the dude's diary

Where are you and where are you going?
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El Duderino
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July '17 Update

Post by El Duderino » Tue Jul 18, 2017 2:57 pm

Hey folks! Been a while since my last update, though there haven't been any huge changes to my methods. Just some gradual improvements and clearer thinking, mostly.


Dude's Deal

Still using a per diem to keep expenses under control. I've decided to change how I calculate things, which will ease up a bit. I think it was stressing me out, which is very un-dude-like, I know. My thinking on the matter had become all jumbled and when I was consistently carrying a negative balance for weeks on end, well, it's demoralizing to feel impoverished all the time.

1. Still going to take 1/10,000th of invested assets (i.e. total portfolio of stocks/bonds) per day as a gimme
2. Added to that, I'll take 1/30th of the cleared rent profit* I earned that month

Currently, this gives me $82 + $26.66 or ~ $108 per day to use for all personal expenses. That means everything from toothpaste and toilet paper to entertainment, insurance, rent and utilities. After being on this scheme at a lesser amount for about 3 months already, I suspect this amount is going to feel downright luxurious.

*Rental profit is a conservative figure I've reached after deducting standard expenses (capex, tax, insurance, etc) from monthly rental income

Metrics
PhotoBucket finally kicked the bucket. It seems they couldn't figure out how to make money so they started clamping down on use of their hosting site for bulletin boards. Bummer, man. That means all my old image links are broken and though I was able to save many of them before shuttering my account, and could certainly recreate them from my spreadsheet, that might just be too much fun even for me to indulge, so I'm gonna have to pass on that like a kidney stone.

This does offer the chance to change things up, so rather than get into the details about current portfolio holdings or a breakdown of my discretionary spending, I'll take a page out of M741's book and put this out there:
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Looking at this, it really reinforces the #1 and 2 things I need to be focused on right now: expense control and income generation. The dude's deal covers the first point, and #2 can be helped as well.

Madison
I've been putzing around with more little jobs here and there on this place over the past month. Here's what I've accomplished:
  • Put a de-humidifier in the basement for 100% improvement in the conditions down there. Should've done this the day I moved in, duh!
  • More tree trimming to get rid of unwanted branches that are preventing the lawn from growing. This is about 2/3 done.
  • Finished digging the perimeter of the trench around the garage to prevent erosion and rotting of the base of the walls. Still lots of work to finish the digging, grade the area, put up a retaining wall and lay the drainage pipe with protective barrier and gravel.


What I haven't done yet is to fix up the spare apartments and get those rented. These could significantly (700 pcm +) boost my rental income and should be top priority. Unfortunately, I'm hesitant to dive into this because it's messing with the sewer, water and electrics of the house -- all things that I'm somewhat knowledgeable on, but not yet confident enough to jump into straight away. My family is visiting this coming weekend, so I hope to have my father take a close look at it with me to advise the best way to proceed.

Other stuff
Debating whether or not to go to my employer and express that a 22% raise would be necessary to retain me. If accepted, I'd be willing to stay on another year, to July of 2018. The extra money taken in would pad out my investment portfolio, emergency and year one funds, and pay down the Madison mortgage even more aggressively. If declined, I'd probably quit at the end of October at the latest. I've already proven to myself that I can live to my 3.5% budget, so I'm ready to press eject now, but the extra pay would be just the temporary incentive I need to push through one more year of working as I get the rental properties fixed up and starting to generate some real money.

Second, I located a BJJ gym near where I live! Training gives a great outlet for work stress, keeps me fit and in shape, and I like the camaraderie that comes with it too. Coming back to it after over a year off is a bit of a jolt to the system. I need to slow my roll and take things gradually.

Finally, the electric Opel remains unstarted for the most part. Time is an issue as there's lot of house stuff that should get addressed first. Then, pricing out the components has revealed it's probably going to take north of 18K for all the gear to do this thing as I'd like. That means that even if I sold the car that I'm currently using for what I'd use the Opel for, I'd only just cover the cost of conversion plus the original cost of the chassis. And I'd really only want to sell that other car once the Opel is fully operational. So, for the time being, I think I'm just going to continue to research and learn more about it and just do things that don't cost anything and aren't irreversible. Basically, that limits me to fixing up the interior and measuring mocked up version of the various components to determine placement and possibly even fabricating mounts for things like the motor, once I learn which specific unit I intend to use. Good news is that just in the past year there seems to be a real shift in the market back to 3 phase AC motors which is more costly, but has other advantages. Also, I'm pretty sure that at least for the version 1 of the car I'll only be looking to spec a requirement of 40 miles on a charge. That's plenty to get me to the gym and run whatever other errands I need to do locally, holding other vehicles in reserve for longer trips.

