Early Retirement Extreme Forums

Really cool. Congratulations. Did you finish that whole champagne bottle by yourself?

Wonderful little journal, I have just read it all from start to finish. Funny, I became really serious about money and ERE plans around five years ago too and although I wasn't racing, I was heavily into bikes with as many as six on the go at any one time! Bicycle and camera collections just had to go, those two hobbies can be some of the worst for obsessing about new equipment and being drawn in to spending more money. I now have two bikes only, one rain bike single speed with fenders which I built up myself (including the back wheel which has held up for more than four years now) and a steel framed fixed track style for training. I kept the single speeds as it prevents me from debating what groupsets to buy as groupsets are one of the most expensive things (next to wheels of course).

Love the fact that you have come so far and logged it all. I have covered a similar distance over a similar time but didn't really log it all like this, or at least not as extensively. Wish I had. Well done you.

GR

@ Everyone - Thank you !!

@ before45 -- native plant gardening sounds interesting. My (small) front yard has a fairly steep hill and I will be thinking about planting something else there rather than grass. Maybe you can help me with ideas! It would also be nice to have an FI-conscious acquaintance in the area

@ Standard Staples - the inside is actually fairly plain now. The windows have all been replaced and this may have eliminated some stain glass. It is in Dogtown - just south of Forest Park.

@ RealPerson - goodness no. I drank maybe half of it.

@ Gravity's rainbow - Thanks for the comment. Right now I have one single speed and one full drivetrain bike (with some awesome 2,004 campy record 10-speed that could be tricky to maintain as pieces fail).

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AUGUST 2013
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Lots going on in August… BIG SPENDING too.
1-Bought a house
2-Lots of travel
- Vegas
- Chicago
- 2 Relocation trips to St Louis

SPENDING: $3,550

- Home - $1,867
- Travel - $940
- Entertainment - $334
- Food - $322
- Other - $87


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SPENDING DETAILS

Home:
- Rent - $525
- Relocation Trips - $226
- Insurance, new house - $554
- Taxes, new house - $342
- Other - ~$225

Work covered all the closing costs so that is nice. Also put $22k down on the home but wasn’t sure whether to count that as spending or not.

TRAVEL:

VEGAS: A very good friend of mine got married. They had a small and quick ceremony which was nice. It was great to see my old friends – I hadn’t seen them for a while. Stayed in one of the nicer hotels which was a bit expensive, but it was also nice. Shared the room with a couple friends so that helps (and it’s more fun than having a room to myself only). I won a bit gambling – enough to cover all of my food/booze/etc. while there. All in all I had a blast. I’m not that big on Vegas, but it can end up being a great place to spend time with friends.


CHICAGO: Another friend who I hadn’t seen for a few years (and who has been giving me a lot of crap for not going to visit him) was in Chicago for a weekend. So I drove down and hung out with him and his new wife. I’ve never particularly enjoyed Chicago – it feels too crowded for me. But it was fun. They were staying in a new five star hotel – downtown – right by the canal. Possibly the nicest hotel I’ll ever stay at in my entire life. Very nice building and rooms, very good service, etc.. etc.. – and a pretty big price tag (they got it for $350 for the night). My friend didn’t want any money for the hotel and that kept it fairly inexpensive. I post some things on Facebook about my FI/ER plans and we discuss sometimes. His retirement target is $3.5 million and he is very much in the camp of Spending $ = Happiness (for him). He was curious about my plans and what I’d do after retiring and it seems he can appreciate the concept. When I asked him how much my share of the hotel was he said he didn’t want anything and that they were going to stay there whether I came or not. I did wonder whether he said that because he knows that I dislike spending on that kind of thing while he enjoys it - or if the fact that he doesn’t mind spending so much causes it to really not matter to him. Anyways, we made a pretty good trip out of it. When went out for the night - instead of standing in a stupid line to go to a stuck-up club (like we used to) we spontaneously bought a bottle of Champagne at a CVS and drank that while walking around and enjoying the evening. $8 for 3 people to get buzzed and have a great time when it would’ve cost at least ten times that to drink as much in most downtown bars. The next day we went to the Art Institute of Chicago. It was well worth the $23 admission. TONS of nice art there and also some really cool Greek/Roman artifacts. It’d take a full day (at least) to see everything without rushing.
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RELOCATION


