MBB_Boy's journal

[MBBboy]

TLDR at bottom

Following my decision to make an account and post an intro, I’ve also decided that the best way for me to explore ERE is to start a journal and start engaging a bit in the community. I’ve been reading a few other ones without commenting – now that I have my own I’ll feel empowered to chime in on the journey of others now that they will have the option to lob some criticism and questions my way. Fair’s fair.
I don’t know if ERE is truly for me, but I do know that I’ve reached diminishing returns in my primary internet lifestyle outlet (Bogleheads). I’d like to spend less of my online time there and more of it elsewhere, because it’s gotten repetitive.

An analogy that I’ve come up is that my FI game is strong, like a longtime marriage. We’re in love, I’ve fully internalized its aspects into my daily life, and been enriched by it. Alternatively, I’d rate myself an A+ here on a grade scale.

Prepping is the hot girl I picked up at the bar. We’ve exchanged numbers, flirted a lot, gone on a few dates, even made out once or twice. But I haven’t fully committed, and I don’t know where this is going. We recently got drunk together and now I have a generator and an interlock on my house. I’ve got a long way to go. I’d rate my prepping as a C+. Passing.

ERE is currently the cute girl that’s a friend of a friend. She’s popped up at a few BBQs, we’ve chatted a few times, and every once in a while I find myself sort of eyeing her from across the party. I don’t even know if she’s interested, or if am. But I’m curious and wondering if I should ask her to lunch on a weekday. My grade is incomplete at best, but perhaps the community will give me an F (aka reject me) once I eventually get around to discussing spending.

Because the “problem” with potential fit is that while we have saved between 45-65% of our incomes since we’ve been married and I found FIRE………our incomes are large. I was completely comfortable and ok with that before, but part of the intellectual discomfort I’ve been purposefully seeking is leading me to pressure test whether I’m ok with our spending. Many people here would be saving 95%+. With our net worth / investments, my read of the forum says most would already be FI. Instead, I’m projecting FI in another 5 years subject to uncertainty from children. I’ve read Medsavers journal with interest.

My first month or so reading here was a struggle – many of the perspectives, tones, and opinions were grating. I decided to press on and keep going as an exercise in intellectual discomfort. I eventually found the blog (which I realized I had run across a few times years and years ago), through the blog decided to take a chance on the book.

I really enjoyed the book. I read it cover to cover during my beach time on our recent vacation in Miami – at a St. Regis resort no less, so the irony was certainly not lost on me. But like any good WL5, I rationalized it away because I got a great deal and used points accrued during my / my wife’s management consulting careers.

I’m not sure what’s happened, but the early blog and the book have a different feel than I’m picking up from the online community. I surmise that things have simply gotten more extreme over the past 10 or so years, which makes sense.

I have a “comparison is the thief of joy” problem. The first order insight of that saying is that there are many people who are happy / content until they compare themselves to others – after which they become unhappy even though nothing has changed. Therefore, don’t compare yourselves to others and focus inward / on things you can control.

HOWEVER, comparison might be the only way to recognize that change is needed. You can be perfectly happy with your head in the sand saving 5% of your income for retirement, buying everything that’s advertised to you, being overweight, and working until you are 67 when social security kicks in. We certainly wouldn’t suggest that person stay on their path because comparing themselves to people pursuing FIRE or ERE is the “thief of joy”.
If I was part of a murder board and forced to counter this point, I’d accuse myself of conflating knowledge and comparison. You can learn of a new way without necessarily comparing yourself to the people walking it…….but I don’t know if that’s realistic.

TL;DR: WL5 thinks most people would be envious of position and say he’s doing great. Married and happy, 50% savings rate, will be FI by 40, happy at work, kid on the way, etc etc. But THIS community will provide a different, likely critical point of view. He hasn’t done enough, spends waaaaaaay too many JAFIs, should have been FI years ago, and is ruining the planet by having a lawn and two cars. Starting a journal to decide how to weigh these POVs and what changes may be warranted.

[mountainFrugal]

Welcome. Looking forward to following along.

[mathiverse]

Welcome! I'm curious how you'll change things now that you're actively involved! I'm looking forward to following along as well.

I started in a similar position with respect to income and spending. I always enjoy seeing how others handle that starting point and what changes they make because I find those stories inspiring and relatable due to the similarities to my own path. I've gotten my spending lower, but I haven't hit really low levels yet. Maybe in another few years as I gradually figure out how to ramp things down.

[jacob]

I’m not sure what’s happened, but the early blog and the book have a different feel than I’m picking up from the online community. I surmise that things have simply gotten more extreme over the past 10 or so years, which makes sense.

