How Much is Enough

[daylatedollarshort]

We were too busy and stressed during our working years to pay attention to the minutia of our spend, and once we retired we drilled down and found lots of stupid spending that we eliminated.

We have been on a similar path. We still work at home but have more free time for budget analysis. We cut 45K so far from our annual expenses without downsizing or downgrading the cars, so we still have the same basic lifestyle.

We have just been going over the budget line item by line item - getting Ooma instead of the landline, dropping life insurance we no longer needed, dropping collision on the kids cars, switching to LED bulbs, low flow shower heads, etc.

I keep a spreadsheet of all the ideas and how much money each one has saved. I still have quite a few to implement. That is one of my main hobbies these days.

I don't see it as accepting less. I see it as waking up to the value of free time vs money and that it feels good getting rid of a lot of clutter and expenses that didn't really add to our happiness.

 

[meierlde]

Note that one other expense you can eliminate after retirement is disability insurance.

 

[Al in Ohio]

Note that one other expense you can eliminate after retirement is disability insurance.

Dropping both life insurance and disability if you had it certainly help, the big question on either is how far in advance should you drop them. Life insurance is intended to cover lost future income, but most mega corps include at least one years salary as a benefit, plus your built up wealth self insures you. So the question is how many years ahead of FIRE does one safely feel comfortable dropping their life insurance?

 

[meierlde]

Dropping both life insurance and disability if you had it certainly help, the big question on either is how far in advance should you drop them. Life insurance is intended to cover lost future income, but most mega corps include at least one years salary as a benefit, plus your built up wealth self insures you. So the question is how many years ahead of FIRE does one safely feel comfortable dropping their life insurance?

One question of course is on life insurance, do you keep enough to pay final expenses? One nice thing about the old whole life policy, is you can turn it into a paid up policy and keep getting the dividends. (Actually if you have an old whole life policy it may not be costing much, as the premiums almost all go to cash value, have a 45 year policy where the insurance cost is now $10 per year, and in 2 more years or so it will be paid up)

 

[2B]

One question of course is on life insurance, do you keep enough to pay final expenses? One nice thing about the old whole life policy, is you can turn it into a paid up policy and keep getting the dividends. (Actually if you have an old whole life policy it may not be costing much, as the premiums almost all go to cash value, have a 45 year policy where the insurance cost is now $10 per year, and in 2 more years or so it will be paid up)

For any evaluation of keep or cash out, you need to know what the cash value is if you take it now vs what your heirs would receive when you die. Throw into this what your health and longevity are likely to be.

My FIL had an old whole life policy that we found when we took over his finances. It had a $25,000 death benefit and had a $17,000 cash value. Since he was in poor health, we kept paying the payments and in a couple of years my DW and her sister split the death benefit and cash value. Overall, it was a poor investment for my FIL since he had paid on it many, many years with a low return. However, the time frame we expected for the payout made it obvious that this was the time to keep the policy. This runs counter to my normal response to most financially based insurance products.

 

[In-control]

We are embarrassing minimalism. The kids will be graduating next year and we are pushing/selling things( not the kids) out of the house for the transition to ER next year. We use the budgeting tool FinanceWorks from Quicken that comes with our bank account. We setup a budget and try to work toward it based on our current spending. It is easy and automated to notify me when we are close/ go over budget.

We are anticipating selling the house and using that as extra $ for travel and fun. We are going to rent until we find a area that we really like. This will help control our costs as we own a house now and every year there seems to be a big expense/surprise.

 

[NanoSour]

I suppose it's just a mindset, but I've always had difficulty spending/consuming to my level of income. I guess that's the main reason I was able to ER at 49.

Left my career where we were grossing over 250K, but spending only 72K annually. I track our spending using Quicken and that's been the level for the last 3 years so I'm pretty comfortable sticking with it in our early years of ER. Just for reference, this is for a family of 5 with 10, 11 and 15 year old children.

My main retirement calculator is ESPlanner and it gives me a net spending level of 99K/year with our assets and AA using a "cautious" spending scenario (meaning assume you only average 1/2 the historical real return from your AA).

I will note that even at our 72K budget, I'm finding we are well under that by about 1K/month without even trying. Food has been our biggest area for savings. It's amazing how much you can save not having takeout pizza ever Friday and 2 trips to Longhorn a month at $100 a whack. I don't even think the kids have noticed the change. Costco is also contributing quite a bit to our reduced food bill.

