The Money Mustache Community
Learning, Sharing, and Teaching => Case Studies => Topic started by: chairman5 on August 23, 2019, 02:40:25 PM
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I have been reading many posts and am struck about how many folks I see in their late 20s to early 40s indicating that they "want to save xxxx in the next 10 years and then retire." I see numbers like 400k, 500k, and I'm thinking "am I missing something?"
As I have shared in another case-study post, I am 55 and looking to retire in a few years and am currently FI, with a NW about 3.5 million. I get not everybody "needs" that much but by my calcs at a 4% withdrawal rate on 400k that is $16,000 per year before taxes? Are people really planning to live on that? Esp at that age when you may be starting a fam? Are they planning to move back in with their parents? That's about $1,333 per month, when in 10 years due to inflation, it will carry a present value of about 1,100 per month.
So should I be assuming, if posters are not indicating, that they really mean they are retiring from some regular job but still plan to augment? Or is their a bit of naivete there? I don't mean to Suzie Orman anybody, but just wondered how some here who plan to retire at a young age with 500k or less in savings plan to meet their expenses?
Also, for those of you who are living off of only savings (not pensions) are there any here willing to share how small of a nut they are living off of?
Thanks!
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The 4% has inflation built into the calculations, so those retiring on $400k would have $1333/month in purchasing power theoretically forever. Also, for many, it is not a net worth of $400k. It is a nest egg/investments of $400k, which does not include a paid off house and cars.
I currently don’t pay for housing (no rent, no mortgage), and it’s definitely possible to live well on less than $1333/month, even with a family and a kid.
That being said, our lean FI goal is $1M. Full FIRE goal is $1.5M, not including primary residence.
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OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?
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The expectations might be naive or unrealistic but so might the assumptions...
I wouldn't be surprised if some folks underestimate their income requirements as time passes by not leaving enough cushion for unforeseen repairs, medical issues, etc. but that doesn't mean one couldn't live on 1300/mo or some other low amount. It's surprising just how inexpensively people can live if they choose to and still have a pleasant time of it. A cozy, paid off house, inexpensive hobbies like gardening, hiking, volunteering, etc can easily fill up a life for very little money.
For me, that example wouldn't be enough as I've chosen to maintain some fairly expensive hobbies (cars, travel) so I'll have to go up a bit higher before I can check out of the rat race. On the plus side, I do have some cheap hobbies that I could easily turn to instead if I wanted to speed things up in the accumulation phase or lengthen the withdrawal phase. It's nice to have options.
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Howdy, we are a couple of DINKS living a kick ass life in HCOL area on ~$35k/yr.
The 4% rule accounts for inflation, so your point about inflation eroding the $1333/month is moot* (thanks @SwordGuy!)
It's very easy to do this, but takes a profound shift in thinking and lifestyle. You have to *gasp*, learn how the world works again, rather then relying on magic (technology), and money to solve all of your problems.
Most people sadly know how to do only one thing well enough where their entire capital is derived from this activity, and for everything else they pay someone else. Learn how to be good enough at many things, such that you don't have to pay for solutions, and maybe even diversify for that which you are able to trade capital (financial or human).
Here is a great book on the subject, but you may want to start with something a little more par for the course.......
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The 4% rule accounts for inflation, so your point about inflation eroding the $1333/month is mute.
The point was only mute because it's plain text on a web page.
It was, however, a moot point. :)
And what's the name of the book and the author?
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The point was only mute because it's plain text on a web page.
It was, however, a moot point. :)
And what's the name of the book and the author?
Whoops! Good catch :)
Early Retirement Extreme, by Jacob Lund Fisker
I'm reading through it for the 4th time right now, each time learning something new and gaining a Wheaton level
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Those numbers sound fine to me, especially if a person wasn't big on travel - our annual spending for two people, minus going to Europe and Asia every year, would be in the ballpark of 16K, though we're not retiring on 400K (more like 600-700).
Rather than assume people are naive for planning to spend less than you, why not look at it as a learning experience in more badass living? If someone told you their running speed was higher than yours, would you assume they just didn't know how to use a timer and/or were cheating, or would you instead think maybe they have a more effective training regimen and see it as something to learn from?
I always wonder if the type of people who post things like this are trying to validate their own overspending. Like, if you can just write off the people who spend way less than you as naive, mistaken, living shitty lives, etc, then you don't have to look too hard at your own spending and wasteful choices.
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I think in some cases, there is a paid off house implicit in those numbers. Remove rent/mortgage from the equation, and $16,000 goes a lot further. Also, plenty of people plan for a >4% withdraw rate. It's riskier, but I wouldn't call it naive.
If you don't want to do it, cool. I don't either. But I certainly believe I *could* and that others do, happily.
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My FIRE number is €300k, which is €1000/month. That's more than I currently spend and by that time my home will be paid off. I am also planning to keep doing my side hustle that I enjoy a lot, which means my planned withdrawal rate would be anywhere from 0-2%. When we reach conventional retirement age pensions, retirement investments and social security will likely cover our expenses and then some. I'm in Europe where affordability of health care is not an issue. We don't have children.
I have also noticed that I spend way less during periods I'm not working. I don't have expensive hobby's, doing frugal things like gardening and canning and knitting is what I enjoy most. So I'm not worried about post-FIRE lifestyle inflation even though it would be possible.
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It's hard for me to imagine a likely scenario in which I would need a $3.5MM nest egg . . .
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I guess this can easily be explained by "different strokes for different folks".
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I think the point about inflation that was trying to be made is that inflation is only accounted for once FIRE is reached. Someone counting 25X their expenses today to produce a FIRE target in ten years time need 25X what their expenses are at that point, not now. The shockingly simple maths isn’t quite that simple.
However despite the maths being quite complicated around all of this I think the people on these boards are generally very intelligent, or if like me, the investing/maths side doesn’t come naturally, they are willing to read and put the work in to learn more. So I don’t think many are naive or unrealistic no.
I’m in the UK and spent less than $13k last year. I won’t be able to always do this because of lumpiness around home maintenance etc. I also appreciate I don’t have health care to worry about. I also have a paid off home. As others have mentioned a budget without a mortgage or rent, combined with responsible choices regarding transportation and food means it is possible to live on extremely modest amounts.
Since I’ve found these forums I’ve slashed my food bill by 20% without too much effort. I’m just more efficient. I’ve more than halved my car mileage as I now ban myself from driving if the trip is less than five miles and I’ve banned myself from flying too. If the ultimate goal here is to minimise the impact on the environment and to feel that my footprint is as small as I can get it, then it actually becomes hard to spend money. I refuse to buy excessive amounts of stuff that will just end up in landfill.
For what is really possible read Early Retirement Extreme that 2Birds1Stone has mentioned. My $13k is really quite spendy!
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Are we on wildly different forums? Because those are not the typical numbers I see around here at all.
Whenever someone comes here with concerns about people here being overly optimistic, that's when I know that they've spent absolutely no time actually reading or participating before they posted their "concern".
If anything, this forum is overwhelmingly packed with overly-conservative and overly-cautious people who know the math so well that they can argue for pages about different mathematical models.
I feel like I see far more cases of people aiming to save multiple millions AND have a 3% or less WR, AND have a paid off house AND not factor in SS AND worry about healthcare.
As for the few that I've actually seen retire on sub 1M, they seriously have their shit together, they know exactly what their numbers and options are, and I have no doubt that they have the skills and talent to pivot if they ever end up in a situation where they need more money.
I'm willing to concede that *some* people, very early on in their FIRE journey can be a little naive, but I don't worry about them because it takes years to get there, and if they're *here* early in their journey, they're already way ahead in terms of finding resources to help them actually execute their 10-year plan.
Chances are, in 10 years, they'll be here posting about working at least one more year to lower their withdrawal rate to a more statistically supported low-risk value after reading everything ever written or said by Big Ern and running no fewer than 800,000 simulations, and contemplating a bond-tent allocation to minimize sequence-of-withdrawal risk, and maybe also socking 2 years of expenses away in a cash account just to be safe.
So yeah, if you want to come into our house and tell us we're all naive/unrealistic, you might want to get to know us first.
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I think the point about inflation that was trying to be made is that inflation is only accounted for once FIRE is reached. Someone counting 25X their expenses today to produce a FIRE target in ten years time need 25X what their expenses are at that point, not now. The shockingly simple maths isn’t quite that simple.
I set my FIRE goal in 2016 and so far it's still realistic (because I've lowered some expenses that compensate inflation) but I do review this number periodically and I expect 99,9% of the people on MMM to do that. I think the FIRE number isn't set in stone for most people. As Malkynn pointed out, I think there are waaaay more people doing OMY than jumping in this naively.
I'm not a super conservative person, if you RE at a young age and after a few years you find out you need a little more money than you can safely withdraw, it's not that hard to make some extra money. You can start a business or find a parttime job or even work fulltime a few years to add some money to the stash. I'd say that if you RE before the age of 30 and you find out you need to go back to a minimum wage job for a few years age 40 (assuming you didn't keep up your skills from your previous job) that's not the worst thing in the world. There are people who work those kind of jobs for 40 years.
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@Imma, exactly. If someone is retiring based on a 3% WR, then for every $3k per year they earn in income, they need $100K less saved.
In my situation, I'm pulling the plug ~$500k in investable assets, and plan on drawing 3% ($1265/month).
Between churning bank account bonuses, and travel rewards, we will earn an extra $1-2k/yr + fly for free or close to it.
Even a seasonal job for 3 months out of the year can turn that $1265/month into $2-2.5k a month if I suddenly felt the need to inflate my lifestyle.
Or go back to work in previous career for 3-4 years and double the nest egg.
There are so many things to fall back on, it would be crazy not to take some time off in our early 30's while we have the energy and zest for life to vagabond for a few years.
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Are we on wildly different forums? Because those are not the typical numbers I see around here at all.
Whenever someone comes here with concerns about people here being overly optimistic, that's when I know that they've spent absolutely no time actually reading or participating before they posted their "concern".
If anything, this forum is overwhelmingly packed with overly-conservative and overly-cautious people who know the math so well that they can argue for pages about different mathematical models.
I feel like I see far more cases of people aiming to save multiple millions AND have a 3% or less WR, AND have a paid off house AND not factor in SS AND worry about healthcare.
As for the few that I've actually seen retire on sub 1M, they seriously have their shit together, they know exactly what their numbers and options are, and I have no doubt that they have the skills and talent to pivot if they ever end up in a situation where they need more money.
I'm willing to concede that *some* people, very early on in their FIRE journey can be a little naive, but I don't worry about them because it takes years to get there, and if they're *here* early in their journey, they're already way ahead in terms of finding resources to help them actually execute their 10-year plan.
Chances are, in 10 years, they'll be here posting about working at least one more year to lower their withdrawal rate to a more statistically supported low-risk value after reading everything ever written or said by Big Ern and running no fewer than 800,000 simulations, and contemplating a bond-tent allocation to minimize sequence-of-withdrawal risk, and maybe also socking 2 years of expenses away in a cash account just to be safe.
So yeah, if you want to come into our house and tell us we're all naive/unrealistic, you might want to get to know us first.
+1
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I think the point about inflation that was trying to be made is that inflation is only accounted for once FIRE is reached. Someone counting 25X their expenses today to produce a FIRE target in ten years time need 25X what their expenses are at that point, not now. The shockingly simple maths isn’t quite that simple.
Not really.
There are a few assumptions in the shockingly simple maths. One is that your wages keep pace with inflation. So, the percentages mostly work out on newer savings. For forward projections on my stock holdings I used the 7% (after inflation removed) historical average rate of return for the US market. That way, when I get to the future and need those future dollars, they'll be probably be there at the 10% rate of return (average inflation included).
Each year I double-checked our current and planned expenses and our actual net worth and made adjustments along the way. It really wasn't a big deal.
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I agree it isn't a big deal, but the reason it wasn't a big deal for you was because you did the bit quoted below. The OP implied we didn't do this adjustment so we just simply hit our FIRE total from ten years previous.
Each year I double-checked our current and planned expenses and our actual net worth and made adjustments along the way.
The question this thread poses is are some expectations here naive/unrealistic? I think for the majority of cases the answer is no because generally the people on these boards do so much reading and research into the subject that they have all these aspects covered, safeguards built in, a full understanding of their relationship with money etc.
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@2Birds1Stone I would also feel totally comfortable pulling the plug in that situation. You already know how to live on a low budget and you can always work for a while later on if you think you need it. I also believe very few post-FIRE mustachians would spend all their money and end up broke, if you're clever enough to FIRE you're clever enough to adjust your withdrawal rate in time or find a way to earn some extra income before you're so broke you're back to fulltime work indefinitely. I'm sure you'll do just fine!
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So yeah, if you want to come into our house and tell us we're all naive/unrealistic, you might want to get to know us first.
^^This. So much this.^^
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A lot of people's spending also doesn't really increase, or increases by such a miniscule amount (i.e. much less than inflation). We're about seven years into a ten year projection and our spending is still the same.
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I think that if you can afford to take a year or 2 off when young it’s awesome because when you retire older you can’t do as many things as when young. In the states I think it’s better to have at least a million. We knew a few people that retired in their 40’s and were sorry by 60 because they couldn’t afford to do things like travel, etc. Don’t know them well enough to know the whole story. I do know that they unsuccessfully tried to restart their careers in their late 50’s.
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There are far more naive/unrealistic expectations in the general population than here. Expectations of lottery wins, inheritances, magic money that will suddenly appear and fund foolish lifestyle choices.
Naive financial reckoning that thinks a car is an "investment" or an asset.
Aiming for financial independence, with or without early retirement, is in fact the opposite of naive and unrealistic.
It usually entails long hard scrutiny of financial reality!
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Considering that I used to live on less than $14,000/year, it is possible to live like that, although I wouldn't recommend it. People should at least aim for a 'stache of $600,000, which would provide $24,000/year. Give yourself some breathing room in case of trouble. In our household, we're aiming for $1.25 million, because that would provide $50,000 and that would absolutely cover really good health insurance for us.
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OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?
Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.
I am not boasting but honestly seeking knowledge. I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month. Insurance alone is about 750 of that...at least. Property taxes another 300/month and there you go. $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else. I believe it is being done, I am just trying to figure out how.
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I think that if you can afford to take a year or 2 off when young it’s awesome because when you retire older you can’t do as many things as when young. In the states I think it’s better to have at least a million. We knew a few people that retired in their 40’s and were sorry by 60 because they couldn’t afford to do things like travel, etc. Don’t know them well enough to know the whole story. I do know that they unsuccessfully tried to restart their careers in their late 50’s.
That is a cautionary tale indeed!
I think if people want to restart careers after being off a number of years, the key is to have contacts/a current network because it will be the personal connection that can get you back in the door.
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OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?
Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.
I am not boasting but honestly seeking knowledge. I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month. Insurance alone is about 750 of that...at least. Property taxes another 300/month and there you go. $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else. I believe it is being done, I am just trying to figure out how.
[$11,300 = 3.5Mx4%/12]
Hm, how can I put this? I feel like I could say the exact same things from the opposite point-of-view as you.
