Monday, October 5, 2015

Living on $7,000 a year?

Telling people stupid stuff like "You can live on $7,000 a year" isn't helpful.  Well, unless you are trying to sell something, then it is helpful to the seller.

Google tells me what entries find this blog, and one of them is a website that is selling "extreme retirement" - well, at least a book about extreme retirement for $17.95.

Some readers have asked why I don't have a book.  Probably for the same reason I have not monetized this blog.  Once you go down that road, you end up like Suze Orman or other gurus out there, and are in it for yourself, to make money, and you've given up your moral center in favor of shilling for others (or shilling for yourself).

You may disagree with what I have to say here.  I have not taken any of your money or tried to sell you anything.  If nothing more, I have wasted your time.   And by telling you to consume less, I certainly haven't caused you to squander anything on some ill-conceived scheme, have I?

Can you live on $7,000 a year?  Maybe in Africa.  Not in the United States or even Costa Rica.  To suggest such a thing is a little short of criminal, as you are getting people's expectations up, and then letting them fail, to fuel that low-self-esteem engine that we all have.

It is akin to these diet plans that tell people they can lose weight without effort. And when the people don't lose weight, they feel worse about themselves.  So they go out and gorge themselves on ice cream.

Or MLM schemes - you'll be rich overnight!   When you aren't, well, you must have done something wrong and are a rotten individual.  After all, everyone else got rich, right?

The blog portion of the site was typical wishful pie-in-the-sky thinking.  One fellow opines that as soon as the three-wheeled "Elio" car comes out, his life will be perfect!   But of course, we all know the oil companies will "suppress the technology" right?   (Actually Bombardier sells a three-wheeled car now, and it costs more than a four-wheeled one!).  This is the sort of mentality that bites on messages like that. 

And it is an example of externalizing as well.  Life will be great, if only some external event occurs (Free energy is realized, the aliens are released from Area 51, the Elio car reaches production, and so forth.   All are equally unlikely).

In other words, the site is just full of plain bad advice, in that the advice is not realistic for anyone's personal private life.   You can't live on $550 a month, even if your house is paid-for.   I know this because it costs me $850 a month just to cover taxes, utilities, and insurance.   If you lived in a cardboard box, maybe, or slept on someone's couch perhaps.  But that's not living - that's the definition of homelessness.

The internet, sadly, is rife with bad information - and much of it is designed to tell people what they want to hear (fantasies) and then sell them something.   And what people want to hear is that the impossible is possible (perpetual motion, 100 mpg carburetors, etc.) and that the reason their lives suck so much is the fault of unseen others - usually banks, governments, corporations, or "rich folk" who took all their money away.

In most cases, the only damage to the reader is the $17.95 they fork over for a book on whatever topic they are pining for.   But telling people they can retire on $7,000 a year - early retirement no less - is a little dangerous.   A lot of people would use this data as an excuse not to save.  "Hey, I don't need $500,000 in my 401(k)!  I can retire on $7,000 a year - the book says so!"

Early retirement is not easy to do, and one reason is health insurance.   In addition to paying for the monthly underlying costs of owning a house, you are required to pay for health insurance, which can run you about $400 a month (the $7000 a year you are supposed to be living on).

Now to be fair, even the fellow who put up the website seems a little embarrassed by the claim and how popular the posting has become.   He is quick to point out that the $7,000 a year is actually half the cost - he adds in another $7,000 a year for his wife, bringing the total to $14,000. 

But that begs the question, can two people retire early on $14,000 a year?

It is a little hard to quantify.  If you can qualify for various forms of welfare, perhaps this may be true.   But you don't need a book to go on welfare - just go visit your welfare office.   If you could get into Section-8 housing, perhaps that would be a start.  But it seems to me that intentionally sponging off the government is not a really good plan for "early retirement".

Besides, even with section-8 housing, you have to pay a portion of the rent - a few hundred a month at least, plus utilities.   So you may be talking $500 a month or more - about half your $14,000 budget.

Food is the next problem.  Again, you can solve this by collecting food stamps - sponging off others.   It is a program designed to help the needy, not someone trying to game the system.   But for two people, the amount collected isn't that great.  And quite frankly, one of the joys of life is in eating good food, not in trying to scrape by the the least amount.   We spend $600 a month for two people on groceries.   Yes we could cut back, no, we choose not to.

And at $14,000 a year, that means no eating out ever.  Because as I noted in another posting, the cost of restaurant food is two to four times what you'd have to pay at home.   While it is a good idea not to use a restaurant as your kitchen (eating out several times a week) this doesn't mean you have to live like a monk on bread and water, either.

As for getting around, you can forget about owning a car at $14,000 a year, as more than half of your income would be taken up in car ownership.     Not owning a car is one sure way to save money. 

So add all this up.   $6000 a year for a home or apartment.   $8000 a year for a car.   $7200 a year for food and drinks.   Maybe $4800 a year for health insurance (if you get the subsidy).  We're already up to over $26,000 without buying any clothes, seeing a movie, having a hobby, traveling or doing anything of interest.

That, in short, is why life can be so expensive.   Yes, I could live on as little as $25,000 a year, perhaps, if I pushed the issue.   However, I do like to actually do something with my life.   But I can do things and save money by making smarter choices.   I'd rather read a book at the library than spend $120 a month on cable TV.  I'd rather take a walk in the woods than obsessively text people on a smart phone for $150 a month.    I'd rather have a cheap, paid-for car than a status symbol that needs constant expensive repairs.

This allows me to live a better life on less money, as the mission statement of this blog recites.  Yes, you can own a boat or RV on a budget - just not both at the same time, plus the Harley and hobby car.  

But living on $14,000 a year?    Very difficult to do, at the minimum.   And yes, there are likely folks out there who are forced to live at that level but again, can collect a swag-bag of government handouts by virtue of having such a low income - and thus have an effective income that is much higher.    These government programs are designed for people who are in such situations by circumstance - not by design.

Eschew easy answers.  When someone tells you something that is "too good to be true" chances are it is - and they are trying to sell you something as a result.   Stop believing in faeries and ghosts and government conspiracies and start believing in yourself.