As for future college costs, well that's another thread and 4 years down the road.

 

[daylatedollarshort]

We are going to rent until we find a area that we really like. This will help control our costs as we own a house now and every year there seems to be a big expense/surprise.

The one thing that never really clicked with me until I started reading ER books and blogs and made a retirement budget was how much extra a bigger sized house costs above and beyond the mortgage payment for repairs, insurances, furnishing, heating, cooling, etc. We have put a lot of money into repairs on our older house over the last ten years and there is still a lot more we probably should do. Just having our trees trimmed is a big budget item. We are looking forward to having a newer and smaller house with a small yard or just a patio to take care of.

 

[RetiredAndFree]

The one thing that never really clicked with me until I started reading ER books and blogs and made a retirement budget was how much extra a bigger sized house costs above and beyond the mortgage payment for repairs, insurances, furnishing, heating, cooling, etc. We have put a lot of money into repairs on our older house over the last ten years and there is still a lot more we probably should do. Just having our trees trimmed is a big budget item. We are looking forward to having a newer and smaller house with a small yard or just a patio to take care of.

This would be an interesting topic to explore further, unless one already exists in the forum that I haven't yet discovered.

Owning, assuming mortgage is paid off, still involves property taxes, insurance, HOA fees (for us at least), services like gardening, housecleaning and pest control, maintenance and property upgrades. Roughly about $13K - $16K a year for us.

Renting involves ongoing rent, renters insurance and . . . that's about it I think. About $18K a year in our area for a two bedroom/two bath rental.

The difference isn't as dramatic as one would think when you really drill down.

 

[Meadbh]

This would be an interesting topic to explore further, unless one already exists in the forum that I haven't yet discovered.

Owning, assuming mortgage is paid off, still involves property taxes, insurance, HOA fees (for us at least), services like gardening, housecleaning and pest control, maintenance and property upgrades. Roughly about $13K - $16K a year for us.

Renting involves ongoing rent, renters insurance and . . . that's about it I think. About $18K a year in our area for a two bedroom/two bath rental.

The difference isn't as dramatic as one would think when you really drill down.

This is an interesting topic. My current cost of home ownership is approximately $5000 per year (no mortgage, no housecleaning). The current going rate to rent a condo like mine is $1200 per month, or $14,400 per year.

 

[RetiredAndFree]

This is an interesting topic. My current cost of home ownership is approximately $5000 per year (no mortgage, no housecleaning). The current going rate to rent a condo like mine is $1200 per month, or $14,400 per year.

Would that include all expenses? (Yes, clearly gardening and housecleaning are not things everyone might include, I get that! )

Even if we just include property taxes and insurance on our 2400 sq ft, 1980 built, paid off home,, including earthquake insurance here in quake prone California, we're at $8,000. Our HOA's bring us to $10,000, though clearly HOA's can be avoided depending on where one buys.

But, big surprise, we needed termite tenting this year, which ran $2,000. That put us at $12,000 for the year before another thing was done.

We also accrue several thousand dollars annually for intermittent big ticket home ownership items like plumbing repair and replacement, roof repair and replacement, hardscaping repair and replacement, softscaping upkeep, appliance repair and replacement, exterior and interior painting, carpet cleaning and replacement, and so on. It's a pretty hefty amount overall, but they are all things we've already dealt with, or expect to at some point.

And that's still not taking into account ever doing any kitchen or bathroom upgrades.

It really is a bit shocking when you add it all up, and something to re-evaluate going forward to be sure.

 

[Meadbh]

Would that include all expenses?

Yes. All exterior and common element maintenance is covered in condo fees. We have a heat exchanger system and the building is very energy efficient. My utility bills for in suite electricity average $25 per month. Home insurance is included. Building insurance is included in condo fees. Condo fees will be increasing shortly, but not by much. I did include carpet cleaning.

I did not include an allowance for in suite painting, kitchen renovation and decor, nor did I include the price of my new coffee maker. While I did have my unit painted before moving in (2011) I do not foresee any interior home renovations in the near future.

I have been pleasantly surprised at the relatively low cost of living in my condo. It is a relatively new building and we plan to budget proactively for future maintenance by building a strong reserve fund.

 

[RetiredAndFree]

Yes. All exterior and common element maintenance is covered in condo fees. We have a heat exchanger system and the building is very energy efficient. My utility bills for in suite electricity average $25 per month. Home insurance is included. Building insurance is included in condo fees. Condo fees will be increasing shortly, but not by much.

