jbb13's ERE Journal

Where are you and where are you going?
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jbb13
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jbb13's ERE Journal

Post by jbb13 » Sat Aug 20, 2016 9:53 pm

Hi all,

I discovered ERE in 2014 after my dad brought the book home (I read it and he didn't ha). I've read it a couple times and each time I intensify my game plan. So after reading it a couple months ago I thought I would check out the forum as a bit more to get my hands on. After reading a couple journals (and getting inspired) here I am creating my own.

About Me:

Currently enrolled at Virginia Tech as a dual major. Primary: Ocean Engineering. Secondary: German.
I am 22, quickly approaching 23, and am just about to begin my last year in college.

I've been recording expenses since May 2015 but didn't impose a budget until March 2016. The differences between passively observing behavior and actively directing it are quite apparent in my spending graphs.

I am living in a small apartment with my girlfriend who has also read ERE and is equally dedicated to becoming financial independent (lucky). We have been together 5 years (since the end of high school) and went to the same college. Right after high school we camped across the US and have been addicted to travel ever since, which resulted in 4 more road trips. If anyone is close to Colorado check out the Great Sand Dune National Park by the way. It's otherworldly.

Issues:

We both have a car, which will change when I graduate since I am going to convert to riding a bike. My car still has a loan on it so that's an expense on top of insurance and upkeep.

We both have smart phones, also going to change when I graduate, possibly beforehand. Really I only use the camera and send people pictures which was impossible on my former flip phone. Not sure if the technology has caught up with the basic phones yet?

Since I'm still in school I can't bring in much income so I've been focusing on cutting costs rather than upping income. We shall see where that is in a year.

Where I'm At:

Assets:
Currently I have $1,500 in an investment account. However, I'm studying investing and am going to wait until I have a good understanding before putting any principal at risk.

Liabilities:
Currently I have 30k in student loans, probably going to end up with 31k once I graduate. This doesn't have to be paid off immediately but I'm going to try to pay it off within the first year upon working.
My car still has 9k until it's paid off. Once I graduate I will sell the car, for 9k, and break even paying it off.

Spending:
I'm averaging somewhere around $1,500 a month:
- Rent $600
- Food $250 - $300 (too high but working on it). We cook every meal, unless we meet up with friends from out of town or something.
- Cars $286 (which kills me)
- Phones $70 (which kills me)
- Then random wants like ice cream or chocolate milk or eating out with the above mentioned friends $10 - $30 depending if we eat out or not

Here are what the graphs look like:
The orange line is when the budget was imposed.

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I know the numbers don't add up since there are a couple things like random medical expenses or once a year travel expenses. But these are the main ones. So right now we are just under $20k for yearly expenses. After graduating and purging, my goal is to get that number below $10k.

Depending where I work, the plan is to live on board a sailboat, since we will be cruising for a bit after FI, to keep rent down. I'll have to run the calculations to see how much it is per month depending on the boat we get.

The goal is to be financially independent, with a 4% SWR, by age 26. So I have a little over 3 years.

Goals for Now:

Bring food costs down to $200 or less every month

Research basic phones or how to get by without a phone

Keep studying investing and put as much as possible into the investment account. Right now I have 60% of my income going into the investment account and using the other 40% to pay bills and stuff.

Get hired. The number one choice is Bridgewater Associates in CT. I want to work as an analyst and learn as much about finances as I can, not to mention working in a kind of extreme environment, which suits me, hence ERE.

I'll stay tuned with monthly or every 2 month updates depending on if anything exciting happens.

Don't hold back with any comments or questions, I don't have a problem discussing finances or personal situations.

jbb13

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Dragline
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Re: jbb13's ERE Journal

Post by Dragline » Sat Aug 20, 2016 10:05 pm

Welcome, young Paduwan Learner. It all looks pretty good except for that car. We'll let that go as "sunk costs."

Have you read Ray Dalio's manifesto describing the way Bridgewater works? It's very interesting.

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Viktor K
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Re: jbb13's ERE Journal

Post by Viktor K » Sun Aug 21, 2016 1:14 am

jbb13 wrote:I've been recording expenses since May 2015 but didn't impose a budget until March 2016. The differences between passively observing behavior and actively directing it are quite apparent in my spending graphs.
I started budgeting before tracking, but I can easily relate to this. I feel like some good financial advice would be to budget AND track your expenses. Maybe just doing one or the other doesn't work as effectively :)

I'll definitely be keeping an eye on your journal man, sounds like you're starting nice and early and with the right mindset.

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jbb13
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Re: jbb13's ERE Journal

Post by jbb13 » Sun Aug 21, 2016 9:01 am

Thanks for the kind welcome!