I am not boasting but honestly seeking knowledge. I realize with my low income I can retire but for the low prices I am seeing out there just for groceries/rent/reliable vehicles, etc. (we have no student loans or fancy health plans to inflate our expenses) I just can't imagine my wife and I living on over $11,300 per month. Rent alone is about 750 of that...at most. Property taxes aren't relevant when renting and there you go. $10.5k left for mere utility bills, entertainment, groceries, car/home maintenance...everything else. I believe it is being done, I am just trying to figure out how people can spend so much.
Sounds like culture shock to me. I think you'll find that life isn't so expensive when you trim out the unnecessaries and inordinate luxury.
It's very interesting to me that you come to the forums and are amazed by how many folks are making it with such low numbers, while I come to the forums and feel exactly the opposite-- almost every single case study on here are incomes and investment goals double, triple, or even 10 times higher than mine. It makes me feel poor and stupid sometimes (and my life is amazing and full of luxury at ~$30k income), just because the difference seems so vast that I feel like I will never even come close.
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OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?
Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.
I am not boasting but honestly seeking knowledge. I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month. Insurance alone is about 750 of that...at least. Property taxes another 300/month and there you go. $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else. I believe it is being done, I am just trying to figure out how.
Your initial post did not come off as "honestly seeking knowledge", it came off as judgemental about something that you clearly don't understand.
However, I'm willing to give you the benefit of the doubt that what you really want is to understand how people with so much less than you actually manage to feel secure even though you don't with a sum that most here would consider ample, or even excessive.
That said, most target numbers I've seen here are in the 1-2M range, usually including a paid off house, so several thousand a month to live on, not $1300.
As for those living on $1300, they're probably not paying $750/mo for insurance or $300/mo in property taxes. If you want to understand their budgets and how it works, then seek out their case studies, journals, etc. Just because you can't fathom how they do it doesn't mean it can't be done.
That said, that may not be the right path for your family. If you are trying to imagine owning a detached home in a medium to high cost area while maintaining a typical middle class lifestyle, then yeah, $1300/mo isn't likely to cover it.
It's not that people with those budgets are naive, it's that they're making different choices. Trying to apply their budgets to your lifestyle is nonsense. That's why the budgets of people living like you are significantly higher.
People who don't actually know this community at all like to think that it's a bunch of extreme people living off of cans of beans and retiring on unrealistic low savings and magical thinking, but it isn't.
The people here make appropriate, if overly conservative, budgets and plans that meet their particular needs, which is why so few retire on only $1300/mo.
The knowledge housed within this forum is astounding.
If you "honestly" want to learn, there is plenty here to learn from, and NONE of the regular contributors are naive or overly optimistic...except for maybe me. I don't actually have a savings target and regularly say "the money will work itself out", but I'm an oddity here, and if you knew me, you would know that my optimism isn't even remotely naive.
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OP, I’m not sure what your point is? It’s weird for you to be at 3.5m and judging others. No one needs to satisfy your curiosity so you can passive aggressively make people feel bad. That’s how your post reads. I read the case studies all the time and there are few that are just aiming for $500k with families. I can think of one couple with a lowest number but the plan on a very frugal life, which is fine. It seems you’re exaggerating things just so you can puff your chest out about your 3.5m. If people want to aim for whatever amount and do whatever they want, power to them. No need for the doubting Thomas act. The guy who started this FIRED with $800k and lives off around $25k/yr, it can be done. Since you’re not posting a case study, which this section is for, what are you hoping to achieve here?
Yes my post doesn't really apply to this thread but I couldn't find another category that it fit nicely into.
I am not boasting but honestly seeking knowledge. I realize with my investable assets I can retire but for what I am seeing out there just for healthcare/long term disability insurance, etc. (we have no pensions or company health plans that carry over) I just can't imagine my wife and I living on 1,300 per month. Insurance alone is about 750 of that...at least. Property taxes another 300/month and there you go. $300 left for utility bills, entertainment, groceries, car/home maintenance...everything else. I believe it is being done, I am just trying to figure out how.
Your initial post did not come off as "honestly seeking knowledge", it came off as judgemental about something that you clearly don't understand.
However, I'm willing to give you the benefit of the doubt that what you really want is to understand how people with so much less than you actually manage to feel secure even though you don't with a sum that most here would consider ample, or even excessive.
That said, most target numbers I've seen here are in the 1-2M range, usually including a paid off house, so several thousand a month to live on, not $1300.
As for those living on $1300, they're probably not paying $750/mo for insurance or $300/mo in property taxes. If you want to understand their budgets and how it works, then seek out their case studies, journals, etc. Just because you can't fathom how they do it doesn't mean it can't be done.
That said, that may not be the right path for your family. If you are trying to imagine owning a detached home in a medium to high cost area while maintaining a typical middle class lifestyle, then yeah, $1300/mo isn't likely to cover it.
It's not that people with those budgets are naive, it's that they're making different choices. Trying to apply their budgets to your lifestyle is nonsense. That's why the budgets of people living like you are significantly higher.
People who don't actually know this community at all like to think that it's a bunch of extreme people living off of cans of beans and retiring on unrealistic low savings and magical thinking, but it isn't.
The people here make appropriate, if overly conservative, budgets and plans that meet their particular needs, which is why so few retire on only $1300/mo.
The knowledge housed within this forum is astounding.
If you "honestly" want to learn, there is plenty here to learn from, and NONE of the regular contributors are naive or overly optimistic...except for maybe me. I don't actually have a savings target and regularly say "the money will work itself out", but I'm an oddity here, and if you knew me, you would know that my optimism isn't even remotely naive.
^This.
When my living expenses were below $1,300/month, I couldn't even get on the ACA exchange to pay for insurance-- they just automatically slotted us for medicaid. Insurance = $0. We were living in a small house in a rural county that we bought cheap because it needed work-- mortgage was <$300, taxes even less, of course. We didn't even buy cans of beans, because they are expensive, lol! Healthy, homecooked food for two can relatively easily be done for less than $100/month. We had 2 cars-- reliable little Honda Civics ('95, and '96), each bought for <$2k, and only needed basic liability ins. Gas is cheap when your cars get 35-45mpg. No car payment or high insurance or maintenance costs. Other people might moan about how "basic" or "beaters" they were, but to me, they're pretty fancypants (they had heaters that worked, and were so quiet, lol! I grew up driving a '71 VW that barely defrosted the windshield and was l.o.u.d.).
My lifestyle even today is SO different from other, "normal" folks my age, that I find it hard to relate sometimes.
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You state it as though $300 in property taxes and $750 a month is som inescapable reality. I feel fairly confident that the people living on $1300.mo don't have those expenses. You could not have them, too, if you choose. It is a CHOICE to have a Cadillac health plan (though admittedly, some factors like age and health issues aren't a choice). It is a choice to live in a place with moderate to high property taxes, or even to own a home. You also mention home maintenance, which is nearly zero is someone rents, and car maintenance when, shockingly, some people don't have a car or drive very little and DIY nearly all maintenance.
I'm not super frugal like many here. But I recognize that wanting to travel 2x/year, for example, is a CHOICE and a luxury and a privilege, not some inescapable money suck that is out of my control.
Even things like cell phone plans, cable, going to restaurants, etc. are all active choices. If you want to sell more years of your labor to make them cool. But you do yourself and your family a gross disservice by not at least recognizing that most of what you spend is entirely optional.
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Oh, so it's for educational purposes and you're wondering how the breakdown looks for people with lower spending? Cool. Here's our August spending - we're probably done now since we have all our food until September and I'm heading out into the woods in a few days, where there aren't exactly any places to spend money.
- $826 - Housing (renting a cheap apartment)
- $349 - Food (skewed high due to annual Costco renewal)
- $101 - Cat (had to buy both his expensive food and litter in the same month, which is rare)
- $95 - Bills (Two basic cell phone plans and home internet)
- $60 - Public transit
- $130 - Misc (beach umbrella, board game, a roll of duct tape, a dental cleaning, allergy meds, a few toiletries, and a movie at the theater)
Total= $1561
That's a pretty normal month for us, though we are frequently in the $1400s. And that's for two people. $1,300 should be a breeze for one person.
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If we don’t include travel we live on 47k/year. Our retiree health insurance costs 12k/year. We live in a MCOL area. That does include fun money. Our mortgage, taxes and insurance are 650/month and our cars are paid for.
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I assume that when you mentioned long term disability insurance, what you meant was funds for long-term care should you or your spouse require assisted living or nursing home care.
For me, helping my mom find an assisted living facility was an enlightening process. The one she ended up in had a policy of allowing anyone who ran out of their own funds to switch to medicaid payment + a guaranteed supplement from a local charity (sisters of providence - not sure whether this is just local or something more widespread geographically) as long as they had paid themselves for at least one year. It was a pretty bare bones kind of place, not luxurious, but the staff were good(especially the director of nursing -- she was an angel) and the community warm and welcoming. Also, my mom's condition was such that she was not likely to ever need really long term care (congestive heart failure, declining pretty rapidly).
Anyway, my point is that there are ways you can plan for your late days care WITHOUT sinking tons of money into LTC policies -- many of which are pretty much a scam anyway, as they often dramatically raise the cost of premiums year on year and force people out. Also, you can make the decision to utilize things like a POLST or death with dignity laws to ensure your life isn't extended past the point of meaningfulness to you.
As half of a married couple it is worth considering how you will protect assets for the use of a surviving spouse, should one half of the couple need to spend things down for their care. A simple 20-30 year term life policy on each person with a solid 1-2 million payout would be much cheaper than LTC, assuming you don't have pre-existing conditions that would preclude purchasing such coverage.
Strongly encourage everyone considering early retirement to at least do a minimal amount of research into what the care options are in your community. Some places have long waiting lists, especially the better ones -- you don't necessarily need to get on those lists immediately, but knowing how long the wait might be helps with future planning. One way to do this in a more meaningful way would be to assist a friend or loved one with their choice of a community -- that way you help them in a time of major stress, and you get something out of it, too. And you can visit them in their chosen community and see if the initial research proves it was a good choice (though like with schools, there will be issues in any community that you only see after being involved for awhile, so you have to remember that no place is perfect).
I agree with this. My Mom entered a assistance living facility couple years ago - not top of line, basic average community but she needs pretty much constant care to dress herself, help her eat, etc. Costs $10k per month. She entered with 400K in assets. Called Medicaid and they laughed when asked we filed for assistance and said "call us back when her assets run out." Called back last month when her assets were down to 4k. They laughed and said call back when $0. That is the way our wonderful system works and why you probably see a lot of fraud by elderly trying to pass down wealth. In any case, poof, a couple years of required assisted living and poof - life-saving gone. perhaps it is situations like this that skew me about amount of money. It isn't just about what I can live on right now, but what about planning for older age and not wanting to be a burden on family? Remember, with no assets you won't get that initial entry into a decent facility and will need to rely on the state or your kids. Once in, then Medicaid will pick it up once you are bled dry.
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Some states let you keep a bunch of your money and the person goes on Medicaid if you have a lawyer that knows what to do. The surviving spouse should not be impoverished but my friend got a big inheritance even though her mom was on Medicaid for 10 years. This is wrong.
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I am 55 and looking to retire in a few years and am currently FI, with a NW about 3.5 million. I get not everybody "needs" that much but by my calcs at a 4% withdrawal rate on 400k that is $16,000 per year before taxes? . . . .
The 4% rule of the Trinity study never was a 4% rule. It was a 4.3% rule (if memory serves me), simplified. Realistically, unless someone retires very early in life, right when the next great depression hits this country and has no hope of any traditional retirement income, a withdraw of up to 7% is viable.
You, Sir, are 55 years of age. To make a point, I simply assume that you have a paid off home and will receive $2K from SS per month once you hit age 62. When I deduct $500K from your NW for the home, you're left with $3M. Deduct 5% of that per year, and you'll have $150K per year. Seven years from now, you can add another $24K to the total. To spend $174K in retirement annually requires serious effort. The wife and I spend $100K per year, including our HCOL mortgage, including retirement savings, and I have calculated that -- based on that number -- we should not be spending more than $25K per year, with a paid off home and no further retirement savings.
I'd love for someone here to post a retirement budget that reaches in the 6 figures.
Related, I am asking an honest question: what percentage of retirees do you think have $3.5M to their name? I don't have the answer to that, but it definitely must be in the single digits.
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The OP can certainly retire anytime he wants to. Our HI is our biggest expense with premiums at 1k/month. I was hoping that when we both are on Medicare that things would be cheaper but my sister spends 600/month just for herself.
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I have been reading many posts and am struck about how many folks I see in their late 20s to early 40s indicating that they "want to save xxxx in the next 10 years and then retire." I see numbers like 400k, 500k, and I'm thinking "am I missing something?"
Probably. Obviously the big factor is they're planning to live on a much lower spending rate than what you're used to. Have you read these posters' journals, case studies or other posts to determine whether their spending levels are similar to their planned FIRE spend?
Selected examples from Case Studies section:
$14k annual budget, "been tracking expenses for 5 years and never gone over" - quote is from OP when other posters questioned his plan to retire on 375k. You could ask him about family plans, but who says he/she has to have children?
https://forum.mrmoneymustache.com/case-studies/can-i-retire-in-early-2020/msg0/#new
$12k annual spending, family of 5. Unusual and mindblowing, but reports past data, therefore shows it's possible in the short term. Includes several special factors that wouldn't apply to all cases, such as a food pantry partnership from his workplace that cut their grocery costs. Does have the reproducible feature of two well known factors that affect some low income families with children: EITC and Medicaid. Ignore the move-to-Israel parts, focus on the current spending...though you can argue "it won't be sustainable" if you wish to assume bad things will happen to their family later. I would argue that their current thrift implies that moderately lesser thrift could be sustainable. Naive, or merely bold?
https://forum.mrmoneymustache.com/case-studies/large-family/msg0/#new
by my calcs at a 4% withdrawal rate on 400k that is $16,000 per year before taxes? Are people really planning to live on that? Esp at that age when you may be starting a fam? Are they planning to move back in with their parents? That's about $1,333 per month, when in 10 years due to inflation, it will carry a present value of about 1,100 per month.
So should I be assuming, if posters are not indicating, that they really mean they are retiring from some regular job but still plan to augment? Or is their a bit of naivete there? I don't mean to Suzie Orman anybody, but just wondered how some here who plan to retire at a young age with 500k or less in savings plan to meet their expenses?
Yes, 4% of 400k is $16k before taxes. Are you aware that federal income tax on 16k is really low, and that federal tax on $16k of capital gains and qualified dividends is zero?
You'd have to ask the people involved if they plan to live on that...but if they're posting their plans at that pace, the probably are!
Re moving back in with their parents... pretty offensive remark IMHO. I will grant you the courtesy of believing it's an honest question, not a sarcastic one, because I have a brother in law who in moments of worry thinks my secret plan is to move in with him and my sister. Said BIL has a several times larger stash than me, buys new trucks as daily drivers every few and spends more than I do, but is also frugal in many respects. Despite his truck habit, he and Sis have combined spending that AFAIK is a smaller percentage of their likely investment income than mine is. Both of them have shared rough numbers with me over time. It seems clear that he could retire right now and she could stay retired and they could live until the end of their days on investments they already have, even if they never reduce spending by a penny. He isn't quitting now because he ALSO will get a pension in 3 years, so he is going to do that. He can't grasp that my spend fits into my stash safely because my gross numbers are smaller, so he just...doesn't deep down believe it. His own fear of quitting and feeling that he Might Need More Money is irrationally making him afraid for himself AND for me. I was shocked when my sister told me of his fears/assumptions, because it had never occurred to me to even imagine living with them. Presumably you too haven't quite grasped other people's lives, and honestly want to know. Unless they say otherwise, probably the posters in this forum are independent careful planning types who have backup plans for their backup plans. I know I do, even if my stash is 500k instead of 3500k.