I did not include an allowance for in suite painting, kitchen renovation and decor, nor did I include the price of my new coffee maker. While I did have my unit painted before moving in (2011) I do not foresee any interior home renovations in the near future.

I have been pleasantly surprised at the relatively low cost of living in my condo.

I knew there was a reason we might want to consider a condo as some point!

Most interesting . . . thank you very much for the counterpoint perspective.

 

[daylatedollarshort]

This would be an interesting topic to explore further, unless one already exists in the forum that I haven't yet discovered.

Owning, assuming mortgage is paid off, still involves property taxes, insurance, HOA fees (for us at least), services like gardening, housecleaning and pest control, maintenance and property upgrades. Roughly about $13K - $16K a year for us.

Renting involves ongoing rent, renters insurance and . . . that's about it I think. About $18K a year in our area for a two bedroom/two bath rental.

The difference isn't as dramatic as one would think when you really drill down.

My post didn't address owning versus renting. My point was the cost savings in having a smaller and newer home.

We are getting rid of clutter now so we can downsize. We'll save quite a bit on the next house in terms of price, plus have less to clean, lower insurance costs, less yard work, lower energy bills, lower repair bills, less to furnish, etc.

It isn't just the money but the time for upkeep. It took me a half hour just to sweep the driveway yesterday. One of my friends lives in a townhouse and she could sweep her driveway in 5 minutes. I am not sure our current driveway and yard, most of which we never use except for the patio, are doing anything to add to my quality of life. They seem to be subtracting from it.

In 1950 average houses were 983 sq ft and held 3.8 people, today they are 2,500 sq ft for 2.6 people. For us I think our house size has crept up without really adding to our quality of life. I personally would rather have less rooms and clutter to care for and more free time.

 

[RetiredAndFree]

My post didn't address owning versus renting. My point was the cost savings in having a smaller and newer home.

We are getting rid of clutter now so we can downsize. We'll save quite a bit on the next house in terms of price, plus have less to clean, lower insurance costs, less yard work, lower energy bills, lower repair bills, less to furnish, etc.

It isn't just the money but the time for upkeep. It took me a half hour just to sweep the driveway yesterday. One of my friends lives in a townhouse and she could sweep her driveway in 5 minutes. I am not sure our current driveway and yard, most of which we never use except for the patio, are doing anything to add to my quality of life. They seem to be subtracting from it.

In 1950 average houses were 983 sq ft and held 3.8 people, today they are 2,500 sq ft for 2.6 people. For us I think our house size has crept up without really adding to our quality of life. I personally would rather have less rooms and clutter to care for and more free time.

Yes, I did misunderstand, my apologies. Likely a result of just now beginning to realize the true cost of 'owning' our home in a manner I did not prior to retirement. I think I assumed because we'd been in our home for a very long time, and had paid it off, we were home free. Clearly that is not the case.

 

[Katsmeow]

My post didn't address owning versus renting. My point was the cost savings in having a smaller and newer home.

We are getting rid of clutter now so we can downsize. We'll save quite a bit on the next house in terms of price, plus have less to clean, lower insurance costs, less yard work, lower energy bills, lower repair bills, less to furnish, etc.

It isn't just the money but the time for upkeep.

This is a good point. We downsized into our current house.

The old house was 4400 sq feet with 2 1/2 acres, 2 double garages, a pool, and a guest house.

This house is 2900 sq ft with 1 acre, one double garage (with a storage room in the garage that we use as our dog kennel). This house cost about 57% of the other house

The upkeep costs are very, very different.

Just this evening a came across a spreadsheet from the old house. In 2008, we used an average of 5447 kwh electricity each month. Now, we use an average of 2641. To be fair in 2008, there were 6 people in the house. Now there are 4. Our electric bill now is much less (and will be even less once the kids at home are gone).

But, it isn't just utilities. Virtually all work we've had done to this house costs less than it cost to do similar work at the other house because everything is smaller. Yard maintenance is easier. In the old house, tree maintenance was a huge expense (I once counted over 60 trees just in thr front yard. This house still has lots of trees but not that many). Here, it is an expense, but not to the same extent.

And, yes, cleaning the house is much, much easier (also helped by the fact that this is a one story while before we had a 2 story).

We did lots of decluttering between the 2 houses, in part because I didn't want to have to clean stuff. I am still working to do more decluttering (I would be more extreme about it, but DH is a tougher sell on it).

