Saturday, August 16, 2008

My Early Retirement Budget

Every once in a while I like to write out my goal to retire early to help keep me motivated. Of course I have my budget on a spreadsheet with 6 different scenarios and I have my retirement plan on another spreadsheet with 6 different scenarios. My budget is $700 right now but here is my pared down budget after I retire:

Budget:
$44 Car insurance and registration
$50 Gas (I won't be commuting anymore)
$39 Cell phone
$36 Life insurance (not sure why I have this)
$80 Food (this will be a challenge)
$40 Electricity
$3 Trash (trip to dump every 3 months)
$30 RV registration and insurance
$68 Property tax
$9 Mobile home tax
$4 AAA (in case my car breaks down in the middle of the desert)
$37 Internet
$20 Christmas gift fund
$140 Health Savings Account
Total= $600

Total income from rental house after I pay off the mortgage= $600

I'm still 2-3 years away from paying off the mortgage but after that, with my basic bills taken care of I will be able to pursue other goals like travel, volunteering and hobbies. I also want to get a fun part time or seasonal job for extra income and experience. Maybe something in the arts or gardening.

I also have my retirement fund which I am hopefully not going to touch until I am 65. By then if the stock market plays along and increases my investment by an average of 9%, I will have $942,000. I can't imagine what I will do with that money if I am used to having such a low standard of living but I'm willing to give it a try. I'm sure I'll think of something.

32 comments:

Sallie's Niece said...

woohoo, that seems awesome, retire away! Do you have health insurance though?

Daizy said...

Hello Sallie's Niece. Thanks for visiting. I love finding new blogs like yours to read.

I have the $140/m premiums for a high deductible insurance plan in my budget but I don't have any extra contributions (up to $2,850/yr for a single person)for the Health Savings Account that I would have to set up. That's one reason I would still need a part time job but even if it was just minimum wage it would still be ok. My only requirement is that the job be so fun that it doesn't feel like a job.

Sallie's Niece said...

Hi it's nice to find you as well. I can't believe you're going to pay off your mortgage in two years, congrats! How long have you had your house? I would love to retire early and get a fun job instead - for me it would be in the vacation industry. I hope to read more about your plans!

Daizy said...

It will be 4 years in October that I have owned my house. The first 3 years it was just my big doll house. I bought furniture and decorations and plants for the yard while paying the minimum...and I wasn't even living in it full time. That was when I had a much better paying job. Since I got laid off from that job 2 years ago I decided I didn't want to be paying it off for 30 years so 9 months ago I embarked upon my extreme payoff plan. 2-3 years to go depending on what I'm dealt in the next few years.

Michael said...

$80 for food is a stretch... unless you're going to eat Ramen noodles twice a day. That's just $2.67 per day after all.

Also, are you sure you want your trash to pile up for three months!? Even after just a month, I would imagine the trash would be rather rancid.

I hope you don't take this as an assault on your blog; you just may want to check into the feasibility of such a shoestring budget.

Rebecca said...

I'm surprised that you don't have a "travel" budget. In retirement, it seems most people want to travel more since they are now free to do so. So, I would assume that you would also want to start traveling more.

Btw...you are an inspiration to be able to pay off your mortgage so soon. Your dedication is amazing! I'm working on getting that dedication very soon :)

Daizy said...

Hello Michael. Thanks for the comments. My minimum budget is just a safety net equal to my rental income. I plan to have other income to supplement it from temp or part time work. $80 for food for me is strict but I eat spaghetti a lot. And if I'm visiting family they will feed me right? Just kidding. I'm not planning to mooch off relatives too much :)

For my trash I make sure I separate all biodegradable items and don't throw any wet things in the trash. Liquids go outside or down the drain, food waste goes in this big hole that the neighbor dogs conveniently dug for me while chasing ground squirrels. The recyclables go in another bag for the dumpster outside the library. I generate about one kitchen bag of trash a week, so that would be around 14 bags for 3 months. I keep my trash in my mobile home to keep the pack rats out of it(I learned that the hard way).

Daizy said...

Hello Rebecca, I don't have travel in my minimum budget because there wasn't any room. The budget is limited by the rental income of $600. Travel is one of those things that I will only be able to do if I get a part time or temp job...such as if I want to go on a trip I'll work a full time seasonal job for 2 months and then I'll go.

