How important is using $$ efficiently for meeting your goals?

[Sandy]

One of the things I like about the people here is the tendency to research the heck out of every purchase, buy wisely, and make sure that every spent dollar counts – efficient use of $$ so that it goes farther. My early jobs were low paying and I needed to do all I could to make the $$ go as far as possible, or do without. I still do that.

Is this the trait that lets you LBYM and not feel you are depriving yourself?

I live in a nice neighborhood, and have a nice lifestyle yet I suspect we save more than neighbors who earn more. An example: A neighbor and I have kids about the same age and we interact a lot. My neighbor is gossipy and shares info about finances in bits and pieces, and may not realize/care that I put it together across conversations. This family earns $20-$30K/year more than we do, but doesn’t have same the savings and aren’t currently saving as much as we are. On the surface it looks like we live the same lifestyle, but there are many differences:

•Lifestyle home changes: We put in a pool a few years ago, they followed suit, same contractor but spent 40% more - a bit bigger pool and a bigger deck.
•Recreation: We go camping: bought tent and equipment for a family; They had said they hated camping, but their son asked to go, so they bought a pop-up and use it about 4 times per year
•Books: Us: library; They purchase books
•Landscaping: we are on the 5+ year phase-in plan, using cuttings, seeds, small plants, etc. They purchased 3-5 gallon plants in groups of 10, 20, or 30 all at once (many of my cuttings come from their now excess).
•Eating out: Us about 2x/month, them about 2x/week
•Etc.

Is this tendency to be cheap, er careful so that you can get to the same place for less the skill you use to be able to reach FIRE goals without feeling deprived?

 

[Nords]

One of the things I like about the people here is the tendency to research the heck out of every purchase, buy wisely, and make sure that every spent dollar counts – efficient use of $$ so that it goes farther. My early jobs were low paying and I needed to do all I could to make the $$ go as far as possible, or do without. I still do that.
Is this the trait that lets you LBYM and not feel you are depriving yourself?
Is this tendency to be cheap, er careful so that you can get to the same place for less the skill you use to be able to reach FIRE goals without feeling deprived?

Yep. It's always easier to reduce your expenses than it is to raise your income. And for a number of years you tend to challenge yourself to live as cheaply as when you were a starving student... because if you could do it before then you can probably do it later and bank the savings.

I guess that starts to change when you've reached FI and filled your savings buffer and set up your contingency spending plan and provided for long-term care and basically planned for everything but the asteroid strike.

I thought we'd stay beach-bum LBYM forever. However I've watched my PILs carry it to ridiculous extremes (children of the Depression) and make everyone around them as miserable as they must be. In the last year I've started buying with less research and less driving around. (I think we've done enough driving around.) However for most groceries, toiletries, & cleaning supplies we'll still price the brands and choose the cheapest commodity on the shelf. And I can stop a newspaper subscription but I'll still clip coupons.

I don't know if it's big-box/Internet competition squeezing out the price differentials, getting even more lazy, placing a higher value on my ER time, or just being better at recognizing the bargain when we see it. Finding bargains seems to be more challenging today than it was 20 or even five years ago.

When we start a new activity (like tae kwon do) I try not to dump a bunch of money into it until we can see that we'll be doing it for a while. For example we signed up for monthly lessons (not annual), bought cheap uniforms, used the communal protective equipment for six months and then bought our own from a friend during their Korea trip, and so on. After the first year I started to loosen up. Now we're on the annual lesson payment plan, buy higher-quality uniforms, have good gear and will probably buy better in the next year, spend time at clinics & camps, bought dedicated gear bags & special equipment, and don't hesitate to travel to Maui for a fun tournament. In another year or two we're going to have to buy our kid her black-belt display board...

 

[WM]

I think that for us, the efficient use of our money has been the primary factor in our FIRE progress. I was in school for a long time and the years that I was part-time, we saved all kinds of money because I did the research, etc. The year I worked full-time, there was no time left for figuring out savings, and as a result we ended up with very little extra money at the end of the year - even with a lot more income! We're keeping that in mind as I head back into the work force.

Psychologically, I think it's hard to feel deprived when we're daydreaming of all the extra time and opportunities we're "buying back" for ourselves for ER. Sure, we can't always buy everything we'd want, but neither can most people.

