Author Topic: READER CASE STUDY: Can this artist semi retire?  (Read 9254 times)

Mikaelus

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READER CASE STUDY: Can this artist semi retire?
« on: March 13, 2014, 12:53:51 AM »
Hi everyone,

I'm a big fan of the MMM blog, but this is the first time I've posted on the forums. Until now I've just enjoyed getting advice, but now I'm getting closer to my goals I'm hoping I can get some specific help with some questions.

I want to know if I've saved enough to go into semi-retirement.

Over the last ten years I've been working as an artist. I've become moderately successful and for many years I've been bringing in between $20K and $30K a year performing around the country.

It wasn't a lot of money, but I loved the lifestyle of being a travelling performer.

The one concern I had was what I'd do if I ever had to stop working. Like anyone who works in the performing arts, I live with the risk that I could suddenly become unemployed and all my income dry up at very short notice. That hasn't happened in the last 10+ years I've been in this game, but who knows what tomorrow might bring?

For that reason I got into the habit of saving at least half my yearly income (usually around $10K or more a year) and living frugally off the rest (spending about $8K or less).

I didn't really plan this, I just wanted to be ready in case of a rainy day, but by the end of my twenties I'd saved quite a stache.

Then, about two years ago I stumbled onto ERE and the MMM blog.

Living off passively invested savings seemed like an amazing idea. I figured if I could do that, I'd be able to focus entirely on my art and never have to worry about money again. Even if the unthinkable happened and all my work dried up, I'd have savings I could fall back on.

So, with that goal in mind, I got a boring desk job. I kept performing on weekends, lived off the proceeds from that, and saved everything I could from the 9 to 5.

Right now I have $135000.

I calculate my yearly minimum yearly expenses are $5400 ($450 per month - see below).

Following the 4% safe withdrawal rate I should be able to retire, right?

I'm not really planning to retire though. Since $5400 is a little more frugal than I like, my plan is this:

- Quit the 9 to 5 and just live off the income from my performing career.

- I won't touch my 'stache. Instead I'll leave it to compound and try to add $10K each year from my art.

- Currently my 'stache is invested in the Vanguard Australian Index fund, and I've signed up for the dividend reinvestment plan.

- This should allow to keep doing my art knowing I've always got this passive income to fall back on.

- If, in say five or ten years, my performing career has dried up for some reason (or even if I want to take a break) my 'stache should have grown to more than $200K providing over $8K a year in passive income which is enough for me to live on quite comfortably.

Currently, my only debt is a $13K student loan (charging 2%p.a. - fees aren't too bad here in Australia). Once I've paid that off, I'm thinking of quitting the day job.

Before I do though, I thought I'd run my plan past the MMM community to get your feedback.

What do you think of my plan?

Am I almost ready to go into semi-retirement?

Can I quit the desk job for a more fulfilling semi retirement pursuing my artistic interests?

Have I made any mistakes or missed something?

BREAK DOWN OF FINANCES

Income:

Desk Job: $47,500 p.a.

Art: $10,000 p.a. (before I took the desk job I usually made over $20K a year, but have had to scale it back).

Savings: $135000 invested in the Vanguard Australian Shares Index ETF. You can find information here: http://www.asx.com.au/asx/research/companyInfo.do?by=asxCode&asxCode=VAS

Current Monthly Expenses:
Rent: $210
Internet: $15
Water: $21
Gas: $11.20
Electricity: $16.45
Misc: $15.50
Travel: $81 (I mostly bike, but also have a pass for public transport)
Food: $70

TOTAL: $440.15
YEARLY TOTAL: $5281.80

Assets:
I don't really have any. I rent. I don't own a car. From living as a traveling performer for so many years I've just got used to not owning stuff. I've got clothes, etc. but pretty much everything I own could be packed into a suitcase (which is the way I like it).

MDM

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #1 on: March 13, 2014, 02:02:12 AM »
If you are confident that you can make $10K/yr with art, and spend $8K/yr to live, then you could indeed retire from the desk job (after paying the student loan as you plan). 

