Monthly / Yearly Spending for Super Savers

[rk911]

LBYM?

 

[Spock]

LBYM?

Live Below Your Means.
Conventional Wisdom says you can spend 33% of your income on a mortgage, but you only spend 20%. etc.

 

[DeborahB]

I live in a relatively expensive area and bought a house 2 years ago. I moved back to my hometown. So I have $2500/mo in mortgage, interest, insurance, taxes. There’s no way I can live cheap. Plus I’m getting older and not healthy enough to do yard work,snow shoveling, or serious house cleaning. So for some people I live extravagantly. Others would say I live reasonably modestly. I think I spend $50-$60K a year because of the house. I am comfortable. I keep the heat and a/c comfortable.so far I’m doing fine and more importantly, I’m happy. YMMV. But when I was working, I saved like crazy and lived way below my means.

 

[The Cosmic Avenger]

Everyone is different. I mentioned I saw first hand how stressful it can be. If this lifestyle is a choice, I don’t get it. I would rather put the same amount of energy into maximizing my income. I wonder how much fear of success plays into some of the decisions to pursue this lifestyle,

The thing is, added effort towards work doesn't always mean added income. I've actually gotten better raises in years when I feel like I've done less, and gotten smaller raises in years when I feel like I've accomplished more. I also would likely have a huge drop in my quality of life if I was paid a lot more than I am now, because in my experience people with much higher incomes have a lot more responsibility, and so a lot less flexibility and free time. However, added effort towards savings will reap far more consistent benefits. At least, that's the general perspective of those of us who emphasize savings rather than earnings.

 

[meleana]

We are pretty frugal but you can't live on $26,000 in NY when your property and school taxes are already $10,000.

 

[davidfin]

My DW and I have always considered our lifestyle to be on the frugal side but never cheap.
I've always made pretty good money but spending and investment with an eye to the future we wanted to live was paramount. Fired at 57 and now thinking I'm living the highlife. Folks who fire living on <$20K a year seems as incomprehensible as some one who who hasn't saved a penny for retirement. To me it seems like some kind of fringe hobby. All the best to those who choose the lifestyle but it seems to me that working a bit longer would add to your joy. I'd hate to give up the experiences we are collecting and can't wait for the new ones we are planning. Just don't see how it would be possible on meager resources. To each their own I guess.

 

[gooddog]

At about 36k/year. The 36k is covered by our guest house which we rent out as a vacation rental. We spend none of our income, or dividends/interest. Got that dryer sheet sliced up into 1 inch squares.

 

[Bongleur]

Define spending. Does it exclude real estate taxes, mortgage, rent, medical insurance, medicine... ?

 

[Al in Ohio]

Their words, not mine.

Yeah I thought the same thing. My second thought was there are some of us longtime saver/investors that retire early and have plenty of dough from good investments that taking off to Europe while not employed in our 40s or 50s is not a problem.

 

[SecondCor521]

Define spending. Does it exclude real estate taxes, mortgage, rent, medical insurance, medicine... ?

I included everything except college expenses (which I am paying from college savings) and child support (which will end in about a year).

I own my home so I don't have a mortgage payment or rent, but I do pay and included real estate taxes and other home-related maintenance, repairs, and improvements.

I included my ACA insurance premiums, copays, and medicine.

I also included food, clothing, all other insurance, recreation, utilities, Christmas, auto, pets, and miscellaneous.

I do agree with what I think may be your underlying between-the-lines comment, which is that housing and medical expenses can be quite high in certain circumstances which can make it hard to have super-low expenses.

I also think that for some reason when people talk about low expenses, we have a tendency to exclude some spending categories for various reasons. I do include everything in Quicken and in my plans, but as noted above I expect some of my current expenses are definitely temporary, so I justify it to myself that way. YMMV.

 

[Oversoul]

My wife & I, both retired, own a home & have no debt, with a net worth in the 7 figures, live on less than $10k a year....much less.

We lack nothing & have an enjoyable life.

 

[scrabbler1]

Define spending. Does it exclude real estate taxes, mortgage, rent, medical insurance, medicine... ?

