As you contribute
every month to your 401(k), you've probably asked
yourself, "Do I have enough to retire?" But perhaps you
should be asking, "How much am I paying to work?" After
all, maintaining a career -- and the lifestyle that
often accompanies it -- isn't free.
How much is
work costing you?
and taxes make up most of the expense of working. But
there are other areas as well, like clothing and eating
out that take a sizeable bite of your personal and family
Houses and rent in
high-employment areas are more expensive than those in
"depressed-employment" markets. So you need to live near
job opportunities or be willing to make a long commute,
the latter of which increases your gas bill and adds
wear and tear to your vehicle, not to mention your
psyche. Your spouse needs a car, too, to efficiently run
the home and to haul the kids and pets around. If both
of you are pursuing careers, then you have to add
day-care expenses to your monthly bill.
According to AAA the average cost of owning a car (May,
2014) is 59.2 cents per mile, or $8,876 per year based
upon 15,000 miles of annual driving. And assuming state and
federal taxes take 30% of your income, you'll need to
earn $11,540 just to cover the costs of car ownership
per a tax
daunting thought indeed.
require that you keep up an image, including any or all
of the following: a house with the right address, a car
that is suitable for a partner of a firm, impressive
watches or jewelry, and professional clothing with the
necessary dry-cleaning expenses. You are encouraged to
represent the company itself with proper shoes,
handbags, or briefcases, essential computer traveling
cases, and cell phones. There are also pricey haircuts,
manicures and nail buffings, hair coloring to look young
and vigorous, or perhaps a membership to a country club
or golf lessons so you can schmooze with potential
Keeping fit can be
expensive, too, with a gym membership or personal
exercise equipment quickly racking up bills.
When we were working,
we treasured our moments at home. We didn't want to
spend our precious time cleaning it, so we employed a
service. It was the same for mowing the lawn, pruning
the trees, or planting flowers each year.
There are social
pressures, too. Working couples are often so busy that
getting together with family and friends causes the
social calendar to be scheduled far in advance. Small
yet significant moments with children can disappear
before our eyes, and having unstructured time to simply
unwind seems a distant luxury.
aren't free, either. They must be adequately insured,
repainted, renovated, recarpeted, and otherwise
maintained, with roof repairs or plumbing problems
adding sizeable sums to the minus column. Don't forget
the cost of utilities. The larger the home, the more
space you must heat or cool. If people looked at owning
their home in the same way as running a business --
tracking every dime they've invested, plus the hours of
their labor to maintain it -- they would be shocked.
A recent Wall
Street Journal study found that "the cost of
keeping a typical home up to current standards for 30
years is almost four times the purchase price." The
sobering conclusion, according to the Journal:
"Almost every house, no matter how recently or expertly
built, is a money pit." It's enough to make the "Home
Sweet Home" sign in the kitchen shudder right off the
You might be enjoying
the recent run-up in property values. It's a terrific
feeling until the home is reassessed and your property
taxes increase to reflect that new value. Are you now
paying $3,000, $4,000, or even more in annual taxes for
that privilege of ownership?
These days, both
partners want the chance to express themselves in a
career or to pursue a mental or creative challenge.
Since each spouse is working, taking the time to cook at
home is not always a convenient option. Constantly
eating out, rushing to pick up something on the way
home, or using packaged microwave products definitely
ratchets up your food expenses.
And then there are the
yearly vacations. Spending thousands of dollars to
justify the enjoyment of a few weeks off so you can tell
your co-workers what a fabulous time you had feels
great, until your tan is gone and the credit card
This whole scenario is
starting to add up.
What to do?
1. If you are preparing
for retirement, you may want to consider different
housing options. Are you planning on staying put or
moving to a more economical location? Will you need the
same amount of square footage?
And why not try
someplace new? There are many ways to
downsize your housing expenses. You could rent or purchase a condo
with amenities that management takes care of for your
enjoyment. You could move to a sailing vessel or
houseboat, or maybe an RV. We know many RV and boat
"full-timers" who have long ago given up the
conventional house. It's not because they cannot afford
one -- it's that they prefer the unhampered lifestyle.
consider a move to
a less expensive country. There are expats in just about
every corner of the world, and this is the time of your
life to live your dream. When we first retired 24 years
ago, we shared a spectacular house with some others on
the tiny island nation of Nevis, in the West Indies.
Since our friends worked all day, we had a mansion with
a spectacular view overlooking three islands all to
ourselves. Upon returning to the U.S., we slowly
traveled through the West full-time in a fifth-wheel
trailer. We know others who have done house exchanges in
return for living in a faraway land. There are so many
options, you only have to use your imagination and look
for opportunities. Besides, you can always buy
a house whenever you want... they're everywhere!
2. Take a look at your
transportation outlay. Will you
continue to need two cars? Will you be able to get by with other choices,
like public transport, a moped, a golf cart, or a
instance, we live in a location that
is within walking distance to grocery stores and
restaurants and has shuttle service to the airport. Our
entertainment options are also close by.
3. Exercise during
retirement can be a daily part of life. Walking is free.
Tennis, hiking, biking, rollerblading, tai chi, or yoga
cost almost nothing.
4. Dining is an area
of expense in which you have great control during
retirement. Perhaps going out to lunch is a better value
than meeting friends for dinner. Or better yet, learn to
cook! Eat fresh! It's healthier and more economical. You
won't be nearly as rushed as you were when you were
working, and being smart in this one area can give you
5. Don't forget the
impact of lower taxes once you're retired. Having no
earned income means you'll pay no more payroll taxes.
Now is the time to simplify your tax structure,
before you leave your job.
you'll find that many of your expenses can be
dramatically reduced. Once you understand your cost of
working and deduct this amount from your budget, you
might find that you're much closer to your goal of
financial independence than you realized.
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