Gabman98's Road to ERE

[gabman98]

Can I say I'm on a road to ERE, when ERE for me will be 50? After reading ERE and a few other books and blogs, journals, and whatnot, 50 seems so old to quit the every day 9-5, or in my case 5:30-2:30 workweek.

About myself: I'm 48 yrs old, married, no children. I'm a mechanical engineer at a defense contractor, my wife is a software engineer at a defense contractor also. Our combined income varies since she contracts a few months per year. but it's roughly 175-225K per year. We live in Southern California in a very expensive city close to the ocean. So, we have state income tax, federal income tax, gas tax, sales tax, taxes on top of taxes. But, we love it here and don't plan on leaving.

I know some people think 200K per year is a lot of money, but between taxes and food and gas, etc it goes quickly. We do save money though. Our net worth not including the condo is about over a million. And, based on the 40X expenditures formula that leaves us 42,500 per year to live on if we only lived on our investments. But, we also get pensions.

The monthly pension amount goes up the longer I work. My wife's pension is fixed, 10K per year. If I walk out of here at 50 I will get 10K per month at 55 yrs old. So, that brings us to 65K, not including social security.

We have the maximum social security benefit coming at 67 and with pensions and investment income we'll be okay, I think... Why am I afraid of giving up this crappy, but reliable job.

We live in a little condominium, 250 dollar monthly HOA which includes water. Electric bill is 75, she never turns off the heat of the air conditioner depending on the month. Cable is 120 which includes internet. She will not give up cable no matter what. It's okay, I have a sailboat, which costs me 250 per month including slip fees and cleaning, insurance. So, I don't complain about the cable. We owe a mortgage of 140K and we pay 1,050 per month for another 15 years. Property taxes are 400 bucks a year. I've got another rental house which has been in escrow for 9 months, no kidding, and when it sells I want to pay off the mortgage on the condo... Any thoughts on that? My wife says no way, I read Dave Ramsey's book and took his class, he says pay it off if I can.

Oh, speaking of D. Ramsey, I took his class several years ago and cut up all credit cards and paid off all debt except for the two mortgages. In my mind, if I pay off the condo this year we'll be debt free and can easily retire with what we've saved. I recently paid cash for a new car, didn't want payments.

My wife wants to retire in another 7 years. An arbitrary number I know, and there's no rationality for that number. I want to retire in 24 months, Jan 2018. Why? Because I've been an engineer for over 25 years and I'm burned out with this, it's not rewarding, not interesting, and I absolutely hate sitting in a cubicle under these fluorescent lights. I enjoyed it for years, got to be creative, got to design, build, be on the cutting edge. But, now it's tedious, and a thorough hassle to get my butt in here in the morning. I find myself taking vacation time instead of working a full day. It's not a good mental place to be.

This month I did a thorough look at 2015 expenses. I waste a lot of money. I spent 8,500 dollars on Amazon alone. And, I golf. I didn't mention that. But, that's 3K per year.

Here's the heavy hitters to the budget.

Amazon 8500
Golf 3000
Restaurants 3000 I bet it's closer to 4000
Vacations 3000
Boat 3000
Cable and internet 1400

Smaller Bills, but really add up
PO Box 225
Storage 500
Extra, 3rd car, 1000
Trips to Mexico 1200
Netflix and Amazon Prime both 180

My wife's spending is very limited. Some clothes, when Kohl's has their famous Kohl's cash and 30 percent off sales. She buys chocolate. But, she's not a spender. Looks like I'm the spender.
Last weekend I cleaned out the storage locker and cancelled Netflix. And, I'm giving stuff to charities but, oddly, I found myself throwing most of that stuff in storage in the dumpster. I know, low hanging fruit, I should have done it years ago. I'm cancelling the PO Box and selling the 3rd spare car this month.

And, I'm doing a 30 day no spend month starting last weekend. 8500 dollars on Amazon is crazy. And, I'm not golfing or buying boat parts.

According to my spreadsheet we should be able to live comfortable on 20K per year once the mortgage is paid off. What's going on?

I know this first post is rambling. I'm trying to capture everything I'm thinking right now and drawing a line in the sand. Today I start the road to Early Retirement.

[jacob]

$8500 on amazon is a clear sign of work frustration. My amazon spending was highly correlated with work dissatisfaction. Over the years it went in waves... retail therapy. Admittedly, my amazon spending was more on the order of $85... but I always buy used.

The amazon spending fast is a good idea. You'll probably discover several things [psychologically] if you keep it going, e.g. initial boredom, followed by frustration/withdrawal, and then the discovery of alternatives.

Another way to go is to only spend up to the amount you've sold. If you've spent 8k on amazon, you should have plenty to sell. Selling is not so surprisingly much harder than buying, so it'll put a damper on things.

For the storage/buying-nothing, see
viewtopic.php?f=7&t=7378

[vexed87]

@gabman98, I had an amazon addiction too, they make it too easy to buy stuff. Deliberately not saving your CC details on your account really helps curb impulse spending, unless unsubscribe from every type of marketing e-mail that comes into your inbox, I mean everything, otherwise the temptation can become too great!

