cmonkey's journal

[cmonkey]

Hey look...I'm done with my bathroom!

Here's what we had for a basement bathroom when we moved in...



Here's now.












It tooks a couple weeks longer than it should have because I needed to move the outlet down a few inches. That large wall vanity was bigger than I planned originally. We also repainted the wall vanity because it was part of a different collection and I guess 'white' means different things to different people.

Work on the stairs is about to commence. I have begun marking where to cut the hole and will be doing that this week. From there on its just framing and drywall and on to the next bathroom.


3 rooms down...6 more to go.

[jennypenny]

That looks amazing!

btw ... you'll never finish. By the time you get those other six rooms done, the first ones you did will need some work again.

[cmonkey]

@jp Thank you! It looks much better in person actually.....I'm not a good photographer and the room is pretty small. I think I'll let DW do the photos from now on, she's much better.

[C40]

Your before picture looks like the bathroom section of a jail cell! It's so much better now it's hardly comparable

[cmonkey]

@ffj, thanks. I haven't been putting in the hours like I was back in January. That was a quick way to burn out! I do get something done each day though even if its just 30 minutes of work. Weekends I do more though.

@C40, Haha! We thought that as well, we call it the old jail cell bathroom. I wish I could find a picture of the shower we had. It was a rusted metal box with broken glass for a door and was located under our staircase. I really think it came out of some horror film.

[cmonkey]

More Changes

Earlier in the month there was a discussion about 401K contributions and subsequent access to the funds. I have spent a couple of weeks 'sleeping on it' and have settled on making some changes to how I want to go about FIREing*.

I never was a fan of SEPP plans mostly because the funds were still locked up behind a government mandated withdrawal rate. On top of that I have read from several sources that it makes your chances of being audited a bit higher since the IRS is trusting you to obey the limit. Many people might not.

Doing some calculations and thinking about the Roth conversion ladder, it seems this is definitely a better route for us to take. It hinges on us having a couple of children and being able to leverage a higher tax free (federal, not state) income. I figured out we can safely go just over 50K in income and still not pay any federal taxes if we have 2 children and the tax credits and exemptions for them are not eliminated.

Our income/tax situation breakdown would be ~13K from Lending Club after losses and ~4600 from dividends, which leaves us just north of 31K we can convert from the 401K IRA to Roth and not pay taxes. Deductions total 12,600 and exemptions would be 16,000 leaving a taxable income of 20K-25K. A tax credit of 1K per child would safely cover the taxes due on that income.

The only problem I ran into was how to cover the income that we would have had from the SEPP plan. This amounted to about 4500 annually. In reality we will have more than that in Lending Club income, but I wasn't really satisfied with that since it doubles our withdrawal rate for a few years. Then it dawned on me that 4500 will be well under a 4% SWR for our brokerage account so we could have the choice of either using extra Lending Club money OR just well some stock gains if we need to. I could also just try to sell more seeds or pick up some side income. Maybe we could just spend less money! In any case, we have a few options so I am comfortable going this route.

Another potential issue is with healthcare subsidies which I have not looked into yet. This would increase the amount that we need to pay.

I still haven't justified maxing out my 401K at this point since then I would need to cover over 9K annually (since we wouldn't have a brokerage account) until our first Roth distribution can be made. That is far too high and would force me to work longer. I guess there is only so much optimization to be made.

This works in my mind, but let me know if you think there may be problems in regard to taxes. I value all the input. This does not take into account state taxes, which in Illinois are currently 3.75%. I'm not sure what to do about this since we are not moving. @jacob, if you have any suggestions for Illinois taxes I am all ears.


The most positive news about this change is that our timeline moves up again since we will have a higher yield on the 401K money going into retirement by using the Roth conversion as opposed to the SEPP plan (assuming rates don't rise). We would have been limited to ~2% with SEPP. With the conversion, we can withdraw whatever our brokerage yield is, which is currently ~4%. This allows us to call it quits about 4 months earlier in early to mid 2020.


*At least until the next round of changes.

[George the original one]

You've still got 4 years to go, so it's early to accurately judge the expenses. Does that mean the children will be arriving before or after 2020?

[cmonkey]

Next year most likely for kids. So we will get a good snapshot of expenses before FIREing.

This is my typical over analytical self shining through.

[George the original one]

Scenarios, scenarios, o how I love thee.

[C40]

Sounds like I'll be in the same situation as you: selling off a little bit of my stocks in post-tax accounts while I wait for the 5-year ladder to get going.

