Dave's Journal - documenting the path to FI

Where are you and where are you going?
jsnikeris
Posts: 1
Joined: Wed May 27, 2015 8:44 am

Re: Dave's Journal - documenting the path to FI

Post by jsnikeris »

Hey Dave,

I've been enjoying your writing (and your profile picture :).

I know it's somewhat personal, but if you don't mind, would you please elaborate on:
My "spiritual practice" if you would call it that is progressing nicely
I was just in Chicago last weekend, but unfortunately I didn't come across your posts until today.

Hope you're enjoying your new digs!

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

Thanks JSN.

Sure, I do not mind at all. Perhaps some background may help.

On and off during my early 20s, I tried numerous activities and practiced several philosophies in an effort to 1) better understand the world 2) become more competent and 3) gain personal satisfaction. In retrospect, I was really always seeking #3, but as an immature teenager I had a pretty long way to go to get to that point, Maslow's pyramid and all. I discovered ERE in the summer of 2013, and in December of 2013 I started reading about Buddhism. Now, I have always been an agnostic and lacked excitement to learn about religion, but I read a quote (that I subsequently forgot) that struck a chord in me and piqued my interest. Since then, I have studied Buddhism (primarily), several other eastern philosophies, and individuals (Eckhart Tolle) with ebbing-and-flowing interest. The focus in this sphere has become a focal point as spiritual enlightenment (which is not a magical thing, but that is for another time) is something of a "theory of everything" in that it seems to encompass every single aspect of life, from my perspective. That is, every single issue I have in my life can be approached with this paradigm, without fail, and a reasonable answer can be obtained given focused effort. This has been pretty powerful in my life, and without going much further I will just say that it has made me realize that everything is okay.

Now, back to your question. The real challenge of practicing mindfulness is consistency. I know from reading the writings of others on these forums that I am not alone in this effort, but when I said that my practice is progressing nicely I meant that I have done well with improving the consistency of mindfulness and not engaging in endless mental theorizing and speculation that plagues my personality type.

Ah, bummer about the timing. Thank you, it is nice being settled in up here :). If you are ever in town again send me a message.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Adjusting to urban life

Post by Dave »

Well, we are completely settled in to our new apartment in Chicago and into a regular routine. We both really like the location: 15 minutes from the beach, minutes from bus and L stops, plenty of grocers within a short walk, parks, and more. Very important is that her commute is only about 20-25 minutes via bus, and 50 minutes walking. My commute is two steps from bed to desk :-D. I measured the apartment's square footage and it is a little smaller than I thought, around 270 square feet. When we did the tour of the apartment I could gauge visually that it was sufficient, but upon measuring the unit I was amused how little square footage we actually have/need. I wonder how we used a 550 square foot apartment at our prior place, since we can sleep, eat, cook, work, workout, and bathe here. I will say the one significant downside is that it is not big enough where we can really host friends and family, but I don't see that as a major problem given the plethora of things to do in the area.

Overall the adjustment has been seamless. We have both lived in suburbs for all of our lives, so living in a more urban area is a new experience for us. But truthfully everything is just easier here since everything is nearby, as opposed to our prior apartment in a more suburban area.

A lot of people who know of our frugality questioned the wisdom of moving to Chicago from Indianapolis in light of the higher cost of living. My thoughts prior to the move have held accurate: a minimally expensive lifestyle doesn't increase much (in absolute terms) in a more expensive place. Said differently, lentils and rice do not cost much more here :-D. Or in mathematical terms, 120% of a small amount is still a small amount. Truth be told, our total expenses decreased substantially upon moving here as DF no longer needs her car, which we said farewell to Sunday. Even aside from the financial reasons, we both always wanted to live in the city.

I am sure as we spend more time here we will get more financially efficient, and learn some things about city life that we do not like so much. But all in all, I am very content with the move and look forward to each day.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

July Review

Financial Review

Groceries: $29
Rent/utilities: $786
Transportation: $168
Entertainment: $247
Insurance: $375
Miscellaneous: $13

Total: $1,618

Assets = 5.50X annual expenses

July was expensive. The primary causes were 1) paying rent on two apartments 2) annual renters insurance policy due and 3) trying a lot of restaurants after moving to Chicago. Mix in more frequent visits from friends and family and you have an expensive month. August will be similarly expensive with our final month of double rent, weddings, a bachelor party, and annual vacation. No complaints though, I would not change it.

