How to live on $110,000 less income each year?

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sk.dolcevita
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Re: How to live on $110,000 less income each year?

Post by sk.dolcevita » Mon Jun 06, 2016 5:07 pm

Now, why are you comparing yourself to your friend? Just look at your own budget line-by-line and see if you can cut some fat there while still living the life you want to (now and in retirement).

BTW, I doubt your friend can save much for his retirement if living a typical middle class lifestyle with kids in MCOL city. And the current rental market is probably killing him.

Grogs
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Re: How to live on $110,000 less income each year?

Post by Grogs » Mon Jun 06, 2016 5:31 pm

miamivice wrote:
cpw84 wrote:
Could you break this out line by line? Something like Mint would help you out a lot to pinpoint where the spending is. If you limited your eating out to $200 per month, you would be amazed at how much you save in buying groceries and cooking at home, especially if you primarily use Aldi or Costco. How long are your commutes to work and how much do you drive otherwise? With what kind of mpg? Amusement park season passes are a luxury item. Furniture doesn't need to be constantly replaced. If you have a lot of wi-fi access and don't mind waiting to use data until you're in wi-fi range, you could both get a plan for $50 per month total if you're careful with data.
No, I can't break it out line by line very easily. I just don't have the time or desire to use Mint.com regularly and update categories. Plus, we do a lot of shopping (probably $18k/year) at a variety store where you buy groceries, household goods, kid goods, and the like that the transactions don't tell the story on what was actually purchased.

I agree that amusement park season passes are a luxury item. I think it's something we can afford today but not sure if we can at a reduced budget. That is the type of trades that I am trying to consider.
I would say this is a problem. At 80k/yr, your 18k is nearly 25% of your gross income. I just don't see how you can have a miscellaneous category that large and hope to succeed. Instead of doing line by line, maybe you can just save receipts for a couple of months and highlight items that aren't part of the monthly essentials. You might find that there are "splurge" items that, while they don't seem very expensive individually, they combine to make up a big portion of the 18k.

randomguy
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Re: How to live on $110,000 less income each year?

Post by randomguy » Mon Jun 06, 2016 5:53 pm

DTSC wrote:Also, your friend might be racking up thousands of dollars per year in credit card charges to keep up appearances. You never know.
Maybe but it really sounds like taxes , child care, and savings accounts for the difference.

Friend 80k of income, 2kids under 16
Fed income tax = 4.8k
payroll tax 6k
Total taxes 10.8k

Poster
parent 1 110k
parent 2 80k
Income tax: 32.2k
FICA 7400+6k = 13.4

Total taxes: 55.6k

That is probably an exagaration (401(k) and housing deductions should narrow some of the gap) but 45k more in taxes + 30k in child care + 20k in housing is 95k. That last 15k could be savings (22 versus say 8) or not living a luxurious lifestyle (i.e the spending numbers mentioned are far from basic.). Obviously the situation changes a lot when the kids hit school (30k/year more to save/spend) or and the housing numbers change (rent increases vs paying off the house).

wolf359
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Re: How to live on $110,000 less income each year?

Post by wolf359 » Mon Jun 06, 2016 5:59 pm

miamivice wrote:
yellowgirl wrote:
Oh, I get it. Are you complaining that you guys are making too much money?
No, we don't have too much money. I'm seriously trying to figure out how I can make ends meet if I make a certain lifestyle change.
It's a lot harder to cut expenses once you're used to them than it is to inflate your lifestyle when you get new income.

There are several ways to accomplish this:

1) Go back to a timeframe when your income was actually $80,000. Adopt that budget.

2) Start from scratch. Assume you have a budget of $80,000. How do you live? Your biggest expenses are housing, transportation, and food. My 6th grader is doing this for a class project -- she got assigned a budget and she has to find actual expenses and figure out how to live within that budget. Don't cut from your existing budget. Start from zero and budget from there. When done, you can compare the two budgets.

3) Radically change your fixed costs. I have an emergency plan such that if the worst-case unemployment scenario happens, we can radically downsize houses and cars, and live off savings indefinitely. This is not desired -- the kids would have to change schools, and we'd be in a much smaller house. But if circumstances called for it, we could execute the plan and FI/RE immediately.

HIinvestor
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Re: How to live on $110,000 less income each year?

Post by HIinvestor » Mon Jun 06, 2016 6:17 pm

I agree with other posters that it is MUCH easier to live on less money than have a sudden drop in income to a lower amount.

Most of our marriage, H brought in and we comfortably supported our family on well under $80K/year in a very high cost of living area, HI. We did it by eating a ton of oatmeal and peanut butter sandwiches, rarely dining out, driving used cars until they couldn't be repaired, and just living very simply. It obviously can be done and is done by most of the US, since that's more than many households make.

Tracking spending is very illuminating, and then you and spouse can determine if you're both happy with how your funds are currently being spent and if you'd like to make any changes. If you have no idea how it's being spent, you have no idea what changes (if any) would work for your household.

Tracking spending can be as simple or elaborate and as detailed or general as you like.

I agree that it can be better and easier to start with a blank slate and make a budget for $80K than cutting things from your existing budget. Lifestyle creep is very easy--a lunch a day for each of H&W is $20-30+ x 5 = $100-150/week x 52 weeks = $5200-7800/year. If you also have dinner out or takeout regularly, that can really add up quickly, especially with beverages, liquor, and "nice" meals.
Last edited by HIinvestor on Mon Jun 06, 2016 8:01 pm, edited 1 time in total.

surfstar
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Re: How to live on $110,000 less income each year?

Post by surfstar » Mon Jun 06, 2016 6:51 pm

Yet another one saying TRACK EXPENSES!!!

That is where you're bleeding out. The fact that you can't be bothered to track them, is very telling.

What cars do you own? vs your friend? That can be a large gap too.


If you wanted a spouse to stay at home, you could do it. But you would have to cut back, track expenses, and stick to budgets. Is that something you're willing to do?

Runner01
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Re: How to live on $110,000 less income each year?

Post by Runner01 » Mon Jun 06, 2016 6:52 pm

TOJ wrote:
Runner01 wrote:You need to track your expenses and understand what you are spending money on. My wife and I went from $100k household income to about $65k last year when our son was born. However, we planned for this years in advance and had no problem at all when our son was born. Also, at this income level we pay $0 in FIT and save around $18k per year.

Also, it helps to keep in mind that 50% of all households in the U.S. earn less than about $50k per year.
In the time leading up to this change, did you save money for the express purpose of bolstering your future lower monthly cash flow?
Yes, among other things. We did major repairs to the house, cash flowed my wife's masters degree, cash flowed the last two years of my BS (had an associates before that), paid cash to replace an old car, invested quite a bit in retirement accounts, and bumped our liquid cash accounts to $40k (which was good because the birth was complicated and cost almost $10k out of pocket).

Slacker
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Re: How to live on $110,000 less income each year?

Post by Slacker » Mon Jun 06, 2016 7:06 pm

Start cutting your non-essential costs that you don't get that much use out of and increase your savings rate. Do that enough, and you may find yourselves at an equivalent spending rate of what someone making $80k/yr could afford.