Time happened. It's been almost 15 years since I started the blog and there has been some development.

I'd judge the blog as WL4 in 2007 and WL6+ in 2011.
Here's a list of the posts in chronological order: https://wiki.earlyretirementextreme.com ... ed_by_Date

The ERE book is WL6-7.

The gravity of the forum used to sit around WL5-6 for the longest time but over the past couple of years it has moved to WL6-7.

[Married2aSwabian]

Welcome! The accountability of tracking and posting monthly expenses is huge and the feedback from this forum is great. We’ve fallen short of budget goals several times last year (also stuck around WL5) but are more confident in making decisions when everything is being tracked more closely. Sure there are plenty of diverse approaches / philosophies, but that makes it kinda interesting.

[MBBboy]

Thanks for the welcome everyone!

@Jacob - exactly as I surmised, thanks for confirming! It's a bit like what happens when you watch old TV shows or movies. Seeing Steve Carell or Will Smith in current times is a shock when your view of their age is encapsulated forever in the sitcoms.

[Dream of Freedom]

I really enjoyed the book. I read it cover to cover during my beach time on our recent vacation in Miami – at a St. Regis resort no less

[MBBboy]

I’m beginning a series exploring each of our budget categories, starting from the most expensive and continuing down until the line of irrelevance. My wife and I have detailed tracking by category for the past 7 years, and I create a 2x per year presentation that includes a waterfall chart of all of our expenses (among other things).

The only thing I’ve struggled with before starting this is whether or not I should share the $ amount of each category, or just the % of income. Given my intelligence background and personal inclinations, I’m basically allergic to sharing personal information, even anonymously. Sharing the actual $ amounts makes me uncomfortable……..which is exactly why I’m going to do it. The primary reason I stuck with lurking the forum and ultimately making an account is because I have found many of the thoughts and expressions grating and uncomfortable.

I’ve thought deeply about the potential risks, and ultimately thought of the potential downsides in a 2x2 fashion, with an X axis of severity and a Y axis of probability. What were the potential outcomes if I shared this info, got doxed, and someone stapled together all the posts along with our EOY financial presentation and gave it to everyone that knows me?

Turns out none of these things fall in the scary upper right quadrant (high probability, high severity) OR the upper left (high probability, low severity). Some things are on the tail risk side in the bottom right (low probability, high severity) – but the severity of the threat isn’t affected by sharing this info, only the probability….which remains low. Everything in this box is already cared for, because I already practice good behavioral and digital hygiene (no social media, unique usernames and passwords, MFA, no wifi that isn’t my own, etc etc). And then there’s the bottom left (low probability, low severity) which I would tell any client to dismiss without further action, so I’m going to take my own professional advice.

Preamble out of the way, on to the first entry: (ETA: There will be 14 of these)

[MBBboy]

1. Housing

Background: We bought our new build, 3 bedroom, 2K sqft house a few years ago when we moved here. It’s bigger than we needed immediately, but not as big or expensive as we could afford. We decided that moving multiple times would be stupid, so we got more than we needed with the plan to grow into it with kids (first one on the way!). We paid 38.4K last year, with a 2.375% fixed rate. Our mortgage is 3,776 a month (did another refinance last year, so numbers won’t foot). The mortgage was 20% of our expenses last year.

I am aware that you don’t NEED a house of this size to raise a family, and that my grandparents generation did more with less. The average American house has gotten bigger, even as family size has shrunk https://www.ncbi.nlm.nih.gov/pmc/articl ... 4135.t001/

Motivation to change and rationale: Low. We like our house, the interest rate is really low, and our housing costs (and all other costs by extension) are not a significant portion our revenue. We are 5 minutes away from our grocery and a great park where we jog and take long walks, short biking distance from a 20mi round trip bike path, and less than 15 minutes away from downtown. The plan was to have and raise some kids here, and there’s no functional reason why that plan has to change. In summary, the interest rate is lower than historical inflation, and the payment itself is not a burden.

The Good:
• Interest rate
• Low % of income
• Location
• Like the house
• Smaller house footprint than national average
• New build

The Bad:
• Yearly payments are still higher than an average person’s salary
• Time and money on house maintenance (not unique to this house)
• Ever rising property taxes (not unique to this house)

The Ugly:
• I don’t honestly think there’s an ugly here

Current go forward plan: Keep the house, will be 45K this year due to full year of higher payments after refinance (I shortened the term from 30 years to 20 years to optimize rate and cashback). I don’t feel a psychological need to be debt free

[MBBboy]

2. Home Improvement

Background: This was an unusually high year at 30K (16.7% of expenses) – we put in a deck + stairs from our back patio (16K) and did some electrical work to upgrade our exterior panel to accept our new generator (2K). The new deck led to some xeriscaping in the backyard instead of replacing the grass (7K). Looking over the last few years, this number is typically closer to 1-2K.

