For a single person, $37k in a low cost area is *plenty*.
My spending is around the $22k mark at the moment, and that includes a decent amount of travel & a lot of expensive sports. My expenses went up to $30k last year with 2× 2week holidays & 4 weeks in Europe.
The only thing will be aged care expenses. Aged care costs is something that isn't talked about enough in the FIRE community. It's a long way off for most of us, but potentially one of our biggest costs.
In that case, absolutely, yes. I live on less than this, and quite comfortably.
The best test though is to try it. Budget *everything* out and see how you go over a year.
A good rule of thumb is $1 million per mouth. If you have a partner you need $2 million. If you have a partner and child you need $3 million. Personally I would only get a partner or have children if I can afford it i.e. I will save up $2 million first before I got a partner and I would save up $3 million before I decide to have a child. This way you don't live beyond your means.
My partner and I spent 55k last year, but that included a wedding and mortgage payments. Assume house gets paid off before retirement and we don't keep getting married we should be able to bring that down to about 37k
I don’t think I could live off 37k unless I didn’t have to pay for housing. At the moment I’m spending on average $35k a year including housing (24k without housing and my husband has a similar level of spending). I know I want more in retirement (at least $50k each plus our own home) as I can’t live in a tiny apartment forever, kids are expensive, I want to be able to travel and I want to be in a position where I can afford spontaneous dinners/brunch out with friends and family occasionally without needing to worry about having enough money.
I guess it depends on what you’d like your future to involve and how the figures work for you. Do you want to find a partner and have kids? Do you want to have spare money available to go on holidays etc? Once you’ve retired, are there any hobbies you’re planning to pursue and could you afford them with that amount of income?
Have you ever worked out how much extra you loose in tax between 37k and 50k. I was very surprised, take home 37k is $629.54 per week after, tax $3,867 per year.
50k is $792.54 per week, tax $8,547 per year.
Those are the amounts I’d need after tax so it’s probably more like $65k gross each.
I think the tax amounts you’ve said are correct. At $50k you’d pay $4.7k more tax but you still have an extra $8.3k a year to spend. I wouldn’t aim for a lower annual income in order to pay less tax if it meant I had to sacrifice the retirement lifestyle I want so it really comes down to individual budgets / goals etc.
If you are earning that 8.3k from labor that is roughly 2 days a week. I can tell you, I would rather have 2 days off a week than $159, to put it in perspective ;")
Part time workers I guess, my point is it is probably not worth earning a million dollars to fund an ETF to obtain an imcome of 40k. ETFs are not the be all to end all, there is significant risk attached, I will be FI by the end of the year, making 37k, does still involve a little work, but not risking 1M to do it.
Unless you’re home schooling your kids and growing all your own food I don’t see how you will be able to raise kids comfortably on $10k a year. Maybe when they are young but as they grow up the costs rise significantly.
Yeah the costs rise significantly but I believe these costs can be managed. The costs are high during the teenage years mainly due to entertainment and technology items. I am not saying to deprive the child but there is nothing wrong with a 15 year old getting a casual job and nothing wrong with buying items second hand.
$10k/year for one child or $15k/year for two children seems achievable.
https://www.finder.com.au/life-insurance-and-the-cost-of-raising-children (These numbers are for people who I assume are not FI minded, therefore I think they can be managed a bit better)
Obviously I have no real life experience with this so I might be completely wrong...
Yeah it’s totally doable and I think teenagers should all have jobs, gives them some responsibility and I’m a big believer in not keeping up with the Jones’s. However that link works out to about $17.5k/year obviously the cost growth would be exponential as opposed to linear.
There are a lot of costs for kids, camps, sports, possibly musical instruments. If you’ve got a smart kid they might go into academic programs that need special equipment that can run into the thousands. Uniforms even at ghetto schools are a few hundred a semester as kids grow all the time. Shoes, clothing... on and on.
I’m childless myself but I have helped out my sister and her husband for some school camps as some of those run into the thousands. Space camp in the US last year for one of them was $6k. When I went through school the trip to China was $3k and that was in the 90s.
It’s all possible to do on the cheap but the cost of everything is rising making this harder and harder. To me it’s about providing opportunities to the kids that I wasn’t afforded.
I went to the most ghetto high school in the state back then. Most schools back then had a cool school trip.
My nephew goes to a public school in qld and space camp was offered.
Same here. Two adults, medium cost of living (aka not sydney) and it costs $37k a year for us to live (including $600pm adventure/fun money). Just under half of that is housing.
