Good for you!! But keep a credit card. You will need it for travel, car rental, etc. And possibly for an utterly unforseen emergency. It also may get dicey to downshift from spending $6200 a month to half that. You just might need a bit of wiggle room to start. Realistically.

Freeze the card in a block of ice. Defrost it if ever absolutely necessary.

My only other thought is to consider carefully whether 10, 20, 30 years from now what you think is 'enough' will really be enough. Then. Not just college or whatever for the kids, but the effect of inflation on your retirement egg that you say you have covered. I'm 55 this year and laugh when I pull out retirement plans I made 15 years ago. I haven't gone all spendy - I am still as frugal as ever - but that inflation over a couple decades can be a real plan killer!

first thing you will have to adjust to is not going on such lavish vacations. once you get your budget down after the move, you should be fine. with no mortgage, and no other real bills, you should easily be able to live off 30-40k a year.

as stated above, keep the Mastercard for emergencies, but i would probably close the LOC. if you were to need that much money later you would not be able to pay it back. it would be better to take out a mortgage on your home than to use a LOC that is twice what you make in a year, IF they even allow you to use it. many companies will close close an unused LOC after a while, or at minimum require a full credit review before allowing you use it. if they did that, then when they found you now had 1/10th the income, they would close or drastically reduce the LOC.

This is very possible! My husband and I do not use credit cards unless we have the money. We will use the card to buy something online or make reservations. We pay it off when we get the bill. I agree that you need to keep a credit card. We mainly use our bank card (just takes out of the bank account, it isn't a credit card) for everything however if there is an emergency we may not have enough money in our checking account and therefore we keep ONE credit card for things like that.

We do have a mortgage and school loans we are still paying off. We could had bought out our car outright but we decided we wanted to have a large savings in case of an emergency.

So we haven't added any new debts, we have just been paying off our old ones. We are 29 and 30. We bought a house for half the amount that we could afford, in case we have kids and someone stays home or if we lose our jobs. If we don't have any money in our checking, we don't buy anything. That is that. We still do buy stuff and enjoy things though. We canceled cable when we decided we wanted to buy a large lcd tv. We saved that extra money from the cable and decided the tv would be our christmas present and that was IT, we did not buy anything for eachother for christmas. We did alot of research and found the best tv for the money with the features we wanted and then waited till the tv went on sale (at the end of Jan) then we went and bought it. I even did research on the energy consumption of the tv and since it was higher than the old tv, we decided not to turn on the stereo sound unless we were watching a movie. This made the energy consumption the same as our old, small tv.

So, I say, you can do it! Just be WISE with your money. We don't go on vacations like you do :( but alot of that has to do with our two dogs and our work. After we pay off our school loans we are going to save for a small rv or something. Also, learn to wait and save. You don't need it NOW, immediate gratification is something that you need to "get over" sort off. We never spend any money without researching what we are buying first. This makes you think a bit about what you are buying and why.

We also save for retirement as well as a normal money market and savings account. All our friends are creating more debt and it really drives us crazy! We just don't get it. We are more interested in paying off the debt we have and then maintaining a debt free way of life.
that would be great!

I also wanted to say it is easier to go from little money to more money. You are going the opposite so you will have to be careful.

I would get rid of all but one cell phone (you can share) don't get cable or expensive internet. You can always get this later when you figure out your expenses. Most of these places make you sign a contract so you can't get rid of them once you have them. Start with the bare essentials and see how much money you have left each month.

If we didn't have a mortgage or school loans our monthly expenses would be like 200 for gas/electric, 10 for phone, 25 for cell phones, 2 for long distance, 100 for fun, 200 for food and supplies and our big splurge ..40 dollars for cable internet service.
= about 600.
During the summer this is far less because entertainment is cheap (our back yard!) and gas and electric charges are about 100 because we don't have AC.
I can't even imagine how to spend 6200 a month!

I think it's all in your attitude and habits. You've shown that you can take care of business. I strongly believe you'll carry over that attitude to a lower income. We are debt free (except for a modest mortgage) and use plastic all of the time. For the ease of it and to get the airline miles. We don't rack up debt just because it is plastic. The plastic also helps us track things better since we have a business in the home.

