Tag Archives: Frugal early retirement

I Wondered, Could We Live On Social Security Alone? 

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I take great pride in the way we chose to live a frugal life so that we could retire early. It not only allowed us to save a higher percentage of our income when we were still working, but also resulted in needing a smaller portfolio capable of supporting us. I wondered at this time when many people have little to no retirement savings, even with our frugality, whether we could retire and live on Social Security alone.

Of course frugality is subjective and personal. It is also unique to all kinds of parameters. Frugal living in Colorado is different than it is in California. I was a little surprised at where we stood with what many say is impossible to do without severe lifestyle deprivation. I agree it seems challenging. But many people find a way to pull it off out of necessity and unfortunately for some it’s done with a dose of desperation.

I Wondered, Could We Live On Social Security Alone? 

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Can We Live On Social Security Alone?

The first obvious requirement to meet before answering this question is knowing exactly how much our retirement lifestyle costs. Since I retired early over 13 years ago, our retirement budget is clearly known. 

As I will soon hit age 65 and Medicare eligibility, we will see significant healthcare cost reductions. We do have to make some assumptions as to the advanced cautioned property tax, homeowners insurance, and auto insurance increases coming on the next renewal. That said, we can come close to setting a realistic retirement lifestyle budget going forward. We do have many years of retirement budget history behind us.

OK frugal retirement lifestyle, where do you stand against our ability to live on Social Security alone? Close but no cigars. 

Starting With Our Numbers

Neither my wife or I are yet at full retirement age. When looking at  Social Security estimates for age 65, we could expect a combined yearly benefit of $50,100. Is it enough? It could be in many parts of the country, but we live in a beautiful but higher cost area. 

Even with our own flavor of frugality, based on our well honed retirement lifestyle and anticipated budgetary changes we do come up short. About $9,600 a year short. That’s without cutting anything from our already defined frugal lifestyle. An enjoyable lifestyle that happens to come in below half the local median household income for where we live.

Based on this shortfall and a commonly followed 4% withdrawal rate, the down and dirty calculation for our portfolio needs to close the gap on this Social Security alone challenge is $9,600 X 25 = $240,000. Still a tidy sum for many to attempt reaching, but that portfolio savings amount is in line with what a 2022 Vanguard study found for people today between the age of 55 and 64 regarding retirement savings. Their study came in at an average savings of roughly $256,000. That amount can provide $10,240 a year of available retirement funding based on a 4% withdrawal rate.

Fortunately our Social Security Alone failure isn’t detrimental. 

I did this exercise out of curiosity. Our portfolio has things covered if we didn’t want to make any retirement lifestyle changes to line up closer to living on just Social Security. 

That doesn’t mean we won’t cut back. We’ve already begun to see budgetary places where we won’t spend as much going forward very much longer anyway. We’ve constantly experienced changes in our attitudes about things over the years of our retirement. 

We only come this close to being able to consider living on Social Security alone because we paid off our mortgage over an 18 year period several years ago. We bought our modest older home when I was corporately forced to relocate to remain employed midway during my primary career. It was a bad job market so we bit the bullet. Having mortgage obligations in retirement would certainly make this task far more challenging if not impossible. 

Prior to retiring we did a lot of necessary things to get this close to living on Social Security alone. We paid off all debt and stayed out of debt. We also created a frugal yet rewarding lifestyle by cutting all spending waste while prioritizing what is important to us. 

A few more tweaks and possibly our consideration of some other moves could get us to living on Social Security alone without any reliance on savings or feeling like we are living a deprived life.

A few retirement budget and income strategies come to mind that are worth considering  –

Delay Starting Social Security 

This exercise I just did is based on claiming my Social Security at age 65, not FRA or age 70. Social Security would be higher by holding off. Any increase in received Social Security payments not only narrows any retirement budget shortfall but also for someone who is still employed there’s added time to increase retirement savings. 

Being that I’m already retired, delaying Social Security would mean relying on my portfolio to carry the load a little longer and possibly having less to work with later. It’s all the things that need to be considered. It is always best to run the different scenarios against a good retirement calculator. 

Move Somewhere Cheaper

Where we live plays a big role in our retirement cost. Being open to moving to a different town, city, state, or even country can play a role in reducing retirement costs. We do love where we live. Being close to our children and grandkids is important to us. However, we would consider moving somewhere different if staying here meant not being able to afford our desired retirement lifestyle.

Tap Home Equity

We’ve all seen the commercials on TV about Reverse Mortgages. It’s a way to use home equity to help fund retirement. It isn’t high on my list because of the high costs associated with doing this. That and the restrictive rules that can jam you up if you run afoul of them. But it’s something that can be considered if the worst financially happened to us.

Rent Out A Room

We are like many retirees who now have empty bedrooms that have been converted to exercise rooms, offices, and storage that can be changed back. It provides the option to rent out a room or two for retirement income in this high rental cost housing market. 

Apply For Senior Benefits

Aside from getting discounts at restaurants and hotels, there are some senior discounts that we have to apply to get. For example, we did apply to receive a senior property tax break. We meet the age and requirement of living in our home at least 10 years. This is a regional type benefit that is worth looking into to find out what the benefit is and what rules must be met. Our savings are yet to be determined since the huge jump in property tax appraisals over the last couple of years also takes effect this year. 

Cut Transportation Related Costs

I have a problem, a car problem. I just love cars and have been active in the hobby for most of my life. I’d consider cutting back on my automotive hobby and shave down auto insurance costs. That and bank the money received in a sale of one of my babies. 

We do see our world shrinking. There are far more opportunities to use our bicycles to get to town venues, cafes, and shopping. Although it is limited to weather and seasonal conditions. Aside from that, there’s always a way to become a single car household if we need to cut expenses.

Start A Retirement Gig

One of things many retirees find themselves doing is returning to a little retirement gig for the social aspects and earning a little extra to get by. Nothing wrong with that. I’ve had some rewarding paid retirement adventures during my retirement. Picking the right opportunity can be the ticket for closing the loop. 

If you’re collecting Social Security before reaching full retirement age and decide to work, just keep monthly income under $1,770 ($21,240 a year) to avoid bumping into the Social Security pre-FRA earnings limit. Unless of course you find a cool gig doing something that makes a ton of money and you don’t need to worry about the Social Security benefit clawback.

What does this all mean?

Well, what we need is nowhere near the routinely hyped million dollar retirement portfolio. Having no or little retirement savings isn’t necessarily a guaranteed doomed situation. Everyone will have their own unique needs based on where they live, how they spend, the amount of their Social Security benefit, and whether they have room for and are open to making more cuts or generating new income if necessary. 

What’s evident is that all of us had better know our expenses. We have to take control of our spending, have little or no debt, save something for retirement, and prioritize what’s important in our lifestyle. We should also be prepared for necessary changes to meet the inevitable retirement funding challenges. 

This also points out the importance of setting up a low lifestyle cost before retiring. If saving a huge portfolio is unattainable, then we best take care of where and how we want to live at the lowest cost we can joyfully do it. 

If you’re thinking, great, this exercise to see if we can live on Social Security alone only matters if it stays somewhat funded as promised. Well, I think we’ll all have bigger problems to deal with if Social Security collapses. That said, it is always better to save more than you will need based on whether everything else goes great. You know, just in case.

The Brilliance Of A Retire By 50 Plan

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There’s a brilliance to dedicating yourself to a retire by 50 plan. The brilliant part that’s overlooked by naysayers is if you do it right, you can’t lose. It goes beyond the obvious financial aspects. It also allows us to mentally approach work with a healthier mindset. That then leads to enjoying both work and life on a higher level. 

I constantly thank my younger self for having the insight to go against normally accepted societal work and consumerist practices. My younger self instead pursued financial independence with the goal of retiring earlier than the traditional age. Something positive happens when we take control of our lives. Especially when we do so with our financial life. It provides a healthy focus and ultimately power. 

I was happy to read about how Millennials want to retire at 50. They’re now in or nearing their forties. I was 40 when I had the same burning desire. The article eagerly focuses a bit on the obstacles. It wasn’t easy for me to retire early and it certainly isn’t easy now. So what? Anything worthwhile is never easy. 

The Brilliance Of A Retire By 50 Plan

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Done Right, You Can’t Lose With A Retire By 50 Plan

This is what I found to be the best part. Even if you fail you’ve still won. Doing something is always ahead of doing nothing. Setting oneself up through a retire by 50 plan pays off long before reaching the goal line. It does take constant monitoring of not only progress but feelings about how we are living. 