When I first started to pursue ER, I left my debit card at home unless I really needed it, so shopping at work became impossible. It helped me wean myself off as I had no real reason use my DC when travelling to/from work.

I'm sure you have already heard about the 30 day cool off method, basically don't buy anything unless it has been on your wishlist for 30 days (personally, I find a week is plenty!) and usually you realise you can live without the product.

On a particularly bad week I can still splurge on 1-2 used books, usually £0.01 plus £2.80 minimum delivery or whatever it is, lately however I have reduced it to two or three used books per month .

[thrifty++]

My god you are so rich. You have so much slack in your budget there is so much to trim. You can leave whenever you want. I do find it odd you cancelled Netflix which costs peanuts and wont cancel cable.

Your condo has a tiny mortgage. The condo must be worth quite a bit too based on where you are?

[singvestor]

Welcome! I am looking very forward to reading the updates, sounds interesting.

It should be very easy for you to retire if you just optimize your spending. My feeling is that you will make fast progress when you tackle the retirement planning in a systematic way, which should be easy for you as an engineer.

The boat is quite expensive, but I can understand the appeal. Maybe you can rent it out sometimes or somehow monetize it a bit?

[George the original one]

I'm still trying to figure out how you can spend $8500 on amazon when you live in a small condo with nowhere to put stuff? Likely we all have our addictions/compulsions, the trick is how to not spend money while engaging in an addiction. I think sometimes that means finding a different addiction.

Ditto what thrifty++ says.

On the positive side, you must not be spending all your income when you've managed to accumulate $1.7M. With that amount of money saved, leveraging via mortgage is kind of silly unless you're aiming to have more. Pay it off and have one less hassle.

[leeholsen]

"According to my spreadsheet we should be able to live comfortable on 20K per year once the mortgage is paid off. What's going on?"

if you are having trouble making it on 20k with no mortgage and other debts, imo; you are not following the "extreme" part of ere.

if you are going to be extreme about ere, you should be able to do it with no debts and especially with a 1.7 million net worth; which puts you in the top 5% by the way; you've got 95% more than the rest of the usa; you should be able to get by without working.

knowing that you are at such an extreme end of the population financially; it is up to you to figure out what type of life satisfies you for the rest of your life. if you want to live in southern California and play golf regularly, you probably are going to have to plan for a post retirement income of a lot more than 20k. if you have no debts and no mortgage and can live with keeping expenses down to less than $2000 or even $3000 considering the financial cushion you have for the next tow years; you can walk out in 2018; if you cannot; you will have to keep working until you find what life you want.

for nearly every person here, it's a real change to be "extreme", most cannot leave the consumer culture at every level to capture the true freedom being extreme allows, myself included; so we still work.

[gabman98]

Last month was a bit of a rant, frustration with work, progress, spending, accumulated junk... I'm motivated now.

In the last 30 days our goal was to cut to the bone, everything, spend no money for 30 days, and cut out all unnecessary expenses, we wanted to see what we realistically needed to live comfortably. And, we were surprised. Here's what we did.

1. Cleaned out our storage unit, sold or gave away everything inside. 1500 dollars profit, both surprising and liberating.
2. Cleaned out closets, storage shed, bookcases, gave it all away to charity or craigslist.
3. Sold 3rd car.
4. Kept track of all spending, savings, bills on spreadsheet, and every dollar in and out.
5. Cancelled monthly 'convenience' service fees... Po Box, storage, extra car insurance, 2nd boat storage, internet services...
6. No restaurants including work cafeteria. Made food at home only. Even tried lentils for the first time.
7. No purchases whatsoever unless it was food. Certainly, no Amazon purchases.
8. Cut back on golf to once per month.
9. I reread ERE for the fifth or sixth time.
10. I read other peoples blogs on ERE for motivation.
11. Visit a friend who built a Tiny House to live inexpensively and retire early. This is not for me...
12. Created a budget, 1st time actually creating a budget, what a surprise.

Getting rid of the storage unit and extra car was liberating. Years and years of old hobbies, clothes, books, all gone now and it feels great... It's frustrating to think of all the money we spent on that stuff. At one time we must have thought it was important. Plus we're saving on auto registration, storage fees, maintenance, etc.

The spreadsheet was pivotal in this 30 day challenge. It's surprising how much money ends up at restaurants. Restaurants alone could break any budget. And, we had fun cooking at home together. Kind of like dating again.

One odd thing happened which I didn't expect. Whenever something was sold off or closed out I could remove the key from my keychain, storage unit, boat, bike lock, a safe, whatever it was... A nice surprise.. I have one key on my keychain now, the car doesn't have a key.

Something we really never paid much attention to in the past was item 5 above. Monthly fees... 5 dollars here, 10 there really adds up... So, i cancelled everything but the gym, cell phones and internet. My wife refused to give up cable but we did cut the bill by half. I don't blame her, cable is nice.

This month was a huge shift for us. The next 30 days will be similar to the first 30 days by keeping a budget and not spending money. And, of course, looking for ways to live by spending even less.

I've realized I'd rather not get rid of my sailboat. And, just from the cuts to the budget this month it appears I won't have to.

I've read everyone's comments and I appreciate the candid responses.

More to come next month.