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Old 11-13-2013, 09:01 PM   #21
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Darn! If I had to stick to a budget, I would make sure I have my rice and bean containers all filled and stacked first before I even think about the roof. Yes, even if the roof looks like this. A guy's got to know what his priorities are. Oh, and the Xmas ring should be before the rice and beans, I forgot.

I hope that isn't your roof, NW! When I do my daily walks, I notice many that look that bad and for the last 4 months have wondered why theirs isn't leaking while mine is despite the fact it looks great. Oh well, that's why I built up a reserve....I just thought it wouldn't be needed for 10 more years..
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Old 11-13-2013, 09:03 PM   #22
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Well, I'd be much more interested in what Alex's real expense profile looks like. Any of us could come up with a spartan, bare bones, survival budget. But since that's not how any of us actually live, it would be little more than an accounting curiosity.

My own experience - and I'm not even retired yet - is that after killing your debt, including your mortgage, all those miscellaneous and "discretionary" costs become a much larger piece of what you spend.
I always look back instead of projecting a forward budget. I think spending habits are just that - habits, and probably very hard to break.

I can't speak for Alex but here's my spending from 11/12 - 10/13 and if I take out the extra pre-retirement expenses, it's closes to Alex's budget.

$33,127.26
$7,064 Utilities, Car & Home Ins, Property taxes
$5,500 Roth IRA
$5,313.50 Travel, Gifts, Clothes
$3,188 Cigarettes (terrible I know but I'm being honest)
$2,400 Son's college rent
$2,000 Graduation gifts for son and girlfriend ($1K each into a Roth IRA)
$1,000 Brokerage acct.
which leaves
$6,662 in misc - food, pet meds, 1 vet bill, 4 new tires, 1 car repair, 1 dr. bill and gas (I fill up twice a month).


In retirement I can subtract the IRA, cigarettes, college, grad gifts, and brokerage investment (leaves about $19,500) and will have to add health care (whatever that might be) as a monthly expense.

I don't know why I spend so little day to day but I don't feel deprived. I am budgeting $40K per year in retirement though because I agree with you that more time on my hands will lead to more spending in all likelihood.
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Old 11-13-2013, 09:15 PM   #23
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I hope that isn't your roof, NW! When I do my daily walks, I notice many that look that bad and for the last 4 months have wondered why theirs isn't leaking while mine is despite the fact it looks great. Oh well, that's why I built up a reserve....I just thought it wouldn't be needed for 10 more years..
The photo was linked off the Web. I am good at "borrowing" OPP (other people's photo) to juice up my posts.

I have a tile roof and did have to spend $4K a couple of years ago to have the underlayer replaced in some parts of the roof. The felt underneath could look as bad as that, but I was not home to see when they did it. On top the tiles looked great, but inside the ceiling did not lie. Poor workmanship was what allowed water to get under the tiles.

PS. The leaks start at the flashing where two roof surfaces meet. A continuous tile roof has no reason to leak, but there are weak points, particularly with roofs that have too many nooks and crannies for design reasons, skylights and such.
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Old 11-13-2013, 09:18 PM   #24
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In retirement I can subtract the... cigarettes...
Why wait?
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Old 11-13-2013, 09:30 PM   #25
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Why wait?
I'm not actually - Thanksgiving is my D-day. I'm sick of the filthy things! The Christmas season at work won't give me any time to obsess over them and that's why I picked that date - to give me the best chance at succeeding. I've quit before so I know I can do it.
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Old 11-13-2013, 09:42 PM   #26
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Thanks, Alex, for sharing this. I believe you! I tracked our expenses the first year we retired 8 years ago and to the best of my remembrance we spent about $24,000. Our insurances and property taxes are higher and husband and I each got $20 a week allowance. We had financial anorexia the first year and have loosened up some since.
Fortunately the first year we didn't have any large medical expenses and didn't have to buy a car, roof or heat pump. We live in Tennessee.
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Old 11-13-2013, 10:08 PM   #27
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I'm not actually - Thanksgiving is my D-day. I'm sick of the filthy things! The Christmas season at work won't give me any time to obsess over them and that's why I picked that date - to give me the best chance at succeeding. I've quit before so I know I can do it.
Good luck!
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Old 11-13-2013, 10:32 PM   #28
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I guess I have mixed feelings about this. I am also curious about the change in your situation since you posted in May and you were apparently then living at a different property with your wife. I assume that since then you have moved into your current property and your wife is still living at the other property while she continues to work. One reason I mention that is that when you haven't lived in a new place for at least a year it can be hard to totally estimate annual expenses.

