How much do Mr and Mrs Ermine need to live on?

Commenter TNT was intrigued to know what The Number is – how much do Mr and Mrs Ermine need to run their Nest.

We’re anomalous in many ways, so you can’t extrapolate from this a general ‘what does it cost to live in an average paid off three bed semi in Suffolk’. There is a wider and more consensual summary in the post What is your Number. For instance we don’t have any children. That is obviously a big difference from most folks, and from a financial POV it is probably to our advantage. We also, unusually for Westerners, have control of some of the means of production of our everyday needs, in the form of The Oak Tree Low-Carbon Farm. This massively distorts our food bill, most people buy their veg from Tesco, we get most of ours from the ground.

Chris with the squash harvest. There are no Clubcard points on this lot...

We also get firewood, both directly from the farm, from wood that is given us which we have enough land to air dry, and in a year or so from some biomass willow planted nearby. This distorts our heating bill, though not so much as yet. The plan is to nuke that gas usage in winter.

So here it is – the running costs for our household. Two things of note are excluded – I’ve only shown my car. Mrs Ermine’s car is a lot younger than mine so the servicing costs are probably less, and her mileage is probably about the same as mine. Depreciation (original capital cost/years of ownership) is higher. There again we save up for our cars and pay cash, so I could take the line we eat the depreciation upfront in one hit.

The second is some sort of sinking fund for depreciation/house repair, which is somewhere between £500 and £1000 p.a. for an average semi. I have a general emergency fund allocation to that, for instance there’s a flat roof that is past its service life and I have a fund allocated to replace it. Since DIY repairs every couple of years seem to work well I leave well be, knowing that I could replace it at any time should the need arise.

So, given all those caveats and hedges, what gives? What does it cost to run the basics for an Ermine’s nest?

Ermine's Nest basic running costs
Ermine's Nest basic running costs

Now these are basic running costs, what it takes to keep the wolf from the door. In a past life I had an entertainment budget of about £300 a month (=£3600 p.a.) and I plan to reinstate that when I leave work. At the moment that’s a lot lower, as I don’t do annual holidays and have shut down a lot of elective spending.

Unlike our Dave, I didn’t bottle it when it came to clearing unneccessary spending, and this is now directed to my ISA and pension contributions to make life better for my future self. I need improved resilience fast, because of the howling advance guard of the coming economic shitstorm, and also because I will not be owned. One experience of the lethal toxicity of modern performance management was warning enough. Unlike some middle-class professionals, I will not sit on my butt and let it happen to me again. The bell is tolling for me, and over the last two years I have been preparing for exit. Screwing down excess costs and losing my entertainment budget for three years is a fair price to pay for freedom from asshole management. The alternative is to sit and whinge and moan, indeed to become a complainypants. That works for some people, but in the end it doesn’t work for me, here.

Interesting to note is what is not on that list, but are common line items for many people.

  • Mobile phones, pah, away with them. I travel in the quiet coach on trains to get away from this pest. They are handy on occasion for hooking up with people. I have a work mobile, and get people to text me so I don’t have to use the poxy tag your spend function at work, I don’t have non-business spend. When I leave work I will have a PAYG SIM deal and don’t anticipate it appearing as a monthly spend 🙂
  • Sky TV, just KO the glass teat, folks. There’s a whole world out there that’s got real stuff in it. The downside is you need time to explore it, which you haven’t got when you come home from work after a long commute. Unfortunately Sky TV makes money by getting you to buy things as well as charging you for the privilege of being advertised to, and when you buy things, particularly on credit, you have to go to work to pay the debt. And so on, like an ouroboros. Or a hamster on a treadmill…
  • Cable TV/BT vision.  See above.
  • Credit Card/Personal Loan servicing. Now why would I do that? What’s the point of paying £105 for £100 worth of stuff? I’ve already done enough of that with my mortgage.
  • Mortgage – I spent some of Brown’s Seven Years of Plenty paying this sucker down and finally off. Twenty years of my working life went towards paying The Man and that’s quite enough. Obviously if I had gone interest only I would have had a shitload of Stuff and foreign holidays instead. You pays your money and you takes your choice. I choose freedom, not an ersatz consumer life. In these low-interest times there is an intelligent case to be made for not doing that, but I don’t have a long and illustrious history as a talented investor behind me. So I don’t do that, though I salute those that do!
  • Holidays – well, having decided I want to quit work, why do I want to prolong it by spending over the odds on holidays to fit them into the short vacation allowance? Once my time is my own I can take longer about holidays and save money. For all that, however, I would be bulling you if I said this were easy. There is a good reason why people spend a lot of money making their two weeks in the sun as different from work as possible.
  • iFads or anything made by Apple. I just don’t have the fanboi gene there, and don’t want to have Apple’s blood funnel in my bank account when it comes to portable music. I have to acknowledge that the iPod is probably the ergonomically best solution for that. An iPhone combines the Apple blood funnel with the mobile phone monthly contract and Itunes blood funnels <shudders at the thought> though it is a damn fine piece of gadgetry

