Foremost in my mind while planning for retirement is how to balance my costs and income and key to making this work is my assumption that my cost of living won’t rise that much in retirement. There are many reasons for this optimistic view, some of them are just general economic trends, some my own lifestyle choices and the rest are down to decisions that I’m planning to take about my investments. I definitely concluded that my cost of living will stay fairly stable or decline and that I won’t be the victim of inflationary lifestyle costs (I might fall victim to inflation eroding my savings, but that’s not the topic of this post). When I’m developing a strategy at work I try to make sure that it’s resilient to uncertainty and so being able to vary my cost of living to match my income is an approach that I highly recommend and I described that in a separate post.
So let’s get on with looking at costs in more detail, but before I do it’s worth pointing out that I own my own home and have no debt, which makes planning a lot simpler as does cultivating low cost hobbies like playing musical instruments, sketching, reading, walking, listening to music, gardening, DIY and meditating.
Minimising ‘Fixed’ Costs
The first and most important strategy is to live simply, to resist the temptation to link satisfaction in life with owning stuff, in fact I think the inverse is true. Beyond a certain level, more stuff leads to less life satisfaction, stuff weights me down. I’ve believed this to be true academically for many years, and I’ve read enough by proponents of simple living to know that’s it’s true in real life for some people. I’ve personally practiced not buying stuff for nearly 8 months and I’m now confident that it’s true for me too. It’s a shocking personal revelation because even though I had this academic understanding, prior to this experiment I’d been an avid acquirer of gadgets, tools, clothes and books. Having broken the addiction to buying things I’m well on the way to controlling my costs.
The second key factor is minimising the cost of replacing and fixing things that break. There are several beliefs and approaches that I’m currently using or planning to use to minimise these costs. First up is the belief that in many areas of consumer goods costs are falling not increasing, pretty much anything high tech is following this trend, provided I don’t buy at the high end. These deflationary pressures seem to apply to Software, TV’s, computers, games consoles, cycling and hiking clothing and shoes. I do have some top quality second hand waterproof jackets and trousers, but people tell me these will last for over a decade, so I considered them a good investment, they contrast nicely with the low cost end of line, end of season and just plain cheap stuff I normally buy.
Then there’s all those ‘white goods’ fortunately I have a strategy that has worked well for me there too, buy high quality products with 10 year warrantees. I might pay a little over the odds, but they really do seem to just keep on working and they are repairable. Then we have household furniture and decoration where I will again be following a strategy that’s worked well for me for the last 30 years, decorate with paint not wallpaper, buy quality leather sofa’s and chairs, select solid wood furniture and lay laminate flooring. Most of what we have bought in the last 30 years is still just fine. Charity shops are a great source of replacements.
The last big area of cost is maintaining the house and here the strategy has three key elements, all of which I have already done, replace wood with materials that don’t rot, get to know a few local tradesmen and finally wherever possible do the work myself. Learning the skills to fix stuff, and then fixing stuff with those skills are both very rewarding activities.
Finally get loads of insulation in the roof and the walls, minimise draughts, fit porches to minimise warm air loss through doors and get a high efficiency boiler, with on demand water heating.
Minimising Food Costs
Not long ago I would have been the worst person to ask about minimising food costs. I love to eat out, I used to buy most of my food from M&S, I bought what I liked regardless of season and always bought animal products from sources with the highest animal welfare standards. I haven’t really compromised any of these standards in a big way, but I have reduced my costs considerably through a few changes:
- I’ve replaced two meals a day with green smoothies. These have allowed me to buy a whole range of cheap vegetables from Aldi without much consideration for quality, because it all looks the same blended. I can mix up a smoothie for about half the cost of a traditional salad and get more greens.
- I’ve turned over almost all of my vegetable patch to berries and greens, especially fast growing ones like kale, spinach, lettuces, spring onions and the like, I get three or four crops a year and that’s about half of what I eat for 6 months. Where I can, I now also get frozen veg rather than fresh (sprouts, broccoli, cauliflower, runner beans …) and veg that keeps really well like Red Cabbage.
- Debbie and I eat a berry salad each night, but we add a heap of spray cream to it that makes it much easier to eat fruit that’s a bit battered, under-ripe or otherwise not top quality without noticing, we buy cheaper and throw away a lot less
- Instead of expensive beef, I eat supermarket fresh ‘best quality’ 100% beef burgers and I eat free range chicken joints rather than skinless breasts saving nearly 50%.
