How low can you go?

[scrabbler1]

My annual spending in 2020 has dropped to an all-time low in the 12 years of ER. It dropped to just under $20k thanks to adjusting my portfolio to reduce my income (which reduced my income taxes) and being able to get back on the ACA subsidy train (which reduced my medical expenses). My previous ER low was just over $20k back in 2012, before the ACA when I switched to a cheap, bare-bones HI policy which left me underinsured for a few years until the ACA's exchanges were created in 2014.

[vrijheid]

Quote:

Originally Posted by anothercog I'm somewhat amazed on what people say they live on. I saw one guy said his annual budget is $15k!? How is that even possible in America. Even after I pay off my mortgage, my property taxes, HOA, insurance and light maintenance will still run $20k/year. I'm sure my expenses will drop considerably once my kids are grown and hopefully financially independent but I can't see how DW and I can get any lower than 80k/year including health care costs and that is with cutting travel to the bone. I'm not interested in a retirement where we have to live with roommates and live off ramen. I already did that in college. For those couples living on less than $60k/year, how do you do it? What does your budget look like?

House paid off. Car paid off. Stick to the budget fairly well which runs between 45,000 and $55,000 depending on extras which are easily cut back.

2020 has been different without travel and dining out but I love to cook and bake so that hasn’t been an issue. Material items aren’t a big deal for me. Less is more. It makes a huge difference once the kiddos are grown and self sufficient also.

[Gumby]

I also wonder how people live on so little. Including all taxes (income and property), our yearly spend is approximately $100,000. And we don't live extravagantly.

[jim584672]

I've been $15K or lower for the last several years.

[Major Tom]

Quote:

Originally Posted by Gumby I also wonder how people live on so little. Including all taxes (income and property), our yearly spend is approximately $100,000. And we don't live extravagantly.

IMHO, many folk in the developed world have relatively high expectations for their material standard of living. To be clear, I have absolutely no problem with people spending what they can afford. Compared to what my ancestors in England and Ireland accepted as an adequate standard of living in the early part of the twentieth century, most of us are living in the lap of luxury.

[Gumby]

Quote:

Originally Posted by Major Tom IMHO, many folk in the developed world have relatively high expectations for their material standard of living. To be clear, I have absolutely no problem with people spending what they can afford. Compared to what my ancestors in England and Ireland accepted as an adequate standard of living in the early part of the twentieth century, most of us are living in the lap of luxury.

When I started this life, I lived in a council flat (for Americans, public housing) in the slums of London, the bastard son of an uneducated, teenaged Cockney mother. Things did not get substantially better when we emigrated to the USA and lived in a series of cheap apartments and trailer parks. I often cannot believe how fortunate I have been in my adult life. If my mother were still here, she probably would be appalled at my spendthrift ways.

[LarryMelman]

Quote:

Originally Posted by Gumby I also wonder how people live on so little. Including all taxes (income and property), our yearly spend is approximately $100,000. And we don't live extravagantly.

I doubt most people include income tax in their "spending". I certainly never have. And maybe property taxes should not be considered in this discussion since they are so variable. (Mine on a 1700 SF house in the suburbs of Phoenix was about $1600 last year.)

Since paying off my house in 2009, my annual spending runs between $16K - $20K. Including: property tax and an unplanned major item in the 2K to 4K
range every year (home and/or vehicle and/or medical expenses) . Excluding: Income taxes, medical insurance premiums, and a car purchase.

[Gumby]

Quote:

Originally Posted by LarryMelman I doubt most people include income tax in their "spending". I certainly never have. And maybe property taxes should not be considered in this discussion since they are so variable. (Mine on a 1700 SF house in the suburbs of Phoenix was about $1600 last year.) Since paying off my house in 2009, my annual spending runs between $16K - $20K. Including: property tax and an unplanned major item in the 2K to 4K range every year (home and/or vehicle and/or medical expenses) . Excluding: Income taxes, medical insurance premiums, and a car purchase.

If you want FIRECalc to be accurate, you need to include all taxes in the spending figure.

[Jerry1]

Quote:

Originally Posted by anothercog For those couples living on less than $60k/year, how do you do it? What does your budget look like?

My budget is $100K. Last year we spent under $90K. When I really got serious about retirement and the budget, I separated out necessary and discretionary spending and really hammered the necessary expenses. I could live a good life with a roof over my head, good food and a little bit of entertainment and be in at around $50K, definitely under $60K.

Key in my case is to have a paid off house (1700sqft) and cars, and no other debt. Property taxes are around $4500 and utilities are reasonable here. Good food (healthy food) is not expensive and you don’t eat out much which would be fine if necessary. Necessary did include some sinking funds for home maintenance (roof and such) and auto (repairs and replacement). Healthcare insurance is subsidized (employer sponsored retiree healthcare) but not free. About $500 per month for me and DW with reasonable out of pocket costs. Of course that’s a big help.

I’m thankful I can live above that level, but there is a great deal of comfort in knowing that there is a pretty good life even if I had to tighten up my spending significantly.

[lauradrops]

We are 1 1/2 years into our early retirement and have been under 40k a year. We budgeted more, but with covid there has been no travel.

We have no mortgage, property taxes around 8300, fully paid for health insurance and no car payments. I expect it will go up when we are comfortable traveling again.

