An Update on Financially Free - Can I Live on $3,000 per month Shows Us Why "No Worries"
One of the most-read posts on A Juicy Enough Life is about living on $3,000 per month. The data is seven years old and could be considered a case study in why inflation isn't such a big deal.
I had just retired early for the first time and was headed toward tiny house living. It was seven years ago. Even then I knew it would be tight and was a bit concerned about inflation.
A reader recently asked for an update on this post and if things had changed. Well, so much changed that the ups and downs could be considered a case study in "why plan at all??? LOL! But primarily my net worth increased because of additional work and the increases in the stock market.
Expenses didn't increase all that much, because of diligent spending, LBYM, and a partnership. #inflationmitigation
If you watch your spending closely and apply what you've learned about personal finance, odds are you don't have that much to worry about regarding inflation either. Vicki Robbins mentions in "Your Money or Your Life," that conscious spending is the best hedge we have against inflation. If the last seven years of my personal data prove anything, she is 100% right. Jose Dominguez, her co-author, was fond of saying:
Consciousness grows faster than inflation ... Once you are FI (financially independent), you'll have more time to learn. More time to DIY. More time to bond with others. More time to find just what you need for a fraction of the cost.
Here is my 2022 DIY hedge plan against inflation:
- Passively invested index stock funds (22% of my asset allocation). I can avoid touching these for 10 years or more.
- A social security start date well into the future. Social security is the only cost-of-living-adjusted (COLA) asset I have at this time.
- Strike-point grocery shopping - buying in quantity when items are on sale. (I use an Excel spreadsheet to keep up with good prices on 30 or so items we purchase a lot. A can of black beans or spicy diced tomatoes at less than $1.00? I'm stocking up!).
- Use grocery store apps to check prices and create my list before hitting the supermarket.
So What Changed in 7 Years?
My net worth went up by 275% while my expenses only went up by 57% (and that includes fun money I didn't expect to spend).
I went back to work for a few years at my dream job (LSU's internationally renowned nutrition research powerhouse Pennington Biomedical Research Center). Never saw that offer coming and was thrilled to get it. Their focus at the time was on nutrition research to reduce heart disease, diabetes, and obesity. It was a great four years and I would have done it for very little, but they paid me well. I retired from that job last year.
1) Cash in the Bank went up by 275%
Even though I was making a good salary, I kept my lifestyle simple. Even kept driving the same 2011 Honda Insight. So I saved a lot. The stock market did well. I also had a small inheritance from my Mom's estate, which I'm now sharing with my daughter. (Thank you, Mom and Dad!)
- Debt (non mortgage)
- 2015 - $0
- 2020 - $0
- Assets
- 2015 - Over $350,000 in retirement funds plus almost $80,000 in cash.
- 2022 - Over $750,000 in investable retirement funds plus $150,000 in cash. = $900,000.
2) Expenses up 57% including discretionary spending.
They could have stayed the same if I hadn't eased the spending reins for fun money.
- Monthly Overhead
- 2015 - $2,999 per month
- 2022 - $5,250 per month
The increase in monthly overhead is discretionary and aspirational type expenses. My basic needs can still be met at the $3,000 per month level. And that includes my "must-haves:"
Housing
Utilities
Healthcare
Personal care such as toiletries and clothing
Auto and auto expenses
Cell phone
High-speed internet.
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Detailed Monthly Spending
- Housing - 25% higher
- 2015 - $600 per month for 280 square feet.
- 2022 - $800 per month for half ownership in 1700 square foot home
We share a smallish home - only 1,700 square feet, 1 bedroom, 1 study and 2 baths. Costs are about the same except for the darn maintenance. (boo hiss - so expensive!)
- Medical, Dental, Vision, Long Term Care - 0% higher
- 2015 - estimated I would spend $800 per month including a cobra policy.
- 2022 - about the same (Medical is $560, Dental is $35, LTC is $170)
- Utilities - 15% higher
- 2015 - $229 per month
- 2022 - $264 per month
I split some utilities with my partner, which helps. My share of energy and gas is $100 on average per month, $32.50 for water and sewer & garbage. I pay $37.50 for my cell service and $94 for high-speed internet, my partner picks up cable television, I still don't watch it very much.
- Food & entertainment - 86% higher
- 2015 - $430 per month, which included eating out at restaurants
- 2022 - $800 per month, also including eating out at restaurants.
This category definitely went up. But I know I can cut back on eating out if I need to. I also share some of that expense with my partner. And I'm looking forward to dusting off the strike-point grocery pricing sheet to see how I can reduce the monthly cost.
- Transportation - 0% higher
- 2015 - $450 per month
- 2022 - $450 per month
This cost has stayed the same or gone down. I'm still driving a 2011 Honda Insight which now has 127K miles. The maintenance costs have been primarily oil changes and tires. I got LUCKY with this car.
My insurance per month is less because I don't drive to work anymore. My fuel costs are less. But I still save $200 per month for buying a new car next year and for maintenance costs.
- Gifts/charity/helping daughter with student loans - -64% (down)
- 2015 - $250 per month
- 2022 - $150 per month
My beautiful daughter is now married and handling her own student loans. My giving is primarily through my Rotary Club membership and a few favorites like public radio, plus a few cash gifts throughout the year to my daughter and her new family.
- Clothing -
- 2015 - $ 65 per month
- 2022 - $200 per month
Guilty of splurging here! I have plenty from years of clothing purchases for corporate world job. That's finished, but I'm now finding that my running shoes and outerwear needs were piling up. A destination wedding for a family member last year necessitated lots of new clothes and shoe purchases. So I'm selling some of my better pieces on Poshmark at @isabettarose. I'm also finding great deals there for branded, new with tags, fantastic clothes! Won't ever need to buy new again! https://poshmark.com/closet/isabettarose
- Personal supplies, grooming, etc. - 33% higher
- 2015 - $75 per month
- 2022 - $100 per month
Not much more in this category and it is flexible. I learned during the pandemic that I just don't need to highlight my hair at $300 per 6 weeks!
- Household supplies - 0%
- 2015 - $100 per month (Includes food and litter for cat, paper goods, cleaning)
- 2022 - $100 per month (Includes paper goods, cleaning and home office supplies)
Very little growth in this as my kitty cat passed away and I haven't had the heart to adopt another one yet. Also, cleaning supplies just don't cost that much more than they did.
Following professional and/or obsessed housecleaners on Facebook and TikTok has saved me a fortune in cleaning supplies. Following others' experiments with cleaning supplies and asking questions of the group members has been very helpful.
- Taxes -- No change, still in the 22% tax bracket - boo! (Single - No dependents)
More Reasons Not to Worry
- Mr. Money Moustache posts his thoughts about inflation and why it isn't something to worry much about here.
- Your Personal CPI could be much lower than general CPI.
- Here is a fairly simple Personal Inflation Rate calculator based on your own expense estimates. It's important because the calculator weights inflation on what your consumption habits. If you don't purchase new cars, you probably don't care if new car prices are up, for example. If you drive an electric car, are you concerned about diesel gas prices busting your budget? NO.
My personal inflation rate is around 2% -- which is right in line with my fixed income asset returns. Whew! I'm good!
Check it out and let me know if it works for you!
http://www.candaceshira.com/learning_center/calculators/personal_inflation_rate
What are you planning on doing or learning or testing to fight inflation costs in your household? Please stop by the comments and share! We would love to hear from you.