I have a good friend who uses nothing but cash and she is always lamenting that she goes through it, but doesn't know where it goes. She would have to go through a large bag of receipts to track herself. I quickly know if I've been to the grocery store 10 times in a month and need to better focus my meal planning. We actually went to plastic because I had bad habits with cash. Now, I just zip the card at the gas station and go, rather than paying inside, while grabbing a cup of coffee and a candy bar at the same time. Sounds strange, but I spend less with the cards.

I would keep the cards and use them a few times a year to keep your credit good. Plastic isn't the enemy, our habits are the bad part.

Gloria

After the progress you have made, do you just not trust yourselves?
Keep your card, unless:
You never plan on traveling (ever imagine a health problem outside of your country?, renting a car, renting a hotel room?)
You never plan on buying anything online
You are absolutely positive that you have planned for every contingency.

Good luck!

Congratulations pelican!

I agree with everyone about not cancelling the cards and also your LOC. Life hands you all kinds of unexpected things.

I've found the easiest way to save money is to not go shopping. Don't go to the mall/shopping center unless you need something. Keep a list of what you need, then don't get anything else. Don't treat going shopping as an "outing" - just a job.

Don't watch TV shows about the latest products, etc. Stay away from "art fairs". If it's not in front of you, you will not be tempted.

I don't like monthly fees and contracts, so I bought one of those "pay-as-you-go" cell phones, It's great. I can use it when I need it and keep it home the rest of the time. If you don't need it - even better.

Keep your hobbies inexpensive. Growing vegetables, cooking, canning, baking bread - these are great, useful and rewarding hobbies. So is walking, jogging, bicycling, all the free outdoor activities.

Yes, it can be done. Your major hurdle overcome is the new residence sans mortgage. Lavish vacations might have to take a back seat. But, like other posters have said, keep the credit cards since things like travel or an unexpected expense are not easily taken care of without them. And raising children certainly does not come without cost!

I retired, at age 55, sold my house in Maryland (and wasn't facing the prospect of having to buy another) and relocated to the paid for family home to become a live in caregiver for my mother. Both of us had zero debt to begin with, but put away the credit cards and went on a cash only basis. Didn't have to, but looked at it as an experiment. And it works.

If you're not adverse to list making - keep a notebook of every penny spent on anything no matter how trivial for a couple of months. It's an eye opener.

Good luck. You sound like you're good managers with good financial grounding and should be able to do just fine.

We each have 1 credit card that we use for gas and groceries and I have a 2nd credit card just for online and telephone purchases. We use the cards over cash for convenience but we pay off in the full the balances each month.

It's quite a change to go from $300,000/yr to $40,000/yr. It will mean a definite lifestyle change for your whole family. With a family of four you should expect that there will not be many dinners out, Christmas presents will be fewer and less expensive, and vacations will be shorter and closer to home. You can do it but you really need to be realistic about how much your willing to give up. As another poster said it's much easier to change to living on a higher income than a lower income. It's tough to make the change to living on a lower income even when it's forced by job loss etc. Just make sure you really discuss what your willing to live with and without.

pelican, you and your wife should be very proud of yourself. Most in your age group don't think like you. I am sure you will do fine.

pelican, owning a credit card does not put you in debt. That is entirely caused by spending more than you make. If you are smart enough to figure out how to earn 300K then you should be smart enough to figure out how to live within the smaller income. I find it distressing that you have to attempt to force yourself to live within your means by getting rid of a credit card. Making sure this is doable before you do it is critical.

Thanks for all your advise and encouragement.

We just see all the people who live paycheck to paycheck and wonder what happened to them that they couldn't see what a state they were putting themselves into. We don't want to fall into the same trap. We have set ourselves up nicely and don't want to fail.

You didn't say when this lifestyle change is going to happen.
If it is a few months down the road I would "pratice" now
Do the numbers and see how much you will atually be "bringing home" and live on that amount. Going from $300k to $40k is going to be a major lifestyle change. It will be much easier to ease yourself into less spending than going cold turkey. Now you are able to do things ie: trips, shopping etc without thinking.
Moving to a new area and a new home is stressful enough without adding the loss of the comforts you are use to.

going from 300k to 30-40k? That is not only a lifestyle adjustment, but a bigtime risk, no matter how secure you think you are finanacially..You and your wife are young,you have children, and just from experience, 30-4ok will disapppear much faster then you can imagine..No mortgage debt is great, BUT housing still has costs.Property taxes,utility bills,upkeep costs,etc will chew up a significant amount of 30-40k..Add in grocery bills,fuel costs,phone bills,etc and you get the picture..
As someone noted ,try it while your income is higher to see if it can be done, best of luck

If it is a few months down the road I would "practice" now
Do the numbers and see how much you will actually be "bringing home" and live on that amount.
That's a great idea.