One of the biggest naysayer talking points is having to waste your life in voluntary poverty in order to save enough to pull off early retirement. Here’s the problem with that nag. If done right there is no feeling of poverty or feeling of a deprived lifestyle. Naysayers should worry more about living in fear of losing a job. Fear of putting up with workplace garbage in desperation to work until old age. Fear of worrying about where to get money in an emergency.

We set ourselves up both mentally and financially while we’re doing it.

Frugal adaptability, living a non deprived lifestyle. 

Nobody should dedicate themselves to a retire by 50 plan that leaves them feeling they are living a deprived life. There will always be tradeoffs. The great thing is we get to decide for ourselves what we want and the way to get there. All is defined by us.

I found that we could still live an enjoyable life while cutting wasteful spending, eliminating debt, and setting aside money for our future. When my family or myself felt it went too far, we scaled back. When things changed and we could cut something that wouldn’t be much missed, we then did so. Frugality is different when you do it with purpose. It’s a major form of taking control. It will change over time in both what we do and how we do it.

My salary never made it to 6 figures. Frugality was a must to succeed with my retire by 50 plan. The lower the cost of my self defined happy lifestyle, the more I could save from our income to eliminate debt and invest. Creating a lower cost of living also means needing a smaller portfolio size to support it once retired. 

Divorcing our identity away from our chosen career.

It is too easy to get wrapped up in our careers. We educate, learn skills, gain experience, and work hard to advance. But it’s also easy to mentally frame our identity around our work and career accomplishments. Dedicating oneself to a retire by 50 plan starts the mental process of seeing our career as the means, not the ends nor our life focus. 

Starting my early retirement plan began my understanding that my work is transactional. It’s not a marriage of mutual interest or loyalty. It was always that way, but I found myself believing otherwise while leaning into my career over the years. 

I was painfully disappointed many times during my career thinking that it was a fair exchange based on long standing rules and promises. I wasted many years in obedience to a false employment perception and could see there are no real rules requiring the honoring of agreements when you have no power to enforce them. Getting our head straight about this aspect is the first mental step to work identity liberation. It will ultimately help us during our retirement transition once we ditch the rat race too.

The can’t lose fact: We will be far more financially ahead than if we had not made this decision.

Even if we miss our savings goals we’re miles ahead of where we would be if we hadn’t been on the retire by 50 plan. I was 9 years into my 10 year plan when the great recession hit. A year later at age 50 my target was missed because market conditions caused a diminished portfolio but I was way ahead of a lot of desperate working people in a time of constant layoffs. 

There is no way to know how we will feel, what we will be doing, or how the economy will be in the future. It’s a lot easier to come out on top if we stay on plan and have the options that come from living a financially disciplined life.  

Hustle- Chasing money will transition to chasing interests and passions.

When I was climbing the career ladder I felt like I had to put money ahead of all other decisions when it came to work. Work overtime, take extra shifts, second or third jobs, accept unpleasant tasks, whatever it took. I couldn’t turn away a chance to bring in extra money to make ends meet. Nor say no because it might tick-off the boss. As my retire by 50 plan was fully engaged with measurable progress it became easier to be choosy about what I would lean into. 

I still had a desire to accept opportunities to earn extra money or advance my position and salary. But I didn’t just accept anything because I no longer felt desperate to do so. I became focused on aspects I like doing, wanted to do, and wanted to learn more about doing. Within company work guidelines, I was mentally freed to easily reject any unpleasant assignment. I found that I was able to care less about management’s feelings and confident in knowing another opportunity that was better aligned with my goals would come.

Redefine retirement- Working in retirement is easier when retired in your 50s.

It’s time we redefine retirement, especially early retirement. Retirement is the absence of needing to work, not the absence of working. Having a retire by 50 plan allows us the time to earn skills and direct our attention to making ourselves attractive to opportunity if we choose to pursue them. Whether to start our own business or do as I did and seek opportunity into other fields that we had passion and interest in learning and doing. My early retirement work was very rewarding. The time working through a retire by 50 plan can be useful in preparing for this retirement definition shift. 

There’s no shame in missing an age 50 date.

Retiring by 50 is not easy for most people. Salary constraints, debt issues, economic shifts, market volatility, and the cost of living where one lives comes into play. Something all the naysayers lean into. The age 50 is a goal, not a measurement of failure if missed. The brilliance of this target is it gives us time to fine tune and define what success will look like while we’re on the path to try to meet it. Something that will shift as we live our lives, experience new things, and we age. 

The Nothing Tricky Financial Side of Things- The way I started my retire by 50 plan

There are all kinds of advice and metrics that are recommended on how to develop a retire by 50 plan or any financial independence plan. Some are basic and others seem extreme or unattainable because of our own unique economic factors. Personal finance is uniquely personal. When I started my FIRE journey there was little internet or anything on the internet about it. There were few books on the subject. Here’s the high-level approach I took.

Build an emergency fund.

The conventional advice is to save 6 months worth of expenses in an emergency fund. Great if you can, but if you can’t don’t let that stop you. 

I started with a target of 6 months housing, not full lifestyle expenses. In my case it was a modest mortgage payment. The idea was if I lost my job I could get by until getting back on my feet with unemployment or temporary work. 

Setting emergency savings goals at different levels was the way I approached this. I felt that it was important to cover the other necessary personal finance aspects too and not go all in exclusively on a full 6 month emergency fund first. I dropped this to a small monthly allotment until I could ramp up emergency savings amounts as the other retire by 50 plan goals were met. 

Eliminate debt.

One of the reasons I was slow to build a respectable emergency fund was I had debt to clear. We were good to avoid a lot of credit card debt at this point in our lives but with a family there were always the occasional large financial hit that caused me to tap an equity line of credit against the house. 

Our debt load was eventually reduced not only by a dedicated amount from income but also by savings from making lifestyle changes through frugality. Debt was a primary target of earnings to resolve first. One of my delayed emergency fund goal relief thinking was that if the worst happened I could still access needed money from the line of credit that I was paying off. 

Set and Work Towards Meeting An Overall Savings Goal 

I had dug into defining our lifestyle costs over a number of months while setting aside money. When it was time to figure out an overall retire by 50 savings target, I sought the help of a financial planner. I was not saving enough and wasn’t saving it in the right places or allocations to meet my early retirement goal. It was hard to squeeze more out but we found it was there all along. With having solid direction it was easy to dedicate ourselves to the plan.

The Goal Of A Maxed out 401K.

The first rule I accepted regardless of my income level was If your employer matched a percentage of your 401K savings, then you have to at least do that. Mine at first was a measly 100% match of my first 3% of 401K savings. Not doing it was leaving money on the table. I started at this small percentage earlier in my career but bumped it up to 10% which was where I was at when I chose a retire by 50 plan. 

While I was still working on the other goals, I began adding about half the amount of my yearly salary increase to 401K allocation increases. As debt was cleared and emergency fund goals were met I was eventually able to set aside the allowed 401K maximum yearly allocation. When the IRS raised the allowed threshold I also increased my allocation. It is important to invest early because time is our greatest ally and the more we have invested the more time helps us. 

Maxed out IRA and Roth IRA strategy. 

My wife and I never made enough money to limit our participation in side funding an IRA or Roth IRA alongside 401K savings. Once I was meeting 100% funding of my 401K I started funding an IRA and Roth IRA. I initially split the yearly maximum IRA limit between the two types for both my wife and I. 

Because contributed Roth IRA amounts can be accessed if necessary without penalty or tax, I later funded the yearly maximum amounts into our Roth IRA accounts instead of splitting it with IRA contributions. I saw the Roth as another emergency fund source although that was not its primary retire by 50 plan objective.

Began non-retirement account savings and investments.

I eventually added a non-retirement investment account. I chose a stock mutual fund through a financial planner I was using.

Leveraged my skills for better pay. 

I became a courageous salary negotiator. My journey and shifted goals toward early retirement allowed the time to open my mind to see things from a different place. I went from going with the flow at all costs to advance my career, to challenging management misdeeds to secure the higher income that I earned so I could further feed my retire by 50 plan. 

This also reduced workplace disappointment. It was replaced with the strength to demand what was promised if I held up my end of any bargain. My growing portfolio and financial confidence provided the power to leverage my skills and accomplishments. 

Having my well won financial backing allowed me to stick up for myself without fear of job loss or worry about any quiet firing tactics. 

Establish an early retirement funding strategy.