Bought the house as mentioned earlier. I’ll be in the process of moving for about a month due to work location demands. Looking forward to getting settled in.
I bought the house Thursday morning of Labor Day weekend and stayed the entire weekend. Went out to bars a lot and spent a lot of money on drinks! I forgot to bring my flask. St Louis (with all it’s shit hole areas) seems nice so far. I think I’ll enjoy living so close to Forest Park. It is a HUGE city park that was made for the World’s Fair.. It has a ton of open space. This is important for me as I can feel walled-in inside a big city. The park has a ton of potential activities – many FREE (2 museums, sports fields, concert amphitheater, a zoo, and a lot more)
My home expenses will go up significantly. I had a pretty good setup in my current apartment ($575 per month for everything including electricity and internet). Excluding payments on principle, the expenses will be something like:

- Taxes – $110
- Insurance – $50
- Electricity – $100 ??
- Gas - ?? $50 ??
- Water, sewer, trash, internet - $100 ?
- Maintenance - ?? $200

So maybe somewhere around $550 per month. The principle payment will be around $600 but I’ll consider that to be in the ‘savings’ category. I’m very unsure about these costs so we’ll see how it goes. Getting one roommate could make it cheaper than my current apartment. Two roommates and I’d be close to $0 housing cost. I don’t think I’d do that though unless I had a girlfriend living there and one other roommate. If I end up traveling more than expected and am generally only home weekends – It would be an option to get two roommates (that occupy both of the bedrooms) and to stay in the basement. It is not really mean to be completely finished, but I could set it up well enough to work.


I believe that I will be more active in searching out new friends and girlfriends in St Louis. I expect that my spending on going out and activities will increase. I want to get better at finding people that are 'strange' like me - who it won't cost money to hang out with. The quickest/easiest ways I'm used to meeting people will likely result in making friends who go out spending frequently. I want to make some friends who spend a good chunk of their time at home gardening, reading, working on things, etc. But it's harder to meet people with hobbies like this -- they're at home practicing them much of the time. I've found some ideas from this forum (such as attending couchsurfing events) but I'll need practice and could use advice on this.


I'm excited to start working on house projects:
- Home gym in basement (freeweights & chinning bar)
- Shop area in basement (bicycle & general)
- Garden


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CAPITAL
Got three paychecks and extra money for relocating so my income was pretty big. Didn’t hit $250k – it will be another month or two.

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The $350k FI target might not be relevant for staying in the house.. My ~$500,000 retirement target does include home value.

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I do need to adjust the SWR now to not include home equity (or to figure out in which case it should)

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I'm not particularly worried about current high spending - have extra income for relocation in June and August.

Two little updates for tonight..

#1 -- I'd told my apartment manager and mailed a letter to the owner about moving out - with my last rent check. Got a letter back from the owner confirming and noting that I'll also need to pay for the NEXT month (minus however long they get it rented before that).. I didn't think that would be right - that it was normally 30 days - and that since I'm long past the original 12 month lease period it wouldn't apply anymore. Looked at the lease and it is spelled out very clearly. I was pretty pissed off about it so I just wrote the check and mailed it that day so I wouldn't have to stew over it for a month before sending it. I could have told them the full 60 days in advance.. Ugh... STUPID!!

#2 - I'm cleaning a bunch of crap out of my facebook profile tonight and came across this status back in 2,007 (before learning about FI/ERE):



It is great being so much more in control now - and much easier to feel content knowing the wheel timeline is just years - not a life.

No full update yet.. (haven't had internet service until today so I haven't written it yet)..

But I hit another net worth milestone in September. YAY!! Interestnigly - the timing was pretty much dead on with Benford's law (which Jacob mentioned on page 6). Buying the house just pushed it back a month or so.




(The category names are not all accurate)

Congrats! You can now officially measure your progress in millions rather than thousands.