The reason for the deck is that we don’t have backyard access from our back patio – it’s about a 12 foot drop to the backyard. This was fine in prior years, but we got a dog this year and wanted to let him into the backyard easily. This was probably the most expensive way to achieve that goal. We have a pretty severe slope in our backyard. Looked into doing the deck DIY (one of my good friends here did his own, willing to help). Ultimately decided against it because of the required stairs, and didn’t feel confident doing stairs for wife and baby as part of my first major DIY project…

Xeriscaping is harder to excuse – I could have spent the time and energy getting equipment to haul rock and shoveled it myself. If I was confident in my ability to remove and replace panels our wood fence, maybe I would have. But the prospect of hauling the rock around my entire yard and the house without moving the fence was a hurdle too high, so I paid for the easy way. I also decided to buy into the idea that I wasn’t going to grade things properly for drainage like the pros.

Motivation to change and rationale: Low. I view this high number as an aberration, and it’s well outside the established range from the other years we’ve been homeowners. Most of our furniture is used / hand me down, we avoided filling the empty bedrooms in our house (guests have used air mattresses in mostly empty rooms, stayed on the bed we kept from our apartment, etc).

The Good:
• Enjoy and use the deck
• Spend not habitual – usually in the 1-2K range
• Deck should eventually help with resale value, even though we have zero plans to go anywhere

The Bad:
• No bad here, just ugly (see below)

The Ugly:
• No matter how I dress it up, this was a metric crap ton of money. 20K+ on a pure luxury for the ostensible reason of giving a dog (discretionary) access to our backyard instead of simply walking him out the front and around the house. We were fine not having a backyard deck for years and just using the elevated patio.

Current go forward plan: I plan on just writing this off, because I don’t see it repeating. If I work on my own handyman type skills, I can possibly avoid or minimize expenses going forward. Not sure how realistic this is, because the “normal” home improvement expenses have been furniture or decoration related (e.g., buying an office chair). But I plan on installing indoor ceiling fans this year!

[MBBboy]

3. Student Loan

Background: Wife and I have 4 degrees between us: 2 undergrad, and 2 MBA. We did very well here, as the first 3 degrees were net zero through scholarships, work study, summer jobs, GI bill etc. We went to an expensive, private, “elite” undergrad and a Top 10 grad program for our MBAs.

So why do we have a $2K a month student loan payment (13% of expenses)? Well, as a “banking professional” I wanted to execute some arbitrage while my wife did her MBA. We took out a little over $100K near the end of my wife’s second year because I knew we could immediately refinance it, invest the proceeds, and pocket the difference. This worked better than my wildest dreams, as I decided to go variable on our second refinance, and the interest rate on the loan is currently 0.3%. That is not a typo – it actually got done to 0.07%, but started coming up recently. Both refinances were free – went from 6% fixed initially which we held for 5 months down to 4.5% fixed down to 2.3% variable (initially).

Motivation to change and rationale: Low. I actually wish there was a way to get more of this money. I have an unlimited add-on CD that’s paying a touch over 3%. I don’t even have to put this money in the market or doing anything exotic to win here (although the money is actually all invested and returning well over 3%). We’re making out like bandits here even without thinking about the implications of inflation. The 24K a year in payments doesn’t hurt due to high incomes.

The Good:
• Interest rate
• Low % of income
• Arbitrage opportunity

The Bad:
• Having a mandatory 24K expense is a risk in the case of job losses

The Ugly:
• This is indicative of a propensity to complicate financial affairs and get greedy. There was no need for us to take a student loan, and I took a risk we didn’t have to for the sole purpose of making more money. Am I going to end up doing something stupid and risky later that blows us up?
• Taking this further, one of the reasons I’m trying to redirect my mental energy away from investing is because this is the type of stuff I get into at this point. The more time you spend reading and thinking about something, the more ideas you’ll have. At some point, I noticed I was spending a lot time deep into the weeds on credit card rewards systems, shaving down already low expense ratios, and backtesting portfolios to see what the impact of an extra 5% tilt toward small caps could be. In actuality, I’m much better served getting some low hanging fruit in other parts of my life (like sharpening my own mower blades or having emergency drinking water).