My assets are down a bit due to a large holding, MAT decreasing a decent amount. I am not concerned about this. Actually, I was thinking about asset classes yesterday. I am in Florida with my family staying in a condo, and every time I am here I think about what it would be like to own rental property. There are some aspects of real estate investing I find attractive: "safer" leverage than using leverage with equities, having tangible assets, generally less (visible) volatility in asset price. But when we talk to the owner of the property, it becomes clear to me the parts of rental property that I do not desire: constant work on securing and keeping tenants happy, repairs and maintenance upkeep, inability to ever really be away without paying/being willing to pay someone if things go wrong. For my temperament and current skillset, investing in equities is much preferred. I spend a lot of time on the front-end researching a company and making the buy decision, I follow 10Qs and 10Ks to ensure the business is not deteriorating, and that's about it. At some point there comes a time to sell if 1) the price becomes irrationally high and an opportunity to take profit presents itself 2) the business fundamentally deteriorates or 3) a more attractive opportunity presents itself, and at that time a lot of work will go into that decision. But by and large, the time commitment during the holding period of the investment is fairly low. That, combined with my (emotional) willingness to ride the vicissitudes of stock prices makes equity investing preferential to me.

So, the investment plan is proceeding smoothly, it's just a matter of staying the course and letting things build. One of Dragline's recent posts comes to mind here: "I am less inclined to view life's model as a series of mountains or ladders to be climbed. To me its more like a garden that needs more or less constant tending but will produce wonderful things over time if properly maintained and depending on what has been planted." In this case, keep attention on the investment process, but let things do their own thing and enjoy the fruits of labor down the road.

Nonfinancial Review

July was a pretty eventful month mainly due to settling into a new city.

It is the first full month that I have worked remotely. That is going pretty well all things considered. I am trying to sort out a few a tech issues, but they are not so bad that they prohibit me from being productive. I really like my coworkers and miss not seeing them daily, but the flexibility is great. Instead of taking a coffee break and chatting up fellow cube dwellers I can walk to the grocery store, workout with my recently purchased (and employer reimbursed) kettlebells, or do laundry. When I am going out of town on the weekend there is no issue with leaving early, I can essentially do my work whenever and wherever as long as I am attentive of deadlines and maintain strong communication of workload with my coworkers. This is great. I am in Florida right now and brought my computer, and plan to work 2-5 hours a day. This vacation is going to cost money, but with a few hours of morning work (during time I would otherwise be doing nothing useful) I can cover my expenses. Since I am hourly, the motivation is there for me to work on vacation. When I was salaried, I would absolutely not do something like this, but now it makes a lot of sense to me. We will see how things continue going forward, but I really cannot complain with my work arrangement right now.

One part of our move we are still trying to work through is dealing with the temperature of our apartment. We live on the top floor of an old apartment building without AC in a westward facing unit with big windows that gets lots of sun. We could purchase an AC unit, but because we do not have much longer to go both of us just want to wait it out. I logically think we will adapt to this over time, but even DF who enjoys hot weather has struggled to fall asleep on the hottest of days. It is also hot to work in the apartment in the afternoon, but I can counter this by starting work earlier and wrapping things up by 2-3PM. I am working through the details, but don't have it all figured out yet.

Although my health goals are really the same as they were in the beginning of the year, I have changed my workout program. I was doing a simple workout program for the first part of the year that primarily consisted of bodyweight squats, pushups, pullups using a pullup bar, ab exercises, and stretches. I started having knee issues so I stopped the squats, and our new apartment does not have a doorframe that I can use the pullup bar on. With that said, my employer recently rolled out a new health program with a $200 allowance towards fitness equipment, thus the above-mentioned kettlebell purchases. These have replaced squats/pushups/pullups, and truthfully I do prefer weighted exercises to bodyweight exercises.

With respect to doing "cardio", I have never been into running and have no desire to get into it or any other form of cardiovascular "exercise". I prefer to integrate movement into other activities, primarily walking. I started walking a lot more when I tested carfree living prior to selling my car, and have been walking a lot since then. However, I have found walking in Chicago to be significantly more entertaining than walking around suburbs of Indianapolis. There are a lot of things to see. For example, DF and I walked 3.5 miles downtown last Wednesday and watched the firework show at Navy Pier, and 3.5 miles back. That might have been an unusually active day for me, but it is not unusual for me to cumulatively walk 5 miles per day.