So there we go. Sort of 8K to run the Ermine’s nest and a car (I plan to go to one car after leaving work) plus an entertainment budgets of similar-ish. This is reasonably in agreement with at least one retired couple I know of who run two cars and seem to get three holidays a year out of a shade under £20k. Our attempts to gain control of some of the means of production in terms of fuel and food are because we expect these to rise in relative cost dramatically over the coming decades, as a result of peak oil and increasing aspirations of the booming East, combined with inflationary assaults on Western currencies in an attempt to make government debt more tractable.

So the narrow answer to TNT (love the observation of The Firm as ” a truly great place to work gone bad” BTW) is about £6k basics and practically circa £10k if you are single, depending on how you feel about the entertainment budget, and indeed about running a car. As an individual in a couple it could be less, but with kids I guess it obviously could be more 😉

I would already get that if I drew my pension early, and yes, sometimes I do ask myself why the hell I don’t pull the big red ejector handle – right now?

The reasons are many – the original escape plan was for three years, and I have slightly under a year to go. I could use getting voluntary redundancy, which I’d be unlikely to get before London 2012 is under way. I anticipate a financial shitstorm to hit the West in the next two or three years, so having just enough now is not a long term solution – if I live as long as either grandmother I could see nearly as many summers ahead of me as I have seen so far. There may be elements of one more year before comfort. Perhaps I have been working so long I can’t emotionally envisage a word without work, though intellectually I’m up for it right away.

On the other hand, although my quit date is subject to variation depending on voluntary redundancy opportunities, I’m also aware that I haven’t got much more tolerance for the misanthropic management style, and there is the potential for health downsides.

Sustained stress can spew out in various physical forms, none of them particularly great, and one does see this in people working for The Firm in my age cohort, indeed we have said our permanent goodbyes to two people I have shared offices with over the years, and one took retirement last year pretty much with a warning from his doctor that he is running out of road. It is truly a great place to work gone bad. So I won’t leave it too long, I don’t expect to be working there in October 2013, in the interest of my own health, because good health is not something that money can buy…

20 thoughts on “How much do Mr and Mrs Ermine need to live on?”

  1. Hi Ermine, ah, I’d forgotten that earlier post, and did in fact read it.
    Using an online SOA tool I came up with £32k, which has some fat in it an some real “living” allocations – holidays, eating out, decent food budget and two cars.
    Assuming a move to a lower cost area – we are currently looking in Suffolk and Norfolk – and assuming my wife’s clothing budget is not decimated, and the fact that we currently also produce most of our own fruit and veg, via allotment and home greenhouse, I reckon we could easily shave that by a few £k, so £27k does not seem to far off.
    Dumping Sky – which we have but now only the basic package and reassessing things like continuing health care (up to £255 per month to retain The Frim’s package!) it would actually be easy.moving to one car would help too.
    So, I find that other than inflation fears I actually have enough to retire today! And I’m only 48.
    This is due to a major effort in the last ten years to save first and spend second, but not missing out on much. At a guess i’s say we saved about 50% of our post tax income.
    Interesting – now do I have the guts to do it?


  2. @TNT go for it 🙂 You know it makes sense.

    East Anglia is cheaper than the home counties I think, and offers lots of coastline and and natural beauty for low-cost recreation, Norfolk is renowned for its birdlife and both counties have lovely villages and countryside. Excellent seafood and a growing local food scene for eating out too.