We earn close to what you two do and our "essential bills" could be covered by $80k/yr income with a nice house in a moderate cost of living area (2800sq ft 4/3.5 home with two teenagers, two adults and multiple animals). However, we'd have to cut back on vacations and drastically cut back on savings at $80k unless we were to move out of our home (2/3 of our fixed monthly costs is our home).

Slacker
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Re: How to live on $110,000 less income each year?

Post by Slacker » Mon Jun 06, 2016 7:08 pm

randomguy wrote:
DTSC wrote:Also, your friend might be racking up thousands of dollars per year in credit card charges to keep up appearances. You never know.
Maybe but it really sounds like taxes , child care, and savings accounts for the difference.

Friend 80k of income, 2kids under 16
Fed income tax = 4.8k
payroll tax 6k
Total taxes 10.8k

Poster
parent 1 110k
parent 2 80k
Income tax: 32.2k
FICA 7400+6k = 13.4

Total taxes: 55.6k

That is probably an exagaration (401(k) and housing deductions should narrow some of the gap) but 45k more in taxes + 30k in child care + 20k in housing is 95k. That last 15k could be savings (22 versus say 8) or not living a luxurious lifestyle (i.e the spending numbers mentioned are far from basic.). Obviously the situation changes a lot when the kids hit school (30k/year more to save/spend) or and the housing numbers change (rent increases vs paying off the house).
We make a little more than the poster and with maxing two 401k accts (TSP), maxing two HSA accts and house deductions paid $21K last year in Fed Income Taxes.

State income taxes also will have an impact too.

Grt2bOutdoors
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Location: New York

Re: How to live on $110,000 less income each year?

Post by Grt2bOutdoors » Mon Jun 06, 2016 7:17 pm

You can not match your friend. You and you wife, assuming your income is split roughly in half between you and your wife - you both are paying into Social Security and Medicare (you pay $13K, your friend pays $6K - there's $7K right there). Your friend is benefiting from $28K in personal exemptions and deductions, $2k per year in child tax credits (those who earn above $110K are out of luck).

So far that is $7K + $28K +$2K is $37K. Better to make money than not, I think if your friend had the choice, he'd like to make more income and not less.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

surfhb
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Re: How to live on $110,000 less income each year?

Post by surfhb » Mon Jun 06, 2016 7:27 pm

miamivice wrote:
cpw84 wrote:
Could you break this out line by line? Something like Mint would help you out a lot to pinpoint where the spending is. If you limited your eating out to $200 per month, you would be amazed at how much you save in buying groceries and cooking at home, especially if you primarily use Aldi or Costco. How long are your commutes to work and how much do you drive otherwise? With what kind of mpg? Amusement park season passes are a luxury item. Furniture doesn't need to be constantly replaced. If you have a lot of wi-fi access and don't mind waiting to use data until you're in wi-fi range, you could both get a plan for $50 per month total if you're careful with data.
No, I can't break it out line by line very easily. I just don't have the time or desire to use Mint.com regularly and update categories. Plus, we do a lot of shopping (probably $18k/year) at a variety store where you buy groceries, household goods, kid goods, and the like that the transactions don't tell the story on what was actually purchased.

I agree that amusement park season passes are a luxury item. I think it's something we can afford today but not sure if we can at a reduced budget. That is the type of trades that I am trying to consider.
You spend upwards of $20K a year on"shopping", don't want to take the time to see where your money is going then question how your friends get by on one income?

$20,0000 a year on shopping?! You have a spending issue :happy

TomCat96
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Re: How to live on $110,000 less income each year?

Post by TomCat96 » Mon Jun 06, 2016 7:35 pm

miamivice wrote:So, a friend makes $80,000 a year and has a stay at home wife, so his total family income is $80,000.

My wife and I both work, and I work extra hours, so our family income has been $190,000 for the past several years.

I'm slightly perplexed at how we could possibly reduce our expenditures to live on $110,000 less income each each (to be in a similar spot as my friend).

The big differences that I see:

Childcare: They have no childcare expense (stay at home wife) while we have 2 kids in daycare. Differential: $30,000/yr.
Housing: We own a nice house while they rent. Difference in total costs (including differential in insurance, utilities, maintenance, etc) $20,000/yr.
(The downside to them renting is they are not accuring equity in their house while we are in ours, in terms of asset appreciation).
Retirement: We currently set aside maybe $22,000 of our after-tax money into retirement. While I don't know how much they save for retirement, a guy could change this to $0 and make up a big chunk of the difference.
Taxes: My friend pays probably $10,000 less in taxes (wild estimate) due to the less income.

As far as I can tell, our lifestyle is relatively basic. The remaining amount we spend goes toward basic needs and not disposable needs.

So, I am calculating a $82,000 difference. What additional steps could we take to reduce our budget by the remaining $28,000 so we could live on $80,000 a year?

Also, would it be smart to go from owning a nice house to renting a small multifamily place? I'm not thinking that would be a wise financial move.

We are contemplating a lifestyle change that might change our salary to match his family income of $80,000, and I'm trying to wrap my mind around how I can survive a drastic cut in income.

I'm kind of with the first reply hand, on this one.
The big assumption you gloss over is that he isn't earning income from other areas in his life.

Do you work, or have you ever worked in a public agency? The magic of having everyone's salary being public knowledge is that you know exactly the compensation your coworkers are getting. You would be astonished at sheer breadth of living standards across the board that people choose to have with identical salaries.

I live frugally, but I know coworkers that spend every penny. Some consistently spend more than they earn.


One year for a christmas party, I went to the rather large home of a church friend. My brother worked at the same company he did, so knew the man's exact compensation. The man's wife didn't work. We ran some numbers based on the going values of the home, the property taxes paid in prior years, etc. The numbers didn't add up. Somehow the guy was supporting a wife and 2 kids and a 9k a month mortgage on a 230k salary.

In all likelihood, the man had received a windfall, or had significant cash reserves beyond his salary.

Seeing people receive windfalls is relatively common among the white collar. I never received any kind of windfall personally.
But people do post regularly on this site saying they had just received 150k, 200k, 250k+, inquiring how to invest it.

The best approach is: you do you.

Your whole post is based on the premise that your neighbor lives off his salary of 80k alone and nothing else. Trying to live on 110k less income per year, is exactly that.

I think its better if you live on numbers that make sense to you and your family's personal needs rather than the perceived spending habits of your neighbor.

If you're looking for ways to be more frugal, then certainly that's a good thing. But don't drive yourself crazy fighting phantoms.

Non7WoodUser
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Re: How to live on $110,000 less income each year?

Post by Non7WoodUser » Mon Jun 06, 2016 7:50 pm

Annual costs target should be < 50% of take home pay.

HIinvestor
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Re: How to live on $110,000 less income each year?

Post by HIinvestor » Mon Jun 06, 2016 8:06 pm

By the way, when we were living in way less than $80K for our family of 4, we were maxing out retirement and IRAs, so people CAN live amazingly frugally, compared to others. Much of the US and world does manage to do so just fine.
Last edited by HIinvestor on Mon Jun 06, 2016 8:18 pm, edited 1 time in total.

jsapiandante
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Re: How to live on $110,000 less income each year?