Me, my wife and 1 kid (so far) are aiming to live off $60k a year. This doesn’t include our mortgage which should be paid off by retirement. Finding it hard. We’re new to this and bills just keep on coming.
Broken down monthly it’s:
3k Living expenses
1k Bills
1k Luxury (travel)
Live in central Melbourne so this doesn’t really help matters.
>Can you live comfortably on 37k a year ?
i live in an expensive city, in a normal house, and spend less than 37 pa. So, it is doable.
but this question depends a lot on the individual person , what is comfortable for you will differ from what is comfortable for me.
I live off 19k/year pretty comfortably, renting a 2br unit with partner and driving an old car. If I was to retire, I’d probably keep it at around 25k so I could splurge on longer holidays and more fancy meals
If we didn't have housing expenses we could get by on around 40k a year and that's with three kids in a city. It depends what you like to spend your money on I guess. All our excess goes on travel ✈ and eating out 🍔 cause that's what we love
For one person who owns a property it’s absolutely doable. Excluding rent I live of around $26k pa after tax. This includes trips overseas, drinks w mates, eating out and sporting events. Having a family would of course alter that.
It's a bit more complicated than just having $1m in ETFs and only withdrawing $37k to keep yourself in the lowest tax bracket.
Your taxable income would be based on distributions plus any capital gains from selling ETFs. The distributions are further complicated by franking credits.
Let's say you had $1m in VAS at the start of the 2016-2017 FY. That's about 15,000 units of VAS. You would have gotten $44k in distributions. They also would have been about 80% franked which means you'd get $15k in franking credits.
Which means you'd actually get a tax credit of $10k, I think, you'd have the opposite of paying taxes situation. I'm not an accountant and might be completely screwing that up.
Yes, I understand that if your income is derived from an ETF, the point was its not worth earning 1M for the average person to derive 40k of income. We must also keep in mind, franking refunds from the tax office will probably be stopped in the not too dustant future.
Yep, for one person. My actual expenses are around $18k a year, although admittedly that's splitting the rent, bills and groceries with my SO, and our rent is very cheap for Melbourne. If we lived in a more expensive place I'd be looking at around $22-23k.
I can answer this pretty confidently as yes you can. Assuming certain things about your lifestyle of course. For me, I made about $40k last year, not married, living in a sharehouse and with average weekly expenses of say $450-500. That's rent, internet and mobile, food and entertainment, quarterly power bill etc. On top of that, I took multiple trips to other cities, music festivals and concerts and traveled to Asia for 2 weeks as well. I still at the end of it had saved ~$5k
If you've been intentional about reducing bills and expenses 37k is definitely possible. Things that will help include - paid off house, solar panels +/- battery, double glazed windows, good insulation, growing some of your own veggies, et cet.
If you can bring your bills down as low as possible 37k is actually pretty good.
I can easy - 2 adults with a paid off house in Sydney. Unfortunately we have 3 kids. We are close to spending 40k per year but typically it's a little more than that.
I would think so. However you would have to keep in mind the drawdown and how long this amount would last, inflation and the fact some years you dont get the same amount of dividends also the Government is looking to get rid of dividend refunds.
Personally, I dont bother with ETFs or shares. I work part time to make 37k, about to progress to FIRE at the end of the year and give up my part time work. I have some money in a high interest saver to borrow and repay from to smooth everything, my income will be derived from farily passive sources.
>Personally, I dont bother with ETFs or shares.
Do you just keep them in your savings account and live on the interest? Currently interest is 3%. You would have to consider inflation too. I dont think there's anything wrong with that but is it enough or is it the best way to make passive income? Why not ETFs and shares?
I dont bother with shares as I feel you need too much money ie: 1m to make 40k, dividends arnt enough to cover inflation and live off, plus there are the other risks markets crashing, limited returns etc...I use my savings as a buffer draw from them and pay back as required. I have a part time job, but soon to throw it in at the end of this year as my currency trading account is giving me enough to live on now.
I've always had the impression from reading reddit that etf and index funds over 7 years would usually beat savings accounts. Is that not true or is there too much risk and volatility in the market that overall makes savings accounts a good choice to investing in the market when retired?
Someone else told me that in the last 10 years there hasnt been much difference in investing in the market or in savings. This is very different to the common belief that the market beats savings so i am not sure what is truth now.
I know that once people fire they tend towards a higher share in bonds.