My portfolio was primarily behind 401K and IRA accounts. That meant getting required retirement funding at age 50 without early withdrawal penalty by using a SEPP 72t arrangement. This substantially equal periodic payments scheme allowed me to start receiving monthly checks from my IRA at age 51 without penalty and only paying normal income taxes. A sort of  backdoor approach to fund early retirement. When I took on paid work I would live off of my retirement income. Then i’d invest all of my work earnings back into my net worth. 

Having an early retirement healthcare strategy.

Of all the early retirementment costs that await us, healthcare is most likely the trickiest. What I paid when I first retired 13 years ago and what I pay today is beyond any of my planning.

This one is tough because things can change over the duration of our early retirement journey. The way I see planning ahead for a retire by 50 date is to stay informed about early retirement healthcare, learn the ins and outs of the ACA, and vote in your future’s best interest. 

If There Is A Trick, It’s This-

The trick is to have the discipline to knock out the primary goals and increase retirement savings as soon as you can get to it. But at the same time finding a happy medium living your defined efficient and enjoyable frugal lifestyle. If the word frugal is a turnoff, use purposeful.

It is a choice to live a life of optimism based on actions taken instead of just hoping it somehow works out. It’s optimism based on our financial investments and investments in ourselves through solid personal financial discipline.

The best part of being dedicated to ditching the rat race while young is we get to determine what lifestyle meets our needs and allows us to still live a happy life. We can practice and refine it over time. There are no hard rules and if you screw it up it just means a retirement delay. Understanding what our enjoyable retirement lifestyle would be like and what it would cost provides enormous motivation and confidence in knowing we have a solid financial target.

The brilliance of a retire by 50 plan goes beyond actually reaching the goal. It is the way that it trains our brain to see life, spending, work, and power differently. We can improve our lives while on the journey. Even if we fail to hit our financial target by age 50 we still win. We are closer than if we hadn’t and it’s surely better than failing a risky work until 70 retirement plan. 

Cost-Effective Ways To Enjoy Retirement

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This post was contributed to Leisure Freak by personal finance blogger Ted James.

Approximately 22% of Americans have less than $5,000 saved for retirement, according to a study cited by The Motley Fool. Additionally, 15% have no retirement savings at all. If you have very modest savings or none at all, you’ll need to live off your Social Security benefit during retirement. While the amount you’ll receive depends on your work record, the average monthly Social Security benefit was $1,509 in 2021. But you can still enjoy your golden years if you follow these tips, presented below.

Cost-Effective Ways To Enjoy Retirement

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Create a Budget

To create a budget, such as one following the 50/30/20 rule, first determine your fixed monthly expenses. These include your mortgage or rent, utilities, groceries and loans, and credit cards. You can’t eliminate these expenses, but you can reduce their payments. Try refinancing your loan for a lower rate, reducing utility usage, or negotiating a lower interest rate on your credit card.

Mixed Up Money notes that the most challenging part of creating a budget is finding ways to cut back on nonessential expenses because they’re difficult to track. These expenses can include dining out, buying gifts, taking vacations, and purchasing magazine subscriptions. Keep receipts and check your bank and credit card statements to see where you’re spending. 

Perhaps the most important aspect of your budget is planning for your retirement goals. You can be doing fine right now with your budget, but have you factored in the cost of retirement living or travel? When creating this document, project for the future. What income will you have after age 65? What are your primary goals once you retire, and how much will they cost to achieve? Once you factor in these components, you will be budgeting for more than now – you’ll be budgeting for your retirement.

Downsize

Downsizing means less maintenance and lower bills. It also allows you to find a property better suited to your needs as you age. Furthermore, if your home has increased in value over the years and your mortgage is almost or entirely paid off, downsizing to a cheaper property may leave you with a lot of equity. 

However, there are some potential disadvantages to downsizing. These include:

  • Fewer belongings. Some people get emotionally attached to particular items and may find it difficult to part with them.
  • No room for overnight guests. Family members who’ve stayed over in the past may now have to book into a hotel when they visit.
  • Lack of privacy. Smaller and fewer rooms make it difficult to get away from other family members when you want time alone.
  • Less recognition. Some people are more concerned with how others perceive them than with comfort and may find that moving to a smaller property doesn’t project the image of success. 

If you choose to downsize, you can also decide whether you want to sell your larger home or rent it. This decision will likely come down to money. Can you rent the property for more than you owe on it each month? If not, are you willing to break even in order to keep the equity? Or do you need the money in hand right now that would be available through a sale? 

Take in a Lodger

Taking in a lodger can help with expenses. Unlike tenants, lodgers are easier to evict should any problems occur. Lodgers also provide extra security for your home, particularly when you’re away. Check out the short-term rental laws in your area before considering renting a room to a lodger.

Part-time Work

Earn extra cash by freelancing to meet expenses and boost your bank account. One increasingly popular job is becoming a medical coder. In addition to performing critical behind-the-scenes tasks like accurately documenting patient data, medical coders determine a patient’s diagnosis and any procedures performed. By taking medical coding courses online, you’re equipped to learn industry standards, including how to use the Healthcare Common Procedure Coding System, (HCPCS) and Current Procedural Terminology (CPT) codes. 

Whatever type of work you pick up, if you decide to start a business using your skills, forming an LLC gives you tax advantages, flexibility, limited liability, and less paperwork. Avoid expensive lawyer fees by filling out the paperwork yourself or using a formation service. Check out your state’s rules for forming an LLC before proceeding, as they differ from state to state. 

Less Stress and More Enjoyment

Having a fixed income in your golden years doesn’t mean you have to worry about finances. Taking steps, such as budgeting, downsizing, working part-time, or taking in a lodger, can make your later years less stressful and more enjoyable.

 

Much thanks to Ted James for contributing this article that shares cost-effective ways to enjoy retirement.

Author Bio:

Ted James is a husband, father, dog owner, and rock climber living in the Pacific Northwest who devotes a large chunk of his time helping people get back in the driver’s seat of their finances. He created his site, Ted Knows Money, to share money tips and help people get complete control of their finances.

My Shameless Anti-Economy Sins of FIRE That Can Benefit Anyone

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To be clear, for what I’m about to confess, I remain fully unrepentant. I understand that I’m considered deplorable in the eyes of some government, economic, business, and corporate authorities. I shamelessly stand by my anti-economy sins of FIRE. Although what I confess may cause authoritative scorn, I share my path because I know that anyone can benefit from adopting my sinful examples. But do so knowing what you may risk taking this path of wickedness.

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The Anti-Economy Sins of FIRE Of Which I’m Guilty Of

Time to lighten things up. I find that in today’s divisive and anti-everything environment that the only way to get some people to pay attention is to join the darkside. So on that note, here are the anti-economy sins of FIRE that can benefit anyone who dares walk this same path.

My biggest anti-economic sin is practicing the dark arts of frugality with purpose.

Spend-baby-spend is the call of this consumer based world economy. My anti-economy sin goes beyond frugality, it also includes a heavy dose of purposeful spending. I only buy what I need and only from sources I like. Oh my, it’s my personal sinful dabbling into cancel-culture. All the laughable political screaming about “cancel-culture” has me deciding that I am willing to play in this sin to personally feel better about, wait for it…. MY LIFE. 

I admit there are some businesses and products I purposely refuse to spend money on or at.

Freedom baby! I don’t go around screaming who and why, nor wearing a provocative hat or T-Shirt to make a big deal about it. I just quietly stay on budget and purposely choose where my money goes. If a business, whether at point of sale, corporate or owner level acts like Jack-Holes or goes out of their way to promote Jack-Holes, they are cancelled from my budget.

My spending moto: Only do business where they act decently. I don’t want or need to hear about their perversions. Not everyone wants to know you enjoy humping active beehives.

Inflation has me cancel some product purchases until either prices come down or I change my mind on whether it represents a good value. 

Funny thing about all of this. We haven’t been left feeling for want or deprived. There are always alternatives. My money, my choice! 

Frugality with purpose adds the huge financial benefit of being able to live my life of freedom on less money. I needed less in my portfolio to fund my economically sinful early retirement lifestyle so I could ditch the rat race without first acquiring a massive portfolio. On top of that, because of my lower yearly income needed, I’m able to pay far less in taxes. 

Next on the anti-economic sin list is my refusal to work.

Oh the wicked horror of practicing this sin in a time of business complaints over the lack of people to hire. During this time of the anti-work movement and the great resignation where there’s a huge need to fill job openings, I’m passing on opportunities to chase carrots to build even more wealth. I must be some kind of economic heretic. It must be economically selfish and sinful when an able bodied and skillful person purposely refuses to work for the good of the consumer centric economy, profits, and the tax base. 

