Discretionary spending % in retirement

[Teacher Terry]

We could not cut our grocery budget by much or we would be extremely skinny)

 

[W2R]

We could not cut our grocery budget by much or we would be extremely skinny)

For many of us I think that substitutions like chicken or eggs instead of the occasional steak, and maybe rice instead of bread or rolls, would help.

Time for a stir-fry!

 

[Teacher Terry]

Yes we do eat steak once/month.

 

[ggbutcher]

I don't work to a percentage of either mandatory of discretionary spending. To me, mandatory is just that, mandatory to basic living, and then discretionary is what we do with whatever's left over.

Not retired yet, but planning shows discretionary should have significant positive margin.

 

[NW-Bound]

We could not cut our grocery budget by much or we would be extremely skinny)

It would be tough for us to cut our grocery bill that much. We eat a lot of vegetable, and my wife is almost vegetarian. I am more of a meat eater than my wife, but have been watching my diet for health reasons.

However, I can already cut 20-30% off 2016 expenses without changing our meals. The 2016 expenses are already 65% of what FIRECalc says I can spend. And those 2016 expenses still include $18K of unexpected items (darn home again!) that should not be recurring. Food is the last thing I have to worry about.

No, our meals cannot and will not be changed even if we have to move into the motorhome and drive it to camp cheaply on NM state land.

 

[Koolau]

I guess I struggle with the concept of "discretionary" when it comes to spending. Certainly, I could cut out all charity and helping the kids with student loans/house down payments, etc. That would be a big saving. Now it gets a bit more dicey. Is owning two cars in an area that has good bus service discretionary? Is living where I live rather than a much cheaper place discretionary?

I've alway thought if there were some personal financial reversal or gummint catastrophe, I could easily cut back 15% just by routine belt tightening (ditch one car, ditch one cell phone, never eat out, skip a mainland trip, etc.) Beyond that, I suspect I would have to move to a much lower COL area to save significant coin. My final back-up (making such a move) would likely save 50% of what I spend now. So, depending on what is considered "discretionary", I could call it 10 to 15% or 50% plus. Just all depends how you look at it.

Since the mid 80s, we haven't had to put our backups to the test. At that time, we cut about 15% to weather a personal financial crisis. It wasn't that difficult and it proved we could do it. YMMV

 

[braumeister]

For many of us I think that substitutions like chicken or eggs instead of the occasional steak, and maybe rice instead of bread or rolls, would help.

This is one of the points made by the Freakonomics folks:

A few years ago the government (Bureau of Labor Statistics) started publishing measures (chain-weighted price indexes) that no longer fail to account for consumers constantly shifting the bundle of goods they buy toward those whose prices are rising less rapidly, as the standard CPI does. Consumers do substitute when relative prices change, and the new measures recognize this.

The so-called "chained COLA" measurement favored by some would mean reduced COLA increases for Social Security and some pensions, which makes it very unpalatable for most politicians. But despite the fact that it would hurt me personally I have to admit it would most likely reflect reality better than the current system.

Mods: I don't mean this to be a political comment, just an economics one. I have no problem if you want to delete this.

 

[MichaelB]

No problem, Señor Braumeister. . One comment on chained CPI and substitution. It assumes people derive similar levels of satisfaction from the goods they substitute. So, chicken replaces steak in that equation only when the consumer is indifferent between them.

 

[bclover]

So I'm about 20% of my budget on discretionary spending but that doesn't include travel. I have travel in another category.

anyhoo, I don't find it hard at all to tweak my budget at all. last year I spent a bit more on my house. had to get the roof repaired and redo my deck so this year I'll take it a little easy on shopping and eating out. stuff like that.

since most of my family and friends are here in the US, highly, highly doubtful I would move out of the country no matter the circumstances.

 

[retire2020]

25%. Current WR 3% and wife's part time consulting brings another 1%.

 

[braumeister]

One comment on chained CPI and substitution. It assumes people derive similar levels of satisfaction from the goods they substitute. So, chicken replaces steak in that equation only when the consumer is indifferent between them.

Thanks, that's an excellent comment.
Personally, I eat far more chicken than steak because most of the time I prefer it. But on a higher level, I think substitution is well within the range of acceptability for most of us.

For example, I would be just as happy taking an extended trip in this country instead of the same length of stay on another continent. The cost would be lower but the enjoyment would be just about as great.

On a more basic level, I find that the generic brands in the supermarket are usually every bit as good as the advertised brands costing twice as much. So my feeling is that on the macro level, chained CPI would not be the disaster some claim.

"Discretionary spending" assumes that the consumer exercises discretion in where to cut back.

 

[pjigar]

MY projection sows 25-30% in discretionary category.

 

[kimcdougc]

Could easily cut 25% to 35% just by doing away with some long trips, eating out so much and cutting the cord.

The key for DH and I are to be flexible and to realize just how blessed we are even without all those discretionary funds. Be happy or content with what you have. Learned that lesson by being so poor when we first started out.

Just my 2 cents.

 

[kcowan]

Time for a stir-fry!

We stir-fry a lot so no joy there for us!

