How far below your means?

[Walt34]

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Originally Posted by growing_older I have learned over the years what works well for me, and I have learned over the years that what works well for other people and they are not necessarily the same.

That's about where we are with it. After my divorce and buying a house by myself in 1985, for the first few years I was merely treading water, just keeping a few $k in savings in case the furnace died or the roof leaked. But I was optimistic that a house payment just under $900 would eventually be a joke (in that area) and five years later I knew people with house payments three times that. While dating DW we ate a lot of spaghetti dinners at home while watching a rented movie, and if I'd worked some overtime maybe a bottle of nice wine.

But all through that there was the sense that, as DW put it when we were dating "The trouble with loans is that they always want you to pay it back. Plus interest." Gotta admire a girl with that sense. (An aside - why do so many people not understand that?)

Fourteen years later DW and I were putting 48% of income into savings, in part because we didn't want a 2nd home, RV, boat with a galley, didn't have a strong desire for Pennsylvania House furniture, etc.

Even now, the bulk of the income (~75%) from my job is going to savings, as I know it's contract work and when I decide to quit the income stops. But we splurge now and then - I just ordered a pricey computer monitor for photo editing, DW enjoys entertaining her nieces - and we feel free to dine out more than we would without the "unplanned for" income.

And when I do quit we will adjust our spending accordingly. Or maybe DW will get a job that will keep me in the style to which I would like to become accustomed.

[East Texas]

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Originally Posted by chinaco It is not a formula.... it is a vague description of spending level.

For us it's a description of a lifestyle.....

[Gumby]

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Originally Posted by growing_older LBYM to me means comfortably living, somewhere below my means. I want to manage wisely to make the most of the means I do have, but I still want to live comfortably. Finding the right balance between what I want and all the things I could have is something everyone probably has to find for themselves. I do not think LBYM means living as far below your means as possible, nor that it should be competitive (unless you want it to be, I guess, I don't want to do that myself). I want to be comfortable now and retire early and comfortably then. I'm okay if it takes me a little longer than it might have, if I get to be comfortable enough along the way.

This sums it up just about perfectly for me.

[rescueme]

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Originally Posted by Walt34 ...didn't have a strong desire for Pennsylvania House furniture, etc.

I hope not, since all the new trash is being made in China ...

Watch for WallyWorld sales; I'm sure they will start to market the brand at that location, someday...

[East Texas]

This is an except from Scott Burns recent article: Some Choices Will Drive Us Straight Over a Cliff - Registered Investment Advisor

"....it is the idea that we try to use our income in ways that will allow us to maintain a stable and reliable standard of living throughout life. All of it. This means we will save money when we have more of it, so we will avoid the experience of having less of it later. Basically, all of us try to arrange our lives so we can avoid a sudden drop in our standard of living."

It sounds like most of the people on this board follow that philosophy in a variety of ways. The important part is not so much all the details we used to get to a comfortable retirement - it's that we got to a comfortable retirement. Money management (or lack of) is so very personal. What works for one person may be inconceivable for another.

[SecondCor521]

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Originally Posted by obgyn65 Hello SecondCor521 - Is there a place where we could compare Excel files / models please ? I am not a finance expert and my excel model seems to be very, very complex. Not sure if I got all my model assumptions right.

I wouldn't mind sharing, except my model is very particular to my situation. If you're a single father of a 15/11/9 year old kids going to college later and are paying child support and have stock options in my company, it would work for you...otherwise not so much. It also has all of my personal data in it.

The trick is to just start with a small Excel model and then make it more complicated and personalized over time.

I don't really use anything more complicated than an array formula, and that I only use in one spot. The rest of it is just, in essence, take last month's 401k balance, add my expected contribution to it, then increase by my estimated rate of return = this month's 401(k) balance.

Feel free to PM me with specific questions if you like, though....

2Cor521

[Nords]

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Originally Posted by GeoffC People seem to have taken my original post in a number of distinctly different ways.

It's always fun to watch a poster try to get this cat herd discussion board to agree on a definition of... just about anything.

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Originally Posted by GeoffC There are many ways to get to a state of financial security and I am interested in the common themes. We can surely just declare that we all need to live below our means and we can use estimates from some of the better calculators to figure out how to get there, but it is valuable and interesting to see how people *really* do this. Obviously more saving is better, but I don't think that most of the people here are the kind of folks who budget their toothpaste consumption. A lot of people here apparently own second homes.

I think LBYM is the line where your spending finally matches your values and goals... frugality without deprivation.

A side issue is that when the goal has been achieved, the frugality isn't easy to shut off. It makes no economic sense for me to bend over and pick up a penny on the sidewalk. Emotionally, though, found money is a real thrill.

