My Journal (purplepatch's FI journal)

[purplepatch]

Reason for journal:
I read a few other journals, and I think it's cool that other people can also read and give suggestions, support, and new ideas.

A little context:
I am a 24 year old living in the greater Los Angeles area. I finally found a full time, long-term (hopefully) job as a tax accountant at a small firm, which I will be starting in the next few weeks. For the past year, after I graduated with a BS in business, I held a couple of temporary full time positions as a bookkeeper/ general admin staff.

I've been reading this website, the ERE book, and a couple other forums for a month or two. I only started thinking about retirement seriously the past couple months; before that, I knew I would start saving once I began working, but I had no insight or any particular plan. Actually, my plan was 'save as much as I can'. I discovered early retirement on a blog --I don't remember which. It had the usual savings rate vs time until financial independence graph. That was the small 'aha' moment for me. It was so simple, and I felt like I could do it too, and from then on I started playing with the idea of FI and ERE.

Having said that, I still do not have concrete goals, such as FI in xx years. I'm still holding onto the 'save as much as you can' plan and will see where it takes me. I have been logging all my finances in Quickbooks for the past year so I have a pretty good idea of my spending, but it's a little hard for me to project income (bonus, raises), until I work for a little bit. At the end of this year I think I will have at least a range for when I can become FI.

My short term goals:
-keep expenses under control
-learn more about investing (right now I'm only doing index funds) and a managed portfolio at a brokerage branch of one of the banks I use.
-liquidate and close the brokerage account. The expenses are insane. 1.5% AUM + the funds themselves have 0.05-1.5% expense ratios.
-worry less about the market

I worry a lot about the economy, and day to day fluctuations. I noticed that I'm happy when the market is up, and just alright when it's red. I want to change so I'm not affected by daily (or even monthly/quarterly) movements. I also worry about the long term returns of the market. When I begin my new job, I probably won't have too much time to think about it though! Also, I will be studying for the CPA exam which I plan to take throughout next year (there are 4 parts).

This first entry is vague in terms of finances, but I wanted to keep it short. I will try to post a little bit more about my living arrangements and financial situation soon.

[m741]

Welcome, and good luck. Sounds like you're on the right track.

Don't look at the market every day. It doesn't matter. Take a peek every week or every month, whenever you have enough to invest. You could also make some small spreadsheet that hides market movements and only alerts you when a given name has dropped by some amount X over the past Y days (or below absolute number Z). You could use that as a safety net that alerts you when you need to sell (or buy more...).

[steveo73]

Good Luck !

[FrenchGirl]

Welcome and good luck!
I am myself starting reading/learning about investing. So far, all my savings have been in low-to-zero interest saving accounts and in a mutual fund set up by my former company. The market's daily fluctuation can definitely be scary but if you choose a buy and hold strategy, it really does not matter.

[purplepatch]

Thanks everyone for the welcome!
I've been a little better about watching the market. I only checked twice today . I think I get a mini-rush whenever I see the the graph, but I think I'll get bored of it eventually.

This week, I was able to close the brokerage account. The account representative sounded a little sad when I told him to close the account. He did try to get me to buy ETF's on the account (instead of managed funds), but I declined. I checked online just now and it had calculated the final 'maintenance fee', which was about $150 for the quarter (yikes!) I'm glad that's over with. All I have left to do is put the money into Vanguard funds with the rest of my investments... I think I'll just place an order Monday (actually, I might do it this weekend, I need to figure out my AA first) and not look at it for a while, so I won't get the "I should have waited xx more days" thoughts. I heard mathematically it's best to do this, since the time in the market will be longer, and average returns are positive.

Budget this month:
Rent: $600 (I share a room with my sister)
Utilities: averages to $45 ~ $50 a month
Car insurance: $150 a month
Gas for car: $100 (about 40mi a day for commute)
Food: aiming for $120/mo
Eating out/entertainment: usually around $10, but this month I am going to meet out of state friends and go watch a (my first!) concert and hang out. Budgeting $110. (this doesn't include tickets; I got them a few months ago)
Health insurance: $0 I have to wait 2 months until I can join the company health insurance plan.

I've already spent $26 on my first grocery trip this month. Last month, I decided to eat one meal per day like how it was described in the ERE book, but I think I didn't eat enough during the one meal, so I lost weight, which sucks for me because I'm trying to gain weight and muscle mass. I'm physically weak right now for my age.. So I'll be a little more liberal with the food budget and try to eat more.