First, your expenses are a good example of how low expenses often flow from having a very small, inexpensive place to live. Your utilities, home insurance and real estate taxes are a small fraction of mine and I'm sure it is a function of size of home, value of home, and location. People often don't realize just how much impact home choice has on overall expenses.


Second, I think there is value in knowing what your "bare bones" expenses are. However, when trying to present them to others, I think different people will have different definitions of what bare bones expenses are. For some people those expenses would be the things that are clear needs with no wants. That doesn't seem to be what you are doing though. Things like liquor are clearly not needs and most would consider it discretionary. On the other hand, there are things that are clear needs that you don't include in your budget.

A capped repair fund of $3000 for home repairs is adequate most likely for the "ordinary" repairs that most of us have. However, this does not include the kind of major repairs that are not frequent but will happen at some point (new roof, etc).
Auto maintenance of $100 a month is probably OK for basic maintenance and repairs most years, but I have certainly had years when repair, particularly for older cars, exceeded that amount in a given year. And, there will likely come a time when your car either has to be replaced or repairs have to be made to it which exceed the value of the car.

Health care is helped because you are on medicare. Very few retired people not on medicare can approach your costs. That said, you don't include much for expenses not covered by medicare such as actual dental expenses (most dental insurance is capped and doesn't cover all costs), prescription costs (most people I know with Part D still have some costs of their own).

You also don't include some things that I would certainly consider part of my basic expenses: water, sewer, (I realize you may be on well and septic as we were at our last house - I also have had to pay well and septic maintenance and repair so know those things aren'tfree), garbage, veterinarian, pet immunizations, some travel (vacations are discretionary, visiting my mother and going to funerals or other family events are much less so), clothing (yes to some extent clothing is discretionary but there is a bare bones element to it as well), personal care items and services, computers and peripherals (may not need to be often replaced but again should be accrued for).

You have done a great basic budget for bare bones stuff if nothing goes wrong. In my life, sometimes things go wrong. A car has to be replaced (or repairs have to be done that are worth more than the car), a hurricane comes through and requires several thousand dollars of tree clean up work (yes that happened), a computer suddenly dies, an unexpected out of town funeral for a close relative, a loved pet has a serious illness. Stuff happens. So, for me, a basic budget would have to include reserve for those things.

Third, while it is good to know what your bare bones expenses are if you had to cut (and I've done that exercise myself), it has proved to be of limited help to me in retirement planning. That is because I don't want to live a life where I can only spend my bare bone expenses. Could I do it for awhile? Sure. Would I do it if I had to? Sure. Do I want to do it? No.

So it is more useful for me in my planning to look at what my budget is with discretionary expenses in there. If someone's bare bones expenses are $20,000 and the person has $60,000 a year to spend that might sound OK and if that person wants to and is spending $30,000 a year on discretionary stuff then everything is OK. On the other hand if that person wants to and is spending $80,000 a year on discretionary stuff and wants to spend $80,000 a year on discretionary stuff then everything is not OK.

So, for me, it is important in my budgeting that I look at what it will cost each year to spend what I want to spend as well as what I have to spend. That doesn't mean I'm not interested in cutting expenses. I love cutting expenses that don't affect my quality of life.
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Old 11-13-2013, 10:53 PM   #29
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Hello, calmloki, W2R, ERD50 and Alan...

