How much could you cut spending?

[Rustic23]

Another thread got me thinking, 'Just how much could I cut back on spending if I had to?'

At first thought, 'Not much'

Yea, there were small things, like cut my internet speed, drop one cell phone, maybe cut back on the amount we eat out, which is about four or five times a month. But really these would not amount to a lot.

Then I came up with some larger items. In Tx., over 65 can defer property tax. That is about $7,200 for us. We also budget $8,000 a year for travel.

Results, I think we could reduce our monthly spending about 35% without a major lifestyle change. i.e. cut back electrical a/c use, cheaper food, etc.

 

[jazz4cash]

Not retired. My retirement budget includes low, medium and high levels of spending. There is a 32% spread between these. The high spending level includes higher discretionary expenses (e.g. travel, gifts, home maintenance,etc)

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Cutting spending can be a lot different from cutting expenses. We are currently facing the music for many expenses that were deferred due to dependent tuition payments (which are now thankfully done except for residual loans).

How does the deferred property tax rule work? I believe some locations charge interest until the tax is paid?

 

[Rustic23]

Yes there is a 7% simple not compound interest. However, this would be more of a concern for our kids as it would reduce their inheritance. I would also effect us if we were forced to sell, but, would seem to be an option for a short term reduction. i.e. drop in market that forced reduction in withdrawal rate.

 

[rodi]

We have some big ticket things we could cut - but would strongly prefer not to.

- We have earmarked, set aside, funds for some large home improvement projects - those could be postponed indefinitely.
- We have a major "once in a lifetime" vacation funded and set aside - that could be cancelled.
- We could stop funding the kids college funding - we're currently budgeting $12k/year in set aside funding. (Their 529's are already funded 2/3's of the way - so we'd still be giving them a boost for school - just not fully funding as we wish to do.)

There are other things we could do -
- cut down to one car.
- cut some of the kids extra activities
- cut back on travel/vacations planned
- stop buying organic and buy less expensive food. (We already cook from basic ingredients - but we currently choose to buy meats/fruits/veggies that are organic... which adds to the grocery bill. We could eat more beans, rice, lentils, etc.)

I've thought about this... In case the future is far worse than firecalc's historical view offers.

 

[NW-Bound]

... I think we could reduce our monthly spending about 35% without a major lifestyle change. i.e. cut back electrical a/c use, cheaper food, etc.

While I am frugal, I think I can easily cut back about the same, but I will not say it's without a lifestyle change. My bills for home repair run $20K this year already, and who knows if something else may break before the year is over. And I have not done much travel yet.

So, yes I can cut back because having 2 homes is not a necessity, nor is travel. The truth is that most of people's expenses are discretionary to some extent. We can all have a healthy life living in something like this, and I am not sarcastic.

 

[Meadbh]

I started a poll thread on deferring property taxes last year. Here it is:

http://www.early-retirement.org/forums/f28/deferring-property-taxes-poll-64574.html

I found that discussion helpful and decided not to defer my property taxes.

I have cut many expenses since I ERd and my biggest expenses now (by far) are income tax, car payment and travel. Unfortunately the income tax is not discretionary so travel is the elastic category. The car payment has one more year to run and then I will probably loosen the purse strings a little, assuming that there is no major market correction.

If things went sour, assuming the car payment to be part of a reduction, I could probably cut 25% from current spending. Without the car payment, discretionary cuts would be less than 10% of current spending. Eliminating travel completely is not something I am prepared to do.

 

[daylatedollarshort]

So far to semi-ER we cut over $100K a year and counting (taxes, business expenses and personal expenses), not including saving for retirement.

 

[W2R]

To me, the question is not how much COULD I reduce spending, but how much do I WANT to reduce spending. Anybody can reduce spending by any amount if/when life demands it. This is one of the lessons one learns from having varied amounts of resources at different times during life.

I did a quick check of my 2013 spending and found I could cut back 40% easily, keeping the same house and car and so on but not eating out, buying so much "stuff", using air conditioning in the summers, or getting that dental implant. Many people in south Louisiana live similar lifestyles to that so I wouldn't feel this was a gargantuan effort.

If I worked harder at it I could probably cut back 60%.

Beyond that, we are probably talking about soup kitchens and living in a refrigerator box under a bridge.

If we had a 2008-2009 style market crash that lasted several years, I might get to find out how much I could cut back.... I hope we don't, though!

