This is the story of G and K, a 43 year old ESTJ attorney and a 38 year old INFJ software developer (respectively) couple, who looked at each other back in 2009 and said:
"We make a combined ~$160k, yet wehave a negative net worth and experience no joy when we think of our financial future. I wonder... if we put our minds to it, paid off all our debts, and started saving 75% of our income... even with our huge Brady Bunch family and a greedy court-happy ex in the mix... if we make all the right choices starting now and going forward, I wonder if we could both be retired in ten years or less?"
Since that conversation took place, we have paid off all of our consumer debt, have achieved a positive net worth, and have gone from having ~$60k in our retirement accounts to having ~$130k, AND... at our current payment rate, our house will be paid off in two years instead of twenty. At present, we are indeed on track to retire in 7-8 years if we stay on our current path.
This road has not been easy. We are in regular, unavoidable contact with people for whom image is everything, and as I (K) have posted before, I am extremely uncomfortable with being judged harshly for our financial decisions. Also, although I would love to stay home with our youngest (18 months), G has a heart condition that sent his dad to an early grave, and I have an autoimmune disease. Part of the reason we want to retire early is to be in a position to take better care of ourselves physically before we get to the point that our relative youth no longer compensates for our relative weakness... and to increase our chances of actually having a few healthy years together retired. Although we could get by now on one income only, if either of us came home today, the other would have to take up the slack. Years of it. Not willing to play Russian Roulette with either parent's health, we swallowed hard and found a woman we love to care for the baby during the day so we can both power forward while we are both still able to do it.
I found this forum a few months ago. I'm learning a great deal, and G the lurker is learning as well. I was reluctant to start a journal initially because so little of this site is specifically applicable to our situation. Then I decided that if everyone felt that way, there'd be no site at all. o_O
As regards investing: I refuse to buy bonds. I think debt is the major economic problem of our time and if I buy bonds, I am at the very least an enabler. This creates a problem for me when discussing balanced investment strategies like the PP. I want balance, but without the bonds (and preferably without shorting anything either). I can get lost in the math for days, and have done so. My present strategy is 45% US stocks, 10% international, 20% real estate, 10% gold, 5% oil and 10% cash. I continue to search for my holy grail portfolio.
GandK's journal
-
borisborisboris
- Posts: 67
- Joined: Sun Aug 08, 2010 4:12 pm
Hi! Always glad to see another journal pop up. I wish you both the best, especially in regards to your health.
Very interesting perspective on bond investing. I agree that certain types of debt, especially consumer debt, can be pretty toxic. However, consider that much of the bond investing you will do consists of lending money to businesses, who will use your money to create ventures for new goods and services. Their only other options are bank loans (indirectly financed by your savings accounts), or to invest with any excess cash from their established revenue streams (erratic or nonexistent for many small and new businesses).
Very interesting perspective on bond investing. I agree that certain types of debt, especially consumer debt, can be pretty toxic. However, consider that much of the bond investing you will do consists of lending money to businesses, who will use your money to create ventures for new goods and services. Their only other options are bank loans (indirectly financed by your savings accounts), or to invest with any excess cash from their established revenue streams (erratic or nonexistent for many small and new businesses).
Awesome, congrats... Keep downsizing and I think you could be looking at easily under 5 years. Perhaps even less if you'd consider relocating. I hope you don't have to sacrifice health, even though I'm sure many of us are [by working] to some degree.
I also am disgusted by US spending and debt practices. However, I still do PP and have the 25% LT bonds. I make my stands politically (can you guess whom I support?:). I'm really in the PP more as a trader than a subscriber to any of the underlying investments.
I can find ethical problems with almost every investment. Stocks, dominated by finance, which is dominated by bailouts/regulatory capture... USD? That to me is the most distasteful of all. Even gold has huge parasite industries around it, like cash for gold and all those infomercials selling overpriced proofs to the elderly.
I think your portfolio wouldn't fair to well in an 08 scenario (US/int stocks/RE/oil all down), but will likely do well in most times. I don't really want to own anything in the PP, I'm bearish or unsure about everything in it! But it is quite resilient and historically has done very well. I can't argue with my own returns either.
I also am disgusted by US spending and debt practices. However, I still do PP and have the 25% LT bonds. I make my stands politically (can you guess whom I support?:). I'm really in the PP more as a trader than a subscriber to any of the underlying investments.
