Planning An Early Retirement Budget
At age 36, I now have less than one year until I achieve an early retirement from my current job.
Now would be a good time to see how my finances might look when I no longer have a full-time income coming in.
My projected monthly income from my pension will be $1,976. That amount will increase by the 'official' inflation rate so there will be annual increases in the nominal amount. Included in that is also some basic health care and other small privileges. But let's just focus on the financial part of it all.
I looked over my spending for the past year and averaged out what I have been paying in different categories every month.
EARLY RETIREMENT
Now I just want to make it clear I don't expect to 'retire' in the normal sense. What I mean is that I will no longer have to work. I can be picky as to what I do with my time as my basic expenses are covered.
I still intend to hustle and earn money as I enjoy this type of stuff. Using my knowledge and opportunities around me to make a profit is not something that I tire of. Without having to go to work for 8 or 9 hours every weekday I will have much more time to focus on that. Plus, since most people are at work during those times I will be available should any offer present itself during that time.
I know I have seen them, but could not jump on it as I had work that day.
So with that out of the way, let's jump into the budget portion of my early retirement.
HOUSING & UTILITIES
- Mortgage - $713.19
I purchased my home in 2014 on a 15-year loan. By the time I retire, I would have made 4.5 years of payments. I have also made extra payments on top for multiple years. I probably have around 8.5 years left if I paid the mortgage as scheduled from here on out.
Without a mortgage, my $1,976 income would go much further.
If some of my investments really take off, I might just pay the whole thing so as to have more cash flow every month.
- Electricity - $105.66
- Gas - $28.14
- Water/Trash - $51.49
This is the average amount billed over the past year. I consider this an accurate amount going forward, with only inflation type increases expected.
After paying for housing and utilities I have $1,077.52 in monthly income left.
COMMUNICATION
- Internet - $62.99
- Phone - $60
My internet is the cheapest available, so can't go lower there.
The phone is for both mine and my wife's as we pay $30 each every month. Pretty cheap, but we could shop around and see what is slightly cheaper.
If we both saved $5 a month, that would come out to $120 every year.
After paying these bills, I have $954.53 left.
AUTOMOTIVE
I have no car payments, so the normal expenses are for fuel and insurance.
- Fuel - $119.75
- Car Insurance - $100
Most of that fuel expense is not related to my driving to work. I probably only account for $30-35 of that as I live very close to my job. The rest is from some road trips averaged into the monthly cost and my wife driving around places with the kids.
I think this expense will stay relatively similar, as long as gas doesn't go wildly different in price.
I could probably get the car insurance amount down as we have three cars at the moment. I really want to sell the third one as it is not needed but have got flack from the wife. I can work on that in the coming months.
After paying for this, I have $734.78 remaining.
FOOD
Lately, the grocery bill has been at $450 per month or $15 per day. This is for two adults and two kids.
My children are rather young, so the amount they eat will increase. I don't know when they will cost more on food as much of what we give them ends up on their faces and the floor. So if they just ate the food that gets wasted it will buy some time. But the day will come when they eat a lot.
We could negate some of the rising food costs by eating more meal prepared from scratch since time would be less of an issue. So let's say that $450 per month is a good number.
After accounting for groceries, I have $284.78 leftover.
EVERYTHING ELSE
$284.78 is not very much of a wiggle room.
- There will be maintenance costs on the cars and the house.
- We will have travel costs.
- There will be a need for larger clothes as the children grow up.
- Entertainment and restaurants will call out for some money.
- While we don't spend so much on 'stuff', eventually things will be needed as what we have wears out.
All these things will have their cost and add up to a large sum of money.
What to do about it?
Well, first off, my wife could go back to work while I become the stay-at-home parent. Whatever she earns would be the savings and discretionary income.
Secondly, I could grab an easy part-time job. I figure that if I worked 2 days per week I could easily bring in $200 from even the most basic, low-paying, of jobs. $200 every week for a year is over $10,000. That amount of money would easily cover any normal extra financial needs my family has. I don't think I would mind an easy job for just 2 days every week.