Congrats on the milestone!
I read through your journal this morning, great journey so far. If you don't mind me asking, what type of car and insurance company do you have? Your insurance is so low!

theanimal - PM sent

Regarding the basement gym, I used the plans from this website to build a rack. It has been rock solid and keeps things safe, since my wife can't really spot me. If you start lifting some decent weight, it might be worth the small investment (especially for squats). Includes a stable chin bar, too.

http://www.home-gym-bodybuilding.com/ho ... -rack.html

All of the materials cost me about $115, compared to $500+ for the retail steel models. You can also slide a few extra lengths of pipe cut to about 12-16" in the holes to create an almost free weight tree on the rack. Keeps things off your concrete floor and nice and neat. I can send you some pics of my setup if you're interested.

Standard Staples - thanks. I already bought a rack I found on Craigslist. Got a rack, barbell, lots of weights, a weight tree, and a nice flat bench. $375 for those -- or about one year worth of gym fees -- so pretty good deal in comparison.

I bookmarked that website to review. Looks cool.




I do need to see if the barbell works alright for me doing overhead and bench pressing. I've been using dumbells for each, which I strongly prefer.. but dumbells are generally either expensive (fixed weight sets) or annoying (most adjustables)

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SEPTEMBER 2013
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Better late than never. Been keeping myself quite busy.

SPENDING: $1,980

* Home: $1,134
* Entertainment: $268
* Food: $251
* Transportation: $216
* Clothes: $111

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DETAILS

Home expenses include paying both rent and mortgage. They do not include the principal portion of my mortgage. Entertainment includes $113 of booze, which is pretty low considering how much I’ve been going out. I’ve been wanting/trying to make new friends. I’ve made some progress, but going out to the bars is not a good way for (me) to do this though. So I’m looking for other stuff to get in to.

Got a gym started in my basement. I bought a power rack, barbell, 400# of weights, and a flat bench (Craigslist, $375 - in October actually so it doesn't show up in spending yet). That’s enough to do most things that I prefer. I’ll have just a few more things to get (weight belt, floor mats, mirror, trap bar, hand strength gear). Next projects in the basement will be setting up some storage shelving, and then a workshop area.

Haven’t been in a hurry to get a roommate but still want to do so. I want to get settled in more first.


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CHARTS






And with actual investment returns:

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OCTOBER 2013
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SPENDING: $2,317

- Home: $1,082
- Entertainment: $938
- Food: $266
- Transportation: $32

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DETAILS


- $525 - Rent at my old apartment. Last month, finally.

- $375 – Home gym equipment. Money well spent I think. Only have some small things left to finish it up

- $100 – A fountain pen nib from a specialist (Nibmeister). I also have a bunch of cheap nibs that I’ve been meaning to try out modifying myself. After ordering the nib, I spent a couple hours and realized it is pretty easy to modify the nibs. It will take me more practice to be completely happy with the ones I do, but not I know I wouldn’t ever need to buy expensive nibs (at least an expensive italic nib) unless it’s something really specific like modifying a pen that would be really difficult to replace if I mess it up. This could be a fun way to make money in the future.

- $55 – tea. Fairly cheap hobby, but the caffeine is not so good for me.

- $55 – other writing stuff. Mostly paper. Still haven’t found paper that I’m happy with the balance between different characteristics (it is a little harder for me as a left-hander – dry time gets more important but papers have fast dry time by being more absorbent, which also results in ink feathering.

- $200 – total internet cost. High because I had nearly a month of service at my old apartment, paid for a month of new service, and bought a new wireless router.
Spending should be dropping off a bit now as my double spending related to two homes is over.


Savings rate this month was 54%. For the year it’s around 75%. I’ll end up close to my savings goal for the year ($60k) – but just a bit short most likely. Would’ve made it easy if I hadn’t moved. If I do get a roommate, my increased saving rate will be pretty nice and more than make up for the extra house spending.