The main expense comes from rent and transportation (including car insurance). This is a little tricky for me to reduce. I am living with my sister right now, and our jobs are a few cities apart. I drive about 20 miles each way, I think her job is about 10 miles away. We looked at Google maps and tried to figure out a good mid-point so we don't have to drive so much, but there wasn't any location that was close to the freeway with good routes to work. We could live separately, but that will most likely increase costs for both of us. We also have a cat, which makes it a little harder to find apartments. Ideally I will live very close to work and I could bike there... I'll keep an eye out, but for now I think I'll stay where I'm currently at.

[purplepatch]

A few things came across my mind this week about investing. I will try to research a little more.
- Are (ordinary) dividend stocks priced lower, because of the lack of preferred tax treatment (long term capital gains tax). Or, do they cost about the same because of their lower presumed risk?

- Does index investing work well for ERE? It's true that over the long run, daily variance has little effect, but ERE's don't have decades to reach the target amount or recover from a correction.

[steveo73]

Personally I'm a fan of index funds. I trade foreign currency and I don't care what people state but picking the market is hard and I think picking a broad general direction as in the currency markets is easier than picking an individual stock.

[purplepatch]

So I was a little bit busy the past few months, but not that busy. I think I wasted a lot of time doing pointless stuff like surfing the web for hours.

My expenses for October - December seemed fine. Had a little bit of ($250) entertainment expense, mostly from concerts and meeting with friends. I spent more than I liked to on parking (usually it costs $20 - $25 for parking at events), so next time I will try finding a bus route, unless I have friends to pick up.

Had an unexpected vet bill (rip cat), a little over $2,700. Really took a huge chunk but costs were very minimal throughout her life so I'm more than glad to have paid for it. I have extra cash on me so my emergency fund is still full.

Got a $2000 bonus last day this year, which was nice. (The bonus itself is nice, and it's nice that it came before on 2014, since I'm in a low bracket 2014).

I calculated my income tax liability for this year. I worked 5 months, and got around $12,000 in gross income. $87 Federal tax liability, and estimating about $150 for CA tax. The Federal tax is low because of a nonrefundable tuition credit. It would have been $0 if it wasn't for the ACA penalty (I had no health insurance for 10 months). I have more than enough withheld so I'm getting a sizable refund of about $600. I am not adjusting my withholdings this year, and am going to pay a big tax bill come 2016 April. I have safe-haven from underpayment penalty if I pay 100% of this years liability, which will be met in one or two paychecks.

I maxed out Roth for 2014 (very low tax this year), and sold some bond funds in my taxable account to fill 2015's Roth limits. Later this year I can join the company's 401(k) plan, so I will reduce my taxable income there instead of with an IRA. If stocks do well, I am planning to tax harvest gains in the taxable account. More on this in the coming months...

A few months ago I was wondering about dividend paying stock and their prices. I hadn't realized that Qualified dividends also are taxed at much lower rates. So I guess the tax advantage doesn't affect their relative prices because they are taxed about the same (if I'm mistaken please let me know

For 2015, my goals are:
-Pass 3 of 4 CPA exams. Might be able to do all 4 depending on how manageable/tough the busy season is.
-Improve on my programming skill. I know some Python, but want to be able to get a little bit more comfortable with advanced topics (unittesting, generators, decorators, better understanding of OOP). I also found a cool graphing module called matplotlib. Maybe I can make FI graphs with that )
-Read a little bit

My number one issue right now is procrastination. I should have been studying for the CPA exams all year last year, but I ended up not studying much at all. Even now, I only study about an hour a day, which is just not enough to pass. Every waking moment I tell myself I should study, but still put it away.. I think the motivation issue comes from the fact that I generally don't like studying; the topic can be dry sometimes; and I am way easily distracted. I'm always chatting, watching videos, reading articles/blogs/forums, updating my quickbooks...Ugh...

To combat this, I set up a no-internet rule on my router for my main computer. I can't access the web from 10:30pm on weekdays. Results have been pretty good. I either buckle down to study or go to bed earlier.

Anyway this is it for now, I need to think of a plan to save $18,000 in the 401(k). I calculated that the takehome will be about $650 each paycheck (twice a month) if I start contributing from April (month I get to join plan). If I watch my cashflow very carefully I may be able to pull it off.

[Dave]

Hello PP,

We are in very similar circumstances! I am a 25 year old CPA working in tax, so it is interesting to hear your thoughts.

