300 -Think Twice About How Much Money You Need to Retire $$$

Using 300 to See How Much Retirement is Going to Cost

Remember the movie 300? I watched it recently to refresh my memory and in it, King Leonidas uses his incredibly strong and skillful army of 300 warriors to slice through Persian armies until he reaches the king and ultimately his luck runs out as he is overcome by countless foes. However, in the end, his bravery causes his people to rally and defeat the Persians. Let’s explore this number, 300, and see how it can help us reach FI faster.

Retirement calculators say you need 25 times your yearly expenses to retire. Do you know what you spend in a year to exactness? Can you tell me right now what your yearly expense on food is? How about what you’re annual spend on gas or vacations? You might be able to tell me your annual housing costs as you can easily multiply your monthly cost by 12 to get your annual expense.

I’m pretty exact with my finances, as I keep meticulous records in Mint and other spreadsheets yet the annual expense number is such an evasive number for me. It’s far away, it seems like it is hard to measure and changes so often, and as we know “only what is measured gets managed.” I only know my annual expense numbers once the year is over. If it’s over what I wished, I think to myself, “Well I’ll try to do better next year”, then a whole year goes by before I revisit it. I’m sure for most average Americans it’s an impossible figure to calculate, which means you can’t know how much money you need to retire easily. So many of our expenses are at the monthly frequency that I wanted a way to understand how much they were moving my FI number and then I could make small course corrections to get me their faster.

Expense Breakdown

Let’s break our annual expenses down another way so that we can slay this beast just like Leonidas did in the film, 300.

We’ve established you need 25 times your annual expenses to retire. As an example, if your yearly expenses are $75,000, then you would need $75,000 X 25 or $1.875 million to not earn another dollar from work in your life.

What if we break that down to monthly expenses instead?

$75,000/12 = $6,250 per month.

Multiply that number by 300 and we get our magical needed number of $1.875 million. This means any expense we have on a monthly basis, we can multiply by 300 easily to determine what it costs us in retirement nest egg dollars. Game changer for instant feedback!

This is much more real, more exact. We all know what we spend each month. Our whole world revolves around it. We hear things like,  “Only $9.99 a month!” “What monthly payment do you want for your car payment?” It’s all we can process… How do we get to the next month so we can start the ride all over again? It’s the American Dream!

Multiply Each Monthly Expense by 300

Here’s a fun game. Multiply any regular monthly expense you have by 300. That number will then tell you how much you need in retirement to fund that expense. Go ahead. Try it.

Netflix -12 bucks a month, 12 X 300 = $3,600

That means assuming you have Netflix for the rest of your life, you’ll need to add $3,600 extra to your war chest to fund that expense.

Of course, not all expenses are fixed nor will you have them for the rest of your life. But it gives you an idea of how much you need to additionally save for any given activity. Furthermore, it brings it to the month level, which I can relate to so easily. If there’s an improvement to be made its only a few days away till the month starts over and you can try again. Here’s a chart of all the type of expenses I came with and it caused me to nearly lose my chalupa. I hope it will do the same for you.

How to Use 300 to Your Advantage

These aren’t my expenses but they are very common for the average American.  I’m not advocating for a life of extreme frugality. That’s not my jam. I have 4 kids and we live well, but we don’t live stupid. Most of these expenses on this chart I don’t have, but my neighbors do!  You’ll notice I didn’t put most inelastic expenses on this chart like groceries, rent/mortgage, or utilities. Unless you are an extreme frugalist, you aren’t getting rid of those anytime soon, but that doesn’t mean you can’t shrink them over time.  I’m not asking you to get rid of Netflix. I have Netflix and I love it. However, do you need Netflix, Hulu, and YoutubeTV? Probably not. If you think you do, put it through the 300 test and see if you can stomach that end number.

Personal Application of 300

My wife cuts our hair, my kids do the yard. We wash our own cars. I work from home so I rarely need dry cleaning. I paid cash for my cars. Once you are intentional about your expenses, you can make that huge $458,000 liability in the chart above evaporate into almost nothing, thus bringing you ever closer to FI. I see my neighbors all spending money on these things and it kind of makes me sick. Most of them are dual income households so they can “afford” it. However, think what progress they could make if they buckled down and whittled away at the monthly expenses! There are two ways to FI, getting a bigger shovel (increasing income), or starting off with a smaller hole (reducing expenses). The Stealthy Rich are a proponent of improving both at the same time. #winning

Parenting Example Using 300

The other day my son left the light on in his room. He had been doing this every day for a few weeks now. He was just forgetting to turn it off before he went to school. I used that example to show him the power of 300. We figured it cost about $.10 a day  to leave his light on, in a room nobody was even in most of the day. My son who is a math whiz quickly calculated the solution and said it would cost us about $2 a month for him to keep his light on (school days only). Multiply this by 300 and this great look of concern came over him as he realized, “Dad, you have to save an additional $600 to keep my light on?” 600 dollars was a huge amount for this boy so he felt bad once he realized what this meant, and needless to say, he doesn’t leave his light on anymore!

Intentionality

We just want people to realize what they are choosing. If you want to pay to have unlimited car washes each month, great! If it’s worth your time to have somebody clean your house because a messy house stresses you out, then hire a housekeeper! However, understand the financial consequences of your decisions. Value your decisions by assigning some type of amount to them, either in units of time or dollars.  This way you can manage your precious resources of time and money better and hopefully reach your goals much faster. You’ll realize where you can make slight course corrections and help reduce the consumer bloat that is plaguing middle-class America. We all have the same amount of time each day, 24 hours. Let’s figure out a way to maximize it and be intentional!