I can find ethical problems with almost every investment. Stocks, dominated by finance, which is dominated by bailouts/regulatory capture... USD? That to me is the most distasteful of all. Even gold has huge parasite industries around it, like cash for gold and all those infomercials selling overpriced proofs to the elderly.
I think your portfolio wouldn't fair to well in an 08 scenario (US/int stocks/RE/oil all down), but will likely do well in most times. I don't really want to own anything in the PP, I'm bearish or unsure about everything in it! But it is quite resilient and historically has done very well. I can't argue with my own returns either.
Yes, I would look carefully at bonds. Although they are 'debt,' they're a different kind of debt than consumer debt, and corporate bonds are a different kind of debt than government debt.
Looking at your portfolio, '08 would be a nightmare. Real estate got hammered, and US stocks didn't fare much better. Oil is loosely correlated with market prices - better market means more demand for oil. International might be ok, depending upon what countries you've focused on. Typically developing nations trade like US equity markets, but more volatile. On the other hand, Europe/Japan/India are probably better diversified. The only true hedge you've got there is gold, which has its own problems (doesn't actually produce anything).
Looking at your portfolio, '08 would be a nightmare. Real estate got hammered, and US stocks didn't fare much better. Oil is loosely correlated with market prices - better market means more demand for oil. International might be ok, depending upon what countries you've focused on. Typically developing nations trade like US equity markets, but more volatile. On the other hand, Europe/Japan/India are probably better diversified. The only true hedge you've got there is gold, which has its own problems (doesn't actually produce anything).
Welcome! You guys have really made a turn around in the last few years, kudos. Thanks for contributing. I think it is easy to look at a situation and say I really don't have anything to contribute because our situation is so different. It is that difference that makes it so valuable. If this board and society in general were so homogenized to limit the significance of the individual experience, life would be so much less interesting. Give your experience voice. I can tell you that for every person here that will read your journal and comment many more will read and not comment, but will take something away from what you have to say. The circumstances amongst us our indeed different, but the practice of the principles is the common thread that links us all and there is great wisdom in the expression of those experiences.
I for one look forward to hearing more about your experiences.
I for one look forward to hearing more about your experiences.
Thanks for the encouragement, guys!
Early this week my 45% position in US stocks rose above a 10.5% gain for 2012 which triggered an automatic sell order. Because I believe the market will go down significantly at some point this year, I decided to take my profits and hold them in cash if I hit a 10% gain plus fees (10.5%). If I held the cash for the rest of 2012 at this point I'd still be happy with that gain, but as I said... between Europe, oil and this being an election year, I think the market will drop substantially, and there will be a buying opportunity for those with cash.
For the record, G thinks I'm silly for trying to "anticipate the market" in this way, but I think it's wisdom to figure out what you think will happen and plan accordingly. Because I got tired of hearing him talk smack about investments I challenged him to a contest to see who can get the better return in their Roth IRA in 2012. The winner gets to choose where we go on vacation next. He's a beach bum and I prefer Alpine cabins, so I have a lot riding on this!
Early this week my 45% position in US stocks rose above a 10.5% gain for 2012 which triggered an automatic sell order. Because I believe the market will go down significantly at some point this year, I decided to take my profits and hold them in cash if I hit a 10% gain plus fees (10.5%). If I held the cash for the rest of 2012 at this point I'd still be happy with that gain, but as I said... between Europe, oil and this being an election year, I think the market will drop substantially, and there will be a buying opportunity for those with cash.
For the record, G thinks I'm silly for trying to "anticipate the market" in this way, but I think it's wisdom to figure out what you think will happen and plan accordingly. Because I got tired of hearing him talk smack about investments I challenged him to a contest to see who can get the better return in their Roth IRA in 2012. The winner gets to choose where we go on vacation next. He's a beach bum and I prefer Alpine cabins, so I have a lot riding on this!
Yesterday I had a lengthy exchange with one of my frugal coworkers about the possibility of retiring early. I finally sat down and showed him the math. He walked away with stars in his eyes. It was beautiful.
Confession: During the stellar months of January and February I found myself looking at my portfolio via Wikinvest several times a day, every day (they have a great Android app for tablets). Then March's volatility kicked in, and now I'm back to checking once a day.
Confession: During the stellar months of January and February I found myself looking at my portfolio via Wikinvest several times a day, every day (they have a great Android app for tablets). Then March's volatility kicked in, and now I'm back to checking once a day.
I have liquidated the last of the stock fund positions in my Roth IRA, taking profits. I'm sitting on that cash (52% of my portfolio). My remaining ETF positions are in nontraditional vehicles like REITs and commodities.