No mortgage debt is great, BUT housing still has costs.Property taxes,utility bills,upkeep costs,etc will chew up a significant amount of 30-40k
So true. I was shocked to see the amount of property taxes in other parts of the country, and even my state. Utilities, and insurance can vary widely as well.

Have you researched the 'given' expenses of taxes and insurance?

Where are you moving 'from' and 'to'? From mild temps to extreme? Will utility consumption likely be different? More? less?

We want to cancel our credit cards, cancel our LOC.
I'd think not a good thing from the standpoint of your credit rating, which often drives the cost of home and auto insurance. One should always try to keep their credit score in mind, if possible.

Lock it away, if need be...or like someone else said, freeze it in a block of ice, if you don't trust yourselves. I for one, can carry cards and not use them, just because they are handy. I, like so many others, only buy on a card what can be paid off that month.

30-40K will disappear much faster then you can imagine...particularly since it takes $74,400 (after taxes I assume) now. Is it possible to do a break down of that amount after deducting vacations?

We are very practical people. We don't have a cell phone because we don't need it. We cancel our TV programing in the summer because we should be outside. We don't shop at Walmart because we don't need "stuff". We buy solid wood furniture instead of MDF junk. We own a Toyota Echo and a Dodge Caravan because they are practical. We buy the best quality items that we can afford so that they last longer.
Was a good part of that $74,400 going into mortgage,an expense you won't have after the move? And will your taxes and insurance maybe be lower? Higher?

You should know what expenses you have that are givens and how much just went 'away'.

Will you be having a good health care plan once you move? Big premiums? copays? Expenses you did not have b4? Dental care? That could be expensive for a family.

Sue

Of course it's possible.

My husband and I have been married over 30 years. DH's income is about $50,000/year. I'm a SAHM, and only work a 'little' parttime job, but have some rather lucrative hobbies that have allowed me to make more money at home, than I ever did teaching.

We live in one of the highest cost of living areas of the country and manage quite well.

Now, understand, we don't drink or smoke. Neither of us are fashion plates. We entertain simply. We do love to travel, but have found a way to do it without spending our own money. We're never going to live 'the life of Riley' but I believe we've got our retirement figured so that we'll be relatively comfortable. Our house has been paid off for over 30 years. Both our vehicles (DH's truck, and my 8 month old FJ Cruiser) are paid off. We have no debt of any kind.

We do keep one credit card, simply because it's a convenience if we want to rent a car. Or for ordering online, or renewing our prescriptions (which we have to do mail order). But, like you, we pay it off each month--in over 20 years of having this card, the company has never collected a single penny of interest from us.

You're going to have to be very frugal. You will be counting pennies, but it definitely can be done. We buy everything with cash or checks. It's a lot more realistic, IMO, than spending money you don't have, and hoping it will come in before you have a family emergency. And, keep in mind that a creative, hardworking person can ALWAYS add extra $$$ to the family income. It's not that hard to find ways to make extra money. Even though I don't work at a 'real' job, it's a rare year that I don't pick up an extra $10,000-30,000 for my family. You just have to figure out how to make your own talents and abilities pay off.

The one area you absolutely MUST splurge on, though--and I'm sure you're aware of this--is healthcare and health insurance. Vital not to cut corners there.

Good luck.

Fortunately for their family, Pelican lives in Canada - much simpler expense levels relative to health coverage.

o j

I have a very affluent lifestyle. For me, counting pennies for grocery bills and not going on European vacations is NOT what would bother me about the change in the income level. For me, the most difficult part of adapting from an afluent lifestyle to a relative modest lifestyle would be that I could not afford the kind of children's education I want to provide for my kids. For my family, we can easily afford an excellent education at a private school. We live in an area where the public schools are in crisis and many middle class families send their kids to private schools scraping their last dollar together.

I am not sure if you have looked into what the public schools are like where you will move to. In very small and rural towns of America, public high schools can be dismal and families will send their kids to boarding schools when/if they can afford it at your income level. This may not apply to you at all.