Post by jsapiandante » Mon Jun 06, 2016 8:11 pm

For my me and my wife, it always makes sense to break down your expenses. We categorize them by importance. The expenses to keep us alive like food, mortgage, utilities, life and health insurance. Next are the expenses to secure our future (401k, simple IRA, and Roth IRA). Then everything else is broken down by what keeps us happy. Fortunately, we live a simplistic lifestyle and don't have kids. We own our cars, we don't have cable television, we share our meals when we eat out. Since we both have stressful careers, we take a few short vacations a year locally, and one long vacation out of the country for our mental health and to recharge.

If our mortgage and property taxes weren't so large (3.5k/month), we'd save 60-70% of our after tax income. But that's an argument for another topic. Don't try to compare yourself to others. As long as you're happy, making ends meet, and saving for retirement, then that's all you need. Now, if you're unhappy about your situation, then you need to take a serious look at where your money is going.

petiejoe
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Re: How to live on $110,000 less income each year?

Post by petiejoe » Mon Jun 06, 2016 8:13 pm

wolf359 wrote: 2) Start from scratch. Assume you have a budget of $80,000. How do you live? Your biggest expenses are housing, transportation, and food. My 6th grader is doing this for a class project -- she got assigned a budget and she has to find actual expenses and figure out how to live within that budget. Don't cut from your existing budget. Start from zero and budget from there. When done, you can compare the two budgets.
I remember doing that activity in school. My family was lower middle class. I was assigned a budget that was upper middle class (at least to my perception, perhaps they were more in the middle than what I realized). It felt like I had to try hard to spend all that money on paper. Fancy things like eating out for lunch and dinner every day and taking the whole family to the movie theater on a Friday night. As a finishing touch for that project, I made a point of putting a couple more charges on the credit card (the budget I was assigned started out with a hefty credit card balance and he had to have gotten there somehow).

You can always live on less money - plenty of people do. You need to find what's right for you with your income and your goals. I track my spending super closely, but you don't have to track it to the penny to get value from Mint. Maybe at the end of 3 months you make an observation that you routinely spend $x at Costco and you start asking yourself how that is actually divided. More likely at the end of 3 months you discover that you're spending $x on gas and $y on dining out and you don't have to do any more tracking or budgeting to discover easy ways to cut a significant chunk of change from your budget.

warner25
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Re: How to live on $110,000 less income each year?

Post by warner25 » Mon Jun 06, 2016 8:15 pm

This thread is outrageous. Every other reply suggests that the $80k/year family is saving nothing, drowning in debt, or living off an inheritance.

I make only a little more than the friend in question after taxes, and my family of three (with SAHM for childcare) spends $40k/year, saving the other $40k/year. We spend less (often much less) than most Americans in virtually every category but don't feel deprived. We are in a LCOL area, but I figure our expenses only go up to about $55k/year in a HCOL area.

I think the OP is living a life of high luxury despite reassurances that it's all "basic needs."

surfhb
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Re: How to live on $110,000 less income each year?

Post by surfhb » Mon Jun 06, 2016 8:27 pm

warner25 wrote:This thread is outrageous. Every other reply suggests that the $80k/year family is saving nothing, drowning in debt, or living off an inheritance.

I make only a little more than the friend in question after taxes, and my family of three (with SAHM for childcare) spends $40k/year, saving the other $40k/year. We spend less (often much less) than most Americans in virtually every category but don't feel deprived. We are in a LCOL area, but I figure our expenses only go up to about $55k/year in a HCOL area.

I think the OP is living a life of high luxury despite reassurances that it's all "basic needs."
Yep. Even in a HCOL area, 40K is more than doable. Many live on much less.

Personally, without a mortgage, I wouldn't see any need to spend over $2K a month expenses for a family of 3 or 4. Once you start buying new cars, eating and drinking out and spendy vacations all that goes out the window. I guess its all about priorities. My desire to become Financially independent is much greater than a new car or a fancy steak dinner.

cherijoh
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Location: Charlotte NC

Re: How to live on $110,000 less income each year?

Post by cherijoh » Mon Jun 06, 2016 8:31 pm

miamivice wrote:
cpw84 wrote:
Could you break this out line by line? Something like Mint would help you out a lot to pinpoint where the spending is. If you limited your eating out to $200 per month, you would be amazed at how much you save in buying groceries and cooking at home, especially if you primarily use Aldi or Costco. How long are your commutes to work and how much do you drive otherwise? With what kind of mpg? Amusement park season passes are a luxury item. Furniture doesn't need to be constantly replaced. If you have a lot of wi-fi access and don't mind waiting to use data until you're in wi-fi range, you could both get a plan for $50 per month total if you're careful with data.
No, I can't break it out line by line very easily. I just don't have the time or desire to use Mint.com regularly and update categories. Plus, we do a lot of shopping (probably $18k/year) at a variety store where you buy groceries, household goods, kid goods, and the like that the transactions don't tell the story on what was actually purchased.

I agree that amusement park season passes are a luxury item. I think it's something we can afford today but not sure if we can at a reduced budget. That is the type of trades that I am trying to consider.
Worrying about whether one can afford season passes to the amusement park when you are contemplating cutting your take-home pay by more than 50% is akin to rearranging the deck chairs on the Titanic, IMO. :oops:

It is pretty obvious to me that OP couldn't make the transition to $80K/year. If OP has housing costs that are $20K more than his friend who is renting, then it is highly unlikely he would have the cash flow to afford his house on $80K gross even if discretionary spending were cut by 50%. (The only caveat would be if this includes a significant sum towards accelerated mortgage payments that could be discontinued).

Hopefully, this is an academic exercise and he isn't seriously planning to try cut $110K out of his budget and live on $80K/year. Or maybe he is simply bragging on himself?
miamivice wrote: One poster is confused about my question. It is, very simply "If I choose to go from my current $190,000 income and replace it with a $80,000, what am I giving up? What am I gaining in life by earning $190,000". There are a lot of non-economic parts of that question but this thread is focusing on the economic parts only.
Give me a break! This is a personal finance website. Why would you expect the answers to focus on anything but the economics?

Topic Author
miamivice
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Re: How to live on $110,000 less income each year?

Post by miamivice » Mon Jun 06, 2016 8:41 pm

Thanks for all of the replies. It's pretty clear to me that I couldn't go down in salary by 110k a year at this point of my life. Perhaps someday but not today.

I sincerely appreciate the seriousness of the responses that I got on here. It meant a lot to be able to discuss my finances with a group of financially-savy folks and I appreciate the opportunity.

JH4P
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Re: How to live on $110,000 less income each year?

Post by JH4P » Tue Jun 07, 2016 8:55 am

Theoretical budget for a family of 4
$80k – Income

$10k – Taxes (Federal, State, Local)
$20k – House (Mortgage, Taxes, Insurance, Utilities)
$15k – Health (Insurance + Actual Annual Expenses)
$15k – Food (Groceries + Restaurants)
$8k – Cars (Maintenance, Gas, Insurance, Incremental Saving for Next Vehicle)
$4k – Shopping (Clothes, Furniture, Etc.)
$3k – Communications (TV, Internet, Cell Phones)
$1k – Vacations/Travel
$1k – Routine Entertainment (Golf, Movies, Babysitters)
$1k - Gifts (Birthdays, Christmas, Anniversaries)
$2k – Misc Other (Charitable Giving, Paying off Debts, Etc.)

Obviously anyone is free to cut one category to allow more spending in another. My point is simply to show ONE possible example as a baseline of what it might look like. Hope that helps.