Current go forward plan: Keep making minimum payments. Loan will be gone in about 2 years anyway, and eliminating this expense from our monthly burn doesn’t change our situation in a meaningful way. Not going to repeat anything like this, but don’t see a reason to accelerate payoff.

[MBBboy]

4. Charity
Background: This will be a short one. We donate to our church and a variety of organizations (e.g., anti-human trafficking, animal rescue, cancer research, alma mater). Last year was $17K.

Motivation to change and rationale: Zero. This is one of two budget categories which I consider off-limits (vacation is the other). It is the absolute last discretionary item to go, and we have a household rule that this number will ONLY go up over time. So when we discover some new thing we want to donate to, or up the amount for a match or challenge, etc. etc – that additional becomes permanent. Our giving has grown quickly as a result, up from 3.5K in 2019. It’s outpaced our income growth, which is sort of the point

The Good:
• It’s all good

The Bad:
• N/A

The Ugly:
• N/A

Current go forward plan: Stay on course. Last year’s donations are this year’s base, and we will happily expand it to whatever we feel moved to give

[MBBboy]

5. Car Payments
Background: We are currently a two car family, with one paid off 2011 vehicle and a 4 year old Tesla Model 3 that was bought new (was an early waitlist consumer). The payment is 899 a month and represents 6% of our expenses. Loan is 2.79% interest and will be done in 2024.
We each had a car when we got married (each paid off), and sold one to go down to a one car household while we alternated being in school / when I first started my traveling consulting job. We stayed with one car when we moved back to my home state, and the second car came after waiting years on the waitlist.

Motivation to change and rationale: Low. I don’t think we have the typical “car problem”. The paid off car is a small 4 wheel drive SUV, which will be crucial when our baby comes and we actually want to go somewhere all together. Our dog is 80+ pounds, won’t fit in backseat if there’s a person / carseat there. Has to go in the open trunk area. This car is paid off, 10 years old, 100K plus miles. The carrying cost is minimal. Payments will already be gone before FI, and represent 3% of our net income. I’m not sure I trust being 100% reliant on an electric car, especially not with camping / hiking as hobbies.

The Good:
• Interest rate
• Low % of income
• Enjoy the cars
• One car paid off
• Redundancy – when one car has a problem, we aren’t stranded and scrambling

The Bad:
• Know that we can make it work with one car

The Ugly:
• Bought a brand new luxury car

Current go forward plan: Keep both cars, maintain as long as possible.

[MBBboy]

Looking back over this expense series so far reveals the problem I've been struggling with. Here I am having listed out somewhere between 50% and 63% of last year's expenses (depending on if I normalize the home improvement), and not a single budget category has anything over than a "low" motivation to change.

Two of these categories will go away in the next 2 or so years naturally (student loan and car payments), but it's hard to make significant progress on getting overall expenses down when I can rationalize / justify all the large ones. And this is ignoring the fact that we make and save a lot of money, so none of this is "necessary". Or maybe I'm fooling myself by saying that my lack of motivation isn't tied to our high income / savings rate.

[mooretrees]

I'm glad you wrote that last post. I had noticed that you listed your motivation as low on every single budget category and was sorta confused by it. I think you've read the ERE book? At the end of chapter one Jacob writes (and has a fancy figure too) about the (paraphrasing here) four variables for changemongers have to make change;
"1.increase your dissatisfaction with your present situation.
2. Strengthen your vision of the future.
3. Build a plan to get from the present to the future.
4. Lower the perceived cost of the plan." p.14 ERE

Which option seems realistic for you? You are mostly content with your situation as noted with all of the 'low' motivation to change descriptions. I wonder if strengthen your vision of the future is the area to focus on? Do you plan on having children? If so, what about your life would be different if you did?

[MBBboy]

Thanks Mooretrees. I have read the book, and at your prompting went back and re-read the “Barriers to change” portion. And we are expecting our first child in April.

Part of the reason that everything so far has been low has simply been ordering / chance: The largest expenses have debt attached to them, which means there’s an interest rate component, which has led to a financial optimization question around debt vs investing.

But even looking ahead, you’re right that there’s a live-time internal struggle I’m going through. It’s actually the reason I got the book and ultimately decided to join the site / start a journal in the first place.

Using the Vision / Dissatisfaction / Practicality framework, I am lacking in vision, undetermined in dissatisfaction, and middling in practicality. I agree with you that vision is what I need the most help with.