I did make some mock ups of the motor and the controller using rapid prototype CAD (cardboard aided design). The cylinder is the motor and the box is the motor controller. Combined, they're nearly $5000, so will probably be one of the final purchases made, along with the battery pack.
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SavingWithBabies
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Re: the dude's diary

Post by SavingWithBabies » Sat Jul 22, 2017 9:12 am

I saw an electric Opel at the Grocery Outlet in Berkeley, California, a couple of times. I googled the markings but not much info. I suspect it was an early lead acid conversion. Cool project! I'd be curious if a VW Kharman Ghia would be feasible.

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El Duderino
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Kharman Ghia

Post by El Duderino » Tue Aug 01, 2017 4:12 pm

SavingWithBabies wrote:
Sat Jul 22, 2017 9:12 am
I saw an electric Opel at the Grocery Outlet in Berkeley, California, a couple of times. I googled the markings but not much info. I suspect it was an early lead acid conversion. Cool project! I'd be curious if a VW Kharman Ghia would be feasible.
That'd be a great candidate platform for a conversion! In fact, it looks like EV West sells a kit, which means they've got an adapter plate for the trans already sorted, which is a help. Video link

MDFIRE2024
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Re: July '17 Update

Post by MDFIRE2024 » Thu Aug 03, 2017 2:40 pm

El Duderino wrote:
Tue Jul 18, 2017 2:57 pm
Looking at this, it really reinforces the #1 and 2 things I need to be focused on right now: expense control and income generation. The dude's deal covers the first point, and #2 can be helped as well.
Hi Dude! Great progress!

I am looking to your chart and it seems that the spending line is / will be below the 3.5% Investment Income line in the next few months. Is that so? Would be really good.

Why do you think about expense control? Your monthly spending was going down in the last 18 months.

Do you already generate passive income, as the chart suggests?

Beside the numbers, I do like the pics what you posted. You created something out of cardboard. Where I work we also did some rapid prototype CAD with cardboards. Is that something you do as a side-income or has it something to do with your profession?

You calculate your daily budget. It is $108 per day. It is an interesting number or indicator, but do you find it practicable? Usually I know, that one uses a monthly budget and compares that with monthly actuals. I am interested in the positive aspects of that number. Why and how do you use it? Do you also calculate your actual daily costs? Please don't misinterpret my many questions, I am just curious about other/new FI related perspectives. (still learning :-)

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El Duderino
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Re: July '17 Update

Post by El Duderino » Mon Aug 07, 2017 1:28 pm

Hey MD,thanks for the comments and questions. Happy to add more info.

Although the next few months are predicted to be under the estimated income line, I've used an estimated monthly budget. Thing is, I haven't been so good at working to a budget unless I'm tracking it closely, and that's what the daily tracking is meant to help.

Expense control is the single biggest way to build robustness in anyone's finances. While my monthly spending has gone down over the last 18 months, some of this was due to a move to a new city and a change from renting to owning my primary residence again. What I'm really trying to prepare for now is a move to a post-accumulation phase of my FI journey. To help bridge that gap over to not having a job income and being more reliant on my savings and earnings from assets, I'm using a daily budget to keep tabs more frequently and while I'm still earning income from my job, I want to test run for a while to make sure my expenses are under what my assets will support.

Perhaps it's just me, but I find it convenient to distill all expenses down to a daily basis to give me a better idea of what things are really costing me. For example, I pay $1381 a month to my mortgage, but really >$1000 of that is to the principal and around $300 is to interest. So on a daily basis, it's costing me ~$10 a day to live in a house. Of course, I need to add in the cost of utilities, insurance, repairs and maintenance, etc, but all those come separately and can be dealt with as they arise just like any expense like groceries. When I make my monthly mortgage payment, I subtract the amount of the payment that went to interest from my running total. Similarly, when I go to the petrol station for fuel, I subtract whatever it cost from my balance. Each morning I can add $109 to the balance rather than adding $3,270 once a month because I think if I did it that way, I'd probably 'run out' of money by the 20th each month and then go significantly over.

I've been keeping a running total going since mid-Apr and I'm carrying a negative balance right now of -$1454. Seems high, but that's totally recoverable and if I stopped doing daft things like spending nearly $800 on cosmetic car parts last month, I'd be doing really well. I hope to get caught up by the end of Aug. When I've had a positive balance going, it gives me a good feeling and sense of satisfaction, but the real benefit is that it keeps the pressure on me to control costs as I feel like the income generated from my assets (even if it is estimated income, currently) is something precious to be conserved and spent wisely.

Income shown on the chart comes from two sources. The biggest bit comes from dividends and stock price appreciation from current equity investments and the other is rental income from two properties. The rent income isn't as passive as I'd like it to be and the equity instrument gains aren't ulta-predictable so I just estimate 3.5% annually as a reasonable SWR. To be super-safe, I'd like to get that down to 3%.

