Spending in early retirement

[Cut-Throat]

TH,

I think what oldcrow may have done is taken the Dryer Sheet thing literally.

There are a few folks out there like Amy Draczizzzz (can't spell her last name) - Frugal something or another that suggests things that are truly morbid. If that were my choices I would go back to work in a heartbeat.

 

[unclemick]

33% That's my story - got me to join this forum. We peaked around 100k - his and hers before ER and in ten years are slowly drifting up towards 33. My personal best was 12k for one year early in ER but that was overkill - frugal wise.

 

[John Galt]

Hey Cut-throat...........I recall her name rhymes with
"decision", even though I have not read the book.
It's a bit tedious having all of the answers, as there
is very little left for you to learn.

John Galt

 

[Nords]

Re:  References

"Don't save sex for old age." -- Warren Buffett

Amy Dacyczyn, "The Frugal Zealot".

I don't religiously practice her preaching, although it's good to have the skills if they're needed. But yesterday HGTV ran a special on running a frugal household and our kid was appalled to see that we're already doing EVERYTHING that they featured on the "new" show. Now she's sure that she's the most deprived kid in the world...

Hey, OldCrow, it's not whether we can afford the experience-- it's whether or not it has value. That's always a personal decision.

I think that there's always more left to learn, if we survive the experience. Frankly I've had enough travel experiences, although I enjoy checking out the changes to places where I've already been. As always it's the arduous travel to get there that sucks all the fun out of it...

 

[Bob_Smith]

Man, if I had to live like some of posters on this board I'd rather work till I drop.

That may be true for you, but not for everyone.

It would depend upon what kind of work you're talking about. Some people despise their jobs and would rather be boiled in oil than continue. It would be nothing for these folks to give up a few luxuries in exchange for their freedom.

It would also depend upon the individual's lifestyle history. Those who become accustomed to high living may suffer by being forced down a notch or two. Those who have managed to live modestly all along will likely have a much easier go of it.

So someone who dislikes their job and hasn't become used to the high life would see things quite differently.

I read an interesting book a few years back called "The Pursuit of Happiness: Who Is Happy - and Why?" by David G. Myers. Luxuries hardly appeared on the radar screen.

 

[unclemick]

Yep. It's a lifestyle thing. I LIKE CHEAP. Have a backup clothes line and bag of pins in case the price of generic dryer sheets gets too high.

According to Firecalc and ORP at 7% return our ER portfolio's are underspending by 40-50%. Spending more now foolishly would make me irratible and unhappy. Unless something shows up adult toy or otherwise - we'll stay in our 'cheap' comfort zone.

 

[williams406]

Hi folks! I am desperately searching for a thread I found a week or two ago that discussed the living expense drop-off many retirees have experienced. I've run a few searches and have not been able to find it. Any ideas? Thanks.

Williams406

 

[wabmester]

The 33% thread?

http://early-retirement.org/cgi-bin/yabb/YaBB.pl?board=costs_board;action=display;num=1033641894

 

[cute fuzzy bunny]

Have a backup clothes line and bag of pins in case the price of generic dryer sheets gets too high.

Come to the dark side Mick...

I'm actually enjoying the heck out of my clothesline, never used one before.

Of course 80+ degrees and almost no humidity means my that by the time I'm done hanging, the stuff I hung first is already almost dry. I dont even need pins!

 

[ordway]

I've loved it the times we've lived where I could use a clothesline! They come out nicer when they dry in the sun instead of a dryer (and it's better for the clothes, which last longer). It's pleasant to go outside and get some fresh air while doing an ordinary household chore.

 

[ESRBob]

On a more serious note, when people talk about blowing away their SWR and living on 12k a year, are you counting the cost of depreciation on your car (or do you just bike!?), do you have health insurance, do you own a home (that may need paint some day and needs homeowners insurance?) and do you count the costs of money management fees properly? Do you count any fed/state income taxes in your annual budget? All these things are actually part of annual expenses (unless your Monte Carlo specifically uses after-fee returns, it is giving you an SWR assuming that your US Large Stocks or whatever earn their historical returns which data generally does not have fees deducted from it. Even so, almost none of us includes the right amount for trading costs/brokerage costs the fund incurs and hides away just nicking its return slightly and making us think we are really getting the return due to that asset class when in fact we are getting less, thus reducing our SWR by that amount).