 

[LOL!]

About 7 years ago efficient use of $$ was important, but it became pretty clear that our goals would be reached by our deadline no matter how much money we spent. So we started eating out 3X a week, buying new cars, going on exotic vacations and stopped depriving ourselves and our charities. Psychologically, it's been liberating.

 

[JJac]

I should hit a point where I can live comfortably on a 3% swr in about a year, but I plan on working another year or two afterwards for other reasons

I have had a very hard time mentally opening the purse strings, but I plan to let loose during those last working years and spend most of what I earn. It is during that time that I will do a few $10k vacations to remote scuba diving destinations

I think there is just an "enough" threshold

 

[chinaco]

After our mortgage is paid, we could live (our current lifestyle) on about 2.5% wr (for normal living expenses) of our target. Extraordinary periodic expenses (cars, furniture) would raise the average amount a little.

Our approach has been too save/invest aggressively early on. Manage expenses reasonably (but not deprive ourselves).

However, we will spend more money in ER than we do today. We intend to enjoy the fruits of our labor. We can always tighten up if we need to.

I have struggled with identifying the target amount... But I think we will have oversaved unless the domestic economy/markets go into the crapper for the next 20 years.

Nords hit the nail on the head. Managing expenses is easier than increasing wealth. In fact managing expenses is part of increasing wealth.

 

[kaudrey]

Hi Sandy,

Yes, I do LBMM, but I guess I never look at it as feeling deprived. I don't spend money on "stuff" because I grew up in a LBYM house (my parents retired 12 years ago at 57), where "things" and "shopping" were low priority, and family time, sports, and school, were high priority.

My parents saved up for house projects (like the pool we got when I was 10), and my dad did all of the work around the house, paid cash for cars, and never charged vacations.

Don't get me wrong - I spend money, but I spend it on vacations (I like to camp too!) and nights out with friends - on "experiences" rather than things. But I do that after saving 30% of my salary.

I don't deprive myself, I just think differently than others. A lot of my friends drive BMWs, I drive a Volvo S40. Could I afford a BMW? Yes. I just couldn't get myself to spend that much on a car. It's not in my nature (or nuture?)

 

[Sandy]

Yep. It's always easier to reduce your expenses than it is to raise your income.

So very true. Often the only way I could get a raise was to cut some other expense and redirect the funds elsewhere.

I think that for us, the efficient use of our money has been the primary factor in our FIRE progress.

For me this is so accurate and really the point I was trying to make. For salaried types, I think that the only way to become FI is to manage you $$ to make sure that you get the most from what you have.

Years before I read YMOYL, I would look at something and calculate how many w*rk hours I would need to purchase the item. Just my nature. When I did buy something, it was researched, thought thorough and a solid purchase meant to last.

I don't deprive myself, I just think differently than others.

I hate feeling deprived and have made some choices that were not necessarily financially sound but "worth it" on the lifestyle scale. But neither do I want to waste my $$.

And, based on my liefstyle, I don't think of myself as deprived, but I do credit frugal tendencies and sound management to being able to live as well as I do while also meeting savings goals.

 

[WRBT]

Our biggest difference compared to others in same income range has always been the cars.

Software engineer and attorney, completely content with a 98 Corolla and 99 CRV. We've had coworkers and neighbors go thru 2-3 new cars in the time we've had these... and when I think about how much a monthly burden car payments and the transaction cost of buying new every 3 years... ouch.

We're considering replacing the wife's Honda with something newer next year, but I'll probably hang on to the Toyota for at least another 4 years. It's due for a new clutch soon and it's easy to get caught in the mindset where you just dropped x amount on the car so you have to hold onto it for another couple years eh.

