In search of a modest lifestyle

[RockMiner]

I have read a number of posts by those who are retired on modest budgets, say around 45K per year or less (after income taxes).

Obviously this is very doable, but I admit to having trouble demonstrating such a lifestyle...We don't live lavishly at all yet we spend more than this every year.

I must be missing some potential savings. Maybe it will become easier to spot spending "hot spots" after we finish tracking expenses for a year? Right now it's a bit of a mystery  

 

[Cut-Throat]

Rock,

Are you including any part of Rent/Mortgage Payment in the 45K per year. WHen I speak of my yearly budget, I try to stay in the 50-60K range, but this is without any mortgage payment, because my house is paid for.

Also, I don't include car payments, because I pay cash and only buy one every 4 years or so.

 

[RockMiner]

Rock,

Are you including any part of Rent/Mortgage Payment in the 45K per year.  WHen I speak of my yearly budget, I try to stay in the 50-60K range, but this is without any mortgage payment, because my house is paid for.

Hey Cut-Throat...I am assuming zero debt (no rent and no car note) I can make it work at 50K+ but that may push my SWR beyond "100% safe". I know that complete safety is an illusion, but I dislike uncertainty and tend to view a FIRECalc success rate of 100% as a minimum condition of ER.

Old habits die hard but I guess I'll have to get used to Pinto beans, corn bread and cheap beer Either that or w*rk a little longer...Hmm, actually beans don't sound so bad.

 

[ESRBob]

Rock,
Do you eat out a lot? Bars? Those places have become brutally expensive in my neck of the woods, but going out kinda snuck up on us over the years, and I don't mean Mickey D's. Now we try to be 'foodies' a bit and cook something innovative and nice at home to skip one meal out a week.

Cut=Throat mentioned property taxes -- big disparity between 'blue states and red states'.

btw, are you in a blue state? That could probably account for 10k a year right there. (among other things they tend to have high heating bills) do you drink capuccino?

You might try a home square footage comparison, some sort of Annual Budget Dollars per square foot and you might find that the real budget folks are living in smaller home -- I'd be curious. As the home gets biggger though, all sorts of overheads start to creep up. We've been frequenting the church thrift shop for home decorating stuff and knick knacks. If you set foot in any place that keeps accounts for interior decorators, then fuggedaboudit. But even just upgraded outdoor equipment can start to add up. And home servides: Does someone cut your lawn? Service your sprinklers? Clean your gutters? Blow your leaves away or snow plow your driveway? Cut your trees? I am thinking the 40k folks pack their own chainsaws and mow their own lawns -- but am not sure.

Library or Amazon.com. Or impulse buys at the local book store? That'll nail you for 500-1k a year. It's always 50 bucks to walk out of barnes and noble, if not $100. How often do you buy a new computer? Car amortization should actually be in your budget, though I suspect most people leave it out when reporting their spending.

Any status symbol shopping? The 40k crowd couldn't give a toss (usually!) about what anybody thinks of their economic prowess -- may even try to downplay their status purposefully. They aren't spending to impress anyone, or make themselves feel special. Purchases are pretty much purely utilitarian. Even if your clothes purchases are few and far between (an annual order at Lands end and a trip to the gap?) how about your wife? How many pairs of shoes does she own? How many new pairs of shoes this year? (careful about collecting this data -- you might not want to know!) Not singling out your wife, of course: how many watches do you own, btw?


I would love to hear whether any of this is way off base by someone actually living on 40k a year as a couple or less. I can't do it myself and have been trying to piece together the above the best I can from posts and other observations over the past year. (and memories from early in our marriage when we did live on that budget).

 

[Roger_R]

I have read a number of posts by those who are retired on modest budgets, say around 45K per year or less (after income taxes)

Hmmmm.....I see someone in the mirror everyday that lives on less than that after taxes and 401K contribution and is still working and paying mortgage. Matter of fact in my neck of the woods that ain't half bad hay. This person is hoping to retire on 50% or less than that.

 

[Familyretired]

I suspect that it depends a lot on where you live and how many people you are talking about.

We are going through a expense tracking exercise and were surprised at how much insurance and taxes run as a percentage of our overall expenses.

More people also means more space - also overall standard of living tends to be higher - I could live for a while on hot dogs and macaroni and cheese while my wife could live on salads - we compromise by having much better meals all the time.

Travel/vacations also seem to be a major variable.

Finally, I think the definition of modest has changed over the years. As a generalization - I find that the older one is - the lower the cost - older individuals tend to be more set in thier ways - have routines that have been optimized - also put up with more inconvenience - than younger individuals.

 

[hocus]

Re: In search of a modest lifestyleu get

Maybe it will become easier to spot spending "hot spots" after we finish tracking expenses for a year?