- For a treat I eat a mini 85% dark chocolate bars from Aldi, from a pack of 5
- For infrequently purchased expensive foods I have an Amazon Prime subscription giving me typically 25% off shop prices with no delivery or transport costs
- I no longer take any vitamins, because I have such a nutrient dense diet
- When I do a lot of exercise and need some carbs I’ve swapped the expensive cheese cake for the 40p a severing Super Nutty Granola from Jordan’s, which is much healthier, has no gluten and tastes great!
- When I eat out I drink tap water, when I go to cafe’s and don’t want the expense of eating I buy a bottle or water or diet coke
- When we go out for meals now we are transitioning to picnics in the summer and friendly local eateries where we can get a good meal served by people we know for £5 per person.
Minimising Experience Costs
The previous section covered all of those hard costs that are difficult to avoid, we try to minimise these costs because we (especially me) don’t believe in stuff. I want to save up money for experiences.
When it comes to experiences though I like cheap too. I’m at my happiest when walking and cycling and these have the benefit of reducing my pain levels and increasing my resilience too. We live two minutes away from a 30 mile coastal walk and cycle path so we don’t need to travel, but if we do we are an hour away from the Lake District and 30 minutes from the Rivington reservoir system for fantastic hill walking, lakes and canals.
When we want to get away for a longer break we like low cost options, like Premier Inns and off season caravans. When it comes to holidays I much prefer five, off season, low cost weeks in UK beauty spots to one week abroad. This is especially important as I have 12 weeks holiday a year and this will be even more true in retirement.
These exercise related experiences can get even cheaper though because in retirement we have even more out of season flexibility and the option to enjoy low cost B&Bs, youth hostels, house swaps and camping to make longer adventures affordable, like hiking the long distance footpaths.
Many other forms of entertainment experiences are reducing in cost as well though, here’s a small sample:
- Low cost afternoon movies for the over 50s
- 2 for 1 movie nights
- Free music streaming services
- Public libraries and their eBook lending services, audiobooks, physical books and magazines and cafe like reading spaces
- Free TV and movies from Amazon prime
- Amazon book subscription service, coming soon to the UK
- Free online courses
- Amazing free podcasts and blog posts
- Newspapers making much of their content available for free
- Low cost public transport for elderly people and for everyone like Megabus
Non-obvious cost decreases
There are a lot of cost reductions and new opportunities that we can expect to arrive in the next few years and even more in the next 10-20 years. Some of the things I’m already seeing are costs lowering as a result of additional automation, we can expect these to filter through into restaurants and shops, my health club has just reduced it’s costs through automating the car park and reception.
Some of my favourite areas of innovation that are going to have a big impact on my costs or enjoyment include:
- Cost effective electric bikes and soon cars allowing me to travel more often, further and on more days of the year
- Improved public transport
- Virtual 3D HD tourism experiences allowing me to visit the wonders of the world ‘from the comfort of my own home’
- Employment will reduce and so the average number of working hours will reduce to share jobs around more fairly. I think wages will fall a little and people will have more time to volunteer. Older people who are struggling will likely benefit from this.
- While the costs of caring for the elderly is likely to increase in the highest quality nursing homes, we have four children to help with that a little but more importantly I’m expecting that dramatic improvements in home assistance robots, home safety and health monitoring, drone deliveries of essentials to the rear patio etc. will allow me to live in the comfort of my own home for a very long time
There are a few areas where costs will increase, but not many:
- I expect the cost of heating and lighting my home to increase, but I’ve hedged against this cost somewhat by buying solar panels a few years ago. I’m going to be enjoying those feed-in-tariff payments until I’m over 70
- Food prices will increase, due to shortages and fuel costs but I’m hedged against those a little too because I can grow a lot more of my own food than I do now and I already buy quite a bit of locally grown quality food which won’t increase as much
Overall then I’m very optimistic, but I’m also very thankful that our fixed living costs are fully covered by our index linked pensions!
The photo today is of the old quarry, part of the wonderful Rivington Reservoir system that in just a few years time will be just a short hop away from our house in an affordable electric car, fuelled up for free from our existing solar panels.