 

[txdakini]

DH and I have lived below our means for years, but not very efficient about it. We lived together for 10 years before getting married. When we bought a house together and when we rented together, our rule was that we would only buy/rent what one of us could afford. And that was the least paid one of us, not the richer of the two. At one time we had a vacation home as well, but when I quit my megacorp job, we immediately sold it although we could have "afforded" to keep it. We keep our cars for ten years or more although we sometimes buy new. We're not real into shopping around for groceries, but definitely shop for best buys in electronics, large appliances and office stuff. His clothing is bought retail but basically he shops twice a year (still working) for work clothes, dockers and long sleeve shirts, new shoes every two years. He's already stocked for the first few years of retirement...shorts and t-shirts. I buy clearance racks and consignment stores, and each of our closets have lots of empty space. Our biggest money waster is eating out, but we've already scaled that back (by 70%) and feel we have more room to cut as we're not feeling it yet. We rarely buy things for the house and have had the same decorating scheme and furnishings for ten years. We are sellling our house now in prep for late summer retirement. One of my friends said, "oh, great, you get to have all new furniture when you move!" I don't think so.....! That's why they will never be able to retire. We'll use what we have and probably get rid of about half as we are downsizing.

We could have retired sooner or with more cushion had we been more efficient. But DH has been a little slower to get on the "less is more" bandwagon. And when I was working for megacorp making gazillions of dollars, I was also working 60-70 hours a week and exhausted. We paid for every kind of service and didn't question costs much. Now that he can actually retire, he's becoming the cheerleader for LBYM. Being "efficient" will absolutely be required for us to stay retired.

We have a couple of friends who live on less than half of what we are anticipating living on in our retirement. They serve as inspiration, just as many on this board do, that it can be done. They are happy and live well.

I teach workshops (one of my true passions) as I want to and recently I met with one of my groups. They all live at a much higher consumption level than we do. 3/4 to 1 Million dollars homes, nice new cars, kids go to private schools, housekeepers, etc. And on occasion have talked about being strapped for cash or juggling this investment or property to make another deal. They are all about 10 to 15 years younger than us. They were shocked that we could retire. They kept trying to ask (but still being polite) how we could possibly afford that. I told them we live below our means and have for years. and we are willing to downsize our homes and lifestyles in order to retire now while we still have some good years. We made enough money through the years that we also could have lived near the same level they do, but would never have felt comfortable being "overextended" or spending so much.

 

[W2R]

Is this tendency to be cheap, er careful so that you can get to the same place for less the skill you use to be able to reach FIRE goals without feeling deprived?

Not exactly. You might say that I don't "keep up with the Joneses" at all. So, I'm NOT in the same place. I spend a lot less than most people at my income level, period. It's easily discerned by anyone who knows how I live. I live better than the majority of Americans, but not as well as my income would imply.

I don't feel deprived, either.

I have done a whole lot of introspection from time to time, and have nailed down my priorities pretty firmly. I know exactly what I want to do with my money. So when someone else shows up on my radar driving a new luxury car, it honestly does not make me feel deprived.

Instead, I think about what I did with that money, and I feel genuinely pleased with my decision. I'm not conflicted, and I feel like THEY are the ones who should feel deprived, with their dumb car payment hanging over their heads for years.

I think that as a society, we have a Madison Avenue inspired compulsion to spend, spend, spend - - and as individuals, we need to combat that tendency within ourselves.

 

[LBSuarez]

Realistic incomes/expenditures for retirement...

I've been reading this thread about using money efficiently, and wonder if anyone would care to share what their actual costs are for retirement. I'm referring to the necessities here. I've worked out what I think we will need if we "took a break" for a year while deciding to go for ER or not and found that $3500 a month should pay for everything including Health Insurance, and Long Term care insurance which we don't yet have, but have a quote for policies. We're 55/56 and have no mortgage or debt, a 6 and one year old car, and can live very simply if we have to...Does this sound like a reasonable figure for bare bones living? Does anyone else out there live on less than that (and still pay for the insurance?)
Thanks for sharing...I do not want to live quite that simply, but would like to know if it's a realistic figure, or I'm missing something important.

 

[TromboneAl]

Yes it's realistic. Our documented expenses for the last 12 months are $31,000, and that includes a trip to Hawaii for two, and a trip to Sweden for one.

You'll find ranges from $15K per year to $200K per year on this forum (there are some threads with full budget details).

 

[MasterBlaster]

I've been reading this thread about using money efficiently, and wonder if anyone would care to share what their actual costs are for retirement. I'm referring to the necessities here. I've worked out what I think we will need if we "took a break" for a year while deciding to go for ER or not and found that $3500 a month should pay for everything including Health Insurance, and Long Term care insurance which we don't yet have, but have a quote for policies. We're 55/56 and have no mortgage or debt, a 6 and one year old car, and can live very simply if we have to...Does this sound like a reasonable figure for bare bones living? Does anyone else out there live on less than that (and still pay for the insurance?)
Thanks for sharing...I do not want to live quite that simply, but would like to know if it's a realistic figure, or I'm missing something important.