I’m committing the sin of breaking  the commandment that when the economic beast is hungry none shall escape except when “they” don’t need you anymore. It’s funny to me how other times it’s not a sin but totally cool with the economy gods to voluntarily lean out. As was the case when I retired young in 2009 among the masses of the downsized.

I’ve actually enjoyed working since I first retired 12 years ago.

I’ve been able to learn and do rewarding work that has been on my bucket list while increasing net worth at the same time. But I only take on retirement work when on my terms. Not all jobs are opportunities. Being picky is something FIRE sinfully allows to be the highest priority. It would take a very special retirement job pitch to get me back in the game. Shameful, just shameful, NOT! 

That said, my refusal to work isn’t set in stone as never. Just not now.

I sinfully use my credit card but I never pay interest.

Plastic, the easy way to buy whatever you want and need. Many do it as designed. Buy more than you can payoff each month and pay high interest for the privilege of being allowed to do so. Banks don’t provide credit cards out of kindness, but some do offer rewards to lure you to use them. It is easy to assume that they do this knowing most will slip up and spend more than they can clear. Then becoming locked into paying monthly interest on their unpaid balances. 

My sin is using the hell out of our rewards credit card and winning their game by always paying the balance off each month. For over 25 years I’ve paid no interest but have reaped cash rewards. We cash out credit rewards to cover 35% to 50% of our overall Christmas budget each year.

Not my biggest anti-economic sin but perhaps considered the worst: Promoting my sinful ways to corrupt others to join me.

I shamelessly promote my anti-economy sins of FIRE here on Leisure Freak and every chance I get. Although I never word it in this dark tainted manner. I’m just talking about the same personal finance habits that get pitched in a positive tone everywhere else but trying to appeal to those who are better motivated by having an adversarial emotion to do something that’s actually positive. 

Do any of the economic overlords really care about my promoting these sins? I doubt it. They know most people won’t pay attention and will continue on their normal consumer, employment, and debtor path that has systematically been laid out. Sadly, that is something I know they’re right about.  

Beware the sins of FIRE risks

Walking this wicked economically sinful path doesn’t come without risks. 

Those with the power to hire set the commandments. No matter how accomplished you are in your field, take time away and you may be punished. Skills will be seen as diminished. Your escape can be used against you if you ever wish to chase new opportunities in the future. 

You can never complain about low, lax, or incompetent service. There is a risk of over challenging your patience capabilities. If you sin against the economy then you must accept labor shortages and their impacts. You will have to lower expectations and still feel gratitude towards those who are obedient to the mainstream consumer economic system. 

There’s the risk that there may be times when you feel yourself being a hypocrite. Preaching the benefits of your anti-economy sins of FIRE while knowing full well that if everyone joined you the economy would crash. That would certainly destroy the benefits of your economically wicked ways. Nah, I think keeping personal finance and the freedom it provides a secret is the far greater sin.

FIRE Transition Alert: Good Savers Are Lousy Retirement Spenders

Budgeting, Early Retirement Lifestyle,

One of the hardest retirement transitions that I encountered wasn’t a loss of work identity or social isolation. Yes, I did work through some of that but those were rather quick and manageable. Here’s the thing that threw me harder- good savers are lousy retirement spenders. It has been the bigger and longer lasting FIRE transition. I still occasionally struggle with it, even after 11 years into my early retirement.

FIRE Transition Alert: Good Savers Are Lousy Retirement Spenders

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Good Savers To Lousy Retirement Spenders

Having been a successful saver and now lousy retirement spenders is certainly a fortunate problem to overcome. Especially when a Fidelity Retirement Savings Assessment found 46% of American households are at risk of not being able to cover essential expenses in retirement. The whole reason we saved as well as we did was for a better future. Sure, when it comes to spending there are all the numbers that must be respected. But then there’s the nagging mental side of things when making this retirement spending transition regardless of how good the numbers look. 

Frugal Living Got Us Here 

There’s nothing extreme about our early retirement story. Everyone has to define their own livable frugality to meet their financial goals. For our family’s frugality, we never feel like we live a deprived life. But we also don’t enjoy spending money thoughtlessly. There will always be needs, wants, and nice to haves in life. 

During the FIRE journey we were really good at sticking to what we defined as our frugal budget. It focused on our needs and only what brought true happiness to our family. A game that was hard won in the face of all the consumerist temptations and social pressures to fit in. 

As hard as it was to create what became good frugal living habits, once the game is won and numbers look great it’s just as hard to draw against savings and decide to spend a little more. Maybe enjoy some wants and “nice to have or do” things that were long set aside. We found early in our retirement tendencies to even scale down spending on things long considered part of our budget. 

The Balance Between The Retirement Budget and Covering For Longevity

A new mental spending boogaloo started to rise up several years into our early retirement. Aging adds new dimensions that I really didn’t fully appreciate in my youthful retirement planning and early retirement living. The realized reality is that our retirement portfolio and spending is a lifelong dance with changing music and tempos. I’ve already found that out as I get older. Life’s tempo does start to slow down. Aging adds new dimensions long before what we consider old age. 

Like most people, my retirement planning was more focused on the portfolio financial swings that came with market volatility, future projections, and possible inflation.

There was motivation to get out of the rat race early but I should’ve also had a higher focus on the diminishing years to play on the planet. There’s a high value associated with youth and health that is often missed in our calculations. I was doing everything right to stay fit and healthy. That might have influenced my thinking. I didn’t fully allow myself to focus on the likely future negative age related health issues that could surprisingly appear and disrupt my perfect retirement plan. 

Good retirement calculator scores help settle a retiree’s spending-troubled mind. But we just don’t really know how long we’ll be on this world and under what health conditions. I think that’s the monkey wrench in the mental works for triggering most of the lousy retirement spenders syndrome. Even without fully thinking about it, it’s always there: The fear of outliving our money, which of course is a worthy concern. It just has to be reasonable and balanced with living a purposeful retirement life, not a financially fearful one. 

My wife and I have already experienced a couple of unexpected health scares, which adds to this reluctant retiree spender mix.

These came before we reached the traditional early retirement age of 62. There’s the highly probable cost of covering future unknown but inevitable medical issues. I will admit, it took our medical scares to wake us up. All of a sudden our focus was forced to change. Now we truly realize there needs to be a balance between having enough to pay for what comes but also put a value on how we really want to spend the healthy time we do have left. 

How We Overcome Lousy Retirement Spending Syndrome

Old spending habits die hard. 

It takes time to transition from saver to spender. For us it had been a far more gradual transition over time. Regardless of how good calculated financial results looked, we knew there was little headroom with our less than million dollar portfolio and we needed to slowly and cautiously test them first. It took us seeing reality based results bounce against the simulations. Now eleven years into early retirement it appears any past financial anorexia on our part was for not. The numbers held up better than expected, even with surprises like rising healthcare costs.

My takeaway: Give yourself the time to make the retirement spender transition.

Track and test as necessary. But there’s wasted time in worrying or cutting back beyond the budget that got you to retirement or cutting the retirement budget numbers used in your retirement financial calculations. Trust in your ability to recognize any problems. Be flexible enough to counter them.

Updated our spending quotient.

To get to early retirement our spending was always done with purpose. We spent on needs and only what added real happiness to our family’s life without fluff and waste. Now we’ve also added to our spending quotient the permission to allow for spending to reduce stress or simplify life. 

Previously in my younger form if it was something I could do myself I wasn’t going to pay someone else to do it. I still struggle with this issue. But there are things I’ve always hated doing even though I’m fully capable of doing it. Life is much better letting go and paying for qualified professional tasks that need to be done. 

My takeaway: Doing full due diligence with cost comparisons and client reviews when applicable will satisfy frugal financial tendencies.

That’s what helps with mentally accepting this form of spending. 

Spending on unique experiences, each time might be the last time.

We have kids and grandkids. I remember my grandparents but it’s limited to visits with a lot of quiet chatter and sitting around waiting for mom and dad to say it’s time to go. That’s also the subject of every old photo I look through. There are no special experiences to remember them by. We’ve tried our best to be part of our adult kids and our grandkids lives. We’ve found that spending a little more on experiences with them is a whole new level of joy in our retirement.