[SecondCor521]

Quote:

Originally Posted by Gumby I also wonder how people live on so little. Including all taxes (income and property), our yearly spend is approximately $100,000. And we don't live extravagantly.

My guess would be that you live within about 50 to 75 miles from either the Atlantic Ocean or Pacific Ocean. I'll bet you could buy a house of the same age as yours and with the same number of bedrooms and bathrooms in, say, Tennessee for a literal fraction of what it's worth where you live.

My $28K number includes income taxes, both federal and state, and property taxes as noted above.

[GenXguy]

Quote:

Originally Posted by LarryMelman I doubt most people include income tax in their "spending". I certainly never have. And maybe property taxes should not be considered in this discussion since they are so variable.

Taxes are usually not considered as part of spending/expenses during the accumulation phase, but they are during the drawdown phase.

Absolutely include property taxes if you have them as as expense. Mine are a significant part of my pre-FIRE and planned FIRE budgets at $4000+/yr that I must account for.

[Gumby]

Quote:

Originally Posted by SecondCor521 My guess would be that you live within about 50 to 75 miles from either the Atlantic Ocean or Pacific Ocean. I'll bet you could buy a house of the same age as yours and with the same number of bedrooms and bathrooms in, say, Tennessee for a literal fraction of what it's worth where you live.

But then I'd have to live in Tennessee (no offense to those who do). Currently, the Atlantic Ocean is about 300 feet from my bedroom.

[Cobra9777]

For DW and I, basic living expenses average $65K/yr, with no mortgage and no car payments. Federal income tax and local property tax add about $40K. But half of that is driven by voluntary Roth conversions to take advantage of the temporary 22% bracket.

No state income tax, but property tax in Texas is quite high and we still own a very large house on 2.2 acres. The house also drives higher insurance, maintenance, utilities, etc, which are included in the basic $65K.

We also allocate $25K/yr for pure discretionary spend, like travel, home improvements, new cars, etc. And we also use the $25K like a sinking fund to cover major repairs, such as a new HVAC system, etc.

Discretionary spend was WAY down in 2020, mainly due to no travel. But normally, overall spend comes in around $110-120K/yr, excluding conversion tax. Subtract the big house, which is our only real vice, and we are in the $90-100K club.

For a 2-person household in a low-ish-but-growing-COL area in North Texas, that feels pretty normal to me. Sub-$60K... not so much.

[Mr. Tightwad]

I spent 50k in 2019 for my household, all taxes, 6 insurance policies and the expenses of 2 rental properties. All mortgages are paid off. Property taxes were 12k

[Major Tom]

Quote:

Originally Posted by Gumby When I started this life, I lived in a council flat (for Americans, public housing) in the slums of London, the bastard son of an uneducated, teenaged Cockney mother. Things did not get substantially better when we emigrated to the USA and lived in a series of cheap apartments and trailer parks. I often cannot believe how fortunate I have been in my adult life. If my mother were still here, she probably would be appalled at my spendthrift ways.

I had a slightly different experience to you, Gumby, growing up in a very tranquil middle class environment in a small English village. A caring, conscientious woman, my mother was, it has to be admitted, somewhat concerned with appearances. Both her and my father would have been happy to know that I have been careful with my money and have security for the future. However, she would have been perplexed at my willingness to stop work so early, and be so content with such a modest existence. Even I occasionally wonder if I should have suffered a little more, for longer, in order to have more.

[mrfeh]

Quote:

Originally Posted by LarryMelman I doubt most people include income tax in their "spending". I certainly never have. And maybe property taxes should not be considered in this discussion since they are so variable. (Mine on a 1700 SF house in the suburbs of Phoenix was about $1600 last year.

+1

Comparing raw numbers is next to useless without a shared definition of "annual expenses" that every poster uses.

[jldavid47]

For DW and I our projected budget for this year is about $42,300 and that includes all taxes (although we will pay ZERO income tax because of how the taxability of Social Security is calculated). That allows us to live off our combined Social Security payments and not dip into our IRAs until until we hit RMDs unless we want to. It isn't even a bare-bones budget. $5400 of it ($450 a month) is set aside for "mad money" that we can just go out and spend on a whim. The one thing I don't include in our budget is medical expenses (outside of medical insurance payments) because we have a dedicated HSA account to pay for those "off budget."



FWIW, we live in central Indiana where the cost of living is below the national average. We also have no mortgage, only a HELOC with a small balance. We are living comfortably at that spending level.

[Nemo2]

Major Tom/Gumby: I learned that my mother had died while I was out of contact, (in the middle of a variety of nowheres), age 20/21. My father died, 52 years ago, in the same rented, unheated, London basement apartment where I was 'raised'.....they never had a car, a TV, a fridge, etc....different lives.

[jldavid47]

Quote:

Originally Posted by LarryMelman I doubt most people include income tax in their "spending". I certainly never have. And maybe property taxes should not be considered in this discussion since they are so variable.

Well, Income taxes are certainly an expense for most people in retirement. And income taxes are far more variable than property taxes for us. There are really two ways to look at income and spending.


1) Take gross income and include taxes as part of annual spending.
2) Take disposable income (gross income minus taxes) and exclude taxes as part of annual spending


Before retirement I used (2) (except property taxes were counted as spending) and after retirement I use (1). Both work. YMMV.