What about college funds? I know that Canada has lower tuition than US but you will have to plan for this from your modest income. (you may have it already....)
I think you will be fine in regards to debt. You are used to living below your means already. It looks as if you never lived to your maximum income level any rate. BTW, do not burn all your bridges. If the change is NOT what you wanted, do you have a way to come back? Someone we know moved back 1000 miles when the family thing was NOT what they wanted after all.

Life is about changes and willingness for those changes to happen to you for the better future. I am really excited for you and your family and I wish you the best.

I love credit cards! Use "their" money for the term of the billing cycle and then pay the bill in full WITH ONE CHECK.

The way I see it, I already AM paying "cash" to get through a month.

The key, I've found, is to live comfortably below your means. Can you learn to live monthly on the budget dictated by an annual income of $30-40K? Only YOU can answer the question.

Could I? Yup.

I know that we can do it, we never would have made the plunge if we never thought that we could.

My last day of work here will be June 01, 2007.

I have been working at the same job for 14.5 years now. My mind is turning to jello doing the same thing for so long. Sure, I have done things to mix it up a bit and make it more interesting, but it has not worked for long.

We have no family where we live. We want our kids to grow up knowing their cousins, aunts and uncles, and especially grandparents. Occasional visits are not fulfilling this need.

My dad's dad, my grandfather, died of cancer at age 52.
My dad died of cancer and heart attack at 57.
I am 38.

I told my boss, two weeks ago when I quit, that I would not stay for one million dollars a year. He understands my longing to be closer to family, and I am leaving on good terms.

We are choosing to be rich with family.

Thanks for all your advise.

the 30-40k you speak of to live on, is this net or gross? because i can't even fathom living on that amount if it is gross/

Gross.

We are choosing to raise our own kids until they go to school. After being home for 2.75 years, my wife is getting the urge to get out of the house, so it is my turn to be Mr Mom.

I will do what I have to keep a roof over our heads and food on the table, even if I have to work at an odd job or two.

pelican, congrats on your new role..It is one i have occupied for nearly 7 years!!! You will experience the whole range of emotions from desperation/aggravation to elation and joy...Best of luck to you!!!!!!!!!

I congratulate you! It's easy to get caught up in the whirlwind of the consumer economy, the lures are everywhere. And it's tempting!

You really have to be single-minded and continually ask yourself "do I want it or need it?". Either is perfectly fine, but if it's a question of "want"... well, then how much do you desire it? and what will you GIVE UP to balance the desired item's cost? :)

People think I'm NUTS because I've never owned a dryer, dishwasher, microwave, or a new car. I don't mind hanging the laundry, washing the dishes and watching the birds while I do both. I don't mind fussing around with firewood, sweeping up "the mess". As long as the car starts and does what it's supposed to do, I'm FINE with it; beats WALKIN'!

The best part of taming the "wants and needs" is knowing that you can take a day off, stay home when you don't feel well, and not lose sleep over it. Being acquisitive at the expense of life's simpler pleasures is not all it's cracked up to be.

Good for you!

I think what you are doing is great. Your kids are fortunate to have fiscally responsible parents.

Here is a link that could be useful.

The Dollar Stretcher
www.stretcher.com

Congratulations on making the right choice for you and your family. Your kids will be truly blessed!

If you choose a prepaid credit card, that money has been paid to the credit card co., and they may or may not compensate you while it lies unused. But if they do, I venture to say that it'll probably be at a low rate of return.

Abd it'll almost surely be interest - which type of income is taxed at the highest marginal rate.

Which is one of the major reasons, among others, that I don't like earning interest

If you keep your current card, you don't pay for the stuff until a few weeks after you took it home - and if you pay in full each month, you pay no interest on the purchase cost while it was sitting on the credit card co's books.

But they wouldn't be, either - for they don't pay the stores for a while after the purchase was made, and the store sends in the account.

It looks as though you possess the inner discipline to manage your credit card well.

And that you have a pretty good handle on the other aspects of managing your money effectively.

An accountant that I know who retired last year with no pension says that part of his procedure is to borrow at 6% (deductible, since he uses the loan for investment) and invest where his return on investment is 12%, part (most?) of it taxed at a low rate.

Good wishes as you set out on this new and useful, if challenging, adventure.

ole joyful

"We are deathly afraid of falling into the "consumer debt trap" that so many fall into."
Silly to be deathly afraid of such an event, I've never seen it happen. One does not "fall" into such a thing, you can make a personal choice to use a card or not.

