How much do you need to live on?

ctdctd

My goal used to be £12K per year - just me and the dust mites.

However, 5 years on and 5 years more savings in the pot have allowed me to up the goal to £18K

How I would ever have got by on £12K, I don't know!

Oh, and I always allow 20%+ on top for contingencies, stockmarket crashes, health changes etc etc.

Assumptions - savings grow by inflation, pension grows by inflation + 2%. May be pessimistic, may be optimistic, time will tell!

Stubod

Probably optimistic, I have based our plans on 1% interest and 3.5% "inflation"..ie how much our expenditure needs to rise each year. Although over the last 20 years our annual expenditure has only gone up by an average of about 1%?

theoretica

I look on it is the length of my working life and likely retirement. Consider a life chosen for the sake of easy numbers of study to 25, earn to 60, retire and live until 95. This means that each year of working must pay for two of living. Of course this won't exactly mean save half of your net earnings as some of it will be automatic in the state pension, some will be in reducing later costs by paying off the mortgage or not needing commuting costs and some (hopefully) through savings increase from investments.

boglehead

Excluding mortgage (£3,300) and full time nanny (£1,600), our average monthly budget is still £3,000.

That excludes savings too, but we live in central London and both my wife's and my family live abroad and we travel to see them a couple of times a year.

mgarl10024

melbury wrote: »

Just wondered, does this figure of £12K include the state pension or is it in addition to?

This figure is on its own. I was working out "how much would I need invested, to on average, be able to 'retire' without other income". And by retire, I mean work becomes optional.
So, that 300k figure should give the 12k, without anything else being required.

Stubod wrote: »

12k to live off??.... seems a little low to me..unless you mean 12k each...ideally I would want about 24k (total)

To each their own I guess. A lot of the Mr Money Mustache site (and others) is about questioning what really makes you happy. If that is expensive holidays and fast cars then you will need more of a pot to fund that lifestyle and so would have to work longer/harder for it. If, like me, you can separate happiness from purchases, and get more out of simpler things in life, then perhaps you'll find that £12k is enough. To me, the most important thing is time - I'd like much more of it to allow me to chase the many things I want to do with my life - rather than selling that precious and non-renewable commodity to an employer to do something I don't enjoy doing for the highest rate I can get.
I say "perhaps" in relation to the 12k being enough as I'm not there yet, but all the signs point to it being enough.

ratechaser

I've been working to a retirement income for both my wife and I of around £40k each (in today's money) to keep below the 40% tax threshold. Nets to about £5k a month 'take home' between us. I know that might sound offensively extravagant to some, but although I don't go big on fast cars, we do like to travel, eat out etc. Call me materialistic if you want, but believe me, relative to the industry I work in, I'm extremely restrained!

I'd also rather be over-shooting my requirements and have some spare money to recycle back into the 'pot' than under estimate what my living expenses will be. I come from a fairly modest family background and in my youth I saw older relatives and their friends struggle to get by because they wongly assumed they had made enough provision (or god forbid that the 'state' would look after them). As for myself, through a mix of bl**dy hard work and a little good fortune, I'm in a rather better position, and don't intend to underestimate how expensive it can be to get by when you're older!

And finally, although I hope we will have already have set them up, I know that children sometimes make financial mistakes in their lives - I certainly did. So I also want to make sure that my plans bake in a bit of reserve so that if they need my help - and by that I mean REALLY need it - that I can still do something for them. You never stop worrying... etc...!

kangoora

We worked it out to £1750/month (net) as a minimum to £2500/month (net) to be very comfortable for a couple in our situation. So roughly between £21.5k to £34k a year gross income.

No mortgage, debts, kids left home etc.

The £1750 would put us slightly worse off than before retirement. The £2500 probably puts us slightly better off. The middle of this range probably equals our current disposable income with mortgage, kids etc.

The difference between the two is pretty much luxuries i.e. more in the car fund, more/better holidays, more eating out, more 'spending' cash allowance, being able to treat the kids a little, day trips etc.

AlanP_2

kangoora wrote: »

The difference between the two is pretty much luxuries i.e. more in the car fund, more/better holidays, more eating out, more 'spending' cash allowance, being able to treat the kids a little, day trips etc.

I'm hoping the kids will be treating me by the time I retire :rotfl:.


Mind you both my 20 something boys have taken us out for a meal in the last year so things are looking up on that front... just my daughter now.