Are the budget numbers "off the top of your head" or "based on previous 12 months actual spending"?  The closer to the latter, the more confident you can be.

One consideration: starting a family and providing food/clothing/shelter for additional people could make the cash flow situation tighter - you can evaluate the likelihood.

Good luck!

limeandpepper

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #2 on: March 13, 2014, 04:08:35 AM »
Wow! You live on so very little. That's really amazing, and in Australia too. If you can continue to keep those expenses so low, I don't see why you can't semi-retire.

I do notice that your budget is really bare-bones. Do you account for replacing things, e.g., if, say, the fridge stops working, or your equipment for performances get damaged? Or what if you have some medical expense that isn't completely covered by bulk-billing? It looks like you don't have private health insurance - do you still go for things like dental appointments? Or does the "Miscellaneous" category cover all of the above?

I am really curious - how did you get such cheap rent, and do you think it will always stay this cheap? And your food expenses are really low as well - where do you shop and what do you eat, and do you dumpster-dive? Sorry, I'm asking more questions than I'm answering. :D 

Seriously, well done on pursuing your performance career and managing to do such a good job of saving!

garrettld

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #3 on: March 13, 2014, 04:42:20 AM »
limeandpepper brings up a good point. Do you have medical insurance? You should budget for large medical expenses. Do you expect to have future kids? Buy a house ever? You get the idea.

If you spend more time on art again and can get it back up to around $20k then I see no reason not to quit the desk job.

limeandpepper

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #4 on: March 13, 2014, 05:09:52 AM »
limeandpepper brings up a good point. Do you have medical insurance? You should budget for large medical expenses. Do you expect to have future kids? Buy a house ever? You get the idea.

I will add to this - we do have universal healthcare in Australia, so private health insurance is more of a bonus - if anything happens it won't be too catastrophic. However, as far as I know, some procedures/medications still cost money, and even if it's not a huge sum, it would be good to have a buffer.

Jim from QLD

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #5 on: March 13, 2014, 06:00:23 AM »
Wow! Very good expense discipline. May I ask how you managed to get your accommodation so low?

arebelspy

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #6 on: March 13, 2014, 07:48:41 AM »
If you are confident that you can make $10K/yr with art, and spend $8K/yr to live, then you could indeed retire from the desk job (after paying the student loan as you plan). 

This.  I'd leave the whole "stache" sitting to accumulate and only to touch in emergencies, and shoot for covering all of your expenses with your art income. But it sounds like you have enough F U money to go live your dream.

Also I just want to say: Well done.  You are inspiring.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
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meadow lark

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #7 on: March 13, 2014, 11:04:01 AM »
Wow.  I am super impressed by your expenses!  Since your art is your passion,a I would say go for it.  If in 10 years you find you need more money than you have, you can always go back to work.  It's funny, I give this as advice, but in my own life I am much more conservative.  But then, I am not an artist, and I can not currently pay my expenses with my stache.

Melody

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #8 on: March 13, 2014, 04:54:18 PM »
Super inspiring :-)
I think your bare bones budget is fine as you will actually continue working - your budget is the equivalent of my "if I got fired tomorrow budget" - it does not sound like you would have to live off it for extended periods of time, it's about knowing you could if you had to until you worked something else out.
I am also assuming though that once you go on tour expenses would increase, unless you were hitchhiking between towns (more plausible than most people think) etc, so you may want to plan for/budget for this.
Just to float a random idea to you, one of my good friends was (barely) able to sustain a living as a professional musician and writer here in Australia (occasional set up work for large concerts and the like made ends meet in a frugal existence) but since moving to London has really widened his reach. Touring is far cheaper there and there are more venues, as he is able to play for more people he is making more money as well as having more fun! If you are able to up the budget to include the odd airfare (traveling frugally as you do in Australia) it might actually be a worthwhile investment in your art career.

Mikaelus

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #9 on: March 13, 2014, 10:16:24 PM »
Thanks for the feedback guys!

Itís very heartening to hear youíre on the right track. A lot of family and friends have said Iím nuts.

To answer individual questions:

MDM asked if the expenses listed was based on 12 months of actual tracking or off the top of my head.