Building memories of shared vacations and spending on experiences now with them instead of worrying about leaving more behind when we ditch this world makes for a more satisfying retirement. All of those opportunities evaporated during the pandemic and now with vaccinations and reopening of life, we look forward to returning to this big part of our retirement happiness.

My takeaway: We remember how hard it was for us when our kids were young and we didn’t have the resources or money to do a lot of things.

From vacations to simply babysitting. Doing things now that makes their lives easier while the grandkids are still kids makes for our happy retirement and will hopefully be remembered. Budgeting for and mentally opening up some of our spending so we can offer to do things with them that they might not normally be able to do spreads that joy across our family. 

YOLO with a twist.

Falling into the “You Only Live Once” thought process is usually a sign of overspending and poor financial decisions. Certainly a financial curse to many and something that must be tamed when tapped. But if there’s ever a time to recognize some of the wisdom within YOLO it’s when you have had a close call or are otherwise finally made fully aware that there’s an eventual end date.

As the years tick off, any unchecked bucket list items need to be seriously addressed or just scratched off. It’s not even about how long we will live. It’s about how long we will be fit and healthy enough to accomplish them. All of course with respect to budget and portfolio constraints. My misstep was allowing spending reluctance to overtake any other thoughts.

My takeaway: There are things I missed an opportunity to do because I didn’t get off my keister earlier to make them happen.

Missed opportunities that I either can’t do now or even really want to do now. But I still wonder if I have missed out by not doing them because of my lousy retirement spenders syndrome when my life’s time was right to do them. I will never know. But I’ve pledged that I owe it to myself to do a better job of it going forward. 

 

Once we retire after a successful run of years saving and investing to pull it off, changing from saver to spender will mess with our minds. For my wife and I, it has been a long gradual mental adjustment over many years that still challenges us. 

Being aware and having new reasons to combat mental tendencies to unnecessarily hold retirement spending back even when the numbers support relaxing spending reluctance is the first step. Then it’s giving ourselves the time it takes to work through this transition and the permission for the occasional purposeful splurge for a better retirement life. 

Can A Frugal Retirement Be Enjoyable? Mine is

Budgeting, Early Retirement Lifestyle, Frugal Living, ,

My choosing a frugal retirement is an enjoyable personal success. When you can’t ever see earning a 6 figure salary or having a million dollar portfolio you have to create a unique retirement solution. I chose to strategically make smart balanced adjustments and decrease our lifestyle cost which means less is needed in the bank to retire. Getting our lifestyle cost aligned with our portfolio amount where the retirement calculator said the numbers work became the goal. I’ve seen some frugal retirement naysayers, mostly from people who have never tried it. Now as I’ve already cleared a decade of early retirement I can say that my flavor of a frugal retirement lifestyle has exceeded expectations. 

Can A Frugal Retirement Be Enjoyable? Mine is

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Choosing A Frugal Retirement, What’s Not To Enjoy?

Why I looked for a workable employment liberation answer –

Retirement is constrained by how much money we have. All the talk about being able to replace 80% of our pre-retirement salary for a comfortable retirement is a tall task and I think I’ve proven that notion wrong. For many households including ours, it’s really tough to save a million dollars or more for retirement. With all I had experienced in my tech career that required a relocation, endless cycles of layoffs, reorganizations, etc., my having to survive working into my 60s or later was something I couldn’t stomach as acceptable or even viable. In 1998 at age 40 I decided that I wanted to explore early retirement options and began my 10 year early retirement plan. 

We didn’t let the million dollar portfolio barrier deter us from early retirement. That’s when frugality became the solution. But it had to be done right or not at all. If it was a joyless existence of austerity it wouldn’t be worth it. While some choose extreme frugal practices, ours was uniquely measured to fit us. 

The Fun Stuff – 

I want to clear the air up front and get past notions of a frugal retirement as sitting in a small apartment or RV with a TV as the only entertainment. While some may call that heaven, that isn’t at all close to our retirement lifestyle. We stayed in our 2 story home close to our daughter’s families and have what we call a frugal budget. It not only covers all of our living expenses, but includes our hobbies, entertainment, and much more.

Travel- 

We travel as much as we want to. Other than a Hawaiian vacation bought through Costco Travel a couple of years ago, we usually prefer budget friendly road trips. We have our go-to destinations of the Black Hills SD and southern California where we hunt for and lock-in great lodging deals ahead of time. We also travel yearly to places where we enjoy visiting and staying with extended family. All on a yearly travel budget of $3,500. If we over do something and go over one season we adjust down the next, make other budgeted adjustments, or accept any slight overrun for the year.  

Holidays-

We enjoy making the holidays merry just like anyone else. With grandkids there’s always something going on from Halloween to New Years. We have a $1,500 holiday budget that covers family outings, celebrations, and gifts. 

Dining Out-

We dine out on occasion but we aren’t hooked on going out to eat a lot. In fact, by the time we return from a vacation we get pretty tired of restaurant dining. We do dine out for special occasions and typically try to use a promotional discount or coupon of some kind. I happily admit to useing our advancing age to our advantage and get senior discounts when available. Dining out comes out of my misc budget which also covers other random household, automotive, unplanned but expected non-fixed monthly spending. 

Activities-

When you look you find all kinds of free activities and events. The only cost is getting there and what you spend once you are there. Food trucks and beer vendors are always around. We go with a $40 cash budget in mind for events and it comes out of my misc budget. It’s always easy to stick to. We typically go to events to enjoy the venue, not load up on expensive food or drink. We have a habit of going with a beverage in hand to start things off and have already eaten a meal. I do love a good draft beer and that is always a budget challenger while attending events. 

Coffee Shop-

Every frugal person goes on about ditching the lattes. I do enjoy a good cup of drip coffee or an Americano and frequent an independent coffee shop in my town. It also serves as my daily social outlet. I have gotten to know many people in my town there and have been able to greatly expand my social circle beyond what had only included work peers before retirement. I have a $40 a week petty cash, aka pocket money allowance in the budget that covers this and everything else that’s a small random purchase during the week. 

Movies and TV Entertainment-

We cut the cord years ago and not sending that bill in every month still puts a grin on my face. I installed an attic type antena and used the existing coax cables running through the house to hook up our TVs on every floor that had cable before. Between over the air and online streaming with a Roku or Chromecast dongle we get all the programming we want. For movies we checkout free DVDs from our local library or use a standard $13 a month Netflix.  

Hobbies-

We do have hobbies in retirement. My biggest is an automotive hobby. Although that can be expensive if buying cars, my oldie has been with me since 1993. The hobby cost comes from the events I attend. Like other events, I set a cash budget. Any out of town events are aligned with planned vacations. Car maintenance comes out of my monthly misc budget. I did have a 21 year old Corvette that I gave up this year for a fun but rationally more practical all-season any weather or road condition convertible Wrangler. The difference between the two in the purchase amount was outside our 2020 budget and will be listed as a one time charge off. I had just survived a serious health scare and was ready for a change. It was also about a 45 year bucket list item I wanted to scratch off and it only happened because we had the extra funds to do it. Our frugal retirement allows for the occasional splurge.

Cell Service-

I see people spending way too much for their cell plans. I still use an old $100 a year pay as you go flip phone plan that I never use up all my prepaid account balance. One that brings a laugh from people around me every time I take a call. My wife uses an iPhone on a $10 low cost cell and data plan. We can live frugally and still stay connected to the world as much as we want to. 

Day to Day Lifestyle Cost and Spending-

What we did was push against our frugality threshold. When we went too far we backed off. The idea was to cut costs that didn’t have real happiness values and do so without feeling deprived. As opportunities to improve our frugality came we took them. There are many frugal living decisions we can make. There are just as many frugal living tips to put into practice. We embrace purposeful spending. Seldom is anything bought on whim without thinking first about whether we really need it, getting it will add something positive to our lifestyle, or if we decide to get it, getting it for a better price. We also won’t just settle for cheap. A needed quality product that may cost a little more but will last and do what it is supposed to do is what we target. 