My priorities related spending are:
- Not spending a lot on setting up the house and initial improvement efforts
- Getting a roommate soon

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CHARTS




So the bad news – my spending has been high. It looks like I went through an initial period of ERE excitement but I've been slipping off the wagon. It was going up first from spending more on hobbies… Now lately it’s high because of the move and house purchase. The result is my equivalent net worth in years has plateaued. Shows how critical spending is for this ERE stuff! I’m not too worried, but of course I don’t like it much.



And now the good news: with the stock market going crazy lately, my actual investment returns have been making nice step changes upward.



One last note – I made my first ever purchase of an individual stock. I’ve been thinking about dividend growth investing lately (maybe a fad lately? Hope I’m not just following fads..). Bought some AGNC at $21.79. Probably a bad way to start out here – a stock with a really high yield, and a business concept that I don’t fully understand. Others I’ve started looking at closely are in oil and tobacco, and I want to investigate other REITS.

C40 wrote:
One last note – I made my first ever purchase of an individual stock. I’ve been thinking about dividend growth investing lately (maybe a fad lately? Hope I’m not just following fads..). Bought some AGNC at $21.79. Probably a bad way to start out here – a stock with a really high yield, and a business concept that I don’t fully understand. Others I’ve started looking at closely are in oil and tobacco, and I want to investigate other REITS.

I have been too lately. It feels like the overall market it is really frothy and at an all time high so now would not be a good time to buy a broad ETF like VTI or VT. So I have been looking for bargains in individual stocks. If it is a fad now it is because it is one of the few things that seems to make sense in this crazy market.

have you read Dividend Mantra's blog? You may find it useful if you are getting into dividend investing. Its a bit repetitive but basically its a really detailed ERE Journal.

C40 wrote:One last note – I made my first ever purchase of an individual stock. I’ve been thinking about dividend growth investing lately (maybe a fad lately? Hope I’m not just following fads..). Bought some AGNC at $21.79. Probably a bad way to start out here – a stock with a really high yield, and a business concept that I don’t fully understand. Others I’ve started looking at closely are in oil and tobacco, and I want to investigate other REITS.

Unless steadily increasing payouts for longer than most of us on the forum have been alive is a fad, I would not say you're following a fad with respect to dividend growth investing. The principles are sound, and for those of us pursuing early retirement, they make tons of sense.

That being said, AGNC doesn't remotely qualify as a dividend growth investment. High yield? Yes. Consistent dividend growth? Absolutely not. In fact, they have now cut the dividend two consecutive quarters. I'm not saying it's a bad investment or that you won't do well with it (the 14% yield is mouthwatering and with that number you could achieve a 100% payback in ~7 years), but this is far from dividend growth investing. This is yield chasing.

I would advise you to study David Fish's list of Dividend Champions when pursuing your next purchases. You have a short horizon until retirement, and if you're serious about DGI, you're going to want to have money in established, storied, true dividend growth companies that will sustain you for many decades. I'd personally sleep better with my passive income tied to companies like JNJ, XOM, KO, PG, etc. than an REIT that IPO'ed in 2008 with a dividend all over the map.

Standard Staples - Yes, that is exactly what I meant when I said "Probably a bay way to start" about buying AGNC.

Pemulis - Yep, I've been reading DividendMantra and Dividendgrowthinvestor. I've also read a couple books on the subject.

Right now I'm mostly struggling with finding a source for good information. I'm looking for a free way to use Value Line, as it seems like a nice easy source for certain things. I'm not sure yet whether it's available through my Library (couldn't tell from searching online). I do use the Dividend Champion's excel file.

What other sources do you guys use for company investigation?

I've since bought some CVX and BP, and might buy some XOM.. I'll probably also buy some MO and RAI soon. (they have pretty good business results but I'm also speculating here about them transitioning to marijuana sales if/when it becomes legal widespread.) I'm pretty sure I'll also be buying companies such as JNJ, PG, KO, etc... but I might wait a little while before doing so.

C40 wrote:Right now I'm mostly struggling with finding a source for good information. I'm looking for a free way to use Value Line, as it seems like a nice easy source for certain things. I'm not sure yet whether it's available through my Library (couldn't tell from searching online). I do use the Dividend Champion's excel file.