What I listed above is an exact record of my expenses for November 2013. Iíd been keeping a roughly tally for many months, but decided to run a bit of an experiment to see exactly how much I spent. For November I wrote down every single purchase I made down to the cent and added it up.

Iíve been keeping track every month since then (not being quite so precise - if I buy something for a couple of cents I wonít write it down, and I round cents up to the nearest whole dollar), and so far Iíve not had a month where Iíve spent more than $450. That includes Christmas 2013 (instead of buying presents I did nice things for people e.g. making my dad a website, etc.).

I was a bit surprised when I ran this experiment in November. Iíd thought I was living on about $600 a month, so I was delighted to find I was doing better than I thought.

Limeandpepper asked whether this budget covered health insurance, covering replacing things, and my crazy cheap rent and food expenses.

Yeah, youíre right: this budget is very bare bones. Iím pretty used to living frugally after living out of a suitcase for most of my twenties, but even for me $5400 a year is tightening my belt a bit more than Iíd enjoy.

That budget doesnít include health insurance. I sometimes worry it should (if I got seriously ill itíd scupper my retirement plans). Iím pretty fit and havenít had any medical expenses over the last few years, and live in Australia which provides pretty good public healthcare.

Still, that is a bit of a worry.

The budget doesnít include replacing anything. I live in a share house and pretty much everything in there is owned by the landlord (the fridge, stove, couch, etc.). If it breaks heíd be replacing that.

I donít really own anything much myself and if you put it all together itís value would be under about $2000. If something like my laptop (worth roughly $500) or my bed (from Ikea, about $300) broke Iíd have to work to pay for a replacement.

My food? I dunno what to say here. I just eat very simply. A lot of rice and vegetables which I buy from the Footscray market (super cheap). I buy in bulk where I can. Taking a leaf out of EREís book Iíve given up milk. I would like to spend a bit more on food. Iíd like to buy better fruit and (with the exception of canned tuna and the occasional beef mince discount special) Iíve been almost vegetarian for the last year or so.

Now, to the most interesting part of my story: the rent.

This is the one weak spot I can see in my plan. Well done spotting it, guys.

I moved into this sharehouse in Footscray (a low income suburb in western Melbourne, Australia) in July last year. When they told me the rent my jaw hit the floor. I still canít believe theyíre charging me so little.

My room is fairly tiny (itís basically a big cupboard), but the house is wonderful, my housemates are delightful and I canít believe my good fortune. I was paying almost twice the rent to live in what was basically a meth lab before moving into this place.

Maybe the landlord hasnít figured out he could be charging a LOT more, or maybe thereís some awful catch (the house is built on an Indian burial ground?) I havenít figured out yet, but eight months in and I couldnít be happier.

The rent situation is good and bad. It keeps my costs down, but if I ever lost this place, itíd probably add at least $2000 to my yearly expenses scuppering my retirement plans.

At the moment, Iím just counting my blessings. I figure if my rent is the only thing that increases after I quit the desk job I should be able to cover that with what I make from my art.

Garrettld asks about future plans:

Good point. That budget would not enable me to have kids, buy a house, etc. etc.

Iím a bit of a non-conformist and donít have much of an interest in buying a house and starting a family. I love being single and carefree. Would that change if I met the right lady? I dunno. If it did I probably couldnít do it on this budget and would have to get a job.

Melody asks if this includes touring and would I consider moving to the UKÖ

Youíre right, this budget doesnít cover touring. I gave up touring when I got the desk job (hence the drop to about $10K p.a. from my art). I still live pretty frugally when Iím on the road (I sleep on a lot of couches) but itíd blow my budget out a lot.

I have definitely been considering moving to the UK. Like you said thereís just a lot more opportunities for artists over there. Iím kind of torn; I hear living in the UK is very expensive, but maybe the increased income would make it worthwhile. Thoughts? Is there a UK equivalent of the MMM blog? I should probably start doing some researchÖ

Thanks for all the feedback guys!