Thank you for contributing to the discussion arising from my original post. All of you posed good questions regarding expense categories that either you did not see specified in my budget or that I did not make clear enough. I hope the following answers your questions.

Water -- I have a well.

Sewer -- I have a septic tank.

Trash Service -- I live 2 miles from a county no-charge drop-off station.

Liquor -- $20 a month is all I spend (I don't drink all that much).

Stamps -- Let's throw that into the $700 error allowance at the end of the budget.

Clothing -- That would come out of my discretionary fund (except that I mostly get my clothing at no cost from Land's End or Sears using Amex reward points).

Shoes -- Same answer as clothing

Gifts -- That would also come out of my discretionary fund though I don't do that much of it.

Miscellaneous -- Honestly, I don't incur any expense that does not fall either into a specific basic living expense category or that logically (to me) has been allowed for in and comes out of my discretionary fund. (Part of the method in my budgeting process is to have the least amount possible of trickled away / don't know where it went spending.)

Replacement Car Fund -- For a full answer, we'll have to wait for a post I'm working on dealing with the question of "repair or replace". (One could also have replacement funds for the refrigerator, the roof, the mowing tractor, the furnace, and on and on ad infinitum.) And a vehicle with 128,000 miles on it still has a lot more room to run, if it has been and is kept up properly.

Cheers,

Alex in Virginia
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Old 11-13-2013, 11:21 PM   #30
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$18K per year is amazing. College tuition for our younger DD is $15K already.
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Old 11-13-2013, 11:27 PM   #31
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This frugality is very easy to duplicate--buy a cheap house with low taxes on a well and septic. No secret to that. Not sure what someone who is Medicare aged is saving the surplus $6k to $14k of his passive income for. Is social security going to add to that income in the future? What is the goal here? I think we all know how cheaply we "could" live, but there is no intrinsic virtue in competitive frugality, is there?
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Old 11-13-2013, 11:41 PM   #32
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$18K per year is amazing. College tuition for our younger DD is $15K already.
The youngest of mine has been done with school for 2 years now. That's the only way I can retire and live on 3.5%WR.

About the $18K/yr, I exceeded the $10K/deductible of my HI policy this year, so add that to the premium plus some dental work and miscellaneous and I got to $18K easily just on medical expenses. Man, a few $K here and there and you are talking real money.

If not the roof, it's something else worse...
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Old 11-14-2013, 01:55 AM   #33
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Just curious, Alex--how do you accrue enough Amex points to buy clothes if your budget is so low? You don't seem to be buying much of anything.

I would have to buy a ton more stuff on my Visa than I do right now in order to get even $25 in reward points.
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Old 11-14-2013, 06:52 AM   #34
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My $18K Annual Basic Expense Budget


I drive a very well maintained 1996 Dodge Dakota -- also paid for -- with 128,000 miles on its odometer. I like it very much, and it covers that 102 miles to my wife’s house every weekend just fine.

Cost Per Month


Auto
auto loan 0
(paid off)
auto insce 28
maintenance 100
(accrued in a fund)
basic gas 35
(200 mi @ 20mpg)
Alex,

Maybe I missed it in earlier comments, but if you weekly drive 102 miles to DW's house that would be at least 102 miles x 2 (each way) x 4 (weeks per month) / 20 mpg = 40.8 gallons X $3.50/gallon of gas = $142.80. This would not be counting any other miles driven the rest of the month. If you meant 102 miles round trip that would reduce it to $71.40 per month, which is still above your posted $35/month.

While I can appreciate that on any given year such a low budget is possible, (DW and I have had several years in a row in the low $30 m ) but sooner or later you get whacked up side the head with some significant upkeep bills even with well and septic. You have to replace appliances and re-shingle the roof and paint the house, etc. Upkeep and replacement costs for us have been significant this past year. Sooner or later I will also have to replace my 9 and 11 year old vehicles. That cost is significant and I didn't see where you have that cost covered in your budget.
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Old 11-14-2013, 06:55 AM   #35
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Hello daylatedollarshort and Katsmeow...

