Do you feel there is a big gap between the “haves” and the “have nots?” As a retired person or couple, do you feel you are on the wrong side of the equation? Does everyone seem to be doing better than you despite your lifelong financial prudence, tendency to save and relationship with a good financial advisor? Can you live a comfortable, approaching luxurious lifestyle on slightly under $100,000 a year? I think so.
Without going into details of “who” lets looks at an example, starting with a few assumptions:
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This is a snapshot at a moment in time. Long term care might be needed later, but you are healthy and mobile now.
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This $100,000 is after tax dollars
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You are a couple, both retired, both collecting social security
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You own your own home with no mortgage
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You have no children (or they are independent, living elsewhere, not an expense)
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You own your own car (or cars) outright.
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You have no credit card debt or pay off your cards monthly.
Let us look at several expense categories:
Overhead ($1,300/mo) $15.600
This includes supplemental health insurance, home insurance, wireless plan, internet access/cable,, possibly other incidental, but regular costs.
Property and school taxes $ 16,200
This varies by where you live.
Power and fuel (not counted as overhead) ($333/month) $ 4,000
This assumes oil heating at $2,250/year and electric power at $1,800/year)
Household maintenance ($1,000/month) $ 12,000
These are general repairs, occasional appliance replacement.
Charitable contributions ($1,000/month) $ 12,000
This includes gala tickets, general contributions, memberships
Monthly spending ($2,000/month) $ 24,000
This includes dining out, dry cleaning, gas for car, grocery shopping, etc.)
Vacation travel (6 x $2,500 average) $ 16,000
This assumes four short vacations in Europe are $2,500. One good cruise deal
Is $2,500 and an occasional longer international trip is $3,500.
This totals out to $99,200.
What Kind of Lifestyle Does This Give You?
As a couple, you are pretty active in the community. You are also developing the reputation of people who travel a lot.
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$1,000/month in charitable contributions. You are giving away 12% of your income, which would both count for and exceed the definition of tithing. This allows you to have memberships in multiple local nonprofits. (Most have at least one free event and some reasonably priced ones.) You are attending the occasional gala, but not that often.
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$16,000 in vacation travel. This is where the luxury enters the picture. You are getting away every two months. Your friends can’t keep track of where you are! Ideally you live in the NY area because there are great airfares to Europe available, especially off season. (Think London or Lisbon at $500+.) You have airline and hotel program status. Sailing soon savings gets you onboard a cruise ship for about $100/day. There is the occasional time you want to get away and prices have not gone down.
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$2,000/month in monthly spending. This is an area that can get tight. It’s about $500/week. It allows for some dining out, perhaps once a week. You are only feeding two people (yourselves) but you entertain at home too. You become very good at buying what is in season or on sale.
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$1,000/month in household maintenance. This is the category you might dip into when monthly spending rises. It is also the category where lawn mowing and other expenses get tallied. You need to allow for preventative maintenance.
There are expenses that don’t show up in this example. Car repairs. Life insurance premiums. Pursuing a hobby like art or wine collecting. However, at under $100,000 a year (after tax income) you are not only keeping up with the Jones’s, but to some friends, you are the Jones’s.