Author Topic: Young couple, $60k income, estimate annual expense of our target RE lifestyle?  (Read 729 times)

TheHickoryHick

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I'm 23, my husband is 25, and he earns $60k gross annually.  We have no debt and are currently maxing out both Roth IRA's and contributing $5,400 to his 401k (this includes employer's contribution).  We want to buy a duplex in the near future to "house hack" by renting out the second unit to cover the mortgage payments.

I am finishing up a college degree but our goal is for me to SAHM and homeschool.  We recently sat down to brainstorm our ideal golden years lifestyle and we are wondering how much we need to put away before being able to live that way indefinitely.

We are both extreme introverts with modest tastes so the flashy HCOL, traveling, vacation lifestyle has no appeal.  Our dream scenario is to buy a small cabin on 10+ acres somewhere very remote (and cheap!) - we love rural Kentucky or Tennessee but anywhere Appalachian is nice.  I want to garden, keep bees, quilt, and sit in a rocking chair on my cabin porch watching whatever the 2040 equivalent of Netflix is.  He wants to do oil painting, small-scale woodworking, and play video games.   My uneducated estimation is that this lifestyle shouldn't be very expensive, likely doable on 20-30k annually?  Am I missing anything?

Obviously kids will require more expenditure not to mention contact with civilization, so we don't see ourselves putting this lifestyle into action until after the kids are out of the house.  Assuming we finish having children within the next 10 years, that gives me a target year of 2046, 28 years from now.  How much should we aim to have invested by then, and is it doable on his modest single salary?

Thanks guys!

dhc

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You're going to be better at estimating this than any of us can be. What does your current lifestyle cost? What will change between current and your retirement ideal? Take those changes, figure out what they add or subtract, and you've got your cost. Post it as a case study and people will point out what you've forgotten. But we can't really pull a number out of thin air without more details.

TheHickoryHick

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Well it's kind of tough since not only are we decades away from retirement, our current lifestyle is pre-kids which I imagine are a huge shuffle.  However it would be motivating to have a number goal, hence this exercise.

Right now we make those standard retirement contributions, spend about $200 monthly on groceries and house supplies, about $100 monthly on our dog, $200 on utilities including internet (no cable), $40 on gas (I don't drive much and his car is very efficient), and not really anything much else. Occasional large purchases like a new laptop when one breaks.  After tax and retirement contributions he takes home $3,400/month, and of that we're saving over $2k/month cash for the future down payment.  As a wedding gift his parents are paying our rent this year, but that $800 could comfortably fit in our budget if necessary.

wordnerd

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Do you track your spending? If not, start.

Do you want to buy a house? If so, what does one go for in your area? Add that to your budget.

You won't have childcare costs if all goes according to plan, so that's not a huge issue. Kids clothes and foodn(at least in the beginning) are cheap. Are you hoping to have a lot of children? 6 is different from 2, but you could add say $5K or $10K a year to your budget ($125K or $250k needed for your stash, respectively).

Will you need health insurance before Medicare? This is hard to budget for, given that rates and subsidies/policy could change dramatically before you retire, but keep it in the back of your mind.

$20K-30K is doable, if you decide that's how you want to live (my family has happily lived sub-$30K for 8 years now, but we only added kid 1 3 years ago and kid 2 7 months ago).

Track your spending, keep reading here, fiddle with your budgets. You'll find a target.

dhc

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The good news is your take home vs savings numbers suggest you're currently spending about $1400 pet month. It sounds like that would be $2200 if it included rent, which is roughly $27,000 per year. That's within your 20-30k range, but as you say, kids do add costs, as does home ownership in most cases, even if the mortgage itself is cheaper than rent. You've for very, very little room for lifestyle inflation without breaking 30k per year.


I'm probably 5-10 years ahead of you and in that time our spending has risen about 25% but leveled off at what I consider to be more sustainable than where it was at the end if college. If you don't already have it, I'd recommend Mint or something so you can track your ongoing spending vs saving and see how your own numbers change overtime. Change is not necessarily bad by itself, but it's good to stay aware so you're not caught by surprise if you're suddenly further from FIRE than you'd expected.

Villanelle

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Are you including a mortgage in that $20-30k estimate or would that be with a paid-off home?

Those numbers do sound roughly doable (if that's today's dollars) if you truly will live the lean lifestyle you imagine and won't be supporting adult children in any way. 

However, you are 28 years out, so you don't need a particularly accurate estimate.  So sure, mentally hope for $25k as your goal for now. Reassess every few years based on your actual expenses and anything you hadn't planned for (maybe you end up wanting to help with college costs or you have a kid you want to let live at home while they attempt to launch, for example, or you develop at taste for hookers and blow, or...).  When you are ~ 5-8 years out, look at actual properties in the area so see if you can purchase for what you'd hoped.  Adjust accordingly. 
 

If you just need a mental goal for motivation and visualization, if can't hurt.  If you end up being off by 20%, there's really no damage, and you'll be able to see things more accurately as you get closer. 

TheHickoryHick

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I wasn't including a mortgage in that annual because right now I can find the type of property I want for sale between 100-200k, so I figured we would buy outright.