Thanks for adding to the discussion, and for pointing out that my original post needed to have clarified my "before and after" home situation.

Circumstances -- and my wife's job -- changed since my early summer postings. Consequently, our housing situation had to change and we now live in 2 separate houses. The particular housing cost details of my earlier "Ducks in a Row" post no longer apply. What you see in this "$18,000" post is my new budgetary reality.

Thanks for getting me to clarify that.

Cheers...

Alex in Virginia
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Old 11-14-2013, 07:16 AM   #36
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The typical rule of thumb is that household spending will increase by the square root. So using his data, his basic expenses would increase to $25.5K/yr with his wife added. So much of what he includes comes down to what is "basic" and what is "discretionary."

DW and I have a "comfortable" budget requiring $60K/yr which includes the income taxes on this amount. It also covers an extra $12K in HI which would be required in retirement mode prior to medicare. This includes liberal allowances for presents, dining out, liquor, entertainment, basic home repairs and average auto expenses for 2 cars. We've discussed this amount and feel we could go down to about $45K/yr if necessary without feeling deprived. I showed her a "getting by" budget of $35K/yr but that didn't go over too well. Anything lower involves moving out of the house. There's no reason to worry about making any of these cuts unless there is a collapse of our current SS and medicare systems and/or a massive financial disaster. If either happen, I suspect we'll have other problems to consider.

This doesn't include our primary indulgence of international travel which I assume will decrease as we age. I'm already having trouble getting my DW to keep up with my travel plans.
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Old 11-14-2013, 07:22 AM   #37
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My bare bare bones budget is probably not too far off with the exception of my golf addiction. Country club fees and golf trips adds to it. My house is a similar size with similar costs. But my budget will be going up as I don't plan to live here for ever, have plans to travel more and health insurance premiums will be going up for the reasons we all know about it.
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Old 11-14-2013, 07:58 AM   #38
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I appreciate this post as a reminder that one can probably get by on a lot less than one thinks. We've actually gone through a similar exercise to understand exactly what our bare bones budget would be in the event of a financial catastrophe, and came up with $22,000 before medical insurance. For now, until we reach Medicare age, we'd need to add a minimum of $5,000 for medical insurance, bringing the total to $27,000. If they don't make the changes being discussed this week to allow those of us happy with our coverage to continue it rather than having it cancelled and replaced with a more expensive ACA policy, that figure will double, bringing us to $32,000.

$27,000/$32,000 a year would cover $1,000 a year in gasoline, plus $100 a week for groceries, our HOA fees, property taxes, all utilities, and all insurance, but no discretionary whatsoever. In drilling down even further, HOA fees, HO and EQ insurance and property taxes account for 35% of the total, meaning we could reduce those by relocating to a smaller home or less expensive area.
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Old 11-14-2013, 08:08 AM   #39
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Once the kids are grown and out of the house I have GOT to get out of Illinois and to a place with better property taxes. $49 per month for property taxes and $47 for insurance? Holy cow. I live in a 2200 or so square ft paid off house, and pay about $550 per month in property taxes alone. There goes 1/3 of the 18k budget!

Nice to see what's possible though, for sure.

- John
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Old 11-14-2013, 08:15 AM   #40
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Once the kids are grown and out of the house I have GOT to get out of Illinois and to a place with better property taxes. $49 per month for property taxes and $47 for insurance? Holy cow. I live in a 2200 or so square ft paid off house, and pay about $550 per month in property taxes alone. There goes 1/3 of the 18k budget!

Nice to see what's possible though, for sure.

- John
Texas milks the large metro areas for property taxes so you wouldn't come here for the property taxes. We don't have an income tax. I am paying just under $10k/yr. That's a big chunk of any budget that involves staying in our current house.
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