What could you cut?

[Luck_Club]

This is only if we're in dire straits

 

[FUEGO]

I already have the thermostat at 65 degrees during the day and I'm always freezing.

Seems like you could squeeze a little extra $$ into the heating budget, no? That's one area where I don't mind spending what it takes to keep it comfortable in our hot, humid summers and our cold winters. Going from uncomfortable to comfortable adds maybe $200-300/yr to our heating/cooling budget (aka about the same cost as one day on a family cruise or 2-3 days of family slow travel).

 

[mrfeh]

After summarizing our 2017 spending I looked at the number with a bit of disappointment. We live in a paid off home in a low cost of living area, with 2 paid off cars and employer healthcare, and we still managed to spend more than $37000 this year.

But what could I cut?

- $3000 on home improvements, $2000 was necessary but could’ve been delayed
- $5000 on “personal purchases”. This is everything from clothes to going out. DW and I each get half of that per year. We could probably cut this in half, but it wouldn’t be fun.
- $2000 on travel. A lowball, all of the airfare and most of the hotels were paid for with points.
- $1000 on booze
- $700 in union dues. $200 on Spotify.
- We’ll move in RE and save $1300 on neighborhood fees.
- We don’t have cable, our hobbies are cheap/free, we eat out maybe 5 times a year.

So we’re looking at $35k a year (plus healthcare & taxes) in retirement. We could trim down to about $30k a year while still covering needs and most wants. Down to $24k if we had to scrape by for a bit for some reason.

What about others? How much wiggle room do you have?

We are in a similar situation - paid off home in the midwest (not LCOL, but not HCOL either).

Our numbers are pretty much identical - $35K per year excluding taxes and health insurance. That includes $4-5K on vacation.

Note that that does not include intermittent large purchases (car, furnace, etc).

 

[rodi]

A big thank you to the OP and all the respondents. This kind of thread is gold for a pre-retiree. For me right now, it's a higher priority to get a handle on future outgo than future income.

When I got serious about ER I started
a) looking at what I could pay off early to reduce expenses later.
b) what I could save more of..

this was like multiplying our retirement plan - we increased savings TIMES reducing our spending.

In our case we started doubling up mortgage payments and I did more 401k contributions and after tax savings.

Net result - we still had a great lifestyle - even though we were now spending far less (if you look at extra mortgage payments as savings rather than spending.) The old "pay yourself first" meant we didn't have a lot of "extra cash" to fritter away.

We did this for 2 years and were comfortable in our lifestyle... which let me re-run the firecalc, fidelity RIP, etc with a much lower lower annual spend... and Voila - I could retire. I retired write after I made the last mortgage payment. We haven't expanded our budget since retiring in 2014... although market returns suggest we can... We have enough.

 

[Sasset]

Similar situation here. This is the first year of FIRE and downsized to the Midwest, so the number I planned for is $50K with all the fun stuff. I could cut cable, entertainment, and travel and probably get down to $30K

 

[unclemick]

This thread reminds of the early days of this forum. You know Dory36's - 33% That's My Story - The Four Yorkshiremen - Dryers Sheets - and all that.

I'm tempted but I not gonna go there - again, yet,

heh heh heh - It's not bragging if you did it. That fact I was layed off, canned with a less than stellar portfolio is a minor detail I often neglect to mention.

 

[athena53]

Seems like you could squeeze a little extra $$ into the heating budget, no? That's one area where I don't mind spending what it takes to keep it comfortable in our hot, humid summers and our cold winters. Going from uncomfortable to comfortable adds maybe $200-300/yr to our heating/cooling budget (aka about the same cost as one day on a family cruise or 2-3 days of family slow travel).

I know- I can be cheap in silly areas like this, then spend a few thousand $$ for the comfort of Business Class on a transatlantic. This is my first year of keeping the thermostat that low and I plan to compare it to last year when I have a full heating season behind me. (I know it won't be perfect due to temperature fluctuations.) I kept the A/C off till it hit 80 and that didn't bother me at all.

 

[FUEGO]

I know- I can be cheap in silly areas like this, then spend a few thousand $$ for the comfort of Business Class on a transatlantic. This is my first year of keeping the thermostat that low and I plan to compare it to last year when I have a full heating season behind me. (I know it won't be perfect due to temperature fluctuations.) I kept the A/C off till it hit 80 and that didn't bother me at all.

I was thinking about that Biz Class seat when I wrote my comment I'd gladly "save" $3-4k by spending an uncomfortable 8-16 hrs in coach and use that to have 10-15 years of very comfortable indoor temperatures for the entire family and all guests. Or spend the same $ on 5-10 years of hiring out the mowing in the summer. Or hiring a housecleaner 1-2x/month for several years.

I'm taking baby steps and have decided to contract out some of the HVAC and plumbing chores that I used to do myself (and still fly coach ).

 

[Sasset]

I was thinking about that Biz Class seat when I wrote my comment I'd gladly "save" $3-4k by spending an uncomfortable 8-16 hrs in coach and use that to have 10-15 years of very comfortable indoor temperatures for the entire family and all guests. Or spend the same $ on 5-10 years of hiring out the mowing in the summer. Or hiring a housecleaner 1-2x/month for several years.