Tracking the numbers makes a surprisingly big difference. The Christmas season of the year when my wife and I first adopted a budget, I elected not to record my expenses for the purchase of Christmas presents until I got to the end of the process. I just saved the receipts as I went, presuming that I would be able in my head to keep my spending within the amount allocated for that category. When I reached a point where I thought I might be close to the limit on spending, I added up the receipts. I had already spent about double what I had planned to spend.

I see this process as working in stages. You first develop the motivation to track spending. Then you develop your first budget. Then you get feedback from the first budget as to which spending categories are not providing adequate value per dollar spent. Then you adjust the budget to something that you would have considered "unreasonable" at any of the earlier stages. Then you see how much sooner you can reach financial freedom than you had thought and you gain new motivation to begin the cycle again.

 

[johnlw]

Rock,

Do you live in the South?

My Dad was from Kentucky and he would always talk about "corn bread and beans".

And he did drink some mighty cheap beer...


John

 

[bruce1]

Welcome! This is my planned retirement budget. Single owning my own home. Sorry for lousy formatting

monthly annual
Car ins 100 1200
Car Fuel 150 1800
Car mnt/purchase 300 3600
Phone internet TV 100 1200
Food 400 4800
Home mnt 200 2400
Major apps 50 600
Yard 50 600
Furniture 50 600
Property Taxes 120 1440
Hydro 100 1200
Home Ins 75 900
Ent/Traval 300 3600
Clothing 100 1200
MISC 100 1200
TOTAL 2195 26340


I am not too far off this now. Last year after taxes I cleared $44,000 saved $11,000 and had about $4000 in employment related expenses so I spent $29000 on other stuff. I can cut cars way back by buying an older vehicle and doing my own maintenance.

Bruce

 

[REWahoo]

Bruce, what about health insurance?

 

[bruce1]

Bruce, what about health insurance?

Should have said I am in Canada and I have a supplemental insurance through my employment that will cover drugs private rooms ect. this will continue after I retire for about $30 monthly. Oh yes heating is included in manitenance as I own a gas well and what AC I use is in hydro. Somewhat different circumstances than many but presented as an example.


Bruce

 

[REWahoo]

Should have said I am in Canada and...I own a gas well...


Bruce

I'll check into getting you an honorary citizenship as a Texan. Don't think it will effect your medical coverage.

REW

 

[ordway]

Count me in as another person living happily on under $45K. At the moment (now that we moved to CA and our rent doubled) we're probably at about $35K, after-tax. (We save about 50% of gross income, pay about 25% in taxes, and live on about 25%).

I don't feel deprived at all. I feel that I have everything I want, or can get it if I really want to. I have found that people have a hard time with this concept (living well while not spending a ton of money) and actually that prompted me to write a book (currently looking for a publisher) and set up my web site for more musings on the topic .

I think you hit on the major points of not spending a ton of money. One thing you didn't mention was having only one (modest) car. My husband and I have always had only one car, and it's always been a small, inexpensive, PAID FOR car. We pay less in insurance in a YEAR than most people pay for one month's car payment. This has meant that we have to think a little bit about transportation options, but it has always been do-able, since we plan where we live accordingly. (Right now he bikes to work and I work from home, and can walk to do most errands, so the car doesn't get used much at all.)

I'm a good cook and that's a big factor in why we don't go out to eat more than a couple times a year. Why go to some place, have to wait around, and pay a bunch of money, when I can cook something as good or better at home? I'll note that it wasn't like I was born a chef or something. I learned in the good old trial-and-error way in college when I first got off the meal plan, and pasta with tomato sauce or brownies from a box were big productions.

In general, a big thing is just to not buy "stuff." I mean, people spend so much of their money on "stuff." New clothes, gadgets they never use, who knows what. If I buy something, it's because I genuinely want it or need it, and I'm going to use it until it wears out. Our spending on clothes averages $5-10 a year. (yes, a YEAR not a month). Clothes and shoes just don't wear out that quickly if you take care of them! (And I'm not some fashion maven who gets "tired" of stuff... if I liked it last year, I'll like it this year.)

And yeah, I don't give a damn what other people think (as someone else mentioned). "What would the neighbors think?"( or other permutations of that question) is utterly irrelevant to me. I occasionally get "Why don't you [buy X] - you can afford it!" from relatives, and they don't really get it when I say "I don't want to buy X, I'm happy with what I have." I mean, I could replace my admittedly rather shabby-looking coffee table, which I bought for $10 at a flea market 10 years ago.... but you know, I really don't want to. I LIKE that coffee table. It has exactly the features I like (drawers, two shelves) and it's just the right size. I can put my feet up on it and not feel like I'm messing it up. And it works just fine, even if the finish is worn. Not to mention that it has fun memories attached. Why would I want to get rid of it? If it eventually breaks, that's another story, but for the meantime, it's irrelevant that I can "afford" to buy an expensive fancy coffee table... I like my old one just fine.