As has been mentioned, there are sustainability motives behind LBYM & frugality. We have no apparent economic reason to compost or vermipost or recycle but we enjoy it anyway. Good thing, too, because the economic reason is pretty compelling for all that it's difficult to identify.

[nun]

Being a physicist I appreciate all the vector calculus.........but I must, once again, point to literature as the place to find the ultimate LBYM philosophy.
Just focus on Mr Micawber in David Copperfield and you will discover how to achieve financial security and understand the consequences if you don't practice LBYM.

FYI I save 50% of my gross, 25% goes to the mortgage, leaving 25% to cover taxes, living expenses etc. I'm looking at ER between age 50 and 55 so the numbers quoted in this thread look to be pretty good.

[clifp]

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Originally Posted by Nords It's always fun to watch a poster try to get this cat herd discussion board to agree on a definition of... just about anything. .

This does seem like a pretty tough topic for us to agree on, even if we understood the question.

I do wonder if it is necessary to have an innate sense of frugality to really LBYM? By this I mean there are somethings that I won't buy even though I could easily afford them. I know there are other who feel the same way.

For example my 3+ year old cell phone recently died. Being somewhat of a gadget guy I was pretty tempted to get an smart phone like an Android. However, I decide that between the cost of the phone the $20/month extra charge and the apps I would get, the phone would cost $1,000 over two years. While some of the functionality (Navigation, price comparison scanning) is unique to a cellphone, the vast majority (checking facebook, stock quotes, or email) can be achieved with a PC,which I am seldom more than a few hours away from. Now I can easily afford the extra $500/year but my frugality resulted in spending $40 for a new dumber phone. Now if my net worth was north of $10 million I probably would spring for the more expensive phone.


On the other hand there are somethings that I'd never purchase no matter what my wealth, because I think they are inherently overpriced. I think Rolexes look pretty nice, and I might even buy one for the very rare occasion when I need a dress watch if they cost a couple of hundred bucks. However,at $5K+ I'd never buy one even if I was billionaire.

Basically, my tastes and desire never kept pace with my affluence so LYBM was never particularly difficult for me.

[Nords]

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Originally Posted by clifp I do wonder if it is necessary to have an innate sense of frugality to really LBYM? By this I mean there are somethings that I won't buy even though I could easily afford them. I know there are other who feel the same way.

I find myself getting annoyed with the prospect of spending $675/year for analog cable TV service or $1200/year for water/sewage service, but somehow both those numbers are OK for the right size/quality of longboard...

[kyounge1956]

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Originally Posted by clifp (snip)For example my 3+ year old cell phone recently died. Being somewhat of a gadget guy I was pretty tempted to get an smart phone like an Android. However, I decide that between the cost of the phone the $20/month extra charge and the apps I would get, the phone would cost $1,000 over two years. (snip)

I sympathize. I was hankering for an iPad until someone mentioned that home broadband access might cost around sixty bucks a month. That's $720 a year, which at a 3% WR means I'd need an extra $24K in my portfolio—a little more than a year's worth of retirement fund contributions—to cover the support costs. Would I like to buy myself an iPad? Sure! Enough to delay my retirement a year? Naahhh.

[landover]

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Originally Posted by kyounge1956 I sympathize. I was hankering for an iPad until someone mentioned that home broadband access might cost around sixty bucks a month. That's $720 a year, which at a 3% WR means I'd need an extra $24K in my portfolio—a little more than a year's worth of retirement fund contributions—to cover the support costs. Would I like to buy myself an iPad? Sure! Enough to delay my retirement a year? Naahhh.

This is something I struggle with. I have a perfect phone which cost me $10 and makes and receive calls. Why should I buy a 300$ phone and spend 30-40 months. Are smart phones so useful? I guess as Internet is a need now, someday smart phones may be. I also don't understand why one has to pay for incoming SMS and calls, this is not under my control. I thinks it's free in most of the world,

[Midpack]

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Originally Posted by kyounge1956 I sympathize. I was hankering for an iPad until someone mentioned that home broadband access might cost around sixty bucks a month. That's $720 a year, which at a 3% WR means I'd need an extra $24K in my portfolio—a little more than a year's worth of retirement fund contributions—to cover the support costs. Would I like to buy myself an iPad? Sure! Enough to delay my retirement a year? Naahhh.

+1, amazing isn't it. I use the same calc to talk myself out of purchases, even small ones like your example.

I sold our boat last month after 21 years as a boat owner. In retrospect it was crazy when I think of what it cost us, no matter how much we enjoyed it. We could "afford it," but it wasn't worth it...

