Sample Household Budget For Early Retirement: 85% Savings Rate!

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The Hustle has an article on 30-year-old early retirees and it serves as a quick introduction to the concept of FIRE (Financial Independence Retire Early). For the most part, it profiles young tech workers and engineers with very aggressive savings rates. Here is the budget of a 28-year-old computer programmer in San Francisco who saves 85% of his take-home pay (over 91% of gross pay):

At first glance, isn’t the budget missing a few lines? Health insurance? Paid by employer, I assume. Transportation? No need for a car in the city, I assume. Utilities? I guess renting a room in a 5-bedroom can become quite a deal when splitting things that many ways.

On the other hand, how does $165,000 gross salary end up as only $91,000 take-home pay, even in California? His true saving rate might be even higher than stated.

Let’s forget the details. He makes a big salary, and spends very little. That’s all you really need to know. I don’t question the overall spending numbers because I also lived on less than $20,000 a year as a 20-something single person in a budget apartment shared with a roommate. Even that 165k income is simply about average for a tech worker, per Statista:

(If you are prone to salary envy, don’t poke around the tech worker salary comparison site

I’m happy for Kevin, but is frugality only for the rich? No, I don’t think that is a fair statement. Now that I am older, I can estimate the income of my parents and can appreciate the lengths that they went to in order to manage our family without going into debt. You have to to believe that you can make a difference. I hate the suggestion that there is no point in trying, and that we have to wait for the politicians to save us.

Now, I would agree if you are a household that is earning significantly over the median income, then yes, you have the power to quickly build a pile of money that is big enough to change your life. “Financial freedom within 10 years is for the rich” isn’t quite as catchy. A positive aspect of the FIRE movement is that it is showing people an alternative way. You don’t have to save 85% of your income, but you should realize what you are giving up if you’re just spending it all.

My overall message? Personal finance still matters. You can make a difference. You can raise your income. You can prioritize your spending. I avoid the acronym FIRE acronym because the words are confusing for too many people. The vast majority are not going to “retire” completely from paid work in their 30s or 40s (even if they technically could). However, you can still read about the examples of others in order to find inspiration. Take what works for you, and leave the rest.

The fact is, if you are able to use your saved money in order to lead a life with less stress and more meaning, then you are winning the game as far as I am concerned. Different job/same place, same job/different place, less hours, more flexible hours, better hours, there are countless possibilities to improve your daily life.

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  1. I like the general theme of the article, save your money and spend wisely. For a 28 year old this is a great idea but he has a life and experiences ahead of him. Retire early? Sounds great at 28.

  2. These types of articles always drive me nuts. He spends $5 a day, every day, on food? LOL come on. He has no subscription services (tv/magazine/gym) of any kind? No transportation so no bus/subway pass either? Must be single and childless too. Basically friendless because you can’t go many places with them on $20 a week. What does he do all day, just work? What a sad way to live, sacrificing the prime years of your life for some not-promised future. Just my opinion, of course.

  3. If he’s happy with his life then thats good for him. But .. that level of frugality is going overboard as far as I’m concerned. Why live like a poor person just to save enough money to stop working to spend the next 60 years living like a poor person? I sincerly hope theres a better long term plan.

    I call foul on the $60 phone bill. Someone whos is that much of a miser with 4 roommates who eats nothing but beans and rice is spending $60 on a phone plan? I don’t believe that.

  4. FI is a great idea, but sometimes, the FIRE endeavors may forget there are other things in life that are also worth pursuing. But instead, they are depriving themselves from everything that cost money and trying to saving every single pennies just so that they can FIRE. At the end of the day, yes, they have FIRE, but they also lose the best youthful years to expand their horizon, to experience life and/or to see the world. Like Kevin in this example, he is planning to maintain this lifestyle for another 12 years so he can retire at age 40. How about building a family/traveling/donating to good causes etc etc?

    Do not be the poor whose only blessings to count is his money.

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