And finally, my eating has been less than great given how much we have been eating out. I think the frequency of eating out will decline now that we are settled in and tried a lot of the restaurants we wanted to. But similar to the garden analogy above, I view life in general as an accumulation of a lot of little actions over time. It is okay that I spent more money eating unhealthier food in July, but on average I expect my eating and spending to improve. It does not have to be perfect every day, but if the average is trending towards improvement that is what is important.

A good month overall, and onward to my busiest month of 2015. I will try to enjoy it as much as I can, and hope everyone else has a great August as well.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Post by Dave »

August Review

Financial Review

Groceries: $64
Housing: $782
Transportation: $123
Entertainment: $28
Insurance: $56
Miscellaneous: $1,022

Total: $2,075

Assets = 5.61X annual expenses

July was my most expensive month in 2015 due to taking a vacation ($307), miscellaneous costs associated with traveling to/getting accommodations for/eating at two weddings, one of which I was a groomsmen and one of which I will be best man in ($223), and the costs associated with throwing a bachelor party for one of my best friends ($488). I felt the heat financially this month, but it was a good opportunity to observe my personal desire for frugality conflicting against my desire to maintain a normal social life. In a person's life there are only a handful of occasions where you are in the wedding party, and it happened for me that two of them fell in a 3 week window between August and September. The costs associated with getting to, staying at, eating at, and attending the bachelor parties has really added up, but I regret none of it.

Outside of the miscellaneous expenses noted above, August was the second and final month where we were paying double rent, so housing expense will drop going forward.

Last, grocery expense was up a bit this month as I took advantage of a few Groupon offers to buy store credit for $0.7 on the dollar. This ran grocery expense up a bit this month, but I am in effect prepaying a portion of the next month's expense.

Nonfinancial Review

As much as I have enjoyed the weddings and parties this month, the introvert in me is ready for the excitement to die down so I can get back into a rhythm. Specifically I look forward to eating healthier on weekends, getting more sleep, and working on my meditation practice more consistently. Life is good, and I look forward to another month.

FrenchGirl
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Joined: Sun Dec 08, 2013 4:27 am
Location: France

Re: Dave's Journal - documenting the path to FI

Post by FrenchGirl »

Hi Dave,
Just wanted to stop by here and say great journal. You mentioned mindfullness and it actually shows in your writing that you make that effort to appreciate/live in the moment and *choose* happiness (correct me if i'm wrong). You are so positive! Kudos!
Regarding maintaining both frugality and a social life, I feel you. I have debated this issue a few month ago because one of my best friend was getting married back home. With the plane tickets and other expenses for me and my BF, it was a 2000-2500€ budget. On one hand, this is a tight year financially for me since we live on one "income" (=unemployment) and I did not want to dig into savings, especially since we were (and are) starting a company and would need to put a lot a lot of money in it. On the other hand, close friends are so precious. I consider them family that I got to chose. Do I really want to miss the big events of they life ? For money ? Needless to say, we went and she was very happy to have us there.

Plus, you and I are the same age and I find it to be a critical time in our life were everyone is settling into adulthood, fiding their path, making big life changes, etc. It requires effort to stay in each other's life and I am well aware that if I don't pay attention I'll lose sight of everyone (esp. with being a busy entrepreneure, being an introvert homebody, not being a big spender, etc.) So I make a special effort from time to time to step out of my habits to spend time with them.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

FrenchGirl wrote:Hi Dave,
Just wanted to stop by here and say great journal. You mentioned mindfullness and it actually shows in your writing that you make that effort to appreciate/live in the moment and *choose* happiness (correct me if i'm wrong). You are so positive! Kudos!
Regarding maintaining both frugality and a social life, I feel you. I have debated this issue a few month ago because one of my best friend was getting married back home. With the plane tickets and other expenses for me and my BF, it was a 2000-2500€ budget. On one hand, this is a tight year financially for me since we live on one "income" (=unemployment) and I did not want to dig into savings, especially since we were (and are) starting a company and would need to put a lot a lot of money in it. On the other hand, close friends are so precious. I consider them family that I got to chose. Do I really want to miss the big events of they life ? For money ? Needless to say, we went and she was very happy to have us there.