The only spending I place into a purely secondary category, below my regular spending, includes the additional income taxes triggered by irregular, erratic income spikes such as cap gain distributions. I do not rely on these distributions to pay my bills, as I have more reliable and consistent forms of monthly and quarterly dividends which pay the bills, some of which are income taxes on these dividends. Since it is income which triggers these additional taxes due, I will always have the means to pay the taxes.

 

[Teacher Terry]

Over, do you live in a foreign country with LCOL?

 

[Dtail]

My wife & I, both retired, own a home & have no debt, with a net worth in the 7 figures, live on less than $10k a year....much less.

We lack nothing & have an enjoyable life.

You live on less than 10k yearly while living in Florida?
Is that net expense after including income, or total expenses are less than 10k?

 

[rk911]

Live Below Your Means.
Conventional Wisdom says you can spend 33% of your income on a mortgage, but you only spend 20%. etc.

thanks. we’ve been practicing LBYM since 1972 and it has paid off handsomely for us.

 

[youbet]

Unemployed, retired - is there a difference?

Well, I guess you could say retired is a subset of unemployed.

I haven't earned a nickle in over 12 years due to being "long term unemployed." During the first few years, I did qualify for some benefits and programs that I wouldn't have had if I declared myself "retired." Some from the gov't and some from Mega. But, yes, there's a lot of overlap and misleading semantics involved........

 

[youbet]

My wife & I, both retired, own a home & have no debt, with a net worth in the 7 figures, live on less than $10k a year....much less.

We lack nothing & have an enjoyable life.

You simply must share a bit of detail with us! Are there some programs or special circumstances involved that allow you to do this? Property taxes, basic utilities and Medicare premiums alone would consume your annual spend which you say is " live on less than $10k a year....much less."

Do you have some tricks where you're hiding that seven figure stash (and the income it generates) in a way that allows you to benefit from low income programs? Or?

 

[beowulf]

I still don’t really understand how couples can live, travel, pay taxes, medical expenses, utilities, etc. spending less than $10, 20 or $30K a year. Even if you live in a state with no income tax, sales taxes and RE taxes tend to be high. Even assuming they have no taxable income (no 401Ks, Ibonds, etc), live in a remote area, own a paid off home with no debt of any kind, how is it possible to live comfortably with that low level of spending? I understand cutting the cord, having one very low cost cell phone, no trash, electric or water bills, growing your own food, but how many people really live like that. And why would they with $1M in savings? No interest or dividends? Never sell any of the assets?

I know I would not want to live that way. We travel a lot, including internationally, pay over $40K a year in SALT plus federal taxes a year (and, of course another $7K or so in Medicare, Medigap and associated medical and dental costs).

So we are nearly at $50K in those fixed costs without taking into consideration utilities, repairs/maintenance for car and house, food, clothing, etc. We prefer to use a washer and dryer, microwave and stove which all use electricity. In the summer we use A/C as 95 degree temps with 90% humidity is not tolerable. In the winter, it can get very cold and snows on occasion - oil heat costs less than electric heat, but it still isn’t cheap. We do live in a HCOL area, but we have always lived in one and still managed to accumulate decent savings. The only times I can remember living on less than $15K a year were in the very early ‘70s, when I was stationed overseas in the Army and housing and utilities were free and I was driving a beater ‘63 VW bug. But I also made less than $15K a year, so spending more wasn’t an option for me.

To those who live extremely inexpensive lives, more power to you. It’s just a lifestyle that’s not for us and one we would never strive for.

 

[Teacher Terry]

In the US I don’t see how it’s possible for 2 people to live on less than 10k.

 

[daylatedollarshort]

I would love to see some of the annual budgets for the super savers. I started researching how to live on Social Security alone for a relative I don't want to see homeless or have living with us. It would seems like to live in the U.S. and have medical care you would have to be on Medicaid to live on $10K or less for 2? Otherwise $10K is what I have budgeted for us for health care alone during our, age 65+ Medicare years.

 

[SecondCor521]

I still don’t really understand how couples can live, travel, pay taxes, medical expenses, utilities, etc. spending less than $10, 20 or $30K a year. Even if you live in a state with no income tax, sales taxes and RE taxes tend to be high. Even assuming they have no taxable income (no 401Ks, Ibonds, etc), live in a remote area, own a paid off home with no debt of any kind, how is it possible to live comfortably with that low level of spending? I understand cutting the cord, having one very low cost cell phone, no trash, electric or water bills, growing your own food, but how many people really live like that. And why would they with $1M in savings? No interest or dividends? Never sell any of the assets?