It is a good idea to not be too concerned with day-to-day movements in the markets. I would also note that for those of us that are fairly early into the accumulation process that market movements are not terribly important. If you do not have significant assets, the movements will not matter so much. It is much better to focus on controlling your costs than worrying about the market swings (1% of 10,000 is not so much). You get a lot higher return on your mental energy by trying to cut costs (think housing, auto, then food) than eeking out an extra few basis points at this point in the game.

It would also be good to focus on the CPA exam and try to knock three parts out this year, as you set as a goal. I would caution you to give yourself a little more time than you think for each exam. I generally am all about setting large goals that might be beyond reach, but given the nature of taking such exams, the timing involved, and the restudying time involved, I would probably shoot for three this year. I have had a number of colleagues overstretch themselves and fail a part, which leads to a ton of restudy time. And they were not even travelling down the ERE path as you are, which takes a lot of mental energy as well!

Good luck with everything, and keep us posted!

[purplepatch]

Hi Dave,

Thanks for your comments. It's great to see another tax professional!

I think I got over worrying about the markets. It's probably due to how I set up my AA. If the market tanks, I can sell some bonds and it will be a good opportunity to buy as I work and contribute more. However, it's still nice to see it going up. I still check S&P500 daily, and some news. I learned a few things here and there about the economy and market trends. But I haven't and don't plan to change my AA or investment strategy at all.
And you're right, I should definitely focus on costs.

Thanks for the tip on the CPA exams. I am working on REG right now, and I will schedule to take it at the end of February. Then, I'll schedule FAR three or four months after that. I'm not in a big rush to pass the exams (although my managers keep asking about it ), and I am going to be on the safe side because each test costs about $180. The testing locations near me do not have tests on Saturdays, so I will also have to take a day off of work.

[Dave]

I don't know what your firm is like, but it might be overly ambitious to try to take FAR in May if you are working 60+ hour weeks through 04/15. FAR is generally the "hardest" to pass, as a result of having the most material covered. I would try to build in the most slack for FAR, and if you are tight on time squeeze AUD or BEC in. Everyone is different, and every firm is different, so I cannot say for certain in your circumstances. I just try to tell CPA candidates to give themselves plenty of time, as I have seen many folks fail parts of the exam due to ambitious study schedules!

Has work started picking up for you yet?

[purplepatch]

Wow, it's been more than a year since I started the journal

It feels like not much has changed, and I just turned one year older. I am saving about 45% (I think, haven't run numbers for a while...) so I am at least progressing towards retirement, albeit much slower than I would like. Actually it doesn't feel like I'm progressing at all, but I suspect I feel that way due to the recent market performance (lots of red numbers !)

- Currently waiting for all my 9/30 statements to come out so I can see how I did for Q3.
- I need to stop procrastinating and study for my next exams.. Only 4 weeks left to study.
- I am moving soon. Need to throw stuff out (did a little bit today - unnecessary papers/statements, clothes and misc things to take to goodwill). I won't be living with my sister so I might look for a shared housing situation. Rent here is $1000+ for an oldish studio in an okay neighborhood. To refocus on my ERE plan, I need to reread some parts of the ERE book. A lot of kitchen stuff (dishes, utensils, spices) need to be thrown out/ donated too. Next time I won't buy anything to begin with (actually, I didn't buy anything except for an iron pan, cutting board, knife and maybe a thing here and there. Most are my sister's)
- I got good reviews for work for the first year. Asked for a raise but I'm not very hopeful. We'll see in a few weeks.
- Going out with friends can be very expensive. ($100 dinner) . Hard to believe a bunch of us guys would eat at expensive places. Alcohol ups the tab a lot but still...

Also, I've been thinking of buying a scanner, the type that I can feed a stack of documents, so that I can scan and shred everything. For receipts, I've been using an app on the iphone, but paper scans (photos) don't look very good and takes a bunch of disk space. But I don't want to buy anything before I move.

[purplepatch]

I think I'm pretty much done closing September. Although I do often come across expenses that I need to add months later.



Ughh! The label for the expense got hidden! Blue bars are expenses. So it looks like savings rate is a tiny bit above 50% for year to date. (%'s at the bottom are savings rate) Whoo!
After moving and settling down a bit, I'll try to aim for 55%, then 60%. As income increases, savings rate should go higher too, but I do have places I can cut spending on. This chart took way too long to create (and getting the image to be no larger than 800px.. grumble grumble). When things are slow I'll perhaps work on automating this and a few other metrics.

