Twinbrook2540's Journal

[Twinbrook2540]

November 2013

After some reflection, I thought that it would be appropriate to start this journal after Thanksgiving. There is a lot for me to be thankful for - even if the path to FI can seem long, difficult, or lonely at times. I began implementing some MMM/ERE strategies back in July 2013. This journey was precisely what I needed at that time - I was feeling hopeless at work, and out of control in other ways - my health/fitness was not a priority, and I spent too much time "rewarding" myself with material objects. No joke - while I've never had a problem living within my means, as my income expanded, I let my lifestyle inflate... And one of the final straws that led me to ERE was a feeling of panic when I was unwrapping an expensive item that I had purchased to commemorate winning a really important trial. I will tell more of these stories as time permits, but for now, here is a quick recap of where I am at. Unfortunately, no pretty graphs like many of the journals yet I have very minimal spreadsheet skills. I should also note that I am not going to start out with a detailed breakdown of expenses - that will probably materialize in months to come. At this point, I'm most interested in tracking net worth increase month/month, along with dividend income tracking.

FI/ER target date: May 1, 2017 (Someone else wrote about it being helpful to set a date to think of "graduation" approaching. I like that.)

Assets: ~250k house; ~70k IRA, pension, 401k; ~48k taxable accounts, including checking
Liabilities: ~140k mortgage - 10 year fixed, 3.375%

Income: ~4k/month (after tax and 401k contribution)
Savings: 500-401k; 1100-mortgage principal; 1775 taxable

Dividend income: 149.01

Metrics I am tracking:
Months of expenses saved: 48000/2500=19.2 (This counts only taxable account assets, non-house.)
Percent of expenses covered by dividend income: 149.01/2500=6% (This is pretty variable since dividend income is inconsistent month to month. A year over year, or quarter-quarter tracking will probably be most illuminating.)

I'm coming off a really intense year at work, where I almost went to trial on two different cases in November (one settled and one will be re-animated in 2014, most likely). Barring something strange, I'll close out 2013 with around 2200 billable hours, which is way too many to consider having any reasonable quality of life. Nevertheless, it was a unique year, where I learned a lot, and accepted a lot about what my goals are.

My plan is to update monthly with financials, and some other life/work vignettes along the way. One topic I plan to explore is how improving my fitness/eating habits coincided almost perfectly with implementing ERE habits in my daily life.

Best wishes to everyone for a productive and joyful holiday season with family and friends.

[1taskaday]

Hi Twinbrook2540,

Sounds like you had a hectic year work wise.There's nothing like working a lot of extra hours to suck up all your energy and put your goals out of balance.At least that's one lesson I have well and truly learned.

My favorite way to track my progress towards retirement is also dividing my savings by my monthly expenses.
And then I think ... imagine I could survive this ... long,without any income from work.
What a great empowering feeling that brings, especially when I am feeling disillusioned.

Looking forward to following your progress towards your end date, around May 2017.

1taskaday

[Twinbrook2540]

Thanks, @1taskaday.


December 2013

Assets:
242,606 - house (per Zillow)
75,592 - retirement savings (IRA, pension, 401k, HSA)
50,233 -taxable savings

Liabilities:
139,091 - mortgage

Income:
~4000 - salary (after tax and 401k contribution)
~80 - redemption of credit card rewards
~508 - dividends and capital gains

Savings:
500 - 401k
1055- mortgage principal
1550 - taxable

Months of expenses saved:

50,233/2500 = 20 months

Percent of expenses covered by dividend/cap gain income:

508/2500 = 20%

December was an interesting month, although expensive. In December, I pay my winter property taxes (~$640), and also make several charitable donations (~$250). I had increased expenses for gasoline for holiday travel, which were set-off partially by lower grocery expenses. I continue to work to find a balance between diligently watching for deals and clipping coupons and not wasting valuable time to chase a savings of 20 cents. I have been surprised by how easy it is to shave some significant savings off my grocery expenditures by spending 5 minutes a week organizing coupons, without sacrificing any quality in the type of food.

I was surprised to end up with $508 of dividend/capital gain income for December. Obviously, December is an outlier since lots of companies/funds pay out at year end/quarter end. Nevertheless, it's really encouraging to see dividend income increase dramatically year over year, because I am most interested in tracking coverage of monthly expenses by dividend income as my indicator of financial independence. For 2013, my total dividend/cap gain income was $1,528.

