Gilberto de Piento's Journal

[RealPerson]

March 2014

6. The restaurants category is high. I'm starting to notice a problem I need to watch out for at restaurants. My friends are mostly couples and I'm generally flying solo. At the end of dinner people usually put in one card per couple and have the waitstaff divide the bill evenly. Between this faulty math and the fact that I don't order more than one drink with dinner and don't order meat I'm usually subsidizing other people's meals. I appreciate being invited but if this happens a couple of times per month it adds up.

This is crazy... My initial reaction would be to say something like: "hey if I'm going to be subsidizing your dates like this, I'm gonna need the girlfriends to come over a night or two per month"

If they aren't close enough friends to say that to, maybe try this: when the bill comes, put cash on the table covering your meal and tip. The waiter can divide the remaining balance for the credit card users. Problem solved.

+1. Although I am married we face the same problem with our friends ordering fancy wines and big steaks. When the bill comes we take it, add up our expenses, and put sufficient cash on the table to cover our food, tax and tip. The other couple often takes the cash and pays the entire bill by CC. The only drawback is I don't get miles and they get double.

I do wonder a little about those friends, because often our friends offer to pay for their extra expenses and that solves the problem also.

[Gilberto de Piento]

Thanks for all the replies!

This is crazy... My initial reaction would be to say something like: "hey if I'm going to be subsidizing your dates like this, I'm gonna need the girlfriends to come over a night or two per month"

If they aren't close enough friends to say that to, maybe try this: when the bill comes, put cash on the table covering your meal and tip. The waiter can divide the remaining balance for the credit card users. Problem solved.

@C40: That's hilarious, I laughed out loud. I agree that cash would solve the problem but I'm trying not to spend any cash right now because cash is a black hole where about $200 per month disappears. If I don't spend any cash I can figure out where it's going and control it. I feel guilty using the card because the credit card company is then taking a cut.

+1. Although I am married we face the same problem with our friends ordering fancy wines and big steaks. When the bill comes we take it, add up our expenses, and put sufficient cash on the table to cover our food, tax and tip. The other couple often takes the cash and pays the entire bill by CC. The only drawback is I don't get miles and they get double.

I do wonder a little about those friends, because often our friends offer to pay for their extra expenses and that solves the problem also.

@RealPerson: It's good to know that someone else has the same problem. My friends at least do acknowledge that I'm getting screwed and then say they will cover things next time or buy me drinks wherever we go next but it never happens. I think I'm going to keep using the card but have the waiter apply only my expenses to it. My friends will understand even if it means it takes slightly longer for the bill to get sorted out.

457b withdrawals, is that equal payments based on irs actuarial tables, because someone here pointed out the percentage was low, like <3% low.

@Toska: I'm not sure I understand your question about actuarial tables. Right now my contribution to my 457b is my entire paycheck because I can only put in what I make or less. I don't want to do less because I want to take as much advantage of the 457b as I can before I get a new job (if that ever happens).

I'm going to watch the Vanguard account next week and the next time it goes over $10,000 I'm withdrawing it. If it doesn't go over $10,000 I'll withdraw it on Friday.

[C40]

This may work for you, depending on how you track and review your spending:

If you carry a phone, you could keep track of your cash spending with the note utility on my phone. I keep a little note file like this:

APRIL:
Lunch date 15
Gas 38
Groceries 27

Then at the end of the month I enter them in my spreadsheet.

[mxlr650]

My friends at least do acknowledge that I'm getting screwed and then say they will cover things next time or buy me drinks wherever we go next but it never happens.

Do they say this every time? If so, then next time someone promises an future opportunity to do justice, you can declare "I will save you guys the trouble of buying drink in the future, and instead I will pay my share from now on". I would recommend cash like C40 mentioned since it keeps the math and the whole process simple.

I wouldn't consider someone as a friend if they pull this shit with me/DW – that would be the last time I would eat out with them. FWIW, for two of us, our monthly restaurant bill is more like $160 currently and we would like to move towards $120/month.

[Gilberto de Piento]

@Toska: For a long time I thought the 457b was the government version of a 401k - that's the way it was described at work. I found out recently that the 457b that I have access to is actually considered "deferred compensation" not a retirement plan. According to the administrators I can withdraw any amount at any time with no penalty (though I will have to pay tax on any withdrawal). I'd like to post a link to the 457b but I'm trying to stay anonymous here and it would reveal where I work.

[Myakka]

Big Goal: Six Figure Net Worth This Year

Take money from CD or Vanguard?
I've been working on filling up my 457b to the $17,500 limit as soon as possible. In order to do this I've been withdrawing from my savings account so that I can put my entire paycheck into the 457b. My account is dangerously low so in order to keep up this strategy I need to either withdraw money from my 5 year CD which has about two years remaining at 2% and a penalty of 180 days interest lost (about $90) or withdraw from my taxable account at Vanguard (currently about $50 below the $10,000 I put into it). I'm leaning towards Vanguard on a day when it's even with what I put in. What do you think?