Self-insuring is a huge risk to the Portfolio that is a necessary cost of having a life or a house, and if we choose to self-insure rather than insure through an insurance company, we should be setting aside the same amount of premium (more actually since we are a very small risk pool) in some separate fund to pay for the eventual costs of lawsuit, tree through the roof, or appendicitis when it eventually comes along. (A lifetime is a long time, and this sort of thing will eventually happen to you.)

It is not that I am trying to be a wet blanket, but I would not want some of the ER Planners on this board to go in and tell the Boss to take this job and shove it Monday morning thinking their 300k portfolio will throw of 1,000 a month for living expenses and forget about all these other costs that should properly be part of their annual budget and ER planning.

 

[Bob_Smith]

Hey ESRBob, those are very good points. I've said it here before, but I wouldn't even consider retiring without knowing with 100% certainty what ALL my costs are now - including all those not-so-obvious costs that will most certainly rear their ugly heads down the road. Right now my total expenses (including me footing 100% of health care) comes to $41,500 per year. That includes setting aside (annually) funds for such things as house repairs, car purchases, root canals, household appliances, and on and on. I know this with a certainty that comes from tracking every cent for more than 10 years, and thoroughly examining the expense side of the equation from every conceivable angle. I've beat it to death. I also know that I can cut back some, and I'm in the process of determining how far I can cut if I must. This is for a family of 3 (me, wife, & son) living in a relatively low cost area.

I would add one more item to your list - long term care. I had three grandparents who really needed that assistance for many years. I've known many others who have as well.

 

[Jarhead*]

Hi Bob Smith:

Regarding your answer to poster that said he would rather work until he dropped, than live like some of the posters do.
If as TH calls it, you"re a show horse, you might find it more difficult.
Your answer was a bullseye, as far as I am concerned.
Most early retirees do so without an inheritence, or large pension, so they are already pre-conditioned to living below their means, or they wouldn"t even be able to consider early retirement.
We have been retired for l7 years, and it has been a very easy transition for us. More so, the last 17 years has given us a wonderful opportunity, to actually have the time to do things we would have never done if we would have waited.
By the way, in your other post, you talked about your expenses being about $41,000 annually. That is very close to ours. We also have had to pay for our own medical and dental. (No company contribution).
Actually, mine is slightly higher, but part of the reason for that is a situation that I hope isn't long term. One of my daughters has hit a rough patch, and we"ve been helping her out.
Anyway, Bob, you answered that better than I could have. (The luxury of independence is worth a lot of new cars and keeping up with the Joneses)
Regards, Jarhead

 

[unclemick]

Amen guys

Cheap is really fun - if you have sufficent reserves to buy a whole case of brand name dryer sheets when the need to get frivolous strikes. Plenty of posters have shown ways to work the 'core or basic' part of budget to maximize the fun(as defined by each ER) part - not just $, but the luxury of time to savor and enjoy.

 

[Bob_Smith]

Hey Jarhead! The poster who said he'd rather work till he dropped than live like the people here... He must not have read much on this site before posting. I've never seen any group of people who express more satisfaction with their lives than the people here. And you've been doing it for 17 years already - what an accomplishment! I hope to follow in your steps before too long.

 

[John Galt]

Well, I must repeat. Retiring early, even with very little
planning, was the best decision I ever made in my life,
and I'm pushing 60!

John Galt

 

[Jarhead*]

Hey John Galt:

Regarding your not planning for early retirement.