I think back to my just out of college and grad school days when I lived on next to nothing - and it's amazing how much I spend and "need" today.

But to the cash v. credit question: I don't spend any cash - I put everything on the credit card so I have one big bill. I hate debit cards because I spend too much time trying to balance the check book. Plus, putting everything on the credit card allows me to each 5% (annual) interest on the cash (not a lot - but every penny helps) + get the 1% cash back on the card. I just check the CC balance every few days to see if I'm within my comfort area of monthly expenses.

The point about inflation is a good one. Your $40K income will have the buying power of $20K in 20 years. Make sure you are withdrawing no more than 3-4% annually of your retirement savings and that you are invested sufficiently in equities, not just bonds, to keep your buying power growing.

Good luck!

Keep the credit card. Sometimes it just makes life so much easier, such as when trying to purchase something online. Just make sure that you have the cash in the bank to cover the expense & you won't fall into the trap you're worried about. It's also good to have one in case of emergencies.

The change you're speaking of is huge. Have you tried doing it reality yet? Do you know what your net paycheck would be? I could estimate it pretty closely if you were in America. I know nothing of Canada's tax structure, though.

I would calculate how much net income you'll have & then actually try living off of that. Once your income drops, you won't have a chance to save much. Is your savings adequate to take care of emergencies like expensive car repairs? Will you be renting your house or buying? If you're buying will you have enough savings to cover household repairs?

What about college for your kids? Will you need to save for & pay for that or will they be able to get assistance? What about retirement funds for your & your wife? Again, I don't know how this works in Canada.

I would actually try what you're proposing because financial issues can cause a huge stress on a marriage. Trust me, I've been there. I'm not talking about the stress where there's actually plenty of money & one person is being a bit wasteful about some things & spending a little too much. I'm talking about the stress that comes when you've cut out everything like cable, cell, etc. & you have an electric bill or mortgage payment due & actually don't have the money in the bank to pay them on a timely basis.

Also, are you both prepared for the change in your roles? Is your wife prepared to be the sole earner for the family? This could also add a lot of stress while you both adjust to these roles.

You're proposing living on very little money for an entire family. You may have plenty of savings & know that you'll be able to dip into it for emergencies. If so, how long will your savings last?

Best wishes!

In Canada, a "wealthy" person can make $40,000.00 annual income before becoming tax-liable (it was about $27,000. last year: our current government is wealthy-people-friendly).

Proviso: must have only one kind of income, dividends on Canadian stocks.

If the "taxpayer" has dependents with low income, or makes substantial charitable/political deductions, or over 3% of net income in eligible medical costs, the tax-free income level can be increased.

If one has other types of income, the tax benefits mentioned will still work ... but one won't be able to avoid tax entirely.

Good wishes as you make your plans.

ole joyful

When I worked, I paid off the CCs each month, and continued to do so after taking early retirement.
I still use the plastic whenever I can, so I don't have to carry around more that a few dollars or a checkbook. This has two other benefits: I think 'Do I really need/want this' before buying and I can look at past CC statements to see where the money is going (I have several years of data in Quicken to help me do this).
The critical part of this is Always Pay Off The Entire Balance Each And Every Month.
I view a credit card as a tool. Used carefully, it makes my life easier, though like a chain saw (one of my favorite tools), a credit card can cost you an arm and a leg if used carelessly. (Sorry if this sounds preachy, I'm practicing for a 'facts of life' discussion with my DD)

My husband and I have lived off of cash only for the last 10 years.We pay all bills by money order,and didnt own a credit card.
Now we have one,but never use it,it is only for emergencies.
Only bad thing is alot of places want a credit card number for things (even blcokbuster,to get an account with them)and you cant order stuff online without one.
Yet,those are small unimportant things,so you should be able to do it. We have,and it is nice having credit card debt.

I am debt free and frugal. I carry one credit card, mastercard, and pay for everything with it. I pay it off in full every month and the card has no annual fee. It is so much easier (and safer) IMO to pay with a credit card than cash. Purchases are posted on the online account within a day or two, so the paper trail is very easy to monitor. Should you decide to return something, it is credited back to the account very quickly. And, as others have mentioned, travel or online purchases are impossible without it. In fact, I rarely have cash in my pocket at all these days--I just paid for a $.50 newspaper with the credit card. No one minds around here.