BW1985
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Re: How to live on $110,000 less income each year?

Post by BW1985 » Tue Jun 07, 2016 9:48 am

JH4P wrote:Theoretical budget for a family of 4
$80k – Income

$10k – Taxes (Federal, State, Local)
$20k – House (Mortgage, Taxes, Insurance, Utilities)
$15k – Health (Insurance + Actual Annual Expenses)
$15k – Food (Groceries + Restaurants)
$8k – Cars (Maintenance, Gas, Insurance, Incremental Saving for Next Vehicle)
$4k – Shopping (Clothes, Furniture, Etc.)
$3k – Communications (TV, Internet, Cell Phones)
$1k – Vacations/Travel
$1k – Routine Entertainment (Golf, Movies, Babysitters)
$1k - Gifts (Birthdays, Christmas, Anniversaries)
$2k – Misc Other (Charitable Giving, Paying off Debts, Etc.)

Obviously anyone is free to cut one category to allow more spending in another. My point is simply to show ONE possible example as a baseline of what it might look like. Hope that helps.
Retirement savings though?
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

tl24
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Re: How to live on $110,000 less income each year?

Post by tl24 » Tue Jun 07, 2016 10:16 am

Aside from your post tax retirement savings, how much do you put in for retirement pre-tax? If you both max that out, the difference between you and your friend may actually be 64k before taxes, and a lot that could be attributed to the differences in day care costs already.

I have thought about the possibility of cutting out additional income as well (around 45k), but then realize that it would be more difficult to save for retirement. My goal is to retire before 60 and I doubt that would be possible without the additional income and her pension.

One thing I would do is play around with paycheckcity.com's calculators to see how much less money you would truly have to work with on a monthly basis. As long as you use it correctly, I have found it to be very accurate. In addition, like others said, I recommend Mint to see where your money is going.

stoptothink
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Re: How to live on $110,000 less income each year?

Post by stoptothink » Tue Jun 07, 2016 10:16 am

BW1985 wrote:
JH4P wrote:Theoretical budget for a family of 4
$80k – Income

$10k – Taxes (Federal, State, Local)
$20k – House (Mortgage, Taxes, Insurance, Utilities)
$15k – Health (Insurance + Actual Annual Expenses)
$15k – Food (Groceries + Restaurants)
$8k – Cars (Maintenance, Gas, Insurance, Incremental Saving for Next Vehicle)
$4k – Shopping (Clothes, Furniture, Etc.)
$3k – Communications (TV, Internet, Cell Phones)
$1k – Vacations/Travel
$1k – Routine Entertainment (Golf, Movies, Babysitters)
$1k - Gifts (Birthdays, Christmas, Anniversaries)
$2k – Misc Other (Charitable Giving, Paying off Debts, Etc.)

Obviously anyone is free to cut one category to allow more spending in another. My point is simply to show ONE possible example as a baseline of what it might look like. Hope that helps.
Retirement savings though?
This thread still blows my mind, the way to live on $80k is to spend less. There is no secret and most of the families in this country do it. Our household income is just short of the OP's, but our expenses are ~$40k/yr (not including retirement savings, other savings, and extra mortgage principle payments), and this includes a 15yr mortgage and full-time childcare for two children. We have less house and less overall discretionary spending - done.

JH4P
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Re: How to live on $110,000 less income each year?

Post by JH4P » Tue Jun 07, 2016 10:25 am

BW1985 wrote:
JH4P wrote:Theoretical budget for a family of 4
$80k – Income

$10k – Taxes (Federal, State, Local)
$20k – House (Mortgage, Taxes, Insurance, Utilities)
$15k – Health (Insurance + Actual Annual Expenses)
$15k – Food (Groceries + Restaurants)
$8k – Cars (Maintenance, Gas, Insurance, Incremental Saving for Next Vehicle)
$4k – Shopping (Clothes, Furniture, Etc.)
$3k – Communications (TV, Internet, Cell Phones)
$1k – Vacations/Travel
$1k – Routine Entertainment (Golf, Movies, Babysitters)
$1k - Gifts (Birthdays, Christmas, Anniversaries)
$2k – Misc Other (Charitable Giving, Paying off Debts, Etc.)

Obviously anyone is free to cut one category to allow more spending in another. My point is simply to show ONE possible example as a baseline of what it might look like. Hope that helps.
Retirement savings though?
Yeah... :oops:

Knew I'd miss something obvious.

BHUser27
Posts: 650
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Location: A Midwestern Town

Re: How to live on $110,000 less income each year?

Post by BHUser27 » Tue Jun 07, 2016 10:43 am

I think the OP is really asking, "How do I HAPPILY live off $80k a year?"
The first step is to stop equating money with happiness :wink:

Jags4186
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Re: How to live on $110,000 less income each year?

Post by Jags4186 » Tue Jun 07, 2016 11:36 am

stoptothink wrote:
BW1985 wrote:
JH4P wrote:Theoretical budget for a family of 4
$80k – Income

$10k – Taxes (Federal, State, Local)
$20k – House (Mortgage, Taxes, Insurance, Utilities)
$15k – Health (Insurance + Actual Annual Expenses)
$15k – Food (Groceries + Restaurants)
$8k – Cars (Maintenance, Gas, Insurance, Incremental Saving for Next Vehicle)
$4k – Shopping (Clothes, Furniture, Etc.)
$3k – Communications (TV, Internet, Cell Phones)
$1k – Vacations/Travel
$1k – Routine Entertainment (Golf, Movies, Babysitters)
$1k - Gifts (Birthdays, Christmas, Anniversaries)
$2k – Misc Other (Charitable Giving, Paying off Debts, Etc.)

Obviously anyone is free to cut one category to allow more spending in another. My point is simply to show ONE possible example as a baseline of what it might look like. Hope that helps.
Retirement savings though?
This thread still blows my mind, the way to live on $80k is to spend less. There is no secret and most of the families in this country do it. Our household income is just short of the OP's, but our expenses are ~$40k/yr (not including retirement savings, other savings, and extra mortgage principle payments), and this includes a 15yr mortgage and full-time childcare for two children. We have less house and less overall discretionary spending - done.
Your food and your health categories are way bloated IMO.

$6000 on groceries and you probably eat out once or twice a month to the tune of another $150/mo.

If your health expenses were 15k/yr I'd be looking for a job with better health benefits. I pay $2100 for insurance for 2, a family would cost me $3900/yr. you'd have to be catastrophically injured to spend $15k on health related costs.

surfhb
Posts: 231
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Re: How to live on $110,000 less income each year?

Post by surfhb » Tue Jun 07, 2016 12:08 pm

I know some people hate Mr Money Mustache around here but I think the OP would benefit greatly by reading his blog :D

JH4P
Posts: 37
Joined: Mon Aug 10, 2015 3:57 pm

Re: How to live on $110,000 less income each year?

Post by JH4P » Tue Jun 07, 2016 1:41 pm

Jags4186 wrote:
stoptothink wrote:
BW1985 wrote:
JH4P wrote:Theoretical budget for a family of 4
$80k – Income

$10k – Taxes (Federal, State, Local)
$20k – House (Mortgage, Taxes, Insurance, Utilities)
$15k – Health (Insurance + Actual Annual Expenses)
$15k – Food (Groceries + Restaurants)
$8k – Cars (Maintenance, Gas, Insurance, Incremental Saving for Next Vehicle)
$4k – Shopping (Clothes, Furniture, Etc.)
$3k – Communications (TV, Internet, Cell Phones)
$1k – Vacations/Travel
$1k – Routine Entertainment (Golf, Movies, Babysitters)
$1k - Gifts (Birthdays, Christmas, Anniversaries)
$2k – Misc Other (Charitable Giving, Paying off Debts, Etc.)