Our 2020 Retirement Budget Numbers

We do not live in a low cost area of the US and live in the house we raised our 3 kids in. The last report I found of the median household income where I live is $121,000 and it’s most likely higher than that today. As almost everywhere else, based on the cars I see in the driveways and the cost of some of the housing around here, most people are living paycheck to paycheck. Here’s a peek at our retirement lifestyle budget figures for 2020. It’s based on the previous year and adjusted when necessary like once we see actual property tax assessments, insurance increases, etc. This should give an idea of what our definition of a frugal retirement that’s sustainable, enjoyable, and that works for us: 

  • Utilities: Water/Sewer/Power/Natural Gas/DSL/Cell/Netflix – $3,500
  • Insurance: HomeOwners/Umbrella/Autos – $4,400
  • Home Property Tax – $2,800
  • Healthcare Insurance: Medical/Dental –  $15,990
  • Out of Pocket Healthcare/Predeductible) – $4,000 max
  • Petty/Pocket Cash – $1,960
  • Misc: Repairs/Maintenance/Dining/Purchases/Gas/etc. – $9,000
  • Grocery/Toiletries/Cleaning Supplies/etc.- $10,400
  • Travel – $3,500
  • Holidays/Christmas – $1,500
  • Federal/State Income Taxes – $3,500

Total yearly budget $60,550

Will we be on budget for 2020? 

We will come in under budget this year. We are not traveling during the pandemic nor having family celebrations as normal. Events have all been a no go. Some things at the grocery store cost more but other expenses have all but disappeared. Just because we have a budget doesn’t mean we have to push against it. Hoping 2021 is a little closer to normal.

Are you thinking that our retirement budget isn’t very frugal?

There are plenty of frugal living stories of those living an enjoyable life spending less than we do. I love reading about what other people do and get great ideas but I don’t compete in frugality games. Here’s why I feel confident about considering our retirement lifestyle as frugal.

  • Our retirement lifestyle budget is just under 50% of our town’s median household income. We get to live here and enjoy all that it offers at a discounted price.
  • That 2020 budget figure comes in at 42% of our actual, not inflation adjusted 2009 household joint tax return AGI. That AGI was eleven years ago when I retired. Sure beats that 80% pre-retirement salary recommendation some experts throw around. 
  • Our yearly budget is the equivalent of us both earning $15 an hour at a full time job. An amount recommended as a dignified minimum wage.
  • When looking at the budget breakdown, our living expenses are fairly low at nearly $40K if it weren’t for ridiculously high healthcare costs. Health insurance and its associated out of pocket represents a full third of the total budget. In 3 years we will see a big part of that cost decrease when we are Medicare eligible. That along with my eventual Social Security that will also reduce our IRA withdrawals, lowering our taxable income for less income taxes.

Frugality Is Personal, Make Sure You Can Enjoy Yourself

We have been more frugal in the past when we needed to be and we still make adjustments to stay in our frugal living sweet spot. Our frugality isn’t defined by anyone else’s definition of frugal living. It’s based on what makes sense to us while still meeting our financial sustainability goals. All of this became the model for our frugal retirement lifestyle. What’s not to enjoy about that? 

I won’t nor can tell anyone what they should cut to live a sustainable and enjoyable frugal lifestyle. That has to be figured out by each individual and their unique circumstances. Everyone’s frugality threshold is different. Living a life feeling deprived is not an enjoyable way to live if you can do something about it. 

I want to give a shout out and a thanks to Feedspot’s top 10 frugal retirement sites that rated Leisure Freak at number five for 2020. Check out their list if you want to find sites that can provide ideas for successfully living your own frugal retirement lifestyle. 

Ditch The FIRE Movement? If Dissatisfied Then You’re Doing It Wrong

Budgeting, Frugal Living, Retirement Plan, , ,

It’s one thing to be a conforming consumer. Blind to the trappings of debt and undisciplined spending. Least forget the unending cycle of unrewarding work needed to support it. But it’s another thing when folks walk away from FIRE dissatisfied after they’ve been awakened to the possibilities of financial independence and maybe even an early retirement. If you’re dissatisfied and have decided to ditch the FIRE movement, then maybe you’re doing it wrong. 

Ditch The FIRE Movement? If Dissatisfied Then You’re Doing It Wrong

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There’s a lot of impressive FIRE stories to be found. 

The FIRE pitch is seductive. A glorious freedom lifestyle awaits all who dare challenge society’s consumption, employment, and retirement norms. We can be inspired by other’s FIRE success. There are some amazing people who are in their 20s, 30s, and 40s saving as much as 70% of their incomes to build a portfolio that’s at least 25 times their annual lifestyle expenses. 

They hit their numbers and retire early to live off their chosen safe withdrawal rate doing whatever their passions direct them to do. Many even taking on side hustles or other paid opportunities aligned with their interests. After all, a FIRE Retirement is the absence of needing to work, not the absence of working. It’s easy to fall in love with matching their success formula. 

Stop Keeping Up With The Jones’s and FIRE’s Most Famous

FIRE walkers fully accept the concept of not wasting time and money trying to keep up with the Jones’s. But sometimes that concept is ignored when it comes to creating a FIRE strategy. Especially if trying to reach the common FIRE before age 50 goal. 

The problem is that not everyone can match what some of FIRE’s most famous have done in a long-term sustainable manner. Either because of income or frugality. It’s clear that a plan that goes too soft will mean little seen as financial progress. But pursuing an aggressive FIRE plan based solely on the success of our FIRE superheroes can be a recipe for disillusionment. Go too far for too long and feelings of a living a deprived life creep in. The thought of living that way for the rest of one’s life can be daunting. 

Don’t Ditch The FIRE Movement. If you don’t like the taste, just change your recipe

There are no FIRE rules but you can still be approaching FIRE the wrong way. Not wrong as far as anyone else is concerned, there are no FIRE police. Just wrong as far as how your approach to FIRE impacts you. I came across a post by Ben Le Fort that lists the Ten Commandments of FIRE. Personally I prefer to use Tenets over Commandments but it captures in detail the following for anyone who wants FIRE:

The 10 Commandments of FIRE
  1. Thou Shalt Calculate your Savings Rate
  2. Thou Shalt Track thy Expenses & Create a Budget.
  3. Thou Shalt live a Frugal Life
  4. Maximize your Income
  5. Thou Shalt Not fall Victim to Lifestyle Inflation
  6. Clear your Debts
  7. Thou Shalt max out your tax-Sheltered Accounts
  8. Minimize your Investment Fees
  9. Thou Shalt not try to time the Market
  10. Talk About Money

There’s nothing pushing FIRE walkers to unsustainable extremes other than themselves

These FIRE tenets are not extreme unsustainable principles. But it’s easy to push too hard when being fueled by not only what we see others have done, but also the intoxicating thrill of watching the snowball effect destroy debt and grow wealth. However, we must logically define what we can realistically support and want for the long-term. Our limits in income and frugality need to be leveraged to our full advantage. But that must also come with the goal of living a happy life. 

From the stories I read of folks who decide to ditch the FIRE movement, I see in their complaints that everything they did was concentrated on numbers. They lamented cutting and living without things that brought them joy. Their plan left out that very personal component of a happy and enjoyable life of which only we can test and measure.

Create a plan that allows you to still enjoy the ride

Forget about having a take no prisoners plan. 

FIRE includes making lifestyle choices to optimize our savings rate. We decide what brings value to our life and cut the waste. Figuring that out isn’t always clear. We should push hard against our frugal thresholds without overly breaking them because it leads to feeling like we are living a deprived life. 

I know from experience that I won’t always know what that frugal threshold is until I break it. Then it’s time to adjust and back off a little until the real threshold is revealed. 

The idea is to create a sustainable lifestyle for the long-term that we want to live with now and after we ditch the rat race. Some of us aren’t happy or ready for a life where we never go to a coffee shop, out for a meal, attend a concert, or hit a movie. We should have a plan that allows for the little things we enjoy doing, but done in a thought out balanced way. Constantly test your frugality thresholds. 

FIRE and career can be worked on at the same time.

It’s OK to enjoy and even love what you do for income. Our jobs are key to reaching FIRE. Make decisions that best leverages your personal finances, career moves, and your life’s happiness when pursuing FIRE. We should be driven to improve our career prospects but don’t let numbers alone drive you. Watching a growing portfolio will not make you happy if you hate your budget and/or job.

Stop comparing and trying to keep up with FIRE’s most famous

Sometimes it seems like there’s a race to see who can retire the youngest or spend the least. Extreme stories are amazing and inspirational. But those stories aren’t going to be a one size fits all FIRE solution. Instead they should inspire ideas that can be used in a sustainable way for your own plan. 

We all have unique parameters to work around from income and frugal thresholds to the cost of where we live and family size. You can’t buy back years of regret, for either going too soft or too hard in your FIRE plan. Find your own sweet spot.