Thanks for all your input.

I have decided that it would be prudent to keep the credit card, and cancel the LOC. I am going to switch to a no-fee card though. We have stayed in our budget the past 30 days, so I don't think that it is going to be a hardship. Plus, I have come up with a job that I can do from home, with relativly flexable hours, for extra money.

Hi again pelican,

I have developed an assumption that you are not only fairly aware, financially, but also quite able to impose a regime on yourself (and, with their agreement, your family) ... and stick to it.

If you feel fairly certain that such is true, then it might be wise to keep your LOC, as well, for you might need it in case of an emergency.

If you suffer a fairly substantial emergency and put it on the "credit" (i.e. "debt") card, but are unable to pay in full over a very short period, those high interest rates will murder you.

If you keep the LOC, you can call on that to pay the credit card in the following month, thus avoiding the credit card's high rates on extended balances, and pay it off at lower rates that the LOC carries.

And that as quickly as possible, for on a slim income, you don't need the added burden of taking food out of your mouth later to pay accrued interest which results from today's foolishness.

I am not in favour of people using credit cards or LOCs for frivolous things - and certainly not when they are living on a restricted income.

Especially would that be true if that restricted income were a recently instituted situation.

I think, however, that you are smart enough - plus have enough will power - to restrict yourself from such frivolity.

If you don't - I guarantee that you'll regret it later.

I am pleased that you are instituting your plan now - it will get you into the swing of that regime.

Plus the extra income now, salted away, will give you some maneuvering room as you get squared away into the new system.

And I hope that you can hang on to most of it. If you do, I guarantee that you'll be pleased that you did, a year or so from now.

Good wishes to you and yours as you plan, look forward to and now have begun instituting this new adventure.

ole joyful

Hey Pelican.

Happy to hear the first 30 day 'test run' went well. Good decision to retain some acccess to money just in case of emergency. Never know what life will bring.

If you haven't read it, I'd recommend an excellent book called "Your Money or Your Life". It will help solidify what you are already thinking and doing.

(and need I say you will of course get your hands on it at the library rather than the bookstore..)

We had the problem of deciding if we could live on Social Security payments as that would be our only income. should we work as long as possible? We "praciticed" living on the SS amount for two years before we made the jump to retirment. At first it was hard, very hard, and then as we got used to it, it became easier and easier. Then we retired!!!! Now the SS payment with a small return from our IRAs is enough to live well. Not fancy, but comfortablly.

We live on hubby's pension and SS and my SS goes into our "Piggy Bank" (savings, CD's) We have a hobby of working with wood, and in turn sell our creations on Ebay, supplementing that income and giving us "splurge cash" for vacations, lobsters, and gifting on holidays...
This keeps our minds and bodies active and provides a small amount of cash to play with.

Our home is very close to being paid off, and we are thinking of actually selling it and downsizing to a high end mfg. home. We already have enough property and if we do that, we will be totally debt free. Plus it will cost less to heat and ac and taxes will be far less aaaaand we will end up with a sizable nest egg to boot.
The only real travel we would like to do is a trip to Alaska.. and that is already in the planning stages and we plan to pay for it with money from Ebay.

I think it just depends on what is important to you. For us, worldly things are not important and we would never even consider something extravagant such as a Lexus or Infinity because we have found that our Saturn wagon gets us where we wish to to and safely and comfortably and it cost us about 1/4 of what a Lexus with the same amenities would have. We much prefer to concentrate on our everlasting life and invest in that.

All in all, we live on about $2000 per month and are very comfortable.

Living on cash alone wouldn't be hard, my folks never had a credit card and they managed. What I'm thinking with your situation is not so much the Cash, but the Lifestyle.

You're making $300K and going to $30K. Did you used to buy $100 running shoes for your kids? Now you're looking at $10 buck shoes. It's a percentage downgrade. OK, so your usual 'at home dinner party' would run $500, could you feed 10 people on $50?

I don't really have a point here except that what you're used to is going to be cut way down, and that might take a couple of years to get used to.

Hello again, Pelican,

Well, it's about two months into the new adventure.

How are things going?

Are you feeling rather stressed - or relieved, that it seems to be working fairly well?

By the way - what security backs your credit card?

