Lucky C's Journal

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Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Lucky C's Journal

Post by Lucky C » Sat Mar 18, 2017 6:06 am

Hi everyone, time to start a journal! My wife and I just bought a house so I should have some interesting things to write about on a regular basis, rather than just grinding away at work. First though let me get the basic financial background out of the way:

I'm 31, DW is 27. We have both lived in New England all our lives. Our current biggest sources of income are designing electronic stuff (me) and managing grocery store stuff (her).

Our house is paid for in cash. The current market value is about $250k.
March 2017 assets (not counting home value): $392k
Cash flow: about $8k/month

I don't have a single FI number. My handy spreadsheet says that we could manage with $432k minimum, but that's making some assumptions that may not hold in the future. At the other extreme, I estimate based on a conservative (high) budget and a 3% withdrawal rate, we would be totally safe with about $750k. So those are a broad range of values, placing our FI date anywhere from a few months to a few years away. Neither extreme is very likely, but I think it's important to consider possible scenarios like this since nothing ever works out exactly according to your plans. Planning out a minimal budget to see how quickly you could potentially quit is exciting, but it's also important to see how much you could possibly be working in case you end up wanting a higher budget, lower withdrawal rate, etc.

It's likely we would not fall short even with the minimal $432k budget, but I would be motivated to get other income streams going as quickly as possible for extra safety margin. We are both considered hard workers so that should be achievable, but it would still pose its challenges. The other extreme of $750k would almost be too easy, and we'd likely end up with "too much" money and could regret working those extra couple of years just to be able to be lazier in early retirement.

Realistically I will be at my current job another 1.3 years minimum, since that's how long I have to stay there for full retirement account vestment. That should put us around the $530k mark. We could probably keep our budget around $20k initially for a 3.8% withdrawal rate, and that would be enough to have some fun money considering we have no mortgage, taxes are pretty low, etc. However I would still want to have some decent plan of getting a few thousands or so of steady income if I quit at that time.

The next big thing I'm looking forward to is getting some new home maintenance skills, and seeing how the move from an apartment to a house really impacts our budget, compared to my naive estimates!

Jake9870
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Joined: Sun Feb 12, 2017 1:22 am
Location: Under the Great White North

Re: Lucky C's Journal

Post by Jake9870 » Mon Mar 20, 2017 11:43 pm

Congrats on the house! Hope the move is coming along well. I'm currently pondering on moving into a house now.. I don't think it's the right time, but my girlfriend (of 5 years) would like some more space and somewhere to garden.

Congrats on the move and looking forward reading more.

Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Re: Lucky C's Journal

Post by Lucky C » Thu Jun 15, 2017 8:34 pm

I'm locked in to leaving my career in about a year. I've reached escape velocity. My expected financial situation at that time should allow for a comfortable period of reinvention, with a goal of producing some income from doing things I like to do, however long that takes. If investment returns are poorer than expected, and/or expenditures on the house are higher than planned, I should still have enough margin to not have to postpone my quit. However I may choose to pick up some part time hours at some local business if I want to reduce risk.

At any rate, I am very confident that in a year I will be able to eliminate these irksome aspects of my life:
- Having to work 40 hours a week, every week, aside from the occasional vacation or holiday. I can do better work if I work fewer or irregular hours, just when I feel like it. Routines and schedules are overrated.
- Needing to produce over-engineered technology, which just feels wrong to someone who just wants to perform a function efficiently (even though I am responsible for design work, it feels like the opposite of hand-crafting something of my own design where I am free to make the important decisions as to form/fit/function)
- My 60-mile (each way) commute. Of course this was self-inflicted knowing that I was in the home stretch, with my average commute time over my working years being under half an hour. Still, even if I only had a 15 minute commute I'd be glad to be rid of it.
- Work email. Life is so much better without email, except for when you occasionally choose to log in and communicate with loved ones. I think when people take vacations, they are overestimating how great of a place it is they visit, and underestimate how much better life is wherever you are if you are unplugged from email and other electronics. Office workers should take a vacation staying in a hotel in their own town, doing things locally, as a control to test other vacations against.

If I could eliminate those aspects from my current job, I would happily stay there for much less pay! I guess I could use a list like the above to determine what a good job for me would be in the future, if I decide to get another "job". Something local, without (much) email, part time, and not wasteful. One example: working in a thrift shop. I think I'd be happy doing something like that a couple days a week, even if I didn't really need the money, as long as I liked the people there.