I know I would not want to live that way. We travel a lot, including internationally, pay over $40K a year in SALT plus federal taxes a year (and, of course another $7K or so in Medicare, Medigap and associated medical and dental costs).

So we are nearly at $50K in those fixed costs without taking into consideration utilities, repairs/maintenance for car and house, food, clothing, etc. We prefer to use a washer and dryer, microwave and stove which all use electricity. In the summer we use A/C as 95 degree temps with 90% humidity is not tolerable. In the winter, it can get very cold and snows on occasion - oil heat costs less than electric heat, but it still isn’t cheap. We do live in a HCOL area, but we have always lived in one and still managed to accumulate decent savings. The only times I can remember living on less than $15K a year were in the very early ‘70s, when I was stationed overseas in the Army and housing and utilities were free and I was driving a beater ‘63 VW bug. But I also made less than $15K a year, so spending more wasn’t an option for me.

To those who live extremely inexpensive lives, more power to you. It’s just a lifestyle that’s not for us and one we would never strive for.

Emphasis added. I think people underestimate the amount of variance between high cost and low cost areas of the United States. They then conclude that, since lower cost areas must be in the same ballpark as higher cost areas, that a life lived on less than $30K must either be very austere and filled only with deprivation, or contain some hidden advantage.

I'm going to go into extensive detail on my expenses. Partly to #humblebrag because I am competitive, but also to explain how it can be done without being super-weird or thrifty. I find these explanations illuminating because I can look at where other people spend or don't spend large amounts of money and then change or not change my lifestyle to optimize my spending for me.

I track all of my money in Quicken. I just did a Quicken report on all of my expenses over the last twelve months (3/28/18 - 3/27/19) and I spent $32,825.13:

Recreation	-7445.31
Food	-6509.12
Insurance	-4113.93
Utilities	-3367.54
Auto	-2985.27
Medical	-2150.51
Christmas	-2065.08
House	-2055.48
Misc	-965.21
Charity	-636
Pets	-296.03
Clothing	-233.67
Interest Exp	-1.98

To respond point by point to the above-quoted post:

I am single, but the above expenses include maintaining a home and food for anywhere between 1 and 3 children at any given time.

Travel - I reduce travel expenses by using a lot of airline miles and hotel points that I accrue through travel hacking. I also partly choose destinations based on their cost. This year I'm taking an 11-day trip to the Caribbean and a 5-day trip to Washington DC to visit my sister. Both plane tickets plus one of the hotels were with points plus some taxes and fees. My sister will let me stay at her house. Out of pocket costs include the AirBnB in the Caribbean, car rental there, plus some train and bus tickets in DC - total for both trips will be about $1500. I've also taken three road trips to visit colleges with my daughter, a road trip to north Idaho with my daughter, a climbing trip to Las Vegas with my son where we also drove supercars, a Thanksgiving and Christmas trip to Utah to visit my sister, a trip to California to get some sun, and another trip to Utah to visit Lagoon.(*) I include travel under Recreation, which is my largest category as you can see above.

Taxes - With low expenses, I don't need to realize much taxable income to cover my cash flow needs. With low taxable income and two dependents as well as one in college, I have negative income tax liability to both federal and state governments.

Medical expenses - I pay $201.37 for an ACA Silver plan with cost sharing reductions for me and my younger two kids. My ex reimburses me for part of that expense also per our divorce decree. We are all relatively healthy. Insurance premiums are included under Insurance above. Copays and prescription costs are included under Medical above.

Utilities - Obviously I have a Utilities category above. That includes natural gas heat and electric air conditioning for my ~1800 square foot, 4 bedroom 2 bath, 2 car garage home in a subdivision in Boise. I heat it to between 68 and 72 during the winter, and keep the AC on down to 75 or so in the summer. Utilities also includes my cell phone (pay-as-you-go via Page Plus) and 100Mbps cable internet. I have and use a washer, dryer, oven, microwave, and refrigerator.