Hi there Gilberto,

My opinion is that it is probably a bad idea to overextend to reach your goal. Filling up your 457b is a good idea, but somewhere there is a limit to what it makes sense to do in order to reach that goal. Do what you can, but don't kill yourself over it, if you know what I mean?

Probably, it would make better sense to make some more money somehow. Maybe do some more of those websites like you described above OR maybe see if there is someone out there who might pay you to make websites for them.

Good luck with everything,
Myakka

[Gilberto de Piento]

@Myakka: Thanks for your reply. I'm definitely not killing myself over it. I just need a goal to focus on. It's a good goal: within reach but a challenge.

I'm definitely working on making more money. I'm bored with my job anyway and I think I can make more, maybe a lot more, doing the same thing for a different organization (though I might have to give up some quality of life). I've been studying some topics where I think I'm lacking and looking for the right opportunity.

Unfortunately changing jobs is all wrapped up with moving to another state that I have always wanted to live in. I'm not one for making big changes so it's tough to make it happen.

[Gilberto de Piento]

Don't tell my true believer brothers and sisters over at Bogleheads but I successfully "timed the market" this morning. About three months ago I put $10,000 into VTSAX. Thankfully the account has been hovering around that amount. Yesterday it went above $10,000 to $10,097 so I cashed it out this morning for a 0.97% gain over three months.

I'm withdrawing the money from the taxable account because it will allow me to max out my 457b. I can't put the taxable account money directly into the 457b because I can only invest money there that comes out of my paycheck. I'll be living off the taxable account money for the next couple of months while all of my paycheck goes into the 457b. I won't do this again in the future - it's just a one time process to take advantage of my nontaxable space for the year. Now that I know that the 457b can be used for FIRE I'll max that out each year before making any other investments.

For those following the splitting meals with friends issue discussed in earlier posts, I went out with a group this week and was able to just pay for my own meal. I said that I needed only my purchases on my card with no further explanation and it was fine.

[BennKar]

@Toska: For a long time I thought the 457b was the government version of a 401k - that's the way it was described at work. I found out recently that the 457b that I have access to is actually considered "deferred compensation" not a retirement plan. According to the administrators I can withdraw any amount at any time with no penalty (though I will have to pay tax on any withdrawal). I'd like to post a link to the 457b but I'm trying to stay anonymous here and it would reveal where I work.

Not to derail this too much, but my understanding is/was that a 401k plan is usually considered "deferred compensation" as well (Also referred to as "defined contribution" plans). That's why you don't pay taxes on money going into a 401k as well as monies going into a 457b plan. AFAIK, the main difference between the two is the more restrictive rules regarding when you can access the money in the 401k plan without IRS penalties.

[saving-10-years]

Glad to hear that you have found a way to halt the cross-subsidy of your friends' entertainment budget.

[Gilberto de Piento]

On Track to Reach Goal?

Am I on track to meet my goal of having a six figure net worth by the end of 2014? Simply taking the amount of money saved in the most recent month or even over a few months and extrapolating isn't ideal because the monthly numbers fluctuate a lot leading to very different predictions.

The most interesting idea I've come up with for predicting whether or not I'm on track to meet the goal is to fit a linear model.

Here are the data I'm working with:

Code: Select all

date	net_worth
10/1/2013	$68,000.00 
11/1/2013	$68,341.84 
12/1/2013	$72,722.15 
1/1/2014	$74,990.98 
2/1/2014	$74,702.66 
3/1/2014	$78,528.71 
4/1/2014	$81,976.40 

I fit a linear model where net worth is predicted by date. The model predicts a gain of 7.570e+01 or $75.70 per day.

Code: Select all

Call:
lm(formula = net_worth ~ date, data = nw_data)

Residuals:
      1       2       3       4       5       6       7 
  740.5 -1264.3   845.1   767.3 -1867.6  -161.1   940.0 

Coefficients:
              Estimate Std. Error t value Pr(>|t|)    
(Intercept) -1.142e+06  1.256e+05  -9.093 0.000269 ***
date         7.570e+01  7.817e+00   9.684 0.000199 ***
---
Signif. codes:  0 ‘***’ 0.001 ‘**’ 0.01 ‘*’ 0.05 ‘.’ 0.1 ‘ ’ 1

Residual standard error: 1253 on 5 degrees of freedom
Multiple R-squared:  0.9494,	Adjusted R-squared:  0.9393 
F-statistic: 93.78 on 1 and 5 DF,  p-value: 0.0001994

The last data point I have is $81,976.40 on 4/1/2014. There are 275 days between 4/1/14 and 1/1/15. If I'm gaining $75.70 dollars per day I'm predicted to gain $20,817.50 dollars over the next 275 days. If I add $20,817.50 to $81,976.40 I get $102,793.90. If the gains continue as they have been I might just meet my goal!