Obviously anyone is free to cut one category to allow more spending in another. My point is simply to show ONE possible example as a baseline of what it might look like. Hope that helps.
Retirement savings though?
This thread still blows my mind, the way to live on $80k is to spend less. There is no secret and most of the families in this country do it. Our household income is just short of the OP's, but our expenses are ~$40k/yr (not including retirement savings, other savings, and extra mortgage principle payments), and this includes a 15yr mortgage and full-time childcare for two children. We have less house and less overall discretionary spending - done.
Your food and your health categories are way bloated IMO.

$6000 on groceries and you probably eat out once or twice a month to the tune of another $150/mo.

If your health expenses were 15k/yr I'd be looking for a job with better health benefits. I pay $2100 for insurance for 2, a family would cost me $3900/yr. you'd have to be catastrophically injured to spend $15k on health related costs.
Regarding health insurance, Forbes says average family of 4 spends a little over $9k per year in combined premiums and costs. Yes, I guess my $15k was a little high. That frees up $6k or so for something else. Retirement maybe?

http://www.forbes.com/sites/danmunro/20 ... cd38dd6963

Regarding food, the USDA would call $6,000 on groceries and $1,800 on restaurants very thrifty.

http://www.usatoday.com/story/news/nati ... y/2104165/

I don't disagree it is doable, but it is not close to normal, especially by families with well above median income. I'll concede $15k per year might be a tad high, but then again, I probably should have included toiletries, cleaning supplies, etc as part of that lump sum. You usually buy those along with food products at the grocery store. Group those in with food and I think you would find $15k/yr very representative of families of 4 making $80k per/yr.

Like I said before, everyone is free to tweak as they prefer, but my goal was simply to represent a very average budget. The original poster seemed to have a hard time picturing what living on $80k looks like due to a much higher current income. I don't think a scorched earth food budget would have been very relatable to them. This gives them something to compare to on an item by item basis. Move a little out of health and into a retirement savings category and I think my list is very representative of a budget somewhere near the middle of the bell curve for this income group.
Last edited by JH4P on Tue Jun 07, 2016 1:51 pm, edited 2 times in total.

N10sive
Posts: 626
Joined: Thu May 05, 2016 6:22 pm

Re: How to live on $110,000 less income each year?

Post by N10sive » Tue Jun 07, 2016 1:50 pm

JH4P wrote:
Jags4186 wrote:
stoptothink wrote:
BW1985 wrote:
JH4P wrote:Theoretical budget for a family of 4
$80k – Income

$10k – Taxes (Federal, State, Local)
$20k – House (Mortgage, Taxes, Insurance, Utilities)
$15k – Health (Insurance + Actual Annual Expenses)
$15k – Food (Groceries + Restaurants)
$8k – Cars (Maintenance, Gas, Insurance, Incremental Saving for Next Vehicle)
$4k – Shopping (Clothes, Furniture, Etc.)
$3k – Communications (TV, Internet, Cell Phones)
$1k – Vacations/Travel
$1k – Routine Entertainment (Golf, Movies, Babysitters)
$1k - Gifts (Birthdays, Christmas, Anniversaries)
$2k – Misc Other (Charitable Giving, Paying off Debts, Etc.)

Obviously anyone is free to cut one category to allow more spending in another. My point is simply to show ONE possible example as a baseline of what it might look like. Hope that helps.
Retirement savings though?
This thread still blows my mind, the way to live on $80k is to spend less. There is no secret and most of the families in this country do it. Our household income is just short of the OP's, but our expenses are ~$40k/yr (not including retirement savings, other savings, and extra mortgage principle payments), and this includes a 15yr mortgage and full-time childcare for two children. We have less house and less overall discretionary spending - done.
Your food and your health categories are way bloated IMO.

$6000 on groceries and you probably eat out once or twice a month to the tune of another $150/mo.

If your health expenses were 15k/yr I'd be looking for a job with better health benefits. I pay $2100 for insurance for 2, a family would cost me $3900/yr. you'd have to be catastrophically injured to spend $15k on health related costs.
Regarding health insurance, Forbes says average family of 4 spends a little over $9k per year in combined premiums and costs. Yes, I guess my $15k was a little high. That frees up $6k or so for something else. Retirement maybe?

http://www.forbes.com/sites/danmunro/20 ... cd38dd6963

Regarding food, the USDA would call $6,000 on groceries and $1,800 on restaurants very thrifty.

http://www.usatoday.com/story/news/nati ... y/2104165/

I don't disagree it is doable, but it is not close to normal, especially by families with well above median income. I'll concede $15k per year might be a tad high, but then again, I probably should have included toiletries, cleaning supplies, etc as part of that lump sum. You usually buy those along with food products at the grocery store. Group those in with food and I think you would find $15k/yr very representative of families of 4 making $80k per/yr. Like I said before, everyone is free to tweak as they prefer, but my goal was simply to represent a very average budget, and other than my oversight of leaving out retirement (average person barely saves for retirement, so was this really even an oversight?) I think my list is very representative of a budget somewhere near the middle of the bell curve.
I think the key word is healthy diet in the article you posted. I could live off fast food and spend less than 2k per year on food. 6k for food seems very thrifty especially for a family to have a mix of healthy/okay diet food. I alone spend 4k on food a year and im single.

BW1985
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Re: How to live on $110,000 less income each year?

Post by BW1985 » Tue Jun 07, 2016 1:58 pm

N10sive wrote: I think the key word is healthy diet in the article you posted. I could live off fast food and spend less than 2k per year on food. 6k for food seems very thrifty especially for a family to have a mix of healthy/okay diet food. I alone spend 4k on food a year and im single.
Agreed, $6k for a family of four is thrifty. ($115 a week) Shopping at Aldi & Wal-Mart I'm sure you could make it work but I doubt most people in this income range do that. $15k is much more realistic especially considering personal care items, household cleaning products, etc. included.
"Squirrels figured out how to save eons ago. They buried acorns. Some, they dug up, for food. Others, they let to sprout, in new oak trees. We could learn from squirrels." -john94549

Hikes_With_Dogs
Posts: 292
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Re: How to live on $110,000 less income each year?

Post by Hikes_With_Dogs » Tue Jun 07, 2016 2:04 pm

surfhb wrote:I know some people hate Mr Money Mustache around here but I think the OP would benefit greatly by reading his blog :D

Hah, that was my first thought - those guys would eat him alive!!

READ, don't post. :)

randomguy
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Re: How to live on $110,000 less income each year?

Post by randomguy » Tue Jun 07, 2016 4:38 pm

N10sive wrote:
I think the key word is healthy diet in the article you posted. I could live off fast food and spend less than 2k per year on food. 6k for food seems very thrifty especially for a family to have a mix of healthy/okay diet food. I alone spend 4k on food a year and im single.
Fast food costs more than eating healthy. For the 6 bucks a big mac meal costs, I could get 1lb of chicken, a pound of rice, a pound of beens, and some veggies and have 2 or 3 healthy meals.

