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Friday, April 10, 2015

Finally Financially Independent: Can You Live a Rich Life on $3,000 a Month?

Yesterday was my last day at Megacorp (gulp) and I'm not 65 years old yet, I'm not even 59 1/2!   Anxious?  Excited?  Terrified?  Yes, yes, yes.    Is it something that you could do too?  Yes, you too.

Call it semi-retirement, retirement, a mini-retirement, early retirement, embracing the simple life, the mid-life crazies, taking a break from burn-out...I'm not sure what label fits yet.   The truly kind people at Megacorp gave me a subtle kick-in-the-pants and I am eternally grateful.  The choice was to conform to a job that just wasn't a great fit or get the heck out of the way.  

I took it as a sign from the universe to RUN, not walk, from a bad fit to finding the people who need exactly what I have to offer.   I may never work full-time again and just volunteer, or work by-the-hour, or even find another, better-fitting job -  not sure yet.  But I do know that this will test the financial freedom plan I'd been preparing for years.  Nothing is more satisfying that being the master of your own life.

Game.  On.  

$3K per month financial road map - This is a high level outline of my financial readiness checklist that may help you if you are planning or even just dreaming about walking away from the corporate cube.  If I can stick to the $3K per month plan, I can choose where and when I work and keep my financial independence for the reset of my life. 

1)  Debt.  

None.  The only credit card debt I have is paid off each day.  I use the credit card every day in order to score the rewards and pay the card each night with a transfer from my online bank.  

No mortgage.  Sold the townhouse I was renting out and added that cash to my "cache."  Found a place to rent that is cheaper than a mortgage plus upkeep (thank you Michael BlueJay!).    I do choose to help my daughter pay on her student loans, but I can opt out at any time.  My name isn't on the loans.  (No worries, honey, I'm not planning on stopping payments in this lifetime.)

2)  Cash in the Bank. 

Over $350,000 in retirement funds plus almost $80,000 in cash.   I have two pensions I can tap into beginning in 3 years.   It's squeaky tight, assuming my nest egg growth is equal to my personal inflation rate, around 1.3%.  

3)  Monthly Overhead -  $2,999 per month

  • Housing - $600 per month for 280 square feet.  

Hello tiny house living!  (See photo above. It sounds cheap, but it's actually expensive for my area -- the rent is a little over  $2 per square foot which is double local rental pricing.  But it's in a great neighborhood, covered by a canopy of 100 year old oak trees.  I can walk to the grocery store and say hello to my neighbors sitting on their front porches.  It's truly a juicy spend - frugal yet satisfying
  • Medical, Dental, Vision, LTC - $800 per month.
$500 for COBRA coverage, $100 for long-term care, $125 for meeting annual deductible and $75 per month for prescriptions.   I do take advantage of an HSA, so may get a little back next year in tax benefit.
  • Utilities - $229 per month
$60 for electricity - another benefit of tiny house living is that you just don't need as much cooling and heat.
$35 for water and sewer.
$68 for cell phone service
$66 for high speed internet (yes, this is my juicy enough splurge).
No cable television, I use rabbit ears and get all the public television that I need, plus ABC, NBC, CBS and Fox.
  • Food -  $430 per month
$220 from the grocery store, $210 budgeted for dining out, coffee, etc.  I save on dining out by doing a lot of happy hours - fun, social and satisfying but cheaper; and I use strike point pricing for grocery items.  I'm also blessed with a significant other who likes to take me out to eat a couple of times a month.  Love, love him.
  • Transportation -  $450
My state is notoriously backwards in providing public transportation and has a high insurance rate, so this is a tough category.  Not much wiggle room.
$125 per month for insurance.  $80 a month for fuel. ( I have a hybrid Honda Insight)    $200 per month in a savings account to build up funds for repairs, new batteries for the car, a new-to-me car when this one draws it last energy-efficient breath.
  • Gifts/charity/helping daughter with student loans - $250 per month.
This category might get shaved down a bit, but there's no way I'm going to stop giving.  It makes me happy to give gifts and to donate to every high school car wash and Girl Scout cookie sale I stumble upon.
  • Clothing - $65 per month
I have plenty from years of clothing purchases in corporate world.  But do need new running shoes and sundries from time to time.  Can you say "Goodwill.?"
  • Personal supplies, grooming, etc.  - $75 per month
  •  Household supplies - $100 per month.  Includes food and litter for cat, paper goods, cleaning supplies.  
(caveat - this plan has so little room for error, as my friends/experts/free financial gurus over at Early Retirement pointed out.  So I will continue to work as a freelance digital marketing consultant for awhile.  Expected monthly income from that will offset costs of new computer.)  