@Dragline
Yeah that car needs to go, but until I move I think it's going to have to stay. Maybe I can find a way to get rid of it before I graduate but I'm not sure. I have read Ray Dalio's manifesto and think it would be an interesting place to work, especially for an INFJ looking to grow. I wonder how close the company has come to actually functioning based on his principles though.

@Viktor K
I'm a little unsure what it would look like to budget before tracking. How did that work?
Also that looks like a hard boulder problem you're on. V8?

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Viktor K
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Re: jbb13's ERE Journal

Post by Viktor K » Mon Aug 22, 2016 12:42 am

It basically looked like me estimating or deciding what I thought I would or wanted to spend in various categories, but then I wouldn't look back and see if I followed it or not. So at the beginning of the month I'd be like, "Oh, cool, I can save like $300 this month," but then at the end of the month that $300 had gone God knows where :p.

And it was actually much easier than V8! All the holds were super positive jugs, but it had some good movement :)

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jbb13
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Re: jbb13's ERE Journal

Post by jbb13 » Wed Aug 31, 2016 4:46 pm

This month has been a little disappointing:

Cons:
- More spending on food than I would like
- I bought a luxury item (first in a few years so it's ok)
- More treats than usual (cinnamon rolls are so good though : ) )

Pros:
- Started swimming laps before classes in the morning. Really enjoying waking up and getting the day started by being in water.
- Showering at the gym (after swimming in the morning), which has decreased the amount of showering we do at home, which in turn has lowered the electricity bill
- Applied to Bridgewater. Interviews start in October so we shall see what happens
- Being more disciplined about getting school work done early


Graphs/Data:

Image

Swimming started in july so it's making a difference, albeit a small one.

Monthly Spending: $1552.78 vs. $1644.47 moving average.
So even though this month was lower than the average, it still seemed like a bit of superfluous spending.
Food: $325.85 vs. $277.65 moving average
This was the category that was most surprising since it seemed like we had enough food to last us through the month without needing to shop, but ended up having quite a few trips to the store.
Treats: $15.92 vs. $9.39 moving average
Sugar addiction. It's all about the cinnamon rolls and ice cream ha
Eating Out: $3.09 vs. $29.03
Finally. This is the first month in the last 3 or 4 that we haven't eaten out with friends, which has helped. I also realize that I need to create a friends category to track spending in. We've been going on more picnics and hikes and having more people over for dinner than we did in the past so that makes a difference in the amount of food spending we do.

Investing:
Nothing has moved yet. Still looking into plans and researching how I want to allocate.

I'm also debating on if I want to get a part time job while in school just to have some money coming in that could be invested. It's only been a week and a half since school started so I'm getting a feel for how much free time I will have.

The luxury item that I bought was a knife sharpening kit (japanese waterstones), which I'm very excited about. We do a lot of cooking and our knives are dull as can be. This video shows how sharp knives are supposed to be, so I think most knives fall into the "dull" category compared to this

Bob Kramer: What is sharp?
https://www.youtube.com/watch?v=xRPrswhMdAc

The stones should arrive friday so I'll give an update as to if they actually work or not : )

llorona
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Re: jbb13's ERE Journal

Post by llorona » Fri Sep 23, 2016 4:28 pm

Not sure how much the knife sharpening kit cost, but I'd call it an investment. Lots of people pay to have their knives sharpened professionally, which can quickly add up. By learning to do it yourself, you'll save money over time.

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jbb13
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Re: jbb13's ERE Journal

Post by jbb13 » Tue Oct 04, 2016 9:39 pm

Goals for September:

Bring food costs down to $200 or less every month
- Failed. Food was $280 which is right about my moving average.

Research basic phones or how to get by without a phone
- Didn't do. Honestly this probably isn't going to change until I graduate

Keep studying investing and put as much as possible into the investment account
- Minimal studying done. Could have done more

Get hired.
- Still working on it but progress it being made

September Expenses

Food:
$280 vs. a $286 moving average. I'm not sure how to bring this down other than just eating less, which is a viable option in all reality. How do you guys handle your food budget? I buy things in season and on sale, have cut out more expensive foods like cheese, but I've been hovering around $300 and $275 for a couple months.

Rent (includes internet and electricity):
$585.33 vs. a $658.25 moving average. Nothing has changed since January, just taking a while for the average to settle down to the current rent.

Treats:
$13.97 vs. a $9.77 moving average. Yeah, I developed a nasty little sugar addiction in the middle of the month and ate ice cream and cookies. I'm a bit disappointed in that but fortunately it's been broken. I need to refocus on why I'm cutting costs. Back in March it was very clear to me that every dollar spend meant losing money to invest for FI, but now that clarity has worn off with the passage of time. Time to bring that back into the decision making process.