With any of these things you can argue about what is reasonable (and healthy) and grocery stories are place where planning can save you big money. Buy that chick breast when it is on sale for 1.99 versus 3.99 and your money goes a lot farther. Buy the 6.99 organic chicken breast and you are paying 3x as much. The person that needs to eat fruit loops is paying a lot more for food than the one that buys fruit circles.

With budgets you can pick through them forever and someone will always spend less. Obviously living on 80k of spending isn't remotely hard. Living how the OP wants on 80k might be.

N10sive
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Re: How to live on $110,000 less income each year?

Post by N10sive » Tue Jun 07, 2016 4:56 pm

randomguy wrote:
N10sive wrote: I think the key word is healthy diet in the article you posted. I could live off fast food and spend less than 2k per year on food. 6k for food seems very thrifty especially for a family to have a mix of healthy/okay diet food. I alone spend 4k on food a year and im single.
Fast food costs more than eating healthy. For the 6 bucks a big mac meal costs, I could get 1lb of chicken, a pound of rice, a pound of beens, and some veggies and have 2 or 3 healthy meals.
I was thinking more along the lines of the dollar menu :). 2 Tacos at Jack in The Box is 1 dollar. I don't know many ways to build a healthy meal for 1 dollar unless its PB&J.

But again yes its mostly up to the person's will to budget not only money but time for food. Yes 6 dollars might get the above, but a lot of people are too lazy to spend the 30 min to 1 hour to make the food. But that is another topic altogether. (Plus the associated costs with preparing food).

OP just needs to sit down and figure out what the advantages are of moving to a lower salary. If it is so his wife can spend time with their children more than that is a worthwhile move. Just will need some sacrifices.

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nyknicks4412
Posts: 80
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Re: How to live on $110,000 less income each year?

Post by nyknicks4412 » Tue Jun 07, 2016 5:00 pm

My girlfriend and I went from making roughly 140k to 45k after I decided to go back to school full-time for an MBA. We don't save anything other than her 401k contributions at work to get the match but we make it work.

Tracking expenses is key. What can and can't be cut becomes pretty obvious when the $$$ is no longer come in. One way we adjusted was by living on the budget we would have while I was in school before I went back. First few months were hard but pretty quickly you learn that $5 coffees add up!

Jags4186
Posts: 4082
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Re: How to live on $110,000 less income each year?

Post by Jags4186 » Tue Jun 07, 2016 5:39 pm

JH4P wrote: Regarding health insurance, Forbes says average family of 4 spends a little over $9k per year in combined premiums and costs. Yes, I guess my $15k was a little high. That frees up $6k or so for something else. Retirement maybe?

http://www.forbes.com/sites/danmunro/20 ... cd38dd6963

Regarding food, the USDA would call $6,000 on groceries and $1,800 on restaurants very thrifty.

http://www.usatoday.com/story/news/nati ... y/2104165/

I don't disagree it is doable, but it is not close to normal, especially by families with well above median income. I'll concede $15k per year might be a tad high, but then again, I probably should have included toiletries, cleaning supplies, etc as part of that lump sum. You usually buy those along with food products at the grocery store. Group those in with food and I think you would find $15k/yr very representative of families of 4 making $80k per/yr.

Like I said before, everyone is free to tweak as they prefer, but my goal was simply to represent a very average budget. The original poster seemed to have a hard time picturing what living on $80k looks like due to a much higher current income. I don't think a scorched earth food budget would have been very relatable to them. This gives them something to compare to on an item by item basis. Move a little out of health and into a retirement savings category and I think my list is very representative of a budget somewhere near the middle of the bell curve for this income group.
I could be wrong, but my guess is Forbes average is highly skewed towards people with astronomical debt. Maybe I'm living in a fantasy land, but I don't see most people unless they have a chronic illness, having $9000 in medical expenses every year. I know I most certainly don't.

As for food, again this is one of those things where I think it's very similar to mutual funds. Just because lots of people pay 5.75% load, or pay 1%+ annual fees, doesn't mean it is inevitable. I'm not super frugal, but I don't particularly have a problem keeping our grocery bill under $125/wk. Now maybe I'm boring and eat like a poor person compared to some here, but oatmeal costs almost nothing, cold cuts cost very little, bread costs nothing, and dinners shouldn't really cost that much either. But maybe I'm the anomaly.

The point is, the average household is 2.6 people. The average household income $52,000. So if you make 80k a year, you could save $18,000 into 401k, $11,000 into 2 IRAs, and live like the average American spending every penny they make...but at least you're saving 36% of your income :D

delamer
Posts: 9481
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Re: How to live on $110,000 less income each year?

Post by delamer » Tue Jun 07, 2016 6:51 pm

Jags4186 wrote:
JH4P wrote: Regarding health insurance, Forbes says average family of 4 spends a little over $9k per year in combined premiums and costs. Yes, I guess my $15k was a little high. That frees up $6k or so for something else. Retirement maybe?

http://www.forbes.com/sites/danmunro/20 ... cd38dd6963

Regarding food, the USDA would call $6,000 on groceries and $1,800 on restaurants very thrifty.

http://www.usatoday.com/story/news/nati ... y/2104165/

I don't disagree it is doable, but it is not close to normal, especially by families with well above median income. I'll concede $15k per year might be a tad high, but then again, I probably should have included toiletries, cleaning supplies, etc as part of that lump sum. You usually buy those along with food products at the grocery store. Group those in with food and I think you would find $15k/yr very representative of families of 4 making $80k per/yr.

Like I said before, everyone is free to tweak as they prefer, but my goal was simply to represent a very average budget. The original poster seemed to have a hard time picturing what living on $80k looks like due to a much higher current income. I don't think a scorched earth food budget would have been very relatable to them. This gives them something to compare to on an item by item basis. Move a little out of health and into a retirement savings category and I think my list is very representative of a budget somewhere near the middle of the bell curve for this income group.
I could be wrong, but my guess is Forbes average is highly skewed towards people with astronomical debt. Maybe I'm living in a fantasy land, but I don't see most people unless they have a chronic illness, having $9000 in medical expenses every year. I know I most certainly don't.

As for food, again this is one of those things where I think it's very similar to mutual funds. Just because lots of people pay 5.75% load, or pay 1%+ annual fees, doesn't mean it is inevitable. I'm not super frugal, but I don't particularly have a problem keeping our grocery bill under $125/wk. Now maybe I'm boring and eat like a poor person compared to some here, but oatmeal costs almost nothing, cold cuts cost very little, bread costs nothing, and dinners shouldn't really cost that much either. But maybe I'm the anomaly.

The point is, the average household is 2.6 people. The average household income $52,000. So if you make 80k a year, you could save $18,000 into 401k, $11,000 into 2 IRAs, and live like the average American spending every penny they make...but at least you're saving 36% of your income :D
I don't see where you are getting the idea that the data cited by Forbes average is skewed, related to family debt or any other characteristics. It is a report of average healthcare costs. And I can confirm, anecdotally, that my family of four had costs about 45% higher than the Forbes average (without any expensive chronic conditions) and we don't have astronomical debt.

randomguy
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Re: How to live on $110,000 less income each year?