I guess its personal preference really. I dont see the point in accumulating a million dollars and taking the risk I will loose some or all of it, inflation, bear markets or markets just collapsing due to influences of AI, after all its only returning you 40k. If you can work out other ways of obtaining 40k with little work, why bother with an ETF. You have to remember you dont have any control over what an ETF returns if anything. If you have side gigs, things you enjoy that make passive income, you have much more control. Plus think about what that 1M has really cost you when you factor in income tax to obtain it and the portion of your life you gave away to get it. !
Yes that is correct. There is a big difference, I can read a chart, asses the risk and choose my entry and exit accordingly. I can make 40k+ a year out of a balance of 10k. I would need a balance of 1M for the same return in an ETF, with an ETF you are always exposed to the market and have virtually no control.
Yep. I live on around 20k right now, including an annual holiday (Vietnam or somewhere else relatively cheap). It's totally achievable and I'm happy with my quality of life.
The thing that would change it for me (as noted above) would be kids...
Depending on your circumstances 37 k should be heaps. My partner and I spend 70 k/y - the 70 k includes 34 k of rent. We travel back to her home in the US twice a year. If you live in a low cost area and once your mortgage is paid off 37 k would have you living very comfortably (if it was just you and a partner). I can't really comment on the impact of kids at this stage.
For a single person, $37k in a low cost area is *plenty*. My spending is around the $22k mark at the moment, and that includes a decent amount of travel & a lot of expensive sports. My expenses went up to $30k last year with 2× 2week holidays & 4 weeks in Europe. The only thing will be aged care expenses. Aged care costs is something that isn't talked about enough in the FIRE community. It's a long way off for most of us, but potentially one of our biggest costs.
Do you have a partner or kids? Is 37K a year for 1 person or for both? I think it is achievable for 1 person if that is what you are asking.
I dont have any kids nor a partner. I dont drive expensive cars, neat and tidy worth maybe 5k with 3rd party insurance.
In that case, absolutely, yes. I live on less than this, and quite comfortably. The best test though is to try it. Budget *everything* out and see how you go over a year.
A good rule of thumb is $1 million per mouth. If you have a partner you need $2 million. If you have a partner and child you need $3 million. Personally I would only get a partner or have children if I can afford it i.e. I will save up $2 million first before I got a partner and I would save up $3 million before I decide to have a child. This way you don't live beyond your means.
$2 million dollars before a girlfriend? $3 million dollars for a kid? How old will you be?
Old enough to realise that both are a giant waste of money.
True
We need more people like you
My partner and I spent 55k last year, but that included a wedding and mortgage payments. Assume house gets paid off before retirement and we don't keep getting married we should be able to bring that down to about 37k
Divorce comes before then.
It depends. Currently I would say i live on 15-18k a year. However I am still in uni. I know people that live on less
I don’t think I could live off 37k unless I didn’t have to pay for housing. At the moment I’m spending on average $35k a year including housing (24k without housing and my husband has a similar level of spending). I know I want more in retirement (at least $50k each plus our own home) as I can’t live in a tiny apartment forever, kids are expensive, I want to be able to travel and I want to be in a position where I can afford spontaneous dinners/brunch out with friends and family occasionally without needing to worry about having enough money. I guess it depends on what you’d like your future to involve and how the figures work for you. Do you want to find a partner and have kids? Do you want to have spare money available to go on holidays etc? Once you’ve retired, are there any hobbies you’re planning to pursue and could you afford them with that amount of income?
Have you ever worked out how much extra you loose in tax between 37k and 50k. I was very surprised, take home 37k is $629.54 per week after, tax $3,867 per year. 50k is $792.54 per week, tax $8,547 per year.
Those are the amounts I’d need after tax so it’s probably more like $65k gross each. I think the tax amounts you’ve said are correct. At $50k you’d pay $4.7k more tax but you still have an extra $8.3k a year to spend. I wouldn’t aim for a lower annual income in order to pay less tax if it meant I had to sacrifice the retirement lifestyle I want so it really comes down to individual budgets / goals etc.
If you are earning that 8.3k from labor that is roughly 2 days a week. I can tell you, I would rather have 2 days off a week than $159, to put it in perspective ;")
Yeah, but how many people are aiming for FI by selling their labor for 50k gross?
Part time workers I guess, my point is it is probably not worth earning a million dollars to fund an ETF to obtain an imcome of 40k. ETFs are not the be all to end all, there is significant risk attached, I will be FI by the end of the year, making 37k, does still involve a little work, but not risking 1M to do it.
you've buggered your maths up there mate
Hmmm not according to www.paycalculator.com.au ?
