I recently read an interesting article that proposed a simple thought experiment. It poses, “How much money would you have to be paid, right here and now, to retire today and never receive another dollar of income (from any source) for the rest of your life? The catch this time is that whoever among the five players writes the lowest amount on the check will be paid that sum. The other four players will get nothing.”
It is a question that I have actually being thinking of quite a bit recently, as we are currently reworking the budget to accommodate rising property taxes and new savings goals.
We currently have a household gross income just over $50,000, as I work and my boyfriend is currently going back to school full-time. We’re better off the many, but the cost of living has been consistently outpacing my increase in income by 2-3% each year.
Last year, we had $43,000 remaining after state and federal taxes. After our aggressive contributions to savings and retirement accounts, we were working with $29,965. Running the numbers, and excluding retirement contributions, we are living relatively comfortably on under $30,000 per year.
$2,497 per month covers property taxes and HOA, appliance repairs, and tuition, utilities and bottom-tier internet, bulk toilet paper packs and discounted foods, medical treatment, car maintenance and fuel, PC video games and weekend road trips, and everything in between. We are comically frugal by necessity, using every trick in the book to secure the best value possible. Yet, we don’t feel any sense of lack.
I recently saw an article about a couple who make $350,000 a year and were just getting by, and it just blows my mind that a family with seven times my income could be struggling. The article suggests that “The country’s 10 percent really do feel strapped, and really don’t understand how much better they have it than the 90 percent below them.”
Having once been a broke college student, I honesty can’t imagine ever shaking the frugal-by-necessity mindset. Once you’ve learned how to effectively cut corners and stretch a dollar, it is a challenge to go back.
I personally think that budgeting should revolve around values. My boyfriend and I jointly prioritize health, experiences, and saving for the future. We’ve both had past health challenges, so we splurge on organic foods, vitamin and mineral supplements, and regular medical checkups. Quality time is a shared love language, so we try to incorporate novel experiences into our lives, sometimes at a nominal cost. Finally, we both hope to retire early, stay at home if we choose to have children, and take advantage of future anti-aging technologies. We have built up a substantial fuck-off fund, as well as a FOMO fund.
We saved aggressively to be able to afford to sleep on a Tempur-Pedic mattress, cook with stainless steel pots, and backpack with the highest-quality gear. The sacrifice is that we watch shows on a small 15-year-old television, wear hand-me-down clothing, and chose not to replace the water-damaged furniture in the living room (that we don’t use). It doesn’t feel like a sacrifice, though, because we have been so intentional with our purchases and lack thereof.
Ideally, it would nice to have some extra cash to perform some much-needed home renovations or travel out-of-state. However, it feels quite empowering to realize even our household income were not to increase much, we would be okay. $30,000 per year affords us the opportunity live a great life in alignment with our priorities and values.
How much money would you have to be paid, right here and now, to retire today and never receive another dollar of income (from any source) for the rest of your life?
With the average life expectancy of a female living in the US being 81 years old, that means I have approximately 49 years left. While $30,000 per year is doable, the budget is a bit tight so I would ideally bump that number to $35,000 annually. Calculating that out, if I were to receive $1,715,000, I would be able to retire and life a semi-comfortable life. $40,000 would permit seemingly endless freedom and luxury. I have a sneaking suspicion that even that number is a fair amount lower than the average response.
What the question does not account for is inflation and cost-of-living changes, which are huge factors. The amount of money in circulation has skyrocketed in recent years and the cost of housing and groceries continue to rise. Given the rapid deflation of fiat currency value, I worry that–unless adjusted for current market value–the number above won’t begin to come close to what I need to survive.
Semantics aside, I found this to be a fantastic thought exercise. It can be easy to get caught in the wheel of consumerism and dream about that large house, luxury car, or exotic vacation. This thought experiment forces us to cut away the natural impulse to aim for the stars (if you do that, you’ll bid too high and get nothing). When it comes down to it, most of us don’t really need as much as we think we need to feel secure and satisfied with our lives.