Note: this is just for fun. I haven't had any coffee yet this morning so let me know if you see errors or have better ideas for how to do this. Can you think of any additional predictors to put in the model?

[leeholsen]

@Myakka: Thanks for your reply. I'm definitely not killing myself over it. I just need a goal to focus on. It's a good goal: within reach but a challenge.

I'm definitely working on making more money. I'm bored with my job anyway and I think I can make more, maybe a lot more, doing the same thing for a different organization (though I might have to give up some quality of life). I've been studying some topics where I think I'm lacking and looking for the right opportunity.

Unfortunately changing jobs is all wrapped up with moving to another state that I have always wanted to live in. I'm not one for making big changes so it's tough to make it happen.

dont underestimate quality of life(thats why i bolded it). you will always get a chance to make more money again, but time in your life that give give up is lost forever.

its hard to quantity that, but what i do is look at my life on a timeline and think about what i most want to do in the next 2-5 years and what do most people do in their lives during that age and what do some of the extremes like rich or risk takers do. you might find you want to master rock climbing and thats not an old man's hobby.

but probably being a fellow ere'er, you know that already; it's a big reason for going ere imo.

[Gilberto de Piento]

April 2014

A good month! I came very close to a 50% savings rate! Auto costs were high again due to a twice yearly insurance bill. Restaurants and shopping (entertainment really) were high due to some dating (can't complain about that). I'm getting cash under control too.

If I got an ideal month I might hit a 55% savings rate but that's probably the maximum without making significant changes in my spending, like getting a cheaper apartment or spending less on groceries (both are unlikely to happen).

Expenses
Alcohol & Bars 30.24
Auto & Transport 354.11
Business Services 31.15
Cash & ATM 80
Charity 10
Clothing 32.44
Doctor 25.39
Gas & Fuel 80.34
Groceries 343.93
Gym 41.15
Mortgage & Rent 940
Restaurants 77.35
Shopping 112.41
Sports 36.44
Television 47.46
Trade Commissions 4
Total -FI 2242.41

Income
Paycheck 93.23
Amazon 57.82
Google 153.4
CD 17.06
Checking 8.66
457b 4000
Total +FI 4330.17

Savings: $2087.76
Monthly Savings Rate: 48.21%
Net Worth: $85,194.78

Am I on track to meet my six figures by 2015 goal? Yes!



Every small positive change we make in ourselves repays us in confidence in the future.
-Alice Walker

Thanks for reading!

[Gilberto de Piento]

May 2014

A 50%+ savings rate and I broke $90,000 in net worth! Thanks to a three paycheck month I was able to go on vacation (auto & transport, cash & atm, gas & fuel and groceries are high but I had a good time) and still post good numbers.

I'm thinking about buying a newer car though. I came close to a breakdown a few states away from home. A little luck kept me out of trouble but I'm looking for something else now. I'll spend no more than $5000 and I can probably sell the current car for $2000. The extra cost might not really be as large as the $3000 difference as the current car is requiring a lot of repairs lately and hopefully a newer one won't.

Expenses
Auto & Transport 246.59
Business Services 156.34
Cash & ATM 523
Charity 10
Clothing 9.28
Gas & Fuel 363.63
Groceries 442.19
Gym 41.15
Mortgage & Rent 940
Restaurants 37.6
Sports 74.76
Television 47.46
Trade Commissions 4
Total -FI $2892

Income
Paycheck 180
Amazon 56.49
Google 141.92
CD 17.66
Checking 0.42 (I've got to look into why the usual 2% wasn't applied)
457b 6000
Total +FI $6396.49

Savings: $3504.49
Monthly Savings Rate: 54.79%
Net Worth: $90.768.30

On track for $100,000 net worth by the end of the year:



“In the midst of winter, I found there was, within me, an invincible summer. And that makes me happy. For it says that no matter how hard the world pushes against me, within me, there’s something stronger – something better, pushing right back.”
Albert Camus

[Gilberto de Piento]

***POINT BREAK SPOILERS***





I was watching Point Break last night for the first time in at least 10 years and I think the bank robbers are ERErs. Without giving too much away, they work 10 days per year robbing banks so they can surf the rest of the time.

On YouTube (will probably be taken down): http://www.youtube.com/watch?v=qtqK4Kq1510

Vaya con Dios, brah.