Sales tax - Idaho sales tax is only on products, not services, and runs 6%. It is not assessed on my insurance or utilities. I include it in the cost of goods that I buy. We also get a $100 per person grocery tax credit annually, which offsets some of the sales tax we pay for food. A rough calculation indicates that my sales taxes at most are $720 over the past year. Net of the grocery tax credit, that would be $420 maximum. As noted, this is included in the various expense categories and not broken out separately.

RE tax - I paid $682.87 for my last semi-annual property tax bill. The property tax rate in my taxing district seems to run about 52 basis points annually. Included above under the House category.

Remote area - I live in suburban Boise. I have a YMCA, gym, Home Depot, Walmart, 21-screen movie theater, airport, doc-in-the-box, golf course, and multiple grocery stores, restaurants, and banks within 5 miles of my door. We have water, sewer, natural gas, electricity, trash, and recycling service. We get police and fire protection; the nearest fire department is less than 2 miles from my house, and there is a fire hydrant two lots over and across the street from mine. Two regional hospitals and a state university are within 10 miles.

Home - I do have a paid off home; as previously noted this helps a lot in keeping expenses low. Mine is 15 years old and in good shape. Maintenance, repairs, and HOA fees are included in the House category. I am in the process of painting it and adding a door to turn the bonus room into a bedroom - both projects are DIY and total cost for both is less than $2000. Some of that will be recouped in a better selling price down the road.

Cutting the cord, etc. - I do have a low cost cell phone - an Iphone 4, which I bought several years ago secondhand for probably under $100. I don't have cable - I watch YouTube on my Samsung Smart TV and OTA network broadcasts. Trash/electric/water are all included under Utilities. I get weekly curbside trash and recycling service, I use electricity like a normal person. I shower daily, use my washing machine and dishwasher regularly. My state does have low electricity costs due to hydropower with some solar and wind energy in there.

Food - I don't grow my own food. I buy mostly prepared food from the Fred Meyer grocery store 2.5 miles from my home.

Interest and dividends - I collect ~2% interest on my savings account, which I keep at between 0 and 3 months of expenses. I receive dividends from Vanguard on my taxable account. I experience capital gains when I sell stocks from my taxable account, but the amounts are low enough to where I don't pay any taxes on them.

SALT - Again, negative state income tax liability, and 50 basis points of property tax. No local income taxes. Not enough to itemize, so I just took the standard deduction this year.

I'm 50 so I don't pay for Medicare or Medigap coverage. (My Dad has Medicare and a Medigap policy that he pays $142.40 per month for and it seems to cover almost everything that Medicare doesn't.) I see my dentist every 6 to 9 months and pay out of pocket for cleaning, exams, and the occasional crown or filling - included under Medical above.

I have - also as noted previously - a 26 year old Lexus sedan. It was a hand-me-down when my Dad stopped driving and is maybe worth $2500 KBB. Auto expenses include fuel, maintenance, repairs, license, registration, etc. and are in the Auto category. (Auto insurance I put under Insurance. I have liability and UIM coverage through USAA and self-insure for comprehensive, collision, glass, and rental car coverage.)

I donate platelets to the Red Cross, volunteer in engineering competitions, play bridge, go out to eat, watch movies, exercise, bank, shop, spend time with family and friends, and travel some. I drive a decent car, wear clean clothes, live in a decent climate-controlled home with all of the standard amenities, have a cat, pay all my taxes due, and take care of my health. It seems like a very normal middle-class life to me.

An objective analysis of my finances indicates to me that I could easily spend about 3x what I spend today. Yet I do not. Therefore I am (a) mistaken about my financial numbers - I doubt it, (b) not acting rationally with regards to my finances - somewhat more likely, or (c) living a life of relative contentment in a LCOL area after having worked for years to arrange my financial situation so I could do so.

I think I covered all of the bases mentioned by the poster I quoted, but if anyone wants clarification or detail, I'm happy to provide it as long as I remain personally unidentifiable.



(*) I also went on a two-week river cruise through Europe last year and visited Switzerland, Germany, France, Luxembourg, the Netherlands, and Belgium. But my Dad paid for most of that; only my personal expenses (gifts, extra food, train tickets, etc.) are reflected in my Quicken data.