Post by randomguy » Tue Jun 07, 2016 7:07 pm

delamer wrote: I don't see where you are getting the idea that the data cited by Forbes average is skewed, related to family debt or any other characteristics. It is a report of average healthcare costs. And I can confirm, anecdotally, that my family of four had costs about 45% higher than the Forbes average (without any expensive chronic conditions) and we don't have astronomical debt.

Forbes is for a family of 4 with PPO coverage. How that relates to people buying HMOs(cheaper in my experience). Obviously things like company contribution (i.e. the difference between the employer paying 0 and 20k is pretty substantial) and individual situations (lots of people with like 500 out of pocke cost. A few with 10k) matter a ton.

delamer
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Re: How to live on $110,000 less income each year?

Post by delamer » Tue Jun 07, 2016 8:26 pm

randomguy wrote:
delamer wrote: I don't see where you are getting the idea that the data cited by Forbes average is skewed, related to family debt or any other characteristics. It is a report of average healthcare costs. And I can confirm, anecdotally, that my family of four had costs about 45% higher than the Forbes average (without any expensive chronic conditions) and we don't have astronomical debt.

Forbes is for a family of 4 with PPO coverage. How that relates to people buying HMOs(cheaper in my experience). Obviously things like company contribution (i.e. the difference between the employer paying 0 and 20k is pretty substantial) and individual situations (lots of people with like 500 out of pocke cost. A few with 10k) matter a ton.
All true. But I was commenting on the idea posted above speculating that the averages reflected people with astronomical debt. There is no evidence of that.

protagonist
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Re: How to live on $110,000 less income each year?

Post by protagonist » Tue Jun 07, 2016 8:42 pm

As far as I can tell, our lifestyle is relatively basic. The remaining amount we spend goes toward basic needs and not disposable needs.
The median household income in the US in 2013 was $51,939.

With all due respect, if you are spending $190K/year (nearly 4x the median household income), or $168K/yr after what you are saving for retirement, your lifestyle cannot be considered anything close to "relatively basic", unless you are paying off a lot of debt and thus have little disposable income. In fact, if you are spending ~165K/year, then you are spending more than 91% of American families are making BEFORE taxes! http://money.cnn.com/calculator/pf/income-rank/ Even your stated expenses are not "relatively basic", by most people's criteria...eg: spending $30K/yr on daycare, spending "20K more"/yr than your neighbor on your "nice" house....those two items alone add up to way more than the median household earns per year after taxes. You are way beyond "basic needs". Wait until you have to pay college tuitions!! (I assume nobody in your income bracket would qualify for financial aid).
Last edited by protagonist on Tue Jun 07, 2016 9:01 pm, edited 1 time in total.

scottinmet
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Re: How to live on $110,000 less income each year?

Post by scottinmet » Tue Jun 07, 2016 8:59 pm

warner25 wrote:This thread is outrageous. Every other reply suggests that the $80k/year family is saving nothing, drowning in debt, or living off an inheritance.

I make only a little more than the friend in question after taxes, and my family of three (with SAHM for childcare) spends $40k/year, saving the other $40k/year. We spend less (often much less) than most Americans in virtually every category but don't feel deprived. We are in a LCOL area, but I figure our expenses only go up to about $55k/year in a HCOL area.

I think the OP is living a life of high luxury despite reassurances that it's all "basic needs."
I'm in about the same position as you are, family of three in a LCOL area earning about $100k. We don't have an extravagant lifestyle but live comfortably while I'm fully investing in retirement and taxable accounts every year.

I agree with some of the other posters in the usefulness of a detailed budgetary spreadsheet. It not only helps me understand where my money is going, but I also have a better appreciation of the worth of everything I'm purchasing. Vacations, cars, dining and entertainment, retirement, everything has a relative priority in my budget. I know when I"m spending too much or too little in one area and can adjust accordingly.
Jags4186 wrote: As for food, again this is one of those things where I think it's very similar to mutual funds. Just because lots of people pay 5.75% load, or pay 1%+ annual fees, doesn't mean it is inevitable. I'm not super frugal, but I don't particularly have a problem keeping our grocery bill under $125/wk. Now maybe I'm boring and eat like a poor person compared to some here, but oatmeal costs almost nothing, cold cuts cost very little, bread costs nothing, and dinners shouldn't really cost that much either. But maybe I'm the anomaly."
You're not, we eat well on $450 a month with occasional nights out. I don't think I could increase my food budget if I tried, we would probably end up throwing a lot of food away at the end of the month.

From a thousand miles away, I'd say to the OP that If you want to live on $80k a month you will have to stop the child care, find a cheaper place to live, and cut back on the expensive vacations. After that take a look at your budget and see what can be done to reduce even further. You will probably be surprised that the last step is the easiest one to accomplish once you have all the information.

JH4P
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Re: How to live on $110,000 less income each year?

Post by JH4P » Wed Jun 08, 2016 9:45 am

Jags4186 wrote:As for food, again this is one of those things where I think it's very similar to mutual funds. Just because lots of people pay 5.75% load, or pay 1%+ annual fees, doesn't mean it is inevitable. I'm not super frugal, but I don't particularly have a problem keeping our grocery bill under $125/wk. Now maybe I'm boring and eat like a poor person compared to some here, but oatmeal costs almost nothing, cold cuts cost very little, bread costs nothing, and dinners shouldn't really cost that much either. But maybe I'm the anomaly.
Yes, you are an anomaly, and that is not bad at all. It is actually probably very wise.

However, I was not answering the question "what *should* someone do?". I was answering the question "what does the typical family in this scenario *actually* do". Although I agree above average frugality is wise, I do not think it is relevant to the thread's topic. The OP was concerned with simply dropping from above average down closer to average. If the concern was that simply being average was going to be difficult, I don't think opinions on how to be extraordinarily frugal were what the OP was looking for. My goal was to help lay out what "average" actually looks like.

Jags4186
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Re: How to live on $110,000 less income each year?

Post by Jags4186 » Wed Jun 08, 2016 9:51 am

JH4P wrote:
Jags4186 wrote:As for food, again this is one of those things where I think it's very similar to mutual funds. Just because lots of people pay 5.75% load, or pay 1%+ annual fees, doesn't mean it is inevitable. I'm not super frugal, but I don't particularly have a problem keeping our grocery bill under $125/wk. Now maybe I'm boring and eat like a poor person compared to some here, but oatmeal costs almost nothing, cold cuts cost very little, bread costs nothing, and dinners shouldn't really cost that much either. But maybe I'm the anomaly.
Yes, you are an anomaly, and that is not bad at all. It is actually probably very wise.

However, I was not answering the question "what *should* someone do?". I was answering the question "what does the typical family in this scenario *actually* do". Although I agree above average frugality is wise, I do not think it is relevant to the thread's topic. The OP was concerned with simply dropping from above average down closer to average. If the concern was that simply being average was going to be difficult, I don't think opinions on how to be extraordinarily frugal were what the OP was looking for. My goal was to help lay out what "average" actually looks like.
Okay, well the typical household lives on $52,000/yr. So this typical family should be able to save $28,000/yr.

Guest9876
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Re: How to live on $110,000 less income each year?

Post by Guest9876 » Wed Jun 08, 2016 9:53 am

I don't know if any of this helps, but I went through almost exactly the same situation years ago (almost dollar for dollar when adjusting for inflation).