Third, since I don't have work anymore I can focus that time towards my side hustles. Even with a part-time effort, I have brought in $1,000 per month in income/profit before. What could I do when I was not tired from work and had all those hours available to me? I think I could do a lot.
Of course, any combination of these three methods could be used. Say I worked 2 days and hustled the rest. That would bring in around $2,000 per month without too much negative effort on my part.
$2,000 per month is $24,000 per year – effectively doubling my post-retirement income.
There is also the possibility that I go hardcore into wealth generation by finding another full-time job. I would still be bringing in the $1,976 per month no matter if I worked or not. So if I could get another job like what I have now, that passive monthly income would get thrown on top.
With that much money coming in, I could quickly buy more income producing assets that produce dividends or rental income. That would really set my family up for future income and generational wealth.
Drive for Uber or Lyft, your schedule, easy to do, instant pay right onto my debit card at the end of a day.
I own a business and travel a lot, but in between when I am board I drive... the proceeds I get go to Crypto investments. I go out when I am home for 4 hours and pick up around $100 and head home. At the end of what ever time I chose to drive, I cash out, fill the tank with gas and go to coinbase to pick up LTC (or ETH if I am working toward an ICO).
I do this all on my phone...imagine, money, freedom, crypto's!
You can turn the app on or off anytime, I can do it here or anywhere... you have complete freedom, instant cash and variety talking with all the people. Here is something I wrote on it two months ago:
https://steemit.com/life/@kyusho/never-before-has-there-been-such-freedom
Let me know if you want more info... god luck in your retirement!
My Uncle drives for Uber and he worked in the financial industry in Boston. I know a few people from work that do it, but I have not tried it out yet.
Certainly it was something on my radar as an option.
I know many successful business people doing it, some think it shame full,but I think man this is easy and fun money to re-invest in crypto. Must of hit my head too hard and often as a child.
Hey, ALL my side hustle money gets invested in one thing or another - I see the power of it :)
First off- Is this a picture of your house? If so, the lawn is excellent.
Second, I am also 36 and have two kids, but sadly I am not a year away from retiring! Great work on lowering the expenses- very money moutashio
The only check point I can cross off this year is paying off my car! Which will save me $200/ mo.
I have built up quite a bit investing, but my wife has type 1 diabetes. Currently she has very good insurance through her university job. For some reason big pharma really likes to price gouge life or death medicine (insulin). So even once I'm able to replace our monthly cashflow, leaving her insurance could be a very dicey and surprisingly expensive unknown.
It sounds like you're doing all the right things though, and I look forward to hearing more about your success over the next two years.
Upvote for the MMM love!
Also for the insurance angle. I was looking heavily into potential early retirement but in the US, health insurance is a huge unknown risk that has dampened my desire. With young active boys, we have already gotten our fair share of stitches and broken bones. I know a couple who are not yet 65, and they only plans they could qualify for were individual plans $1000 USD/month for coverage that started AFTER the first 10,000 USD (also was max out of pocket). So best case they are paying 24k for coverage and worst case they are paying 44k out of pocket.
What are your plans for health insurance @getonthetrain ?
Health insurance is covered by the pension. Additionally, my wife is British and we could always move there for the National Health Service.
Also, I would easily travel to a cheap, but well-rated, country for health care if it was not an immediate need (such as an accident).
Thanks! And 44k...OUCH! 😖
I always love me some MMM!
No, that was a house I found for my previous post about $100K (If you want that house, it is still for active sale! Only $100K)
Sucks about the cost of healthcare.
Ah okay, and I like my house, I just don't like weeds and crab grass :/
Wauhhh....I actually never thought of that. In fact, it's rare to see young people in Africa planning on retirement. We all think that we shall work until late.
Even our fathers also never thought of that and just found themselves at an old age and still hustling.
May be, I should start thinking about it and act. Every day I learn from your posts and you really encourages me.
Thanks @getonthetrain
Hey Jona, while it is hard to earn a lot in your country - you will also not need as much to live. It is just a trade-off. Everyone can retire early if that is important to them. I might say retire early, but I more closely mean financial independence.