Real estate taxes are less of course and in this area real estate taxes are high (no state income tax here). So moving here saves me over $3000 a year just in lower taxes.

Light bulbs - Fewer rooms, so fewer bulbs. As we try to move from fluorescent to LED we are glad to need to replace few lights.

Just fewer things to replace. We had 5 toilets in the old house. Now we have 3. And so on.

 

[Amethyst]

Although I was a National Merit finalist with high SATs, and graduated from high school at 16, I knew my parents couldn't afford to send me to a private college. As a result, I attended a community college for 2 years before transferring to an upper-level state university. It all cost my dad very little, between in-state tuition and his Social Security stipend for a full-time student living at home. No student loans were involved. At the CC, I took advanced classes, joined the school paper and other activities, dated like crazy, and generally had a good experience.

For decades, I had to learn not to mention the community college, since other people looked down their noses at it, yet I have done fairly well in life, all told. Better than several people, of my acquaintance, who attended private colleges,

Amethyst

Our son did go to community college. He transferred his credits just fine to the state university. I looked at the cost of private colleges and the level of education of each and just saw no benefit to paying that extra cost. FWIW, DS's classes in CC were smaller than many of the first two years classes at a 4 year school and he had great instructors. And, yes, it did cut costs a lot.

.

 

[Katsmeow]

Although I was a National Merit finalist with high SATs, and graduated from high school at 16, I knew my parents couldn't afford to send me to a private college. As a result, I attended a community college for 2 years before transferring to an upper-level state university. It all cost my dad very little, between in-state tuition and his Social Security stipend for a full-time student living at home. No student loans were involved. At the CC, I took advanced classes, joined the school paper and other activities, dated like crazy, and generally had a good experience.

And the age was another thing. DS graduated high school at 15 and started CC at 16. Some kids might be ready to go live in a dorm at that age, but DS wasn't one of them. So living at home was a necessity and the CC was a lot closer than any of the other universities so we looked into it. Now that he has had the experience I'm a huge fan of CC. (My daughter is 17 taking a dual credit course at the CC this fall while he homeschool her other subjects. She will graduate in December at 17 and will continue on at the CC in the spring.)

 

[tuixiu]

We are looking forward to having a newer and smaller house with a small yard or just a patio to take care of.

We downsized from a bigger house to a townhome (2BR, about 1200 sqft) eight years ago. Bought with profit from sale of the big house so no mortgage.

Association fees are $170/month, that handles landscaping, roof, structure, etc. so aside from the heat pump on the roof there aren't many expenses to budget for outside the walls.

The last annual property tax bill was $650, although it has been close to $1000 when property values were much higher.

Electricity is $105/month for the level payment plan, ranges from $65 in March to almost $200 in July. We're near Phoenix so obviously summer is the killer for AC.

Townhome is nice since nobody above us or below us, plus we on an end unit so just one shared wall and we never have noise issues with hearing neighbor thru it. Obviously mileage may vary.

I haven't carefully tracked expenses on the old 4BR house with yard vs. this one, but I can say one the biggest differences for us has been the time. Sure there is a tradeoff as we don't have a yard to frolic in, but we sure don't miss pulling weeds, mowing, trimming trees, blowing leaves, constantly fooling with the irrigation system, all those things I know some people genuinely enjoy but we used to dread taking up our time on weekends.

Maybe when we do retire the balance will tip the other way and we'll find having an extra 50 hours per week freed up makes the yardwork and stuff more palatable in exchange for the benefits of more outdoor space, who knows.

 

[Dawg52]

For decades, I had to learn not to mention the community college, since other people looked down their noses at it, yet I have done fairly well in life, all told. Better than several people, of my acquaintance, who attended private colleges,

Amethyst

Must depend on the people you run with. I attended a CC my first 2 years too before transferring to a state University. Most everyone I knew over the years did the same thing. I guess I hung out with the lower class.

 

[eytonxav]

We are getting rid of clutter now so we can downsize. We'll save quite a bit on the next house in terms of price, plus have less to clean, lower insurance costs, less yard work, lower energy bills, lower repair bills, less to furnish, etc.

It isn't just the money but the time for upkeep. It took me a half hour just to sweep the driveway yesterday. One of my friends lives in a townhouse and she could sweep her driveway in 5 minutes. I am not sure our current driveway and yard, most of which we never use except for the patio, are doing anything to add to my quality of life. They seem to be subtracting from it.