Eating Out:
$3.09 vs. a $25.47 moving average. Before celebrations begin, look at the friends category. Eating out with friends has now been moved to the Friends category instead of being kept in the eating out category, where it is a little misleading. If it were just us, we wouldn't eat out, but when friends want to go grab a bite we are more inclined. Do you guys deal with this too? At what point does it become unreasonable to decline hanging out with friends to save money? I understand that we could do something else, or we could go to the restaurant but not eat anything, but is that social awkwardness worth it? So far my thoughts have been that for the large expenses that make the difference between FI and working for many years, such as housing, food, random consumption, and transportation, I don't care what other people think of it since it's so important to me to become financially independent. However, I'm unsure about the little, nitty-gritty aspects of budgeting. I'm feeling like it's the difference between being frugal (altering lifestyle and strategy to save money) and being cheap (saving money for the sake of saving money without consideration to 2nd and 3rd order consequences). So to conclude this essay, I'm thinking that I won't skimp on the small spendings that bring in large amounts of reward. If that contradicts someone's philosophy, I'd love to hear a counterargument.

Friends (newly created category):
$29.75 - hasn't been around long enough to have a reasonable moving average, however, based on past eating out with friends data, this is about at the monthly average.

So all in all, it was a pretty average month ha.

October

Highlights:
- I should be contacted by Bridgewater within the next week or two and see where that goes.
- I have a rule about getting school work done (inspired by Teddy Roosevelt who would get his work done well in advance), that an assignment should be completed the day it is assigned. I haven't gotten there yet, but I'm steadily working ahead and getting close. It feels really good to not have assignments looming over me at the last minute. My peers are always scrambling to submit stuff at the last minute and it's an unnecessary stress.
- There is a quartet (2 violins, 1 viola, and 1 cello) coming to town that we are going to for $10. Not bad
- It's cold enough to enjoy hot tea! :D

I'll keep working on the food and the treats, but honestly I'm just waiting to get out of school before going true ERE style.

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jbb13
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Re: jbb13's ERE Journal

Post by jbb13 » Thu Oct 06, 2016 8:22 am

@ llorona

I actually thought the same thing and ran a few numbers. It turns out that if my stones last for more than 6 years, which they should, then it would be cheaper owning them than reoccurring professional sharpenings. Not to mention I could probably make a few bucks using the stones to sharpen friends' knives or something. I had gotten one of my knives professionally sharpened just to see if it was going to be sharp enough and they put it through an electric sharpener, but it still wasn't sharp. So long story short, I put half of the expense in investments and half of it in luxuries and yeah my knives now cut through paper like the video I linked. It's awesome :D

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jbb13
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Re: jbb13's ERE Journal

Post by jbb13 » Sat Jan 06, 2018 4:34 pm

So after a year and a few months, I'm back! I had stopped posting, as nothing of interest was going on: no income. With no income, and therefore no progress, there wasn't much to talk about. Well no longer! I've now been working full time since June. So basically, the journey has finally begun. Here is a quick summary of the important things that have happened:

1. Graduated with a degree in Ocean Engineering and a degree in German
2. Got a job in Newport News, Va
3. My girlfriend (same one as before) and I are renting an apartment
4. Bought some stuff on the high of actually making money, now am settling into saving and getting going on FI
5. Studying options as the main vehicle of investments instead of stocks, as were previously the go-to investment (reading Nassim Taleb, excellent stuff).
6. As of last week, I found out that I've been driving in a car whose airbags won't go off if something happens. So now I'm borrowing my GF's car until I order parts and get mine fixed

So here is the situation: our number is 400k, which would give us a 16k per year SWR (4%). The 400k includes buying a sailboat so we will actually be living on less, just depends on how much the sailboat costs. I am currently making 61k pre-tax, working as an engineer. I’m not entirely sure what the take-home pay is going to be since I haven’t gotten any tax returns for the year yet, but I’m guessing somewhere around 50k. The GF is looking to find a job in the area but we are assuming she will be in the 50k range, pre-tax. So post-tax, we are looking at bringing in 90k per year, not including any kind of business or investment returns.

The issue is our expenses, which are currently floating around 30k per year, which I know is terrible. This means we would be bringing in 60k per year after taxes and expenses, which would mean we reach FI in (400/60 = 6.67) about 7 years. This is ok, but really the goal is to be financially independent by the time I turn 26, which is 2 years away. So that whole 7 years thing doesn’t sit too well with me. The only way we are going to be FI by the time I turn 26 is by having businesses on the side bringing in income or simply selling a business in the 2 year time frame. This is currently what we are working on.

Back to the expenses. I would like for our expenses to be somewhere around 20-24k while working, then drop when we retire to our SWR number. I know people often advise to live at your FI number before retiring on it, but in our case we are going to be traveling and rent is the main thing upping our current expenses. So I do see a substantial drop in our expenses once we retire. Retirement will be sailing around the world in a relatively small sailboat (influenced by Lin and Larry Pardey for anyone interested), which is inexpensive. After sailing, there will be other land travels, mountaineering adventures, business ventures, and remote cabin subsistence-living for a period.