Ooohhh....I get it now. Financial independence has also been my dream and free from someone's obligation to perform a particular task.
If I could, I'd probably just stop doing anything and see what I figure out. I know from recent experience that being unemployed is really annoying, but part of that is the fact that you constantly have to stress about finding a job. With that stress gone, I'm not sure what I'd feel.
Anyway, I'm not even near that yet being 9 years younger and just starting my career. And in Finland the pay is much lower even for well earning jobs. You mentioned $6000/month in your previous post. For the same living quality, I need to have as much in euros as you have in dollars and I can only hope getting 6000€/ month some day. That would place me in the top 15% earners in Finland, but due to my line of work that is very possible. Currently I'm able to save about 1000€/month.
He said he was making less than USD $65k annually. It higher than median salaries in Sweden or Finland, but definitely not out of reach. USD $45k annually in Sweden is quite realistic (about €3,000 or 30,000 SEK a month). But yes, many things are more costly in the Nordic countries than in the US, including food.
Man, if you’re managing to save €1,000 a month it is VERY good!! If you invest it smartly, you will definitely be able to retire in about ten years from now. Like I mentioned, I’ll be forty in a year from now, and I only started working in Sweden, when I was 30. My first jobs were not very well paid either. Still, I managed to save enough to consider stopping to chase full-time jobs for money and focus on having more quality time and working less.
Sorry my bad with the 65k anually.
Well yes don't get me wrong, 1000 euro is really good. Sorry if that came out sounding like I was complaining. I'm a person to whom saving comes naturally, I'm making under 30k€ anually, currently, but expect to start earning 3000€/month soon, because in my line of work that is still below average, but with that along comes more and more tax. So it won't make that big of a difference.
As for having enough to retire in 10 years, I doubt it. 12 000€ saved in a year will amount to about 170 000€ in 10 years with a realistic 8% interest rate. Anyway, there will be multiple things affecting both positively and negatively along the way. I'm well on my but it will probably take many more years unless some of my crypto investments hit huge. :)
And returning to the topic of the Nordics, the good thing is that we have a safety net here. That costs a lot to maintain and some people misuse it, but in the end I rather have it than be completely on my own in case something happens. :)
I’m sure that investment in crypto will give much better return than the annual 8%. That’s why I had half my savings invested in Bitcoin, when I first began to invest in crypto assets. And now 90% of my savings are in crypto.
Have you considered moving to a cheaper place to reduce your spending? For example, if you can work remotely, you could move to Portugal and be exempted from income tax for 10 years (here’s automatic 30% saving for you). Also, the cost of life is lower in Portugal (especially food and transportation). And you will still enjoy your European safety net and healthcare, which will be transferred from Finland to Portugal, once you get your residence card.
I invest in crypto but only a small amount. Not enough to change a life. And I'm not a day trader, I don't make predictions based on the movement of any currency. I invest in promise of the cryptocurrency and that is a slow way to profit but it has huge potential in the long term.
It is quite awesome that you trust cryptocurrencies so much that you put 90% of your savings in them. I can't get the image of risk out of my head despite knowing that the risk-reward-ratio is very high.
As for moving abroad, I might move abroad again for a while at some point. But Finland is my home and my family lives here. Family is important to me and living abroad makes visiting harder.
I think you’ve misunderstood what I wrote. Or, more likely, I wasn’t clear enough when I described it. I invested half my savings in crypto. Since then the value of my crypto assets investments have gone up so much, that their share in my savings portfolio amounts to 90% today.
Otherwise I have the same strategy as you: invest a little bit regularly (I buy every week), only in coins that you understand and believe in a long-term potential of, don’t try to day-trade, HODL long-term (3–5 years).
Ah, right! Mine have been up to 50% of my savings. But they went down quite much now
And now they are rising again! ;)
Hey, $1K per month in savings is very good - keep doing that amount of investing and you will become wealthy in time.
Every country is different and I enjoy hearing about it from everyone. Financial life seems very different there.
It is a plan and it is your plan! So I guess you did the calculations over and over again!
But the more time you are not working you can spend money!