Plus, you and I are the same age and I find it to be a critical time in our life were everyone is settling into adulthood, fiding their path, making big life changes, etc. It requires effort to stay in each other's life and I am well aware that if I don't pay attention I'll lose sight of everyone (esp. with being a busy entrepreneure, being an introvert homebody, not being a big spender, etc.) So I make a special effort from time to time to step out of my habits to spend time with them.
Thanks FG!

You are spot on - I am choosing to live in the moment instead of endlessly dwelling on a not-yet-occurring future. As my practice has developed, I realize it is more accurate to say that I am choosing to consciously be present in the moment. We have been conditioned to find certain experiences enjoyable and certain experiences not enjoyable, but instead of requiring a certain experience to be happy I am applying an observational lens to my experience and noting whatever thoughts arise as distinct from me. By disassociating myself with those feelings, they have much less influence on me. For example, if I am waiting for a bus and there are loud children running around, I normally would become annoyed and find the experience unpleasant. Instead, I can observe the annoyance arising within, and the distinction between environment-emotion-"me" takes away a large degree of the unpleasantness. I have found this to work surprisingly well, and allows optimism to arise more naturally (you say I am so positive, but for most of my life I have been very negative :-D). This makes life more pleasant.

The balance of frugality with a social life can be challenging. For those who are not close to many people it is not as difficult, but in your situation of your best friend getting married, there was simply no low-cost solution that allowed you to attend. And I would have made the same choice as you, since I also consider my closest friends like family. I will not impose my financial values on our friendship, and thus will not miss the big events. This may keep me from achieving an annual expense level of $6,000 per year, but the extra ~$4,000 (living in a city near family/friends, with a transportation and entertainment allowance) required for my social life is well worth it to me at this point in my life.

I should say, especially at this point in my life, because as you say people are settling into adulthood and it requires effort to stay involved with their (busier) lives. My three closest friends are now married, and our friendship has and will continue to change somewhat as a result. Between marriage and the early stages of their careers, we will no longer have quite as spontaneous hangouts, even if I am able to with my current job setup! So like you, I make the effort to step out of my habits and spend time (and money) with them.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

September Review

Financial Review

Groceries: $18
Housing: $426
Transportation: $95
Entertainment: $221
Insurance: $56
Miscellaneous: $482

Total: $1,298

Assets = 5.4X annual expenses

September was a tough month on the expense side of the ledger, between the (2x) weddings and related expenses (wedding gifts, tuxedo rentals, travel and hotel, incidental expenses, etc.) and a little indulging in Chicago entertainment. Some part of me feels bothered that expenses have been high the last few months, but I would not do it differently. As IlliniDave recently said, high expenses "... "hurt" the plan, but in the end the plan serves me, I do not serve the plan." Forward march.

I have been giving some thought to transitioning to a dividend-growth investing strategy in the coming years. I enjoy economics and studying financial markets, but I think I want to decrease the amount of time I spend managing my portfolio. With my current strategy, a lot of time goes into a buy decision, and then as capital trickles in to be invested I continually need to compute intrinsic value of my current investments and potential investments to determine the best area to deploy funds. As the business's market capitalization moves significantly down or up, I have to monitor whether it has reached the time to sell. I have enjoyed this, but all of the monitoring and updating have began to wear on me.

In contrast, DGI seems to require significantly less time to manage. After identifying 15-20 businesses, the process of maintaining the portfolio becomes mechanical. Of course, time will need to be spent monitoring the businesses to ensure no fundamental declines are occurring, but the ongoing effort will be significantly reduced. And although I do not believe in infinite growth and that the next 100 years will be as economically productive as the last 100 years, I do believe that large corporations with strong brands and strong economics in certain industries will continue to be profitable into the foreseeable future. Since the focus of DGI is on an ever-increasing stream of cash flows, some of the price-risk associated with more capital-gains style investing strategies will be reduced. Since the type of corporations I would invest in (historically) grow their dividends faster than inflation, inflation risk is mitigated. And from the psychological angle, downturns in the market become an opportunity to buy cheaper cash flows, which is a silver lining.

I certainly do not think there is anything magical about DGI that yields extra alpha, but I do think the strategy aligns with my views, risk tolerance, and desire for involvement. I will continue to think about this in the coming months.