    South Suffolk is in reasonably easy reach of London by train – an hour and a bit each way from Ipswich to the City of London, though the price of train travel in the UK is something else.

    You have the advantage on me on having saved for 10 years, I began from a standing start two years ago so I have to use more extreme methods. Since you’re with The Firm, and I am only a little older than you are, I take it you’ve considered pension AVCs in your early retirement plan, for various reasons they work well with the Firm’s pension system if you’ve been with them for a while?

    Producing your own fruit and veg, and having the skills, will help greatly against that inflation, as well as being good for you in a holistic way (I haven’t got that gene, DW is the driving force behind the farm 🙂 )

    I’m not planning to continue the healthcare option, I’ve been fortunate enough to not use it personally though it did pay for itself for DW for an accident. I think reducing the stress level is a far better healthcare investment, plus living in a better way. However, that’s a call everyone has to make for their own circumstances.

    Sounds like you have most of your ducks in a row. I tip my hat to you for having spotted the malaise earlier than I did. Could be time to execute the plan soon! Every year you work for the Firm is a year of life you won’t get back. I know a couple of early retirees who’ve followed our general path and they say it’s the best thing they ever did – you can see their improved well-being in their faces as soon as six months afterwards, it looks like they’re a year or so younger…


  3. I’ve never done any AVCs nor purchased the “extra years” – when i got a quote it was about £11,000 per extra year which i thought was a bit steep – not sure how tax works on that though, maybe it would have been worth it.
    I’ve got 27 years in the pension so with that and my wife’s pensions kicking in a 60 i reckon we’d essentially replace the £32k equivalent after tax plus have the lump sum, and hopefully some money left from our current savings and shares, though again I do have concerns about inflation, which at current rates would halve our real spending power by the time i get to 60, though the pension (albeit at CPI) will have kept pace. i would not plan to take the pension early.
    With an even cheaper house (£450k in South Suffolk can be bought for £380k in Mid to North Norfolk) and if i could get a release package i reckon I’d be laughing, and as i never intended being the richest guy in the cemetery i don’t really have any qualms about spending all my savings.


  4. I see I’m going to have to get more aggresive about our energy costs… you are spending about half of what we are, though you probably aren’t trying to heat 1800 sq ft. More woodburning for us, I guess.

    I’m surprised your water costs are so low. I’d have thought that the good ol’ USA would be cheaper, but you’ve whittled them down to being about the same.

    We can both pity the folks that live in the big town here (Portland, OR), where the sewer rate is rolled into the water bill and the total about 3x more expensive.

    Car insurance is similar, home insurance is more expensive here (about 2x).

    Food… I’ve not tried very hard to minimize the costs and so we might be as much as double your budget. Your costs are slightly higher to others who have optimized food budgets in the states.

    Council tax is probably similar enough to our property tax so that they serve the same purpose. I pay about 25% more than you do. Downsizing homes or changing jurisidictions is the only way I can reduce it.


  5. So, you are the one responsible for the looming recession 🙂 I am seriously jealous at your control over the two most important life inputs, food and energy. As you say, this will enable you to battle inflation better than most.

    Choosing when to quit The Firm has to be a personal decision. In my case, it was a no brainer with an unrepeatable redundancy offer. I hope you manage to secure one as it will obviously impart a bigger margin of safety, but I’m sure you have it sorted anyway.

    Having two kids, one just started in HE and another to go next year puts me in a different situation involving planned capex over a number of years (I just have to hope that my fairly pessimistic assumptions on maintenance are just that). Leaving that aside, however, there is still no way that I can screw down our expenditure to yours.

    For a household of four in London I find that we spend annually around £20k with no big treats (foreign hols) but no real stinting, either (some eating out). If it were just Mr & Mrs SG in a smaller house we could probably get down to around £12k.


