Author Topic: Reader Case Study Lifestyle vs income  (Read 5734 times)

Runningtuff

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Reader Case Study Lifestyle vs income
« on: July 29, 2014, 03:47:08 AM »
Hi,

Ive enjoyed reading a lot of the blog posts, and realizing a lot of it aligns with what we do apart from the small matter of financial freedom! At 31, I have pretty minimal financial assets (1k emergency fund + 8k in a 401k retirement equivalent) but do essentially enjoy our day-to-day life balance.

Both my partner and I work part-time in order to share the care of our 3 year old. We have no interest-bearing debt. Combined income is in the region of 40,000 before tax, and the biggest expense is rent (15,000 p/a.) plus food, some daycare, power etc. Cycle to work, take lunch etc. I currently save about $50 p/w.

While Im sure aspects of the expenses could be trimmed/tightened, I suspect its more about higher income and my question is more philosophical/curious: how much of your present lifestyle are you willing to sacrifice in order for future financial stash? And how did you decide?

For instance, Im not inclined to work full time while having a small person (and we may have another). Im reasonably competitive at a sport I enjoy (possibly international rep level) and hope to make the most of this while I can physically (ie, the next 10 15 years). Were also both passionate about creative pursuits and having time to do them. I dont adore my job though, and would prefer not to be 50/60 and still worrying about rent.

Sorry if this has been covered before please link if Im covering old ground!

Cheers.

TheNorwegianGuy

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Re: Reader Case Study Lifestyle vs income
« Reply #1 on: July 29, 2014, 04:00:23 AM »
how much of your present lifestyle are you willing to sacrifice in order for future financial stash? And how did you decide?

I dont really feel that I am sacrificing anything in my current lifestyle. I have everything I need, and I want everything I have (Which is not much in other people standard). I have lots of time outside my full time job to be social with friends and family and to travel and still I am accumulating financial stash... hm.. I mean accumulating time freedom :) I think that is some of what makes this mustachisnm doable is the shift in attitude. Dont see it as sacrifices, but more of beeing more happy of what we already have (and therefore do not have any need to accumulate more stuff).

If I can turn the question around: How much of your future time-freedom are you willing so sacrifice for your current lifestyle? (Not necessarily pointed to you, as it seem to me that you have a life-time-money balance that you enjoy at the moment :) )
« Last Edit: July 29, 2014, 04:23:40 AM by TheNorwegianGuy »

lpep

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Re: Reader Case Study Lifestyle vs income
« Reply #2 on: July 29, 2014, 04:02:49 AM »
It kinda sounds like you want to have your cake and eat it too, and wouldn't that be nice :)

It seems like you've found a balance that works for you, and that's awesome. I think a lot of people like the idea of FI because they can work less later and do more of what they want to do, but you're doing that now. If you're OK with that, then great! But it does sound like you're sacrificing savings, and some people might tell you that starting early is really important. Compounding and whatnot.

I used to be in a similar situation - making $30k living alone, saving maybe $8k of that each year (pre-mustachianism, just my natural frugality), not living as cheaply as I could but hitting a balance. Now I'm in Vietnam, where the cost of living is really low but wages aren't high, and it does become a question of if it's even worth working more to make a comparatively small amount for what I've given up in free time. I've decided it is, just because I'd get bored and I do enjoy my job (teaching). The only thing I'm really sacrificing is eating out/drinking a lot, but I do enough of that. I'm willing to spend on travel.

If you can eventually start making more money and live like you do now, you'll be in really good shape.

(A lot of people are going to tell you that you need more of an emergency fund. Three months living expenses minimum.)

Runningtuff

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Re: Reader Case Study Lifestyle vs income
« Reply #3 on: July 29, 2014, 04:11:50 AM »
It kinda sounds like you want to have your cake and eat it too, and wouldn't that be nice :)

Haha, that sums it up well! Thanks for the ideas. Yes, that's what I figure - when we are earning more down the track, saving will be easy. I saved well mid 20s and then lost it in a finance company (big lesson).
The $50 p/w goes to bumping up the emergency fund.