Nonfinancial Review

September has been a great month on the health front. DF and I have made major efforts to get more sleep, to walk 1-2 hours per day, to exercise every day (kettle bells 3x per week, yoga 4x per week), and to eat meals slower, which has lead to materially smaller portion sizes. The effort has been showing itself on the scale. Earlier in 2015 I set a goal of showing abs by the end of the year, but I had not made much if any progress on that until September. I gained a couple pounds of muscle, but lost no fat. Well, I am refocused now we will see where it takes me. The journey is more important than the destination so I really don't care where I am at on 12/31/15, but I certainly feel better after making the above changes.

Serious talk behind, I have to say that I am enjoying fall and the start of October. This is my first fall in Chicago and I am really enjoying the cool weather and the beginning of fall colors.

I also met a fellow ERE'r last week. It is always great to meet someone with similar financial values, especially since it happens so infrequently! If anyone else who lives in or is visiting Chicago ever wants to meet up please let me know, I would love the chance to get to know more ERErs.

cmonkey
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Re: Dave's Journal - documenting the path to FI

Post by cmonkey »

I agree with your reasoning behind DGI - its a proven strategy that requires a bit less effort than other strategies. It's considered a boring investment strategy for a reason - you can forget about it for months and come back to find things haven't changed. Also in a bear market, its an excellent strategy for preserving income.

My future plans include transitioning all my income to DGI actually. I am investing in LC right now but plan to start using my LC income for DGI investing a couple years after I am done working. LC would basically just be an engine for growing our DGI income since it would be tax free for us (up to 75K/year).


I am also enjoying the fabulous October weather. Yesterday and today I have been euphoric. :lol:

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Egg
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Re: Dave's Journal - documenting the path to FI

Post by Egg »

The focus on these journals tends to be lifestyle/frugality, so I'm always interested to hear investment talk.

Just interested, if you want to be less hands on, why not just buy an index tracker?

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

@Cmonkey - 100% agree. It is interesting you are transitioning away from LC to full DGI. If you don't mind me asking, why the change? And yes, one has to love the favorable federal tax treatment of being a relatively low-income capitalist (<75,000 income for MFJ)!

@Egg - I actually was a index investor (total US market ETF) from the beginning of 2013 to the beginning of 2015, which served me very well. What finally drove me out of the index was a concern with how high market levels were relative to earnings (CAPE ratio being the starting point for this analysis). I always admit that I am not a wizard and do not know the future, but I felt the risk/reward at being invested in a US market fund at January 2015 levels was a little high. Thus, I shifted to investing in individual companies I considered to be undervalued. I have been happy with my investment results with my strategy, but as mentioned I want to be less hands on. As to why I do not go back to indexes, there are a few reasons:

1. I have never believed it was possible (for me) with any degree of certainty to predict macroeconomic trends in the short and medium time frames. Therefore, picking either broad-based (all US market fund + international fund) or industry/capitalization/other-based index funds seemed like throwing darts at a board. With that said, with a long enough time horizon I do not consider this a bad strategy. On the other hand, I do believe in my ability to forecast how a company like Johnson & Johnson is going to be performing in 5 years and establish a sufficient level of confidence about whether their cash flow in 2020 will support a dividend payment >= the 2015 dividend payment.

2. As a future early retiree it is possible (although not certain, depending on what I am doing) that I will need to use my capital to cover expenses in the medium term, which I consider to be 5-10 years. Considering my belief in point 1 above, this exposes me to the risk that in the short or medium term that the portfolio declines in value, forcing withdrawals in a downturn. This is what I meant above when I said "Since the focus of DGI is on an ever-increasing stream of cash flows, some of the price-risk associated with more capital-gains style investing strategies will be reduced." The key is that I will be focusing on somewhat high-yield corporations, so a larger amount (hopefully all) of the income I need to meet expenses is covered by dividends, and not selling off a portion of the portfolio. Theoretically, the total expected return is the same, but with a shorter time horizon I prefer to minimize my exposure to price risk.

3. The obvious next question is not why invest in a fund that focuses on businesses that have decent yield and steady dividend increases, and this is a good question. However, many of the ETF or mutual funds I see that are yield focused are either 1) not as high yield as I would like or 2) achieve a higher yield through investing in what I consider to be riskier companies or industries that may not be able to sustain the dividend yields. In other words, I have not found a fund that is tailored to the combination of the yield rate I am targeting at the risk tolerance I am willing to take. There may be one out there, but I have not seen it yet.