Does this seem extreme to you?  Or is it close to your monthly budget per person in your household?  Would love to get thoughts, comments and suggestions here from the readers.    


  1. Sounds like you have lots of breathing room to me!
    We earn $4711.32 a month.
    We pay $712.15 at a minimum to debt.
    Our housing is $750.
    Our health/dental/vision insurance is taken out before takehome pay, so we don't have to count that.
    We paid $232.67 in utilities last month. That's $36.25 a piece for each cell phone, $3 for dollar shave club, $111.17 for heat/electricity, $36 for internet/telephone, and $10 for house misc - that's things like trash bags, zip locks, lightbulbs.
    We pay $372 for food - $310 for groceries, $32 for dogfood and $30 for dining out.
    Transportation is $310 - $150- for insurance and $160 for gas for a small car and a motorocycle.
    Charity/Gifts is $470 - 10% of our income to charities and our church.
    Clothing - we buy clothes so infrequently that this does have a line item, but it's only for $10 a month. Really the aim is to save that over a few months and find a really good buy.
    Then... our single largest expense: $1332 for kids. $1292 for childcare and $40 for wipes and diapers.
    We save $100 that gets divided unevenly between saving for Christmas, our anniversary, our dog's vet visit, and a visit out of state to see our family.That's our "sinking fund" - as we expect to sink funds for these annual things every month so Christmas does't hit us hard all at once. That's my only question - where is your savings? For visits, for cat vet visits, for yearly things. We prefer a little each month to a huge chunk once a year.
    And then we spend $250 on what we call our family fund - it also happens to be what we spend in cash, each month. That's $30 date night, $40 car maintenance, $30 gifts/birthdays, $10 clothes, $10 kids, $40 equipment related to my husband's job, $20 per person to spend as they please, and $50 for health.

    So, if you pulled some moolah from a few sections and put it into yuearly savings for big things, I think you'd be in fantastic shape, and not at all extreme!

    As for us, two working parents who raise two small kids - I think we could use a little more breathing room. Hopefully soon...

    1. Hi there -- it sounds like you are doing great on your budget! Especially with two kids. Re the question on sinking funds, I do have the health/medical covered in the $800 per month listed in the budget. It's the biggest expense I have since I'm not employed. I also save $80 a month for gifts like birthdays and Christmas, $200 a month to replace my care eventually or to use for car servicing, $25 a month to replace the computer, $25 a month for travel money. (Yikes, can't believe I missed that.) Since I have been on this budget officially for a solid month, I will be able to report back on what I've learned from my semi-retirement -- and how I plan on supplementing my sinking funds. Thanks for commenting!

  2. I'm impressed with the fact that you have a written budget! Unfortunately, I have never written one down, or even had an official budget. I guess I've always flown by the seat of my pants. Your article makes me wonder how much money I would have now if I would have used a budget like you. Thanks for the information. I am inspired!

    1. Hi there -- reading Your Money or Your Life by Vicki Robin and Joe Dominguez really inspired me to track my expenses in writing. With a pencil or a computer, it doesn't matter. It's not so much a budgeting tool as it is a way to become conscious of what I'm spending my precious time on. (time = money). If I spend $30 a month on drinks in the machine at work -- and I only really take home $10 an hour after taxes -- do I really want to spend another 3 hours of my life energy on drinks at work? If they make me that happy -- then yes! But if it's not worth it, that's something to think about. This example is straight out of the book. Its one of the best inspiration tools out there...