How to Save Big Money in Retirement

Some people say it can't be done, and others simply dismiss the notion outright even if they are curious. How do we live on less than $30,000 per year while traveling through the States, Mexico, Guatemala, El Salvador, and other exotic locations? We don't give up luxury, and we don't deprive ourselves. So what is our secret?

Our approach is very simple: We have chosen not to dedicate our time and money to support a complicated infrastructure.

Over the past 20 months, we have lived in Guatemala, the U.S., Mexico, and El Salvador, had unexpected medical expenses for both of us, refreshed our wardrobes, and purchased two new netbooks, a digital camera, and other miscellaneous digital equipment. All on approximately $30,000.

We have spent more money in some years than in others. However, on average, over the past 23 years of our early retirement, our figures have fallen in this range.

How is it possible?
In the following table, you'll see a listing of categories in which we track our spending, with the percentages based on our actual spending from Jan. 1, 2012, through mid-August 2013, roughly 20 months. We want to clarify that we do not budget but rather operate from the position that we are not conspicuous consumers. (Keep in mind that the $30,000 is net spending per year, not gross income. This amount reflects our actual spending, not a paycheck amount from which taxes and savings must be drawn.)


Percentage of Spending





Food/ Entertainment




Computer and Digital




*We have taken on house-sitting commitments in these past couple of years, and this has affected our housing costs positively. We have been car-free for years now, so we no longer own a vehicle. Our medical expenses reflect some emergencies we experienced abroad.

Reduce the costs of housing, transportation, and taxes
Housing listed here includes our maintenance, repairs, insurances, and taxes for our home in the States, as well as hotel rooms or apartments and the utilities we pay while on the road. It also includes the house-sitting commitments we take on. Transportation includes rental cars, gasoline, airline tickets, taxis, boats, trains, and tuk-tuks, plus renewal of our passports, driver's licenses, and visas.

If you look at your own expenses, you'll see that housing and transportation take a good chunk of your income. Do you know how much you spend to support these two areas of your life? Take a close and honest evaluation of this state of affairs, and you might find that you want to choose other options for yourself.

Another area that takes fiscal attention is taxes. Income taxes are something you can control by structuring your portfolio to reflect this choice. Interest from corporate bonds and short-term capital gains are taxed at income rates that are higher than qualified dividends and long-term capital gains. A smaller house -- depending on where it is located -- often costs less in property taxes than a larger one. You might also consider relocating to a tax-friendly state.

In most cases, housing, transportation, and taxes are the top three areas of cash outlay in a person's economic life. Modifying any or all of them -- which is exactly what we did -- will have a significant impact on your annual expenses.

Living well on low costs
All that said, we have a great deal of fun living on $30,000 per year. We spend wisely and get the most bang for our buck. For instance, since we live in a resort location, we have access to a swimming pool, tennis courts, and a workout room without having to lay out cash for their maintenance. We have added house-sitting to our choices for housing, and this has given us spectacular lake views, gorgeous kitchens to work in, outdoor barbecues, and private gardens -- and all are serviced by maids and gardeners.

One home we house-sat in. Source: author photo.

We eat high-quality meats, fish, fruits, and vegetables, because we shop at farmers' markets and watch for the rotating grocery sales to purchase when prices are attractive.

We walk instead of driving whenever possible, and we choose low-cost entertainment options such as tennis, hiking, biking, swimming, going to museums and art shows, and downloading books. Volunteering for projects in local cultures and in our community provides us with new learning experiences. We share time with friends either cooking for them ourselves or going out to lunch instead of opting for higher-priced dinners. And when it's time to hit the road, we take full advantage of current airline deals and travel packages. For instance, we recently paid US$116 each to fly from Guadalajara, Mexico, to Guatemala City, Guatemala.

The benefits of simplicity are everywhere, and we place more emphasis on creating a life of meaning rather than a life of gathering "stuff."

What about you?
So you think you can't make it on $30,000 yearly? How about $50,000 or more? All this means is that your net worth will need to be high enough to maintain these levels of spending.

  1. No matter where you are in this continuum, you can profit from doing any of the following:

  2. Simplify your personal infrastructure. Know where your money is going, and decide whether it's worth it to you. Do you want to keep up the pace of your current spending? Make your funding priorities reflect your values.

  3. Plan your retirement tax strategy now.

  4. Know there is a balance in the exchange of time and money. Do you want more money, or do you want more time? This could be a crossroad you face.

Remember, the best things in life are free. Friendships and connection to society are based more on your attention and time rather than on your money. Watching the sun set with a loved one or walking on the beach together creates memories that will far outlast anything you can purchase.

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