m741's ERE Journal

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m741
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Post by m741 » Wed Feb 02, 2011 4:59 am

Hi, all! This is my attempt at tracking my ERE goals, formulating plans, and soliciting feedback. I'll be posting monthly updates, starting in a few days when I get January's investment numbers. Any response is appreciated (well, except an openly hostile one...)
Background
I'm a male in my early 20s working as a software engineer in NYC. I have most of the same criteria I've noticed in others in the ERE community - I'm INTJ, geeky, a bit OCD, etc.
As far as my history - I've never been a big spender, and most of my discretionary spending has been on books - I have a huge weakness for books and would estimate my library to be 1-2k books at this point. Suffice it to say that I have enough that I don't want to count and moving is very difficult. I never spent money on big purchases, besides a new computer every few years. No fancy cars, clothes, gadgets, toys, etc. I've never been in debt and graduated from a state college with no outstanding loans.
A few years ago I graduated from college and landed a very lucrative job as a programmer. At that point I didn't buy anything gratuitous, but I started to lose track of my expenses (particularly food expenses). I knew that money would be there, and enough would be left over that I could save as well. I also quickly discovered that the job was too demanding for me long term (55 hour weeks), and that it wasn't something I wanted to be doing in 15-20 years. I was feeling pretty bad, saving some each paycheck, in an aimless state, with the 'knowledge' that I'd need 1-2 million in the bank before I could retire. That started to change late in 2010 when I encountered ERE, and starting in January I began to record all my expenses.
FI Goals and Obstacles
My FI weaknesses are where I live (NYC area, which is very expensive) and the fact that I don't want a roommate - so housing costs are high and difficult to reduce. Furthermore, although I do know that I want to retire early, I'm not sure what else I want to do... whether or not I want kids, how much I want to travel, or even where in I want to end up living. I expect this lack of a passion may become detrimental to motivation.
My long-term goal is financial independence before I turn 30. I can't be more specific, because I don't have an accurate picture of what level of expenditure is reasonable for me to use as a baseline right now - I may reach FI earlier than that. I do know that my expenses are very high by ERE standards, and my immediate goal is to get them below 2k/month. (My rent is $1400/month alone). There's a lot of low-hanging fruit, so this is feasible for me. If my expenses are below $2k a month, that means my non-rent expenses are $600 a month. When I reach FI, I will move somewhere cheaper than NYC, and my net expenses would be closer to the $1200/month range. Finally, I'd like to start to develop the skills that Jacob describes in the ERE book with the aim of becoming a Renaissance man. I'm going to be starting with cooking, and hopefully bike repair in the near future, and take it from there. It feels as though the only true skill I have is programming, and that only within a narrow band where I'm extremely competent - so the ERE book really hit home and I know I ought to diversify.
Lately I have been recording expenses, reading as much as I can about FI (rereading Your Money or Your Life, and other books), and using akratic's Google Docs spreadsheet as a starting point for geeking out over FI and finances generally. It's a wonderful feeling knowing that I'm starting to get control over my money.
I will be posting another update within a week or two describing my progress in January and my goals for the month of February.


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Post by dragoncar » Wed Feb 02, 2011 5:05 am

I assume you are in banking. Why not write a program that collects all those fractions of a penny that get rounded in electronic transactions? It's like that take-a-penny, leave-a-penny jar, only a thousand times a second.
Seriously though, welcome... it sounds like you have some good short and long-term goals worked out.


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Post by m741 » Wed Feb 02, 2011 5:23 am

I think they did that in Superman III. Also, a bunch of hackers tried it in the '70s. One got arrested.


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Post by jacob » Wed Feb 02, 2011 6:57 am

I started downsizing my library (the second-largest of anyone I ever met) about 5 years ago. I used to buy books because there were no other ways to read them and I just didn't think of selling them again when I was done with them.
These days I [try to] only keep reference books and other books I reread. Once I stop reading a book for a while, I sell it.
The problem with books is that they're very heavy and also quite voluminous.