[purplepatch]

I need to move out in a couple weeks since I gave notice to my current apartment manager...
I found a pretty nice room (part of a 3 br condo), about 10 min drive from work at an okay price. However, there is no parking, so I will have to park on the street. Today after work I went to look at the outside to check how crowded the street was, and I found 3 car lengths of space very close, and a couple more within 100 meters. This is a semi-busy road (2 lanes each side + middle lane), and when I turned to a smaller street, there were no free car spots available in the neighborhood. That made me worry that some days I will have a very difficult time finding parking.

Additionally, Thursday 6am-8am is street cleaning, so I would need to move my car somewhere. Also, the other side of the street has Tuesday street cleaning, so on that day, this side of the street might be very crowded.

That's the only hesitation I have.

If I do decide to rent the place, I have three contract duration to choose from: 1 year, 6 months, and 3 months. 6 months is $50 more expensive per month, and 3 months is $100 more expensive per month. I might do 3 months first, pay $300 more overall, and switch to a 1-year contract after that if everything seems okay. The option is kind of expensive, but if I go 1-year and decide to leave in the middle, I will forfeit the deposit (which is 1 month of rent).

I will look for other places, but I can't seem to find many good places. Any thoughts and tips on street parking? My car is 2004 Civic so it's unlikely it will be broken into, and the crime statistics for the area was very good compared to where I live now (although I park in a garage here).

[singvestor]

10 minute drive from your flat to work should be quite short right? Something like 5 miles maybe?

If I were you I would use a bicycle for commuting. Saves time, is a small exercise and also saves money.

[purplepatch]

@singvestor
Yes, I was contemplating that as well. A nice goal would be to sell the car. I'm still very scared of the idea of not having a car, but I will try biking to work in the near future once I settle down to see how it is.

[purplepatch]

Move complete. I have way, way too much stuff. During winter holidays I'm going to sell/donate/throw out more things. This month I am eating out a bit more than I'd like (still getting used to shared kitchen, taking time to restock,etc). By next month things should be more or less back to normal. Grocery here is more expensive, 20%-100% more I would guess. But I can walk to a store, so I'll buy only a little bit each time, and try to reduce waste/spoilage that way.

Also, all of a sudden I am wanting new toys for myself, like a skateboard/longboard, a keyboard (instrument), some nice headphones and maybe an amplifier. Maybe the Holiday season spirit is rubbing off on me

Rent is more expensive than before, but I save a lot of time on the commute so it's worth it for the decreased stress. I got a raise this year, so I'm hoping to increase my savings rate. I noticed that savings rate, after 50% or so, is quite challenging to increase. And when my income is from wages, payroll and income tax increases as well.

For investments, I was hoping to do a decent harvest when S&P500 would be at 2200. But it seems like that won't happen this year with the impending rate hike. I can still harvest a little bit (maybe $1000 of gains) but I was hoping for $2000 or more since I have a bit of 0% LTCG space left.

Work will be really busy coming weeks, but after that I have a week long vacation (yay!!). I am not planning to go anywhere but I'll meet some friends and have fun. Can't wait!

[jennypenny]

Move complete. I have way, way too much stuff. ...

Also, all of a sudden I am wanting new toys for myself, like a skateboard/longboard, a keyboard (instrument), some nice headphones and maybe an amplifier. Maybe the Holiday season spirit is rubbing off on me

[sea]

Move complete. I have way, way too much stuff. ...

Also, all of a sudden I am wanting new toys for myself, like a skateboard/longboard, a keyboard (instrument), some nice headphones and maybe an amplifier. Maybe the Holiday season spirit is rubbing off on me

Music gear (and travel) is something that I struggle with balancing with FI myself. I upgraded to Ableton Live Suite 9, a Push and new studio headphones (Sony MDR-7506) in the last year so I'm holding off on gear accumulation for awhile. It's harder for me when the toys can also be tools, you know? I will be teaching some classes soon using the gear and will probably at least break even, so that's how I'm attempting to balance it for the time being. But music/sound stuff can be a such a black hole.

What kind of keyboard and headphones are you looking at?

[purplepatch]

@jennypenny You caught me!

@sea I've been wanting to learn piano for a while, so I've been thinking about a digital piano. But I'm not sure if I should buy cheaper midi controller first to play around with it in case I get bored quickly. For headphones, I haven't done much research so I only know I want to spend around $160 but not much more. I feel audio gear has a lot of divided opinion (compared to other consumer goods - like computers or TV's) so it's hard to reserach what's good and what's to be avoided.