How much do you need to live on?

Linton

Tokyo_8 wrote: »

So a strategy would be to try and create a pot as big as you can, then
draw off of the capital to a tune of 5% because you can get that return
annually from the pot in 'safe' investements?

Yes, that is the basic idea. The details may be a bit different. Rigidly drawing off an initial 5% and then increasing that with inflation each year may be a bit risky if you dont want to run out of money before you die. See firecalc - it's based on US data but gives a useful insight. Also you may want to retire early and draw off more in the early years until you get your state pension and any employer's DB pension

Gadfium

Ken68 wrote: »

Better surely to see how cheap you can live, and this site is perfect for that. You will make more money economising than you will ever from chasing interest rates.

Well, it's probably a bit of both to be honest. Lots of saving/investment and not being a spendthrift.

At the same time, I am !!!!!!ed if I am going to live re-using teabags all my life just to leave a pile of money in the bank for the taxman (I have no dependants)

166million

Have I missed th epoint?

bowlhead99

166million wrote: »

Have I missed th epoint?

I don't think so, Lalman was just curious about how much money people need to get by, which for some will be £500 and some £5000 due to different people having different goals and objectives and bare minimums that they need or want for an acceptable lifestyle in their own mind and at their own stage of life.

It's like asking people how tall they all are. You could get a range of answers that are all different and average out to five foot six, but you may not be capable of growing that tall or that short and there's no point building a house with doorways that size if you grow taller than that, or if you are shorter and don't plan on ever having any guests.

But there's no harm in asking what other people see as normal for them to give you some kind of guidance as to whether you're a freak

Ken68

Better to go for percentage of income saved.

bowlhead99

Ken68 wrote: »

Better to go for percentage of income saved.

But that's different for all too. If I need £10k for my necessities and I earn £15k gross (£13k net), I have £3k 'play money'. I might be pretty pleased to limit my luxuries and put £50 away each month which at £600 a year is almost 20% of my truly 'disposable' income but only about 5% of my net takehome.

So we could say putting away 5% of your total takehome is reasonable or 20% of your play money.

If instead I earn £60k gross (£42k net) I might have a bigger house or higher commute/work costs and need £20k for what I consider my necessities. I could then have a decent amount of fun with the next £10k and still put £12k away as savings.

So in that second situation then putting away 29% of your total takehome is reasonable which is a lot more than the first person with 5%. The second person is also saving a huge 55% of his play money compared to the first person doing 20%. And none of that scaled smoothly with the salary which quadrupled or the net takehome which tripled.

What if I had a spouse or partner sharing my housing costs and doubling householding income? Savings would go through the roof. What if I had a non-working spouse and three kids? A different story.

So, neither percentages nor absolute pound amounts from a random population is going to give you a sense check of what to save or what is a reasonable level of bills to pay each month.

Gadfium

Sensible commentary, as per usual, from Bowlhead99.

In other words, you have to cut your cloth to fit your measure. What works for one won't work for someone else.
This month I have salted away (in company Sharesaves, pension contributions, AVCs, cash towards next years ISA allowance and so on) 45% of my take-home.
Could I save more? Probably
Is that enough? Dunno
Is it better than a smaller amount? Absolutely
Would it be right for someone else with a completely different set of circumstances to use my example as a hard and fast rule? Definitely not.

lalman

bowlhead99 wrote: »

I don't think so, Lalman was just curious about how much money people need to get by, which for some will be £500 and some £5000 due to different people having different goals and objectives and bare minimums that they need or want for an acceptable lifestyle in their own mind and at their own stage of life.

It's like asking people how tall they all are. You could get a range of answers that are all different and average out to five foot six, but you may not be capable of growing that tall or that short and there's no point building a house with doorways that size if you grow taller than that, or if you are shorter and don't plan on ever having any guests.

But there's no harm in asking what other people see as normal for them to give you some kind of guidance as to whether you're a freak

Bowlhead99 you know me well! Its exactly why I asked the question - I new that this would result in different responses from different people, with the hope that individuals would explain why they would need 3k net income excluding accommodation and car funds…. Compared to others who would need just 300.


I suspect the figures will change significantly too as people get older and change their life styles… or some people will accept a lower life style or find ways to economies better when required…


What's your answers bowlhead99?



I do find it all very interesting to read though!

mgarl10024

My GF and I sat down and totaled up everything we thought that we would need to live a happy 'retirement'. This excludes mortgage etc. but did include a few 'nice things' - a holiday budget, a redecoration budget, etc. etc.
We came to a figure of £12,036.87
I didn't add a contingency to this because I felt there were so many 'nice things' and you probably wouldn't want them all.

This did seem slightly below the figure quoted here: http://www.thisismoney.co.uk/money/pensions/article-2595965/The-key-happy-retirement-A-pension-income-17-000-year.html

Then, assuming that this pot would last indefinitely (and so I'm not burning through the pot each month) and following from here (http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/) I came to the below figures.

0.5% £2,407,374.00
1% £1,203,687.00
1.5% £802,458.00
2% £601,843.50
2.5% £481,474.80
3% £401,229.00
3.5% £343,910.57
4% £300,921.75
4.5% £267,486.00
5% £240,737.40
5.5% £218,852.18
6% £200,614.50
6.5% £185,182.62
7% £171,955.29

So, about £300,000 should give me about £12k for life.

bowlhead99

lalman wrote: »

Bowlhead99 you know me well! Its exactly why I asked the question - I new that this would result in different responses from different people, with the hope that individuals would explain why they would need 3k net income excluding accommodation and car funds…. Compared to others who would need just 300.


I suspect the figures will change significantly too as people get older and change their life styles… or some people will accept a lower life style or find ways to economies better when required…

Well exactly, you get a whole range of answers which might be interesting to read but are in no way comparable with each others. If you already expect the figures to change significantly with lifestyle and age and so on, then any 'survey' is not really worth reading, because you probably know or can guess that you'll see the whole range from 300 to 3000 to 30000 a month if you ask enough people.

Even the part about "excluding car and mortgage" doesn't help. If you already paid off your mortgage you may divert a lot into savings, or maybe you don't need a lot of savings because you are already secure.?

If you 'need' £5k a year for car running and depreciation, then perhaps it's because you do 20k miles of commuting and social travelling each year and the money is saving you £2k on train travel and £2k on holidays that other people would put in their list as necessities. But perhaps it's just an extravagance, a bit of luxury. Or perhaps you have to spend a certain amount of money on car and smart suits etc to keep up a business image for your high paying job, so it's been built into your salary and if you exclude the care expense from the calculations it looks like you're relatively richer than you are.

I do generally think people feel better about their lives if they don't know where they fit on the bell curve - but the 'total income' vs 'total wealth' curves can be vastly different anyway which makes analysis of one at a time a bit fruitless.