PS. Your inflation math is wrong in the sense of not understanding the assumptions of the 4% "rule" (it's really just a rule of thumb). The 4% "rule" means income of 4% that adjusts upward over time with inflation. If inflation rises by 25% over the next decade, the $1333 per month would rise to a nominal $1600 per month...which would have the buying power of today's $1333.
That's one of so many details that this forum is dedicated to mapping out. Keep reading.
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The family of 5 soon to be 6 is naive. Kids get more expensive as they age. Plus vehicles need to be replaced, house maintenance, illnesses, etc. The dad is highly educated yet relying on Medicaid which is meant for poor people. As a former social worker he is taking advantage of it and this type of thing is what turns people against social programs. In my opinion they are not living with integrity. I do admire how thrifty they are. They don’t have the money to relocate by family which they want to do.
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They may be naive, and you may be right about the social programs. But the OP has a stash providing $140,000 year pretax income using the 4% rule and appears afraid to retire on it because he might run out of money. Instead he is asking whether people with $16k income per person are going to move back in with their parents. That a family exists in apparent happiness living on $2,400 per person year in America while not living with their parents, and while at least one member studies at the doctoral level, suggests in my mind that $16,000 per year per person can be sustainable without living a parent's basement.
I think OP probably should focus on his own expenses more than other people's. I am not claiming that $2,400 is sustainable. But since this thread is exploring others' expenses, the point is that $16k to $20k per person can be sustainable.
Does the doctoral family need a $3.5 million stash to thrive? Or does their expense level suggest that a smaller amount might provide safe harbor?
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I know for me if I had tried to predict what I would be spending now ten years ago I wouldn't have gotten it right. Life is long and things change. When I was 22 I wanted to save 250k and live in a van by the river on 10k a year. Once I had 250k I found I wanted a bit more. I think people make choices and then they live with those choices. If you retire with a small stash and find you're not satisfied you go back to work. I did that... but I think the experience of taking some time off was great. Don't burn bridges because you never know what comes next. Live and learn. Live and evolve. We all course correct and find our way. Best to stay upbeat and roll forward! But better to take a chance and learn something then live in fear and regret.
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The OP can definitely afford to retire. No doubt about it. The guy with 6 kids never said what his PhD was in so who knows if he will make any additional money versus a master’s. They are living on the financial edge which is not a good idea with that many kids. I would never presume to know someone’s finances and presume they would have to move back home.
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I agree it isn't a big deal, but the reason it wasn't a big deal for you was because you did the bit quoted below. The OP implied we didn't do this adjustment so we just simply hit our FIRE total from ten years previous.
Each year I double-checked our current and planned expenses and our actual net worth and made adjustments along the way.
The question this thread poses is are some expectations here naive/unrealistic? I think for the majority of cases the answer is no because generally the people on these boards do so much reading and research into the subject that they have all these aspects covered, safeguards built in, a full understanding of their relationship with money etc.
Yes, but inflation has been so low and the market so good that there really weren't any serious adjustments to make... :)
Other than deciding I wanted to go stronger into real estate rental properties in our area because, as I learned more, I realized I could cut a couple of years off our FIRE date by doing so. Plus it lowered our sequence of returns risk, too.
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It might already be posted, but read the post "First retire...Then get rich"
https://www.mrmoneymustache.com/2012/05/14/first-retire-then-get-rich/
Also, it seems you might jive more with the bogleheads
Edit: Taxes on 16k is no more than $30/month if single or nothing if married
Edit2: Sample budget on 500k
housing $200 (taxes, insurance)
utilities $150
car insurance $35
health expenses $55 ($28/month for silver or $0 for bronze plan)
phone $25
internet $45
haircuts $15 if you're spendy
clothes $20
gas $30
food $220
general spending $100
car replacement $125
travel/entertainment $250
gifts $20
car maintenance $30
home maintenance $150
home improvement $40
taxes $25
excess $150
So many edits: oh, and mentioning retiring at those amounts when you are at the age when you might be starting a family (late 20s to early 40s) - everyone is on different timelines. My son will be graduating high school when I am 37
Personally, I am going for a higher number, but I do see how a budget like that can be possible. I know plenty of retirees living on SS alone in that range. I'm shooting for 1.1 in todays dollars with a ~3.5% withdrawal. That will give me ~2500/month plus taxes and sinking funds for car replacement/maintenance, home maintenance/improvement
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@ontheway2, wouldn't that be over the 4% rule?
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@ontheway2, wouldn't that be over the 4% rule?
You're right. The excess would be $131 instead of $150
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What’s up with all the defensiveness? I read the OP as honestly asking how $12k-16k household budgets could possibly be a good FIRE plan. I’m sure in hindsight the OP regrets posting their NW, age, and the fact they are still working because it was superfluous information that seems to have distracted most people from the question.
Also, what’s up with all the certainty? The “4% rule” is based on the historical returns of the US markets during the 20th century AND the historical inflation experienced by the USD during that time. Does that make a “rule” that will certainly apply between 2020 and 2080 like some law of nature? In other countries or eras, not even a 2% WR would have survived a 30y retirement. In other times/places, a 10% WR might have worked. If US inflation runs 10% for, say, 7-8 years in the near future, there will be few early retirees who stay retired.
Here’s the News:
Retirement, like surviving another day, is probabilistic. We all trade years of our lives to increase our historically calculated percentage of portfolio success (which is not the same as the actual outcome). There is insufficient information to determine the optimal time to quit, portfolio size, or the optimal amount of happiness derived from controlling our own time vs. being able to buy things. We’re ALL winging it. Certainty is a MYTH. Accepting this, we can accept each other’s decisions.
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Given that we face a trade off of losing with certainty years-of-youthful-life versus gaining some probability of higher long-term prosperity, consider the following scenario.
As a 55 year old worth 3.5M you find a lamp, rub it, and out pops a genie. Instead of 3 wishes, the genie offers you 3 options:
1) Remain in your current age and wealth.
2) Trade your 55 year old body for your 40 year old body, but your net worth is now only $1M. You must live solely off the portfolio for the rest of your life.
3) Trade in your 55 year old body for your 30 year old body, but your net worth is now $450k. You must live solely off the portfolio for the rest of your life.
I would choose #3 without a second thought. Yea, it’s poverty, but that’s still great money in 90% of the world and I would have half an adult lifetime back in exchange for sewing my own socks when they rip. Plus there’s no rule against the portfolio increasing, which it has a chance of doing despite my withdrawals.
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What’s up with all the defensiveness? I read the OP as honestly asking how $12k-16k household budgets could possibly be a good FIRE plan. I’m sure in hindsight the OP regrets posting their NW, age, and the fact they are still working because it was superfluous information that seems to have distracted most people from the question.
Also, what’s up with all the certainty? The “4% rule” is based on the historical returns of the US markets during the 20th century AND the historical inflation experienced by the USD during that time. Does that make a “rule” that will certainly apply between 2020 and 2080 like some law of nature? In other countries or eras, not even a 2% WR would have survived a 30y retirement. In other times/places, a 10% WR might have worked. If US inflation runs 10% for, say, 7-8 years in the near future, there will be few early retirees who stay retired.
Here’s the News:
Retirement, like surviving another day, is probabilistic. We all trade years of our lives to increase our historically calculated percentage of portfolio success (which is not the same as the actual outcome). There is insufficient information to determine the optimal time to quit, portfolio size, or the optimal amount of happiness derived from controlling our own time vs. being able to buy things. We’re ALL winging it. Certainty is a MYTH. Accepting this, we can accept each other’s decisions.
I think comments like the one about planning on moving in with parents drip with condescension, intended or not, and contributed to some of the backlash. Also, the info on how people plan to live on these low budgets is all over this site. With even a tiny bit of poking around, the OP could have found them, so it seems clear s/he didn't read much before questioning people's approaches.
It definitely didn't come off as "hey, is this really possible? How do people do this? What do their budgets look like?" inquiry. Maybe that's inference rather than intended implication, but clearly I'm not the only one who inferred it (and I'm not even a low-budget person).
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I think we cannot always assume that FI and RE go hand in hand. "The Wealthy Accountant's" NW is now about $12,7M, and he still drives clunkers with a salvage title and has no plans on retiring, ever. Frankly, one has to wonder when enough is enough. Even if I had a job I loved more than life itself, at some point I'd up my spending a bit. That would most likely be way before I hit $5M NW. Is it possible that, perhaps, the extreme savings habit can turn into an addiction, like alcoholism or gambling?
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Given the 3 choices offered I would take number one. Then I would quit work and start traveling.
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My granny tells if I am able to save 15% of my income from age 30 onwards, retirement at 60 should be a relatively easy goal. I am trying to follow her advice but I understand it's not easy to save money when you're so young and you want to spend it on the fun stuff. But finally, you need to understand that if you start saving money later, the amount you have to save increases. For example, if you start at 40, the amount you need to save for a comfortable retirement cushion increases to 25%. So, at the moment I've accepted the fact that all these savings are for good and I'll not be in need if I start to save money now.
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Given that we face a trade off of losing with certainty years-of-youthful-life versus gaining some probability of higher long-term prosperity, consider the following scenario.
As a 55 year old worth 3.5M you find a lamp, rub it, and out pops a genie. Instead of 3 wishes, the genie offers you 3 options:
1) Remain in your current age and wealth.
2) Trade your 55 year old body for your 40 year old body, but your net worth is now only $1M. You must live solely off the portfolio for the rest of your life.
3) Trade in your 55 year old body for your 30 year old body, but your net worth is now $450k. You must live solely off the portfolio for the rest of your life.
I would choose #3 without a second thought. Yea, it’s poverty, but that’s still great money in 90% of the world and I would have half an adult lifetime back in exchange for sewing my own socks when they rip. Plus there’s no rule against the portfolio increasing, which it has a chance of doing despite my withdrawals.
This is an interesting way to look at it! Am I weird that I don't have an immediate urge for door #3?
I think that this would be a nobrainer for someone who never enjoyed their profession and never had kids. If I go back to 30 yo, are my kids still grown and educated? or are they young again too?
I was thinking if I had the expense of raising them again, #3 would not be a pick, to do that on 18k/year. But if I got to have those little kids again, then I think I would do it, but I am hard pressed to think how I could do it on 18k/year with no housing, and not sure that is at all doable. Are housing prices current housing prices, or 25 yo prices? We'd be teetering on homelessness for the long haul, and then I don't think that would be a good experience for them, and if I dipped into principal just here and there, and never able to earn another penny, I'd likely be looking at eventual homelessness for myself, for the long haul.
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$18,000 a year for an individual is well over the poverty guideline. It's even above the 2019 poverty guideline for a 2-person household. (Source (https://aspe.hhs.gov/poverty-guidelines).)
I retired in my early 30's and am spending less than $1,500 a month, so my answer is pretty obvious. The one problem is that I have more than $450,000 now and can weather emergencies and market downturns better. Would I feel comfortable with 450k? cFIREsim shows that in many historical periods, I end up with more money than I need with an annual spend of 18k. If I give myself 5 years of my current, lower spending first, I do even better.
There are still a lot of options if I can't increase my portfolio through work. I don't need to do these things now, so it's not worth it, but for an extra ten years of youth? Hell yeah.
* A PT nanny situation in exchange for free room and board
* A few years of super cheap travel and hope the market does well in the interim
* Long camping trips
* Work harder to understand real estate and get higher returns
* Move further out in the city for cheaper rent
* Move to a different city entirely
* Get more into credit card hacking
* Gold-digging
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@mistymoney yoh got me thinking (a rare event ;-)) about how a person who had 3 kids could live on a stash of $450k $18k/year $1500/month if renting and it would be hard. There are probably ways but the options are pretty limited. I'd probably choose to move to a LCOL area and buy a cheap place with low monthly mortgage to keep my housing cost fixed over the years. Or buy something for $100k and pay cash. That would lower my stash to $350k or approx $1200/month but that would likely lower my housing costs by more than $300/month I'd lose in monthly income. Maybe stuff the kids in one room and get a roommate to cover the housing expenses. Not ideal but doable.
Obviously this is something a kidless person could do as well much easier. And probably what I'd do if I had a $450k stash and nothing else and wanted to RE. Move to na LCOL area and a low prop tax area, buy a place for $100k and then just get a roommate or 2 to cover all my housing costs and probably much of my living expenses including travel and hobbies and little luxuries. I did this (and am kind of doing it now) and I've been able to keep my expenses much lower than $1200 or $1500/month. But people with kids are going to have to make big trade offs and probably have to consider some non-tradition housing/living arrangements to make it happen. There are also a lot of families choosing the RV or sailboat life as a way to RE with kids on a smaller income.
This one has got me thinking too! Although in my case - the only real draw is if the kids are tiny :)
I would figure out a way to make it work. But - I am very averse to being on medicaid, or other welfare, so that is the one thing that is hard for me to figure out, the medical care side.
If I was on my own, it would be super easy and I would likely pick intentional homelessness/vagabond for 10 years - maybe more - to try to live on as little as possible to let the stach grow.
That wouldn't be doable as a single parent with 2 tiny ones.
I think the difficult thing - for me and maybe others questioning the super-low approach - is I grew up in a HCOL area. I don't understand non-big-city lifestyles, RE prices are high, taxes are high, but it's all I know, where everyone I know is - family, friends, etc. I go back 4 generations and everyone in my family are from big cities....
My property taxes just got jacked up and 18k year would likely just cover property taxes, insurance, and utilities for my current home. So without any debts or dependents - I still couldn't even begin to make it on 18k.
Of course there are options for moving - but I've built a life in this city for 50 years. I was born here. What would relocating mean? Particularly on a very low budget, I'm just confused on what I would do with myself after uprooting my life.
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I think the difficult thing - for me and maybe others questioning the super-low approach - is I grew up in a HCOL area. I don't understand non-big-city lifestyles, RE prices are high, taxes are high, but it's all I know, where everyone I know is - family, friends, etc. I go back 4 generations and everyone in my family are from big cities....
My property taxes just got jacked up and 18k year would likely just cover property taxes, insurance, and utilities for my current home. So without any debts or dependents - I still couldn't even begin to make it on 18k.
Of course there are options for moving - but I've built a life in this city for 50 years. I was born here. What would relocating mean? Particularly on a very low budget, I'm just confused on what I would do with myself after uprooting my life.
This does really seem to be the hard part to get past for many and where I, on the other end, don't get spending so much on housing. I feel a little stuck in my L/MCOL area as taxes on my last house were $254/year and the new larger house in the city is ~$900
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I think the difficult thing - for me and maybe others questioning the super-low approach - is I grew up in a HCOL area. I don't understand non-big-city lifestyles, RE prices are high, taxes are high, but it's all I know, where everyone I know is - family, friends, etc. I go back 4 generations and everyone in my family are from big cities....