Based on your reward tab you could easily earn 30 to 40 steem a week, which is also around $120 per week.
In some way I do envy you in another I don’t.
I’m 41 and would like to become a part timer but only as my wife would do the same. But I never made a calculation about it.
To be honest I’m working to give my kids all the opportunities in the world.
I am not worried about my kids as I know they have a good environment to grow up in. Otherwise, they will learn a lot by making their own way in the world.
First, nothing will go as you planned.
Something like your IRA invested in the stock market will go to zero
and your crypto will grow 10,000%.
I like the feeling of paying off the house. However, if you can make a better return on investments, the mortgage pays for itself once in free money and twice in a tax deduction.
I would suggest starting a small business. Like a drop shipping on-line business. Firstly for tax right offs, and second because it can become that part time job. And thirdly, because unforseen stuff is coming, and the financial world is going to change dramatically. Barter will be a big part of the future.
The dollar will definitely collapse during your retirement!
How do you plan for something so world changing?
So, I think you will be better off than 99% of the people out there, you already are, however, you will have to adjust any plans made in our current paradigm.
Investments in food is paying 12% per year.
Oh, I just want to live off the pension and allow my investments to continue to grow. I would also like to at least add in my annual IRA of $5,500.
I was thinking of starting up an online business like that.
As far as the rest of your warnings go, I do have a pile of alternative investments that would be of use.
If you have other best opportunity then OK otherwise not good.
Nice breakdown! My only recommendation would be to look closer at your budget for car repairs. Depending on the age and type of vehicle it is likely to be around $75 a month. House repairs could also be a factor with the average being $100 a month. (of course, both of these are more likely to be higher dollar amounts every few months but it would average out). Car repairs are always the thing that throws off my budget!
Good luck! I am trying for the same outcome. I was pretty close but I am about to become a father so the expenses will likely (ha) go up.
Hey, thanks for the tips based on your experiences. We have a 2012 Mazda and a 2006 Honda. We also have a 2003 Ford, but that is the one I want to sell.
Congrats on the soon-to-be father status! It's a wild ride.
That's awesome! It sounds like you're well-positioned to be in financial control of your life. Even if you work only a few more years, you should easily be able to save enough that you can meet any potential shortfalls of extra expenses.
One thing I did notice was that you did not include Medical/Vision/Dental Insurance in your calculations. Are those included in your pension plan? If so, how do I work at your company. If you don't have it through the pension, the costs can range from $300/mo up to $2,000+. And what is covered varies within that.
You're fortunate to be able to purchase a house for $100k. I was looking at a house last year, but they're all $300k+. It's just not feasible. Again, where do you work, maybe I'll come there. :)
Thanks for giving us another example that we don't have to play the game our whole lives. It is possible to get out of the rat race and into enjoying life.
Medical coverage is a benefit of the pension I am to recieve. Vision is something I am not too worried about as it isn't expensive. Dental would also come out of pocket, but I live just two hours from a thriving Mexican town that is full of quality, cheap, dental care.
Southern AZ is a decent choice for frugal living. 😀
Thank you for making this post, Justin. I’ll be turning 39 later this week and the idea of retiring early, before I turn 40, has been on my mind a lot lately. I find this idea very appealing. I have saved and invested enough money to afford it. Most of it is in crypto assets, however, which is both a highly volatile and risky investment. I also have a neat sum saved in cash, but it’s just lying there, as I don’t dare to invest it in stocks or mutual funds, because I’m expecting another financial meltdown sometimes soon.
I’m already working less than 30 hours a week, so that I have enough time left to rest, participate in recreational activities, have a richer social life, and hustle when I feel like it. Working even less, focusing on pursuing short-term occasional opportunities and doing small remote jobs sounds even better. However, I would like to build up more sources of passive income, before I take this definitive step. Steem can be one of those sources for me, I think. And maybe having a part-time job (2–3 days a week sounds about right) to provide some kind of basic economic security.
Please keep us updated on how your plan is working out, and I promise to do the same! :)
Oh, seems as if you are already living a less hectic life right now. Sounds good to me, I'll post when something important comes up. :D