My $15K Middle Class Budget

[Singuy]

I still don't even get how living on 15k, 20k, even 25k is possible. Granted I live in HCOL area (Orange County california) but even in a lcol area those numbers seem impossible. Do you guys never go out, never buy anything, never do anything that costs money?

My parents live off 12k/year, and 6 of the 12k ends up as property tax, home insurance, and HOA. So the answer to your question is no, they don't go out..lol


My parent's net worth, about 2.5 million.

[hamchan]

My parents live off 12k/year, and 6 of the 12k ends up as property tax, home insurance, and HOA. So the answer to your question is no, they don't go out..lol


My parent's net worth, about 2.5 million.

My parents also live on less than 15k a year. They own their land outright, live in a heated garage that was already on the property. Grow as much of their food as they can. Hunt and fish. They have subsidized health insurance. They do go out, but not much.

[Retired To Win]

How I Got to Financial Independence

... 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"?

The full story of my journey to financial independence deserves its own thread and conversation. Still, I will answer your question now in summary form.

Four major moves propelled me to my financial independence goal.

Investing Move: I sold all my mutual funds and switched to individual dividend-paying stock investing and trading. In 5 years, this tripled the passive income my IRA portfolio would produce. (I regret to say that I never increased my investment savings above the maximum allowed IRA contribution for each year.)

Vehicle Move: I embraced the oldie-goldie vehicle concept. No trading in older for newer vehicles "just because." So no monthly auto payments. This reduced my required financial independence stash number by $150,000.

Housing Move: I looked for and found a good living location where just the equity in my then current house would fully pay for an equivalent home. And I did. So no mortgage required.

Budget Review Move: I looked for and found lower or no-cost alternatives for any items in my budget which could be substituted without giving up the service or incurring lifestyle sacrifice. And we fired our four-hour-a-week maid service.

By the end of the 5 years, the result was a 42% reduction in my basic living expenses and an investment income stream double my new and slimmed down basic costs. So, comfortable financial independence. The journey took 5 years because we dragged our feet on the housing move. But that did allow my financial independence stash to swell even more before reaching journey's end.

[Retired To Win]

My Basic Living Expenses as a Percentage of Income

It might be more relatable as a percentage of total income, since higher COLA areas tend to have higger incomes. Can you live on 25% of your total household income? or something like that...

On a percentage of income basis then, my $15,000 annual basic living expenses eat up 25% of my yearly $60,000 passive income. If I add in my average annual discretionary spending (for fun, frolic and etc.) of $6000, then my total spending consumes 35% of my passive income.

However, approaching my basic living expenses as a percentage of income would not be very satisfying to me if I had an income of $250,000. At 25% of that, $62,500 would be going to cover my yearly basic living expenses. And that, in my humble opinion, would be absolutely NUTS.

[Reggie]

On a percentage of income basis then, my $15,000 annual basic living expenses eat up 25% of my yearly $60,000 passive income. If I add in my average annual discretionary spending (for fun, frolic and etc.) of $6000, then my total spending consumes 35% of my passive income.

However, approaching my basic living expenses as a percentage of income would not be very satisfying to me if I had an income of $250,000. At 25% of that, $62,500 would be going to cover my yearly basic living expenses. And that, in my humble opinion, would be absolutely NUTS.

I think that's what you're missing. You live in an area where housing and taxes are very inexpensive. If you lived in a higher COLA area, you would have a considerably higher income. Our household income is going to exceed $300k this year. There is no way we could live on $15K a year. We pay far higher taxes than that. We could move to the country and live on $15k but our incomes would not be as high as they are now. Also, there are just more expenses when you choose to have professional careers.

I live very frugally for our income, but you have to look at it as a percentage. I spend far less than you do based on percentages unless we throw in income taxes. I pay way more than you earn in income taxes alone. We live in an extremely modest paid off home, we drive nice cars but they are paid off (not crazy expensive at all, just newer),we cook at home, shop at thrift stores, but I still spend $60k a year on basic expenses. The good news is that I save at least $100K a year.

It's all relative.