My property taxes just got jacked up and 18k year would likely just cover property taxes, insurance, and utilities for my current home. So without any debts or dependents - I still couldn't even begin to make it on 18k.
Of course there are options for moving - but I've built a life in this city for 50 years. I was born here. What would relocating mean? Particularly on a very low budget, I'm just confused on what I would do with myself after uprooting my life.
This does really seem to be the hard part to get past for many and where I, on the other end, don't get spending so much on housing. I feel a little stuck in my L/MCOL area as taxes on my last house were $254/year and the new larger house in the city is ~$900
It's also why MMM specifically challenges people to question the assumption that they must live in a HCOL region. MMM didn't grow up where he now lives, he's from Canada, where all of the big cities are terrifyingly expensive.
Does that mean everyone needs to move to a LCOL area? Absolutely not, but it does mean that if you want a very low spend that you either need to drastically minimize your costs in a HCOL city or consider a LCOL location.
@Zikoris lives in North America's second highest cost of living city and manages a very very low spend by living with minimal expenses, no kids, no car, etc.
MMM lives in a low cost area, but has a nice big house, and a car, and a kid.
It's all about trade offs.
No one ever said that a super low spend was realistic for a normal middle class life in an HCOL area, but that doesn't mean a super low spend is unrealistic. There's a reason so few people donut, because most don't find the trade offs worthwhile.
There's a reason there are so very few people here actually living on such low numbers. I see far more $75-100K spends here than $20-30K spends.
I'm personally not willing to make a lot of the trade offs for a super low spend, so I just don't. However, I do spend A LOT less than most people do to maintain my quality of life, and that's the whole point that MMM tries to make.
It's not that you should do whatever it takes to live on $X amount of spend, it's that if you look closely at your life and what you want from it, you probably don't need to be spending $XYZ to get it.
If where you live is that important to you, then yes, a super low spend is unrealistic in terms of meeting your expectations of lifestyle. Your options are then to optimize within the adaptive capacity of your preferred lifestyle.
That's what we all have to do.
I sure as shit am not living off of 18K, and feel absolutely no pressure to do so just because others do.
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I can't say I've ever really made any trade-offs/sacrifices either. I'm been VERY childfree since literally as far back as i can remember (childhood?), and sealed the deal with a tubal many years before I ever got into FIRE (which was a five year battle to get done). Being car-free is also due to deeply-held beliefs, and I had fairly major fights with parents/in-laws/extended family for about a decade over my complete unwillingness to even get a license (everyone finally threw their hands up and gave up when I got close to 30). So those two examples, kids and cars, were not only NOT trade-offs for me, they were things I so vehemently did not want that I was willing to fight hard for 5-10+ years to avoid.
Small-space living is the same - a combination of my personal beliefs re: environmentalism/low consumption, my desire to minimize housework, my sleepwalking habits, and a VERY strong aesthetic preference. Let me put it this way: If someone offered me a 100% free normal-size house on the condition that I had to live in it (and couldn't just sell it and pocket the $), I WOULDN'T TAKE IT. I would literally say nope and walk away from a free house because I dislike large living spaces that much.
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^Just to be very clear, when I say trade-offs, I do not mean sacrifices that you don't want to make. I use the term synonymously with lifestyle choices.
Someone who wants a big house in an HCOL area has to trade off time and energy at work for money in order to afford it. Whereas someone else may make the trade off of living with a roommate in order to have much lower housing costs.
Everything is a trade off, as every decision involves an exchange of some sort between time/money/energy.
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I think in some cases, there is a paid off house implicit in those numbers. Remove rent/mortgage from the equation, and $16,000 goes a lot further.
This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
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Perhaps @ChpBstrd could share if the scenarios in post #53 include or exclude a paid off residence?
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I think in some cases, there is a paid off house implicit in those numbers. Remove rent/mortgage from the equation, and $16,000 goes a lot further.
This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
That's true but I think much of it is also personality based. @Zikoris @2Birds1Stone e and I could probably have zero problems living on a stash of $500k or less even while renting or shared renting. And in many cases that may be our desired state. When I first quit my job (second time ) I thought I'd need about $2000-$3000/month in FIRE. Discovered that with my paid off house and no roommate I could happily live on $1000/month - with about half going to fun discretionary fun stuff like budget travel stuff or any house repairs if needed. Although having a roommate (like I do now) is very helpful financially and it was nice to have a built in house sitter when I travelled. After I sold my house and rented I found I needed more but was still able to live under $1500/month for everything.
Totally. We rent and currently have a net worth of about $420,000, which would give us about $1,400/month for everything That's almost what we spend for two people (excluding overseas travel). For one person, it would be an absolute breeze to live on that.
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I think in some cases, there is a paid off house implicit in those numbers. Remove rent/mortgage from the equation, and $16,000 goes a lot further.
This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
That's true but I think much of it is also personality based. @Zikoris @2Birds1Stone e and I could probably have zero problems living on a stash of $500k or less even while renting or shared renting. And in many cases that may be our desired state.
I'm spending between $1,000-$1300 a month while renting. During my half a year of travel, I was spending somewhere around $100-$400.
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I think in some cases, there is a paid off house implicit in those numbers. Remove rent/mortgage from the equation, and $16,000 goes a lot further.
This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
@ScheaferLight - I am not many, just one, but my net worth is about 500k including real estate. Home equity about 235k, other assets about 265k last time I checked. The "other assets" include pension accounts that could be fairly valued at about 60k more than stated value. I guess you could exclude me for having the equivalent of 560k instead of 500k, but if I "cash in" the pension accounts, I'd have 500k. FIREd about 6 years at this point, though.
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This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
People have a hard time imagining life either up/down a few levels of spending from where they are.
If you spend $100k/year, you can likely imagine what it'd be like to spend $80k or $120k a year. But most people can't fathom spending $40k or $500k a year.
Similarly, if you spend $60k a year, you might imagine spending $50k a year but not be able to imagine what spending $30k or $20k a year looks like. It doesn't mean it's impossible, it means it's impossible to empathize with because it reflects different values/life goals than where your worldview is.
I don't know what the magic percentage is that defines this range of possible empathy. But there definitely is a range of possible empathy. You likely are far enough away from the "can survive on stash of $500k" threshold that you cannot imagine doing so. However, your inability to not imagine it does not mean that it is impossible - which is a common leap that we make. "I can't imagine it to be true, therefore it isn't true" is an oft believed fallacy.
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That's true but I think much of it is also personality based. @Zikoris @2Birds1Stone e and I could probably have zero problems living on a stash of $500k or less even while renting or shared renting. And in many cases that may be our desired state. When I first quit my job (second time ) I thought I'd need about $2000-$3000/month in FIRE. Discovered that with my paid off house and no roommate I could happily live on $1000/month - with about half going to fun discretionary fun stuff like budget travel stuff or any house repairs if needed. Although having a roommate (like I do now) is very helpful financially and it was nice to have a built in house sitter when I travelled. After I sold my house and rented I found I needed more but was still able to live under $1500/month for everything.
ETA: Although I'm buying a small house again soon and roommate is moving in also so I expect my housing expenses to drop quite a bit - probably to zero since roommate's amount will cover everything except future major expenses.
Spot on Spartana.
I'm currently living on less than $18k, while renting in a HCOL area.
Trailing 12 month spending has actually been <$17k all in. The trick was finding a nice 1 bedroom apartment to share with my fiance. We pay $1,100/month including utilities (of which $550 is my half).
This spending also includes vehicle depreciation on a 10 year old sports luxury car, employer subsidized health insurance (ACA plans similar cost at my income).
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Well damn that's awesome! I know you did some serious travel hacking and some couch surfing (and so many forum members have yet to recover ;-)).
Hah! I never ended up needing the official couchsurfing site, but I have slept on many a couch and disturbed many a forumer's routine.
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This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
People have a hard time imagining life either up/down a few levels of spending from where they are.
I knew I would have been better off leaving out that last sentence - the one about retiring on $500k. That's what everyone focused on, and I'm not saying it can't be done. It absolutely can be accomplished, but the point I was trying to make was that in order to do valid comparisons we need to account for the value of paid off residences. Some people have them, and some people don't. If a person says "I'm retiring with a $450k nest egg" but that person also has a paid off $350k house, then that's not nearly as badass as someone who's retiring with a net worth of $500k.
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This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
People have a hard time imagining life either up/down a few levels of spending from where they are.
I knew I would have been better off leaving out that last sentence - the one about retiring on $500k. That's what everyone focused on, and I'm not saying it can't be done. It absolutely can be accomplished, but the point I was trying to make was that in order to do valid comparisons we need to account for the value of paid off residences. Some people have them, and some people don't. If a person says "I'm retiring with a $450k nest egg" but that person also has a paid off $350k house, then that's not nearly as badass as someone who's retiring with a net worth of $500k.
^All true.
I think most of us aren't as far as the numbers appear at first. I woke up thinking about this for some reason, and concluded that my situation is close to OP Chairman5's even though he has $3 million more than I do.
One person's view here, but factors that produce similar safety results with a different net worth number include:
1. Number of people in household
2. HCOL area vs LCOL area
3. Amount of educational spending parents choose
4. Whether the above cause significant tax expenses, especially in retirement
5. Consumer spending
6. Emotional need for safety
OP's original focus in raising his case in other threads was to ask safety questions and express worry about retiring, implying item 6 as his focus. Many of the responses suggested resolving 6 by cutting item 5. To my eye, most of the difference between me (FIREd on 500k or 560k, depending on how you count) and OP (working and worried at $3.5 million net worth) is from 1 through 4.
Roughly, here's how the step ups look to me:
1. OP has spouse and at least 2 kids, so 4 people vs 1. Perhaps 4x more costs.
2. Not sure how much impact from HCOL, but let's guess 40%. Running total, 5.6x net worth needed.
3. Let's say kids cost less than parents because they're small and temporary, but OP chooses substantial education spending, so a wash.
4. At OP's level, taxes have impact. Let's say 25% extra; now 7x is needed.
5. Maybe 15% higher spending on the consumer side...some categories much higher than others, but not all. I waste 15%; OP could be argued to waste 30%, but I think half of that is rational or near-rational purchasing of valuable items. In any case, proportionally no more than a 15% bump. Now we're at 8x.
6. Barring emotional need for safety, it seems to me that OP needs about 8x. His comfort level wants a little more safety, but is financially same. Let's say 12.5% more.
Final result? To achieve the same level of emotional and financial safety I have, OP's choices require about 9x as much net worth. That doesn't mean they're all bad choices. The biggest difference is simply more people in the family, which is a wonderful human thing. But each of the other choices adds to it, so that the outcome requires a hugely different dollar amount. Valuing my stash at 560k (to include fair value of tiny pension account), OP would need about $5 million to achieve my level of safety. Yet he only has $3.5 million! It's no wonder he's hesitant about retiring.
We can discuss details endlessly on how to optimize and what to do. OP or other very high dollar forum members can run the analysis in the other direction, calculating step downs to imagine what 500k FI would be like. But I think that the financial safety and comfort level of posters at very different wealth levels can be much closer than a mere dollar amount would suggest.
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Perhaps @ChpBstrd could share if the scenarios in post #53 include or exclude a paid off residence?
I was assuming no home ownership. In different areas the rent vs buy calculation comes out different, so this is one of the puzzles you get to solve.
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This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
People have a hard time imagining life either up/down a few levels of spending from where they are.
I knew I would have been better off leaving out that last sentence - the one about retiring on $500k. That's what everyone focused on, and I'm not saying it can't be done. It absolutely can be accomplished, but the point I was trying to make was that in order to do valid comparisons we need to account for the value of paid off residences. Some people have them, and some people don't. If a person says "I'm retiring with a $450k nest egg" but that person also has a paid off $350k house, then that's not nearly as badass as someone who's retiring with a net worth of $500k.
^All true.
I think most of us aren't as far as the numbers appear at first. I woke up thinking about this for some reason, and concluded that my situation is close to OP Chairman5's even though he has $3 million more than I do.
One person's view here, but factors that produce similar safety results with a different net worth number include:
1. Number of people in household
2. HCOL area vs LCOL area
3. Amount of educational spending parents choose
4. Whether the above cause significant tax expenses, especially in retirement
5. Consumer spending
6. Emotional need for safety
OP's original focus in raising his case in other threads was to ask safety questions and express worry about retiring, implying item 6 as his focus. Many of the responses suggested resolving 6 by cutting item 5. To my eye, most of the difference between me (FIREd on 500k or 560k, depending on how you count) and OP (working and worried at $3.5 million net worth) is from 1 through 4.
Roughly, here's how the step ups look to me:
1. OP has spouse and at least 2 kids, so 4 people vs 1. Perhaps 4x more costs.
2. Not sure how much impact from HCOL, but let's guess 40%. Running total, 5.6x net worth needed.
3. Let's say kids cost less than parents because they're small and temporary, but OP chooses substantial education spending, so a wash.
4. At OP's level, taxes have impact. Let's say 25% extra; now 7x is needed.
5. Maybe 15% higher spending on the consumer side...some categories much higher than others, but not all. I waste 15%; OP could be argued to waste 30%, but I think half of that is rational or near-rational purchasing of valuable items. In any case, proportionally no more than a 15% bump. Now we're at 8x.
6. Barring emotional need for safety, it seems to me that OP needs about 8x. His comfort level wants a little more safety, but is financially same. Let's say 12.5% more.
Final result? To achieve the same level of emotional and financial safety I have, OP's choices require about 9x as much net worth. That doesn't mean they're all bad choices. The biggest difference is simply more people in the family, which is a wonderful human thing. But each of the other choices adds to it, so that the outcome requires a hugely different dollar amount. Valuing my stash at 560k (to include fair value of tiny pension account), OP would need about $5 million to achieve my level of safety. Yet he only has $3.5 million! It's no wonder he's hesitant about retiring.
We can discuss details endlessly on how to optimize and what to do. OP or other very high dollar forum members can run the analysis in the other direction, calculating step downs to imagine what 500k FI would be like. But I think that the financial safety and comfort level of posters at very different wealth levels can be much closer than a mere dollar amount would suggest.
1. OP has spouse and at least 2 kids, so 4 people vs 1. Perhaps 4x more costs.
It think this is the biggest miss-calculation, I see on this site and it has multiple issues:
a) The cost base is actually more like 6x (so 50% higher) with 2 children for a wide variety of reasons. Obviously, some of these choices are discretionary but this is more the direction you're talking.
b) The emergency fund not only has to be bigger in absolute terms because of the above but also needs to cover a far longer duration (depending on the volatility of employment). E.g. I now run two years of net cash as I work in a volatile industry which could see a significant employment gap if I were cut.
e.g. as a singleton in 20s, worst case in job loss scenario return key on rental property after 1-3 months notice, head to Thailand and live off $1,000 a month whilst having a ball and waiting for improvement in job market.
Compared to as a dad of 2, - mortgage/rent still needs to be paid (probably on a larger property), utilities on larger property, maintenance (as higher proportion will own vs rent), kids clothing costs, kids activities, car payments, school payments etc. Probably more senior and so fewer opportunities for comparable roles to open up (think seniority pyramid).