There's another variable that I may have which you won't have to worry about: my IRA growing faster than what I convert each year and balooning up over the years. Since you can convert so much each year, you won't have to make any choices about converting extra and paying some tax on it.

This ladder method is so nice compared to the SEPP though. We can make adjustments as we go based off our spending, the growth in the retirement accounts, etc. And if the worst possible case happens - which is probably tax laws no longer allowing a conversion ladder, the SEPP method will probably still be there as a last resort.

[cmonkey]

@C40, That's a nice problem to have! I think I have the same issue, though with my Roth. Since we can't withdraw the earnings, only what we put in, I end up with a Roth that grows to over 100K by the time I can access it (59.5). Not a bad 'problem' at all.

In fact it seems runaway accounts are probably to be expected across the board. All this time I only had projections delineated in months up to the big quit date. Making projections for the years and years afterward these past few weeks...things just runaway even with 2-3% returns. I think millionaire status comes before we are in our mid-50's. Money certainly works harder than I ever could.

[cmonkey]

This is easily the most complex part of the work we are doing to our house, and despite this our new staircase is coming along well and I am very happy with how its going so far. I spent a couple of weeks planning out exactly where it was to go and have it 100% square with the upstairs. It's not quite square with the basement, but nothing I can do about that and in the end we probably won't even notice.



We bought our new basement door and this was the first framing I did. It is a solid core door and is much nicer than anything else we have on first floor. We bought it Friday and I had it installed that night. The night before I tore this wall out. ffj has noted the joys of renovating old houses and I share his misery! That wall that I installed the door in is not quite plumb....to the degree where the top and bottom sills are about 1.5 inches off across 8 feet. Unfortunately this is a supporting wall running down the middle of our house. The only way I can fix it is to swing the bottom of the wall into line with the top of the wall one small chunk at a time which is not ideal. So I'll support 1 or 2 of the joists with floor jacks, take out that section of the wall and move it. Then move on to the next couple of joists. Tedious indeed, but as I'm redoing so much I want it to be done correctly.

That gap on the right side is lost space due to position of the basement wall. It sits in from the upstairs wall by a lot. I pushed the stair case as far as I could, right up to the plumbing.





I have most of the framing and a good amount of the drywall installed upstairs. I have one wall built downstairs. I also have the hole cut but I have not removed the boards yet. I wanted to leave them in place while I install the drywall since it would be easier than doing that on stairs. I am not going to remove those boards until I have the ceiling insulated, drywalled and the light installed. There are two joists running under those boards, that's how I don't fall through.
The hole is 89 inches long and the rise is 70 or 72, I can't remember. It won't be as spacious as a new house might be but it is infinitely better than our old staircase. It is about 65 inches long long and the same rise. We will get about 2-3 more inches on each step. This new staircase is also 37 inches wide, drywall to drywall compare to 29 inches for our old one.

I would make a more spacious staircase, but you work with what you get with these old houses and you need to pick your battles wisely. I had to get it positioned between two runs of plumbing and get it square while leaving enough room at the bottom for a good sized doorway into the basement of 30 inches.



Looking from the other side. This will be in our new bathroom.



Speaking of new bathroom, it turns out that we have plenty of space for our upstairs shower to sit at the end of our new staircase...to the tune of 3-4 square feet! I'm going to love this new shower.

[cmonkey]

Yes it is. I haven't removed it and the wall it's in yet since it would allow the cats access to downstairs. The new door just fit perfectly in the space we had although the trim will be tight on the one side in the hallway. Nothing I haven't done already though.

I'll show some comparison photos once I have the stringers and risers/treads up.

[cmonkey]

I thought about just including this update in my monthly update this week, but I think that would be too long of an update for you all to make it through.


I had a pretty productive weekend for renovations. I would have gotten more done yesterday afternoon and evening but DW had a concert and we spent the evening with a couple friends. It was nice considering we do it about once a month I guess. I have planted some ERE seeds but nothing has germinated yet. They have the craigslist/buy used thing down but are making other mistakes with cars and houses. We'll see.

I have the staircase ceiling insulated with Stone Wool insulation. That is the highest R value I could get into our 2X6 ceiling joists.



Vapor barrier installed.



Drywall is also installed.




You can see I also got the lights installed at the top and also the bottom of the new stairs. I was able to to do all of our basement light circuits now since I also finished my framing downstairs last week. We put 3 different 3-way circuits in so we have lots of flexible lighting now.