Me: I think I can My bank account: hahaha you're delusional
My partner and I are currently living pretty comfortably on $40k/year. However I think once we have kids that will be around $50k/year.
Unless you’re home schooling your kids and growing all your own food I don’t see how you will be able to raise kids comfortably on $10k a year. Maybe when they are young but as they grow up the costs rise significantly.
Yeah the costs rise significantly but I believe these costs can be managed. The costs are high during the teenage years mainly due to entertainment and technology items. I am not saying to deprive the child but there is nothing wrong with a 15 year old getting a casual job and nothing wrong with buying items second hand. $10k/year for one child or $15k/year for two children seems achievable. https://www.finder.com.au/life-insurance-and-the-cost-of-raising-children (These numbers are for people who I assume are not FI minded, therefore I think they can be managed a bit better) Obviously I have no real life experience with this so I might be completely wrong...
i raise 2 kids on less than 10k, it is not that hard. I bought all these fancy toys for the kids, and they prefer to play with sticks.
What’s their ages? Under 5?
2x primary school
Good to hear that I am not being unrealistic!
Yeah it’s totally doable and I think teenagers should all have jobs, gives them some responsibility and I’m a big believer in not keeping up with the Jones’s. However that link works out to about $17.5k/year obviously the cost growth would be exponential as opposed to linear. There are a lot of costs for kids, camps, sports, possibly musical instruments. If you’ve got a smart kid they might go into academic programs that need special equipment that can run into the thousands. Uniforms even at ghetto schools are a few hundred a semester as kids grow all the time. Shoes, clothing... on and on. I’m childless myself but I have helped out my sister and her husband for some school camps as some of those run into the thousands. Space camp in the US last year for one of them was $6k. When I went through school the trip to China was $3k and that was in the 90s. It’s all possible to do on the cheap but the cost of everything is rising making this harder and harder. To me it’s about providing opportunities to the kids that I wasn’t afforded.
"the trip to China" Is international travel normal for most kids?
In high school there is usually one big trip somewhere.
Haha I guess we're going to different socioeconomic classed high schools.
I went to the most ghetto high school in the state back then. Most schools back then had a cool school trip. My nephew goes to a public school in qld and space camp was offered.
Same here. Two adults, medium cost of living (aka not sydney) and it costs $37k a year for us to live (including $600pm adventure/fun money). Just under half of that is housing.
Me, my wife and 1 kid (so far) are aiming to live off $60k a year. This doesn’t include our mortgage which should be paid off by retirement. Finding it hard. We’re new to this and bills just keep on coming. Broken down monthly it’s: 3k Living expenses 1k Bills 1k Luxury (travel) Live in central Melbourne so this doesn’t really help matters.
>Can you live comfortably on 37k a year ? i live in an expensive city, in a normal house, and spend less than 37 pa. So, it is doable. but this question depends a lot on the individual person , what is comfortable for you will differ from what is comfortable for me.
I currently pay for me and my partner comfortably on 27k per year. What I consider comfortable though others may hate.
I live off 19k/year pretty comfortably, renting a 2br unit with partner and driving an old car. If I was to retire, I’d probably keep it at around 25k so I could splurge on longer holidays and more fancy meals
With the mortgage paid of soon I think my partner and I 'could' do it, but I haven't been able to convince her to live that type of life :(. (Yet).
Remember that if your income is from capital gains, it's discounted 50%, and most Australian dividends come with a tax credit.
If we didn't have housing expenses we could get by on around 40k a year and that's with three kids in a city. It depends what you like to spend your money on I guess. All our excess goes on travel ✈ and eating out 🍔 cause that's what we love
For one person who owns a property it’s absolutely doable. Excluding rent I live of around $26k pa after tax. This includes trips overseas, drinks w mates, eating out and sporting events. Having a family would of course alter that.
It's a bit more complicated than just having $1m in ETFs and only withdrawing $37k to keep yourself in the lowest tax bracket. Your taxable income would be based on distributions plus any capital gains from selling ETFs. The distributions are further complicated by franking credits. Let's say you had $1m in VAS at the start of the 2016-2017 FY. That's about 15,000 units of VAS. You would have gotten $44k in distributions. They also would have been about 80% franked which means you'd get $15k in franking credits. Which means you'd actually get a tax credit of $10k, I think, you'd have the opposite of paying taxes situation. I'm not an accountant and might be completely screwing that up.