But here is our current situation:
Assets:
- $61k pre-tax income from job (GF job coming soon)
o Most likely around $50k after tax
- GF owns a business she started right after college. Could be liquidated for at least 85k right now
- $3,000 cash in savings
- $5,000 in 401k
Liabilities:
- $30k student loans on my end
- $35k business loans for GF
- We each have a car, which has been rough recently, since they need maintenance
- My car still has something like $3,000 left on its loan
Our typical monthly budget breaks down like this:
- Food: $350
- Housing (utilities included): $1150
- Phones: $70 (this is going down since we are changing plans. GF already did, I need to get my stuff in order)
- Job Related (commute and such): $50
- Medical: $50
- House Upkeep: $30
- Car Upkeep: $300
- Car Loan: $200
- Student Loans: $300
- Treats (ice cream and such): $30
- Eating Out: $40
- Travel: $225
- Entertainment/Luxuries: $90
- Friends/Gifts: $50
- Books: $20

For a grand total of $2955, which I’m calling $3k per month. So that’s $36k per year, ouch! Just as a side note, some of these were averaged over a year, which included large purchases not to be repeated. But still, very high. Here is an actual breakdown of what we spent: Note that we moved to Newport News in June and thus have higher rent and expenses. Also, I paid a big lump sum to student loans in December, which is why that month is so high.

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Here is a breakdown of where all the money goes:

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Note that there are 2 car categories: Car upkeep and car loan. Combining them you get 18% of the pie being taken up by car. So our biggest problems are

1. Rent at 32% of pie
2. Car at 18% of pie
3. Food (including treats and eating out) at 16% of pie

So the top 3 expense categories take up 66% of our total spending. Obviously, it is here that we need to make changes.

But for 2017 here is how much progress we have made toward FIRE

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More to come on strategy and an updated FI number (GF update to be made ha)

EdithKeeler
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Re: jbb13's ERE Journal

Post by EdithKeeler » Sat Jan 06, 2018 5:54 pm

Newport News (my home town!) has a low cost of living. Houses are fairly cheap, though you’ll spend more for better neighborhoods. Definitely a car town—I can’t imagine not having a car there. The good thing is there is so much you can do cheap there. Lots of festivals, free music, etc. and if you get really bored in town you can always run up to Williamsburg and walk around the colonial area or head to Norfolk or Richmond. Biking on the Colonial Parkway is fun, and I suggest making friends with someone who has a boat who can take you fishing. Always fun and a good supplement to your food budget. I bet your expenses won’t stay that high after you get settled in. I miss Tidewater—I don’t think I appreciated it enough when i lived there.

Poor Daniel
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Re: jbb13's ERE Journal

Post by Poor Daniel » Tue Jan 09, 2018 11:01 am

Hi :)
Why don't you get rid of the car and bike/ run/ walk? Better for your health and finances. -> http://earlyretirementextreme.com/day-7 ... -free.html
And you should be able to eat for 80$ a month per person-> http://earlyretirementextreme.com/day-3 ... pping.html

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jbb13
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Re: jbb13's ERE Journal

Post by jbb13 » Mon Jan 15, 2018 9:18 pm

@ EdithKeeler
I will definitely be checking out the colonial parkway. I've been meaning to head up to Williamsburg and Jamestown to see the colonial parts of the area. I'd like to get a sailboat to really explore the Tidewater area but I don't really have the cash laying around for that haha. Small world though huh?

@ Poor Daniel
Thanks for the links. It's been a while since I actually read ERE so I'm going to go through the make overs one by one and make the changes. Absolutely the food should be lower and I have some ideas for lowering transportation costs. However, it's not ideal to live right next to the place I work, it gets sketchy fast, so I need some form of transportation.

Over this weekend I've been making goals for the year. Most of them have to do with getting out and having more adventures (hang gliding for instance), some are about studies (reading and finance), and some are about finding like-minded people in the area. However, the most relevant one for ERE is to invest my savings. I've been putting money aside every month for an investment opportunity and after much reading and studying I've finally got my trade. So now it's time to open a brokerage account and start putting money on the line. This will be my first time doing options trading (hence the brokerage account) but I am feeling good about it. I'm going to keep most of my savings untouched as an emergency fund and simply invest the excess of my paychecks. These will add up as the months go by until I hit the mass I'm waiting for, then I'll funnel my paychecks back to savings until I'm ready to stake more.

It feels good to set some goals though. Now to make a schedule for the goals' completion and get to work!

PS. My GF hence to be known as B, may have just landed her first client for her business and is rather stoked haha

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