Barlotti in Boston II

[Barlotti]

So in my fifth weekend of decluttering, I had “yard” sales both Saturday and Sunday, and made 4 or 5 trips to Goodwill.

I logged on to say that in spite of an intense fifth weekend, the decluttering continues. I figure I reduced my possessions by 200 this weekend, but I believe I own 800 to 1000 things even after 5 weekends of focused decluttering.

Understanding how much stuff I have in my life makes me feel free to get rid of some of it. I saw that I had 5 black Sharpies in my desk. If I only have 1, I’ll take care of it and use it until it’s exhausted. Someone else can use the other 4 black Sharpies. If I need another in the future, I know where to find one.

[Barlotti]

Last weekend, I went to New Hampshire. But while I was away, I sold my Stuart Weitzman heels for $50 on ebay. I don't remember what I paid for them, but I do know that I bought them three years ago, and that they are still brand spanking new.

Notwithstanding the frustration of pointless email exchanges resulting from Craigslist postings (why oh why do people like to waste time asking stupid questions when they are not actually interested in buying an item?), I'm doing OK. I know what I want to get rid of by selling. It's just a waiting game for the right buyers.

Here are a few items I'm desperate to be rid of:
large rug and pad
dresser

They are just so big and difficult to move. Getting rid of one will be like getting rid of 50 smaller items so far as I'm concerned.

[Barlotti]

Before moving onto my YMOYL saga, an update on minimizing my belongings. I sold my dresser, and put a bunch of stuff to give away for free in my car, my storage space on wheels.

I worked on steps 3 and 4 of YMOYL tonight. I'm just gonna cut and paste from MMM for my own convenience:

3: Create Monthly Reports for Yourself
Keep a table of all income and all spending for each month, break it into catagories, and convert the figures into “hours of life energy spent”. Restaurant meals: 20 hours., etc. I find that the “Mint” financial tool does an acceptable job of this for me, but the book recommends you do it in more detail.

4: Three Questions that will Supposedly Transform your Life:
For each of the categories above, ask yourself:
•Did I receive fulfilment in proportion to the hours of life energy spent?
•Is this expenditure in alignment with my goals and life purpose?
•How might this expenditure change if I didn’t have to work for a living? (more, less, same)

Here are some categories I found convenient. Each category has more subcategories, but I'm not going to list them here. I spent about 143 hours of life energy to cover expenses in July.

Dining 7.9
Auto 14.8
Entertainment 7.1
Groceries 22.4
Household 18.8
Utilities 4.7
Health and Fitness 2.4
Medical 3.8
Miscellaneous 1.8
My pets 0.4
Work 3.1
Bank fee 4.5
Cash 5.8
Mortgage 45.6

I realized that I don't mind spending lots of life energy (i.e., money) on socializing. My grocery bill was high last month, but most of it was food I bought for social events. On the other hand, I don't like spending life energy on *eating out* alone and parking. These are both habits I have on account of work stress.

I gained some insight from fine-slicing my categories, but I've done this sort of tracking in the past. Having refreshed my accounts today, I saw that I've been spending more than I would like, thoughtlessly. That's why tracking works!

Ta ta for now.

[Barlotti]

Hi Scriptbunny,
The "life energy" thing comes from YMOYL. For me, my mortgage is totally worth 45 hours of life energy. As a graduate student, I spent 28 hours of life energy (or $700 monthly) to live on one floor of a triple decker with three roommates. The large bank fee is due to interest payment on credit card debt. I know, I know, bad me to carry credit card debt. I usually don't.

On to my monthly net worth calculation!

Assets
Home $188,000
Investments $81,457
Pension $3,292
Checking $1188

Liabilities
Mortgage $141,822
Heloan $14,415
credit card debt $3553

Net worth $114,147

OK, so my net worth has gone up by about $3K. Not great since this is the first month I remembered to count my Pension. Other "deposits" include $710 to my 403b, and $1500 to after tax investments. Considering all this, the net worth increase this month isn't great -- my investments have decreased in value.

I need to work on asset allocation.
Advice welcome.

[Barlotti]

I basically spread out my investments semi-evenly amongst the following asset classes: large cap US stocks, mid cap value US stocks, small cap US stocks, international stocks, commodities stocks, REIT, and bonds.

And you know what I realized?! It's the one year anniversary of Barlotti in Boston II. And since I like celebrating, I must take stock!