Hugerat

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Re: Reader Case Study Lifestyle vs income
« Reply #4 on: July 29, 2014, 08:55:29 AM »
I feel like the huge stash building leading to financial independence aspect of this blog don't always need to be taken too literally. Working less and enjoying life more now is a perfectly acceptable alternative to a mad sprint to permanent retirement, making a lot of lifestyle and time sacrifices along the way. My wife and I took a year off when we were 30 to travel. It definitely hurt the stash and will mean we have to work longer to reach FI, but we knew the sort of travel we planned would not have been possible later in life (too comfortable, not enough energy, maybe kids). It sounds like you've settled on a work/life balance that works for you right now, and your involvement in a competitive sport, as you know, is dependent on your youth. Building a stash is all about coming to a point where you can trade working for time spent doing other pursuits. You've already got that now so you shouldn't feel compelled to suddenly both take 40 hr/week jobs at the expense of other things you enjoy.

That said, you will eventually need to build some financial assets, and there are probably things you can do now to improve your situation. I'm assuming you and your partner work something in the neighborhood of 20-25 hours per week? $40k is a bit low for two people working even part time and it sounds like you live in moderate to high cost area ($15k rent per year). You and/or your partner may be able to do things to increase your earnings like take community college classes, or try to break into a new field. You could also try to negotiate yourselves a better deal in your current employment. Do either of these jobs provide you with health care? That is a major consideration in any employment.

You may also want to think about buying a house. You don't have much savings at all right now, but if you are able to at least temporarily boost your income to save enough for a down payment on an FHA loan, this could be an option for you. $15k per year currently spent on rent will go a long way toward a mortgage payment in many places and the equity you build in your home can start taking care of some of your saving goals rather than lining your landlord's pockets.

Good luck.

Bob W

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Re: Reader Case Study Lifestyle vs income
« Reply #5 on: July 29, 2014, 09:41:46 AM »
Sounds like you're doing well!  You might look at increasing income some  how?   Your rent vs house payment scenario may help.   

You are basically working the same amount as MMM, riding your bike and enjoying a similar lifestyle.   The problem is that long term you will not be able to save enough to retire before 67 at your current rate.   So that is where the income comes in.  An extra 15K a year in savings would be a minimum IMHO.  At that rate you might be able to retire in your mid 50s if that is your goal.

Don't forget that MMM retired early in large part because he and the missus made gobs of money and saved a large percentage.  So if you earn an extra 15K and save/invest 25K each year.   You can retire one year for each year you work.

Yes I know it is long haul but that is the world we live in. 

MrFrugalChicago

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Re: Reader Case Study – Lifestyle vs income
« Reply #6 on: July 29, 2014, 09:44:21 AM »
What sport do you do (just curious).

I think what matters is that you enjoy the now, while not digging yourself in a huge debt hole - which you seem to be doing. Now I happen to have a high enough income that I can both enjoy the now AND save a lot towards FI... I would not want to give up too much of my lifestyle just to get FI though.

Do you have a path for one of you to make more money WITHOUT working more hours? Say take a night school towards a masters in a more lucrative field that is related to what you do now? Anytime you can make more money without more hours (even if it takes 2 years of night school), it seems a pretty easy win/win.

Edit - Bob made a good point. At current savings rate you need to work until the day you die. If you are cool with that, cool.. but don't totally screw your future self to enjoy the now ;)

ShortInSeattle

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Re: Reader Case Study Lifestyle vs income
« Reply #7 on: July 29, 2014, 09:53:25 AM »

While Im sure aspects of the expenses could be trimmed/tightened, I suspect its more about higher income and my question is more philosophical/curious: how much of your present lifestyle are you willing to sacrifice in order for future financial stash? And how did you decide?

Cheers.

This may sound cheesy, bit I think of you do it "right" it doesn't feel like sacrifice.

We've never had a second car, cable, or designer do-dads. This hasn't felt like sacrifice because I've always wanted financial security more than I wanted those things.

In terms of present lifestyle, we are selling our big fancy house and moving into a smaller place to move our FI date significantly closer. Again, this doesn't feel like a sacrifice because we are exchanging square footage for something we want more - freedom and flexibility.

