akratic's ERE journal

akratic · Post by **akratic** » Wed Nov 03, 2010 1:30 am

Where I'm at as of 1 November 2010

- 9.26x projected yearly expenses in assets

- 10.8% + inflation ROI needed to retire right now

- 37% of my way to ERE

- 1.56 projected years to FI

I changed my monthly expenses breakdowns to be only for the past month instead of averaging all months. The average wasn't providing much information.
== EXPENSES ==
My ten days in Brazil cost $433.84, even with me paying for the plane ticket with untracked side income.
I spent $213.49 on food in October, which is totally unacceptable. I need to do better.
Otherwise this was a good month. I also solved the housing thing, moving into a surprisingly cheap place in a nice neighborhood.
== INVESTING ==
Someone came along and outbid me on the short sale house. I had the option of outbidding them, but after much reflection, I chose not to.
The whole reason I want FI is freedom. Real estate investments create freedom in the form of "passive" income, but take freedom away in the form of increased work and responsibility (choosing tenants, shoveling, emergency repairs, cashing checks, etc). Furthermore, real estate is illiquid, and the only reason I'm in Chicago right now is this job. Ultimately I decided that owning real estate would take away more freedom than it would provide in "passive" income.
I will instead be learning about things like REITs, dividend investing, the permanent portfolio, etc. These are compatible with the type of lifestyle I envision living.
== READING ==
The only book I finished this month was a novel by Nick Hornby. I've been so busy! I'm part-way through Status Anxiety, the Omnivore's Dilemma, and the ERE Book, all of which I really like.
== NEXT STEPS ==
Optimize eating. Learn about investing.
What will happen first? Less than $1000/mo in expenses? Or more than $500/mo in investment income?

B · Post by B » Wed Nov 03, 2010 7:16 pm

Regarding your decision to avoid the real estate investment: I would have done the same thing for the same reasons. I am leery of being tied down to any one location for very long. The freedom to pick up and go whenever I choose is also part of why I want FI.
Keep up the good work. Make those red and blue lines meet!

B · Post by B » Wed Nov 03, 2010 8:02 pm

Follow up question: What are you going to change about your eating habits to reduce that expense? My food expense was really high this month as well. My plan is to 1) Eat what I have at home before going grocery shopping again and 2) Avoid eating out, especially until #1 is done!

gibberade · Post by **gibberade** » Thu Nov 04, 2010 7:26 pm

Hey Akratic,

Can you share with us how you create those graphs? I'd like to start making my own to track progress.

Thanks

akratic · Post by **akratic** » Thu Nov 04, 2010 8:35 pm

@B: at a high level, what I need to do is make cooking at home more convenient than eating out. I believe this is possible. The main thing working against me is that I'm terrible at cooking. The main thing working for me is that I view food as fuel rather than a source of pleasure. What I really need is a plan in terms of easy to execute recipes that are healthy, cheap, taste good, and reheat well. Coming up with this plan might take a while.
@gibberade: check out this thread, I explained how to make my graphs there, although Google Spreadsheets is in the process of "improving their charts" -- and I think they're getting worse not better.

RightClawSouth · Post by **RightClawSouth** » Thu Nov 04, 2010 8:37 pm

Jacob needs to make his ERE cookbook

gibberade · Post by **gibberade** » Thu Nov 04, 2010 8:50 pm

Thanks

KevinW · Post by **KevinW** » Thu Nov 04, 2010 10:05 pm

I recommend cooking multiple meals in advance. That makes it harder to justify buying prepared food. Also, there are economies of scale in cooking large batches. My wife and I are on a weekly schedule where we cook an entire week's breakfasts and lunches on Sunday. Another approach is Once A Month Cooking (OAMC), although that requires a lot of freezer space.

akratic · Post by **akratic** » Fri Nov 05, 2010 1:28 am

Yeah, I think you're right, KevinW. I made a spinoff thread for this. I'd love to hear which batch meals you and your wife prepare for breakfast and lunch. Here's the thread: Do you batch cook, and what're your best batch cooking meals?

akratic · Post by **akratic** » Sat Nov 06, 2010 6:28 pm

I made a list of my favorite activities and starred the ones that are free or cost less than $1/hr:
conversation*, games*, travel, reading*, sex*, programming*, being outside*, learning*, movies*, uninterrupted sleep*, and challenging myself*
Interestingly, my day job right now consists of many of these things: programming, games, conversation, learning, and challenging myself.
Perhaps that's why I'm not motivated right now to give up luxuries like travel.
I still eventually want the freedom to walk away though!

