost of taking one round-trip flight a month will be quite a bit less, thanks to my gold loyalty status on Delta (earned from a solid year of business travel). Every round trip flight earns me 10,000 miles, doubled from the usual 5,000 miles for the SFO/NYC flight. And since a round-trip flight on Delta can be purchased using 25,000 miles, I get a free trip for every 2.5 trips. In the end, my flight costs per month come out to $200 per month — not too bad!

Healthcare:

Perhaps the biggest concern I have going into startup life is health insurance. After hearing horror stories of Americans going into bankrupcy due to mounting healthcare costs, I’m extra sensitive to making sure I have coverage during startup life.

COBRA isn’t an option — the HR folks at my employer quoted me the cost of our current plan, which without employer contribution comes to ~$10K per year. Yikes. Thankfully, the Covered California website made it pretty simple to get quotes on decent healthcare coverage, placing my monthly premiums at ~$300 per month. Hopefully my use of healthcare services will be limited, but having the coverage will at least let me sleep comfortably at night.

Miscellaneous:

Of course there are entirely unexpected expenses. Sometimes, these can be huge items (moving costs, furniture needed, weddings, etc) and pretending like they don’t exist don’t work. Along with factoring in a ton of one-time expenses I expect to run into, I’ve thrown in an additional $300 per month in miscellaneous spend into the budget. It’s important to live a little, right?

Grand Total:

• Recurring expenses: $2,600 per month, $31,200 annually
• One-time expenses: $233 per month, $2,800 annually
• Total budgeted burn: $2833 per month, $34,000 annually

Overall, not too bad. $34,000 annual spend that includes decent accommodations, healthcare, food, and regular trips back to NYC is definitely something that I can live with. Still, it is a little surprising that even with reasonably low costs for rent (relative to SF that is), healthcare, and food, the overall annual expense is over the average U.S. house-hold post-tax income. It’ll be interesting to see how close I get to my budget.

At the end of the day, if business is good enough, I’ll likely ramp up the spend to trade money for time. Like my dad always said growing up: “Those who have money, don’t have to spend the time. Those who have time, don’t need to spend the money.”

If you enjoyed this read, I’d love for you to ‘Recommend’ this piece so that others can enjoy it as well. If I forgot a major area of startup life expense, tweet me at @andrewjiang.