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Post by Surio » Wed Feb 02, 2011 7:38 am

Amen to that sentiment Jacob,

When I moved back from UK, not knowing any better I shipped nearly 27 boxes of books (thinking I will make up the transport costs later)! Every day I live, I have regretted the decision, as we have neither paperbackswap nor a second hand market for "esoteric" books. My ERE goals are severely imapired due to the books. I've stopped buying boks for a while now and still thinking what to do. :-(

They are indeed heavy and voluminous. I've packed my back just moving them around the house to make makeshift couches from boxes as I mentioned in the "woodworking" thread earlier!


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Post by m741 » Thu Feb 03, 2011 4:59 am

*January 2011 Results*

This is my first of (hopefully) many monthly updates. It's actually the first month that I've actually kept track of my expenses, and it was truthfully quite shocking to me. I'm still in the process of organizing my numbers and getting some charts put together, so I might post another update later this month. My net expenses this month were $2970; the greatest expenses fell into the following categories:
* Housing: $1400

* Food/Pets/Cleaning Supplies: $454

* Donations: $375

* Utilities (Electricity/Gas/Cell/Internet): $249

* Transport (non-commute): $183
Obviously this is not conducive to early retirement, and was a real eye-opener to me; the only non-regular expense was recharging my pre-paid cellphone. Long-term, I'm going to be selling my car - it makes no sense to own, since I live in the city. This will probably happen during the summer. That will drastically reduce my transport expenses since almost all of my transport costs were car insurance. I'm planning on biking and taking buses/trains to visit family, and signing up for Zipcar to run errands once or twice a month. I'm also planning on reducing the cash I donate, and increasing the time I spend volunteering. I may be moving to a new apartment in the $1000-$1200 range this year, though that's undecided. There's not much available for cheaper, unless I get roommates, which I don't want. Saving $400 per month would be a big deal, particularly if I manage to slim down my other expenses.
My immediate goals, for February, are to trim out some of the spending that's most pointless. Budget-wise, I'm going to make the following changes this month:
* Cancel gym membership (saves $51)

* Cancel a monthly donation to the ASPCA (just $10). Also, I've been donating $75 to various charities, weekly. I will still be doing that, but only on weekends that I don't volunteer for 2 hours.

* Reduce food expenses by $100

* Trim entertainment expenses down to $20 ($80 this month, in the form of books and a few albums)

* Cut electricity+gas costs by $30

* I'm also expecting costs of my social life to go down (this month they were $85 mostly thanks to a very expensive weekend)
In addition, I'm planning on completing the follow ERE-related goals:
* Continue recording all expenses and clean up the Google Docs spreadsheet I'm using.

* Pay all overdue fines from the library and start taking books out again, rather than buying.

* Finish "Your Money or Your Life" and read "Affluenza" and "A Random Walk Down Wall Street"

* Get rid of at least 20 books

* Make all planned calls over Google Voice


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Post by George the original one » Sat Feb 05, 2011 1:37 am

I think we will all enjoy seeing how your changes work out for you!


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Post by sky » Sat Feb 05, 2011 2:17 pm

Were you able to save anything in January?


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Post by m741 » Sun Feb 06, 2011 5:25 am

Yes, I saved 40% of my take home pay.
So far on track for February. Already got rid of 20 books (though I was also given some books people were getting rid of, so net I'm only down 10 books. And my spreadsheet is totally awesome now... akratic, if you're reading this, thanks!) I will be swapping out "Affluenza" for "The Millionaire Next Door" as the book I read in addition to "Your Money or Your Life".


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Post by m741 » Wed Mar 02, 2011 6:56 am

*February 2011 Results*

The following is a summary of my result for the month of February, as well as my plans for March.
Overall I was satisfied with my results for the month. The headline is that I was able to reduce expenses from January by $500. It wasn't even noticeable to me. $100 of that was the fact that I used basically no time on my cell phone, and didn't have to pay any bills for that. Another $150 was from cutting food & grocery expenses, and finally another $150 came from reducing the amount I donated. The remainder was from a general reduction in expenses. In total, I saved 65% of my income (up from 40%), thanks mostly to the fact that I got a raise, which is applied retroactively back to the beginning of the year. So next month it will be a lower percent. My biggest expenses for the month were:

Housing: $1400
Food: $285
Transport (mostly car insurance): $254
Donations: $182

My goals for February were:

Cancel gym membership (saves $51) (not yet)
Cancel a monthly donation to the ASPCA (just $10). I was donating $75/week to various charities. I still did that, but adjusted somewhat, and didn't donate when volunteering.
Reduce food expenses by $100 (completed)
Trim entertainment expenses down to $20 ($80 in Jan) (completed)
Cut electricity+gas costs by $30 (unable to evaluate - bill comes the 15th)
Reduce costs of social life (completed)
Continue recording all expenses and clean up the Google Docs spreadsheet I'm using. (completed)
Pay all overdue fines from the library and start taking books out again, rather than buying. (not yet)
Read "Your Money or Your Life" (completed)
Read "The Millionaire Next Door" (completed)
Read "A Random Walk Down Wall Street" (partially completed)
Get rid of at least 20 books (completed)

Make all planned calls over Google Voice
(completed)

The incomplete goals will carry over. My goals for March are:

Read "The Tightwad Gazette"
Read "The Richest Man in Babylon"
Finish "A Random Walk Down Wall Street"
Pay overdue library fines
Cancel gym membership
Don't buy ANY books
Get rid of another 20 books
Trim total expenses from $2500 to $2300
Trim food expenses to $225 (from $285)
Only watch TV one day a week

In terms of the big picture, I noticed that I really began to think about what I wanted out of retirement. And one of the big things I'm thinking at this point is that I'd like to move from the East Coast out to the Pacific Northwest. I've traveled out there several times and always enjoyed it, I have some family out there, and it seems like a more suitable environment for me. As a consequence of this decision (which is by no means final, just a dream), I realized just how much the stuff I own weighs me down. If, after retirement, I have to travel all the way across the country, and transport my junk with me, that certainly provides an incentive to get rid of some of it, and not to buy anything unnecessary.
Using Akratic's spreadsheet, it now appears that I'm 3.5% of the way to retirement, or 9 years away. One open question is how to evaluate expenses today compared to retirement. For instance, I'm guessing that I'll spend ~$500/month on rent in retirement, which is dramatically different than the $1400 I spend now. Just cutting that out more than doubles my % to retirement, and reduced the time frame to a very manageable 4.5 years. On the other hand, I will be spending something on health insurance, etc.
Anyway, I'm optimistic for March, and I think my goals are reasonable. I'm enjoying the whole ERE process at this point, though I certainly wouldn't classify my current level of activity as "Extreme".


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Post by m741 » Sun Mar 27, 2011 6:17 am

For about a week now I've been suffering lower back pain after somehow re-aggravating an existing injury. The pain comes and goes, but the major impact is that it limits my mobility. I find sitting down for long periods uncomfortable, and laying down is really the only time I feel better.
There are a lot of connections to ERE, particularly, I think, for someone in their early twenties as I am.
To start with, although I've been pursuing ERE for about 3 months now (though as noted above, not with the 'extreme' modifier), I wasn't really sure what I felt about it. That is to say, my attitude hadn't entirely crystallized. There were days when I just felt terrible at work, and was practically counting the days until FI. And there were other days when I really enjoyed my work, and felt that, whenever I reached FI, it would really make sense to work a few more years to have some flexibility. I haven't been able to put my finger on all the variables that control my attitude in this respect.
I'm at the age when youth first begins to fade, and this injury just reinforces that feeling. Is the limited mobility I experience now what life will always be like at 50? Because, if it is - and it must presage life at some age - all the things I wanted to do will be so *painful*. I couldn't imagine traveling like this and enjoying it. So, it's driving me to be more greedy in my ERE desires. Better to retire at 27 or 28; even if it doesn't work out entirely I'll enjoy my freedom when it's at its peak. And I have to have some confidence in my capability to get back on my feet if need be.
Another connection to ERE is that this type of back pain, were it to persist, would not be a good thing for my career, were it to persist. After all, I basically spend 11 hours a day sitting at a desk. And though I'm beginning to feel that I have some measure of security in my brokerage account, I don't want to be at the mercy of my body. On the other hand, it really draws attention to how large medical expenses could be when I get older.
A final note - this has convinced me to be more serious in my pursuit of fitness. After all, healthy minds inhabit healthy bodies. Unhealthy bodies are expensive. Being healthy could limit future injuries. Physical fitness is the key to overall health, including fiscal health.