I will repurchase stock ETFs when my target items have dropped about 15% or in the fall, whichever happens first.
I am a bear.
I will repurchase stock ETFs when my target items have dropped about 15% or in the fall, whichever happens first.
I am a bear.
Well, our journey has taken a major twist.
I am leaving the workplace in March and am headed home to take care of the kiddos/homefront. After some drama in the family, we've decided to focus on spending more time together TODAY. By the time we got to our combined ER goal, all but one of our kids would be grown and gone. We don't want to sacrifice that time with them that we will never get back.
We've spent the last 2 years minimizing our outlay and - thanks in part to this site - are now living on less than a third of our combined income, so this will be a smooth transition for us financially.
With our one "breadwinner" limiting himself to 30 hours a week, about half of that from home (self-employed attorney), we think this will give us the best of both worlds: a good income to save for our future, and plenty of family time.
I am leaving the workplace in March and am headed home to take care of the kiddos/homefront. After some drama in the family, we've decided to focus on spending more time together TODAY. By the time we got to our combined ER goal, all but one of our kids would be grown and gone. We don't want to sacrifice that time with them that we will never get back.
We've spent the last 2 years minimizing our outlay and - thanks in part to this site - are now living on less than a third of our combined income, so this will be a smooth transition for us financially.
With our one "breadwinner" limiting himself to 30 hours a week, about half of that from home (self-employed attorney), we think this will give us the best of both worlds: a good income to save for our future, and plenty of family time.
-
LiquidSapphire
- Posts: 510
- Joined: Thu Jul 28, 2011 6:40 pm
Well, 2 weeks and 4 days from today I come home. I've spent the last few weeks cleaning and painting and rearranging rooms and furniture to try and make our house a little more functional for people to spend a lot of time in.
I don't have exact numbers because there are so many variables - everything from groceries to taxes will change - but I believe that with me coming home, our annual unbudgeted cash will go from ~$80k to ~$30k... that's how much we will have to save and to pay down the mortgage (our last remaining debt).
Then we will divide and conquer! G will be working on the top line and I will be working on the bottom line. That will be interesting... the household "free spirit" will be in charge of saying things like "we can't afford it" and "do we have a coupon for that?"
Current stats:
----------------------------------------------------------
Years' worth of expenses saved (Goal >20): 2.7910
Annual withdrawal rate currently needed (Goal <5%): 35.83%
I don't have exact numbers because there are so many variables - everything from groceries to taxes will change - but I believe that with me coming home, our annual unbudgeted cash will go from ~$80k to ~$30k... that's how much we will have to save and to pay down the mortgage (our last remaining debt).
Then we will divide and conquer! G will be working on the top line and I will be working on the bottom line. That will be interesting... the household "free spirit" will be in charge of saying things like "we can't afford it" and "do we have a coupon for that?"
Current stats:
----------------------------------------------------------
Years' worth of expenses saved (Goal >20): 2.7910
Annual withdrawal rate currently needed (Goal <5%): 35.83%
It sounds like it with your comment on groceries, but in your budget is their any home economist upside built in? I look forward to how that plays out.
We've looked at this if my wife were to stay home for a while with our baby-to-be andit would become pretty important to lesson the sting of the dramatic drop in savings rate.
My wife is an attorney, and is looking at moving to a contract position for multiple reasons, including freedom for kiddos. Seems as a software developer you should be able to get some part time contract work as well if you're concerned? (and some tax advantage)
We've looked at this if my wife were to stay home for a while with our baby-to-be andit would become pretty important to lesson the sting of the dramatic drop in savings rate.
My wife is an attorney, and is looking at moving to a contract position for multiple reasons, including freedom for kiddos. Seems as a software developer you should be able to get some part time contract work as well if you're concerned? (and some tax advantage)
We should have quite a bit of upside! I think our greatest potential for gain is in the area of eating out. My long working/commuting hours combined with the fact that G can't cook at all have resulted in a lot of convenience foods and habitual restaurant abuse. Other anticipated savings: child care (of course), transportation/gas, clothing and dry cleaning, and we're changing our gym membership. Areas of increased costs: household utilities and health insurance (I had a Cadillac plan with my employer).
I will post before and after numbers once I get home.
I'm not really interested in doing any more hard core IT work at this point. I would certainly do it if we were in a pinch financially, but I've overextended myself in my career for so long that I've run myself into the ground. I kind of suck at it now, and I know this. I really need a break. So that probably won't happen.