Mine is fully secured by mutual fund and stock certificates, so at 6% I get about the lowest available rate. But they'll only lend me $5,000. on $10,000. of underlying asset - and I don't want clients borrowing up near their credit limit, in case the market takes a substantial downturn ... if so, the lender wants more dollars (or collateral) right away. I don't like margin calls - have never had one (but haven't borrowed much, either).

I hope at you're assessing that the experiment/adventure seems doable.

As I spoke of earlier, if you have substantial Canadian stocks outside of an RRSP, if those dividends are your sole source of income, you have nil income tax liability until the amounts come to upward of $40,000. - 50,000. annually, as of 2006. With other income sources as well, the benefit still applies, but in most cases you don't avoid income tax entirely: I can show about a couple that might apply to you (plus others to mainly seniors).

Did you read where I referred elsewhere to the writings of a guy Derek Foster who retired at 34, wrote a book, "STOP Working - Here's How You Can", which I borrowed from London City Library.

He's written articles in "Canadian MoneySaver" magazine, as well, beginning about 2005, I think. I can look up which issues, if you wish - but most libraries carry outdated issues for only about a year or 18 mos., I think.
In London, they have a big clearance annually so one could buy some at low price, and they carry them in several branches.

Good wishes as you move forward with your plans.

If you have questions, there are a number of knowledgeable people here who are generous with advice - at an unbeatable billing level!

ole joyful

If you have done the same thing for 14 years you probably have a decent nest egg if that job pays 300,000 per year. I think there is a world of differen living on 30000 knowing you have 500000 in the bank and living on 30000 knowing there is no more money until the next check is earned. The former is like camping when you have a nice home to return to, it can be fun. The latter is like being one step away from being homeless and knowing there is no cushion

As fot the realities, living paycheck to paycheck is that for people in many parts of North America. Depends how expensive where you live is. If you do not have to factor in or live where the following are cheap it is a lot easier, These costs vary a lot by area. a mortgage, property taxes, energy related utilities (whose rates do vary), car insurance as well as food costs. Living in a cheap area it is possible to live well on 40k. In a big city or near it I do not believe it is as easy.

In the suburbs of NY it would be very difficult if you also had housing costs. You would live paycheck to paycheck simply because there would not be enough money no matter how disciplined you were

Glad you decided to keep the credit cards. There is just no way to rent a car otherwise. If the LOC has a good rate I would keep it too nothing says you have to use it. If it has an annual fee cancel it. We have been paying our cards in full every month. I always have, never ever paid interest (to the extent the check got there a day late I always have the fees waived) that I can remember. DH was instructed from the day we got married 15 years ago not to even think of carrying a balance and he has been good. He self employed and the credit card has been a fabulous cash management tool plus the rebate or miles you get are great. In our case we have taken a family of 5 to Jamaica, gone to Hawaii and a Florida using his miles. Of course it is paid off in full. I do agree with the poster that said they tend to lose track of cash faster. I know I do that and will often spend it (we are not currently at a stage where we have to worry about every penny) without thinking. However, when I am down to only a little cash (because I have not gone to the bank not because our account is low) I tend to conserve it a little more because I do not have time to go to the bank and because I feel ridiculous charging 1.50 pack of gum. It was recently explained to me that for certiab credit cards merchants are charged a service fee in addition to a percentage

One thing that I did when we were house poor many years ago, but I had lots of time. I would often buy things and then return them because I found somehting better or just did not love them. I called this bulemic shopping! It was unintentional but it was a great way of getting the thrill of shopping without actually having to pay. My monthly credit card statement often had more things in the return column than the buy.

I do agree with the advice to stay out of stores in general. you do not sound like someone who bought 100 sneakers even when you can afford them so I think you will do just fine with payless.

I personally think it will get more difficult a year from now. I think at first the thrill and novelty of sticking to a budget will be a sort of game. Beating your budget will be fun. Then the joy of living near family. However after a certain time, while some habits will become second nature (I rarely spend more than 20 on a non work item of clothing and it is not because I cannot afford it, I just think it is a waste) it will sometimes get tedious having to worry about the cost of items, never splurging.

I think your 40s are a point when you want to be established and financially secure and occassionally treat yourself or your children to small luxuries. What that is differs from person to person.

I know that as I have matured, I no longer get as crazy about wasting or saving 20 as I would have a few years ago. For example, when we got married I returned everything that I did not absolutely love. When we had kids I did the same thing with gift items they received, especially if it was an expensive useless item, I would exchane it for something practical. Same for birthday parties.

