How Much Do I Need to Retire on September-Style Spending

How Much Do I Need to RetireThis year’s September was a drastically different experience from the last one. Whereas last year the month was spent slogging it out in the city, working 9 – 5 (or much more) at my day job, going out after work and spending much of the day’s earnings on eating and drinking, blah, blah, blah, this year’s was spent primarily engaged in a large-scale project out here in the woods building a super-awesome deck on our house. An incredibly invigorating achievement, I suggest you try it sometime if you haven’t!

I was thinking about this the other night, and it occurred to me how little I must have spent during the month… so of course I decided to add it up:

I ended up spending a grand total of roughly $1600 for the month, or $60/day, which would be in stark contrast to last September’s calculation of $150/day. Isn’t it interesting that one of my favorite months in recent memory was also one of my cheapest months on record! Important note: deck material money was already saved up via Airbnb earnings throughout the summer.

So then of course the next thing that occurred to me was, what is my minimum amount of savings such that I can invest it semi-safely, and live comfortably enough without having to worry about paying bills and such, much like this year’s September was. It is a lot less than you might be thinking as you read this (most people seem to think they need millions before they can retire). Yes, of course things will come up, car troubles, travel costs, etc, etc, I’m not including inflation and bad economic times, I get it… but this is just an exercise to demonstrate that the end goal can be not nearly as far away as you think it is, if you live a certain way that I promise, can be just as fulfilling as my old way was.

How much do I need to retire?

Roughly $300,000 in the bank, give or take. Nonsense, you say!!

A very simple calculation: $1600/month is $19,200/year. If I can make a return of 6.5% somehow (like, collecting dividends from this), then you just type this into your calculator: 19,200 / 0.065, and you get 295,384.62

Again, my number may be slightly off, perhaps I’ll actually need an extra $50K – $100K for safe keepings, but the point I really want to get across here is, if you get your cost of living way down while still enjoying the life you live, and you get over the fear of managing your own investments and start actually doing it, retirement can be a lot closer than you think.

And I think being able to actually see a goal causes a person to make an effort towards it, resulting in arriving to it much more quickly than if the goal were out of sight, like it is for most people due to the assumptions that they’ve made.

How quickly can a person save up that kind of loot?

Obviously it depends on a lot of things, but it can be a lot quicker than you think if you put your mind to it. Back when I had my regular job, had I had my spending under control to the level that I have it now, I easily could have banked $2000/month, resulting in a total savings of $375,000 after only 10 years (feel free to play with the numbers yourself if you don’t believe me!). Bump the saving up to $3000/month (which actually also might have been possible had I really put my mind to it), and I would have had $350K after only 7 years. Amazing!

So what is required of a person to actually make this a reality?

  1. Get your cost of living down as much as is possible for you to still have a comfortable and enjoyable life.
  2. Stop borrowing money to buy things. Period. (well, perhaps a house is the one and only thing. Perhaps.)
  3. Make paying off debts your number one priority, or sell whatever you have the debt on. Stop buying anything until that is done.
  4. Learn how to invest your own money. It is as easy to do as it is daunting to the uninformed.
  5. Most importantly of all: start right now. The sooner you get started, the sooner you can make it a reality!

Easier said than done, I know, but there are people out there doing exactly that. Just try to imagine yourself retired at your age, plus 7-10 years…  perhaps if you try hard enough, the above steps will just become natural!

Feel free to tell me I’m crazy in the comments section, but you’ll have a hard time convincing me :) As always, please spread the word if you enjoyed this!


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2 Responses to How Much Do I Need to Retire on September-Style Spending

  1. Brooke says:

    Great article. Amazing how sensitive the required savings is to the average spend. Going to a spend of 150$/day requires approximately 900K savings. It’s very clear that control of spending is the key. Why don’t you run your numbers assuming 2.25% inflation over a 40 year period and see what you would need.

  2. As always, Noble Anarchist, you get me thinking. Where were you 5 years ago when I should have started all of this?
    I appreciate someone figuring out these numbers that I’ve always wondered about. But I need to ask: Does that mean that I have to return my new leather jacket?
    P.s. it looks really really good

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