My net worth was $62,423 and is now $114,147! (increase of $51,724)
My Roth balance was $9,638 and is now $18,685! (increase of $9,002)
My 403b balance was $20,092 and is now $53,061! (increase of $32, 969)
My nonretirement investment was $6,420 and is now $9,685! (increase of $3,265)
My pension was not vested, but is now! (increase of at least $3,292)

I would love, love, love it if my investments grew another $45K in the coming year. Seems unlikely, but I'll hope for the best.

I've saved $36,624 since last August when I started Barlotti in Boston II. That's about 42% of my gross income.

[George the original one]

If you get a 10% return and deposit $25k, you'll grow $45k.

[Barlotti]

Thanks George. That makes me hopeful that maybe my investments will increase by $45K in the upcoming year.

I'm taking some time off from work, and today, I made two trips to Goodwill to unload some hanging shelves, two armchairs, 6 planters, a deskchair, 7 pieces of milkglass, curtains. I was planning on making a third trip to Goodwill, but couldn't fit the laundry hamper into my car. It's sitting out on the sidewalk right now for free along with lots of nice paper, cards, Japanese paper, kitchen magnets, and a UK cell phone. Last weekend, I got rid of a rug, a blanket, and a hat. It takes work to find a home for usable stuff.

Here's something I've discovered about myself after 9 weekends of decluttering. Once I acquire something, I feel responsible for it. I have a hard time throwing usable stuff away, and end up spending time finding the usable stuff a good home.

I will certainly think twice before acquiring anything else, and I'll use the one in/one out rule.

[Barlotti]

Here is step 5 of YMOYL from MMM:

5: Keep a prominent (i.e. right on your kitchen wall) graph of income and expenses
You keep doing this for multiple months which will grow into multiple years. The authors report that most people start to see their income grow even as their expenses shrink, since they are now learning to spend more consciously. Although I don’t have anything on my kitchen wall, we do maintain a history of spreadsheet versions and graphs of savings that dates back several years. But if you are a beginner who still wrangles with optional luxury purchases while still in debt, the kitchen wall is a good idea.

I've started my chart. Here it is. Hmmm, how do I insert a table here? Well, I'll describe in text.
July 2014
Take home pay: $4486
Expenses: $3603

[5to9]

Seems like you are really on the right track here. Decluttering, a year of solid investment progress, and tracking things by YMOYL. Quite a year!

[Barlotti]

Thanks 5to9!

I feel lucky to have started investing when I did.

I've decided to adopt a new formula for calculating my savings rate ("SR"):
(403b contributions + after-tax investments)/(net income + 403b contributions)

I've figured out what amounts I would need to save monthly (in addition to 403b savings, which I would max out) to reach 65%, 70%, 75%, and 80% SRs. Here are the amounts I would need to save, what I would have left over to live on, and time-to-retirement for the above listed SRs.

65%, save $2116, left over to live on $1852, 9.5 years
70%, save $2391, left over to live on $1577, 8.1 years
75%, save $2667, left over to live on $1301, ~7
80%, save $2941, left over to live on $1026, 5.6 years

I will come back to this entry intermittently to encourage myself to increase my savings rate, or to make more money.

[Barlotti]

I got rid of more stuff. An IKEA bookcase, a couple baskets, some articles of clothing. I'd like to take another inventory, but that will have to wait for another day.

I'm surprised at how easy it is to give things away. Yesterday, I gave away some 3.5 inch screws and bolts. Today, I Craigslist-posted my old gas range (with pilot lights), and there are plenty of people who want it.

My place finally feels "right" and not overcrowded. There are certainly things that I want (for example, I'd like to get one of those incredible pressure cookers and get rid of my rice cooker, I'd like to replace some clothes with more versatile items), but no hurry. I've got everything I need.

I think now that I'm nearly done with minimizing, I'll commit to improving my health. I'm often tired, and I think it's on account of poor diet and inactivity. I'll start off by committing to walk/jog/run at least 10 miles a week. Yesterday and today I've walked about 5.6 so 4.4 more miles to go!

[Barlotti]

As usual, I've been hmmming and hawing about what to do with my money -- invest or pay off mortgage? It's slightly ridiculous to pay down a mortgage with 2.49% interest rate, right? (I need affirmation because the idea of paying off mortgage is emotionally appealing right now.) The mortgage is a 5/1 ARM. If there is a time to pay it down, it would be August 2017.

