Douglas journal

Where are you and where are you going?
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Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Douglas journal

Post by Douglas » Sat Sep 02, 2017 7:06 pm

Shout out to ERE and MMM for introducing me to FI. It was not on my radar until 3 years back and now I am in a much better place.

I am not much of a forum person but from what I can see the ERE Journals are some of the most useful for everyone so here is my stab at one. My goal is to learn from forum feedback and would also like to share the nuances of what I have learned so far in my experience. Current numbers are,

$50,000 stocks, bonds (including 401k)
$25,000 cash
$25,000 in mortgage principal paid

I count all of the above as my net worth but only stocks, bonds, cash towards early retirement. I would like to have 1 million dollars in net worth before saying I am FIRE but don't plan on that happening until about 15 more years at the current pace I am going.

Current monthly expenses are $4500 / month including kids, mortgage, insurance, and travel with the near term goal of $4000 / month averaged (going back two years).

I calculate savings rate by dividing total saved (including principal paid) by total saved + total spent (taxes withheld from paycheck not included). Our average savings rate is 55%.

The plan right now is to work another 10 years at high paying fast paced job then down shift to slower paced work with lots of vacation time. Of course working at any job sucks but I happen to enjoy somewhat my career path (and my current job) so I am not in a super hurry to ERE. My wife likes to save money but she is definitely not ERE. We like the challenge though and are constantly working at it to get better with conserving money.

Right now we are aggressively paying the mortgage to get to 20% in the next year or so, so basically only retirement savings is going into the stock market. We really like our town home but it was a little pricey, but so is the area. The home is our biggest ERE weak spot. Next plan is to get a rental property that we would mostly manage. Not super thrilled about being too much into real estate but my wife does not really trust the stock market. Everything is about compromising when you are married. I feel lucky enough that she is on board like she is. Leveraged with rental property doesn't sound too ERE to me which is why I have set the longer timeline. We are still adding to our cash for safety net and also to pick up deals in the event of a correction. Seems like too much cash though sitting around making nothing.

Jason
Posts: 643
Joined: Mon Jan 30, 2017 8:37 am

Re: Douglas journal

Post by Jason » Sun Sep 03, 2017 7:08 am

lol@compromising

Doug (can I call you Doug?) I'm married. I get it. She wants the rental. She gets the rental. It's OK. No use being prideful on the matter.

Don't let MMM's rugged individualist, testosterone laden, kissing his own biceps blog entries make you feel like he went out and bopped his wife over the head and drug (dragged? who the fuck knows) her by the hair back into his early retirement cave. They did it together as do most couples.

Good luck with everything. You seem to be doing great.

George the original one
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Joined: Wed Jul 28, 2010 3:28 am
Location: Wettest corner of Orygun

Re: Douglas journal

Post by George the original one » Sun Sep 03, 2017 10:57 am

I don't think it would be wrong to put more of your cash to use. There's cash enough for "I need cash today", "I need cash in 3 days" (time to get it out of a brokerage), and "I need cash in a week or two because we're planning on buying some property". The more risk averse prefer to have that third category locked up in cash whereas I think a little more risk can be tolerated and bond funds yielding 3%-6% can be appropriate for it.

Noedig
Posts: 178
Joined: Tue Aug 26, 2014 10:15 pm

Re: Douglas journal

Post by Noedig » Sun Sep 03, 2017 1:31 pm

George

Well done for wising up to ERE. Don't know how it was for you but for me there was a "pixie dust and unicorns and pink glow" couple of weeks when I felt "It exists! It has a name! This is my purpose!". Then smack right back down to earth and the quotidian grind. Still can summon up the glow when it's needed though, to warm my fingers as I hunch round the single coal brazier of frugality. Not.

Do you know your savings %age rate? I resisted doing this for years until I found tools to take the hassle out of it <cough Moneydashboard> and it does gamify the process somewhat.

It might help with pertinent comments if we knew your approximate age/number & ages of children. When you are ready to share with the group here at Former Spenders Anonymous, buddy. "My Name Is George and I now dedicate my life to a higher purpose. But I just bought a hot tub."

Re cash. It's always good to have some emergency cash. Five months worth does sound high, and it's more about *liquidatable* assets, so go ahead and invest them say I. The High Yield Bonds aren't a mad choice of destination. There are all kinds of ERE rules of thumb against market timing, so please ignore the following personal observation which is that the US market has some potential downside at these levels.

Good luck with the goals Georgesome, keep at it.

Jason
Posts: 643
Joined: Mon Jan 30, 2017 8:37 am

Re: Douglas journal

Post by Jason » Sun Sep 03, 2017 2:30 pm

I think his name is Douglas, not George. I'm not even sure if you can call him Doug yet, although I have taken that liberty already. Still waiting to see if its acceptable or not.

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Sun Sep 03, 2017 6:10 pm

You can call me Doug!

I found ERE Googling "INTJ" during my discovery of the Myers Briggs test

http://earlyretirementextreme.com/does- ... ality.html

After reading that first article I tore through the blog and the book while finishing up the MMM blog. Did a 180 on spending then plotted how to increase salary, finally outgrowing my idealistic days. Landed a dream job now I am trying to streamline money efficiency. People still think I am crazy but that's a fairly normal reaction to ERE type thinking.