  6. @TNT AVCs are worth investigating because they are amalgamated with your whole pension pot, so can form part of the 25% tax free lump sum without reducing your pension. Saving you 40% or more tax 🙂 Mid/N Norfolk is breathtakingly attractive, though it can get brass monkeys in winter when the east wind seems to come straight from Siberia 🙂

    @George electricity costs approx £0.16/kWh and gas is about £0.05.kWh if that helps compare. The water charge includes sewerage. I am surprised with the council/property tax as I had been under the impression property taxes were very high in the US, whereas property costs looked low to me in 2007. Area is 1360 sq ft assuming you count 2x total internal building area for a two storey house

    Although growing a lot of it reduces our food costs we quite like to have decent quality so we get a lot of our meat from local suppliers. We’ve come to a reasonable price/quality balance. Jacob ERE would probably find a lot of room to reduce 🙂

    @SG It’s a fair cop, guilty as charged there! Though my consumption had dropped from 2008 onwards so the original credit crunch must’ve been those other guys with the blue and white striped bag over their shoulders.

    Most of the difference with your £20k is in the house size and the kids/higher occupancy – after all I have left out the entertainment budget in this so we may match or exceed your 12k once we have achieved the target. Fingers crossed on the maintenance costs. I was dreadfully wasteful as a student because of inexperience as a householder, and the ropey shared fridge and cooking facilities. That sort of thing has been transformed over the last three decades, though the planning and organisation characteristics of teenagers probably haven’t changed 😉


  7. Good work resisting the iPhone Ermine: I hope to amortize mine over 4 years!

    I think you should budget for an emergency sinking fund in your monthly/annual figures.

    I appreciate you’ve got plenty of assets/savings elsewhere, but if trying to work out ‘the number’ I think you need to incorporate some element of ‘the unknown’.

    In fact, it’s not unknown – sooner or later something will blow up, break down, or run away. I say stick in (say) £250 a month for it.


  8. Perhaps I can add a few extra domestic details from the Ermines’ nest on how we keep our cost down…

    I supply & cook the food, both purchased & grown, (Mr Ermine does the washing up 😉 so I can add a little insight here. The focus is on good quality, simple, omnivorous food made from scatch. Typical evening meal… slow casseroled beef heart and kidney from a neighbours rare breed free range cattle (the only other customers who buy this stuff feed it to their dogs!!) in a stock made with waste chicken bones and a pair of pig trotters, served with butter beans cooked from scratch bought in bulk from a local Indian shop, along with veg from The Oak Tree. Total cost of the meal? Approx £2, allowing for the fact that the veg is “free”, ie I grow it. We eat home grown veg pretty much all year round and this has taken years of experience to achieve! It means you have to ignore all the rubbish about “needing” to buy this or that out of season vegetable or expensive processed ingredients. I do a once monthly shop at a “big” supermarket for basics, which include very good quality butter (never marge) and coffee beans. Another shop at Aldi for other basics. I never stick to a recipe, I use what we have.

    The “food” budget also covers stuff like washing up liquid, shampoo, toothpaste etc. There are a number of key facts here: more expensive doesn’t mean much better. Shop around, and try cheap alternatives out. I have very long hair that I never heat treat of dye. I use large cheap bottles of tesco shampoo and conditioner & then rub coconut oil into the ends once it is dry. Job done. Yes, it would look a bit nicer with fancy shampoo, but not that much nicer. Washing up liquid? Aldi. Toothpaste? Aldi. Washing powder? Wait for the special offers on brands at Wilco (I didn’t get on with Aldi stuff). Bleach? Cheap thin stuff for cleaning from Tesco and refill the toilet cleaning bottles with thick stuff from Aldi . A lady who once worked for the environment agency once told me that eco cleaners were a waste of effort – “you might as well use blue-loo” and bleach works. You get the picture.

    On the energy front, when we are relying on the central heating (morning only, or evenings in very cold weather) the thermostat is at 15 deg C. If we feel cold we sit in front of the wood burner which makes for very sociable winter evenings.

    None of this strikes me as a big hardship. What would be hard to take would be wasting money on brand name products unnecessarily to keep some advertising exec in work!


  9. @Monevator, agreed on the sinking fund, one rule of thumb for that is to set aside about 1% of the house cost, which would probably work out about £100 a month. Those nice guys from NS&I are looking after a cash stash for that sort of thing – that way my sinking fund doesn’t quietly die in the night due to inflation.

    The iPhone article confused the hell out of me. When I looked at mobile data for Mrs E, who could use some sort of mobile broadband for her writing work, the running costs were outrageously high, I couldn’t see any possibility to amortize what is fundamentally a service cost? Appreciated you pay over the odds initially to pay for the handset, but data transmission via mobile broadband seems to be charged at usurous rates.