 

[aaronc879]

This year I expect to spend $17,000 which is very high for me. That includes 3 months down south during the winter and also includes taxes. I could cut that down to $13,000 without feeling much pain(just cold by not going down south). I could cut it down to $11,000 without changing houses or going car-less but there would be some somewhat difficult sacrifices to drop to that level.

These numbers do include taxes on my low income but they don't include budgeting for replacing big ticket items.

 

[Alan]

We could cut spending by 50% if needed and still live well. Fear of losing health insurance kept me working 3 more years which meant retiree health insurance plus a good DB pension starting at 55, instead of a pension worth much less starting at 62 and having to rely on the individual HI market. (Between us we have various pre-existing conditions).

 

[daylatedollarshort]

This year I expect to spend $17,000 which is very high for me. That includes 3 months down south during the winter and also includes taxes. I could cut that down to $13,000 without feeling much pain(just cold by not going down south). I could cut it down to $11,000 without changing houses or going car-less but there would be some somewhat difficult sacrifices to drop to that level.

These numbers do include taxes on my low income but they don't include budgeting for replacing big ticket items.

I think you are a great example of freedom = low overhead.

 

[rbmrtn]

I might could cut some, but I am pretty bare bones already. In looking at the numbers, 40% of my expenditures go to property tax and insurance ( home/auto/health). Taking those out my expenses are below poverty level.

 

[eta2020]

While I am frugal, I think I can easily cut back about the same, but I will not say it's without a lifestyle change. My bills for home repair run $20K this year already, and who knows if something else may break before the year is over. And I have not done much travel yet.

So, yes I can cut back because having 2 homes is not a necessity, nor is travel. The truth is that most of people's expenses are discretionary to some extent. We can all have a healthy life living in something like this, and I am not sarcastic.

Just curious....Is this your vacation house? Looks great....

 

[Lakedog]

I'm sure I could cut quite a bit if required but I'm trying to do the opposite and condition myself to spend more. My pup says he could switch to cheapo dog food rather than the grain free stuff he eats now to save a few bucks.

 

[NW-Bound]

Just curious....Is this your vacation house? Looks great....

No. Mine unfortunately costs a bit more for maintenance (photos shown below have been posted here on this forum).

However, that photo of that stone house I found on the Web looks great, doesn't it?

 

[LOL!]

I could cut spending quite a lot. With the house/cars paid for and utilities relatively inexpensive, I could live like a recluse lying in bed all day and just typing on internet forums or watching TV and walk to the store to get food. Eats would be cereal and milk, salads for lunch, and something cheap for dinner, so let's say $10 a day for food. Doctor & dentist are located next to grocery store, so within walking distance. Since I would come in contact with very few actual people and their germs, I don't think I would get sick.

I wouldn't have maids anymore. I don't have cable now. I have enough clothes to last me the rest of my life. I'd have to sell the dog and give up the cars and auto insurance and liability insurance.

What does the budget come to (annually):

$7000 prop taxes and HOA
$2156 homeowners insurance
$3650 food & household items like TP, detergent, soap, toothpaste, shampoo)
$2500 utilities (gas, electric, water)
$0500 home phone & internet
-------
$15,806 (+ healthcare)

It turns out that I have healthcare through my spouse's employer plan which is pretty cheap, but let's just add in $10,000 because she would divorce me if I only spent the list above. OTOH, the list above (except for food) covers 3 people living in this home. Also the 18-year old male driver probably should not be without auto & umbrella insurance ($3000 per year for 4 people including another young adult not living at home).

Wow, that's a lot more expensive than I thought it would be.

 

[Mulligan]

No. Mine unfortunately costs a bit more for maintenance (photos shown below have been posted here on this forum).

However, that photo of that stone house I found on the Web looks great, doesn't it?

I sure hope you are paying for that service and not risking life and limb in retirement! Nice looking place, NW.


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[aaronc879]

I think you are a great example of freedom = low overhead.

It works for me but many on this forum spend well over $50K/yr in retirement. That requires a very good income for a couple decades and the willingness to save a large chunk of it. A pension or inheritance would work too.

 

[Sea Kayaker]

As I sit here a few months before my ER date our monthly spending sits at around $2500. I could easily pare this to below $2000. But when I casually mentioned this to DW, she laid the hammer down. Her reasoning, which I can understand, is that since she may well work another 10 years (a 6 figure job she loves) why should she have to eliminate virtually ALL luxuries? Believe it or not, even on a $2500 budget there is a fair bit of fat we could remove - do we really need the max cable package and warp speed internet?