[Danmar]

East Texas-Great post. Trick is to get it right. Lot's of forecasting the future which can be difficult. An even lifestyle over an extended period is really the goal. The level of that lifestyle will depend on many things. LBYM is (in almost all cases) a necessary part of it during the accumulation phase.

[Nords]

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Originally Posted by landover Are smart phones so useful? I guess as Internet is a need now, someday smart phones may be.

When my 20-something nephew and his girlfriend visited last August (before our daughter left for college), we all spent a lot of time sitting around the livingroom conversing on various topics. Within a few minutes of starting a conversation, when someone else was talking, he'd quietly pull out his Android phone and glance down at the screen while pushing a few buttons. My reflex reaction was "How rude to be checking messages in the middle of a conversation" but of course I kept my mouth shut.

I'm glad I didn't say anything-- he was going online to look up the answers to the questions we'd been discussing. Within a few minutes, usually while the conversation was still on the same topic, he'd have the answers. It was like having a reference book or a laptop right in the middle of the discussion.

He also taught our daughter how to really use her iPhone map app. She'd never really bothered to learn to read a map, and she trusted everything that her magic phone told her...

[Moemg]

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Originally Posted by clifp Basically, my tastes and desire never kept pace with my affluence so LYBM was never particularly difficult for me.

I can really relate to that . Sometimes I have to remind myself that yes , I can easily afford it and to go for it . My friends who are less affluent than me are amused at my thrift but frankly I am amused at their spending .

[Katsmeow]

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Originally Posted by kyounge1956 I sympathize. I was hankering for an iPad until someone mentioned that home broadband access might cost around sixty bucks a month. That's $720 a year, which at a 3% WR means I'd need an extra $24K in my portfolio—a little more than a year's worth of retirement fund contributions—to cover the support costs. Would I like to buy myself an iPad? Sure! Enough to delay my retirement a year? Naahhh.

I must admit that -- for me -- not having broadband at home would put life in the almost not worth living category. I could more easily give up travel, dining out, TV, almost all new clothes, and most other luxuries of any kind.

In my life, for my personal enjoyment, once basic survival needs are met, the two things I want the most are a computer with broadband and pets.

I will say that one of the parts of the retirement calculus for us in affording retirement is the fact that we do have broadband. Internet usage provides so much free entertainment and benefits for us that many of other expenses are reduced as a result.

A few years ago I started playing World of Warcraft as a primary entertainment activity. Soon after my entertainment type expenses and overall expenses went down even though I pay a monthly subscription fee? Why? I was spending more time at home on a relatively cheap hobby rather than spending more money on other leisure activities that were far more expensive.

[ERD50]

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Originally Posted by kyounge1956 I sympathize. I was hankering for an iPad until someone mentioned that home broadband access might cost around sixty bucks a month. ...

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Originally Posted by Katsmeow I must admit that -- for me -- not having broadband at home would put life in the almost not worth living category. I could more easily give up travel, dining out, TV, almost all new clothes, and most other luxuries of any kind....

You should be able to get broadband for far less than $60/month. I've got a ~ 3-4Mbps connection for $30/month (total, no other fees, $29.99 to be exact - oh, and auto-charged to my Visa Rewards card, so I get 1% back). I think people are getting DSL for less. Investigate.

Is there a way to intentionality (temporarily) throttle back a connection to dial up speeds? It would be a good reminder for me. Plus, most sites use far more BW than required to do what they need to do, it just slows things down.

-ERD50

[kyounge1956]

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Originally Posted by Katsmeow I must admit that -- for me -- not having broadband at home would put life in the almost not worth living category. I could more easily give up travel, dining out, TV, almost all new clothes, and most other luxuries of any kind. In my life, for my personal enjoyment, once basic survival needs are met, the two things I want the most are a computer with broadband and pets. I will say that one of the parts of the retirement calculus for us in affording retirement is the fact that we do have broadband. Internet usage provides so much free entertainment and benefits for us that many of other expenses are reduced as a result. (snip).

I suspect I might be the same, which is the other reason (aside from the expense) that I'm still on dial-up. I don't know whether I'll be able to get broadband at my post-retirement locale. It would be nice to have it now, but to have broadband and then have to go back to dial-up—oy vay.

[kyounge1956]

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Originally Posted by ERD50 You should be able to get broadband for far less than $60/month. I've got a ~ 3-4Mbps connection for $30/month (total, no other fees, $29.99 to be exact - oh, and auto-charged to my Visa Rewards card, so I get 1% back). I think people are getting DSL for less. Investigate.(snip) -ERD50

I will certainly do so, but at this point I've only narrowed down my probable future location to a two-county area. It's very likely I'll be in, or just outside of, the largest town, but even there the coverage isn't wall-to-wall, and I think DSL availability may vary from street to street. I need to have a more specific location to know exactly what will be available.