[Gilberto de Piento]

June 2014

A solid month! I almost hit 50% savings.

$180 of the spending below, mostly in the Restaurants category, is due to a conference I had to attend. I'll be reimbursed for that in about a month so things are actually even better than they look.

I've been working on earning more. I added a new page to one of my websites and I've completed a side job that I'll get paid for next month. I also have another side job planned for July.

Expenses
Alcohol & Bars 61.95
Auto & Transport 220.41
Business Services 17.98
Cash & ATM 160
Charity 10
Gas & Fuel 213.16
Groceries 176.9
Gym 41.15
Mortgage & Rent 940
Restaurants 250.45
Television 47.46
Trade Commissions 4
Total -FI 2139.46

Income
Paycheck 1446.49
Amazon 59.85
Google 186.54
CD 17.12
Checking 12.98
Reimbursement for some parts I needed for a job at my parents' house 170
457b 2345.56
Total +FI 4238.54

Savings $2099.08
Monthly Savings Rate: 49.52%
Net Worth: $92,060.89
SWR: 27.89%

I'm on track for $100,000 net worth by the end of the year though the rate of saving will be slowing down now. I've been putting nearly all of my paycheck into my 457b but the next paycheck will hit the $17,500 limit. This means that more of my paycheck will be taxed and then I will not be able to save as much.


"Luck is where the crossroads of opportunity and preparation meet."
Seneca

[Gilberto de Piento]

I sold my first physical product online recently. I few months ago I set up a cafepress store with t shirts, mugs and decals. I haven't done any marketing for it - I've been meaning to order at least one of the products to make sure the picture I'm using looks good - but someone found it and placed an order. I earned $0.42! Not exactly a huge amount but I think it has the potential to be a small passive income stream if I spend a few more hours on it.

[Gilberto de Piento]

I cancelled my United card this morning. This is a small victory but important. I originally got it to get the free miles, use the miles to pay for a ticket, and cancel. The free ticket worked out but I forgot to cancel and was charged a $75 membership fee after I had the card for one year. Watch those fees.

I was doing some thinking about FI recently and I realized that if I didn't have to pay rent I could probably live off of my existing passive income for a long time. Let's say my $95,000 net worth was all in the market - how much might I earn per month? $95000 * 8% / 12 months = $633.33 per month. Add my internet income of about $300 per month for a total of $933.33. Yes, this is oversimplified (no taxes, no health care...) but its fun to think that I could trade my car for a van and live in the desert.

[Gilberto de Piento]

Investing More Aggressively
The 457b is full for the year ($17,500) and I have about $8500 in checking so I transferred $6000 to VTSMX today. I'll start doing automatic deposits to Vanguard now.

I have $10,500 or so in a 2% CD that won't come due for another 2 years. It's my emergency fund. The penalty for early withdrawal is 6 months interest (about $90). I'm thinking about moving $5000 of that into Vanguard and the other $5000 into my checking as an emergency fund. Moving closer to the MMM "everything in the market" strategy.

Accountability
I've really enjoyed keeping this journal but I feel like I've been missing one component of what I was hoping to get out of it. I've been steadily increasing my net worth and learning a lot but I haven't really made any big improvements. It's no one else's responsibility but I was hoping that the ERE crowd would be a little more "extreme" in calling me out. If anyone feels like holding me accountable for the things I've said I would do but haven't done or attacking my spending a little more I would appreciate it. I'm thinking of things like:
- Saying I would increase my internet income and then doing nothing
- Having skill in a rising industry (data analysis) and sticking with the safe, easy job
- Continuing to rent for $950 a month without exploring other options

Buying a House
I've been thinking about buying a house a lot lately. I'm in an expensive city and I still have thoughts of moving elsewhere but this keeps attracting my interest. I could probably buy something small and rough but in a good neighborhood for $80,000 to $100,000. The mortgage would be less than rent, especially if I had a roommate. I like manual labor and I have trades experience. I would work on it and then turn it into a rental and buy another one. As always, I'm afraid this will lock me into my job and my current location. Right now the weather is great and I've been having a lot of fun but the restlessness with this location will creep back in.

[spoonman]

Think very carefully before buying a house. If you're looking to turn it into an investment then you better hold on to it for a long time (5+ years, probably closer to 10) in order to make the hefty transaction fees worthwhile. If you don't mind being rooted to the area, then go ahead. But if you think you might get a bad case of wanderlust, then I would not get the house. I'm still regretting buying that condo we got back in 2009. We wanted our freedom so bad that we barely broke even when we sold the place last year.

I'm not that extreme myself (at least not right now), so I would find it hard to crack the whip on you =).

Btw, a 2% CD? How did you manage that?