On another topic, perhaps our biggest goal post ER, is to get a cabin built on our little island property. That cute little place that NW-Bound posted would work nicely on our land. Love that. Would like to see floor plan layout.

 

[NW-Bound]

...On another topic, perhaps our biggest goal post ER, is to get a cabin built on our little island property. That cute little place that NW-Bound posted would work nicely on our land. Love that. Would like to see floor plan layout.

You have property on an island? Nice! About the house I posted, search for "Mini-Double Loft Rock House" if you like to read more about it.

I sure hope you are paying for that service and not risking life and limb in retirement! Nice looking place, NW.

I have had an DIY attitude all my life, but the construction of this house makes it impossible for me to do much. I have not had a light bulb recessed in the 25'-high ceiling burning out yet, else would not know how I could even reach it with an extension bulb-grabber pole.

The exterior was nearly impossible for me to stain, let alone doing anything else. After a mere 9 years, I already had to have the lap siding redone recently on 1 side. The scaffold below was set up by the contractor. Thus, as stated in an earlier post my house project bills already ran up to $20K this year, and the year is only 1/2 over.

PS. I still do the staining myself where I can, including the big decks.

 

[Totoro]

Let me see, current expenses total $34k roughly:
* Housing & utilities: 20k
* Food: 4k
* Transportation: 2k
* Travel: 4k
* Business expenses: 3k
* Everything else: 1k

Since housing is 60% of my expenditure my plan involves relocating. Have to shut down my business formally as well.

First option: shut down business & back to belgium, total $26k
* Housing & utilities: 12k
* Food: 4k
* Transportation: 4k
* Travel: 4k
* Business expenses: 0
* Everything else: 2k

Second option: move to thailand or similar, total $20k
* Housing & utilities: 7k
* Food: 3k
* Transportation: 5k
* Travel: 3k
* Business expenses: 0
* Everything else: 2k

Third option is full blown going nepali or permanent camping / thru-hiking, probably for $12k a year or so.

 

[Walt34]

If we had to we could cut roughly 30-40%, below that would involve selling the house and moving. First on the block would be the motorcycle, then the pickup truck. You wouldn't see me here because I wouldn't have internet. Cable TV, what little dining out we do would stop, grocery store spending would go down significantly. No more camera stuff or ink for the photo printer.

So it could be done.

 

[NW-Bound]

If we had to we could cut roughly 30-40%, below that would involve selling the house and moving. First on the block would be the motorcycle, then the pickup truck. You wouldn't see me here because I wouldn't have internet. Cable TV, what little dining out we do would stop, grocery store spending would go down significantly. No more camera stuff or ink for the photo printer.

So it could be done.

If you live in a suburban place, you can always ride your bike to a local public library to use the WiFi or even the computers there. Your frequency of posting will just not be as frequent.

And then about camera and printer ink, you will look for a way to make money off your hobby. Sell on eBay?

See how people can always adapt?

I think that I would like to boondock in the woods with my RV, like many people are actually doing. Here are some photos linked from RVSue's blog. Her recurrent monthly expenses are less than $400, but that does not include gas, food, vehicle repair, etc... I don't think she spends a lot more than $1000/month.

 

[tmm99]

Thank you for this thread. It is a good exercise to think the what if's and see how much we cut shave off - this might put us more at ease of pulling the plug knowing how much can be cut down if needs arise.

After looking at my numbers, I can reduce my expenses by about 10K (by cutting my travel, gift and hobby/entertainment expenses.) Not something I would want to do, but I guess I could I really, really had to do it.

 

[Walt34]

If you live in a suburban place, you can always ride your bike to a local public library to use the WiFi or even the computers there. Your frequency of posting will just not be as frequent.

And then about camera and printer ink, you will look for a way to make money off your hobby. Sell on eBay?

See how people can always adapt?

I think that I would like to boondock in the woods with my RV, like many people are actually doing. Here's a photo linked from RVSue's blog.

Bicycling would be out around here because there are no shoulders on the local roads and they have lots of hills and curves. I'd have a life expectancy of about 20 minutes. That's why I bought the motorcycle instead of a bicycle for a (then) 3.5 mile commute in the first place.

Well, if I have to sell prints and stuff isn't that called work? I've developed an aversion to that. Selling on ebay is a thought though just to see if anyone would actually pay a reasonable amount for a mounted, matted and framed print. Or some sell them not framed but mounted and matted and let their customer buy the frame they like. That reduces shipping by a lot too.

Hmmm. Now you got me thinking. That rarely ends well....

You're right about the library though, I'd forgotten about that when I made the post.