The last couple of weeks, I have written about my past and present financial plans, today I thought I would write about one possible path that my wife and I have looked at.

My plan in retirement is to continue with my frugal lifestyle, spending as little as possible and living off of the investments I’ve made during my working years. One of the benefits of living on very little money, is that we may be able to live essentially tax-free in our retirement years.

In 2013, according to CRA, the basic personal amount Federally is $11,038, Ontario has an amount of $9,574 – both of which are inflation adjusted. Given our current level of spending, we would be fairly close to these minimum amounts, resulting in very little taxes payable to the government. My preference would be to pay zero taxes, because (like most people), I don’t like to pay these at all.

Most major “capital” expenses will be taken care of going into our retirement years. The two major items (our house and car) will be paid off and hopefully well-maintained, and I can’t foresee much in the way of major expenses (outside of normal emergencies like a furnace breaking down or a car accident) taking place, which can hopefully be taken care of out of an emergency fund.

Right now, we don’t spend a lot of money. Like most people, our spending priorities probably wouldn’t make sense to anyone but ourselves. When I look at variable expenses in my monthly spending, the vast majority of it is on gas for the car to visit family and friends, food, and drinks. Other than this spending, we spend almost nothing on “stuff” – we would kind of look like we were living in poverty (compared to a normal North American family).

Our low expenses in comparison to the income we bring in is the main reason we are even able to contemplate an Early Retirement path. I think the vast percentage of people would balk at our lifestyle, but at least for now are more than enjoying the current way we live. What would maybe look like poverty to an outsider, is comfortable and stress free to us. We have savings, we have more than enough food to eat, we have a car to get around with and we can support our various hobbies and interests that we enjoy doing in our free time. Our goal is to increase the free time portion of our life to have more time to enjoy these hobbies and interests.

Do you feel you’re missing out on anything by taking part in an Early Retirement path?

6 thoughts on ““Poverty”?”

  1. Hi,
    While I get the intention of this post, I think you’ve mislabelled it. I don’t think outsiders will think you’re living in poverty because you have exactly what you’ve mentioned…a) you have enough to eat b) you have a car c) you have enough to support your hobbies and interests..

    What you’re living is a frugal lifestyle. You built up enough wealth to be able to live in a financially independent manner. That is actually being rich! So actually I would disagree with the title of your post! People who think you’re living in poverty actually have no idea what poverty means or looks like!

    When you’re living in poverty, you do not have enough to eat, you wish you had some sort of transport (never mind a car!) and you wish you had enough money to support your hobbies.

    I work in policy studies, so I study the economics of poor people on a regular basis.

  2. People who see frugal living as poverty are wrong for two key reasons. The first is that true poverty looks nothing like what you’ve described. And second – while your life style is economically lean, I suspect (having been a long time reader) that your life is flush with spiritual and emotional abundance. People who try to equate money with joy and pleasure will have a hard time finding happiness. It’s an ugly trap that society has created. The people who have fallen victim will always rationalize their predicament and will even criticize those who seek another path.

  3. Since I’ve stripped down excessive, ridiculous spending on things that weren’t making me happy anyway, my daily happiness levels have skyrocketed! It’s not due to peace of mind because of money–it’s just the zen that comes with not wanting “stuff” anymore. …Less bills arrive monthly, I don’t have cable TV commercials driving me crazy in the background, I don’t have new purchases cluttering up my home and closets, I’m not paying to sit down in a restaurant then realizing the food isn’t very good and I could have made something better at home. In short, life have become AWESOME since I started down this path. Buddhist monks have life 100% correct. Minimalism is a form of tranquility.

  4. Great post Dave. My wife and I spend a small part of what we bring in monthly as well. We have recently trimmed our budget of a little fat, what little there was. We could have cut even deeper, but I am not willing to give up cable and ditch the truck in favour of public transit. We are now very happy with $1800 – $2000 of monthly expenses (total monthly income is around $12000). We really aren’t limited very much by this amount of spending – there is still room for the odd dinner out, some decent bottles of wine, and even a bit of frivolous spending. Since I have kind of let my golf affliction die, all of our hobbies are extremely low cost ones (after the initial investment for some costly kevlar sea kayaks a few years ago).

    I’d be lying if I said being kidless wasn’t a big factor in being able to live so well on so little…. but I digress.

    If we can maintain this spending level for the majority of 2014, I will have no choice but to ER this year, as our incoming dividends will exceed our spending comfortably – my wife can join me when she is good and ready. (She has stated she wants to work at least another 5 years) By her working a little longer, we will be able to juice up our passive income quite a bit more – and really enjoy the ER we both want. She isn’t as sold on the concept of an extremely frugal early retirement as I am – and she is willing to work a little longer so that she is able to spend more on herself if she wants. Seems fair.

  5. One condition for my ER 5 years ago was that my day-to-day lifestyle would be unchanged compared to when I was working. If I want to go out to eat once in a while (with my ladyfriend), I do. If I go on a small spendin spree once in a while (as I often do at the start of the year due to some annual expenses such as birthdays and car maintenance), I know it won’t break my budget. I build into my budget a cushion, or surplus, of investment income over expenses so all my current minor spending spree does is eat into that surplus.

    I have trimmed a few small items from my budget over the years but they are mainly at the margin and do not affect my day-to-day lifestyle. I would hardly describe my lifestyle as “poverty” just because I don’t spend a lot in general.

  6. @the Author, it sounds like you are comfortably in the “Esteem” phase according to Maslow’s hierarchy of needs (maybe you disagree?), do you think that you will ever want to get all the way to the top? I have given this topic a lot of thought lately. For example, you are obviously a very productive member of society and I for one really appreciate the fact that you bring an income to Canada and pay taxes. Do you think you will ever fill this way about your contribution to society? Further, do you think that you have not achieved your potential? Finally, do you think that you are/will ever become a “drain” on society?

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