I did a lot of traveling in college so I am not very interested in traveling just to travel. But if I want to visit someone or someone wants me to go with them I'll be free to go!

driger said...

and what if your car breaks down? or you need to maintain your property? or you want a new tv? you need something for miscellaneous expenses. i know, i retired a couple years ago at 45. if your living frugally, a $1000/mo is more realistic. $1500/mo is more comfortable.

Daizy said...

Yes Driger, there are lots of potential expenses that aren't covered in the minimum budget but it is just a safety net while I find out what kind of fun job I want without worrying about salary. An $8/H parttime fun job would provide $550 extra per month for other expenses. Idealy I will find something fun that makes good money too but I'm not holding my breath for that.

driger said...

and don't forget to include future inflation.

cheers.

Daizy said...

Inflation is definitely a concern. Hopefuly rental rates will increase with inflation so I can charge my renters more as the years go by.

driger said...

one final note.

regarding healthcare, learn to work the system. for example, arizona has healthcare for the low income that covers nearly 100% of costs.

and retirement is about freedom, moving on to do the things you love. for me its investing, being a "do it your selfer"(very satisfying and saves money), some hobbys, spending time with family and friends, and fitness. i'm not getting the monthly check anymore, but i love my lifestyle, yet still feel productive.

make sure you'll be happy with the lifestyle your moving on too, and can do the things you love, and won't get bored. and retired or not you'll always have a need to feel productive. in fact i hate the word "retired", i've just moved on to other things.

anyways, sounds as though your off to good start.

good luck. i hope you find my comments constructive.

Daizy said...

Driger, I do appreciate your comments. At what age did you 'retire'? I did get bored when I got laid off from my last job but I was kind of freaked out because of the mortgage payment, dwindling savings and no job. When I get rid of the morgage I will get rid of that paralyzing fear. I have so many things that I want to do that I have a hard time deciding what I will do first...but the dreaming and planning are part of the fun.

driger said...

i retired at 45, and i am thoroughly satisfied not having to show up someplace at 8am everyday. felt a little wierd for a couple weeks. but i'm healthier, and happier doing the things i love. i feel more like i'm 30 again. can't put a price on that. but going back to work is still an option.

Daizy said...

That's what I want too, to be happier and healthier. I guess I just have a depressing job at the moment. I'm sure you had more money when you retired than I will since it sounds like you fully retired, no need for supplemental income. Do you have a seperate retirement account that you will access at 59 1/2?

driger said...

well, i'm single have no debt, a home, savings, a 457 retirement fund(i can draw that now, no penalty) and a pension at 55. i figure i can spend more if i really wanted to, but only spend around 1000-1500. it seems you have some retirement money you can tap into if you need to, although the stock market on average generally returns 7%, not 9%(but who knows), over the long haul. i had a good job, but got tired of it also, after so many years. just felt it was time to do something else. i guess all jobs get old after awhile, but like i said you always go back to work if you want to.

driger said...

cool, i see your in arizona. i snowbird to tucson. theres plenty of healthcare assistance there for early retirees and the low income. i think its through pcap, and ahcccs.

jjames said...

Only $40 for electricity. Seems low given tucson's blistering heat.

Daizy said...

Thanks for visiting jjames! Yes, $40 for electric would force me to get more creative. My last bill for July was $68. If I wasn't working all day I wouldn't have to leave the AC on for the cat at 7am in the morning. I could use fans more or just leave the windows open longer. The biggest cost reducer would be to go to a cooler state for June-September!

Daizy said...

driger, thanks for the healthcare info, I will look in to that. In what state do you spend your summer? Do you have other retired friends? I think one reason people think they will get bored is because all their friends still have jobs. I can't even find anyone to talk to about early retirement except online. People just assume they will work until 65 at least. I am lucky that many of my friends and family are stay at home moms so they are available for visitors all the time (as long as I don't mind hanging out with the kids). They can't relate to the early retirement thing but at least they appreciate a chance at adult conversation!

driger said...

i reside in northern nevada. if you were to visit your parents in washington for 4 months, during the tucson's hot months, you could avoid some utility bills. i assume you could stay there cheap, they would enjoy your company, and maybe you could help them out, too. otherwise look into a "swamp cooler."

i keep in touch with my old friends from work, by email or telephone. yes, most of my friends are working. but its not a problem, i keep myself busy with "diy" projects around the house, or other hobbys.

cheers

driger said...

you can call your working pals, and liston them tell you how tired they are of working. lol.