It really brightened everything up. It's nice not having to fumble in the dark at night when I go down to the bathroom.




Finally, here is a shot of the old staircase I am replacing. It currently sits in the middle of the house and so swinging it around to the left side of the photo makes the layout much better.




Some other thoughts I've had running through my mind lately include amazement at all the work I've accomplished over the last 4 months of renovation work. We started back in the fall but I kicked into high gear in January. It's amazing looking back at all the photos and updates and that's exactly why I put updates up in my journal. I feel more motivation than ever heading into the last bits of the staircase this week and next and starting on the upstairs bathroom by mid-May. I am feeling a genuine joy now and will be sorry when this part of my life is over. Maybe I'll have to get into house flipping.

Metro Anniversary
I forgot to include this is my last monthly update but I have been riding the metro bus every single day to work for over 1 year now. March 18 was the anniversary. I have spoonman to thank for that life transforming decision so thank you spoonman! Hope you come back online soon.

[cmonkey]

Monthly Update, April 2016

Expenses/Savings

If last month was our worst month in a long while, this month was our best ever for normal expenses. We achieved a new record low - 635.03 for two people. If not for renovation expenses our savings rate would have been 89%. As it was we accomplished 60%. I am still very pleased.

This month I went a bit chart/graphic happy. I have been playing with numbers and getting more information in my arsenal of FIRE kit.

Going forward, our expenses are going to be high for the next couple of months. Bathrooms are not cheap to build and that is what we are doing next. I'll be happy with 20% savings if we can manage it. I'm keeping my eye on that 90% savings rate at the end of this tunnel!!


Normal Spend - $635.03
Remodel Spend - $1576.01
Total Spend - $2211.04
Total Savings - $3365.81 ; 60%





Account Details

I added a couple of columns to this spreadsheet. I added the 'Expected Income' column which is simply the FAI column divided by 12. This represents what I would expect monthly income to be at 9% returns. The next column over is simply the difference between 'actual' and 'expected'. So now you can see the past couple months were well over expected and so the sudden drop is "to be expected" given long term ROI projections. We had 4 charge offs last month so it seems that is the new benchmark number going forward.

Also, I offset the 'expected' vs 'actual' since it takes a month for the interest to start coming in. So last month's 'expected' vs this month's 'actual'.



Here's an interest chart for Lending Club. This shows the Charge Off to Interest Ratio for our account. In other words, how much monthly interest we lose to charge offs. For most investors the expected range is 30-50% each month. We had a ratio of 35% last month which is in line with expectations.



We had 5 dividend raises (IBM, PG, XOM, JNJ and PBCT) in April accounting for an increase of $12.51 in our annual dividend income. Dividends were received from GPS and MDU. I added XOM to our position in the middle of the month.



Since deciding that we will utilize a Roth Conversion ladder to access our 401K after FI, I changed the expected yield to match that of our dividend account since we'll be putting the money into those stocks when we get access. So the expected withdrawl rate went from 2.06% to 4.03% which is our current dividend yield. This explains the large jump in FAI for the 401k and also the small bump forward in our timeline.









Total FAI - $3850.43 (+414.97)


Time to Bills Only - 6 Months (-1)
Time to Bills & Food - 18 Months (-2)
Time to TTM Expenses - 30 Months (-3)
Time to 3% LC - 50 Months (-7)

TTM Expenses - $14286.15 (-466.58)


I added a new milestone to our FAI timeline. I noticed that we will accomplish FI for our fixed bills (garbage, internet, property taxes/insurance) this year so I wanted to have that on there. The next milestone include food expenses and is next year.

We are 6 months away from achieving our first milestone. Yahoo! Further breaking up this large project really helps to motivate.

I also included that 'Timeline Evolution' chart to show how our plan has evolved over the past 10 months of accumulation. We started with over 6 years to calling it quits. We are now down to 4 years, 2 months......after 10 months of accumulating.


Remodel

A month ago we were not quite done with our basement bathroom. I had also completed a great deal of tear out in preparation for our new staircase build. We completed the bathroom in the second week of April and this month has seen me mostly doing planning work for the staircase. I started building about half way through April and I now have 99% of the framing done, and about 50% of the drywall. I am now to the point where I will be taking out the joists and supporting the two joists at the end of the staircase that sit under the shower. After that I can build the actual stringers, risers and treads.