Again many of the above items sound discretionary, but realistically, few parents are going to turn around and cancel the kids swim lessons at $XYZ/week on day 1 of redundancy... as its kind of a safety/life-skill that does need to be maintained.
Full disclosure, these are optional costs (to some extent) and individual circumstances will dictate an individual approach (if spouse works, income discrepancy between spouses, safety nets, volatility of employment etc.)
For me personally this means that my emergency fund has had to grow 10x over the last decade.
So going back to your original calc which concluded a stash of 9x. If the first assumption is understated by 50% then its actually even higher than that!!
At the risk of sounding patronizing, its almost impossible to comprehend this until you have kids of your own and have been through a recession/downturn in the market.
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One person's basic needs are another person's luxuries.
Perhaps the single most important part of "Mustachianism" is recognizing wants vs needs.
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One person's basic needs are another person's luxuries.
Perhaps the single most important part of "Mustachianism" is recognizing wants vs needs.
100%. And everyone will have a personal view and a tolerance level for what they think is worth sacrificing and in the best interests of their family unit.
For share my experiences, taking swimming lessons as an example, getting children to a point where they are competent and safe in the water is a need. Swim teams and competitive swimming etc.. is a want. This ramps up when the kids are aged 2/3 - 6 really.
Going back to my pre-kid swimming days (lets say me aged 18-35). My entire swim spend for the year would be $0.00 today, with 3 kids under 6 its materially higher than that. This is just a single example of a cost you are unlikely to have thought about prior to having kids (as in the OPs case). I can give you 20-30 examples like this and I'm sure those with kids aged 6-20 can give me plenty more!!
Other examples would be: life insurance ($0 vs $XYZ), cars ($0 vs $XYZ), house size and location (one room in a house share in a less desirable area vs something more costly), TV ($0 - as out enjoying myself, vs $XYZ... as 3 kids 24/7 can be head-wrecking), babysitting/child care costs ($0 vs $XYZ)...
Its obviously a case of each to their own, how much value you want to place on something, want vs need but until you walk that path its hard to appreciate the additional cost pressure. Again - my personal perspective.
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^All that is true but many people with kids who are FIREing with $500k or less and don't own a home are choosing non-traditional lifestyles. Lots of world travellers, full time RVers and sailors here and elsewhere who have retired early and are raising kids without all the middle class trappings of houses, cars, expensive kid hobbies, etc. There are a million stories out there about people who are doing this and there are many forum members here who have posted about doing it. This couple and 3 kids do it on.about $25k/year but there are many who do the same on less. https://www.google.com/amp/s/amp.businessinsider.com/sailing-around-the-world-gifford-family2018-1
Agree, and I also wonder how many of the high-cost expectations are more of a city vs rural thing. Where I grew up, for example, most kids learned to swim for free with friends/family in some outdoor body of water - I learned in a local slow-moving river, and I think my sister learned in a lake? Parents are also a LOT more likely to just send kids outdoors to play versus tv or structured activities. Babysitting costs end once the oldest kid is like, 12, because it's assumed at that point they can keep things under control for a few hours.
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^All that is true but many people with kids who are FIREing with $500k or less and don't own a home are choosing non-traditional lifestyles. Lots of world travellers, full time RVers and sailors here and elsewhere who have retired early and are raising kids without all the middle-class trappings of houses, cars, expensive kid hobbies, etc. There are a million stories out there about people who are doing this and there are many forum members here who have posted about doing it. This couple and 3 kids do it on.about $25k/year but there are many who do the same on less. https://www.google.com/amp/s/amp.businessinsider.com/sailing-around-the-world-gifford-family2018-1
Yes. I think in general, humans are programmed to think of things as "needs" when in fact they are wants. I assume that serves us by allowing us to resign ourselves to those things and not take a hard look at things we strongly want, because we mentally categorize them as needs. It can make things more comfortable (in the shorter term especially), but means we end up living a less-examined life, and that we don't make adjustments that might actually have little to no effect on our quality of life, because we don't see them as option or see changes as possible.
Our lives are, as MMM would say, exploding volcanoes of choices. I think it's okay to look at life and say that paying for kids' sports and college, or a large house, or two cars (or even just one!), or dinners out, or a housekeeper (sorry, Pete!) are important to us and worth extra time spent in the workplace. But we at least need to consider these things and realize they are very much choices, no matter how much the consumer complex wants is to believe otherwise.
People tell themselves these things are needs because it excuses them from the hard mental work of evaluating the expense, and because it assuages any guilt they might have for choosing them. It's much easier to be a victim of world that requires a bedroom per kid (plus a spare for the two weeks a year one has guests!), a new SUV, a $1000 swim club and $1000 club soccer spot, and a gardener; than it is to admit that we *choose* those things.
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The people who are spending 25k or less a year are relying on on government subsidized healthcare. Those of us who are saving enough to pay the for a non-subsidized plan have an additional ~$900 to $1,100 monthly expense. Two couples on this forum can be effectively living the exact same lifestyle with 18k per year in spending, but one couple owns their home and takes advantage of ACA subsidies and the other couple does not:
Couple 1: spending $1500/month (18k per year) during retirement + $900/month assuming they rent + 1000/month for healthcare is spending is spending 41k/yr and needs $1M to retire.
Couple 2: Spends $1500/month, no rent, and negligible healthcare expenses is spending 18k and needs $450K.
Edit:
All this is to say you may look at a 40k/yr budget at $1M in savings and reasonably see how the poster could make their budget work, but this is roughly the same general budget as someone who posts they are taking off with $450k in savings and is going on medicaid and has a paid off home.
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For share my experiences, taking swimming lessons as an example, getting children to a point where they are competent and safe in the water is a need. Swim teams and competitive swimming etc.. is a want. This ramps up when the kids are aged 2/3 - 6 really.
Going back to my pre-kid swimming days (lets say me aged 18-35). My entire swim spend for the year would be $0.00 today, with 3 kids under 6 its materially higher than that. This is just a single example of a cost you are unlikely to have thought about prior to having kids (as in the OPs case). I can give you 20-30 examples like this and I'm sure those with kids aged 6-20 can give me plenty more!!
This is a good example of being able to imagine spend levels near your own but not too many bands outside. To me, swim lessons are not a need, but taking your kids to a pool/lake/etc and teaching them to be comfortable in water and how to not drown is a need. My kid is not a competition level swimmer, but he can jump in and get himself to the side; he can pass the rec pool swim test, and he did it just from practice
Edit: He is 7 and has been swimming short distances for a few years and able to pass the swim test for maybe 1. I expect him to continue to improve with more practice
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^All that is true but many people with kids who are FIREing with $500k or less and don't own a home are choosing non-traditional lifestyles. Lots of world travellers, full time RVers and sailors here and elsewhere who have retired early and are raising kids without all the middle-class trappings of houses, cars, expensive kid hobbies, etc. There are a million stories out there about people who are doing this and there are many forum members here who have posted about doing it. This couple and 3 kids do it on.about $25k/year but there are many who do the same on less. https://www.google.com/amp/s/amp.businessinsider.com/sailing-around-the-world-gifford-family2018-1
Yes. I think in general, humans are programmed to think of things as "needs" when in fact they are wants. I assume that serves us by allowing us to resign ourselves to those things and not take a hard look at things we strongly want, because we mentally categorize them as needs. It can make things more comfortable (in the shorter term especially), but means we end up living a less-examined life, and that we don't make adjustments that might actually have little to no effect on our quality of life, because we don't see them as option or see changes as possible.
Our lives are, as MMM would say, exploding volcanoes of choices. I think it's okay to look at life and say that paying for kids' sports and college, or a large house, or two cars (or even just one!), or dinners out, or a housekeeper (sorry, Pete!) are important to us and worth extra time spent in the workplace. But we at least need to consider these things and realize they are very much choices, no matter how much the consumer complex wants is to believe otherwise.
People tell themselves these things are needs because it excuses them from the hard mental work of evaluating the expense, and because it assuages any guilt they might have for choosing them. It's much easier to be a victim of world that requires a bedroom per kid (plus a spare for the two weeks a year one has guests!), a new SUV, a $1000 swim club and $1000 club soccer spot, and a gardener; than it is to admit that we *choose* those things.
^^^^^
@Villanelle @Zikoris @spartana @index
The entire point the OP makes and that I also suggested is that its extremely difficult to understand the implications and associated costs of children and the trade offs parents need to make around decisions. I only have children under the age of 6. My opinions, views and expectations of costs have changed from when we had a single 2 year old. I'm sure if I was to share my expectations/forecasts for costs for the next decade with someone with college age kids they'd equally laugh on the inside at my naivety.
All the points that you make are very interesting but are philosophical suggestions from you given (I believe) none of you have kids. They are idealistic rather than experienced based.
Again, apologies to simplify it back to the swimming point. Compare it to life insurance. Few get life insurance when they are single as worst case, in death your estate sells the asset, settles the liability and move on. Typically the key catalyst for thinking about life insurance is when there is a/multiple dependents.
Investing in teaching your child to swim - be that financially through lessons, or time by yourself is insurance that if they get stuck in a body of water, with or without you or your supervision then you're increasing the chances of them being "ok"... and you know not dying.
Is it a high probability event... no. Are the consequences if it happens high - yes. So you do what you need to do.
As a parent, you're also trying to do your absolute best every day to do the right thing by your kids. And the reality is no one has a rule book on how to do that. The end result you're targeting is typically well-rounded individuals, with good moral compass, who are healthy and happy. Above and beyond that I'm sure there are needs and wants, but these are the basic targets for most parents. And its a tight-rope on how you get there.
Some of the "extra curricular" activities you suggest 100% are not essential. They are unnecessary. But they are a tool (not the answer, not the only way, and certainly not cost efficient) in increasing social interaction, self-confidence and working towards the goal of making a well rounded individual.
All things being even.... the lowest absolute financial cost to aged 25-30 probably has a massive list of negative's and is probably not the answer (choose your own path). And in the same breath throwing money at kids, their education and lifestyle is obvious to most on here as not the right path either.
The point I'm just making, and trying to bring it back to, is that the OP thought some of the assumptions from younger, childless posters were unrealistic and I would directionally agree.
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For share my experiences, taking swimming lessons as an example, getting children to a point where they are competent and safe in the water is a need. Swim teams and competitive swimming etc.. is a want. This ramps up when the kids are aged 2/3 - 6 really.
Going back to my pre-kid swimming days (lets say me aged 18-35). My entire swim spend for the year would be $0.00 today, with 3 kids under 6 its materially higher than that. This is just a single example of a cost you are unlikely to have thought about prior to having kids (as in the OPs case). I can give you 20-30 examples like this and I'm sure those with kids aged 6-20 can give me plenty more!!
This is a good example of being able to imagine spend levels near your own but not too many bands outside. To me, swim lessons are not a need, but taking your kids to a pool/lake/etc and teaching them to be comfortable in water and how to not drown is a need. My kid is not a competition level swimmer, but he can jump in and get himself to the side; he can pass the rec pool swim test, and he did it just from practice
Edit: He is 7 and has been swimming short distances for a few years and able to pass the swim test for maybe 1. I expect him to continue to improve with more practice
Totally agree with the route that you have taken here. You identify the need and decide to deploy your resources time/money as you see fit.
Different people will assess and priorities differently either due to circumstances e.g. there is a nearby lake or from experience, e.g. a kid in school drowned. Or completely prioritize the risk - I live in a CBD, have more pressing needs on time and/or money and the nearest water body is 5 miles away!
First rule of parent club - everyone is going to do things differently.
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I think it's a bit of a cop-out to say "But you don't have kids!" when we are literally talking about our own experiences as children NOT doing any of those things, or the people we're friends/family with who have kids and don't do those things. I mean, I literally learned how to swim in a river with friends (along with most of my peers), so I think it's a bit of a stretch to say that whether or not I have kids changes how realistic that is.
I know a couple of FIREd families with young kids and I'm pretty sure they don't have life insurance because, you know, they FIREd first then had kids, and have a big enough FIRE stache that it's not really relevant anymore.
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I don't know about the US, but here a lot of parents are paying a lot of money for swimming lessons. We are a tiny landlocked country with no real water to swim in, but the even more absurd part is that swimming is part of regular school curriculum and kids have weekly swimming lessons at school from ages 3 to 8. They keep swimming after that too but they are only awarded swimming "graduation" after 5 years of this. I have no idea what they're doing exactly (my son is only two years into this, I haven't tried checking if he can swim without aids, but I would guess so as he complained that the school was trying to get him killed by taking them off lol). But it is obviously available and it is not a very pressing need as there is literally nowhere where a kid could come across a body of water and end up in it. And yet there are long waiting lists for private swimming lessons. I don't get it.
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I know a couple of FIREd families with young kids and I'm pretty sure they don't have life insurance because, you know, they FIREd first then had kids, and have a big enough FIRE stache that it's not really relevant anymore.
Again, its everyone's own prerogative to review the risks that they see to their individual or family unit and decide what level of probability they want to ascribe to different scenarios and assess the impact of those outcomes.
I can only speak from my personal experience, but I would suggest that the risk tolerance for most reduces when they have children/dependents. Another way to put that it is the buffer I want to have need to increase.
Separately, the other comment I made is that for the lifestyle I wanted to pursue for my children, I personally underestimated the costs associated with that. 100% this is not a lean fire route (because that is not the path I or my wife want to follow for our family) but my experience would suggest that whatever route I had chosen from "lean" to "obese" my cost assumptions probably would have been incorrect. Most of my friends with kids are in a similar boat.
I'm just sharing my experiences and view point. This doesn't mean that there aren't others.
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I don't know about the US, but here a lot of parents are paying a lot of money for swimming lessons. We are a tiny landlocked country with no real water to swim in, but the even more absurd part is that swimming is part of regular school curriculum and kids have weekly swimming lessons at school from ages 3 to 8. They keep swimming after that too but they are only awarded swimming "graduation" after 5 years of this. I have no idea what they're doing exactly (my son is only two years into this, I haven't tried checking if he can swim without aids, but I would guess so as he complained that the school was trying to get him killed by taking them off lol). But it is obviously available and it is not a very pressing need as there is literally nowhere where a kid could come across a body of water and end up in it. And yet there are long waiting lists for private swimming lessons. I don't get it.
I'm really sorry if I've directed this towards a swimming orientated discussion. That wasn't my intention, I was just trying to use it as an illustrative example. Where we are in the US, swimming is not part of the young years curriculum nor is it in the UK. Some school systems may vary.
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I know a couple of FIREd families with young kids and I'm pretty sure they don't have life insurance because, you know, they FIREd first then had kids, and have a big enough FIRE stache that it's not really relevant anymore.
Again, its everyone's own prerogative to review the risks that they see to their individual or family unit and decide what level of probability they want to ascribe to different scenarios and assess the impact of those outcomes.
I can only speak from my personal experience, but I would suggest that the risk tolerance for most reduces when they have children/dependents. Another way to put that it is the buffer I want to have need to increase.
Separately, the other comment I made is that for the lifestyle I wanted to pursue for my children, I personally underestimated the costs associated with that. 100% this is not a lean fire route (because that is not the path I or my wife want to follow for our family) but my experience would suggest that whatever route I had chosen from "lean" to "obese" my cost assumptions probably would have been incorrect. Most of my friends with kids are in a similar boat.