Funny moment of the month: I was chatting with a colleague (approximately 25 years older than me) at the end of a work day, and he mentioned that he had to stop by the convenience store to pick up lottery tickets on the way home (this was when the Mega Millions jackpot was getting a lot of press). I commented that I had actually never bought a lottery ticket. Colleague says, "Oh, by the time you are my age you will start buying them!" Ha, Ha...How untrue! How satisfying it is to know that we are in control and don't need to gamble on the lottery to have a satisfying retirement well within our reach.

Goals for 2014:

Financial:
-Increase taxable savings by at least 21,000
-Save at least 6,000 in 401k
-Pay down mortgage by at least 13,000 to 126,000
-Increase net worth exclusive of house to 175,000
-Increase non-retirement assets to 100,000
-Increase dividend/cap gain income to 3,000

These financial goals are sort of fluid and are based on my current income and savings rates. I will not know my salary for 2014 and my 2013 bonus until most likely late January, early February. To the extent that the salary increases, I plan to increase 401k savings, because I need to start being a bit more diligent with tax planning.

Non-Financial:
-I started working on writing a novella with an idea that I've had for some time. I'd like to work consistently on this project a little bit each weekend. I also need to spend some time researching self-publishing as an e-book.

-Continue developing proficiency with photography using old (film) SLR. I played around with this hobby all year and ended up giving away framed pictures as Christmas gifts this year, which was pretty satisfying.

-Work more diligently on investment research. I've made a lot of progress building my dividend stock portfolio, but I want to spend some more time reading 10-Ks and considering broader market trends.

-Spend more time outside, and less time in my office.

-Continue to take time to read good books. I'm on a spy novel kick right now.

-Practice mindfulness and embracing contentment with simple pleasures (see above, all my non-financial goals are essentially "free" but incredibly satisfying and fulfilling.)

[jacob]

Are you deliberately not maxing out your 401k (thus missing the tax deduction) in order to retain more money in taxable accounts?

[Twinbrook2540]

@jacob,
Yes, that is deliberate. Since I bought a house several years ago, I wanted to rebuild savings in taxable accounts, as an emergency hedge and also because I have never been that excited about locking up all of my money in retirement accounts. The tax detriment of not maxing out 401k and IRA has been minimized by relatively high itemized deductions for high property taxes and mortgage interest. Now that I've refinanced my mortgage to a 10 year, the interest deduction will dramatically decrease. In 2014, I believe my salary and passive income will finally be at a level where it makes sense to more actively focus on tax planning. Ever since I spent a lot of time studying tax law in school, I've had an aversion to letting tax planning guide all of my financial decisions - even if the results are not always the most rational outcome......

[pathguy]

How much do you hope to have between your 401k and taxable by 2017 to ER?

[Twinbrook2540]

January 2014

Assets:
242,874 - house (per Zillow)
74,451 - retirement savings (IRA, pension, 401k, HSA)
61,332 -taxable savings

Liabilities:
138,033 - mortgage

Income:
17,988 - salary/bonus (after tax and 401k contribution)
107.08 - dividends

Savings:
500 - 401k
1058- mortgage principal
6275 - taxable

Months of expenses saved:

61,332/2500 = 24.5 months

Percent of expenses covered by this month's dividend/cap gain income:

107.08/2500 = 4%


February 2014

Assets:
243,923 - house (per Zillow)
78,453 - retirement savings (IRA, pension, 401k, HSA)
63,883 -taxable savings

Liabilities:
136,971 - mortgage

Income:
3,610 - salary (after tax and 401k contribution)
201.37 - dividends

Savings:
975 - 401k
1061- mortgage principal
7025 - taxable

Months of expenses saved:

63,883/2500 = 25.5 months

Percent of expenses covered by this month's dividend/cap gain income:

201.37/2500 = 8%

This is a two-for-one update for January and February. These were good months, driven mostly by receipt of my 2013 bonus in January, along with a small salary increase. This, combined with digging into some tax stuff while assembling info to do 2013 taxes, led me to finally change my 401k contributions to make the maximum contribution. January and February are expensive months for me in general, with some annual insurance payments due, and other prepaid expenses for the year. Also, it has been abnormally cold here, which has/will increase heating costs. In any event, these were good savings months, with encouraging progress made on increasing both dividend income and months of expenses saved. It's also nice to see steady decreases in the mortgage balance with the 10 year loan.