The Bare bones lifestyle. Maybe I can help here !

I am not retired as yet, but I suspect that if you really want to you can probably live for maybe $200 a month. Just buy a bag of beans and a bag of rice. That should hold you over.

Stop workin' and start liven'

The good life awaits you...

 

[unclemick]

Hmmm - last year drove around in my 94 pickup(249000 miles) with rusty fender in my Salvation Army bib overalls - AND - took the top of the line Princess Cruise(in season aka Feb, balcony suite) to the Mexican Riveria.

Cheap bastardhood and arrogant prick class!

heh heh heh - in ER logic is not my most important product. Get yer jollies the way you want - just sorta keep within compass over the longer stretch - handgrenade wise - so to speak. .

 

[HFWR]

To answer the original question, VERY...

 

[unclemick]

Hmmm - Er'd over 1993 - 2006, roughly 12k to 89k/yr with the average skewed toward the 12k end(never ran a median or average). The high numbers were blow out travel, remodeling including Katrina - a er ah remodeling/move of sorts as it were. Couple, no children, paid up fish camp, vehicles, no health insurance costs - living large in the Louisiana swamp.

Haven't settled in on a core midwest/Kansas City number yet. Best guess in the 30-50k range including now health insurance and 3?? 'vacation trips' per year on average(1-2 wks each). One cruise and 3 last year.

Varies.

heh heh heh - you can really honk back spending if the market makes you nervious or you get an 'el cheap'o attack.'

 

[tightasadrum]

I'm not ER'd quite yet, but I sure hope it's less expensive than while working, or I'm in trouble. However, looking over the expenses in preparation for ER, I've determined that it all depends on how you define a "non-descretionary expense."

Here is an glaring example. DW has always been the biggest kid around the house on Christmas. She starts shopping for Chrismas in January! We have talked about this now for over 30 years, but it doesn't compute. Bottom line: Christmas is a LARGE non-descretionary expense at my house. So I just go ahead and plan for it.

It just proves to me that two CANNOT live as cheap as one.

 

[Sandy]

Bottom line: Christmas is a LARGE non-descretionary expense at my house. So I just go ahead and plan for it.

Proves that you need to know your own expenses in order to plan. This is an important lesson from this board. Using the generic "rules of thumb" don't necessarily translate to your own situation.

 

[old woman]

I have always penny pinched and it has allowed me to save and not get a lot of debt. This week my truck has 120K miles and is ten years old, I didn't know what was wrong with it but it wouldn't go. I could start it but it died. I had 3 men I know look at it and one said it needed a new battery. I could have had it towed somewhere or had my boyfriend get me one and bring it but my boss let me drive a company van home and my boyfriend bought me a new battery as a gift and another man put it in for me. My total cost was zero.
I have been too cheap too long and am trying to recover. I wasted $6.99 tonight buying oysters for my boyfriend. The Dow lost 381 points today saving a few dollars just doesn't seem important. I spent 10 cents a gallon extra on gas this week because I was on empty and it was closest, in my early years I wouldn't have filled it with over priced gas but 1.50 saved me a trip to a different gas station.

 

[TromboneAl]

I'm not ER'd quite yet, but I sure hope it's less expensive than while working

For me, the big surprise was in taxes. Income taxes were one of the major expenses while working, and now, at least until I start using my tax-deferred accounts, taxes will be almost zero.

You should be able to make a pretty good estimate of how much your expenses will drop: less driving, no nice clothes necessary, fewer lunches out, etc.

I wasted $6.99 tonight buying oysters for my boyfriend.

They... um... no, I'm not going to say anything.

The Dow lost 381 points today saving a few dollars just doesn't seem important.

I've got a system for dealing with this kind of thing. That is, let's say you gain or lose $10,000 in a day on the market, and that night you are considering going into the other room to turn off the cable modem and router for the night -- something that will save .2 KWH, or 2.6 cents. You might say "Hey I gained/lost $10,000, what does 2.6 cents mean?"

