Saturday, October 23, 2010

A Ludicrous Plan for Financial Independence

I calculated my net worth today (something I do about once a quarter) and found that I could quit working if I was able to live on $436/month or $5240/year (based on a safe withdrawal rate of 4%). This is only about 1/5 of my actual expenditures, so I'm nowhere near actual FI. But for the first time I found myself thinking, "Well, I could probably do that if I was really desperate."

I know of at least one blogger, Annienygma, who lives on about $500 per month (she owns a mobile home, but it sounds like she bought it for as little as a couple thousand dollars). She lives what sounds like a pretty decent life but she lives somewhere in the south (ugh) and really skimps on air conditioning--I'm a huge wimp when it comes to climate control.

A few years ago when I lived in Austin, I think I could have squeaked by on $436/month (in fact, I may have--I was working part time for $7.50/hour). I sublet a studio for $300/month (a discount off the usual rent of $450), and had a friend who lived in a similar apartment where the actual rent was $300. I lived alone but the apartment could have worked for a couple. It had a decent kitchen and a largish main room--if I was living there with R., he could have part of the room as an office with room for a computer desk, I could work on the card-table sized kitchen table, and there would be room for a double bed (maybe a queen, but not our current king).

At that time, I was spending about $80 a month on groceries, a number I still think I could stick to these days (especially since back then I was eating cereal with soy milk every morning instead of oatmeal with water).

I didn't have a car. My bus pass was $10 per month, bringing expenses to $390.

That leaves $46, which is enough for the electric and gas bill in an apartment like that with a few bucks per month left over, depending on the time of year.

I could almost do that. I could live without home Internet service by walking to the library (which is exactly what I did back then). I didn't have health insurance, and if I was really financially desperate, would probably go without it again as I'm still young and healthy. I could live without eating out, or buying clothes other than an occasional Goodwill purchase.

But I don't think I could live without a phone. If I didn't have Internet, I couldn't use Skype. And without that, I don't think I could get phone service for less than $20-30 a month. Today, my cell phone costs me about $10/month, but that's if I only use it for about 100/minutes a month, which wouldn't be enough if it was my only phone (I don't make many local calls, but I don't think I would be willing to give up talking on the phone to my parents and brother regularly).

If I cut out the bus pass (which would suck in Austin, with its hot summers) or cut my food expenditures down to the bone, I could free up maybe $15-20/month for phone. If I could limit my phone time to 200 minutes/month (still a stretch--I typically talk to my parents about an hour a week, and like to talk to my brother a similar amount), I could do it.

Just for fun, I searched what I could rent in the Chicago area for $300. There was literally nothing as far as actual apartments go (well, one condemned-looking house in Gary, Indiana). One can find a few shares in that price range--if I was single, this apartment is close to where I live now and the poster doesn't sound too crazy (though "dog-friendly" makes me worry that she has a large, enthusiastic golden retriever).

I guess I'm not even financially independent at a ludicrous level yet. But I'm getting there.


Anonymous said...

Keep going! Your not that far of really. I'm guessing your net worth is about $131000 and if your saving about 75% of your income, I reckon if i've run the figers correcty you could hit your target in 5 - 6 years ?? 35 seems like a good age to retire :) Anyway I love reading your posts to please keep writing!

Lisa said...

I think having the goal of financial independence and having thought out the possibility of living on less indicates just how serious you truly are. I think that if you are able and comfortable with living that kind of lifestyle that you should go for it. I would caution about the health insurance, despite being young and healthy. Maybe consider a HSA or high deductible plan so at least you have some coverage. What do you think?

Scarlett said...

@Lisa: Thanks for commenting! I'm not quite there yet but I'm getting closer.

I will definitely be waiting until I can afford health insurance before declaring myself officially financially independent...will probably go with a high deductible plan when the time comes.

DeirdreR said...

Good luck! I admire your determination. I'm totally inspired though!

Annie said...

Hello! I actually traded most of my furniture for my mobile home (in an incredible stroke of luck), though we started out at a price of $1,500 before we started swapping around. I ended up paying a couple hundred plus the transfer fee to move in!

The trailer is paid off, as well as my van; if this were not the case I would have to allow a lot more to live on, but my monthly expenses (not including food) comes to $400 on the high side. I've had to pay that in just rent in other places :(.

I experiment with a lot of things to save money, some I keep and some I don't but overall I do love my life! It took a bit of planning and saving to get where I am today, but I know it is not an impossible goal for others. Good luck!

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Anonymous said...

You seem to think that the 4% rule works indefinitely. However, it doesn't. It is a guideline for making a lump sum last for 30 years (roughly the traditional retirement length of 65 to 95). If you expect it to last from ages 35 to 100 you are mistaken.