More likely though, I would start my FIRE "working from home" or "freelancing" as I would tell people, trying something creative. I've wanted for a long time to create my own games and write stories, but I haven't had the time over the years to focus enough hours on those hobbies to keep me interested. I'm really hoping early retirement gives me a big dose of motivation to put towards all the hobbies I wish to pursue.

Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Re: Lucky C's Journal

Post by Lucky C » Thu Jun 22, 2017 8:27 pm

My electrical engineering work day is not quite what one would expect based on undergraduate classes (or graduate classes for that matter), in terms of how much time is spent on various types of tasks. Very little of the day is spent on actual brain work and math, which is fine by me because although I liked learning concepts and how things worked, the advanced math-heavy topics just weren't for me.

So if you're interested in an engineering career but think you need to be a math whiz, no worries, you can make up for advanced academic shortcomings with general office work proficiency. This includes organizational skills (keeping a list of materials up-to-date and error free), writing skills (need to document everything and write about a dozen emails a day), management skills (even junior engineers need to give tasks to technicians, interns, and buyers), and basic people skills like respect and patience. The more experienced engineers can help guide you through any academic shortcomings by explaining things enough so that you can do your job - you don't need to derive fundamental equations to set up an engineering simulation using a CAD program!

I can design basically any type of filter by clicking through a wizard and running an automated optimization. I don't need to know any details of what's going on inside the filter electromagnetically to come up with a design that works for our purposes. My expertise is in knowing how to use a couple of engineering programs, high-level knowledge of what they're doing, and basic understanding of real-world limitations (e.g. manufacturing tolerances).

Typically though I am not spending much of my time designing something on the component level. I'm more of a systems engineer, chaining together components that somebody else designed. Even easier as far as applied technical knowledge goes! Just know what components are available, copy their specs into another piece of software, and chain together the right combo to get enough power, the right gain, low enough noise, etc.* The challenge in my specialty is the complexity of working with systems rather than individual components. For a component you may be trying to meet one page of specs but for a complex system you may be dealing with something like 100 pages of requirements. You need to have the skills of systems thinking, organization, and stress management to confidently tackle such a complex design. I can handle all that!

* Even for a new design of a "next generation" piece of tech, you're probably mostly swapping out some old components with some smaller/faster/cheaper ones, not reinventing the wheel. There's probably a straightforward/standard high-level design approach and a block diagram can be created in a day. Rough schematics could be done in a week. Prototype designs could be done in a month. Building a prototype could be done in 6 months, and rolling in changes/fixes to create a production-worthy design could be done in a year. Then if you are lucky enough to work on government production programs, after full production starts (add a couple years), you can easily make a multi-decade career of producing and managing that one program. I'd hate that but it's great for some people!

Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Re: Lucky C's Journal

Post by Lucky C » Thu Jun 29, 2017 8:14 pm

I used to have my own office - well a shared office but my officemate was hardly ever there - but now I work in a little cube nestled in a big grid. Part of a hive consisting of some of the greatest worker bees in electrical engineering. Not the greatest minds though - that would be the researchers and academics. We just take the fruits of the researchers' labors and apply it to make great profits.

Still, everyone around me seems so smart. At least at first. After a couple years here I've learned that even these elite engineers have their faults. I keep noticing more and more basic mistakes that people are making, simple things like impedance mismatches or mistakes in cascaded noise calculations. At least things that should be simple for engineers with a decade or two of experience. I came here feeling like I was at the bottom of the totem pole since my previous work experience wasn't really challenging enough for me to grow as an engineer very much, but now I feel like I fit in well. In these two short years with this employer I feel like I've learned enough now to satisfy all my curiosity with this industry.

Not only that, I'm also finding that I don't have nearly as much faith in others' abilities as I once did. Someone with seniority could suggest a design change that makes no sense. Colleagues that say something is ready still have a lot of kinks to work out. Most of the time, senior engineers' high-tech design secrets can be boiled down to rules-of-thumb / straightforward processes / getting CAD to solve it. Turns out, the hard part isn't the technical know-how; it's learning how to just be a good worker bee and sticking with it despite not liking the hive.

Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Re: Lucky C's Journal

Post by Lucky C » Wed Jul 05, 2017 8:02 pm

I live in Rhode Island. Certain parts of the state are great for early retirees, at least if you're looking to stay in New England but need to avoid the Greater Boston Bubble!