4. Finally, I do enjoy economics and financial markets so I would like some degree of involvement beyond transferring cash into an appropriate fund. There may come a point where that changes, but there is certainly a degree of enjoyment I have in being in control of my portfolio. I do not really believe that what I am going to do will generate any/significant additional return beyond investing in the Vanguard High Dividend Yield Index Fund Investor Shares fund (https://personal.vanguard.com/us/funds/ ... IntExt=INT), but for the reasons noted in #3 I do prefer my strategy as it is a bit more tailored, and I will enjoy the time spent managing the portfolio.

Thank you for questions. I find it very helpful to write out my thoughts.

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Egg
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Re: Dave's Journal - documenting the path to FI

Post by Egg »

Thanks for such a detailed and considered answer, Dave. Although I agree that the US is a bit of a concern as a whole, I do think that by more global investing some of your concerns become less important. ETFs like VHYL, for instance, are not so heavily US weighted. I also guess index investing is more of a long-term strategy and is more likely to lead to financial hammering in bear markets.

Entirely accept your comments about forced withdrawal due to income-generating ability of the strategy being reliant on capital gain.. For myself, right now I'm planning to cover expenses with a day job for the foreseeable future and in any case keep an emergency fund to avoid selling investments, but I guess circumstances vary and it doesn't necessarily figure that way for everyone.

One final takeaway from what you wrote is that maybe you don't actually want to be as hands-off as you first thought. I think that's absolutely reasonable if you've got an edge in the form of being able to spot market valuation inefficiencies to use that. I don't have it at all, which is why I'm happy to let go of the decision making, but if you've got that sense then even slight outperformance of the market compounds a lot over time.

Dave
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Re: Dave's Journal - documenting the path to FI

Post by Dave »

That is a good point regarding investing in international equities. I actually did that from January->May with ~1/3 of my portfolio, and hopped out after it ran up about 12%. This was rather lucky, as the emerging market fund I was in proceeded to drop substantially from that point. I do agree with you though, that through better diversification I could have alleviated some of the risk while still investing in indexes.

Truthfully (like you) I expect to earn enough non-investment income to cover my expenses even when I am FI, so I really don't see myself being put in a position where I would be forced to sell investments.

Really, in thinking about it I think you are right. When I read what I typed above and consider what I am thinking, I really do not want to be that hands-off. While I like the idea of not having to spend so much mental energy on investing, but I feel much more comfortable investing in businesses I understand than picking an index, even though I do believe those indexes will do well over time. Whether or not I will achieve alpha is to be determined, but my primarily focus is preventing permanent impairment of capital. And, as you said, if I can earn any extra %s of return that adds up to substantial wealth down the road.

We'll see, I am still thinking about it.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

October Review

Financial Review

Groceries: $49
Housing: $381
Transportation: $52
Entertainment: $91
Insurance: $116
Miscellaneous: $77

Total: $766

Assets = 6.6X annual expenses

October went well financially: expenses were low and investments performed quite well.

Nonfinancial Review

Compared to the last few months, October was uneventful. I kept up with reading, exercising, meditating, and eating well. One thing of note is that I visited Indianapolis for a week for an office visit to touch base with how the remote arrangement is working. So far, so good, from both of our perspectives.

Onward to November.

cmonkey
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Joined: Mon Apr 21, 2014 11:56 am

Re: Dave's Journal - documenting the path to FI

Post by cmonkey »

Dave wrote:@Cmonkey - 100% agree. It is interesting you are transitioning away from LC to full DGI. If you don't mind me asking, why the change? And yes, one has to love the favorable federal tax treatment of being a relatively low-income capitalist (<75,000 income for MFJ)!
Just saw this!

I wouldn't say I'm transitioning to full DGI, but more that I'd like to be able to cover our expenses with either/or. So once LC reaches a certain balance, I'll begin taking out all the interest (including what we don't need for living) and funneling it into other investments (but leave the principle). In other words it will just sit at 200K and not grow anymore, but won't shrink either. It will just churn out money.

I have learned that I really enjoy finding good DGI stocks. :) I might not want to continue after FIRE but want to give myself the opportunity to do it without having job income.

