My $15K Middle Class Budget

[Retired To Win]

If you think about it, your basic living expense budget is THE crucial factor affecting WHEN you can become financially independent, and HOW MUCH capital you need to become financially independent. The lower your basic living expenses are, the smaller your financial independence stash needs to be, and the sooner you will have it.

But how low a basic living expenses “nut” CAN YOU STAND living with? And for how many years would you have to stand it? How much rice and pasta can you stand to eat? How small a place can you stand to live in? How cold (or hot) can you stand the temperature to be in that place? How much of your income will an acceptable, LIVABLE basic lifestyle cost you? And how much would then be left over for you to apply to your financial independence plan?

A comfortable and secure lifestyle can very, very definitely be achieved without spending a fortune on it. My basic living expense budget is $15,048 a year, which is about one third of my income. And I am perfectly happy with the kind of daily lifestyle I get for less than $1255 a month (which, by the way, is a lot MORE than really frugal people find necessary to spend). My case is just one more testimonial to the power and joy of modest expense (I won’t even call it frugal) living.

The context of my basic daily lifestyle includes owning a large house on 2.5 acres of land located 5 miles from a small town and 25 miles from “the big city”… eating a modified paleo diet heavy on meats and vegetables and low on starches… driving a well maintained older vehicle… being free of an obligatory job and commute… and spending a lot of my time hiking, blogging, reading, taking video courses, doing hobby carpentry, watching DVD movies, playing computer strategy games, and listening to classical music.

I live very comfortably. I enjoy my time on a daily basis free from an obligatory job. And I do it on less than one third of my income. Doing that does not feel to me like a big deal.

So why do so many people find this impossible (or unacceptable) to do?

[HappySaver]

Context is everything. In this case, location.

In our high cost of living area, which we need to stay in to keep our jobs, we spend $1800 monthly on housing alone. That includes real estate taxes, homeowner's insurance, and utilities. For the sake of argument I've left off the mortgage payment. Our house is not a "large house", and it has 1/3 acre lot. If we chose to sell and rent, even a smaller place in a cheaper town, we could not rent a 2 bedroom apartment for less.

So it's not only about how much you can stand. It's simply not an option for everyone, depending on where they live.

[disneysteve]

My basic living expense budget is $15,048 a year

Context is everything. In this case, location.

HappySaver is absolutely right. Location plays a huge part in this.

We live in a pretty modest home, 50 years old, no HOA - nothing fancy at all. Our property taxes are over $7,000/year. That alone would eat up nearly half of your annual budget. Our auto insurance adds another $4,300/year. So before we do anything else - like eat - we're already in for over $11,000. So no, we could not live on $15,000/year unless we drastically change our lifestyle and move to a far cheaper part of the country.

[bigdaddybus]

My family size is my largest impact. We are living at under 15K per person so I am good

[HappySaver]

Wow Steve - how come your auto insurance is so high? We spend about $1100/year for two modest cars (one newer, one older). I know you don't drive crazy cars. Even if you've got a college-age driver on a third car, does that increase the rates by that much?

[disneysteve]

Wow Steve - how come your auto insurance is so high? We spend about $1100/year for two modest cars (one newer, one older). I know you don't drive crazy cars. Even if you've got a college-age driver on a third car, does that increase the rates by that much?

We live in New Jersey, home of the highest auto insurance rates in the country.

We do have 3 drivers including our daughter who just turned 19 and had a fender bender a few months ago.

[ua_guy]

If you think about it, your basic living expense budget is THE crucial factor affecting WHEN you can become financially independent, and HOW MUCH capital you need to become financially independent. The lower your basic living expenses are, the smaller your financial independence stash needs to be, and the sooner you will have it.

But how low a basic living expenses “nut” CAN YOU STAND living with? And for how many years would you have to stand it? How much rice and pasta can you stand to eat? How small a place can you stand to live in? How cold (or hot) can you stand the temperature to be in that place? How much of your income will an acceptable, LIVABLE basic lifestyle cost you? And how much would then be left over for you to apply to your financial independence plan?

A comfortable and secure lifestyle can very, very definitely be achieved without spending a fortune on it. My basic living expense budget is $15,048 a year, which is about one third of my income. And I am perfectly happy with the kind of daily lifestyle I get for less than $1255 a month (which, by the way, is a lot MORE than really frugal people find necessary to spend). My case is just one more testimonial to the power and joy of modest expense (I won’t even call it frugal) living.