You see, Boston is tightly hugged by I-95, and within that embrace it is just too crowded and overpriced. The lowest priced neighborhoods close to the city are the ones with all the drunks and stabbings. Further out, I-495 gives Boston a big bear hug. Between it and 95, you still have mostly overpriced towns, suburban hell where the engineers and doctors get $500k split levels that look the same as all the others. Only as you get out near the 495 belt do you see prices start to drop significantly, but again you get what you pay for in those towns.

The real geographic arbitrage play starts to kick in beyond 495. There's a world of opportunity out there even if you want to stay in New England. I insist New Hampshire is a no-no if you want to be a homeowner because of the high property taxes and the fact that you only save on income tax if you also work there. Still, if you are going to do ERE, the showstopper is NH real estate tax multiplied by 25 or 33. When you factor that in, the total cost of home ownership is no better than MA if you are just looking to hop the border into southern NH!

Then you have Vermont and Maine. Nice options to retire to, but out of the question for us due to distance from family and the fact that we still have to commute. Connecticut wasn't very appealing either, not just due to the distance but the fact that where CT homes are cheap (to the Northeast away from NYC), there is absolutely nothing going on. OK if you're a complete shut-in but we like to get out sometimes...

Which brings us to Northern RI. Close to Providence and not a very bad drive to Boston or Worcester. We don't go into the city a lot, but like the occasional special event or museum trip. At the same time, the road we are on has a semi-country feel, with plenty of parks and farms all around.

RI has a reputation of being bad for retirement because of taxes. Maybe for baby boomer style retirement, but not for us. The tax rate for an upper middle class income is higher than in Massachusetts, but the standard deduction is reasonably high. We should owe $0 in federal and state taxes even if we have income in the $20k range, and if we were earning enough that tax is higher than in other New England states, we will have so much spare money, who cares? Also in RI, Social Security gets taxed at the state level, but again we wouldn't care.

Cost of living is a bit lower here than what I'm used to, living most in towns in Middlesex and Worcester counties the past decade. Here we can get a gallon of milk for $1.50 and eggs for $0.55, instead of about $2.50 and $1 respectively where I used to shop. There are casual restaurants that still have sandwiches for under $5. Of course better than food is housing prices, since there are some really pleasant neighborhoods with $250k homes that would easily sell for $500k in the suburbs of Boston. Property tax rates may be a bit higher than in some MA areas (another reason "experts" say not to retire here), but that is a slightly higher rate on potentially a much lower home value. I would rather pay 1.6% on a $200k assessment than 1.4% on a $300k assessment!

So I did the rough math factoring in not just home asking prices but all the taxes and other costs, and (some of) Rhode Island is right up there in the affordability range of Maine and Vermont. I'm glad I didn't dismiss the state based just on the face value of tax rates and "best/worst places to retire" lists. More importantly though, this area feels like a place that embraces individuality and minimizes BS. It feels right for us.

Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Re: Lucky C's Journal

Post by Lucky C » Sat Jan 27, 2018 9:25 pm

I feel like I've beaten the engineering office job career game already and now I'm just tying up loose ends and putting in my time until I can quit. I'm getting a little ahead of myself because although I will be FI in about a month taking account balances at face value, I have to wait until July when I will be fully vested in my 401k because otherwise I would be forfeiting a stupid amount of money when I really don't mind working that much longer. So by then I will have about four extra months of income at 100% savings rate, or if investments do poorly between now and then I should still have enough money remaining to quit.

Part of the reason I feel especially victorious now at the end of January is the nice bump from the stock market melt-up. I know, it's just paper gains robbing us of long term future returns, but it still helps things look positive for the short term. Another aspect of this winning feeling is that January is my least favorite month, so I'm excited that it's just about over. After the holiday distractions of November and December, with short days and long commutes in the dark, and too much time indoors, I typically have some Seasonal Affective Disorder symptoms. I've had my worst feelings about this job and my previous one in January, coming really close to quitting at times with nothing else lined up. Once I recognized it as a pattern, I learned that it gets better, and it's normal for me to have these thoughts and feelings in January.

This past week started horrible for me, due to some issues at work coinciding with my worst moods of the year, but it ended much better. Now I know I'm over the hump and it will be smooth sailing from now on! For those who get SAD or have negative thoughts around this time of year, the most important thing you can do is recognize that when you feel so terrible that you just want to leave work and never come back, it can only get better from there. If it's so bad you're about to quit, but financially you really shouldn't, that should be motivation for you to do something about your situation. Plan vacations for end of January or February, get some exercise and fresh air, and make plans with friends so you don't get cabin fever. Most importantly, for issues at work, take a step back and figure out how much of it is just stuff you'll get over. For the stuff you won't get over, these are problems that can be worked on in a logical manner if you just take a step back and relax. Be rational, don't be rash.

