I asked myself that question so many times in the 5 years before I finally made the leap. If you have spent your whole life with a reasonable salary coming in, you have learned to live at that level and giving up that lifestyle is not really an option. Financial analysts will tell you that you need a million or two to maintain your lifestyle. We could wait forever to retire if we were waiting to have our two million put aside and by the time we retired, our odds of being sick or incapacitated rise substantially.
So we need to find that fine line, where your lifestyle is where you need it to be, but you still live within the money that is coming in. Which is different for everyone. The compromises we make to leave behind the stressful work that robs us of our health and our joy, are different for everyone. I made a few compromises, but I have to say that the joy far outweighs any losses.
I made the compromises, moved on and now I can barely remember what they were. I have never really had a budget. But now I do. And I don’t see it as a loss but as part of what I do to enjoy my next adventure. And I seldom randomly make a purchase, except for books, where the item purchased becomes another thing in my home that I may not need or love. I used to do that all the time.
I still go out for dinner with friends, drink great wine, and enjoy fabulous adventures. Really, I am not hard done by. The reason I keep to a budget is that if I overspend, there is no big paycheck just around the corner, to offset the expenditure. So I live without debt and most months I never hit the end of my budget.
The expenses we have when we retire, make the variance in income, between then and now a little less extreme than they should have been. Here are some of the reasons why it is ultimately less expensive to live retired than working. Everybody’s number will vary but your takeaway on this is that the money you save now is big. When I used to look at my salary top line and compare it to my anticipated retirement income, it made me a little nervous. But the reality is much different.
- Since I make considerably less, I have moved into a whole new tax bracket. Don’t underestimate how big this is. Depending on your pre-retirement salary it could be a variance of $20,000 and more! No government programs to pay for now either. Now you are just benefiting from having paid into them.
- If you moved into retirement with your mortgage paid, that offsets another potential $12000 a year and more if you were topping up to finish early.
- Your kids are no longer a drain on your finances. It is surprising to realize in retrospect the amount of money you paid out while they were relying on you. I did not see it when we were all going through it, but now I do. I still have two kids in University so I still pay out a rich sum for that. But when it is gone, the money will go into my adventure pot and sweeten the ride even more. This is an elusive one to put a dollar value on but if you had kids you see the potential here also.
- I don’t pay to commute anymore. No gas, no wear and tear on my car. Sometimes my car sits in the driveway all day and more. I get around by walking and riding my bicycle because I have all the time in the world. When I am away, my car will sit for weeks. I even move my insurance down a level when I am away, since the car is sitting in my garage. It cuts my insurance in half for the time I am away. And then I put the third-party liability back on when I return.
- I seldom wear a suit anymore so my clothing budget continues to fall as I don’t replace the employment wardrobe that tended to cost more than the comfortable, easy clothing I wear now.
- Here is a big one. I no longer have to save for retirement. I am retired. So that big chunk of money that was taken off my paycheck before I even saw it – not necessary anymore!
This can surprisingly reduce your income to 50-60% of what you once earned. And you will not be living frugally. Less consumer driven than before but that was a desirable outcome anyway.
And you will have a lot more fun with a lot less. And that amazing peace of mind also sets you free. Can you put a dollar value on freedom?