 

[WestUniversity]

I am simple minded so I don’t get it. There is so much to life. Skimping to get by doesn’t seem like much fun.

I grew up poor and I know it’s not all about “things”, but I saw how finances put strain on the entire family plus individual relationships. Why someone would chose this challenge makes me think there is more at play than just wanting to live “cheap.”

+1

 

[youbet]

I'm going to go into extensive detail on my expenses.

You're doing a great job SecondCor521. But in the interest of understanding your true position.......

The money your dad contributed to your travel should be included in your expenses.

The money your ex-DW contributes towards the kids' healthcare and your ACA subsidy should be included.

Counting your kids' college expenses separately is legit, but it does need to be noted.

Your location seems to be exceptional in terms of real estate taxes (I pay close to your annual amount every month on a modest home in a working class neighborhood in the shadows of the Chicago skyline) and the SALT situation in general.

Bottom line, to make your numbers apples to apples with my view on things, I'd add a couple of grand. Still, excellent job. It sounds like you're really on top of things.

 

[SecondCor521]

You're doing a great job SecondCor521. But in the interest of understanding your true position.......

The money your dad contributed to your travel should be included in your expenses.

The money your ex-DW contributes towards the kids' healthcare and your ACA subsidy should be included.

Counting your kids' college expenses separately is legit, but it does need to be noted.

Your location seems to be exceptional in terms of real estate taxes (I pay close to your annual amount every month on a modest home in a working class neighborhood in the shadows of the Chicago skyline) and the SALT situation in general.

Bottom line, to make your numbers apples to apples with my view on things, I'd add a couple of grand. Still, excellent job. It sounds like you're really on top of things.

Thank you for the kind words, @youbet.

As I think I wrote in my first post on this thread, it does depend on how you count.

The way I look at my Dad's trip is that he was, in essence, hiring me to accompany him because he needs mobility help. His payment to me for that was paying for the flights and the trip itself. When I did a side trip myself to Cologne to see the cathedral, I paid for my train ticket there. So I guess I would look at that as a fair amount of imputed and untaxed income, plus some trip expenses. I would not have gone if it weren't for him wanting to go.

The money from my ex I treat as an offset to the child support that I pay her. I did not include child support in the numbers posted.

My ACA APTC is large. I actually do not put that into Quicken; rather just the net premium monthly. Perhaps I should. That is another relatively large source of imputed and untaxed income.

The above three items total about $21,741, so you're quite correct that the impact is significant.

My kids' college I view as spending down their college accounts (which I and my parents saved for over the past 20 years). There is enough money in there to pay for the anticipated expenses at the moment, with some left over that they will get when they graduate.

...

I mentioned hidden advantages in my previous post and wanted to expand on those words. I was born in America to a set of well-off, educated, financially sound parents. They taught me a great deal about money and how to earn it, spend it, save it, invest it, and give it away. I am a white, straight, right-handed healthy male with no disabilities. My parents paid for my college education and my first car, and contributed to my wedding and my first house. My kids are all reasonably healthy and intelligent and are becoming well-educated.

That means that many can't do what I did because they didn't have the head start I did. On the other hand, there are lots and lots of people in flyover country who can do it and are doing it. The general recipe for living frugally is just as well known as the general recipe for generating FIRE-type wealth: Live in a LCOL area, manage taxes, consider costs, don't waste money or stuff, and be fortunate with your health.

 

[daylatedollarshort]

Living low cost is not necessarily living a life of deprivation. We can easily spend $200 for an evening out for dinner and a play with friends. Alternatively, the same $200 would pay for an annual state parks pass ($20 for seniors), $0 for 50 or so cultural events and attractions with free library passes, $100 for an annual seat filler membership including over 1,000 live events a year included at no extra charge, a $30 non profit theater group membership good for about 100 free plays a year, $0 for all sorts of free events including lectures and concerts at local colleges including U.C. Berkeley, $40 for a wine tasting pass for two on sale from Groupon and $10 left over.

If we didn't manage our MAGI to get ACA credits, we would spend $25K on premiums instead of $24, for the exact same policy. I like optimizing our expenses. We get a better lifestyle for our money that way.