Now I rarely can be bothered returning items that do not have receipts, whether from kids birthday parties (we recently had a party and whatever my kids do not want I will donate) or other events, I just cannot be bothered. Just an example, you will find differnet ways that you may want to become less thrifty

well stated saphire...Living on a fixed income with a bankroll behind it, is entirely different then living paycheck to paycheck, and this is not a criticism of the OP, just a fact...And the whole idea of going from 300k to 30k, to me, is mindnumbing..I am fairly frugal and conservative,but i could never make that lifestyle change..There is one thing not spending 100 bucks on footwear, but another spending 10 bucks on footwear..You get what you pay for..best of luck to the OP

Pelican,

In my post above, I asked " ... what security backs your credit card?".

Error. Sorry about that.

"What security backs your Line of Credit?", is what I meant.

Quite likely you realized what I meant.

As I stated earlier, I'm in favour of keeping the Line of Credit ... on conditrion that you have the will power not to abuse it (as with the credit card).

I hope that the experiment is going well.

I think that the poster above makes a good point in suggesting that it may get a bit tiresome, a year or two down the road.

Persevere through the difficult times - I hope that they may be rather short.

ole joyful

Sorry I have not responded for a long time to your questions or comments. Between selling our home, looking for a new home, winding down my job, and one last vacation to Italy, I have not had any time to check back in.

Joyfulguy, my $70,000 line of credit is unsecured. The bank would have been more than happy to use my house as collateral, but to me that felt like a mortgage, and I enjoy being mortgage free. For this reason, I dont doubt that the bank will quickly dial back my limit if they find out that I will be unemployed after June 1st. I donÂt use a margin account for my investments either. If I canÂt pay for it, then I donÂt buy it. This rule keeps me out of trouble. I am going to look for Derek Fosters book, after all, I will have a lot of time on my hands to read. Thanks for the tips.

We are looking at buying a house that will cost $500/month for property taxes and heating. My wife landed a job that will bring home around $1800/month. Even in a "worse case scenerio" we should be able to scrape by. Saphire, you are right that having a sizable amount of money in the bank makes it easier.

I am going from $300,000 to $30,000, but I never spent all of the $300,000, I have socked a lot away. We really are going from $80,000 to $30,000. If I have to, I will get a job working around my wifeÂs job, for extra money. Only if I have to.

The advise about the "novelty" wearing thin is well taken. I have not given that much thought in the past, but now that I recognize it as potential hurdle to overcome, I can prepare for it.

Thanks for all the advise. I have truly learned something from all your posts.

pelican,

Thanks for the update.

I'm glad that you had a good holiday.

As I consider your situation, I remember a couplet that my Grandma told us,

"A remarkable bird is the pelican,

His mouth can hold more than his belli-can".

Good wishes as you set forth on your new adventure.

I hope that you'll visit to share our impressions, observations and experiences as you go.

ole joyful

One more thing about using the credit cards:

Credit cards are much better protection against fraud and identity theft than debit cards. Particularly these days, when clever thieves are stealing the CC#s right out of store card-swiping machines.

Many banks guarantee zero loss on CC theft. Debit cards, OTOH, are much more difficult to secure and thus get reimbursed.

Our debit card # was stolen a couple of years ago from a restaurant (one of our favorites, I should add, that we had gone to for years without a problem). Within 24 hours $1200 left the account!

We got it back, our bank has a zero dollar fraud limit - BUT it took four months to get the funds reimbursed to us.

Now I only use the debit card at certain stores. That was a nasty lesson for us! Credit cards are frankly, much safer to use.

True

Also I recently paid for ds karate lessons in cash (I ran out of checks), they gave me one of those flimsy message type receipts which I have no idea where I put. I just got billed again for it, I guess they did not enter it on their computer system. So now they could ask me to prove I paid, how do you do that with cash. With credit cards it is easy

When one deals in cash, getting receipts (and holding on to them) makes keeping track of what's going on much easier.

Otherwise, it's,

"*Where* did that $22.45 go???",

when you're balancing accounts, a few days later.

And when it relates to three items rather than one, it's more difficult. It's only when you get used to it that you dare leaving balancing to once a week or so.

And most of us need to carry on that record-keeping exercise, in order to guide us in using our money more wisely in future.

Oherwise ... we're pretty well flying blind.

For most of us, that's costly.

ole joyful