  10. I can only reflect on my own experience, but would appreciate your view!

    When you first started with the firm your with was it a fantastic place to work at staffed with wonderful people?

    Mine was and it’s been such a shame to see these money making managers screw up a profitable firm that was a joy to work for into an unprofitable firm that is hell on earth to work for!


  11. @Greg I hope to save too from the pension, but that’s largely because of the extra savings that will pay an income to roughly match it. I have 24 years in mine, a similar accrued number of years 😉

    @Jay Yes, the experience was like yours. I applied to join the Firm because it was a leading research and development facility for The Firm. Two things changed over the intervening years. On was that technical developments in the nature of The Firm’s business meant it needed to do a lot less fundamental innovation, and after the 1990s it really began to buy in technical innovation. In the early years I learned so much from people who were in some cases leading lights in their field, with strings of fundamental research publications to their name.

    That change, though regrettable for me and job satisfaction, was fair enough. A business that doesn’t adapt to changes in its setting is doomed. In that respect it sounds differnt from your experience, where it appears the strategy has gone bad.

    However, the issue I really have with work is the nasty nature of the performance management system, which wrings any residual joy and job satisfaction from work, turning it into a revolting paint-by-numbers operation, where you have to clock up irrelevant points to avoid being hammered in the levelling bunfight. IMO metrics are buggering up the nature of a lot of knowledge work nowadays by turning it into a Taylorist nightmare.


  12. With over 23 years in the University system I saw it go from a poorly paid job with all the expected perks, to a half-reasonably paid job with all the perks gone. Students became customers, lecturers became teachers, and we entered an age of litigation where the weaker (rich-parented) student actually tries to sue for “not being taught properly”. At the beginning of my stint the 3 grade A “A-level” students could still ask you questions that made you think – at the end of the 23 years an A* student was about “O-level” standard from my time. If this downward trend continues we will end up with a country full of young people with a degree and no chance of getting a job as they don’t actually know any of the basics. What am I saying – we’re already there 😦


  13. Your list of exclusions is very notable Ermine!

    I can see why as you are nearing FI or have such a strong urge to pull the plug as quickly as possible then forgoing the holidays would be easy for a few years.

    I’ll have to see about the mobile phone thing though… I am sure I can wangle a cheap £10/month and a £50 phone that does just as much as the latest iThingies.

    Obviously, I still have a mortgage 😦
    I’ll be overpaying some this year though, what with “the markets” still a bit frothy. Luckily we don’t have any other debt to service so that is one down, six to go from your list 🙂


  14. @TFS the holidays were indeed the hardest element to forego while I was still working. In hindsight I probably made a bad call there. I’m talking weekends on the coast, not anything involving air travel.

    One of the costs I did not forego was decent red wine. One could probably easily make the case I drank too much over those years, but I did manage to rack it back after leaving.

    There’s nothing wrong with having a mortgage, indeed you have probably started paying down your mortgage at an earlier stage of life than me 😉

    I did buy an iPod because I had to develop a website and knew zip about mobile optimisation (and Apple seemed the most oddball browser). So I clocked a fail on point 7, although it didn’t cost me anything.

    I overestimated what I would spend after leaving however. The joy of owning my own time and pursuing my own interests is mar more life-enhancing that buying consumer goods. However, it would be rude not to acknowledge a lot of good old-fashioned luck – the markets were extremely kind to me in the crawl out from 2009-2012 although this money is not available to me at the moment, and they were kind to me in my ISA as I managed to diversify across sectors and geography. That was not me being clever – it was opportunities presented to me that I didn’t walk away from. Perhaps it was part of that QE being turned into over-inflated assets; of course what goes up can also come down come the day of reckoning…


  15. Oh! Got the wrong end of the stick about the holidays… In that case then that is living a pretty spartan life. I’m sure it’s all been worth it looking back though?

    I like a glass of red as well but I probably drink paint stripper compared to what you are used to then 🙂

    Web developing as well eh, another string to the bow! Ah the joys of apple! Better go and read that post now as well, sounds like a fun potential rant?!

    Hearing you on that one, good timing indeed and it’s probably a good thing you are underspending just in case that “imminent” crash happens in the next couple of years.


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