Well, that was kind of a rambling example, but that's the kind of thinking that saves me a ton of money (and helps me be very contented with what I have, at the same time.)

 

[REWahoo]

As to the beans and cornbread crack, I'm only half joking but I got the line from a Texan friend.

Rock

Had to be from an East Texan - a West Texan would have said venison sausage and tortillias.

REW

 

[Rich]

>>>We pay less in insurance in a YEAR than most people pay for one month's car payment.<<<

Just a word of caution here. I recommend you have a good bit of "uninsured/underinsured" insurance coverage. Lots of drivers out there with state minimums. And plenty more driving with no insurance whatever. Ever try to get blood from a stone or money from a guy without two nickels in his pocket? I now carry 1/2 million for all my vehicles. Used to be $250,000 until I discovered it wasn't hardly enough. I found out the tough way.

 

[JOhn Galt]

Couple and 4 dogs living on about $25,000 pre-tax
per year. No mortgage or any debt. Minimal insurance
coverage in all areas. No life or LTC coverage. After I start to draw SS in 2006,
our total gross income would be about the same as at present, even if my spouse retired completely. Then, in 2011, spouse can get SS (no pensions). The assumption is that our net worth will stay flat
from here on out. Currently, I see no reason to dip into
our "base" to support day to day living costs. No deprivation whatsoever.

JG

 

[Traveler]

Regarding living with one car--for a Californian, that's a radical and almost heretical concept since this state is entrenched in a car-centric culture.

But going down to one car (a practical, small pick-up truck) is in the works when we move to Sedona, AZ in spring. Bought a house on a hill that's only a half mile into town where I can walk almost everywhere, even to the grocery store. It makes sense on many different levels: more exercise (up and downhill), no traffic hassles, and figure it'll save us at least $130 per month in gas, insurance, and repairs. And we'll still have one set of wheels when we need it.

Anyone out there living a car-free existence?

 

[John Galt]

I can see how you could easily go car-less
in the city, but we won't live in the city. If neither of us worked, one vehicle would be okay I suppose. The cost
savings sure look good to me. It will be a while before
I see us trying it.

JG

 

[Hyperborea]

Regarding living with one car--for a Californian, that's a radical and almost heretical concept since this state is entrenched in a car-centric culture.

My wife and I have been using only one car between us in California for the last 2 years. It does require some juggling of schedules but after a while it becomes pretty easy to do. We may get a second car again when my wife starts working.

Anyone out there living a car-free existence?

I was car-free for a number of years when I lived and worked in a large city. I used taxis on a semi-regular basis (after buying something large and bulky, late nights at the clubs, bad weather, etc.) and would rent a car a couple of times a year for some trips outside of the city. The costs of that plus the public transit costs were only a fraction of the total costs of car ownership.

 

[cute fuzzy bunny]

With no debt and plenty of reasonably new stuff, we're doing well on about $24-30k. I was peddling along on about $24k before we got married and merged households. By dropping stuff like cable tv and internet, simplifying our meals and deferring unnecessary expenditures I could cut this in half for a year or two without feeling like we were "living poor".

We've had a good savings between us on consolidated utilities and whatnot, but I'm laying out just a little more cash now than before. Some of that expense is related to new baby on the way. On the other hand, the wifes income is going heavily into her 403b and our Roths.

We dont travel or have much in the way of very expensive tastes, but we eat well and have plenty of nice stuff.

Its hard to say where your 'gap' is but it might be helpful to start looking at the small or inobvious things. I know a lot of people paying verizon $200 a month for their cell phones when a local company offers unlimited cell phone use for $25. A lot of people have nineteen features on their phone @ $5 a month per feature and dont need/use them. A lot of folks have low deductibles on their insurance (I carry $2500 on the cars and $5000 on the house). Medical insurance rates vary quite substantially. Some states are overall a lot cheaper to live in (tennesee, alabama, texas, new mexico are examples), so a relocation now that you dont have to be close to where someone can make six figures could be a winning improvement. Get out of the cycle of spending for a badge or label. We drive inexpensive cars and buy most of our clothes at costco or sams club. Shop around for a less expensive supermarket...we found a nice one thats 30-40% cheaper on many items than the fancy one thats up the street. Learn how to cook if you eat out very much, and make your meals at home - this is probably the biggest money saver for us. We used to spend $25-30k a year eating out with expensive bottles of wine. I like not working a lot better. Learn how to do your own car and home maintenance and repairs. Even if you cant do everything yourself you can cut costs and understand better what needs to be done

Look for the value in everything you buy, dont buy it if you dont need it, find it as cheaply as possible, and examine every expenditure for how you can slim it down.