Create a FIRE Optimized Lifestyle You Look Forward to Living

I’m no certified expert, just someone who retired early at age 51 nearly a decade ago with an ordinary FIRE story. We did use frugal living to boost our savings rate. Over my 10 year early retirement plan we cut waste and tweaked our budget. We kept the things we valued that added to our happiness. In some cases we found that some things we cut was actually worth paying for and brought them back. Through it all we created a smart frugal and balanced lifestyle that got us the increased savings rate to retire early while still living the lifestyle we wanted to live. Both during the FIRE journey and now in early retirement. 

If in your FIRE journey you have apprehension and concern of forever living a deprived life by pursuing FIRE, then you’re just doing it wrong. Instead of deciding to ditch the FIRE movement, make necessary tweaks when feelings of austerity and deprivation hit. Always make sure that any tweaks are well thought out so that they don’t overly undercut your savings rate. For most of my tweaks it was just a matter of using sometimes instead of never or always to find the right balance. 

FIRE Is A Worthy Goal 

Even if you can’t win a race for the earliest FIRE age, doing the best possible for you is always financially better than doing nothing. Your Future You will certainly appreciate it.

Frugal Not Cheap: 3 Important Differences

Frugal Living,

There are many differences between being cheap and being frugal. Someone who is cheap does not want to spend money on anything, regardless of its value. Someone who is frugal understands the value of things but wants to cut costs when possible. It is important to understand these differences in the following situations.

Frugal Not Cheap: 3 Important Differences

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Short-Term Versus Long-Term Savings

Initially, it might seem like a good idea to brew your own coffee at home to cut costs. Cutting short-term costs such as coffee, fast food, or groceries is always a good start. It can save you a few dollars here and there, of which can add up if sustained. But it’s unlikely to affect your financial situation significantly on its own. Much of these kinds of costs are a great target for disciplined reduction. But since they can play a role in your social life, may cause reason for the cheap label. That’s why the frugal minded will also consider long-term savings.

Many people focus on cutting short-term costs but fail to price-shop for things like auto loans, mortgage rates, and all of the different insurance policies that we need. Price-shopping can be a hassle. But being frugal means considering the long-term and finding ways to reduce their insurance premiums, interest payments, and repayment fees. 

Another long-term savings target are the services you use. Phone, internet, and cable or satellite TV are areas where price shopping can provide long-term savings. Also consider only buying the service level you really need. Frugal thinking asks why pay for unlimited when it’s not needed or is it even needed at all. 

The amount of money you will save by price-shopping on larger purchases and other monthly services is incomparable to what you will save when just cutting a few dollars here and there.

Risk Versus Reward

Financial risk is sometimes necessary to see a profitable gain. People who are cheap might hold onto their dollars so tightly that they fail to take any necessary risks. Frugality is about considering the bigger financial picture. Consider your plan for retirement. One of the most common ways to increase your retirement account funds is to place them into well-researched low-risk investment accounts that follow the market. There are different degrees of risk, but someone who is cheap is likely to avoid these types of investments altogether. 

Although having ready cash available in an emergency fund and for short-term needs, investing the savings generated from disciplined cost cutting is a hallmark of frugal living. Frugality has a strategic mindset where you aren’t just holding onto your money, it is put to work for you. 

It includes investing for a better future. It requires having an open mind and learning about all of the ways to add value to your life and savings. There’s a lot to learn, from passive low-fee ETF investing and dividend investing, to active real estate investing and using technical analysis to make informed trade decisions with swing trading. But if you are being cheap with a closed mind and never advancing your knowledge about what’s available, how would you even know about them? Being frugal means doing the research and making informed investment decisions.

Frugality has you looking for ways to not only cut spending costs, but also how to best leverage your savings for the highest returns within your investment risk tolerance. Being cheap and avoiding taking risks entirely will make it difficult or impossible to increase your profits or to save the funds you require to retire comfortably.

Quality Over Quantity

Someone who is cheap will only consider price whereas someone who is frugal will also consider value. Someone who is cheap might choose to purchase clothing items from a discounted retailer. While your initial purchase might cost less, keep in mind that quantity usually does not indicate quality. The clothing items you purchase from a low-end retailer are going to fall apart much faster than something made with better materials.

Frugality, in this case, would mean finding ways to save on higher-quality items instead. This might mean buying secondhand goods or using discount cards. Otherwise, when you add up the cost of purchased items, you might find you’re paying more over the long-term for the items of lower quality.

Cheap and frugal are often used synonymously to describe the same type of person when they are actually very different things. 

While cheap people tend to focus on the price of something, frugal people look at the bigger picture and cut costs to afford more important things. Important things that include becoming debt free, having financial freedom, and saving for retirement. Understanding the difference between the two is key when preparing for your financial future.

What You Need to Know About Retiring in a Foreign Country

Relocating in Retirement,

The number of people who choose to retire outside of their home countries is significant. Consider these statistics. According to the U.S. State Department, around 8.7 million Americans live overseas, and more than half a million continue receiving payments from the Social Security Administration. Further, while around 247,000 British citizens aged over the age of 65 live in other EU countries, around 85,000 EU citizens from the same age group live in the UK.

If you wish to retire in a foreign land, it is important that you plan your finances well in advance. Fortunately, access to a range of online resources tools helps simplify the process.

What You Need to Know About Retiring in a Foreign Country

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Do You Receive State Pension?

Whether or not you may qualify to receive pension payments in a foreign country depends on where you have lived and worked through your life. Residents of the United States may qualify to receive their social security payments in foreign countries once they spend at least 30 days outside the U.S. The department provides an online tool that lets you determine if you qualify.

Citizens of the United Kingdom stand to receive their state pension payments in most countries the world over, unless the country in question does not have a formal social security agreement with the UK. Some of the nations that do not make the cut include Australia, Canada, India, New Zealand, Pakistan, and South Africa. You may view the complete list online.

 

Is Receiving State Pension in a Foreign Country a Good Idea?

When you receive pension payments in a foreign country, there is a good chance that you will lose some money during the process. This is especially the case if a bank is involved in the process, where you have to deal with unfavorable exchange rates and steep fees.

In such a scenario, you might be better off continuing receiving your pension payments in a local bank account. Then, you may use the services of specialist money transfer companies to carry out more cost effective international money transfers. Some of the market leaders from this realm include TransferWise, XE Money Transfer, OFX, and WorldFirst.

 

What About the Cost of Living?

One of the main reasons behind people wanting to retire in foreign countries is the lure of living a good life, especially when it involves countries with typically low costs of living. Calculating just how much you might need over time based on this factor is vital, because you don’t want to run short of funds somewhere down the line. To determine costs of living in different places, you may turn to websites such as Numbeo and WorldData.

 

Have You Saved Enough?

Don’t even think about moving to a foreign country if you don’t have enough money to get you through the first year comfortably. Account for costs such as rental deposits, money involved in setting up your new home, shipping fees, and legal fees. You may continue keeping a large chunk of your savings in a bank account in your home country, especially if you’re worried about the absence of federal protection. You can then keep transferring money to yourself as and when you need it, by using the services of specialist money transfer companies.

 

Conclusion

There is more to retiring in a foreign country than having your finances in order. For instance, you need to determine how good you’re at dealing with cultural differences or different types of cuisines. Some countries have strict guidelines when it comes to the purchase of property by foreigners, so this aspect requires your attention too. All in all, moving overseas to retire requires that you do your groundwork ahead of time.

 

This informative article was contributed to Leisure Freak by Gavan Smythe.

About the Author

Gavan Smythe is the founder of iCompareFX. You may use this online platform to compare the world’s best international money transfer companies across offered services and features. When he’s not working, Gav likes spending time with his family.

My Early Retirement Spending Miscalculation, It’s Less Than Expected

Budgeting, Early Retirement Lifestyle, Retirement Plan, ,

I was looking at my retirement budget calculations. Just a quick glance at the planned long-term numbers I used pre-retirement to ditch the rat race at the age of 51 on December 17, 2009. I’m happy to see that after 9 years of monthly retirement budget tracking I made an early retirement spending miscalculation. Happy because it’s in my favor.

Overestimating early retirement spending is certainly a good thing. When we plan for retirement we have to figure out how much retirement income we need. It comes down to estimating what our retirement budgetary needs will be and applying inflation to the equation. To get our starting number we guess what costs will go up and what costs will go down once we dance our way out of the workplace. But it’s all an educated guess. We won’t know until we are actually living our desired retirement lifestyle and the real inflation rate is revealed down the road.