I think if you are moving towards what you want, rather than "giving things up" then it's all good.

frugalnacho

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Re: Reader Case Study Lifestyle vs income
« Reply #8 on: July 29, 2014, 10:14:48 AM »

While Im sure aspects of the expenses could be trimmed/tightened, I suspect its more about higher income and my question is more philosophical/curious: how much of your present lifestyle are you willing to sacrifice in order for future financial stash? And how did you decide?

Cheers.

This may sound cheesy, bit I think of you do it "right" it doesn't feel like sacrifice.

We've never had a second car, cable, or designer do-dads. This hasn't felt like sacrifice because I've always wanted financial security more than I wanted those things.

In terms of present lifestyle, we are selling our big fancy house and moving into a smaller place to move our FI date significantly closer. Again, this doesn't feel like a sacrifice because we are exchanging square footage for something we want more - freedom and flexibility.

I think if you are moving towards what you want, rather than "giving things up" then it's all good.

I agree for the most part.  It feels a little like sacrifice to eat pb&j because I can't go out to eat every day and still save 50% of my income.  I want to go to del taco, or tubbys and get a steak and cheese.   But I want to reach FIRE and quit my job more.

I have a feeling I will have the same views once I am FI.  I could drop part of that stash on eating out, and a super luxurious vacation, and jet skis, all of which I would enjoy immensely.  But would I enjoy it more than FI? Would I enjoy it knowing it was sending me back into the work force for several more years? No

Numbers Man

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Re: Reader Case Study Lifestyle vs income
« Reply #9 on: July 29, 2014, 10:37:24 AM »


 how much of your present lifestyle are you willing to sacrifice in order for future financial stash? And how did you decide?

I was about 30 years old when I noticed that all of the offices were occupied by workaholics that put in at least 60 hours a week. I could count on my one hand the number of fifty plus year olds at the 500 person corporate office (excludes upper management). I then decided to start saving for the future, but not at the feverish pace of MMM, since I had already bought into lifestyle inflation. So I wondered what happened to all the old people. Were they just pushed out or vaporized like in "Logan's Run". I knew that I had to step up my game before I was pushed out.

So my advice would be to save as much money as possible while you're young and get full time jobs. You can still enjoy a work/life balance with a full time job. Plus paying almost 40% of your income for rent is insane and will not get any better if you don't increase your income.

Runningtuff

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Re: Reader Case Study Lifestyle vs income
« Reply #10 on: July 29, 2014, 08:04:52 PM »
Thanks very much for the feedback! It helps clarify some of my current thinking.

@Hugerat Yes, thats right re work hours. We both have Masters degrees in arts so lecturing etc is a possibility at some point. I was able to get mine fee-free alongside my current job. Reasons Im still in the job include the p/t aspect and decent colleagues, and maternity payment if we have another child, etc. They give me occasional better-paid teaching in addition if it comes up and Im starting post-grad supervision for two students next month.

No health benefits from employer but our public system isnt bad. Employers do a 2% match on super, which I can withdraw from for a first home at some point if I want.

Rent is definitely the main money sucker, but its a low-standard rate for this city and being near jobs. House prices and rents are pretty high across the country (NZ) in the main centres. Basically dont have the income for a mortgage yet but would like to figure out a way of bringing that expense down in the future.

@Bob good point. Thats why Im mulling all this over I guess.

@MrFrugal Chicago ultradistance running ☺. Not far off the qualifier for representing NZ at world 100km champs which would be a cool thing to experience sometime, and there are also loads of cool races in the US and Europe etc. Pleasure rather anything else, as Im a tier below solid sponsorship level at this stage.

@ShortinSeattle All sounds like it works well! I like the moving towards.. idea ie, we can progress gradually towards saving more rather than having less time in an immediate sense.

Frugalnacho Good call. I manage the lunch savings etc ok mostly, by necessityits more time Im stingy about ;)

@NumbersMan Yes, it feels like an insane percentagesigh.

My mid-long term plan is to find interesting work after a potential next child is 2 or 3.

 

Wow, a phone plan for fifteen bucks!