I'm taking baby steps and have decided to contract out some of the HVAC and plumbing chores that I used to do myself (and still fly coach ).

I am glad you wrote this. I guess I could mow my own lawn. I am cleaning my own house for now when I used to have a housecleaner when I w*rked. Like you said "baby steps"

 

[dunkelblau]

Can any of y'all cut back enough to live on 0.5% WR, as we talked about in another thread?

That's what I've been effectively doing over the past few years. I'm still working but if my W2 income and its associated taxes both go to zero and my living expenses don't change, my spend rate would be below 0.5% per year. So no wiggle room for me, I'm living small enough already.

 

[street]

That's what I've been effectively doing over the past few years. I'm still working but if my W2 income and its associated taxes both go to zero and my living expenses don't change, my spend rate would be below 0.5% per year. So no wiggle room for me, I'm living small enough already.

Good for you. I got some criticism for my .5% WR in an other thread. I'm still not sure why it is such a bad thing. LOL

 

[beowulf]

I don't think it's a bad thing at all. If you have RMDs and you don't need the money and just reinvest it with no other withdrawals, you effectively have a 0.0 WR. what do you call it when your assets gain value over the year and you don't make any withdrawals? A negative WR?

 

[DrRoy]

The OP did not say why to cut back. I might have missed it among the posts. Is it just on principle? We spent freely last year (more than double the OP) on 1.5% WR + a small pension. I do not see a reason to cut back or go to .5% WR. Why not enjoy the resources that you have?

 

[athena53]

I think the OP's question was theoretical; it's a question I ask myself regularly because I don't ever want my "non-negotiable expenses" to be an uncomfortable % of my investments.

So far, 3.5 years in, I'm OK with the withdrawal rate (average a little under 4%, not drawing SS on my own record) and have no desire to pare it back to leave more to my heirs- in fact, at the end of the year when I had money left in the kitty for 2017, I bought a new computer, started a 529 for my youngest granddaughter and made plane reservations to Scotland in September. In Business Class!

 

[Surewhitey]

We are at $43k annually and could easily cut $3-4k on the additional car, $2-3k on travel, and another $2-3k misc...getting us down to appx. $35k, all in...

 

[Danmar]

First level would be the obvious things.. Travel,eating out, gifts and charity, clothing, home renos. Probably around 25%. Next level would include real estate related items up to and including some sales. Could not get down to .5% WR without really major cuts. But could easily get down to div rate and these are very safe so not worried.

 

[Pilot2013]

Not retired yet, but all this "cut" talk got me thinking and looking. Just cut $300/year of CC Annual fees for AMX Delta cards that NEVER give us any benefit... You either can't use the companion certificate without paying through the nose for the 1st ticket, and/or you don't get enough miles to use them. Use to be so much better program with Delta....

 

[athena53]

Good move. At one point DH and I were shelling out over $400/year on annual credit card fees. It made more sense when I was traveling on business when I was also accumulating points from actual travel, but not now. They also cut sign-on bonuses. Now I mostly use my Fidelity 2% cash back card. I laugh when I get the glossy mailings for cards with a $450 annual fee.

 

[FUEGO]

The OP did not say why to cut back. I might have missed it among the posts. Is it just on principle? We spent freely last year (more than double the OP) on 1.5% WR + a small pension. I do not see a reason to cut back or go to .5% WR. Why not enjoy the resources that you have?

I took it to be hypothetical in nature. A brainstorming session of sorts to figure out what a Plan B might look like if Plan B is to cut spending during a really bad period in the stock market.

I don't personally plan on implementing any of the $9000 potential cuts I mentioned upthread and in fact I'm working diligently to increase my spending in response to increasing net worth. I'd hate to leave too much to my children and make them horrible spendthrift layabouts. Worst legacy one could leave!

 

[Lake161]

We have a plan B budget that we update once a year. Right now plan B is 43% less than Plan A. That will carry us through an economic downturn if we need to reduce our withdrawal rate.

 

[kcowan]

Ironically, Danmar and I are looking for ways to increase our spending!

 

[MichaelB]

Ironically, Danmar and I are looking for ways to increase our spending!

Well, if you’re looking for some help, I’m happy to lend a hand.

 

[W2R]

Ironically, Danmar and I are looking for ways to increase our spending!

That does seem like a logical thing to do during this bull market.

After all, if we plan to cut back during future market crashes, the reverse should be true for many of us; we could spend a little more right now while the market is surging upwards.

 

[NW-Bound]

Good for you. I got some criticism for my .5% WR in an other thread. I'm still not sure why it is such a bad thing. LOL

No, not I.

People who can live on 0.5% WR with no other incomes such as pension or AA are either extremely frugal or rich. Either case, it's not something I can do or am.

The Federal Poverty Level for a couple is $20,290. To even get this at 0.5%, one needs $4M in investable assets. If I had $10M, then I would be comfortable with $50K/year, but I am a long way from there.

 

[RobbieB]

I could cut 50% easy, but I wouldn't do it even if the market fell 50%.