My Early Retirement Spending Miscalculation, It’s Less Than Expected

Photo by Andre Hunter on Unsplash

It’s Easy To Make A Retirement Spending Miscalculation

The default advice is you’ll need 70% to 80% of your salary in retirement. That didn’t make sense to me as I was saving a high percentage of my income for retirement. I also expected to pay less taxes. I took the approach that I needed 100% of my pre-retirement frugal living budget minus estimated savings of work related costs like commuting, clothes, and the alcohol I had depended on to counter work induced stress. Then I added 10% to cover my tax obligations. That final estimated figure was far less than using the salary based calculation.

Once I settled on the budget amount I then applied a reasonable yearly inflation factor of 3%. That is except for healthcare. I pulled that amount aside and applied a 6% inflation factor against it to get a closer estimate. Running the numbers through a retirement calculator and coming up with good results is the green light to take the leap.  

The high level retirement spending miscalculations –  

My early retirement spending reality is that healthcare went way up over that 6% inflation amount each year while some others were less than the 3% I used. Some things I initially budgeted for have even disappeared. That’s because things change as we live and experience retirement doing the things we want to do. We settle into an entirely new way of living and our taste for certain things changes over time. Here’s some of my early retirement spending findings.

Healthcare – Medical Insurance

Nobody should be surprised that this went way higher than inflation for everything else. It’s my biggest retirement spending budgetary item and pre-retirement miscalculation. When I retired in December 2009 my retirement health insurance benefit cost $476 a month. For 2018 it was $1,064 and in 2019 it will rise to $1,340. Ouch! The difference between 2010 and 2018 is 123%. That’s a huge healthcare cost increase over 9 years. It should be easy to see how this one will skew anyone’s retirement spending calculations.

I thought doubling to 6% would be high enough when I separately calculated inflation costs for this item from everything else. I figured it was a reasonably obscene inflation percentage to make sure this expense item was covered. The reality is it should have been calculated using a 12% inflation rate. Aside from the company killing this retirement benefit (as they occasionally threaten) and our going on ACA if it still exists, I see little relief from this until our medicare years. I have adjusted future budget projections to reflect that realization.

Cable TV and Entertainment

When I retired we had a basic cable plan. That was our family’s frugal living compromise. Our retired parents all said with more time in retirement you will want to have a good paid TV package. Thinking our basic cable plan was plenty, I included it in our retirement spending calculation. When I retired my cable cost $35. Over the first 6 years of my retirement the same cable service slowly climbed to $92 a month with all their higher channel and fee increases. That increase was well above the 3% inflation rate I used.

We found in our retirement the opposite of our parents retirement experience. We were satisfied with local TV viewing and really only watched a handful of cable channels. It didn’t justify the cost. The nationwide analog to digital TV transmission upgrade and new antenna designs made cutting the cord easy to do. Streaming development also made paid cable or satellite service an easy retirement cost to eliminate.

We have also eliminated other entertainment cost.

We’ve started using our library where DVDs are free to check out. We also connected to our community’s event online calendars to get event email notifications and have enjoyed free concerts near us. Having time also allows us to go to the movie theater or other venues during off hours at a discount.

Retirement brings more spare time but it didn’t raise our TV and entertainment cost. It instead lowered them.

Mortgage

I retired with a modest mortgage still on the books. I calculated our monthly payment into our retirement spending calculation without thinking I would ever pay it off. But then I started a short but sweet encore career. Since I was basically living off of my retirement funding I simply directed 100% of my paychecks to the mortgage and cleared it within 18 months. This move is what made the insanity of rising healthcare cost a near wash for my early retirement spending miscalculation. This is a case of you won’t know what will impact your retirement budget until you are retired. You simply don’t know what you will do until you do it. I had no idea this would happen when planning my early retirement.

Eating Out

Even with all the free time, restaurants didn’t call our name any louder than they did before. In fact they are even harder to hear. Initially we took advantage of happy hour discounts but soon got over it. We prefer home cooked healthy meals and we now have the time to make them. We spend 50% of what we initially modestly budgeted for this.

Travel

We had a decent travel budget. We try to save money when we travel and have done that for decades. With retirement we have time to look for deals and can travel off-season. We also can make reservations and lock into deals months in advance. Another thing we have experienced is our appetite for travel has decreased over the 9 years of retirement. We simply like where we live and play. As far as travel goes we prefer quality experiences to quantity of travel. Although the cost of travel has increased over the years, I’ve found that we travel as much as we want to but are spending the amount we started with. Our travel spending has seen a near 0% inflation increase over these 9 years.

Fuel

I calculated a 50% drop in fuel cost once I retired. Simply thinking that I would be using some of my extra free time to go places but also subtracting out my 20 mile (200 miles a week, whoa!) work commute costs. In actuality the drop has been closer to 75% of our pre-retirement cost. We shop local and travel shorter distances and prefer to spend most of our time outdoors, not driving somewhere. We are lucky that we have outdoor recreation and everything needed within 5 miles of our home. Not only is fuel cost down but so is all auto maintenance like tires, brakes, oil changes, etc.

Taxes

I was paying a large percentage of income in taxes when working so I calculated 10% for my retirement income tax obligation. The reality is when I am not working it is actually only around 5% of total retirement income. Some of that is due to using a more tax efficient withdrawal strategy that I hadn’t considered before I retired.

The Takeaway From This Early Retirement Budgetary Exercise

This exercise wasn’t a yearly spending study.

I merely looked at our initial retirement budget at the end of 2009 with my planned yearly projected increases using our applied inflation estimate. Then I compared that to our spending for 2018 to see how it tracked.

I was happy to see that we are 14% less than what our calculated long-term 2018 budget projection was.

2018 was a year where we did everything we wanted to do. It was also a normal year without any catastrophic events.

For the between years there was one that did go over budget projections. It was a bad year due to a medical crisis. But the other years came in under spending calculations, some much more than others depending on retirement life events. For instance the year we paid off our mortgage and a couple of the following years before health insurance had risen so high came well below the earlier budget calculations.

Having a plan matters.

I believe this shows that having a reasonable plan along with purposeful living and spending discipline, even crazy stuff like obscene healthcare increases won’t necessarily derail one’s retirement plan.

It’s good to have an emergency fund or access to other funding in retirement.

Having the means to carry us through a bad spending year is important. The medical crisis year that we experienced could have caused problems if we only had a fixed monthly income to depend on. We need funds beyond our sunny day budget projections to get through any rainy years.

Retirement life happens and things can change.

During retirement we will do things, stop or decrease doing other things, and make decisions that we couldn’t know to plan for. In my case starting that encore gig and casually paying off my mortgage was a decision that had huge implications in the outcome of this exercise. Had I instead invested my salary, my retirement spending would have been ratcheted higher by healthcare. I would however have more money in my portfolio. Hopefully doing that would have provided higher income to counter the retirement healthcare spending increase. I think I made the better choice.

Inflation is tricky to predict but plays a huge role in planning and outcome.

I admit that my first nine years of early retirement came with many lifestyle cost items having an actual low inflation rate. Healthcare’s massive increase ate solidly into what should have been a stellar lower than expected retirement spending amount. However, had I correctly applied the higher 12% inflation rate to my healthcare calculation the results of this exercise would be off the charts in my favor. The opposite is also true. If we begin to see hyper inflation increases across the board then we have to recalculate our budget going forward. Hopefully investment income can keep up but if it can’t then spending control or possibly returning to a paid opportunity is our best defense.

Having more free time doesn’t necessarily mean spending more to fill it.

I thought we would spend more than we are for travel, entertainment, and all else we do when we are out and about. Although this was partially true in the first couple of years of our retirement, it didn’t stick. In our case having time allows us to save money while still doing everything we enjoy doing.   

Retirement Comes With All Kinds Of Spending Variables

Everyone’s retirement experience will be different. Things like retiring with a child at home that causes spending changes as they age, experiencing a health crisis, or finding out during retirement that you are a passionate travel freak, can throw all projections out the window. If that happens it will hopefully be short-term and you can find yourself back on track or find a way to adjust your budget to meet your retirement’s new spending needs.

Retirement lifestyle cost is a concern for most people when they decide to retire.

What I have found is that as long as there is a reasonable plan based on the lifestyle we want to live and can afford to live, we have a retirement funding cushion available for any bad years, and we  monitor our spending, we can overcome most challenges before they become a huge retirement financial nightmare.

There are no guarantees in life or budgets, but worrying too much about things does no good. Instead know that planning well and tracking our spending gives us the best chances. If the worst should happen then it won’t be due to head-in-the-sand financial recklessness.