I emailed someone the following (regarding continuing to invest in lieu off paying down mortgage) and would like to post it here so I really internalize it (or at least remember it):

Right now, I've got $10K in a Commodities ETF, which I'm relying on as "emergency fund". I'm glad I have that investment because while stocks have been creeping along or losing value, investors have been putting their money into the commodities markets. I don't want to liquidate my sole exposure to the commodities market if I can avoid it.

I think what I'll do is put the $12K I save between now and January in a Vanguard stocks/bonds balanced index fund in a non-retirement investment account. That fund should be relatively lower risk since it's balanced between stock and bond investments, which have low correlation coefficients. That should provide me with an alternative "emergency fund".

[llorona]

Are you comfortable with the amount of cash you've got on hand for an emergency fund or whatnot?

2.49% is an amazing interest rate! What happens after August 2017?

[Barlotti]

Well, I generally don't have more than $500 to $1K cash on hand for emergencies, but my life is pretty predictable (it's just me and my cat). If I really need to, I could liquidate assets. I've gotten a late start to investing for retirement (I started in earnest when I was 37 and am now 38), and I'm feeling a lot of pressure to catch up ASAP. Right now, I have an aversion to holding a lot of cash. Maybe next year I'll feel better about building up cash reserves.

In August 2017, my mortgage interest rate will reset to 2.75% at minimum and 4.5% at maximum (pegged to some U.S. Treasury index -- I think the 1 yr T bill). Every year after, my mortgage interest rate will reset and will increase no more than 2% every year and may reach a max rate of 7.5%. If I pay down my mortgage to $100K before the first rate reset in August 2017, even in the worst case scenario, my 5/1 ARM will do better than a 30 year 3% fixed rate mortgage. Also, my monthly cash flow will be comparable to what it is now, even in the worst case scenario.

I bought my place in 2012 and thought 2.49% was a great rate too. Incidentally, I shared the info with a friend of mine who 6 months later (after she purchased a condo) told me that she'd gotten 2.25% on a 7/1 ARM. Kinda cracked me up. As a caveat, this friend makes more than twice what I do, bought a condo worth two to three times the value of my condo, and has $60K lying around to pay income tax in anticipation of receiving income from non-preferred shares in private equity. So maybe it's an apples to oranges comparison.

Note to self: If you want FI in 7 years, in 2015 you need to reach 70% savings rate. This means living on no more than $1580 each month.

[Gilberto de Piento]

Well, I generally don't have more than $500 to $1K cash on hand for emergencies, but my life is pretty predictable (it's just me and my cat). If I really need to, I could liquidate assets.

I thought I was brave going from $10,000 to $5000 in my emergency fund recently. You are putting the "extreme" in ERE!

[Barlotti]

@Gilberto, love it! I'm being EXTREME! I got the idea of going without a cash emergency fund from one of Jacob's posts. To paraphrase, he said, "why not put your emergency fund in a brokerage account with a limit sell order?" or some such...

[jacob]

I said that?! If so, I'd like to retract it!! What I do remember suggesting is using a credit card as an emergency fund under the assumption that emergencies rarely happen and if they do happen, an 80% savings rate will pay it off quickly, alternatively, you could sell assets (but you might not want to).

[Barlotti]

@Jacob: I probably misunderstood. Sorry about that. What I remember is a post about emergency funds, which also mentioned placing a limit sell order on an asset (for example, at 10% depreciation). It was my first brush with limit sell orders, which caused me to read up on said topic. After learning more, I didn't place a limit sell order on any of my assets because if an asset's value plunges, it could sell heavily depreciated. Now that I know a bit more, would enjoy re-reading that post, but don't know where to find it. I think I read it in June or July off last year? Who knows, the post may be a figment of my imagination.

[jacob]

http://earlyretirementextreme.com/i-don ... -card.html
http://earlyretirementextreme.com/when- ... luous.html

[Barlotti]

@Jacob Thanks! Egad, I clearly don't understand stop or limit orders. I'm going to do some reading.

NEW 2014 AUTOMATED SAVINGS PLAN
Editing this post again. Sometimes I feel like writing, and will edit a post rather than make a new entry.

MY ONGOING EXPLORATION OF MINIMALISM, HARDLY
I'm editing this post again and adding more stuff. I inventoried my belongings after the minimization push: 1048 items not counting foodstuff, not counting my car or the stuff in it, and not counting sundry painting supplies in my basement. I would guess I own up to 1150 items.