I will spend my spare time finishing up my first novel and maybe helping G with his law practice... automating anything he will let me automate (he's quite the Luddite).
Other anticipated savings: child care (of course), transportation/gas, clothing and dry cleaning, and we're changing our gym membership. Areas of increased costs: household utilities and health insurance (I had a Cadillac plan with my employer).I will post before and after numbers once I get home.
I'm not really interested in doing any more hard core IT work at this point. I would certainly do it if we were in a pinch financially, but I've overextended myself in my career for so long that I've run myself into the ground. I kind of suck at it now, and I know this. I really need a break. So that probably won't happen.
I will spend my spare time finishing up my first novel and maybe helping G with his law practice... automating anything he will let me automate (he's quite the Luddite).
-
jennypenny
- Posts: 6858
- Joined: Sun Jul 03, 2011 2:20 pm
@K--I've been home since Dec '11. We've actually saved more money than I thought on things like food, gas, clothing, and entertainment (there's a mental fatigue factor when you work that's hard to put a number on). The one place I find I'm tempted is working on the house. When you're in it all day, you start to notice things that didn't bother you before. At first it was just stuff like painting, but now I find I'm thinking about bigger projects. I also found that my kids became a little less independent because I was always there to bail them out, so I've had to work at cutting the cord again lately.
I'm curious if your kids understand the ERE thing?
I'm curious if your kids understand the ERE thing?
By and large, yes. We tend to talk about money in terms of freedom - the more $ you have in the bank, the more choices you will have. Things like retirement and investing we've only really discussed with G's two oldest kids (ages 19 and 25). But all of our kids know that we live differently from their peers, and probably they see that as: we choose not to spend money on a thousand semi-cool things so later we can spend money on a handful of very cool things instead.
Example: Each of our children, when they turn 15, gets to take a trip to the country of their choice with Dad the travel buff. The last one chose France, with a day trip down into Milan while she was there.
Example: Each of our children, when they turn 15, gets to take a trip to the country of their choice with Dad the travel buff. The last one chose France, with a day trip down into Milan while she was there.
Re: GandK's journal
OK. I've been home for 4 full months, so now I have some solid numbers to report on how the fact that I left the work force has affected us financially.
At a high level: although I was netting $3269/month when working, when all is said and done the amount that G now has to cover is only $642/month. We have been able to cut back on expenses and long-term savings to the tune of $2627/month.
Budget specifics (all #s below are monthly amounts):
HIGHER
Food went up (+$20). This is because one of my stepkids moved in, not because we are eating more.
Electricity went up (+$30). No surprise there since we are home all day now.
Our health insurance went up because we purchase it on the open market (+$290).
LOWER
Gasoline went down because I need the car much less (-$100).
Our homeowners' insurance went down. I had plenty of time to do price comparisons at renewal time (-$20).
The child support we pay dropped when we requested our triennial review (-$275).
Bus pass expenses disappeared (-$80).
Child care expenses disappeared (-$570).
We dropped our family gym membership and work out at home instead. (-$160).
Monthly contributions to my 401k and HSA ended (-$1762).
All other monthly utilities and expenses have remained within $5 of their previous amounts.
I expect the tax savings we will receive by not having both of us working to offset the remaining $642/month significantly.
In addition to the above, we have gone down to one car. This will, I'm sure, save much more in the long run.
At a high level: although I was netting $3269/month when working, when all is said and done the amount that G now has to cover is only $642/month. We have been able to cut back on expenses and long-term savings to the tune of $2627/month.
Budget specifics (all #s below are monthly amounts):
HIGHER
Food went up (+$20). This is because one of my stepkids moved in, not because we are eating more.
Electricity went up (+$30). No surprise there since we are home all day now.
Our health insurance went up because we purchase it on the open market (+$290).
LOWER
Gasoline went down because I need the car much less (-$100).
Our homeowners' insurance went down. I had plenty of time to do price comparisons at renewal time (-$20).
The child support we pay dropped when we requested our triennial review (-$275).
Bus pass expenses disappeared (-$80).
Child care expenses disappeared (-$570).
We dropped our family gym membership and work out at home instead. (-$160).
Monthly contributions to my 401k and HSA ended (-$1762).
All other monthly utilities and expenses have remained within $5 of their previous amounts.
I expect the tax savings we will receive by not having both of us working to offset the remaining $642/month significantly.
In addition to the above, we have gone down to one car. This will, I'm sure, save much more in the long run.