I'm just sharing my experiences and view point. This doesn't mean that there aren't others.
I do agree with you on this. While I do have a 7 year old, I also have a 14 year old, and they can easily get more expensive as they get older. I do not want to live lean now as I want to give them opportunities. However, I do realize what is a want vs need vs true luxury (swim lessons/learn to swim/swim team). I understand costs with kids, but I will be 37 when my oldest graduates. Not everyone planning to fire by early 40s is ignorant in regards to the costs associated with kids
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I don't think the fundamental point here is whether childless people are unable to understand what it's like to be a parent. The Original Post featured someone with $3.5M and a couple of kids asking whether people who retired on 500k were planning to move back in with their parents. The issue is whether the parent with the expensive lifestyle is correct in his assumption that people with a smaller stash will fail because 500k is naive.
I would argue the naivete here is more on the part of OP, and anyone else who doesn't look closely enough at the plans and lives of the people with net worths or net worth targets in the 400k-700k range. As other posters have pointed out, lots of people on this board have net worths in that range, and are quite unlikely to ever "move back in with their parents." Poster after poster has journals, case studies and personal experience documenting their stability, careful planning and success. In this forum, it's on the person who spends a lot to understand the lifestyle of the person with a smaller stash or thriftier way of living.
TL;DR - There's a difference between "realistic" and "realistic for you."
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1. OP has spouse and at least 2 kids, so 4 people vs 1. Perhaps 4x more costs.
It think this is the biggest miss-calculation, I see on this site and it has multiple issues:
a) The cost base is actually more like 6x (so 50% higher) with 2 children for a wide variety of reasons. Obviously, some of these choices are discretionary but this is more the direction you're talking.
b) The emergency fund not only has to be bigger in absolute terms because of the above but also needs to cover a far longer duration (depending on the volatility of employment). E.g. I now run two years of net cash as I work in a volatile industry which could see a significant employment gap if I were cut.
[/quote]
If you go back to the original point I was highlighting that for most people I know, the expenditure line is materially higher as a family than as a singleton/couple in their late 20s. e.g the assumption in the example of the budget for a family of four is 2x the cost of a couple. This is an assumption I see on this site a lot and in my personal opinion is incorrect.
If I look at our costs from when we were in our late 20s as a couple vs today, they have more than doubled.
I'm looking at this though the lens of a male, with a wife who has transitioned to the role of homemaker (with no family near by)
I would be interested to hear from other parents as to how their expenditure patterns have changed from their pre-kids days to having 2+ children +5 years old. e.g not with a single newborn who essentially have their pre-kid lifestyle and home set up but have a baby in their room (which we did for the first 2 years).
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1. OP has spouse and at least 2 kids, so 4 people vs 1. Perhaps 4x more costs.
It think this is the biggest miss-calculation, I see on this site and it has multiple issues:
a) The cost base is actually more like 6x (so 50% higher) with 2 children for a wide variety of reasons. Obviously, some of these choices are discretionary but this is more the direction you're talking.
b) The emergency fund not only has to be bigger in absolute terms because of the above but also needs to cover a far longer duration (depending on the volatility of employment). E.g. I now run two years of net cash as I work in a volatile industry which could see a significant employment gap if I were cut.
If you go back to the original point I was highlighting that for most people I know, the expenditure line is materially higher as a family than as a singleton/couple in their late 20s. e.g the assumption in the example of the budget for a family of four is 2x the cost of a couple. This is an assumption I see on this site a lot and in my personal opinion is incorrect.
If I look at our costs from when we were in our late 20s as a couple vs today, they have more than doubled.
I'm looking at this though the lens of a male, with a wife who has transitioned to the role of homemaker (with no family near by)
I would be interested to hear from other parents as to how their expenditure patterns have changed from their pre-kids days to having 2+ children +5 years old. e.g not with a single newborn who essentially have their pre-kid lifestyle and home set up but have a baby in their room (which we did for the first 2 years).
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Not sure what is happening here with the quotes
If your expenses more than double when you add kids, you're doing it wrong (TIC). Housing should not more than double. Transportation should not more than double. Food should not more than double. Looking at the expectations, poverty lines do not double from 1 to 2 or 2 to 4. USDA monthly food charts actually show a reduction in each person's additional cost as you add more. There are new line items that would not exist without children, but they for sure are not large enough to more than double pre-kid costs.
Edit: You also have to consider the tax savings with kids. I didn't take it into consideration when saying the above, but compare tax liability with and without kids and reduce their costs by the difference
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First rule of parent club - everyone is going to do things differently.
I thought the first rule of parent club was "you can do anything you want as a parent, but my way is the Correct and Right way and I will judge you mercilessly?"
Anyways plenty of people raise families on $40k a year and are not FIRE. The idea that kids have to be dramatically expensive is one of the most "keeping up with the Jones's" things that exists in American middle class culture. There is a long list of social pressures for parents of children now. So many "wants" have become de facto needs.
The reality is that almost all children will be better off with parents who are engaged in their lives rather than parents trying to mash them into a mold of "successful children." FIRE enables parents to expend a considerably larger amount of time in things that matter - engaging with their children and dedicating time to their lives.
I had a ton of extracirricular activities when I was a kid. I would have traded all of them for having two parents who were more actively interested/involved in my life. YMMV.
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1. OP has spouse and at least 2 kids, so 4 people vs 1. Perhaps 4x more costs.
It think this is the biggest miss-calculation, I see on this site and it has multiple issues:
a) The cost base is actually more like 6x (so 50% higher) with 2 children for a wide variety of reasons. Obviously, some of these choices are discretionary but this is more the direction you're talking.
b) The emergency fund not only has to be bigger in absolute terms because of the above but also needs to cover a far longer duration (depending on the volatility of employment). E.g. I now run two years of net cash as I work in a volatile industry which could see a significant employment gap if I were cut.
If you go back to the original point I was highlighting that for most people I know, the expenditure line is materially higher as a family than as a singleton/couple in their late 20s. e.g the assumption in the example of the budget for a family of four is 2x the cost of a couple. This is an assumption I see on this site a lot and in my personal opinion is incorrect.
If I look at our costs from when we were in our late 20s as a couple vs today, they have more than doubled.
I'm looking at this though the lens of a male, with a wife who has transitioned to the role of homemaker (with no family near by)
I would be interested to hear from other parents as to how their expenditure patterns have changed from their pre-kids days to having 2+ children +5 years old. e.g not with a single newborn who essentially have their pre-kid lifestyle and home set up but have a baby in their room (which we did for the first 2 years).
Not sure what is happening here with the quotes
If your expenses more than double when you add kids, you're doing it wrong (TIC). Housing should not more than double. Transportation should not more than double. Food should not more than double. Looking at the expectations, poverty lines do not double from 1 to 2 or 2 to 4. USDA monthly food charts actually show a reduction in each person's additional cost as you add more. There are new line items that would not exist without children, but they for sure are not large enough to more than double pre-kid costs.
Edit: You also have to consider the tax savings with kids. I didn't take it into consideration when saying the above, but compare tax liability with and without kids and reduce their costs by the difference
[/quote]
I suppose it all depends what your base is pre-kids.
An example would be, at the end of the day if you rent a room and live in a shared house (4 rooms) in an undesirable part of town (which is fine since you're out 16-18 hours a day) in order to keep rent low and maximise your saving rate through your 20s - say at $500/month, it's really not difficult to imagine a scenario where you ultimately move to a generally safer part of the city, with better public schools, and get something more than a single room.
Running some super simple math:
Pre-kid rent: $6,000pa.
Pre kid Utilities (shared house) = $400pm /4 = $100pm = $1,200pa
Post kid:
Buy House: $250k
Mortgage interest = $625/month = $7,500pa
Mortgage capital (non-optional savings) = $560pm / $6,700pa
Total mortgage = $14,200pa
Property tax (1-2%) = $2,500-5,000pa
Maintenance (~1%) = $2,500pa.
Property tax/maintenance costs = $5,000-7,500
Utilities = $400pm = $4,800pa
So just using the above:
Pre kid = $7,200pa
Post Kid = $24,000 - 26,500pa or $12,000 - 13,250pa if you say 50:50 split between parents.
So best case you could argue that there is a 66% increase in housing costs, but it could be significantly more should the household go to a single income (again by choice). Through that lens, the costs go from $7,200pa pre-kids to a scenario of $26,500pa. You can decide how you want to treat the mortgage capital.
You can obviously nuance the costs with taxes, property price structures etc. but equally on the other side would be furniture costs for a full house etc. (I literally spent $500 on furniture total aged 20 to 30).
You talk about transport costs not doubling, but if you go from having close to zero costs through walking or cycling pre-kids anything other than taking those options is an additional line item or cost. There are obviously examples where people have two kids and no cars... but I'd suggest that's the exception rather than the rule (even among the MMM community) and so you're realistically in for $2-3k per year on there when you take into account car cost ($500-1,000pa), Maintenance ($400), Insurance ($1,000) and fuel ($600). Then add in kids car seats etc. is it safe? What is the opportunity cost in your life if its not reliable?
Again, there are some who will live with no car - your call but I would say the bar to owning a car with kids moves lower.
The key metric of comparison to a degree, and as highlighted above is what is your pre-kid baseline and how does that inflate (or not) post kids? Obviously if the person was renting a $3,000pm apartment downtown with their partner pre-kids then they'll probably be able to find something for a similar cost albeit in a different location. If you had a car (of some sort) pre kids then any differential will be negligible.
There was a poster higher up the thread who talked about our ability to only think one or two bands outside of our situation. And I think that this is a fantastic point. Certainly one I'm sure I'm guilty of. I don't reference poverty line charts as tbh (rightly/or wrongly) they're not a benchmark I want to measure against - that's my choice.
It's also worth noting and contextualizing all of the above in that the buffer and savings rate needs to be taken into account and again returns to that point of "operating bands". if when you take all of the above into account and it moves your savings rate from 70% to 60% then its more debatable than if if it takes your savings rate from 40% to 10%.
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You seem completely convinced that having kids dramatically increases spending.
That's fine. But stop trying to act like everything increases when you have kids. Plenty of people have kids and don't dramatically increase their standard of living.
I have a friend with two kids who bikes almost everywhere still. In your world, this is an impossible reality. That's fine. But again, this doesn't mean that it is a requirement to having kids. For you? sure. But not everyone.
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You seem completely convinced that having kids dramatically increases spending.
That's fine. But stop trying to act like everything increases when you have kids. Plenty of people have kids and don't dramatically increase their standard of living.
I have a friend with two kids who bikes almost everywhere still. In your world, this is an impossible reality. That's fine. But again, this doesn't mean that it is a requirement to having kids. For you? sure. But not everyone.
I literally said "Again, there are some who will live with no car - your call but I would say the bar to owning a car with kids moves lower". This is totally a trade off you can decide to make and a world I can fathom. I'm just saying the benefits to having a car when you have kids are probably more plentiful. This is certainly the case for myself when for instance.
Just simplistically going anywhere.. there's the option to throw everyone in the car for a fixed cost or by 5x tickets for planes/trains/buses delete as appropriate.
... Feel free to come back in a couple of years and share your personal insights.... when you have a couple of kids that are school age.
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It's funny seeing someone cherry pick numbers to prove a point.
No one is going from living in a $500/month rented room to buying a quarter million dollar house because, *children*.
If anyone reads here, or somewhere like Bogleheads regularly, you can see that on both ends of the spending spectrum, kids are not that expensive unless you make it so on purpose. The notion that going from DINKS to a family of 4 suddenly doubles your costs is silly, but you could inflate your lifestyle 10x and make any excuse for you that you would like.
@ontheway2, you make some great points. People just suck at life, and if you outsource your entire life, then yes.....kids are expensive. You can always give them away.
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yeah, I guess I'm just a naive child-free person, but you are never going to convince me that paying for swim lessons is a need. I can see why you'd strongly recommend it, and I certainly wouldn't judge or condemn the choice. But I can't see how any definition of the word" need" really applies. If they need to swim in order to be safe (and even that is an "if" that should be considered), then there are free options. There are millions of American kids who never had swim lessons, many (most?) of whom learned to swim.
I feel like your insistence that things like this are needs instead of wants just proves my earlier point. People frame things as needs because then they don't have to consider that they are making a choice to do them, at the expense of something else. It's how people end up saying that it's impossible to save, or to save more than a minimal amount. Because their kids need separate bedrooms. And swim lessons. And new (not used) shoes. And paid-for college. And a room full of toys. And...
I'm not arguing that kids don't increase expenses. Of course they do. Of course there are *true* needs to cover, like foods and medicine and basic clothing. And of course, there are going to be wants that are provided for kids, just as we all provide for wants for ourselves. I'm not judging paying for things your kids want (or you want for your kids). But yeah, I see people claiming they "need" things that they pretty demonstrably don't is intellectual dishonesty that I will call out.
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It's also worth pointing out that Mr. Money Mustache's phrase from his blog is, "financial freedom through badassity."
And that they don't spend all that much more now that their kid is older than when they had a baby..
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@BostonBrit, when quoting, it looks like you're pasting the begin quote tag but not the end quote tag, or vice versa. Just make sure that you include both of the tags that include the word "quote" and your quotes should work.
The begin quote tag is in square brackets and starts with the phrase "quote author" followed by an equals sign and a user's name.
The end quote tag is also in square brackets and contains only a slash mark followed by the word "quote".
PS. It sounds like your case is one where you had a very frugal single lifestyle but don't feel comfortable maintaining similar details with kids. So you went from carless to paying for a car because kids. The cost logic you describe follows in that case, but many people don't have that case.
For example, I have a car and no children. At 50something, I'm not likely to add a child, but if I did, the extra vehicle cost would be zero. You can see from my example that not all cases would have more-than-100% ratio of cost to family size. Many forum members here do experience a cost per child that is less than the cost per parent was during single life. I congratulate you on your thrifty single life.
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Just simplistically going anywhere.. there's the option to throw everyone in the car for a fixed cost or by 5x tickets for planes/trains/buses delete as appropriate.
And there are cargo bikes or bike trailers that can be used to transport one or more kids. There are quadricycles - with electric assist - that also can be used.
There are lots of ways to do things that don't involve "the normal way".
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Just simplistically going anywhere.. there's the option to throw everyone in the car for a fixed cost or by 5x tickets for planes/trains/buses delete as appropriate.
And there are cargo bikes or bike trailers that can be used to transport one or more kids. There are quadricycles - with electric assist - that also can be used.
There are lots of ways to do things that don't involve "the normal way".
A) non of which you would buy unless you had kids - so an extra cost. Debate how much more.
B) can be somewhat seasonal in their use
C) have their limits - time, weather, range.
For context depending on where I lived in the world I would have periods with cars and equally periods when it was more convenient (and cheaper not to have cars); e.g living in Manhattan, central London etc.
I fully hear you that you don’t need to follow the herd and the “normal way” which is why most our engaged in The FIRE movement and MMM, but at the same time it is also worth acknowledging that there are many luxuries/wants that can be quite useful - e.g. a car to transport two parents from boston to all Montreal for an incremental cost of $80 return in gas rather than having to pack with precision, get to an airport and drag everyone through security, leave at a certain time etc. vs just jumping in the car.