Really appreciate all your advice. Let me know if you have any other questions, or, now Iíve told you more about my situation let me know what problems you can see in my plan.

spoonman

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #10 on: March 13, 2014, 10:38:46 PM »
For that reason I got into the habit of saving at least half my yearly income (usually around $10K or more a year) and living frugally off the rest (spending about $8K or less).

That's badass!

You have a supreme control over your expenses, congratulations.  If you can manage to keep lifestyle inflation at bay, then I think your plan will work just fine.

Btw, it's great to see an artist in these boards.  We tend to be techonologists, so having you here will add some flavor to the mix!

limeandpepper

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #11 on: March 14, 2014, 12:50:41 AM »
I really enjoyed reading your response, Mikaelus!

I don't go to Footscray often because it's not convenient by public transport for me, but I like it and have thought about potentially living there in the future. Your food budget makes sense if it's mainly rice and vegetables. I know I can live on the same amount as you do, but I'm just a bit naughty when it comes to food, and refuse to cut down too much there.

I also want to say that your disinterest in buying a house and starting a family may not deter the right lady. My boyfriend isn't very interested in those things, and that's fine by me.

If I were you, I might give your version of semi-retirement a go, and then after maybe 6 months or 1 year, re-assess. You may decide to continue with your art, or you may return to a desk job, but either way, you've tried it out and have a better idea of how the concept floats in reality, whether it's sustainable and secure enough for your lifestyle and risk tolerance.

happy

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #12 on: March 14, 2014, 07:30:33 AM »
Mikaelus, you sir are Badass!

I don't have anything extra to add really. Just impressed. You have your FU money, and if you can cover your expenses and do enjoyable work as a performer, whilst leaving the stache to compound, I think thats close enough. You're so clever at this, that you'll find a way even if there's a hiccup.  I do know of partnered performers with kids who still lead a frugal life style.

I wouldn't buy into private health insurance in Australia in your income bracket.  The public system really by and large does a good job. (If you are a high income earner and you don't have private health insurance you pay extra medicare levy so the math and cost/benefit is different.)

Edit Typos ( that damn auto correct thing)
« Last Edit: March 15, 2014, 05:00:21 AM by happy »

the lorax

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #13 on: March 14, 2014, 09:51:07 PM »
Hi
I don't think anyone else has mentioned this but it looks like your stash is all invested in the one index fund - is that right? I'd say it's pretty risky to be invested in the index fund of just one country - lots of US folks seem to do that but personally I'd want to diversify and put any new savings into maybe VEU (Vanguard all world - ex US) and VTS (Vanguard US) and also some bond funds. There are also iShares funds that have low management expenses etc.
Otherwise good luck with your semi-retirement!

gmuk

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #14 on: March 15, 2014, 04:27:20 AM »
Your post was very inspiring, Mikaelus.

I'm a UK-based artist trying to figure out a plan somewhat similar to yours, currently working a 9-5 office job as well. I'd like to save up enough of a 'Stashe that would cover my bare expenses so that I could freely dedicate myself to the low-paying arts world. Thanks for showing that it's doable!

In terms of UK blogs like MMM, my favourites are:
http://monevator.com/ - THE UK investment blog. Also covers early-retirement planning, and adjusts from UK market.
http://simple-living-in-suffolk.co.uk/ - Someone doing FIRE outside London.

In terms of FIRE in the UK, the South East of the country (i.e. anywhere near London) is VERY expensive to live in. Especially right now when there are fears of a house price bubble and ever rising rents. I live in London and my fellow artist friends who don't have office jobs struggle quite a lot. They are mostly in the 20's and I doubt they will last too long living the bohemian life here under such economic pressures. You seem to have the thrifty lifestyle mastered, so it would likely be less of a challenge for you.

If you go far enough outside London, expenses drop quite a lot. The North of England is much less expensive. But as you can imagine, the cultural sector is a lot less fertile than in the big Capital. Lots of Arts funding is concentrated in London, as are most of the large cultural institutions that support new work (as well as audiences who like taking a risk on new stuff). So it's not that simple a decision.

Let me know if you need any more info. Cheers!





