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Do you need over 14k saved in the bank for that 60 pounds dinner?!!
Frugal_Millionairess
Posts: 54 Forumite
As my husband and I strive toward financial independence, I'm becoming more conscious of what it would be like to live without a salary. If we are living off savings, how much savings does each of our monthly expenses require?
Let's take a $100 a month expense. That might be dinners out for some or new clothes or excess groceries that are not really needed, i.e. treats.
And one hundred a month or $25 a week does not seem too crazy for "fun" money. But let's look closer at that number.
Assume a five percent withdrawal rate. Some would argue this is too high and you should really be looking at a three percent withdrawal rate. But we'll be optimistic and go with five percent. To spend $100 a month or $1200 a year, you would need $24,000 invested, "spinning" off that interest.
And if your superfluous expenses are closer to $500 a month, or $6000 a year, you would need $120,000 to fund them.
My husband and I have seen a major upward creep of expenses in the past ten years. We've had kids, done some major home repairs, and become less focused on money saving strategies. The spike got higher five years ago, which correlates directly to the kids being born;-). It is not only the added expenses of their needs, but also the accompanying time crunch. Where I might have spent time looking for the best deals on things before, I now tend to factor in time pretty heavily and "just get the job done." If you've ever gone grocery shopping with a five and two year old, you know leisurely price comparisons between canned goods is tough....
In addition, as our income has grown, we've found ourselves getting more complacent with expenses. "We can easily afford this" is something we've both said. But then I look back over 10 years or so of record keeping and our expenses are almost five times higher than they were in our super frugal mode.
And importantly, I don't think our quality of life is five times better. We had a wonderful life then and a wonderful life now. It's nice not to feel we "have" to stress about how much the electric bill costs, but if it turns to laziness about unplugging appliances not in use and eating out at will and more big screen televisions (private aside to my sweet husband;), we're setting ourselves up to work a lot more years to pay for this luxury lifestyle.
So my goal in the coming month or so is to do some simple math as we go along. For every dollar we spend, we would need $20 in the bank to spin it off. Now that bagel and iced tea at Panera that I so love ($3.95) - is probably not worth $80....and my favorite Friday night pizza place ($20) - is probably not worth $400 - but whether the mind will be strong when the stomach is weak, remains to be seen.
Happy interest computing as you go about your day! The Frugal Millionairess.
Postscript: As you probably guessed from the $ sign, I am an American who found this great website - world economics means frugality is popular everywhere. I don't know an easy way to convert to pounds, but you can get the gist of cost savings.
Let's take a $100 a month expense. That might be dinners out for some or new clothes or excess groceries that are not really needed, i.e. treats.
And one hundred a month or $25 a week does not seem too crazy for "fun" money. But let's look closer at that number.
Assume a five percent withdrawal rate. Some would argue this is too high and you should really be looking at a three percent withdrawal rate. But we'll be optimistic and go with five percent. To spend $100 a month or $1200 a year, you would need $24,000 invested, "spinning" off that interest.
And if your superfluous expenses are closer to $500 a month, or $6000 a year, you would need $120,000 to fund them.
My husband and I have seen a major upward creep of expenses in the past ten years. We've had kids, done some major home repairs, and become less focused on money saving strategies. The spike got higher five years ago, which correlates directly to the kids being born;-). It is not only the added expenses of their needs, but also the accompanying time crunch. Where I might have spent time looking for the best deals on things before, I now tend to factor in time pretty heavily and "just get the job done." If you've ever gone grocery shopping with a five and two year old, you know leisurely price comparisons between canned goods is tough....
In addition, as our income has grown, we've found ourselves getting more complacent with expenses. "We can easily afford this" is something we've both said. But then I look back over 10 years or so of record keeping and our expenses are almost five times higher than they were in our super frugal mode.
And importantly, I don't think our quality of life is five times better. We had a wonderful life then and a wonderful life now. It's nice not to feel we "have" to stress about how much the electric bill costs, but if it turns to laziness about unplugging appliances not in use and eating out at will and more big screen televisions (private aside to my sweet husband;), we're setting ourselves up to work a lot more years to pay for this luxury lifestyle.