We are planning to leave the drywall unfinished in the staircase until we get the rest of the house completed. We are also leaving the rest of the basement unfinished until we complete the upstairs as this is work that can wait until next winter if need be. The upstairs work needs to be done in warm weather.

May and June will be the months of the master bathroom build! We have most of our layout planning completed and have some work to do before we decide on the look/design. We have an idea of what we want though.

One more note - I have been including a lump sum of $375 in our remodel expenses that isn't actually getting spent yet. That money is going into an account for new carpet. So we have about $1500 saved for that at this point. So in reality our 'real' renovation expense have been lower that what I report each month.

Eggs

We got 240 eggs in April, up from 230 in March. We are keeping up pretty well, but we have about 7-8 dozen in our fridge at this point. We have been giving some to friends and I might sell to some co-workers. We also have 1 hen that has gone broody! She just sits on eggs....all day. Each evening I lift her off and she just starts CLUCK CLUCK CLUCKING at me and poofs up really large. It's really really funny.

[cmonkey]

I spent this past week getting the final framing and drywall completed for our new staircase.

Today I cut all my stringers and installed them without much hassle at all. I think I would have gotten the treads and risers cut but I am super sore today from trimming our hedge yesterday afternoon, so I have been moving slow. That jacuzzi came in handy today.

Here's how I secured the header at the end of the stairs. This will support a concrete pad in our shower and so needed to be strong. I put 6 nails through the joist into the header and then attached the metal bracket. I also screwed and nailed the heck out the two 2X8s. On the other end I have them sitting on a 4X4. The floor upstairs is super strong now.







I put cleats at each end of the stringers to make sure they don't move. I also put 4 inch screws all along the side stringers and put in a prop under the middle stringer and strung a metal bracket between them. No sagging allowed!





I am definitely over the hump of 'difficult' on this current project. It's all downhill from here. Tomorrow I should have no trouble getting all the treads and risers put in and our new staircase will be complete! Well for now....we will be having it carpeted after I finish the drywall later in the fall/winter.


Next week I start on the upstairs bathroom.


Oh and here's that hedge I spent 6 hours cutting...

[cmonkey]

I finished our new staircase this afternoon. It is so much nicer than what we had. Rock solid and nice, longer treads.

First I installed the risers around each tread. Each riser was notched so there would be space under the tread to attach a cleat to support the back of the treads.



Next I just installed the tread.



Follow that process another 10 times and you end up with this.








My next updates will be work in what will be the new upstairs bathroom.

[cmonkey]

It's very strong. OSB has a bad rap as being inferior to plywood, but they are strength equivalent actually. I didn't use solid wood since it shrinks and contracts more than osb or plywood and is much more expensive. OSB does tend to bow if in a really wet location like a roof but I should be alright. There is about 16 inches between the stringers all supported by the riser and cleat which doesn't leave any room for much sag anyway.

If we have issues by next fall before we carpet it, its not hard to swap them out.

I'm curious what you would have used?

[cmonkey]

Those look nice, I didn't know you could buy boards specifically for treads. I have 10 stairs which meant my treads would have cost 100 bucks with those with about 25-35% waste. As it was I used about 1.5 sheets of OSB and they are 10 bucks a pop...so..

One issue is that now we will get bad slivers if we walk down barefoot. So we are confined to shoes/socks for now.

Truth be told I based my design on Mr John Heiz's again, so he had some influence.

[cmonkey]

I started ripping all this out on Saturday.




Here's where I am at tonight. Finally done with demolition and I have a good amount of the new framing done. Carving out this space took some perseverance. You can't tell unless you really look, but I moved that wall on the left out about 8-12 inches from where it was.



Getting to this point took a few larger steps that had to be done in specific order. First I had to tear out our old basement stairs and also our attic staircase.







With the stairs gone, I could rebuild the wall between our old staircase and the new bathroom. It was tilted by a huge amount. You can see in this photo how far off it was. The stud in the back is the correct position.




The rebuilt wall.




I also have the entire ceiling leveled, using ffj's method of 2x4s. At the outside end of the house we lost about 1.5 inches of headroom. I think much of this came from jacking the house up last year and replacing my sill plate.




I have this week and next week off of work and the in-laws are coming to town this weekend, so I expect lots to get done. So far this is going much quicker than I had planned. We have also finally decided on our layout! We are not putting in a tub upstairs simply because we want more floor space. We are, however, putting our washer and dryer in the new bathroom and are really excited for that! We've also decided on our color scheme.