We have two cars but could get by on one as my wife works nights at the hospital, so shes working while I'm sleeping and sleeping during the times when I could most use a car. Both cars are 5 years old and paid for, and I do all the maintenance on them for under $100 a year per car, so the costs arent too high.

But dont sacrifice things you really and truly enjoy just to be cheap. Do however comprehend why you enjoy some things...a lot of people spend a lot of money on "compensation spending", "keeping up with the jones'" or trying to create an image that makes them look better to friends, families, etc. Some time, money and effort looking into why you feel that sort of thing is important and coming to terms with it may be a lot cheaper than 40 years of spending to "keep it up".

 

[retire@40]

TH, that about sums it up for me too. I'm frugal, but not cheap. With a family of 3, my budget is probably the same as yours, except my wife and I (and my child) like to travel, so we have a decent line item for travel and entertainment.

Even in traveling, I get as much joy in finding the best possible price for airfare, hotel, and car rentals as I do in the vacation itself.

In fact, I find that many of my friends and relatives copy my vacation plans because I do all the work for them. It doesn't always work out for them exactly because of unduplicated specials I find or because I plan so much in advance to lock in great deals.

 

[Sparky]

My husband and I retired at 44 and 45 and are just ending our first year of ER.

We planned this for years; 9/11 made it seem even more pressing.

We tried to make the big purchases while we were still working.

We originally thought our budget would be about $27-28K, but ended up spending about $34k.

We have a paid off condo, one paid off car, we're both on high cholesterol meds (buy them over the internet from Canada and save about 40% over U.S. prices), have a $5000 deductible health insurance plan for $193 per month for both.

We don't eat out much but take our moms out for lunch once a month. We've planted two gardens this past year. We like our wine. But our property taxes and common charges on the condo have gone up this year.

Sparky

 

[SDY888]

Anyone out there living a car-free existence?

We have been "Car Free" for over three and a half years. Living in a large international city with safe, clean, efficient and relatively cheap public transport helps enormously, as does being within 30 minutes of our respective offices. We have always transported our daughter (now 11 months) around on public transport and never had any problems.

I have no intention in the short or medium term of going back to car ownership, although I hope for my dream "hobby" car a little later. My wife can't drive anyway, so there is no pressure from her whatsoever on the car issue.

 

[gayl]

I have read a number of posts by those who are retired on modest budgets, say around 45K per year or less (after income taxes).

Obviously this is very doable, but I admit to having trouble demonstrating such a lifestyle...We don't live lavishly at all yet we spend much more than that every year. Even after allowing for cost reductions due to debt elimination, house downsizing etc. there seems to be a financial "ER gap".

I must be missing some potential savings. Maybe it will become easier to spot spending "hot spots" after we finish tracking expenses for a year? Right now it's a bit of a mystery  

Old habits die hard but I guess I'll have to get used to Pinto beans, corn bread and cheap beer Either that or w*rk a little longer...Hmm, actually beans don't sound so bad.

I'm one of those that spend considerably less than 45k per yr ... mostly b/c my after tax income is 1825 per month, deductions include $8 for health/dental ins, & 5k per November for prop tax / insurance / gifts. But I do not think that I live 'modestly' at all. I eat comfortably well, albeit a vegetarian style menu with fish and chicken tossed in to keep the diet healthy. I don't travel extensively, just about 4-5 nice trips per year inc cruises <don't see a purpose in cruising for less than 10 days as it takes so long to get there>. I always have a ocean view, usually a balcony, and stay at 4* hotels when traveling on land <this one will be an adventure as I am staying at a B&B instead of my usual>. My single splurge at home is a gardener as my 1/3 acre lot is more than I care to keep up, I view lunches out every Monday and Weds with Starbucks every Mon & Thurs am as cheap therapy.

It is more doable than you think. Track your expenses for a year, you'll find your 'holes.'

2004 expenses posted as reply #52 in: What is the most common ER budget

SF Bay Area resident

 

[jj]

[Just a word of caution here. I recommend you have a good bit of "uninsured/underinsured" insurance coverage. Lots of drivers out there with state minimums.  And plenty more driving with no insurance whatever. Ever try to get blood from a stone or money from a guy without two nickels in his pocket? I now carry 1/2 million for all my vehicles. Used to be $250,000 until I discovered it wasn't hardly enough. I found out the tough way.[/quote]

Could you elaborate on this? Were you sued?

I feel wary about driving now....