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Post by m741 » Mon Mar 28, 2011 2:22 am

This is a summary of my performance for March, and my goals for April. My goals for March were the following:

Read "The Tightwad Gazette" (completed)
Read "The Richest Man in Babylon" (completed)
Read "Rich Dad, Poor Dad" (completed)
Finish "A Random Walk Down Wall Street" (completed)
Pay overdue library fines (completed)
Cancel gym membership (completed)
Don't buy ANY books (completed)
Get rid of another 20 books (completed)
Trim total expenses from $2500 to $2300 (incomplete)
Trim food expenses to $225 (from $285) (incomplete)
Only watch TV one day a week (incomplete)

The summary is that I accomplished most of my goals, but not the ones that were most difficult (or most important). I did all the reading I had hoped to do, and completed some long-standing chorse (cancelling gym membership and paying overdue library fines).
I did a lot of reading this past month after I discovered goodreads.com. And though I'm watching TV at about the same frequency, I haven't been wasting as much time online.
I went overboard with my goal of 'get rid of another 20 books', and actually got rid of around 50. I was able to consolidate and, after the past few months, I'm down one bookcase. I have about 6 bookcases worth of books left, but getting rid of them will be a little bit more difficult from here on out. I ended up receiving some books as gifts, but didn't pay for any of them.
In terms of raw numbers, my overall expenses were down about $60 from last month, if we exclude the library fines I paid ($35 - yikes!). I saved just under 60% of my income. My food expenses were up to $300, but if there's a silver lining to this cloud, it's that I *felt* as though I were being extraordinarily wasteful with my food money. If I tighten my belt on the obvious gratuitous food expenses, I believe I can hit $200 a month on my food.
My ERE goals for April are as follows:

Read "Switch: How to Change When Change is Hard"
Read "Linchpin"
Read "Into the Wild"
Food expenses down to $200
Total expenses down to $2400
Sell two bookcases on Craigslist
Get rid of one medium rubbermaid's worth of stuff (~30 lbs)
Always turn computer off at night

The one with the computer is the only one I haven't mentioned. For years I was extraordinarily profligate with my computer usage. I'd leave it on all the time - when I was in class, when I slept, it was on 24/7 - only if I went away for the weekend did I turn it off. I felt guilty about it at the time, because I knew how wasteful it was, but it was a habit I couldn't break.
Last year I bought a laptop in part to reduce my desktop usage. It's great. Last month, as a sort of self-challenge I turned my computer off when I went to work each day. No hardship. I'm expanding that this month and for the past few days I've turned it off at night, but I'm going for 100% compliance. It should reduce my electricity expenses.


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Post by m741 » Mon May 02, 2011 3:24 am

This is a summary of my ERE progress for April and my goals for May.
For April, my goals were:

Read "Switch: How to Change When Change is Hard" (completed)
Read "Linchpin" (completed)
Read "Into the Wild" (completed)
Food expenses down to $200 (No)
Total expenses down to $2400 (No)
Sell two bookcases on Craigslist (No)
Get rid of one medium rubbermaid's worth of stuff (~30 lbs) (completed)
Always turn computer off at night (completed)

Of the three books I read, I would not recommend Linchpin, which I felt was repetitive and unfocused. On the other hand, I would strongly recommend Switch as a classic self-help book. Into the Wild was also good, in its own way.
In terms of finances: my total expenses were $2454, down about $50 from last month. I didn't quite reach my goal of $2400, though I would have had I not made a conscious decision on a few purchases. Biggest expenses were rent (1400), food (287), utilities (118) and transport (218). Currently, in ERE accounts, I have 50 months of current expenses saved. With a cost-of-living adjustment (-700 if I move out of NYC), I have 70 months of expenses saved.
My net savings rate, ignoring a tax refund I haven't received yet, was a touch over 60%. I calculate this rate by taking after-tax, after-401k income, subtracting expenses, and expressing the result as a percent of income. I always set aside 10% of income to put in my 401k as an 'old-age' fund (rather than a retirement fund). I would not draw upon it until I reached the legal retirement age.
Towards the end of the month I found out a family member was very sick and made a few purchases that were not in my budget. Considering my savings rate, I do not regret these purchases; they were worth it to me. Because of this family situation, I will not tie myself to an ERE budget for the next few months, though I will try to be as ERE as possible for utilities, entertainment (for me), food, and so on.I just don't want to lay out any numbers. I don't anticipate great expenses, but might be over the normal expense levels by $100-$200.
My goals for May are as follows:

Read "Affluenza"
Read halfway through "The Cambridge Handbook of Expertise and Expert Performance"
Read "Alexander the Great and the Logistics of the Macedonian Army"
Food expenses down to $200

I would like to get my total expenses under $2400 but that's not a firm goal at this point.
I'm also in the process of setting up a web development company with a friend, to generate an alternate source of income. I'm excited about that, though I don't anticipate it generating much real income for a long time. At least it gives me a chance to get some entrepreneurial experience and refresh my web development skills.
Over the next few days I'm going to try to get some graphs up to show my progress.


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Post by Concojones » Thu May 05, 2011 7:13 pm

How's the back doing? I'm in my twenties too, and noticed that a lot of sitting facilitates back pain. It's avoidable if you really want it. Examine your sitting posture, get out of your chair A LOT, avoid doing more sitting at home, and do plenty of physical activity. Basically, avoid sitting as much as you can.
From what I've heard, the limitations of aging become noticeable after 40, and get in the way of you doing stuff after 60. A lot depends on your lifestyle, though.
When you'll be moving, perhaps you can move closer to the job so that you won't have commuting expenses (they're expenses too!).
Good job on the savings so far, and even more importantly, on getting inspired about what you want out of life. Good luck!


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Post by m741 » Thu May 05, 2011 8:35 pm

Thanks! My back is better now... took me about 3 weeks to fully recover. And I always have to be sensible about things. I'm doing some light exercise now (pullups mostly, because they help my back some and don't put too much pressure on it.
I'm struggling to stay in shape in my current sedentary lifestyle. I eat a healthy breakfast and lunch - usually oatmeal and yogurt, or oatmeal and mixed vegetables. But when I get home from work after 10-11 hours, I just can't help picking up a snack on the way home - which is usually a loaf of bread and some hummus, or candy, or both. I know it's terrible for me but I can't help it.
I also haven't been very physically active since I started working and I miss it. But I'm also very tired and it's difficult for me to find the energy to work out.
Ultimately these are all excuses and if I really wanted to stay in shape I could, but I haven't been able to find the motivation yet.


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Post by m741 » Thu May 05, 2011 8:37 pm

Also, my commuting expenses aren't much. $50/month for a subway ticket. I distinguish between commuting (travel to work) and travel (running errands or visiting family). My travel expenses are high due almost entirely to car insurance, despite the fact that I don't drive much. But I'm hoping to sell my car when it comes time to renew my insurance in July/August.


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Post by Concojones » Thu May 05, 2011 8:41 pm

One motivation could be that after a good sports game or workout, you feel fully revived again. It's a great battery recharger. It's just dragging your ass out there that's the hard part. I know the feeling :-)


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Post by m741 » Thu Jun 02, 2011 3:13 am

This is a summary of my ERE progress for May and goals for June.
For May, my goals were:

Read "Affluenza" (completed)
Read halfway through "The Cambridge Handbook of Expertise and Expert Performance"
Read "Alexander the Great and the Logistics of the Macedonian Army"
Food expenses down to $200

Obviously I didn't complete many of my May goals.
It was a brutal month for me emotionally. I won't go into details but there were multiple exhausting things going on in the month, and I had to spend way more than I was comfortable with. It was for family, and I just didn't look at the cost of things like flights and hotels. There are times when it's good to have income and savings enough to just be able to pay for something and not worry too much. In the end it wasn't too much. One way of looking at it was that I wasn't able to put anything in my investment account for a week.
My net savings were 52% of income - way below previous months; however, if I don't include the outlays for emergencies expenses were only 36% of income - way better than previous months. I'm happy about that.
I also found a condo near where I live that is being shortsold. I think it's a great deal if I can get it for the price I offered. The seller accepted; the lender must accept as well. If the lender accepts, I think I can pay off the mortgage in 2-3 years. After that, I'll be living right next to NYC for $500 rent/month. Another way of looking at it is that the 'real estate' part of my portfolio would be earning a guaranteed 5.4% each year.
On the other hand if my offer isn't accepted, then I'll still have freedom to move and much larger cash reserves. So I wouldn't be disappointed either way.
I'm going to be taking a bit of a break from goal-setting and so on over the next month or two. I'll still be recording expenses but I expect to be either busy or exhausted and I don't want to set any goals I know I can't keep.