No hot tub at the house but man you're right it might as well be. Its half of our cost of living. Could have rented but definitely upgraded for almost the same in mortgage. I slummed it up for several years (not saving any money when I should have been) and cannot seem to willingly go back especially trying to raise a family. I can sleep with the windows open at night its so quiet and I ride my bike 2 miles each way to work, unbelievable. I wouldn't call it a bad investment but just one that is momentarily keeping us from ER. Alas no ERE for me but at least it will be an aggressive timeline. You never know how things can change this is just our current path.

I am a 35 year old with a wife and 1 child with the hopes of adding a second one in a few years. We have overseas family which adds a lot to our average spending due to plane tickets every other year. I will include that in "entertainment" along with the cat among other things. All numbers are averaged out over past 12 months and are per month. Objective is to average out past 2 years. More than 1 year back though are the dark ages for my personal finance and I would just rather pretend like it does not exist.

$500 food; steadily going down (includes big holiday spending).
$300 utilities
$750 Entertainment; steadily going down
$150 car
$500 personal, includes bicycle maintenance, stuff for my wife, beer, clothes
$2100 home, including upgrades, mortgage, HOA, maintenance, buying out of apartment lease; steadily going down
$350 health expenses including insurance and co pay (employer pays the rest)

$4650 / month total spending. Goal for the next year is to average out at $4000 / month. Baby steps indeed! $3500 / month total spending is within the realm of possibility but it would take cuts across the board which can only come if we level up our game. Not sure if we go it in us. We are starting to eat less meat and dairy, looking at more efficient ways of handling our health care, spending a minimum on upgrading our house

I didn't document my spending until about 6 months ago. I spent a half day setting up the spreadsheet and then an hour each month improving it while its updated. Sounds obvious to a lot of people (at least here) but some of us never bothered to keep track of our spending for the vast majority of our lives and it took getting over a lot of inertia to get started. Its the only way to be now.

Next goal is to quantify all sources of income and taxes paid. Total income is indirectly quantified via net worth but needs to be compartmentalized especially if we start doing rental property. I am still a baby on tax efficiency and have a lot to learn.

Jason
Posts: 643
Joined: Mon Jan 30, 2017 8:37 am

Re: Douglas journal

Post by Jason » Mon Sep 04, 2017 10:34 am

Damn Dougie, what the fuck is up with that monthly entertainment bill? You are out spending JLF's total annual budget on entertaining your ass. And your saying that's going down. I'm curious, what exactly are you and the Dougette doing to entertain yourselves? Or is it just you? And what was the high water mark with that shit? Is "entertainment" a euphemism for a pharmaceutical grade cocaine habit? In that case, I can understand. Or is it a buying out of state clients high end call girls type of thing which you can write off your taxes? If someone gave me $750 a month to entertain myself and it had to be legal and not grounds for divorce, I wouldn't know what the fuck to do.

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Sun Sep 17, 2017 7:20 pm

Some spending stats over time. Will be uploading better graphs in the future now that I am getting the hang of it. There is obviously an elephant in the room with "home" but to make me feel better I call it an investment. Kids are lumped in with health and entertainment. I like to do running averages with the aim of 24 months to filter out the noise.



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MDFIRE2024
Posts: 371
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Douglas journal

Post by MDFIRE2024 » Tue Sep 19, 2017 6:45 am

Hi Douglas. It is great, that you have decided for some FIRE goal (1m within the next 10-15 years.) I think a commitment and a path is the beginning of your ERE-journey. Thanks for journaling here. You will get feedback and you can share stories with others here in this forum.

Do you have evaluated each of those spending categories regarding needs, wants, degree of satisfaction, musts, comfort, "life energy"? Maybe you will find then some spendings you can cut very easily and don't suffer any great satisfaction. There are many good alternatives for food and entertainment options.
Take care. Build your own ERE lifestyle. Adapt to it.

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Sat Sep 30, 2017 1:39 pm

Am I the only one that loves rolling up the numbers at the end of each month? The good months at least. Each month with strange happiness I upgrade charts and graphs and create new ones looking for other ways to look at the numbers...I should have been doing this a long time ago.

I found an accounting error on my part and my insurance actually costs us $500/month instead of the $300 I was using so I went back and updated all previous spending numbers. Before a few months ago I wasn't even counting it towards our monthly spending.

Here is a graph I made today that many of you already have. I have been thinking about SWR for a while and finally got around to graphing it out. The number below is our average monthly spending (total including minimum mortgage payment) and cash,stocks,bonds as the assets.

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MDFIRE2024
Posts: 371
Joined: Fri Jan 06, 2017 5:09 pm
Location: Germany

Re: Douglas journal

Post by MDFIRE2024 » Sun Oct 01, 2017 12:58 am

Douglas wrote:
Sat Sep 30, 2017 1:39 pm
Am I the only one that loves rolling up the numbers at the end of each month? The good months at least. Each month with strange happiness I upgrade charts and graphs and create new ones looking for other ways to look at the numbers...I should have been doing this a long time ago.
...
Here is a graph I made today that many of you already have. I have been thinking about SWR for a while and finally got around to graphing it out. The number below is our average monthly spending (total including minimum mortgage payment) and cash,stocks,bonds as the assets.
No, you are not the only one :-) I am also looking forward to update my charts and numbers monthly, but I stopped creating new ones.

