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URL:  http://boards.fool.com/my-memory-of-paul-terhorsts-daily-figure-was-50-11818931.aspx

Subject:  Re: How low can you go? Date:  1/16/2000  6:37 PM
Author:  hocus Number:  2271 of 757570

My memory of Paul Terhorst's daily figure was $50 per day, or $18,000 per year (1986).

You are exactly right--it's the Terhorst $50 a day rule. If you saved only enough for hocus' $25 a day rule, the phrase "how low can you go" might take on new meaning when you went to your boss to beg for your job back after running out of money six months into the first year of retirement.

Here's some more detail on the real $50 a day rule, pulled from the actual book (not the flawed memory!). Terhorst breaks the $1,500 per month of spending money into seven categories: housing (200); transportation (50); food and drink (300); apparel (100); entertainment (500); health care (150); and other (200). The numbers are derived by making adjustments (to reflect spending cuts that he considers reasonable) from a $2,552 per month budget that represents the median per month spending (after taxes, savings, and retirement contributions) of higher-income Americans (top quintile) in 1982/83. He notes that the average American household spent only $1,440 per month (after taxes, saving, and retirement) in 1982/83. So the $50 a day rule allowed for more spending than the average American needed at that time.

He argues that by selling the house and expensive car, you do away with large amounts of "infrastructure spending," allowing for generous spending on food and entertainment (his favorite categories). Since the $50 a day rule allows only $250 a month for housing and transportation, "you have to move to Tennessee or Georgia or one of the other places [described, and] you also have to live with only a cheap station car." His personal budget was a bit higher than called for under the $50 a day rule, at $22,000. The extra $4,000 went to air fares.




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