The CAD (cardboard-aided design) was just messing about with some scrap boxes so I could get a physical impression of the components and perhaps do some mock-ups in the car once the engine is out. With 3d printing the way it is now, perhaps switching to that for some of the smaller components later in the planning could actually turn it into a money-making proposition.

MDFIRE2024
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Location: Germany

Re: July '17 Update

Post by MDFIRE2024 » Mon Aug 07, 2017 3:27 pm

El Duderino wrote:
Mon Aug 07, 2017 1:28 pm
What I'm really trying to prepare for now is a move to a post-accumulation phase of my FI journey. To help bridge that gap over to not having a job income and being more reliant on my savings and earnings from assets, I'm using a daily budget to keep tabs more frequently and while I'm still earning income from my job, I want to test run for a while to make sure my expenses are under what my assets will support.

The rent income isn't as passive as I'd like it to be and the equity instrument gains aren't ulta-predictable so I just estimate 3.5% annually as a reasonable SWR. To be super-safe, I'd like to get that down to 3%.
Very interesting. It is an approach that I will write down and maybe try it for myself. In the context of your transition phase it makes absolutely sense. A daily budget needs daily tracking and controlling. You are always up to date. I guess you have some tools/app to keep track? Maybe daily budgets and controlling get you a better feeling your spending. I guess it could give you alsa better feeling how the expense is satisfying (e.g. YMOYL with needs, comfort, luxury, clutter...) Thanks for sharing Dude.

I'll follow your journal because I am interested how you do in your transition phase to postFI. For sure there will be some leesons and experiences along the way. Like you, I am also a conservative and risk averse FIRE-aproacher. I appreciate that you share your thoughts in your journal. Happy to learn some things from you who has the goal in sight.

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El Duderino
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Mid-Aug '17 Update

Post by El Duderino » Tue Aug 15, 2017 5:12 pm

Work
Decided against demanding a raise but I did express to my boss at a recent mid-year appraisal that I'm going to be looking for more time away on holiday, which he was receptive to and understood the primary challenge is getting someone who is capable enough to cover whilst I'm away. In the grand scheme of things, comparing my situation to conversations I have with other people about their jobs and what I read on here in other journals, my job is dead easy and really isn't too taxing. I get to work from home, the hours aren't horrible, I'm well respected on the team and the projects I lead are reasonably challenging without being too arduous.

Madison
Started to demolish the 3rd flat, which consisted of ripping out all the old kitchen cabinetry and fixtures. It's now pretty much a pile of rubble that needs to be hauled off. Feels good to have gotten started on that, at least.

Dude's Deal
Probably won't break even before the end of August, being realistic. I've kept really excellent control over expenses this month, it's just that I keep getting hit with little setbacks. 6 month renewal for car insurance? Okay, paid. Pre-pay deposit for next year's ski trip? Done. Canal boat tour for the family when they visited the city a few weeks ago? Sure, it's my treat. However, it means with all the other daily expenses, I'm currently sitting at $-1219.70 and I know I've got another 6 month insurance to pay before month end along with a gym membership and the mortgage interest portion of my house payment. The good part is that clawing my way back to a positive daily balance is really instilling the discipline of keeping below my per diem, which is currently at $108 due to market fluctuations.

Figured out how to create a hybrid chart so I can plot lines as well as stacked areas and bars. It's a long road, but I'm slowly becoming an Excel geek. Perhaps pivot tables are next.

Spending Breakdown
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One thing I'm particularly proud of is that with the exception of two months this year, I've been able to keep my expenses below $4K. Last year I had 7 months with expenses above that line.

Asset Breakdown
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MDFIRE2024
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Re: Mid-Aug '17 Update

Post by MDFIRE2024 » Sat Aug 19, 2017 8:37 am

El Duderino wrote:
Tue Aug 15, 2017 5:12 pm
[One thing I'm particularly proud of is that with the exception of two months this year, I've been able to keep my expenses below $4K. Last year I had 7 months with expenses above that line.
That's great. Congratulations. If I analyze your chart of your expenses correctly, I think it has to do with housing costs. Two years ago you had to pay rent. I think that lead to monthly costs greater than $4k. Since housing is a very constant cost and not very volatile, there are good chances that you will stay below $4k, IMO (if you don't increase other costs, of course).