The major difference was that I knew my pay cut would be temporary. But we were new parents going to single income, and I lost several $10ks as well. Based on today's dollars we went from maybe $240k to $83k or so. In exchange we "made back" a hell of a lot in taxes, child care, etc.

Because mine was temporary, I tax-and-retirement planned the hell out of it---- front-loaded retirement (fully funded 401k, 529s for the year, health care, etc.) and taxes, etc. So once we hit the lower take-home, we were able to bank all of it for the first six months.

What that did was soften the transition so that when Jan. 1 hit next year we had already adjusted our lifestyles and were able to meet the new reality. You might want to consider this as an alternative / addition to having a good savings cushion.

Of course, in our situation, I knew that my pay-cut was a short, "prestige and lifestyle" waystation towards a much, much higher salary in the later years.

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HomerJ
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Re: How to live on $110,000 less income each year?

Post by HomerJ » Wed Jun 08, 2016 9:58 am

miamivice wrote:Childcare: They have no childcare expense (stay at home wife) while we have 2 kids in daycare. Differential: $30,000/yr.
This will become a lot less when your kids go into school. You'll be able to save a ton more money each year.

cherijoh
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Re: How to live on $110,000 less income each year?

Post by cherijoh » Wed Jun 08, 2016 9:49 pm

protagonist wrote:
As far as I can tell, our lifestyle is relatively basic. The remaining amount we spend goes toward basic needs and not disposable needs.
The median household income in the US in 2013 was $51,939.

With all due respect, if you are spending $190K/year (nearly 4x the median household income), or $168K/yr after what you are saving for retirement, your lifestyle cannot be considered anything close to "relatively basic", unless you are paying off a lot of debt and thus have little disposable income. In fact, if you are spending ~165K/year, then you are spending more than 91% of American families are making BEFORE taxes! http://money.cnn.com/calculator/pf/income-rank/ Even your stated expenses are not "relatively basic", by most people's criteria...eg: spending $30K/yr on daycare, spending "20K more"/yr than your neighbor on your "nice" house....those two items alone add up to way more than the median household earns per year after taxes. You are way beyond "basic needs". Wait until you have to pay college tuitions!! (I assume nobody in your income bracket would qualify for financial aid).
Perhaps this "exercise" will be a reality check for the OP. As a high-income family, their savings rate seems rather anemic to me. (Especially if OP converted "before tax" 401k contributions into the equivalent of after tax "savings" for his post). Lower income earners will have a proportionally larger percentage of their retirement income needs coming from SS. That won't happen for someone in the OPs income range, so he needs to save a higher percentage of his income than someone in the 66th percentile for household income (i.e., $80K per year plugged into the calculator protagonist referenced in his post).

Also, prodigious savers need far less (as a % of their pre-retirement income) when they do hit retirement than someone who is used to spending most of their salary.

traveltoomuch
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Re: How to live on $110,000 less income each year?

Post by traveltoomuch » Thu Jun 09, 2016 12:00 am

miamivice wrote:As to how much we spend, we spend about $36,000 - $40,000 per year for gasoline, food, car repairs, amusement park season passes, meals out, furniture for house, utility bills, smartphone charges, and the like. In addition to the expenses listed above (daycare, mortgage, retirement savings, etc), we do not spend anything else on an annual basis.
This seems huge to me.

My first priority, even if you don't decide to drop to a single income, would be to dig deeper into this, and see if there are things in here that you can do more cheaply. Save the rest. :-) Since you say you don't want to dig deeper, then perhaps you could decide to either prospectively budget ("we will limit spending to X"), or learn to agonize a little more over each purchase.

See if you can aim for:
$1000/mo. in total food expenses. That will mean eating out less. Order fewer appetizers, drinks, and desserts. Buy the $3 loaf of bread instead of the $7 loaf.
$100/mo. for smartphone bills, combined (switch to TMo).
$1000/yr. per car in repairs
near-$0 in furniture
trim the cable bill
share internet with the neighbors


You don't necessarily have to deny yourselves the park passes, but do consider how much you're spending on vacations in total. Food in WDW is $$$. Everything in WDW is expensive.

Give thought to "what makes us happy". Would you rather have new furniture or keep the park passes? Would you rather have two incomes or a stay-at-home mom? People will have different (and reasonable!) choices about these priorities. The trick is to be deliberate about them.
Last edited by traveltoomuch on Thu Jun 09, 2016 4:55 am, edited 1 time in total.

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celia
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Re: How to live on $110,000 less income each year?

Post by celia » Thu Jun 09, 2016 1:38 am

DaftInvestor wrote:You made a statement in your "Reality-Check" post/thread that you don't budget nor track spending nor see a reason why you should. This is the first thing you need to do in my opinion - there are a lot of little things that can add up to thousands over the year if you don't pay attention. Until you know where the money is going I'm not sure how you can figure out how to spend less.
+1

I can imagine how to live on $80k per year, but I have no idea how I'd be able to live on $190,000. I guess I would have to track my expenses and spend twice as much in every category and use the rest for taxes.

OP, what would you do if you were out of work for a year? What if in the following year you and your wife were both out of work? I guarantee you'd cut back on everything!
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.

jjface
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Re: How to live on $110,000 less income each year?

Post by jjface » Thu Jun 09, 2016 2:12 am

A lot of these threads make you realise how different people are.

Rather than compare ourselves to others we ought to seek out what level of income and expenses works for us. I guarantee you that someone out there spends more than you or spends less and all three could be equally happy.

There is no doubt a family could live comfortably with $80k or less - just that the OP would struggle to do so happily.

The key for the OP is that they would need to drastically change their ways or would face ruin if they suddenly had to live off $80k.

Perhaps taking some incremental steps now would be beneficial - budgeting has been mentioned. Try cutting out $2-5k of spending this year, a further $2-5k the next etc. In 10 years you'll be down $20-50k a year and would hardly notice the difference other than to your retirement fund balance! Start with the easy things like eating out 1 time less a month, cheaper cell phone plans and progress to shopping around for better insurance costs, doing more things yourselves rather than hiring others etc. Consider cheaper park passes, slightly less expensive hotels etc. Make it a challenge - it could be really fun !

warner25
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Re: How to live on $110,000 less income each year?

Post by warner25 » Thu Jun 09, 2016 7:05 pm

traveltoomuch wrote:
miamivice wrote:As to how much we spend, we spend about $36,000 - $40,000 per year for gasoline, food, car repairs, amusement park season passes, meals out, furniture for house, utility bills, smartphone charges, and the like. In addition to the expenses listed above (daycare, mortgage, retirement savings, etc), we do not spend anything else on an annual basis.
This seems huge to me.
If I'm reading this correctly (i.e. all spending except mortgage and daycare is only $40k/year), I actually don't think that's huge at all, and living on $80k/year while still saving a bunch of money should not be difficult.

As mentioned earlier, we spend a total of $40k/year, and $30k of that is (I think) what the OP describes above. Our other $10k is rent (which would probably be $25k in a more expensive area, hence my earlier HCOL estimate of $55k/year for my family). So I guess it's just a very expensive house and daycare that's killing the OP. Daycare goes away if one parent stops working, and then the OP just needs to move to a (much) cheaper house or apartment.

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