Anyway that's what works for getting me through the cold winter months. Before we know it, it'll be spring, when I don't think I'm alone in finding it much easier to be happier, more positive, and more productive. And in April, my wife and I will be taking a trip to Vegas and the deserts of NV/CA!

wolf
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Location: Germany

Re: Lucky C's Journal

Post by wolf » Sun Jan 28, 2018 1:07 am

That sound's good overall, Lucky C! You are on the "last few miles" toward FI. Quitting earlier doesn't make sense in your situation, therefore maxing out your 401k. Do you make any financial adjustments, like asset allocation, or anything like that because of RE?
I look also forward to spring and I am also relieved when the "dark" months are over. Wish you and your wife all the best in Vegas.

wolf
Posts: 558
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Lucky C's Journal

Post by wolf » Sun Apr 22, 2018 7:51 am

Congrats to your SWR milestone of 4%!

Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Re: Lucky C's Journal

Post by Lucky C » Thu May 03, 2018 6:08 am

Thanks Wolf! Clearly I do not check on this or update regularly but to answer your post from back in January I basically have a very conservative asset allocation right now. I believe there's a much greater than average chance that stocks and bonds can experience significant losses in the coming months and years, and I don't see many safe high ROI bets out there. So I'm hoping that there are better options in the near future. However even though there is a lot of risk out there right now, the odds are still against a major change occurring in the next few months. It typically takes two or three years for a market with high valuations to get back to a good value range.

Elsewhere on the forum, back in January, I posted about stop loss orders close to the current market price. I felt that the melt-up/euphoria then was too good to be true and couldn't last much longer. I entered some at slightly different values in my different accounts, but they all triggered in short succession during the February losses. Since I entered these stop loss orders about 5% down right near the January peak in stock prices, I only dropped about 6% from the peak. This protected me from a complete crash and helped reinforce in my mind that I should switch to being conservative for now. We'll see whether my mind was right or not, but now we're in May and prices are still a couple % below where I sold. So far so good.

My current plan is that while I would probably be OK calling it quits in July, sticking it out until January would be so much safer, especially if my wife wants to stop working completely. However she very well may prefer working a couple days a week to no work at all, in which case we are already at a very conservative withdrawal rate if she were to keep working part time indefinitely (and I would probably pick up some odd jobs here and there too). It might just come down to how I feel about my job at the time. I could see myself working pretty happily through the summer months, and it wouldn't be too long before it's the slower and more relaxed Nov-Dec holiday season, with plenty of holiday time off. Plus I will still have 2 weeks of vacation to use this year, so another six months might not be so bad.

Lucky C
Posts: 216
Joined: Sat Apr 16, 2016 6:09 am

Re: Lucky C's Journal

Post by Lucky C » Fri Jun 08, 2018 4:22 pm

It's been nearly 33 years since my birth. The Social Security Actuarial Life Table says I've got about 45 years until death. So I'm around 42% through life.

Have I gotten at least 42% of my life complete so far? I'd say I'm doing very well. Major life events that come to mind include graduating, getting an (adult) job, getting married, buying a house, having kids, and retiring from your main job/career. I'm planning on achieving 100% of those things by the end of the year.

With a kid on the way in and a job on the way out, my life's focus will change from work and money to raising kids and managing the home(stead). However a major goal will be to find new applications of skills to generate more income or reduce expenses further. I don't think I'll need more money, but I will feel the need to be "working" on something. I actually think our expenses may be easier to cover in the near future than in the long term since there's a risk of rising expenses to help take care of loved ones who might need some assistance in the future. Thus I would like to preserve and grow our wealth over time rather than risking large drawdowns over the years.

But I really don't have much to worry about because my wife will want to be working a couple days a week just to be doing something other than being cooped up at home all the time. I may want the same. An expected part time income of around $12k or more per year would afford us around a 2% withdrawal rate. A combination of lower than expected income and higher than expected expenses would only push us up to around a 3% withdrawal rate. Of course these are starting withdrawal rates and a few bad years of returns could double those withdrawal rates. This however is easily remedied by employing risk mitigation in our portfolio and the willingness to simply take on more hours to make up for bad years. Once you're already FI with very low expenses it's easy to adapt!

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