[scfr]

I think that's what you're missing. You live in an area where housing and taxes are very inexpensive. If you lived in a higher COLA area, you would have a considerably higher income.

Actually, I think you may have missed something. The original post was about how to break away from the requirements of an "obligatory job." Saving and paring basic expenses are a way to reach that goal (either full retirement or only working on your own terms)earlier. And one way to significantly pare basic expenses is to move to a lower cost of living area.

To each their own. OP has achieved what he wants and shares the information for others who may wish to do the same. I don't see anything that indicates he feels it is for everyone.

Like many who posted, rural life isn't for me. But I did relocate to a lower cost of living area and it has really helped speed up progress toward reaching my retirement number. My husband & I have found the happy middle ground that works for us.

[Reggie]

That's fair. It seems living frugally in a high paying area would get you there much quicker tho. My DH and I are financially independent so our jobs are voluntary not obligatory. I'm 40 and he's 45. I don't think we could have gotten here this quickly living in the boonies on lower incomes.

Where there's a will....

[BuckyBadger]

However, approaching my basic living expenses as a percentage of income would not be very satisfying to me if I had an income of $250,000. At 25% of that, $62,500 would be going to cover my yearly basic living expenses. And that, in my humble opinion, would be absolutely NUTS.

I feel this is part of the disconnect. As MANY people have commented, what you spend is highly correlated to the cost of living in your area. Considering expenses as a percentage of income is a FAR MORE REALISTIC number.

The fact that you don't acknowledge this makes it difficult to have a sensible and intelligent conversation that actually accomplishes anything useful.

[scfr]

It seems living frugally in a high paying area would get you there much quicker tho. My DH and I are financially independent so our jobs are voluntary not obligatory. I'm 40 and he's 45. I don't think we could have gotten here this quickly living in the boonies on lower incomes.

Excellent point. We relocated to a (relatively speaking) lower cost area in our mid-40's, after we had built savings and home equity, and DH's self-employment income was solid enough that it wasn't harmed by a move.

What I don't know about OP is at what age he relocated and if he lived in a higher cost of living (and higher earning) area prior to retirement.

[Retired To Win]

... We are already financially independent but I want to have a very nice standard of living after I retire.

Living on less without sacrifice is always a good thing. The difference is everyone's definition of sacrifice.

Bringing my basic living costs down to $15,000 a year does not mean I have sacrificed having "a very nice standard of living." I live in a comfortable single-family home on 2.5 beautiful acres, drive where I want when I want in a comfortable and well-maintained vehicle, eat lots of meats and vegetables daily, stay warm in winter and cool in summer, enjoy all of today's "electronic amenities" and generally have a jolly good time.

And I actually have not sacrificed anything I had or did before I brought my expenses down. My low basic living expenses allowed me (and still do allow me) to have plenty of surplus discretionary income for restaurants, travel and entertainment while still having shortened my journey to financial independence by many, many years.

Or is it that you (mistakenly) believe that a "a very nice standard of living" requires a late-model vehicle, a trip to Europe every year, a $100 bottle of wine every week, and a Rolex on the wrist? Please, tell me it is not so.

To me, it would be an unforgivable sacrifice to have to continue holding down a job for many additional years just so I could spend money on such utterly frivolous things.

Isn't time lived free too important to trade it for that?

[disneysteve]

My low basic living expenses allowed me (and still do allow me) to have plenty of surplus discretionary income for restaurants, travel and entertainment while still having shortened my journey to financial independence by many, many years.

RTW, I believe the problem with this whole thread and your other thread is that people (including myself previously) aren't understanding the big picture. It sounds like you are saying you live on $15,000/year, which isn't true at all. I'm not sure that you've actually told us your complete budget. If you did, I may have missed it. So when people look at this and think it is your entire existence, I can certainly understand why they think it's filled with sacrifice.

How much do you actually spend each year total including everything - your basic expenses and the other stuff like travel, dining out, entertainment, etc? And I mean as a couple, not just you individually.

[txex86]

I agree with Disney Steve, I'm confused as to what your entire budget looks like. It seems that the $15,000 figure is for just you and doesn't include everything. Maybe I'm mistaken, but if you could clarify, that would be great.