What other sources do you guys use for company investigation?

I've since bought some CVX and BP, and might buy some XOM.. I'll probably also buy some MO and RAI soon. (they have pretty good business results but I'm also speculating here about them transitioning to marijuana sales if/when it becomes legal widespread.) I'm pretty sure I'll also be buying companies such as JNJ, PG, KO, etc... but I might wait a little while before doing so.

Great buys on CVX and BP, and you really can't go wrong with XOM. I actually upped my position in CVX a few weeks ago.

MO has been a great tobacco stock for me, and I'd also highly recommend PM in this arena. LO has also been flying high lately, up over 15% in the past couple months, so I'd probably wait for a correction to add.

In terms of sources, there's tons of them, and it's hard to really wade through them sometimes. Some of the aforementioned blogs do excellent research, including DM, Dividend Monk, etc. The CCC list I mentioned has so much information, it could be a stock picker in itself if used properly. SeekingAlpha also has a wealth of information and articles, with some very wise folks executing the kind of evaluations that can almost make your head spin.

At the end of the day, investing in established brands with respectable yields that have steadily increased their payouts for decades is going to be a win. The stock price for the big guys will ebb and flow with the market, but they'll continue to pay you for owning their stock, and ultimately the price you paid won't be nearly as important as the fact that you got in and started collecting that income. Most people will tell you to invest in what you see and what you know. You see McDonald's everyday, you see P&G and JNJ products everyday, you see Coke and Pepsi everyday... odds are quite good these types of companies will be around long after you've retired and long after we're all 6 feet under.

Best of luck on this part of your ERE pathway.

Just wanted to chime in to say I'm also looking to add some dividend growth to my overall investing strategy, and I also bought some MO in October for similar reasons (steady business and speculative marijuana investment). I'm still getting started but between Fidelity's own research capabilities, the Dividend Champion excel file, and Yahoo Finance, I feel pretty confident about making decent dividend growth picks.

The problem for me (and probably in general) is that the average yield on the dividend champions is still under 3%. So IMO there has to be at least a little element of "yield chasing" in this strategy for it to work with an acceptable SWR. Don't feel too bad about the AGNC purchase, but definitely watch it closely and set an exit point.

Spartan_Warrior wrote:Just wanted to chime in to say I'm also looking to add some dividend growth to my overall investing strategy, and I also bought some MO in October for similar reasons (steady business and speculative marijuana investment). I'm still getting started but between Fidelity's own research capabilities, the Dividend Champion excel file, and Yahoo Finance, I feel pretty confident about making decent dividend growth picks.

The problem for me (and probably in general) is that the average yield on the dividend champions is still under 3%. So IMO there has to be at least a little element of "yield chasing" in this strategy for it to work with an acceptable SWR. Don't feel too bad about the AGNC purchase, but definitely watch it closely and set an exit point.

The market is flying high, and "value" is tough to find right now. Many of the Champions ride along with the market, and their stock prices have risen accordingly. However, you need to consider long term yield on cost. These guys are known for raising dividends consistently, year over year. Even for some of the big guys currently paying out under 3%, historically they should grow very well.

A blogger recently covered JNJ in depth, and it seems to be a great example here. If you had purchased JNJ in 1983, your YOC would have been in the neighborhood of 2.63%. Not great. However, if you held that for 10 years, the YOC rose to over 10% and if you continued to hold until now, your YOC would be approaching 100%. I'm not sure of many passive investments that could eventually pay you 100% of your investment every single year after a certain point. (Admittedly this example ignores inflation, but it also ignores all the dividends received over 30 years and considering that the value of the stock has also jumped ~3,600%, I think we can call it even.)

That being said, there are still plenty of Champions currently yielding over 3%, including the likes of Altria, AT&T, McDonald's, etc. Keep looking, and you'll find value worth investing in. Just keep the long term goals in front of you.

Here's what I've bought so far. Fairly high yields and I expect many other purchases to be at much lower current yields.



The REIT stocks are in my IRA