Daizy said...

Yes, driger, visiting the parents during the hot months is certainly an option. I would want to buy a small RV to put in their yard because they are allergic to my cat. Plus I would want my own little place to hide. My sister has an in-laws suite in her basement. She would let me stay there too. My parent's have also mentioned the possiblity of them coming to Tucson for the winter months to escape the snow.

The swamp cooler idea could potentially lower the bills for May, June and Sept. but it is too humid for it July and Aug. Plus I have water issues (I only use rainwater at the moment).

I don't have much in common with my work pals except work. They think I am quite odd already for living in an RV, living on rainwater and not spending money. I doubt we will keep in touch.

Do your hobbies cost much money? And do you include them in your budget of $1000-1500 or do you have other money to spend on them?

driger said...

rainwater? lol.

i admire your resourcefulness and desire to become financially independent.

during a typical day i'll play a few games of chess over at yahoo, strum the guitar for awhile, and in the evening go for a bike ride. all pretty low cost. if you have a house and a car you know theres always something that needs to be fixed, painted, cleaned or replaced. i also spend a lot of time in front of the computer and tv watching the stock market and looking for ways to get the best returns for my money. i'm trying to become good at using technical analysis of charts so i can time the market swings and possibly make 40%/yr. heres an interesting article you may want to look at to get a better return for your investments. its very simple. historically, most bear markets happen during the first two years in a presidential term, and bull markets occur in the last two of the presidents term. so the strategy is simple put your money in fixed income in the first two years of the presidents term and in the stock market during the last two years. historically, this strategy has beated "buy and hold" by a wide margin.

http://gbr.pepperdine.edu/043/stocks.html

Daizy said...

Wow 40%! Sounds good. I'll have to look in to that. I don't have any money to invest at the moment but I plan to sell the rental house and get out of the landlord business as soon as houses start selling and I can get a decent price. Then I'll be looking to invest.

driger said...

don't you have money in your retirement fund to invest?

use the presidential cycle theory if you want to try and improve your returns without a lot of risk.

Daizy said...

Oh, you are right driger! That's funny. I don't even think about that money as 'mine' because I can't spend it yet. But I can move it around.

Dave said...

I was looking for others who retired at 45 like I did last November, and I found this one.

My formula for retiring at 45: No kids, no debts.

I took a $300k payout from my company's ESOP (it taxed only at 24% overall) before it tanked (it has rebounded mostly, I was told), put it into a high-yield (not junk) bond fund which pays about 6% and that along with my other non-retirement investments (muni bond funds) gives me about $2,500 a month, more than enough to cover my monthly expenses including health insurance (total about $1,800 a month). And I still have about $250k in a rollover IRA from my company's 401(k). I also have a frozen pension and small cash-balance plan along with the IRA and Social Security "reinforcements" which will kick in at age 55 or later.

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Anonymous said...

I, too, am considering a frugal type retirement. I am trying to budget out $25,000/yr but am currently able to live on less than half that amount. I work for myself and probably will make money this year but really don't need to. I always look out for ways to cut costs. Recently, I installed a 1.5 gallon/minute showerhead, use about 4 gallons/day to wash dishes, now use a flushless toilet and compost my own waste to produce free fertilizer which I might start to sell in a few years, once it's fully seasoned. I raised the deductible on my health insurance and keep the thermostat at 58 during the winter and at 80 during the summer. My new hobby is woodworking to make my own furniture and new kitchen cabinets. If I get good at that, I might turn it into a new business. I am almost 48. I paid off my house in just shy of 3 years but the taxes account for 30% of my living expenses right now. I cook at home and eat leftovers. Oatmeal or pancakes for breakfast, not bad and much cheaper than cereal. I am thinking of selling the house after I fix it up a bit and moving to the southwest to further reduce my cost of living.

Anonymous said...

If you don't have dependents you really don't need life insurrance. Add the 36$ to the food budget :)