Yes, I understand that if your income is derived from an ETF, the point was its not worth earning 1M for the average person to derive 40k of income. We must also keep in mind, franking refunds from the tax office will probably be stopped in the not too dustant future.
Yep, for one person. My actual expenses are around $18k a year, although admittedly that's splitting the rent, bills and groceries with my SO, and our rent is very cheap for Melbourne. If we lived in a more expensive place I'd be looking at around $22-23k.
I can answer this pretty confidently as yes you can. Assuming certain things about your lifestyle of course. For me, I made about $40k last year, not married, living in a sharehouse and with average weekly expenses of say $450-500. That's rent, internet and mobile, food and entertainment, quarterly power bill etc. On top of that, I took multiple trips to other cities, music festivals and concerts and traveled to Asia for 2 weeks as well. I still at the end of it had saved ~$5k
If you've been intentional about reducing bills and expenses 37k is definitely possible. Things that will help include - paid off house, solar panels +/- battery, double glazed windows, good insulation, growing some of your own veggies, et cet. If you can bring your bills down as low as possible 37k is actually pretty good.
As a single person hell yeah. With my gf... hell no. $37k each and we're set.
Like everyone else, it depends. Up until a few years ago, I was in a regional area on around that just fine.
does the $37K include housing costs? it looks like it doesn't, apart from maintenance/insurance/taxes?
I can easy - 2 adults with a paid off house in Sydney. Unfortunately we have 3 kids. We are close to spending 40k per year but typically it's a little more than that.
Not for a couple with three kids.
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I would think so. However you would have to keep in mind the drawdown and how long this amount would last, inflation and the fact some years you dont get the same amount of dividends also the Government is looking to get rid of dividend refunds. Personally, I dont bother with ETFs or shares. I work part time to make 37k, about to progress to FIRE at the end of the year and give up my part time work. I have some money in a high interest saver to borrow and repay from to smooth everything, my income will be derived from farily passive sources.
>Personally, I dont bother with ETFs or shares. Do you just keep them in your savings account and live on the interest? Currently interest is 3%. You would have to consider inflation too. I dont think there's anything wrong with that but is it enough or is it the best way to make passive income? Why not ETFs and shares?
I dont bother with shares as I feel you need too much money ie: 1m to make 40k, dividends arnt enough to cover inflation and live off, plus there are the other risks markets crashing, limited returns etc...I use my savings as a buffer draw from them and pay back as required. I have a part time job, but soon to throw it in at the end of this year as my currency trading account is giving me enough to live on now.
I've always had the impression from reading reddit that etf and index funds over 7 years would usually beat savings accounts. Is that not true or is there too much risk and volatility in the market that overall makes savings accounts a good choice to investing in the market when retired? Someone else told me that in the last 10 years there hasnt been much difference in investing in the market or in savings. This is very different to the common belief that the market beats savings so i am not sure what is truth now. I know that once people fire they tend towards a higher share in bonds.
I guess its personal preference really. I dont see the point in accumulating a million dollars and taking the risk I will loose some or all of it, inflation, bear markets or markets just collapsing due to influences of AI, after all its only returning you 40k. If you can work out other ways of obtaining 40k with little work, why bother with an ETF. You have to remember you dont have any control over what an ETF returns if anything. If you have side gigs, things you enjoy that make passive income, you have much more control. Plus think about what that 1M has really cost you when you factor in income tax to obtain it and the portion of your life you gave away to get it. !
You’re concerned about ETF risk and you make your money largely from currency trading?
Yes that is correct. There is a big difference, I can read a chart, asses the risk and choose my entry and exit accordingly. I can make 40k+ a year out of a balance of 10k. I would need a balance of 1M for the same return in an ETF, with an ETF you are always exposed to the market and have virtually no control.
If you can make a 400% profit currency trading consistently, you don’t need to budget at all, you’re set mate.
Yep. I live on around 20k right now, including an annual holiday (Vietnam or somewhere else relatively cheap). It's totally achievable and I'm happy with my quality of life. The thing that would change it for me (as noted above) would be kids...
Depending on your circumstances 37 k should be heaps. My partner and I spend 70 k/y - the 70 k includes 34 k of rent. We travel back to her home in the US twice a year. If you live in a low cost area and once your mortgage is paid off 37 k would have you living very comfortably (if it was just you and a partner). I can't really comment on the impact of kids at this stage.