The context of my basic daily lifestyle includes owning a large house on 2.5 acres of land located 5 miles from a small town and 25 miles from “the big city”… eating a modified paleo diet heavy on meats and vegetables and low on starches… driving a well maintained older vehicle… being free of an obligatory job and commute… and spending a lot of my time hiking, blogging, reading, taking video courses, doing hobby carpentry, watching DVD movies, playing computer strategy games, and listening to classical music.

I live very comfortably. I enjoy my time on a daily basis free from an obligatory job. And I do it on less than one third of my income. Doing that does not feel to me like a big deal.

So why do so many people find this impossible (or unacceptable) to do?

It's not hard, nor is it unacceptable.

The question is, how did you get to be where you are?

[Joan.of.the.Arch]

The value of your Medicare coverage is at least another $15,000 in premiums savings. So congratulations for living long enough to qualify for this subsidy.

What kind of annual average household income did it take for you to arrive at this happy point? Did you use that income wisely? What would you do differently if you could do it over again?

[Retired To Win]

My $15,000 Budget Big Picture

It's not hard, nor is it unacceptable. The question is, how did you get to be where you are?

To get where I am, the first two -- and probably most important -- things I did were (1) to CHOOSE exurban Virginia as a place to live and move there from suburban within-commuting-distance-from-DC Maryland, and (2) to systematically go over my entire living expenses budget line by line and in the process cut it down from more than $30,000 a year to its present $15,000 or so (without making any sacrifices).

That $15,048 a year basic living expense budget of mine works out to $1254 a month. Of that sum, $397 goes to housing expenses, $185 to vehicle costs, $378 to health coverage, $244 to household expenditures, and $50 to federal and state income taxes.

My budget big picture also includes my wife, who pays for her share of our overall expenses. If I factored her out of my calculations, and I had to pay the entire cost of our indivisible shared expenses (like mortgage), my monthly nut would go up by a net $34 to $1288 a month (or $15,456 a year).

That my go-it-alone costs would go up so little is something that we have already tested out to be true.

We own a smaller rental home on one acre of land that I have lived in by myself before. If I were alone, I would live in that house. From prior experience, my solo housing costs (lower mortgage, lower real estate taxes, lower utilities costs, etc) would then go up a net $34 a month.

My vehicle and health coverage costs would remain unchanged because they are already calculated on a solo basis for me and my 1996 Dodge Dakota. And my household expenditures (food, etc) would not change either because their consumption would be proportional (half) to the number of people doing the consuming (1 instead of 2).

So, living with my wife or living alone, my basic living expenses would still be about $15,000 a year.

Given that, doesn’t $15,000 a year (per person?!) sound like a more than generous basic living expenses budget benchmark that anyone could apply IF they made up their minds to do so?

[rennigade]

I have friends who also live in VA and commute to DC for work. Dude...there's people who commute from richmond, va to DC...those are the people who have no life and spend 5 hours of the day in a car.

Heck 2 people I know live out route 66 and it takes them 1.5 hours each way. But...they were able to buy a huge single family home for $400k. Unfortunately they spend a large chunk of their time in a vehicle.

Have fun with that op...anything within a 40 minute commute to DC is going to cost you serious $$...especially a single family home...unless of course you're looking at a 900sf shack. Either that or you have to live in a POS town house where you can put your fist through the wall and shake your neighbors hand. That sounds awesome.

[ua_guy]

To get where I am, the first two -- and probably most important -- things I did were (1) to CHOOSE exurban Virginia as a place to live and move there from suburban within-commuting-distance-from-DC Maryland, and (2) to systematically go over my entire living expenses budget line by line and in the process cut it down from more than $30,000 a year to its present $15,000 or so (without making any sacrifices).

That $15,048 a year basic living expense budget of mine works out to $1254 a month. Of that sum, $397 goes to housing expenses, $185 to vehicle costs, $378 to health coverage, $244 to household expenditures, and $50 to federal and state income taxes.

My budget big picture also includes my wife, who pays for her share of our overall expenses. If I factored her out of my calculations, and I had to pay the entire cost of our indivisible shared expenses (like mortgage), my monthly nut would go up by a net $34 to $1288 a month (or $15,456 a year).

That my go-it-alone costs would go up so little is something that we have already tested out to be true.

We own a smaller rental home on one acre of land that I have lived in by myself before. If I were alone, I would live in that house. From prior experience, my solo housing costs (lower mortgage, lower real estate taxes, lower utilities costs, etc) would then go up a net $34 a month.

My vehicle and health coverage costs would remain unchanged because they are already calculated on a solo basis for me and my 1996 Dodge Dakota. And my household expenditures (food, etc) would not change either because their consumption would be proportional (half) to the number of people doing the consuming (1 instead of 2).