But my system is to treat each potential saving independently, and just ask "Is it worth the effort to save that?" In the case of the modem/router, the effort is to push the off switch on the outlet strip with my toe on my way to the bedroom. Almost no effort to save $9.49 per year.

Running joke around here is: Me: "I forgot to turn off the modem last night." DW: "Well that's 2 cents we'll never see again."

 

[deserat]

Yes, I believe living a LYBM lifestyle now as well as during retirement allows one to retire early as well as stay retired. I'm with Nords in that I'm not such a huge researcher anymore in that I've got price points in my head as to what I'd be willing to spend on an item. I think its due to being this way for a long time. Example, we received a flyer from a sports store which had the lightweight hiking shoes featured - they were from $60-$120 a pair - I told my husband - I like those, BUT, let's go find them or wait until they are $20 or $30. Other example - due to husband and I being affiliated with the military, we have access to the commissary and BX - the prices are so much lower at the commissary in general for food, that when I walk into a regular grocery story, I gasp at times. As for the BX, they aren't necessarily the cheapest, but I don't have to pay sales tax (7.75% here), so when shopping, I have to keep that in mind. Other usual suspects; library instead of buy books, don't eat out much or eat a cheap Costco (my husband keeps asking for pizza at Costco...), bring our lunches to work, don't by clothes or only on sale, make gifts for people, don't re-decorate....ever , actually look at it as part of your lifestyle, accumulate those things that have meaning and surround your house with that making it a home versus someone else's ideas adoring your walls and floors, invest first, pay bills second, i.e. pay yourself first and make it a hefty paycheck (more than 10%); etc, etc, etc. As for the market - I keep telling my husband not to track that stuff daily, it will just make him sick, but I think there's something in the male mind...yes, a sexist remark, but I'm surrounded by them at home and work - I know how they work better than women (outside of me).

 

[Mach]

Is this the trait that lets you LBYM and not feel you are depriving yourself?

I don't think so. I think that trait is a symptom of the real thing that you and many others do, and that is:

Analyze opportunity cost - aka looking at the big picture
(and being responsible)

If you don't want to buy books, it's because you don't want to take on the loss in savings/investment, that is, you think the opportunity cost is too high. If there was 0 cost to you for buying, of course it would be better to just buy them (more efficient). This is not because you necessarily "like" penny pinching, you may, or may not...but really it comes down to you have analyzed your wants/needs as a WHOLE. Seeing this "big picture", and accepting that eveything is connected (you spend here, and lose some of your financial security), and accepting the responsiblity of making those choices, you end up doing exactly what you're doing.

Being responsible, and analyzing the "big picture", are keys to success in pursuing goals in general, whether it be reaching early retirement, or running a business, or landing on the moon. Sometimes people are good at applying this to some areas of their life, and not others. But generally, I would bet the rest of your life is pretty well under control as well, because you apply these same good qualities to most things you do that are important.

-Mach

 

[heyyou]

Consider your LBYM lifestyle as practice for retirement. Live on your proposed ER budget for a year or two while you are still working. The savings are a second benefit. The expenses are easy to figure. Look at annual income minus deposits into savings. You spent the rest, so that is your expenses.
Knowing our proposed retirement income, we practiced for a few years, then just stopped going to our j*bs. No change in our lifestyle, but 5 more Saturdays per week. I'm skeptical of the hypothetical cutbacks if you haven't been living that way.

 

[LBSuarez]

Income minus savings...not so simple...

It would be so easy if we had regular jobs to just take our incomes, subtract what we've saved, and then figure that's what our expenses will be. We've had many changes in income AND outgo in the last year...I make commissions, but IRS allows me to subract many expenses from my gross income. My husband has had a tough time finding a good job, and has filled in here and there earning money on and off. We also no longer have college tuition, but are helping our daughter while in graduate school...oh...I forgot to mention that we just sold a house rental near the college where my daughter went to undergraduate school...so, no more income or outgo from that either...For the past 30+years of being married, we've always been saving almost every penny we could, and now...maybe we don't have to?
Ironically, what I think is that we will have MORE money to spend on ourselves than we've ever had before! I was asking if the $3500 seemed realistic for the average retirees with no mortgage, or debt, but having to pay for health insurance and Long term care insurance. I think that barring disaster, we'll have another $1500 a month for fun...and more once medicare and social security are available to us.