That actually proves that numbers can"t be used to pigeon hole ability to retire or not.
What you had going for you is life experience, and you can"t extrapolate a set of numbers to fit all people. That"s what makes a horse race.
Your background and motivation, in my opinion, is what made it possible for you to retire early. (That can"t be handled on a spread sheet.)
As we both know, by a stroke of luck, we were both born in the U.S., and what may seem like hardships for some people here is envied by most of the rest of the world.
I don"t believe there is really anything mysterious about being able to chuck a job that is not worth it any longer.
Spend less then you have coming in. (If you can't figure out how to do that, then you probably should work till you drop. Not for me. And apparantly not for you.
Take care, and continue posting. I really enjoy the exchange of ideas that is available on this board.
Regards, Jarhead

 

[cute fuzzy bunny]

I didnt really plan either. Just stuck a thumb up to a pile o' money and a big paid off house and said "eh...I'll take a vacation and in a year or two I'll look it over".

That having been said, if I had done a little more planning and a little less spending the first year or so, I might be marginally better off.

 

[BigMoneyJim]

That actually proves that numbers can"t be used to pigeon hole ability to retire or not.
What you had going for you is life experience, and you can"t extrapolate a set of numbers to fit all people. That"s what makes a horse race.

To be fair, it helps to have a large salary and appreciated real estate. Heck, I consider myself one of the poorest of this board, but I was able to pay down $20k+ of debt in the past 2 1/2 years while supporting myself, living alone, taking a couple of small vacations, saving more for retirement and still not having to restrict myself to rice & beans, so I'm not exactly poor myself. Although 3-4 years ago I felt poor making not much less money and running out at the end of the month.

Living below your means is obviously the secret here. Bigger means helps, but it can be done with less means.

(I'm not picking on John Galt's situation; I think just about everyone here but me has/had appreciated real estate and/or other considerable assets when they started thinking of retiring, and even I have a vested defined benefit pension plus my saving-since-21 401(k)/IRA.)

 

[Bob_Smith]

Heck, I consider myself one of the poorest of this board...

(I'm not picking on John Galt's situation; I think just about everyone here but me has/had appreciated real estate and/or other considerable assets when they started thinking of retiring, and even I have a vested defined benefit pension plus my saving-since-21 401(k)/IRA.)

BigMoneyJim,

If I recall correctly, you're a fairly young guy, is that right? I'll bet you're far ahead of where I was at your age. Your knowledge is certainly light years beyond where mine was. I enjoy your posts, by the way. You have a way of challenging conventional wisdom that keeps me thinking.

Regarding the considerable assets, I had almost nothing when I started planning my escape at age 38. I'm 51 now. Even now my house is worth maybe $75,000 tops, and it doesn't even factor in to my plans. Not only that, I have never earned the type of money I hear about on this board. Although my wife and I have never been unemployed, even for a day, and have kept the same jobs for 26 and 28 years respectively (her about 25 hrs/week) we are earning only about $68,000 per year gross between us right now. We did inherit $180,000 recently, but we built the other $900,000+ ourselves (which includes the value of my pension if I had to buy it - that would be about $280,000). I guess what I'm trying to say is that this can be done without relying on large real estate gains or inheritances, or even large incomes.

 

[Jarhead*]

Big Money Jim:

Sounds like you are a little discouraged.
I have found that most of the posters on this board that have actually retired, did so without hitting a lottery, a large inheritence, etc. etc.
As Bob Smith stated in his post, you are a young guy. If you are motivated, and your goal is early retirement, live below your means, and invest as much as you possibly can.
When I was your age I was married with small children, and my wife was a full time homemaker. (In other words, we were happy to be paying our bills.)
I didn't really start making good money until I was about 34. (I retired at age 49, so I basically did it on 15 years of admittingly above average income.).
My kids are all doing fine, and appreciate the fact that we can get together with them unencumbered by job requirements.
In my post to John Galt, I did not mean to suggest that anybody, at anytime could retire, but to point out that if you are not motivated, and unable to grasp what is truly important, (In my case, the luxery of freedom), then the alternative is to continue working.
Retirement is not for everyone. I have known a number of people that have stated they made a big mistake when they retired early.
I do not think you will find many of those people on the board though. My wife and I deferred a great deal raising a family, and investing as much as we possibly could to make retirement possible. As I have stated before, the 17 years of time we bought has been worth it in spades.
Don"t get discouraged because you think that other people have a leg up on you. (Life isn't always fair).
You and you alone will have to take responsibility to realize your goal.
Life doesn"t always serve up a nice big fat homerun pitch, but being a good singles hitter is o.k. too.
Regards, Jarhead

 

[BigMoneyJim]

BigMoneyJim,

If I recall correctly, you're a fairly young guy, is that right? I'll bet you're far ahead of where I was at your age. Your knowledge is certainly light years beyond where mine was. I enjoy your posts, by the way. You have a way of challenging conventional wisdom that keeps me thinking.