So my goal in the coming month or so is to do some simple math as we go along. For every dollar we spend, we would need $20 in the bank to spin it off. Now that bagel and iced tea at Panera that I so love ($3.95) - is probably not worth $80....and my favorite Friday night pizza place ($20) - is probably not worth $400 - but whether the mind will be strong when the stomach is weak, remains to be seen.
Happy interest computing as you go about your day! The Frugal Millionairess.
Postscript: As you probably guessed from the $ sign, I am an American who found this great website - world economics means frugality is popular everywhere. I don't know an easy way to convert to pounds, but you can get the gist of cost savings.
"Happiness is a journey, not a destination." Souza;)
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Comments
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Huh?
What is this strange '$' you keep referring to?0 -
Bendix,
I couldn't figure out how to convert to pounds. I had googled money saving/frugality on my own quest and got to this webite, which is great and didn't even realize at first glance it was a UK site. It's becoming a small world! Hopefully you can get the gist and I'll try to figure out when I post here how to convert. Thanks for pointing this out."Happiness is a journey, not a destination." Souza;)0 -
http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206
You might want to read this
Also yes its primarily a UK site but there are a few US peeps who post on here. Its just hard to give advice abotu savings and budgetting and debt etc. because of the different tax issues and differences between the US and the UK.0 -
Lokolo - Of course, The Millionaire Next Door, one of three best finance books ever written;-). And while specifics of taxes may differ, I'll bet yours and my day to day expenses are pretty similar. As an ardent gardener, I've gained more from your FANTASTIC English garden writers than any others....so I'm expanding my cross Atlantic tip seeking to thrift;-). Best wishes!"Happiness is a journey, not a destination." Souza;)0
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Frugal_Millionairess wrote: »Lokolo - Of course, The Millionaire Next Door, one of three best finance books ever written;-). And while specifics of taxes may differ, I'll bet yours and my day to day expenses are pretty similar. As an ardent gardener, I've gained more from your FANTASTIC English garden writers than any others....so I'm expanding my cross Atlantic tip seeking to thrift;-). Best wishes!
OK . . come on, spill the beans.
What are you here to sell?0 -
Well Bendix, I do have that 1-800 number to which you can subscribe for only $220 a month, a few pyramid schemes, one ponzi scheme, and a great offer on shares (limited time only) in the Brooklyn Bridge, but other than those, not much. As I create more nefarious schemes, I'll be sure to post them...disguised of course as frugal living tips;)."Happiness is a journey, not a destination." Souza;)0
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OK . . come on, spill the beans.
What are you here to sell?
Are you serious?! Nice welcome, that's a really rude thing to say considering she has already so eloquently explained herself (and it's not like she HAD to in the first place!) - it's pretty descriminatory of you, just because she's American and posts in here looking for advise / conversation. It's not even as though this site has a ____.co.uk address, so it's easy enough to find, plus, as she rightfuly says, there are plenty of global truths to saving money, regardless of the country in which you're living.0 -
A_Phoenix_of_Tangerine wrote: »Are you serious?! Nice welcome, that's a really rude thing to say considering she has already so eloquently explained herself (and it's not like she HAD to in the first place!) - it's pretty descriminatory of you, just because she's American and posts in here looking for advise / conversation. It's not even as though this site has a ____.co.uk address, so it's easy enough to find, plus, as she rightfuly says, there are plenty of global truths to saving money, regardless of the country in which you're living.
Surely Bendix was being somewhat tongue in cheek...0 -
A_Phoenix_of_Tangerine wrote: »Are you serious?! Nice welcome, that's a really rude thing to say considering she has already so eloquently explained herself (and it's not like she HAD to in the first place!) - it's pretty descriminatory of you, just because she's American and posts in here looking for advise / conversation. It's not even as though this site has a ____.co.uk address, so it's easy enough to find, plus, as she rightfuly says, there are plenty of global truths to saving money, regardless of the country in which you're living.
*Sigh*
I'm wasted here, I really am . . . 0 -
'S'true. A million pounds at, say, 3% interest gives £24,000 pa income after 20% tax (ignoring personal allowances). Then reduce this by your personal inflation figure, worked out by using this calculator
http://news.bbc.co.uk/1/hi/business/7669072.stm
Sigh. I remember when a million pounds was a lot of money...0
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