Around March 1 of each year, I always take some time and read Warren Buffet's annual letter to Berkshire Hathaway shareholders. In this year's letter, there are some great (and empowering) comments about investing (start at p. 17). I would own more Berkshire if it paid a dividend.
http://www.berkshirehathaway.com/letters/2013ltr.pdf

In response to @pathguy, I don't honestly have a set amount of assets that I plan to accumulate before my scheduled retirement date of May 1, 2017. With a 4% SWR and the expenses I have projected, I would need somewhere between $600k and $700k. I expect that by my scheduled retirement date, my net worth (including house) would be around that level. At that point, I view May 1, 2017 as less of a hard "deadline," than a self-imposed "check in point," where I want to be sure that I give myself the option to leave my current position and either do something else, or nothing work-related at all for awhile. It's hard to predict how life will look in 3 years (ie, relationships, kids, etc).

[Twinbrook2540]

March 2014

Assets:
247,010 - house (per Zillow)
79,860 - retirement savings (IRA, pension, 401k, HSA)
58,829 - taxable savings

Liabilities:
135,906 - mortgage

Income:
4039 - salary (after tax, 401k contribution, expense reimbursement)
303.18 - dividends

Savings:
1450 - 401k
1064 - mortgage principal
800 - taxable
450 - IRA

Expenses:
Groceries: 214
Gas: 278 (sort of high due to some work trips that were reimbursed)
Mobile phone: 68
Cable/Phone/Internet: 150
Natural gas: 153
Electricity: 53
Mortgage: 1450
State income tax: 377
City income tax: 144
Annual life insurance premium: 2466

Months of expenses saved: 62,441/2500 = 24.9 months

Percent of expenses covered by this month's dividend/cap gain income: 303.18/2500 = 12%

April 2014

Assets:
255,637 - house (per Zillow)
84,915 - retirement savings (IRA, pension, 401k, HSA)
62,687 - taxable savings

Liabilities:
134,838.69 - mortgage

Income:
3621 - salary (after tax, 401k contribution)
120.49 - dividends

Savings:
1450 - 401k
1067 - mortgage principal
800 - taxable
450 - IRA

Expenses:
Groceries: 136
Gas: 221
Oil change/tire rotation: 42
Mobile phone: 67
Cable/Phone/Internet: 150
Natural gas: 129
Electricity: 46
Water/Sewer (quarterly): 43
Mortgage: 1450
Annual long-term disability insurance premium: 862

Months of expenses saved: 62,687/2500 = 25 months

Percent of expenses covered by this month's dividend/cap gain income: 120.49/2500 = 4.8%

I'm finding it's easier to update this every two months; also - it's easier to see trends and developments over a time horizon longer than a single month. For anyone who is keeping track, May 1, 2014 marks exactly 3 years until my target retirement date of May 1, 2017. It has been about a year since I started reevaluating my priorities, saving more aggressively, and reducing expenses (albeit less aggressively). I have been reflecting on how I *feel* a year later, and it is amazing how much more content I am. It really is powerful and settling to have a plan and know that you can stick to it and make progress, while still having a lot of fun along the way. If things continue to progress as they have been, I really do not think it will be too difficult to meet that target date.

I've never posted expenses before, but I decided I might start doing so. I'm not really looking for critiques -- I am well aware that I could eliminate mobile phone and cable, etc expenses, but it is not really a priority for me at this point. Coincidentally, though, I did eliminate my satellite radio as an experiment recently. I miss it, but probably not enough to turn it on again. Likewise, my insurance expenses may be controversial. I have two whole life insurance policies for a variety of reasons. They play a small part in my financial portfolio. I have not been counting their cash value as part of my net worth here. I also maintain long-term disability insurance, and plan to continue doing so for the time being at least. It provides me peace of mind.

I've been thinking a lot recently about selling my house. The real estate market in my area is booming, and I could probably easily make a $50,000-$60,000 profit. I'm not sure where I would move. Closer to work is a possibility, but the demand for real estate in all desirable areas at the moment far exceeds supply. I don't necessarily object to renting, but I'm also not excited about the hassle of moving. It will be interesting to watch the market through the spring/summer/fall buying season this year.