Or alternatively, a house cleaner. I’d be surprised if anyone on MMM would pay $250/week to a cleaner but there is certainly a point where everyone would - and the “normal way is pretty appealing and you’d see value in that transaction- say if it was $5 week.
My personal decision isn’t to try and follow or equally not follow the herd at all costs. It’s simply to do why I (and my wife) feel is the best value proposition for our family. This is fluid and at times of deep stress we would be the first to use “normal” help options for a short duration (e.g illness in the extended family), but equally would shun “normal” options if we thought it was a poor use of resources (time/money) or if we thought there was a more holistic lesson for our kids.
Again the goal isn’t to purposely “not follow the crowd”.
Choose your own path.
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And of course why even buy a house when you have a kid? A 2 bedroom apt doesn't seem to cost that much more than a 1 bedroom. Especially if you are retired and can move somewhere inexpensive without having to worry about job opportunities. What you pay in prop tax, insurances, maintenance and repair, extra utilities and investment opportunity costs to buy a house would probably cover a large portion of your monthly rental costs. In hindsight I would have been better off renting but I had pets (the fur kids ;-)) and its a lot harder (and often more expensive) to find rentals with multiple pets than kids.
Again, the point I come back to is that every parent is trying to stumble along and make the right call for their children. Not trying to choose a predetermined path and ultimately thread the needle and try and create a well rounded individual and provide a safe, stable environment for them to grow in.
Everything that you say is A PATH and whilst it may make the most financial sense and get you personally to FIRE quickly, it would contain trade offs and compromises which parents may not believe is in the best interests of their family unit.
Certainly what is generally in the back of my mind when making decisions as a parent come back to risk.
At a macro level, you’re trying to make decisions that minimize the chances of screwing your kid up in the long run (and to be super clear this has nothing to do with your suggested path... as I say pros and cons).
At the micro level, it probably makes you err on the side of caution. E.g see my comment on emergency fund cash size (in order to prevent disruptions to the stability of the kids environment). An even more micro example would be picking an airbnb, ultimately the scenario of picking somewhere in a rough part of town, a dodgy street, or that is in a filthy condition is a lot more manageable when your just dealing with yourself coming off a jet lagged flight, rather than when you’re dragging along a clan of 5 (and in our case under 6) who are frazzled and understandably don’t grasp the concept of jet lag. In that scenario, you probably err on the side of caution and pay slightly more to eradicate some of the risks. (On top of having to get a bigger place).
EVERYONE will take a slightly different path and it’s your prerogative, and it’s everyone's natural bias to have their individual circumstances and experiences shape their decision making process. (Eg living away from family, long term illness disability, childhood experiences - wanting the opposite or exactly the same, moral priorities).
Whilst other of the above I would imagine is not that controversial, I truly believe that until you have kids it’s difficult to really understand the impact it has on your decision making process... with cost base being one (but not the only measure).
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So when I was 27 I was making good money, going to bars, having fun; no kids.
Then I got married an adopted a 5 y/o. Sure, some costs increased. Instead of buying one t-shirt (for me); I bought 2 (for me and kid.) T-short budget: Doubled.
The other things didn't. Kid got cold easy, so A/C in the summer went to 78. Money saved.
Sure, kids cost money. They need stuff. I need stuff. I need my basic needs fulfilled. So do they. Anything above that is a luxury. However, the definition of basic needs seems subjective.
OP is much older than I am and has a much difference life experience that I have had so far. I heard a lecture by Chuck Underwood about generational differences and it was the highlight of an event I attended over the summer. I think it honestly made me understand other people more. This MMM blog here is really interesting because we have some serious generational gaps, different life experiences, different multi-cultural experiences, among other things. I think most friction in threads is probably a result of one or more of those.
Anyways, long bullshit post to say: PTF
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I suppose it all depends what your base is pre-kids.
An example would be, at the end of the day if you rent a room and live in a shared house (4 rooms) in an undesirable part of town (which is fine since you're out 16-18 hours a day) in order to keep rent low and maximise your saving rate through your 20s - say at $500/month, it's really not difficult to imagine a scenario where you ultimately move to a generally safer part of the city, with better public schools, and get something more than a single room.
Running some super simple math:
Pre-kid rent: $6,000pa.
Pre kid Utilities (shared house) = $400pm /4 = $100pm = $1,200pa
Post kid:
Buy House: $250k
Mortgage interest = $625/month = $7,500pa
Mortgage capital (non-optional savings) = $560pm / $6,700pa
Total mortgage = $14,200pa
Property tax (1-2%) = $2,500-5,000pa
Maintenance (~1%) = $2,500pa.
Property tax/maintenance costs = $5,000-7,500
Utilities = $400pm = $4,800pa
So just using the above:
Pre kid = $7,200pa
Post Kid = $24,000 - 26,500pa or $12,000 - 13,250pa if you say 50:50 split between parents.
So best case you could argue that there is a 66% increase in housing costs, but it could be significantly more should the household go to a single income (again by choice). Through that lens, the costs go from $7,200pa pre-kids to a scenario of $26,500pa. You can decide how you want to treat the mortgage capital.
You can obviously nuance the costs with taxes, property price structures etc. but equally on the other side would be furniture costs for a full house etc. (I literally spent $500 on furniture total aged 20 to 30).
You talk about transport costs not doubling, but if you go from having close to zero costs through walking or cycling pre-kids anything other than taking those options is an additional line item or cost. There are obviously examples where people have two kids and no cars... but I'd suggest that's the exception rather than the rule (even among the MMM community) and so you're realistically in for $2-3k per year on there when you take into account car cost ($500-1,000pa), Maintenance ($400), Insurance ($1,000) and fuel ($600). Then add in kids car seats etc. is it safe? What is the opportunity cost in your life if its not reliable?
Again, there are some who will live with no car - your call but I would say the bar to owning a car with kids moves lower.
The key metric of comparison to a degree, and as highlighted above is what is your pre-kid baseline and how does that inflate (or not) post kids? Obviously if the person was renting a $3,000pm apartment downtown with their partner pre-kids then they'll probably be able to find something for a similar cost albeit in a different location. If you had a car (of some sort) pre kids then any differential will be negligible.
There was a poster higher up the thread who talked about our ability to only think one or two bands outside of our situation. And I think that this is a fantastic point. Certainly one I'm sure I'm guilty of. I don't reference poverty line charts as tbh (rightly/or wrongly) they're not a benchmark I want to measure against - that's my choice.
It's also worth noting and contextualizing all of the above in that the buffer and savings rate needs to be taken into account and again returns to that point of "operating bands". if when you take all of the above into account and it moves your savings rate from 70% to 60% then its more debatable than if if it takes your savings rate from 40% to 10%.
When I say more than double from 2 to 4 people, I am using your example of 1 person to 4 costing 6x and not 4x or less.
The housing costs seem inflated as interest would run closer to 6k. More than half of the states have median property taxes of less than 1% and none hit 2%, so that number is inflated. You can't include principal payments as "non-optional savings" and also reference it as an expense and not savings.
For your 6x to be accurate, a pre-kid PP annual housing cost would have to be ~$2550. This is also assuming there is a need to go from a shared house to a 250k house and not an apartment.
I don't live in an area where one could reasonably live without a car at all, so I did not think about near zero transportation costs. It seems if a person could get by without a car pre kids, they could do it with a kid though. If someone did have a beater pre-kids, the costs of some additional driving would not double the costs when taking into account the fact that liability insurance and registration were already being paid.
The point of referencing poverty line charts is there is a basic shelter need, and increased costs with adding more people do not double when going from one to two or from 2 to 4. I'm not debating whether you would want to line on 12k as a single person or 25k for 4. The same increase holds true when you look at 200% FPL, 400% FPL, etc.
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I suppose it all depends what your base is pre-kids.
An example would be, at the end of the day if you rent a room and live in a shared house (4 rooms) in an undesirable part of town (which is fine since you're out 16-18 hours a day) in order to keep rent low and maximise your saving rate through your 20s - say at $500/month, it's really not difficult to imagine a scenario where you ultimately move to a generally safer part of the city, with better public schools, and get something more than a single room.
Running some super simple math:
Pre-kid rent: $6,000pa.
Pre kid Utilities (shared house) = $400pm /4 = $100pm = $1,200pa
Post kid:
Buy House: $250k
Mortgage interest = $625/month = $7,500pa
Mortgage capital (non-optional savings) = $560pm / $6,700pa
Total mortgage = $14,200pa
Property tax (1-2%) = $2,500-5,000pa
Maintenance (~1%) = $2,500pa.
Property tax/maintenance costs = $5,000-7,500
Utilities = $400pm = $4,800pa
So just using the above:
Pre kid = $7,200pa
Post Kid = $24,000 - 26,500pa or $12,000 - 13,250pa if you say 50:50 split between parents.
So best case you could argue that there is a 66% increase in housing costs, but it could be significantly more should the household go to a single income (again by choice). Through that lens, the costs go from $7,200pa pre-kids to a scenario of $26,500pa. You can decide how you want to treat the mortgage capital.
You can obviously nuance the costs with taxes, property price structures etc. but equally on the other side would be furniture costs for a full house etc. (I literally spent $500 on furniture total aged 20 to 30).
You talk about transport costs not doubling, but if you go from having close to zero costs through walking or cycling pre-kids anything other than taking those options is an additional line item or cost. There are obviously examples where people have two kids and no cars... but I'd suggest that's the exception rather than the rule (even among the MMM community) and so you're realistically in for $2-3k per year on there when you take into account car cost ($500-1,000pa), Maintenance ($400), Insurance ($1,000) and fuel ($600). Then add in kids car seats etc. is it safe? What is the opportunity cost in your life if its not reliable?
Again, there are some who will live with no car - your call but I would say the bar to owning a car with kids moves lower.
The key metric of comparison to a degree, and as highlighted above is what is your pre-kid baseline and how does that inflate (or not) post kids? Obviously if the person was renting a $3,000pm apartment downtown with their partner pre-kids then they'll probably be able to find something for a similar cost albeit in a different location. If you had a car (of some sort) pre kids then any differential will be negligible.
There was a poster higher up the thread who talked about our ability to only think one or two bands outside of our situation. And I think that this is a fantastic point. Certainly one I'm sure I'm guilty of. I don't reference poverty line charts as tbh (rightly/or wrongly) they're not a benchmark I want to measure against - that's my choice.
It's also worth noting and contextualizing all of the above in that the buffer and savings rate needs to be taken into account and again returns to that point of "operating bands". if when you take all of the above into account and it moves your savings rate from 70% to 60% then its more debatable than if if it takes your savings rate from 40% to 10%.
When I say more than double from 2 to 4 people, I am using your example of 1 person to 4 costing 6x and not 4x or less.
The housing costs seem inflated as interest would run closer to 6k. More than half of the states have median property taxes of less than 1% and none hit 2%, so that number is inflated. You can't include principal payments as "non-optional savings" and also reference it as an expense and not savings.
For your 6x to be accurate, a pre-kid PP annual housing cost would have to be ~$2550. This is also assuming there is a need to go from a shared house to a 250k house and not an apartment.
I don't live in an area where one could reasonably live without a car at all, so I did not think about near zero transportation costs. It seems if a person could get by without a car pre kids, they could do it with a kid though. If someone did have a beater pre-kids, the costs of some additional driving would not double the costs when taking into account the fact that liability insurance and registration were already being paid.
The point of referencing poverty line charts is there is a basic shelter need, and increased costs with adding more people do not double when going from one to two or from 2 to 4. I'm not debating whether you would want to line on 12k as a single person or 25k for 4. The same increase holds true when you look at 200% FPL, 400% FPL, etc.
Mate, I was purely just trying to through around some broad illustrative figures (e.g. using a 3% interest rate on the mortgage, using the full $250k to take out a structuring debate). My personal circumstances are drastically different to this but that's irrelevant.
The key point I was trying to stress, is that in my opinion, most peoples ability to make sacrifice and compromise decreases with the introduction of kids. In my eyes the friction and debate goes hand-in-hand with the core ethos of MMM and equally the challenge of going along with traditional convention and keeping up with the Jones'.
This doesn't mean that sacrifices can't be made but certainly the threshold for sacrifice/compromise/inconvenience is higher in what I'm willing to tolerate for myself, vs what I would ask of my wife and even more so of my kids.
This is not to say there's a blank check and budgets get thrown out of the window... its simply a case of responsibility, trying to generate the best outcome, and minimize the potential for negative outcomes.
Others will make different choices and have a different view; that's totally fine.
I think there are a plethora of examples through the forum that show people willing to move across the country/globally for higher incomes and this was certainly a path that I chose. With a partner and then increasingly so with kids, the ability and desire to make these type of moves decreases. That's because I believe that there is a value to stability and not moving kids around. Its why I carry a larger emergency fund in order to reduce volatility day-to-day.... the FIRE spreadsheet doesn't like these decisions and of course they need to be kept in check and a reasonableness and materiality applied. And heck to be clear, of course there is a figure we would move across the world for... but that figure is measurably higher once kids are in the school systems and settled etc. and perhaps you have to pass on those opportunities.
Again, we will all prioritize, apply materiality and chose the path that we think best for our family units. The weighting of these priorities moves around depending on where you and your family are in holistic terms in life too.
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With kids: What are your college thoughts? Or is the plan to boot the little F'ers out when they turn 18 to fend for themselves?
What about your parents and your spouse's parents? As they age, if they need some financial help, would you help? Or maybe the plan is "F you, you didn't save so maybe you just need to find a nice Maytag box".
And remember the the magical 4% is not for eternity. It's for 30 years.
I think there are some here who do plan carefully and others who hand pick their "facts" and think "whoo hoo...I can retire and live like a hobo hipster on $3 a day forever".
Okey dokey.
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Our house or cars didn't change when we had kids. Yes as teens the 3 boys ate a lot. We also wanted to provide them with some experiences so they each had a sport that they played and there are costs for equipment, travel, etc. They all took swim lessons because to me that is a basic safety issue. It was easier to be frugal when they were small and during the teen years a good haircut and new clothes were important to them. I don't mean designer clothes either. In there teens they had part time jobs to pay for some of the extras they wanted. But since my kids range from 38-46 many of the things that we have now that cost money were not available back then. So I think there is a middle ground between kids are super expensive and they don't really cost much.
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With kids: What are your college thoughts? Or is the plan to boot the little F'ers out when they turn 18 to fend for themselves?
What about your parents and your spouse's parents? As they age, if they need some financial help, would you help? Or maybe the plan is "F you, you didn't save so maybe you just need to find a nice Maytag box".
And remember the the magical 4% is not for eternity. It's for 30 years.
I think there are some here who do plan carefully and others who hand pick their "facts" and think "whoo hoo...I can retire and live like a hobo hipster on $3 a day forever".
Okey dokey.
I don't think there's anything inherently wrong with expecting your kids to take care of themselves once they're legal adults, provided you raised them that way - i.e. they have basic life skills, work experience/references obtained during high school, and grew up aware that they would not receive financial support forever. It's shitty to spring it on them at the last minute without the advance preparation though, or introduce surprise strings at the last minute (my boyfriend's parents did this to him - it turns out his education fund was limited to specific parent-approved study, which he didn't know ahead of time).