TomTX

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #15 on: March 15, 2014, 10:02:23 AM »
The math works out - even if your rent goes up $2,000! Your current "weekend gigs" covers expenses. Done.

Pay off the student loan, quit the desk job. Follow your dreams!

deborah

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #16 on: April 02, 2014, 03:37:44 AM »
I am wondering why you would bother paying off the student loan. Sounds like you will never make enough to be forced to pay it off (currently over $51,309 p.a.). If you die with the student loan still outstanding, it will disappear. And it has an interest rate less than inflation or what you would get for the money elsewhere, so if you do become a squillionaire, the loan would be worth less (in real terms) than it is now.

happy

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #17 on: April 02, 2014, 05:27:53 AM »
According to his post he is making 47k job plus 10k performing so he has exceeded the HECS threshold and therefore has to make some payment. Of course if his income dropped when he went back to performing alone and earnt less this would change again.
« Last Edit: April 02, 2014, 06:10:23 PM by happy »

deborah

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #18 on: April 02, 2014, 04:28:34 PM »
Yes, he probably needs to pay for the student loan now, but in semi-retirement he probably wouldn't, and only paying the minimum makes sense.

ch12

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #19 on: April 02, 2014, 06:38:49 PM »
I'd jump ship as soon as the loan is paid off.

$135,000 as a 'stache, 8k of expenses a year, 10k-20k in income - those things add up to generous math. You can unequivocally quit.


Apocalyptica602

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #20 on: April 03, 2014, 06:54:48 AM »
Just wanted to chime in and say I know a lot of artists / actors with various talents that are struggling to get by, waiting tables, shoe-horning themselves into shoebox apartments in New York City waiting for their 'big break'.

Meanwhile they buy 10 dollar drinks and lament not having rent money and setting up crowdfunding campaigns advertised through Facebook so they can 'afford to go to their friend's wedding' (can't make this shit up!)

You're very fortunate to be in the situation you are in, I'll be the first to admit I tend to associate (wrongly so) artists trying to make a career out of it are set up for failure.

You're kicking ass, following your dreams, sustaining yourself and thinking outside the box. Truly badass. Pay off your loan and go for it!

oldtoyota

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #21 on: April 03, 2014, 07:19:58 AM »

The one concern I had was what I'd do if I ever had to stop working. Like anyone who works in the performing arts, I live with the risk that I could suddenly become unemployed and all my income dry up at very short notice. That hasn't happened in the last 10+ years I've been in this game, but who knows what tomorrow might bring?

I want to address the fear you mention above. I am reading a book called Antifrafile by Nassim Taleb. The author points out that people like you are "antifragile" because your income comes from many sources. Someone like me is "fragile" because my income comes all from one source. However, my job would be labeled "more stable" than yours by most people because I work in an office and have a "traditional" job. The author points out that a taxi driver is more stable than an office worker due to deriving income from a variety of sources.

The bottom line is that the perception of stability is not reality.


skoshi

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #22 on: April 04, 2014, 05:10:02 AM »
Thank you Mikaelus for posting your case study.  I am a 20-something musician with a similar budget as yours, but not paying off the student loan (under the threshold) and only 12,000 in savings. 

Would semi-retirement be possible for someone with the same budget but without the $100,000+ 'stashe or the 9-5 job?

arebelspy

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Re: READER CASE STUDY: Can this artist semi retire?
« Reply #23 on: April 04, 2014, 07:57:32 AM »
Thank you Mikaelus for posting your case study.  I am a 20-something musician with a similar budget as yours, but not paying off the student loan (under the threshold) and only 12,000 in savings. 

Would semi-retirement be possible for someone with the same budget but without the $100,000+ 'stashe or the 9-5 job?

It's possible.  Plenty of artists have (nearly?) nothing, and live hand to mouth.  They're called starving artists for a reason.  ;)

But I bet you most of them wouldn't change it for anything.

Many would recommend you build up a bigger safety buffer, but the bottom line is that it's your life to live.  You have to decide what will make that life satisfying - if that's building up a bigger buffer and then semi-ERing in order to sleep a little more comfortably at night, or if that's FIREing right away and doing everything or anything you want.
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