personal finance simple living: budget cost of living
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Commenter TNT was intrigued to know what The Number is – how much do Mr and Mrs Ermine need to run their Nest.
We’re anomalous in many ways, so you can’t extrapolate from this a general ‘what does it cost to live in an average paid off three bed semi in Suffolk’. There is a wider and more consensual summary in the post What is your Number. For instance we don’t have any children. That is obviously a big difference from most folks, and from a financial POV it is probably to our advantage. We also, unusually for Westerners, have control of some of the means of production of our everyday needs, in the form of The Oak Tree Low-Carbon Farm. This massively distorts our food bill, most people buy their veg from Tesco, we get most of ours from the ground.
We also get firewood, both directly from the farm, from wood that is given us which we have enough land to air dry, and in a year or so from some biomass willow planted nearby. This distorts our heating bill, though not so much as yet. The plan is to nuke that gas usage in winter.
So here it is – the running costs for our household. Two things of note are excluded – I’ve only shown my car. Mrs Ermine’s car is a lot younger than mine so the servicing costs are probably less, and her mileage is probably about the same as mine. Depreciation (original capital cost/years of ownership) is higher. There again we save up for our cars and pay cash, so I could take the line we eat the depreciation upfront in one hit.
The second is some sort of sinking fund for depreciation/house repair, which is somewhere between £500 and £1000 p.a. for an average semi. I have a general emergency fund allocation to that, for instance there’s a flat roof that is past its service life and I have a fund allocated to replace it. Since DIY repairs every couple of years seem to work well I leave well be, knowing that I could replace it at any time should the need arise.
So, given all those caveats and hedges, what gives? What does it cost to run the basics for an Ermine’s nest?
Now these are basic running costs, what it takes to keep the wolf from the door. In a past life I had an entertainment budget of about £300 a month (=£3600 p.a.) and I plan to reinstate that when I leave work. At the moment that’s a lot lower, as I don’t do annual holidays and have shut down a lot of elective spending.
Unlike our Dave, I didn’t bottle it when it came to clearing unneccessary spending, and this is now directed to my ISA and pension contributions to make life better for my future self. I need improved resilience fast, because of the howling advance guard of the coming economic shitstorm, and also because I will not be owned. One experience of the lethal toxicity of modern performance management was warning enough. Unlike some middle-class professionals, I will not sit on my butt and let it happen to me again. The bell is tolling for me, and over the last two years I have been preparing for exit. Screwing down excess costs and losing my entertainment budget for three years is a fair price to pay for freedom from asshole management. The alternative is to sit and whinge and moan, indeed to become a complainypants. That works for some people, but in the end it doesn’t work for me, here.
Interesting to note is what is not on that list, but are common line items for many people.
- Mobile phones, pah, away with them. I travel in the quiet coach on trains to get away from this pest. They are handy on occasion for hooking up with people. I have a work mobile, and get people to text me so I don’t have to use the poxy tag your spend function at work, I don’t have non-business spend. When I leave work I will have a PAYG SIM deal and don’t anticipate it appearing as a monthly spend
- Sky TV, just KO the glass teat, folks. There’s a whole world out there that’s got real stuff in it. The downside is you need time to explore it, which you haven’t got when you come home from work after a long commute. Unfortunately Sky TV makes money by getting you to buy things as well as charging you for the privilege of being advertised to, and when you buy things, particularly on credit, you have to go to work to pay the debt. And so on, like an ouroboros. Or a hamster on a treadmill…
- Cable TV/BT vision. See above.
- Credit Card/Personal Loan servicing. Now why would I do that? What’s the point of paying £105 for £100 worth of stuff? I’ve already done enough of that with my mortgage.
- Mortgage – I spent some of Brown’s Seven Years of Plenty paying this sucker down and finally off. Twenty years of my working life went towards paying The Man and that’s quite enough. Obviously if I had gone interest only I would have had a shitload of Stuff and foreign holidays instead. You pays your money and you takes your choice. I choose freedom, not an ersatz consumer life. In these low-interest times there is an intelligent case to be made for not doing that, but I don’t have a long and illustrious history as a talented investor behind me. So I don’t do that, though I salute those that do!
- Holidays – well, having decided I want to quit work, why do I want to prolong it by spending over the odds on holidays to fit them into the short vacation allowance? Once my time is my own I can take longer about holidays and save money. For all that, however, I would be bulling you if I said this were easy. There is a good reason why people spend a lot of money making their two weeks in the sun as different from work as possible.
- iFads or anything made by Apple. I just don’t have the fanboi gene there, and don’t want to have Apple’s blood funnel in my bank account when it comes to portable music. I have to acknowledge that the iPod is probably the ergonomically best solution for that. An iPhone combines the Apple blood funnel with the mobile phone monthly contract and Itunes blood funnels <shudders at the thought> though it is a damn fine piece of gadgetry
So there we go. Sort of 8K to run the Ermine’s nest and a car (I plan to go to one car after leaving work) plus an entertainment budgets of similar-ish. This is reasonably in agreement with at least one retired couple I know of who run two cars and seem to get three holidays a year out of a shade under £20k. Our attempts to gain control of some of the means of production in terms of fuel and food are because we expect these to rise in relative cost dramatically over the coming decades, as a result of peak oil and increasing aspirations of the booming East, combined with inflationary assaults on Western currencies in an attempt to make government debt more tractable.
So the narrow answer to TNT (love the observation of The Firm as ” a truly great place to work gone bad” BTW) is about £6k basics and practically circa £10k if you are single, depending on how you feel about the entertainment budget, and indeed about running a car. As an individual in a couple it could be less, but with kids I guess it obviously could be more
I would already get that if I drew my pension early, and yes, sometimes I do ask myself why the hell I don’t pull the big red ejector handle – right now?
The reasons are many – the original escape plan was for three years, and I have slightly under a year to go. I could use getting voluntary redundancy, which I’d be unlikely to get before London 2012 is under way. I anticipate a financial shitstorm to hit the West in the next two or three years, so having just enough now is not a long term solution – if I live as long as either grandmother I could see nearly as many summers ahead of me as I have seen so far. There may be elements of one more year before comfort. Perhaps I have been working so long I can’t emotionally envisage a word without work, though intellectually I’m up for it right away.
On the other hand, although my quit date is subject to variation depending on voluntary redundancy opportunities, I’m also aware that I haven’t got much more tolerance for the misanthropic management style, and there is the potential for health downsides.
Sustained stress can spew out in various physical forms, none of them particularly great, and one does see this in people working for The Firm in my age cohort, indeed we have said our permanent goodbyes to two people I have shared offices with over the years, and one took retirement last year pretty much with a warning from his doctor that he is running out of road. It is truly a great place to work gone bad. So I won’t leave it too long, I don’t expect to be working there in October 2013, in the interest of my own health, because good health is not something that money can buy…