Nobody is getting financial aid from us, ever. I would help someone make a budget and research programs they qualify for, and give them unlimited frugal advice for reducing any expense they had.
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I think it's unrealistic to expect your kids to be self supporting at 18. Jobs do not pay well without an education which was very different when I was young. My kids could live at home and attend college, go to a technical school or get a job and live at home to save up money, etc. My 3 boys boomeranged for a while before finally launching.
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I think it's unrealistic to expect your kids to be self supporting at 18. Jobs do not pay well without an education which was very different when I was young. My kids could live at home and attend college, go to a technical school or get a job and live at home to save up money, etc. My 3 boys boomeranged for a while before finally launching.
It's not some horrible fate to not have a great paying job immediately. Learn to budget, get some roommates, and cook your meals. It can be a great learning experience and teach you all kinds of kick-ass self-reliance skills that serve you well throughout your entire life.
This is another funny example of something being called "unrealistic" when I've literally done it myself (and not like 30 years ago or whatever).
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Well, it's easy for me to say this as I don't have kids, but if we had, I would consider helping them out with a part of their tuition/books if we could afford it, but if we couldn't, it's not something to feel guilty about.
Our parents didn't help us much after 18 - in fact my partner significantly supported his mother throughout highschool - and we turned out fine, and what we missed most of all was guidance, not money. We learned pretty quickly where and how to get money.
I have to say I'm from a European country where college costs are maybe $4k + living expenses so (but from this forum I know there are many ways to get an affordable education in the US). I would allow a college student child to live at home rent-free for as long as they studied. I lived at home the first two years of college and paid my parents €50/week in rent, which is fair.
I am not planning to ever financially support my parents. They will all get social security + some pensions, none of them will be in poverty. Some are planning ahead more than others but I don't think any of my parents/in-laws expect financial help from us.
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New to FI mentality/strategy, new to forum - very happy to be here!
Keeping with original theme 'are some expectations here naive/unrealistic' I did want to pose the following question to the group. Let's assume we are comfortable with the 4% rule for simplicity, let's assume early retiree requires $24,000 inflation/adjusted dollars to live on in perpetuity for remainder of their life - a 'stache' of $600,000. Let's break-down this theoretical $600,000 as far as investment types (similar to what I've seen in many case studies). Again, for simplicity sake, let's say this early retiree rents (ie no real estate factored into net worth). Now this early retiree has $100,000 in Roth, $300,000 401k, with $48,000 cash (to rideout a recession, probably excessive for many on this forum but let's just go with it) and the remaining $152,000 in post-tax index funds. This early retiree wants to start their FIRE journey at 35 years old.
My understanding was that the order of operations is to withdraw from your non-tax advantaged accounts (ie the $200,000 between cash and index funds) until retirement age to avoid the penalties of early withdrawals. Forgive my admittedly ignorant financial knowledge at this time, but are there strategies to avoid these penalties and access 4% of the $600,000 immediately for FIRE in perpetuity? Or is the financial bridge to retirement age not long enough to get this individual there? Ie to get $24,000 out of $200,000 is a 12% withdrawal, which based on market history and modeling simulators would not last the 20+ years needed for this individual to get to retirement age.
I wonder if this, in part, is what prompted this original question? Thank for the feedback!
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Thanks lhamo - will look into this! This may/very likely impact my own strategy!
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@bgstache, Roth ladder can also be tweaked to ensure that ACA works in your favor. I do something similar to this.
ACA = Affordable Care Act. In the scenario you describe, the retiree/ FI person might get their health insurance through the federal exchange created by ACA, just like I do. The income level you give would keep premiums affordable. Each state has some minimum income to qualify for ACA. In my state it's the federal poverty level, currently $12,800 for a year. The amount of taxable assets you describe (48k cash, 152 index funds) probably produce less than $12,800 income. For example's sake, let's say $1k interest and $3k dividends for a total of $4,000 income. Yet Medicaid disqualifies you for having assets and private insurance is costly.
Roth ladder to the rescue! From the 401k, our thoughtful hero transfers $8,800 into the Roth account. That $8,800 thereby becomes taxable ordinary income. Combine with the existing $4,000 and voila, the hero's income is $12,800. Like a responsible citizen, he can now buy insurance and keep himself healthy.
I keep my income around $14k to ensure I don't accidentally go under the limit. My net premiums have ranged from $11 per month to $56 per month, changing year by year as the market's prices change.
In the scenario you describe, the 401k-to-Roth conversion serves two purposes. In addition to qualifying for healthcare by having enough income, the transfers increase the amount of Roth available to use before reaching age 59 1/2. Five years after a dollar is put into the Roth, it can be taken out penalty free, though any gains is produced have to stay in the account until 59 1/2. The withdrawals from Roth can supplement the $200,000 and the income from the $200,000 in order to ensure that the FI person can actually pay their expenses.
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With regards to getting ACA in FIRE, is there a way to know which insurance companies in your state are available on it? I tried fiddling around on the healthcare.gov site, but it seemed to want me to submit a completed application to get more information, and I am not actually quitting my job imminently.
https://www.healthcare.gov/see-plans/
Enter your zip code and skip the questions to see who offers plans.
Answer the questions (age, family status, income, etc.) to see real plan prices without actually applying.
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Great questions!
I don't know all the answers, but I do know that the federal health care exchange is surprisingly responsive if you telephone them. It's true that their focus is answers for current questions, not prospective ones, but from a few experiences, there's about a 50% chance that the representative will think of a way you can investigate a scenario.
A person will qualify for ACA as soon as they have a qualifying event, so I think you could just say you're worried about losing your job, and want to find out if Kaiser is available in your area. They might either answer the question, or point you to a resource, or both.
1-800-318-2596 according to current internet search. Available 24/7...how about that!
ETA: I see @bacchi sent a better, faster answer. Now you have options. :)
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I think it's unrealistic to expect your kids to be self supporting at 18. Jobs do not pay well without an education which was very different when I was young. My kids could live at home and attend college, go to a technical school or get a job and live at home to save up money, etc. My 3 boys boomeranged for a while before finally launching.
My oldest is 18 and self supporting by working at a restaurant full time and sharing a house with room mates.
I was self sufficient at 17. I went to college later and worked full time and went to school full time and took out no debt for college.
Nothing unrealistic about it at all, other than your own expectations as a parent.
I think it's unrealistic to expect your kids to be self supporting at 18. Jobs do not pay well without an education which was very different when I was young. My kids could live at home and attend college, go to a technical school or get a job and live at home to save up money, etc. My 3 boys boomeranged for a while before finally launching.
It's not some horrible fate to not have a great paying job immediately. Learn to budget, get some roommates, and cook your meals. It can be a great learning experience and teach you all kinds of kick-ass self-reliance skills that serve you well throughout your entire life.
This is another funny example of something being called "unrealistic" when I've literally done it myself (and not like 30 years ago or whatever).
Saw your post only after I posted. LOL!
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I was self supporting at 18 also but that was 47 years ago. Much more difficult now.
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Moved out at 18 as well, and have been self supporting since. Retiring at 32/33, I see a correlation here :)
Sent from my SM-N950U using Tapatalk
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This is a crucial point. It's tough to compare nest eggs when one person's includes a paid off residence another person's does not. Folks who own their homes outright probably need to add the value of their homes to their retirement savings to do a valid comparison. My guess is that you wouldn't see too many people retiring with a net worth (including the value of their real estate) of $500k.
People have a hard time imagining life either up/down a few levels of spending from where they are.
I knew I would have been better off leaving out that last sentence - the one about retiring on $500k. That's what everyone focused on, and I'm not saying it can't be done. It absolutely can be accomplished, but the point I was trying to make was that in order to do valid comparisons we need to account for the value of paid off residences. Some people have them, and some people don't. If a person says "I'm retiring with a $450k nest egg" but that person also has a paid off $350k house, then that's not nearly as badass as someone who's retiring with a net worth of $500k.
^All true.
I think most of us aren't as far as the numbers appear at first. I woke up thinking about this for some reason, and concluded that my situation is close to OP Chairman5's even though he has $3 million more than I do.
One person's view here, but factors that produce similar safety results with a different net worth number include:
1. Number of people in household
2. HCOL area vs LCOL area
3. Amount of educational spending parents choose
4. Whether the above cause significant tax expenses, especially in retirement
5. Consumer spending
6. Emotional need for safety
OP's original focus in raising his case in other threads was to ask safety questions and express worry about retiring, implying item 6 as his focus. Many of the responses suggested resolving 6 by cutting item 5. To my eye, most of the difference between me (FIREd on 500k or 560k, depending on how you count) and OP (working and worried at $3.5 million net worth) is from 1 through 4.
Roughly, here's how the step ups look to me:
1. OP has spouse and at least 2 kids, so 4 people vs 1. Perhaps 4x more costs.
2. Not sure how much impact from HCOL, but let's guess 40%. Running total, 5.6x net worth needed.
3. Let's say kids cost less than parents because they're small and temporary, but OP chooses substantial education spending, so a wash.
4. At OP's level, taxes have impact. Let's say 25% extra; now 7x is needed.
5. Maybe 15% higher spending on the consumer side...some categories much higher than others, but not all. I waste 15%; OP could be argued to waste 30%, but I think half of that is rational or near-rational purchasing of valuable items. In any case, proportionally no more than a 15% bump. Now we're at 8x.
6. Barring emotional need for safety, it seems to me that OP needs about 8x. His comfort level wants a little more safety, but is financially same. Let's say 12.5% more.
Final result? To achieve the same level of emotional and financial safety I have, OP's choices require about 9x as much net worth. That doesn't mean they're all bad choices. The biggest difference is simply more people in the family, which is a wonderful human thing. But each of the other choices adds to it, so that the outcome requires a hugely different dollar amount. Valuing my stash at 560k (to include fair value of tiny pension account), OP would need about $5 million to achieve my level of safety. Yet he only has $3.5 million! It's no wonder he's hesitant about retiring.
We can discuss details endlessly on how to optimize and what to do. OP or other very high dollar forum members can run the analysis in the other direction, calculating step downs to imagine what 500k FI would be like. But I think that the financial safety and comfort level of posters at very different wealth levels can be much closer than a mere dollar amount would suggest.
Wow - you sir or madam are very very good. I think you quantified in monetary terms what is a very emotional subject for me. Raising a family in a HCOL area and enjoying the benefits of the cultural influences, as well as feeling responsible to provide my kids with a solid education (save and pay for their college) were all important choices for me. However, it made is very difficult for me to imagine life in a more rural setting, which may be much less cost of living, and giving up some of the traditional HCOL amenities of live. Well done! One of the better intuitive posts I have ever read on this site.
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I have lightly criticized this skinny retirement idea also, especially for younger people, so I sympathize with your position. Not $3.5M worth though :-)
My wife and live what I (that's the rub) consider a fairly frugal lifestyle. But our basic living expenses before food is a little over $30k, consisting of Health ins, Electricity, Internet, water/sewer, House/vehicle Insurance, cell phone and CC bill.
Admittedly, I have a couple of college kids that are still on my health insurance and phone bill.
We are just finishing our first full year of retirement and don't have a good feel for our retirement costs yet, but $50,000 would probably be on the low side.
I haven't got a good number yet because I still have high tuition bills and rent for my kids. Luckily the stock market gains have been spectacular and the gains have been almost double all our spending, but we aren't lean FIRE!
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Haven't read the whole thread so bear with me.
I can see the ops point. Personally my perspective is that I could live on tiny amounts, maybe $500k for a couple with a paid off house but I really wouldn't want to. For me I want well above that and I will reduce down as needed. I actually mostly live on a tiny amount but then I throw in travel which is pricey. We aren't retired but I think wouldn't change much. I would like $1.3m minimum. That would provide 50k and I don't have to worry too much. If there is a crash maybe we figure out how to live on something substantially less.
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Just dropping in to mention that as someone who now has kids in their 20s, it IS true that they do not need to cost a fortune. Australian data also shows that they get more expensive with time, and annual household expenditure is at its highest whilst there are young adults still living in the household. Once the kids leave expenditure more than halves. American data may be slightly different because of the"going away to college" phenomenon.
I haven't tracked for a few years now but when I last did, I had managed to get our annual spend for 3 of us ( myself and 2 kids) down to $AUD 45,000. COL in Australia for essentials like food, clothing and gas, are higher than the US and Aussie former some years back determined that it roughly cost Aussies 1.5X as much as US citizens for the same standard. So that's about 30k in US terms ( ignoring the weaker AUD, which might arguably bring it down further if converted to USD). We live a very comfortable middle class life on that and want for nothing. Did I get tired of my kids coming home from school saying "X got a Velostar for their 17th Birthday", why yes! But really I was never going to buy my kid a car.
If you are not naturally frugal, sorting out needs from wants is an essential skill to be learned and it can be learned if you wish to. Its natural to want to do your best by your children and there are a lot of preconceived notions about what is essential to do that emerge as a parent. Much more deep seated and intense than just dealing with yourself. However its amazing how you can work through such things with a little persistence and creative thinking. I also developed my "rule of halves" : if I really wanted to do/have something ( or my kids) that couldn't be done free, then I bought or did said thing half as often, or spent half as much if it was a single spend. If they really wanted something that I thought was nonessential I would say, yes you can have that but you need to buy it out of your own money. So often, the pleas of desperation would immediately evaporate.
As far as activities goes, I put a strict limit on that - 1 sport based and 1 other each. Sure they're now adults and can't play 2 or 3 different musical instruments, as well as 3 different sorts of dancing etc etc but that seems less and less relevant to adult life. There were families who's kids had scheduled stuff on every afternoon, and more than one activity. My kids said to me one day that they really liked that they had time to just hang out and relax at home and that we weren't rushing from one thing to another all the time like lots of their friends.
My best reward for LBYM was in the last recession. My kids came home from school anxious as there must have been a lot of talk about folk losing jobs, houses etc. They asked me if we would lose our house because of it. I was able to say - goodness no! We may look like we don't have as much money as a lot of your other school mates but we're fine because I don't spend all our money on stuff, the bank won't be able take away our house. The look of relief on their faces was priceless. And their sense of social self-esteem rose quite a few notches.
So I'm here to say that its quite possible to raise a family on under AUD 50k..equiv roughly to 30-35k in the the US. You can circumlocute and justify spending more all you like but its really not necessary. If you want to spend more I really don't care, thats your prerogative. In the meantime I'm happy and retired.
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...
(detailed guesswork connecting a 500k retirement and Chairman5's possible 3.5M one)
...the financial safety and comfort level of posters at very different wealth levels can be much closer than a mere dollar amount would suggest.
Wow - you sir or madam are very very good. I think you quantified in monetary terms what is a very emotional subject for me. Raising a family in a HCOL area and enjoying the benefits of the cultural influences, as well as feeling responsible to provide my kids with a solid education (save and pay for their college) were all important choices for me. However, it made is very difficult for me to imagine life in a more rural setting, which may be much less cost of living, and giving up some of the traditional HCOL amenities of live. Well done! One of the better intuitive posts I have ever read on this site.
Thanks, @chairman5!
(A sir, fwiw. Cisgender male, with due respect to the many gender fluid out there)
Best wishes in your decisions and adventures for the upcoming decade.