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How Much Does It Cost To Live A Modest Lifestyle?

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It took a lot of lucky breaks for me to retire from my engineering career before 40. I was able to find a well-paying job right out of school and started investing right away. This enabled me to increase our net worth steadily over the last 20 years. I also have a great partner in Mrs. RB40. She values financial security and shares most of my goals. We wouldn’t be where we are if we didn’t work together as a team.

I’m very grateful for my good fortune, but it wasn’t all luck. One thing that was always under our control was our lifestyle. We live modestly and never accumulated any consumer debt. Our income rose steadily throughout our 20s and 30s, but we always lived below our means. We still live modestly, but we don’t feel deprived at all. I think this is because we value financial security much more than anything else. Well, we enjoy travel as well and we don’t skimp on that.

But what exactly does it mean to live a modest lifestyle? It’s in the eye of the beholder. My definition of a modest lifestyle might look like poverty to some people. I’m sure others would view our lifestyle as luxurious. The important point is to live below your means so you have money left over to invest. Anyway, I want to share how much our modest lifestyle costs. I’d love to hear what you think.

To start off, let’s take a look at the nifty Family Budget Calculator from the Economic Policy Institute. It measures the income a family needs in order to attain a modest yet adequate standard of living. It will be a useful comparison point for us since the location can make a huge difference in the cost of living.

*This post was originally written in 2015. It is updated for 2022. It’s incredible how much the cost of living increased over the last 7 years. In 2015, the cost of living in Portland was around $5,000 per month according to the Economic Policy Institute. By 2022, the monthly costs increased to $7,154. That’s a huge increase.

Wow, it’s expensive to live in Portland. We spent much less than this in the first 9 months of 2022.

*EPI’s Family Budget Calculator measures the income a family needs in order to attain a modest yet adequate standard of living. The budgets estimate community-specific costs for 10 family types (one or two adults with zero to four children) in all counties and metro areas in the United States. Compared with the federal poverty line and the Supplemental Poverty Measure, EPI’s family budgets provide a more accurate and complete measure of economic security in America.

RB40 Household Modest Lifestyle

Housing – $1,300

In 2019, we moved from our old condo to a duplex. We rent out one unit and live in the other one. Our unit is pretty small. It only has 2 bedrooms and one bathroom. It’s getting a bit tight now that our son is 11 years old. But whenever I think our home is too small, I’d remember that my family of 5 lived in a small apartment when we immigrated to the United States. We plan to take over both units in the duplex when our son enters high school. He’ll need more space then. Our housing cost will increase to around $2,000/month in about 3 years.

Currently, we spend about $1,300 per month on our housing. That includes mortgage, property tax, insurance, HOA, and utilities. This is lower than the modest budget from the EPI.

However, I think the EPI’s $1,536 estimate is way off for Portland. A 2-bedroom apartment costs over $2,000/month here. You’d have to go out a bit to find more affordable apartments. The estimate includes 3 counties, so I guess it makes sense.

Food – $600

We usually spend about $600 per month on food. These days, we mostly cook at home because restaurants are very expensive. We shop at WinCo and Safeway, and rarely visit expensive stores like Whole Foods. When we go out, we usually go to family-friendly ethnic restaurants. I think we’re doing pretty well in this category because both of us know how to cook. One of us can always pick up the slack if the other doesn’t feel like cooking.

Childcare – $50

Woohoo! In 2015, we spent about $500/month on childcare. Now that he is in school, we don’t have to spend anything. In 2022, this category changed to various kid stuff like clothing, toys, and entertainment.

Transportation – $200

This is a good category for us. We share one car that we own free and clear. We rarely drive and fill up only once or twice a month. The category includes gas, car maintenance, insurance, parking fees, public transportation fees, and speeding tickets. Ugh, I got a speeding ticket earlier this year.

Healthcare – $400

Currently, we spend about $400/month on health. We’re pretty lucky because we’re on Mrs. RB40’s employer-sponsored health insurance. Once she retires, we’ll have to go with Obamacare. This is a good category for us, but it is getting higher as we get older.

Other necessities – $1,900

“Other necessities include apparel, entertainment, personal care expenses, household supplies (including furnishings and equipment, household operations, housekeeping supplies, and telephone services), reading materials, school supplies, and other miscellaneous items of necessity as reported for the second quintile from the Bureau of Labor Statistics Consumer Expenditure Survey.”  I think we’re okay in this category. Our biggest miscellaneous expense is travel. This year we traveled to California, Thailand, and the Maldives for 3 months. We had a great time and plan to take a trip every year.

We don’t spend much on clothes. I’m still trying to wear out all my old clothes. We have to spend more on RB40Jr because he grows so fast.

Taxes – $1,115

This one is highly dependent on your income. I’m not sure why the EPI includes it. I’ll just use the same number as the EPI.

Overall – $5,565

Overall, we spend about $5,565 per month on our modest lifestyle. That’s about 25% below the EPI’s estimate ($7,154). It’s pretty interesting because we spend more on some items, but less on others. We spend much less on the “Big 3” expenses than the average family. However, we spend much more on travel.

Actually, our spending changed a lot since 2015. Our housing expense decreased because we moved into our duplex. Previously, we paid quite a bit more for housing. We also spend a lot more on travel now because our son can travel more.

Modest Lifestyle

It’s hard to define a modest lifestyle. This lifestyle feels very comfortable to us. I don’t feel like we’re depriving ourselves of anything. And we can still save a good amount every month. Let’s put some of what we do in bullet points.

  • We rarely buy new things. Our living space is pretty small so we don’t have a lot of storage. Replacement is the current policy.
  • Avoid luxury goods. Luxury goods just don’t excite me. I value financial security much more than luxury. Midrange goods are perfect for me.
  • Don’t compare our lifestyle with our neighbors.
  • Use things until they break/wear out.
  • Go with free/cheap entertainment. There are a ton of fun things to do that don’t cost a lot of money.
  • Pick affordable hobbies. I’ll never buy a sailboat.
  • Avoid collections. Books, music, and movies can all be borrowed from the library. I rarely buy knick-knacks anymore. They just collect dust.

Our modest lifestyle is comfortable for us. We enjoy what we have without feeling like we need to buy more things. We splurge on international travel, but I think that’s well worth it.

Do you live a modest lifestyle? How do you compare to the EPI’s estimate?

If you want to keep track of your finances, sign up with Personal Capital to manage your portfolio. They have many great tools for investors including the 401k Fee Analyzer and the best retirement calculators on the internet. I log in almost every day to check on my accounts.

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Joe started Retire by 40 in 2010 to figure out how to retire early. After 16 years of investing and saving, he achieved financial independence and retired at 38.

Passive income is the key to early retirement. This year, Joe is investing in commercial real estate with CrowdStreet. They have many projects across the USA so check them out!

Joe also highly recommends Personal Capital for DIY investors. They have many useful tools that will help you reach financial independence.

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