I'm not sure if I understand the chart correctly. Can you explain it with an example?

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Fri Oct 13, 2017 6:47 pm

The safe withdrawal rate % is calculated by

(average monthly spending/(SUM cash, bonds, stocks assets/12))*100

So if I spend on average $2000/month to live and have $200,000 total in stocks, bonds, cash, then my SWR % is 12

This is my understanding of how you can track monthly progress for SWR % based on reading other posts. Is there a better way?

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Fri Oct 13, 2017 8:50 pm

I am searching for ways to shave off $50 here, $50 there to get our monthly spending down another level. A big target in front of me is the amount I have spent on alcohol during my adult life. I have not kept track but I will venture to estimate that I have spent on average $100 / month on alcohol going back 10-15 years, maybe even more. Lately its been more like $50-75 / month but tough to say exactly.

Time to start quantifying it I say. As we are slowly ratcheting down our monthly spending I have decided to reduce alcohol expenditures down to ~$15/month. This really means something from a guy that loves beer! Arguably though drinking a moderate to low amount of alcohol benefits you financially and health wise so it makes complete sense to drastically reduce it from your life. Will still drink beer but it will be more on a weekly basis rather than daily basis, and of course if someone else is providing than by all means! I am a home brewer but brewing beer is a lot of work and most importantly I don't want to buy a bunch of beer from the store, so the solution is... to reduce drinking. Brilliant!

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Sat Oct 14, 2017 3:03 pm

I wrote some background on my "introduce yourself" post several months back. Want to post again here to better connect the dots.
Douglas wrote:
Fri Feb 10, 2017 2:46 pm
Hello:

Been lurking on the forums for the past couple months for needed inspiration but have been on the FI path since the beginning of 2014. I am starting to have a few specific questions about our FI path so I thought I would join the forum to get feedback and start contributing myself.

A little background about how I got here... First an old college buddy told me about MMM in late 2013, then shortly after I found ERE. Early FI was not at all on my radar and these blogs basically caused me to change substantially the way I think about money. I read all MMM and ERE posts (+book) then moved on to the usual reading list. In a little over three years I went from $35,000 in debt to currently around $50,000 in 401K and cash and no debt (now including my wife who came in with ~$15,000). We do have a mortgage. More on that in another post.

Some basic background: advanced training in a technical field; early 30's; married and want to have kids; consider myself an INTJ; DIY'r (as much as practicable); 1 car family; active outdoors; lots of cooking and homebrewing; prepper/zombie apocalypse mentality (not extreme);

Family income: $12,000/month before taxes; Family spending: $5000/month (including healthcare, mortgage, and other life curveballs); We are working on getting the income higher and spending much lower. Realistic spending for the near future should be $3500-4000/month with minor spending adjustments. Anything below $3,000/month will take much bigger spending adjustments (I don't want to say "sacrifice" but we don't have the discipline yet as a family to go much lower)

I believe my path is more FI driven rather than ER driven. Right now I am trying to make the most money so my work/life balance is not ideal (although it is not bad). After x amount of years working a high pace job I am planning a transition to slower pace with lower pay (and likely more satisfying work). x could be 5-10 years depending on when my employer let's me go or we reach 10 years. Afterwards I will find another job working another 5-10 years. All in all 15-20 years is when I think we can be comfortably FI (Not extreme at all! Conservative estimate). My wife thought I was crazy talking about a 10 year plan at first, now we are talking 20 year plans...haha. We will probably keep working though once FI through part time jobs or small business ownership.

That's a lot of info for an introduction so I will stop there. Looking forward to contributing to the forums.

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Sat Dec 02, 2017 12:49 am

And time stands still...

Average monthly spending 4600
total assets including home equity 130000
total assets considering mortgage debt -108000

We have a long way to go folks. Looking like 13 more years until FI at this pace. Better than 23 more years

Douglas
Posts: 12
Joined: Fri Feb 10, 2017 11:36 am

Re: Douglas journal

Post by Douglas » Sun Dec 03, 2017 2:29 pm

Here is a new graph from the past month or so, % asset allocation over time.

We decided to move a bunch of cash recently to pay of mortgage principal so that we can get 20% paid off asap (low down payment but will take us 20 months to get to 20%). Turns out we pay $1500 / year in PMI which SUCKS so once that goes away we will be less aggressive in paying down mortgage. % home equity will equilibrate to 25% in the next few years and over long term

company stocks will climb over time but we will pull money out so that it does not go above 10%

Cash I would like to keep 10-15% long term

After tax stocks obviously will need to climb. I don't anticipate much action here until another 9-12 months

I guess 401K is OK? I don't anticipate it going under 35% for a very long time. Don't think it will ever go above 45%


ASSET ALLOCATION
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