In 1950 average houses were 983 sq ft and held 3.8 people, today they are 2,500 sq ft for 2.6 people. For us I think our house size has crept up without really adding to our quality of life. I personally would rather have less rooms and clutter to care for and more free time.

+1 we just moved to our downsized digs for the reasons you mention. Went from 4200 sq ft 20 yo house to 2500 sq ft new one, with a much smaller yard. We were procrastinating making the move, but are so glad we did, wish we had done it sooner as life is so much better now!

 

[H2ODude]

Regarding colleges. I got degrees from state and private (well known) and saw no difference in the two. DD and DS were both NMS and could attend any state college for no tuition. DD got accepted to Yale early admission as well as a full tuition scholarship from same private university I graduated from. I was willing to cough up the roughly $120k it would have cost in tuition alone for Yale vs. other. She chose other, loved it. In the process as I queried many people on the advantages of a Yale, it was only worth it if she wanted to go into politics or law by most assessments.

DS went to same private freshman year (on half scholarship), didn't like it, returned to free tuition state school. So, they were both able to compare state vs fairly well known prestigious private as they both majored in Chem e. Their comparisons gave the state school the edge. Later she got her Phd in Chem e (at an Ivy league) and promptly started having babies, now on her fourth. Married to a banker dude; maybe if I did as well we'd have had more kids too! Interesting to see if she returns to her career; she's loving the mom thing right now.

One statement I recall vividly from investigating the value of higher priced schools: Any kid can get a lousy education from a great school and any kid can get a great education from a lower tier college. There's a lot of truth in that as described by others. I frankly think it is obscene what is charged at many of these universities now, as they sit on these huge endowments. I also believe that the availability of loans has aggravated the situation (increasing tuition) which then perpetrates the need for more loan programs.

 

[daylatedollarshort]

I think much of the college decision gets based on personal experience. DH and I went to public schools and did okay. I used to have people with advanced degrees from top public and private schools working for me. I also sometimes hired people that didn't have any degree. In IT I was always happy to find superstar technical talent and where they went to school ten years ago never seemed important.

When our kids were in high school I printed out the Payscale reports of salary by major and by school, plus the Krueger and Dale studies that found it is the student, not the school, at least for non-minorities, that matter for career success. We pointed out that the mid-career salaries of many of the top schools were not much different than what good programmers or engineers made from just about any school, so major was more likely the more important variable than school.

I guess if your kids want to be professors, politicians, lawyers or investment bankers, maybe school makes more of a difference.

 

[MRG]

I think much of the college decision gets based on personal experience. DH and I went to public school and did okay. I used to have people with advanced degrees from top public and private schools working for me. I also sometimes hired people that didn't have any degree. In IT I was always happy to find superstar technical talent and where they went to school ten years ago never seemed important.
.

+1
I never went to college(1 year trade school) but had a great IT career. I've known many that did have degrees and were mediocre at best. Then their were others that did and were very talanted. One of my mentors was a USMC developer. He'd had 12 week USMC COBOL training.

We both had to go evaluate technology that was developed by guys from Berkeley. At the intro they mentioned their advanced degrees, asked about ours. We both proudly told the truth. They explained how we might not understand all the advanced concepts, but they would try to help us understand.

We politely thanked them. What a system they had built, infinitely scalable due to the use of DCE(later known as dead computing environment). We pointed out how network latency would not suggest infinite scale, due to queueing.

Well Megacorp had no interest after that, these highly educated folks went paws up. Lost themselves a lot of money.

I agree it's not where the diploma is from, it's how you use talents.

MRG

 

[Katsmeow]

I guess if your kids want to be professors, politicians, lawyers or investment bankers, maybe school makes more of a difference.

Lawyer here. I don't think that undergraduate school matters. Law school does matter, but not as much as people sometimes think it does. It matters more if you want to go into big law (very large, high prestige firms). However, most people won't go into big law, and many who do are utterly miserable. But if someone has their heart set on it then they need to find out what schools the firms they want to work for interview at and go to one of those schools.

As someone who has interviewed to hire lawyers before (I was always at a mid-size firm), I paid some attention to law school but it was a factor swamped by many other factors. A "good" law school (meaning a law school that was one of the better schools in the state) would be a little plus and a bad law school (a lower rank but accredited school) was a negative but one that might well be outweighed by other factors.