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Post by m741 » Sat Jun 11, 2011 2:08 pm

This is a mid-month update, but I'm currently having a motivation problem for ERE generally. I believe it's caused by several things:
* Some very large expenses (two lawyers, travel, etc)

* Stock market going down

* Stress in personal life

* The realization that my ERE journey might not be as short as I anticipated
Collectively these factors make it feel like I've been treading water for a few months. With no progress, and, by my calculations, about 8-10 years until retirement - it's difficult to focus. And it's difficult to write down these expenses in my tracking spreadsheet: $1200 for a lawyer; $60 to get some photocopies from the local government; $250 to fly family across the country.
On the bright side, I will be rid of my car soon enough, which will save me about $170 on insurance each month. And my condo purchase continues to move forward - I don't want to get too excited in case the bank declines my short-sale offer, but it would be nice to be a property owner and I think that owning real estate, both for yourself and for renting to other people, makes cash-flow sense (I'm not really looking for appreciation in the value of property, just rental income).


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Post by Surio » Sat Jun 11, 2011 7:59 pm

@m741,
Trying to be funny here.... Seems like you need a lift...
So, give you a lift? ;-)
Chin up mate, I was really ill recently and that was a hit on my expenses and all the things I wanted to do... But, cant keep a good man down for long, right?
I'm in a rush now, so I'll write a serious note if I can later.
Chin up.... as they say.

--


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Post by m741 » Sat Jul 02, 2011 1:17 am

June Summary
Overall a productive month. The beginning of June was very difficult for me personally but it got better through the month and now I feel that I'm on track.
There was one major unusual expense during June, which was a lawyer's bill of $300. Not too bad, as far as legal fees go.
Overall, my income was $6,606, including some income from freelancing. My expenses were 2,829. My net savings rate was 57%. If I exclude the legal fees that jumps to 62%. My biggest expenses were, as usual, rent, food and transport.
The big news for the month was that I got rid of my car. I live in a city and was only driving it 1-2 times per month. I'm glad I had it so far this year - I made good use of it the past 3 months, and it would have been difficult and/or expensive without it. But now I'm glad to be rid of it.
I was paying $170/month, just in insurance. And I was spending less than $20 in gas. That's how little driving I was doing for most of the year. I'll probably be traveling by bus and/or renting, as well as picking up some bike parts+supplies. So I don't think my transportation expenses will be 0. But I am expecting a drop of about $150 in my total transportation fees.
It's really liberating being without the car, actually. I don't have to worry about it breaking and I don't particularly mind walking anywhere for my normal errands.
I'm still waiting to find out what happens with my condo purchase. I'm feeling more confident that the bank will accept my offer, but also fairly sure that it will take even longer than anticipated, though hopefully I'll know what's going in 1-2 months.
That's it. I don't want to set any major goals for July. I have about $5000 in my investment account that I want to invest right now, so I need to figure out what works with my portfolio. I think utilities and blue chips are my targets right now. Besides that, I'll just keep trying to lower my expenses.


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Post by Mr. Overlord » Sat Jul 02, 2011 1:30 am

@m741 - I live in the NYC area too and also recently got rid of my car. I was so hesitant to do it, having somehow become dependent on it in a city with one of the best public transportation systems in the world. Like you I found the experience completely liberating; no more worries about breaking it, maintaining it, alternate side parking, dealing with NYC traffic, etc. Glad to see you had the same experience and are enjoying it! And now you're also $200/month closer to ERE :).


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Post by m741 » Sat Jul 02, 2011 1:57 am

Alternate side parking is a disaster. Where I live I had to alternate sides FOUR times/week.


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Post by George the original one » Sat Jul 02, 2011 2:14 am

Utilities: take a look at AVA. It's been bid up 10+% since I bought a couple months ago, but might still be attractive relative to the others. Annual dividend growth rate of 8+%.


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m741
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Post by m741 » Sat Jul 02, 2011 3:55 am

I'll keep an eye on it... looks a little overbought to me right now, but if there's a correction it might be worth it. I'm thinking about D and already picked up a little DUK.


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