Have you already started to think about regrets? Like, regrets to leave the workforce too early? Or, regrets like to FIRE too late or haven't saved enough? For myself, I wrote that down in my Lessons Learned List, that I will focus on regrets when I am in my transistion phase to FIRE. I hopefully won't regret to FIRE too early / late or haven't saved enough or too much. Well, if you remember right, I think you are in a kind of transition phase. I do like your conservative approach to FIRE, btw.

edited: removed "bold"

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El Duderino
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Regrets

Post by El Duderino » Tue Sep 26, 2017 5:45 pm

MDFIRE2024 wrote:
Sat Aug 19, 2017 8:37 am
Have you already started to think about regrets? Like, regrets to leave the workforce too early? Or, regrets like to FIRE too late or haven't saved enough? For myself, I wrote that down in my Lessons Learned List, that I will focus on regrets when I am in my transition phase to FIRE. I hopefully won't regret to FIRE too early / late or haven't saved enough or too much.
I have a tendency to reflect back a lot too and evaluate past decisions, sometimes too much, because I think people can beat themselves up about mistakes they've made and never really move on. However, I really don't have any serious regrets so far. Instead, I'm really glad I started saving when I did with the intensity that I had. It's only been a little over 10 years since I had negative net worth. The weird thing is that I remember those first few months of saving close to 50% of my salary as being very fun and I eagerly awaited the chance to buy more stocks when my paycheck came through. Now I'm less enthusiastic about it, perhaps because I see a fair bit of money exit my checking account and it hardly registers as a blip on the chart when combined with the rest of the long-term accounts. The normal daily market ups and downs more than cancel out a standard month's contribution.

Knowing how risk averse I am, I highly doubt I'll leave the workforce too early as you said. What is much more likely is that I'll wait too long and waste time accumulating money that I'll never need and will largely go unused. Some may be thinking it's already well past that point given my net worth. I've got a close friend who knows more than most about my situation and he occasionally comments on me being overly tight.

Why do you think that regrets are more important when you're transitioning over, MdFire?

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El Duderino
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POSITIVE!!!

Post by El Duderino » Tue Sep 26, 2017 5:51 pm

It felt like forever, but just today I finally went from a negative balance to having a little cash (the princely sum of $46) in my Per Diem!!! :D Seriously, it's been at least two months since I had some extra $$$ kicking around in there and it was really frustrating.

The whole experience has taught me a few things:
1. It's easier to say 'fuck it' and make a dumb purchase when already hip-deep in the money pit than when hovering around a positive balance.
2. When I keep track of all spending on a daily basis, outflows add up a lot faster than I might imagine :roll:
3. It's psychologically better to 'save up' for stuff and have it covered than spend the money and then try to find a way to recover. :idea:
4. By the time I've covered an unplanned purchase, the stuff I bought is a distant memory and the new-ness and thrill of the purchase is long gone.

So yeah, basically all the stuff anybody who has ever saved money and been responsible with their income already knows about. :o

Now that I've worked so hard to climb out of the hole I created for myself by buying a TV and parts for my car, I definitely don't want to do it all again so I'm really taking a hard look at my upcoming purchases to prioritize and stagger them out.

MDFIRE2024
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Re: Regrets

Post by MDFIRE2024 » Wed Sep 27, 2017 12:39 am

El Duderino wrote:
Tue Sep 26, 2017 5:45 pm
Why do you think that regrets are more important when you're transitioning over, MdFire?
Hi Duderino. I have just read again your last two journal posts and found out, that you asked me something. Sorry, that I respond just now, and not earlier.

Initially I found about "regrets in the transistion phase" a few month ago, when I read it here Early Retirement and The Likelihood of Regret.

It is about:
1) "The likelihood you’ll regret retiring too soon."
2) "The likelihood you’ll regret working too long."

Personally with regrets I mean the following. If it is possible to transition into the next phase (of your life, e.g. ER), and you don't do it, you will possibley regret it someday (e.g. a few years later). Why do I think like that? I think so, because I possibly will regret something like that, if I delay my decision to go to the next phase out of subjective/personal reasons, e.g. self-insecurity, fear what comes next, missing courage, etc... Well, I guess it is always a difficult decision, because everyone has different feelings about risks, e.g. I am also risk-averse. I have also read some books about elder persons who reflect their lives and who regret not having done this or that ("Top five regrets of the dying" by Bronnie Ware). In my opinion, the same underlying principle can you find along the ERE-Journey, when it is time to transition over to the next phase.
You know what I mean?

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El Duderino
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Re: Regrets

Post by El Duderino » Wed Sep 27, 2017 9:35 am

MDFIRE2024 wrote:
Wed Sep 27, 2017 12:39 am
You know what I mean?
Yeah, I think so. It's good to approach these decisions from multiple angles by thinking about them in different ways and, hopefully, by reaching the same conclusion, it will boost confidence that the right thing is being done.

That's kind of the story of a lot of our journals. Run the numbers, put down thoughts about progress and run through the scenario of what it will look like to live a very different life.

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