Nice level of expenses, 766 is quite impressive!

cmonkey
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Re: Dave's Journal - documenting the path to FI

Post by cmonkey »

I decided to read through your journal today during some down time and wanted to say that I really enjoy your writing and have subscribed to your journal. I agree with the comment by FG that you display your mindfulness/positiveness in the way you write! Mindfulness is something I have attempted myself but like you said, consistency is the hard part. You have motivated me to start making a more concerted effort.

I also love how you view your path through this life as a sum of all your actions and that even if some of them are less than perfect, its alright in the end. You are exactly where you need to be at this moment. I resonated incredibly well with your comments on your fixation/stagnation cycling and have realized this is something I suffer with from time to time. I need to step back and watch this playing out. Particularly with regards to financial planning, I have become near obsessive with fine tuning everything and looking at investments over that past few months as I have started my accumulation phase.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

@Cmonkey - Ah, I see what you mean about LC/DGI, very interesting!

And thank you for the kind words! For most of my life I have been extremely impatient and pessimistic. I realized these were useless thought patterns, and decided to work on them via mindfulness. I still have a very long way to go here, but I am certainly better than I used to be.

I think it is easy to fall into obsession about financial planning/tweaking for us aspiring early retirees. We figure out what needs to be done to achieve FI, and then it becomes a (long) waiting game. Unless we are in love with our jobs, the grind feels very slow, which I think is what leads us to fine tune our strategy, check investments, etc. Of course, none of these things really (materially) accelerates the process, but it temporarily alleviates our impatience. I still do these things, too, but that is okay. I think the obsession will fade as we cement our strategy and we realize that nonstop monitoring does not change anything.

cmonkey
Posts: 1814
Joined: Mon Apr 21, 2014 11:56 am

Re: Dave's Journal - documenting the path to FI

Post by cmonkey »

Last Tuesday turned into a much better day after I decided to be mindful. It makes a tremendous difference, almost a feeling of tingles all over your body when you get good at it. Today is similar, despite it being gloomy outside.

I'm glad I'm not the only one that checks thing regularly. I have decided to ween myself off this and just check once in the afternoons for the remainder of the year, and see if I can get it to once a week early next year. I enjoy it but need to take control.

Dave
Posts: 545
Joined: Fri Dec 19, 2014 1:42 pm

Re: Dave's Journal - documenting the path to FI

Post by Dave »

November Review

Financial Review

Housing: $431
Transportation: $0
Food: $26
Insurance: $116
Entertainment: $141
Miscellaneous: $57

Total: $771

Assets = 6.3X annual expenses

November was another month with relatively low expenses. I was able to capitalize on a Google Express offer to get $20 of free groceries, which kept food costs down. Entertainment was a bit up with my family visiting and us visiting her family, but nothing crazy. I bought a used coat at a thrift shop, but this will be offset eventually as the old coat is sitting in a consignment shop right now (I was unable to sell it on Craigslist!)

I actually have a few things either on sale right now, or soon to be on sale: a suit, a blazer, two winter coats, some workout equipment, and my personal computer. One of my goals for 2015 was to focus on reselling possessions instead of taking them to a thrift shop, and I have done well at this. As Jacob noted in blog posts, when you buy used and resell, the true cost of ownership is extremely low (for items that hold value).

Nonfinancial Review

Life just chugged along in November, nothing especially interesting going on. I read quite a bit, both financial and other.

I have also been making a concerted effort to develop a watch list of businesses and price points I would buy them at, so that when tax season arrives in a few months I will be able to continue my investing despite not having much free time. As I mentioned in a prior post, I decided to continue with my strategy of investing in individual stocks I deem to be undervalued. I place myself in the fundamental analysis/value investing camp, with a focus on smaller cap (<$5B) businesses with low debt and high free cash flow, preferably with strong competitive advantages. I am continually updating my investment process, and I try to conduct valuation using several methods to minimize deficiencies inherent in each valuation approach, and to triangulate in on a reasonable approximation of intrinsic value. I have a ton to learn, still, but my focus is on managing risk by focusing on businesses where I perceive the downside potential to be very low (low debt, high free cash flow on price, businesses where cash flows are proven to be maintained even in unfavorable economic environments).

Time will tell how the strategy works out, but it will be several years before I really know one way or the other.

mfi
Posts: 93
Joined: Sun Jul 29, 2012 10:27 pm

Re: Dave's Journal - documenting the path to FI

Post by mfi »

In a future monthly update, would you consider posting an itemized list of your monthly food/groceries purchases and how those items translate into meals/recipes?

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