 

[kcowan]

For example, I would be just as happy taking an extended trip in this country instead of the same length of stay on another continent. The cost would be lower but the enjoyment would be just about as great...

That is an unfounded assumption. Our friends from Houston take an extended trip to Europe using a discount flight over and a relocation cruise back that is cheaper than a driving trip and much better. Especially with the cheaper Euro.

So it depends on what floats your boat. They used to drive and stay with friends which was cheaper, but the friends priorities have changed (not there when they want to visit).

So generally you are right but not always. Plus the price of gas is a key variable and is again increasing now that everybody has their SUVs!

 

[ventoux]

Hankster: Thanks for the original post on discretionary expenses, it's a topic I've been looking at for a few months. Our discretionary spending represents 41% of our budget.
Like you, I've gained some confidence in my retirement numbers based on the realization that we definitely have money to cover life's expenses if we exit the employed world. But, it's still a bit confusing in my mind because we get a lot of enjoyment from discretionary spending. If we needed to slash that budget we would, no doubt. But, I need to research and understand my relationship with those discretionary spending items better and what they mean in my life.

 

[Danmar]

Hankster: Thanks for the original post on discretionary expenses, it's a topic I've been looking at for a few months. Our discretionary spending represents 41% of our budget.
Like you, I've gained some confidence in my retirement numbers based on the realization that we definitely have money to cover life's expenses if we exit the employed world. But, it's still a bit confusing in my mind because we get a lot of enjoyment from discretionary spending. If we needed to slash that budget we would, no doubt. But, I need to research and understand my relationship with those discretionary spending items better and what they mean in my life.

Very intelligent post.

 

[ventoux]

Very intelligent post.

Thanks, Danmar! I've been a lurker on this site and mr. money mustache for awhile but getting more comfortable putting my own comments out there. I appreciate the encouragement

 

[Meadbh]

Hankster: Thanks for the original post on discretionary expenses, it's a topic I've been looking at for a few months. Our discretionary spending represents 41% of our budget.
Like you, I've gained some confidence in my retirement numbers based on the realization that we definitely have money to cover life's expenses if we exit the employed world. But, it's still a bit confusing in my mind because we get a lot of enjoyment from discretionary spending. If we needed to slash that budget we would, no doubt. But, I need to research and understand my relationship with those discretionary spending items better and what they mean in my life.

Very true. I think of expenses in the following categories:

Fixed: not discretionary, relatively stable over time, except for inflation. Includes mortgage or rent, property tax, utilities (but see below), alimony (if applicable), car and home insurance, and taxes.

Recurring: regular payments that most people have, but that are open for reevaluation as circumstances change. Examples would be cable TV (I cut mine almost 5 years ago), landline (I keep it because my condo's Enterphone is not wireless enabled), subscriptions to magazines (almost extinct now) or apps (such as TV from my home country). Disability insurance was essential while I was working, but I dropped it as soon as I retired. I question every recurring expense at least once a year and have found lots of savings in this category.

Intermittent, essential: home repairs such as boiler replacements. New or used vehicle purchases. Dental work. For Americans, healthcare events. Trips for family crises. This is why you have an emergency fund.

Intermittent, discretionary: stuff you like to do. Golf club membership, trips for enjoyment. Most new clothes. Eating out. Gourmet food. New furniture. Luxury vehicles. Boats. Vacation homes. These are the material things that can add to quality of life, but could be eliminated in a pinch. My philosophy is to be selective, but to plan for some luxuries no matter what. So if things went sour, I might cut my travel by 60%, but continue to play golf.

 

[whatnot]

Ventoux - Very good post. This is where I am and you have perfectly articulated what I have been feeling!

 

[NW-Bound]

So true, although I smile at the Hollywood divorces in which one claims they "need" $20,000 a month to survive.

Peel me a grape.

For those who don't "get" that phrase, here's the origin:

I like this version of "peel me a grape". But I dunno if I would peel grapes day-in-day-out at the beck and call of someone even as cute as Diana Krall. I would do it for a week.

Peel Me A Grape
Peel me a grape, crush me some ice
Skin me a peach, save the fuzz for my pillow
Talk to me nice, talk to me nice
You've got to wine me and dine me
​

 

[jkern]

My discretionary spending is about 50% of total standard of living costs. I could cut total spending by 10% without much pain. I Could achieve 15% to 20% reduction with a decrease in standard of living.

 

[kgtest]

My discretionary spending is about 50% of total standard of living costs. I could cut total spending by 10% without much pain. I Could achieve 15% to 20% reduction with a decrease in standard of living.

Similar numbers here. Could cut 15% without much pain at all. Anymore cuts into travel and leisure which IMO is the reason for working in he first place. No RE yet though, 15MY.

 

[DrRoy]

We RE in 2.5 months. Our estimate of discretionary $ is about 40%.

 

[Perryinva]

Without citing ones age and income range, then the percentages are useless. A 50% cut for a 68 year old that lives on $150k a year is totally different from a 40 year old living on $42k. One can fairly easily live on $75k knowing that the money has to last for a shorter term, than $21k and the money having to last 28 years more.