So, living with my wife or living alone, my basic living expenses would still be about $15,000 a year.

Given that, doesn’t $15,000 a year (per person?!) sound like a more than generous basic living expenses budget benchmark that anyone could apply IF they made up their minds to do so?

That's not really what I asked, though. Yes, anyone can be free of a job and choose to live on a minimal budget provided they have enough income from other sources than current employment to support basic living expenses. It's not rocket science.

The question is HOW did you get THERE? Clearly at some point you cut your expenses and saved up a bunch of money via employment and sacrificing other wants and needs. What were you doing prior to your decision, what was the turning point, and at what age did you actually "retire"?

[BuckyBadger]

I feel like you spend a lot of effort convincing everyone how well you can live on $15k a year.

But I don't WANT to live on $15k a year. I could, but I CHOOSE not to. I don't want to live where you live and do the things you do. I want to live where *I* want to live and do the things that *I* want to do.

And those cose more than $15k a year.

[Zedon]

So why do so many people find this impossible (or unacceptable) to do?

I don't think it's impossible, I lived on a income like that in my mid 20's but it's not preferable or desirable for me to live that lifestyle especially in my area. I would be renting a room in a house with roommates for starters which is no longer acceptable for me. Spending as little as I can is not my main goal in life. I want to live a comfortable lifestyle that allows me to purchase what I want and go where I want, within reason. I have goals for saving and as long as those are met I will spend the rest on having a nice lifestyle.

[JoeP]

I feel like you spend a lot of effort convincing everyone how well you can live on $15k a year.

But I don't WANT to live on $15k a year. I could, but I CHOOSE not to. I don't want to live where you live and do the things you do. I want to live where *I* want to live and do the things that *I* want to do.

And those cose more than $15k a year.

For some, their location, ability/desire to relocate, job, values, flexibility, hobbies, family situation, friends, volunteer commitments, school district, lifestyle, etc. makes these changes difficult or easy. Almost everyone has the ability to uproot themselves and move someplace where the cost of living is low, but that has ramifications way beyond being able to stand up and tell others how low your budget is.

[Retired To Win]

My Housing and What It Costs

I don't think it's impossible, I lived on a income like that in my mid 20's but it's not preferable or desirable for me to live that lifestyle especially in my area. I would be renting a room in a house with roommates for starters which is no longer acceptable for me...

I too lived in rented rooms in my 20's, but that is not the situation I am in now.

I share with my wife an 1800-square-feet single-story brick house with 3 bedrooms, 2 baths, a full unfinished basement and an enclosed patio room that adds another 200 square feet to our living space. The house sits on two-and-a-half acres of land, along with a detached two-car garage, a large 400-square-foot metal outbuilding, and a humongous 1000-square-foot pole barn (that my wife has converted into her rabbit-geese-chicken raising place).

If I were living alone, then I would be living in what is currently our rental house. There I would have to myself 2 bedrooms, 1 bath, a living room and an eat-in kitchen in a 1000-square-foot single-story brick house. I would also have a full unfinished basement, an attached oversized one-car garage with enough room for a workshop, plus 2 standard-sized sheds -- all on an acre of land less than 1 mile from a river boat landing and less than 3 miles from a magnificent state park with a very large number of hiking trails.

Either way, this is living in an owned single-family home with ample space for me, lots of privacy and no in-my-face neighbors. So, we are not talking about hovel/shack living.

For either house, large down payments make the monthly mortgage low. We keep the shared house at 78 degrees F in the summer and 72 degrees F in the winter (though if left to myself I would be okay with 70 degrees in winter). At the shared house, we pay for 2 Ooma phone lines, have a trash pickup service, and have satellite as our only (and expensive) internet option. If I were alone at the smaller house, I would drop one phone line, do my own trash hauling to a nearby dump station, and enjoy better yet cheaper cable internet service.

So my monthly housing cost breaks down like this (shared house / solo house):
[] $25K mortgage:..........................$114 shared......$112 solo
[] tax and insurance escrow:........$ 56 shared...... $121 solo
[] trash service:................................$ 14 shared.............0 solo
[] home warranty:............................$ 50 shared.........$ 50 solo
[] internet service:...........................$ 45 shared.........$ 48 solo
[] phone service:.............................$ 5 shared................0 solo
[] utilities:........................................ $113 shared.......$100 solo

[] TOTAL:.........................................$39 7 shared........$431 solo

So either way, it takes around 400 bucks a month (give-or-take) for me to live in a comfortable house on a good piece of ground.

With the right choice of location and a serious down payment, couldn’t anyone do just as well or better?