Thanks! Yes, I'm 34. (Gee, that used to sound so old....)

I guess what I'm trying to say is that this can be done without relying on large real estate gains or inheritances, or even large incomes.

Read below for more...

Big Money Jim:

Sounds like you are a little discouraged.
I have found that most of the posters on this board that have actually retired, did so without hitting a lottery, a large inheritence, etc. etc.
As Bob Smith stated in his post, you are a young guy. If you are motivated, and your goal is early retirement, live below your means, and invest as much as you possibly can.

I'm sorry if I came off as discouraged; that was not my intent. The first time I read your message it sounded like "hey, anyone can do it", and I was thinking of those in rougher positions than any of us, but you did make the same points I did, so I was a bit redundant. My point was even as the "poor guy" here I'm still pretty well off. But on second thought the investment advice holds for any income/spending level: If you spend below your means you can retire early. Like the guy with $3.2 million who's not ready to retire with the lifestyle that could afford (which the rest of us drool at), we--or at least I--have in mind a minimum standard of living which we would accept even though many others live below that standard happily.

I agreed with your points; it's just that sometimes I pick a small detail out of a post and nitpick it. And sometimes nitpicking the detail is irrelevant, redundant, or misunderstood by me anyway. Sorry.

Life doesn"t always serve up a nice big fat homerun pitch, but being a good singles hitter is o.k. too.

On second thought, maybe I have been a tad discouraged lately. Real estate appreciation and investment returns have been pretty kind to this ER generation, but much of what I read now says that interest rates will rise, house pricing will crash, the market is overvalued, bonds will slump, they sky will fall, terrorists will bomb us, we'll have a nuclear war, etc., etc.. I had in the back of my mind that I could reach $1mil in about 10-15 years after eliminating debt, but I finally did some calculations and that's overly optimistic. On the other hand, perhaps it's better to be employed and 34 with such a bleak outlook instead of retiring at 55 or so and wondering if my investments will outlive me.

But you're right; we are all tempted to swing for the fence, but once the debt is gone and we LBYM we can make it with only a decent on-base percentage.

 

[trumpeting_angel]

Pardon me for jumping into the middle of this, but . . .

Jim, you're thinking the right things and living below your means and building for the future - it's SO much more than most people are doing. There's always someone to predict nuclear war (when I was a kid we had those air raid drills where you crouched under your desks - how helpful would THAT have been in the nuclear war??).

I, too, have been a little fearful about the predictions of lower returns than we've had historically. But living below your means is the key, no matter what happens. We can't control the state of the world, but we can control our spending, and that's probably going to work for us in the long run.

I've been watching your debt clock since I joined this board, and it's getting quite close. I hope a celebration is planned!

Good luck to you, and to all of us!

Anne

 

[cute fuzzy bunny]

when I was a kid we had those air raid drills where you crouched under your desks - how helpful would THAT have been in the nuclear war??

You have a prime opportunity to kiss your a$$ goodbye...

 

[gayl]

Okay, so can someone tell me where I am going off track? I retired on basically 100% of my previous take home pay. I was living on 2k a month, saving 1k in the 457 plan, and using the rest to convert to a higher pension plan so that I was able to get out at 52. I am now trying to live on 1825 a month ... only 175 less than my previous amt and I should have seen a drop in my financial needs as I was no longer commuting. Yet it is tighter than ever.

Okay, I've taken a few trips ... Fort Lauderdale, thru the canal, Sacramento Jazz Festival, Tahoe at the end of the month ... a few more than ordinary. But the cruise was already paid for. And I am giving more to charity and going to more charity functions ... about 1k more this year.

I think my problem is that I have more time on my hands and that leads to spending more. Any one else experience this