NYC ERE · Post by **NYC ERE** » Wed Nov 10, 2010 12:05 am

spreadsheeting*

RightClawSouth · Post by **RightClawSouth** » Wed Nov 10, 2010 1:29 am

I suspect many on this forum <3 spreadsheeting*

akratic · Post by **akratic** » Wed Nov 10, 2010 1:41 am

My first reaction to: spreadsheeting*

in my google reader feed was "what on earth?..."
My second reaction after thinking about it for a moment was to actually laugh out loud.
And here's my third reaction: I think spreadsheeting is just a special case of programming: excel programming.

akratic · Post by **akratic** » Wed Nov 24, 2010 4:12 pm

plan A: retire rich
plan B: retire poor

akratic · Post by **akratic** » Wed Nov 24, 2010 4:14 pm

freedom = assets / needs

RightClawSouth · Post by **RightClawSouth** » Thu Nov 25, 2010 1:25 am

Surely:
freedom = assets * ROA - needs

akratic · Post by **akratic** » Fri Dec 03, 2010 6:55 am

== EXPENSES ==
$233 for flight to Boston for Thanksgiving

$134 for tickets to San Francisco

$104 for a wedding present
$268 on food... terrible...

$84 on transit because it's freezing in Chicago and I've switched from biking to public transit
I'd like to bring food down to $150/mo, travel down to $200/mo, and gifts down to $50. Transit is going to stay high throughout the winter.
== RENAISSANCE MAN++ ==
I read some great books this month!
ERE Book (recommended)

Omnivore's Dilemma (recommended)

Status Anxiety (recommended)

Fortune's Formula (recommended)

How I Became Stupid (recommended)
== NEXT STEPS ==
My top priority is selling or dismantling my side business before December 31st, 2010. It's a hassle and not worth the time it takes.
I created an investment plan, and now I need to implement it. It's based on Harry Browne's Permanent Portfolio, with an REIT on the side (I plan to rent indefinitely and want some exposure to real estate) and 10 dividend stocks that I will choose as a test and way to get my feet wet. I really like the philosophy behind the Permanent Portfolio. The details of my plan are here and a discussion about my reservations about going "all in" with the Permanent Portfolio is here.
I created a rough diet plan as well. I'm trying to simultaneously optimize cost, convenience, health*, and taste. I want a rough outline that I can live with, but I will be swapping in equivalent meals regularly.
* By health I mean protein... not vegetables...

8am: 1100 calories (60% C, 26% P, 14% F), $1.79, 2.5 cup Rice, 1 cup Beans, 8 oz Chicken, Olive Oil, Hot Sauce, Onions/Peppers as desired
~3pm: 700 calories (57% C, 22% P, 20% F), $2.50, two Trader Joe's frozen burritos
~9pm: 350 calories (53% C, 34% P, 13% F), $1.88, Smoothie: 0.5 cup Oats, 1 cup Frozen Fruit, 1scp Whey
Total: 2150 calories (58% C, 26% P, 16% F) , $6.16
Plus maybe some nuts as a snack around 6-7pm.
I know this is pretty strange. I have a bias towards protein from my days of losing lots and lots of weight. I have a huge bias towards convenience, and I know myself well enough to know that I will pay $6 for a burrito or sandwich if I don't have something more convenient than they are. I don't have any qualms about having a huge meal for breakfast, and actually I prefer that, as breakfast is the only time of the day that I can guarantee I'll be home.
This diet represents a compromise that I can live with, I think. I hope. In addition to wasting money on burritos and sandwiches, I've been putting on fat, which needs to stop.

Ralphy · Post by **Ralphy** » Fri Dec 03, 2010 7:39 am

Really enjoyed reading through your journal over the past month, sounds like you're making good progress. I read through your investment plan (thanks for sharing!), and I was really surprised how similar it looks to the IPS I've been working on for myself lately - PP, VP of dividend stocks, bad 401k options, etc. Seems like a good blend of a couple sound philosophies. Hope you'll keep up the updates!

Maus · Post by **Maus** » Fri Dec 03, 2010 8:10 pm

@akratic

I really feel your pain WRT the 401(k). We had similar crappy options until I browbeat the management into adding VTSMX.
Your musings on the PP forum were very helpful. I've been hesitating about PP because it just seems like gold, stocks and bonds are all too frothy right now. First of the new year, when I rebalance anyway, I am going to initiate a partial PP with the cash I've had on the sidelines, then adhere to a rigid schedule of ramping up to the classic 25%x4 for 80% of my net assets. Like you, my VP will be the selected dividend stocks I already own in my taxable account. I may reallocate this to Roth IRA if the Bush-era tax treatment of dividends is not extended.

akratic · Post by **akratic** » Fri Dec 03, 2010 11:38 pm

Thanks for the kind feedback Ralphy and Maus. Ralphy I always read all your journal posts, and Maus I LOVE your ERE poem on this chain. I didn't want to clutter up that thread just to say this, but your haiku was particularly awesome!
Tree naked in wind --

the true way of retirement:

I need ever less.
Maus, if I could have one 401k wish granted, it would be for a Roth 401k instead of just a Traditional 401k. Almost regardless of where you think taxes are going, a maxed Roth 401k tax-shelters about 33% more growth than a Traditional 401k! It blows my mind that this is not discussed more.
My next choice would be Vanguard funds though.

I've had little luck in getting my company to improve the 401k. I almost wonder if they get a kickback out of the huge expense ratios we have to pay... it's either that or our HR department is just lazy.
PS: VTSAX not VTSMX! Now that the minimum is just $10k, VTSAX dominates... maybe not for everyone in the company 401k though. I can't believe you actually succeeded in getting a reasonable fund added to your 401k options.