I’m in a state of transition with Vision as I’m nearing the completion of what has motivated us so far. Even before knowing about FIRE, my wife and I had the goal of living on only on one income. In order of aspiration, this accomplished the objectives of:
1. Being able to survive emergencies / job loss (achieved)
2. Enabling the freedom to have a stay at home parent (realistically her) (achieved)
3. Having the option to downshift jobs if desired / choose a job not based on money (achieved)
4. Buying back our time through early retirement (in progress)

We’ve maintained this system over the years as our income has increased, which means that both our savings and spending have gone up. We viewed this as a feature, not a bug. We want to have balance between living for the present and the future out of fear of the scenario that we sacrifice all of our 20s or 30s, and then get hit with some sort of negative life event that derails our ability to “live the good life” later. (In short, our dissatisfaction was low)

This has worked very well, and with very conservative assumptions we will be FI in less than 5 years time. At this point, the portfolio is doing all of the work which means that decreasing our expenses in order to boost savings has limited effect. When I modeled it out, increasing our savings by 100K moves FI time from 4.83 years to 3.25 years. So it’s hard to get motivated to cut expenses. (In short, vision is low).

But now I’m starting to think about building toward our “post FI” life, and this has me pressure testing and re-evaluating things. A large part of this is resiliency / safety, because lowering our expenses drastically raises confidence in the nest egg. As it stands, we would simply be exchanging our coupling to our jobs for a coupling to our portfolio. It’s undeniably better because we get back time in the exchange. But it’s still a 1:1 coupling, and there are many things outside of our control that can hurt our portfolio (more things than would cause us to lose our jobs ironically enough).

So when it comes to the change options:
1. Increase dissatisfaction with present situation: I have a high-paying WFH job that only takes 20-30 hours a week, and it isn’t even software! Her job is actually pretty stressful, but she still likes it. One day, she won’t but we can already activate options 2 or 3 above. I don’t see a path forward here unless continued exposure to the POV on these forums makes me think differently about spending money. I talk about this in the intro post, but changing our comparison set COULD result in us feeling differently about our spending, so I sort of think of this as undetermined.

2. Strengthen your vision of the future: This has the most promise. As part of our build towards a Post-FI life, we bought some land out in the country with plans to build a house, pond, and do some light farming / animal husbandry. We started backyard gardening last year as practice and have been researching the animal part.

3. Build a plan to get from present to future: Already working against current vision of the future. But if the future plan changes, will need a new plan.

4. Lower perceived cost of the plan: I don’t have a problem with the cost of the current plan, which we’ve been following for years. But could be a problem with a future plan.

It’s ironic that despite a stated goal of spending less time on the personal finance side of the house, the first thing I did with my journal is start an expense review. But it’s the area where I feel the most comfortable and knowledgeable, and I think the exercise of trying to view these expenses in a new light (and open them up to others) will be good practice. There are some other things bouncing around in my head that aren’t investing / expense related, but I’ll get there when I finish the expense thing. I’m just wired that way

[mathiverse]

This has worked very well, and with very conservative assumptions we will be FI in less than 5 years time. At this point, the portfolio is doing all of the work which means that decreasing our expenses in order to boost savings has limited effect. When I modeled it out, increasing our savings by 100K moves FI time from 4.83 years to 3.25 years. So it’s hard to get motivated to cut expenses. (In short, vision is low).

The reason lowering expenses works better than increasing income is because you have a twofold effect: needing less money to FI in the first place and increased savings. In your case, it sounds like the more important side is needing less money.

The idea the portfolio growth will outpace any effect you could have assumes you won't make any changes that radically reduce your expenses. That assumption appears to be true given all of your previous posts and I'm not trying to convince you to change that. However, I want to point out the more interesting way to think about how savings changes your FI timeline is to think about something like "What if I halved my expenses? What if we only spent 2 - 4 JAFI as a household per year?" Given the numbers you have stated, it's possible that you'd be immediately and sustainably FI in at least one of those cases.

Of course getting to the point where, emotionally and practically, radical spending reduction is possible is non-trivial. But it would surely be faster to lower your expenses to get to FI and probably ERE if that was very important to you.

It really is non-trivial to radically reduce expenses even when your expenses are very high since many expenses can be locked in for a decent amount of time (leases, hard to move, etc), my expenses have taken years to get lower than the high level I started at and I didn't have anywhere near the number of strong commitments to ongoing expenses since I started as a single, debt free, renter, that was planning to move away from HCOL area eventually when I started thinking about ERE.

It’s ironic that despite a stated goal of spending less time on the personal finance side of the house, the first thing I did with my journal is start an expense review. But it’s the area where I feel the most comfortable and knowledgeable, and I think the exercise of trying to view these expenses in a new light (and open them up to others) will be good practice. There are some other things bouncing around in my head that aren’t investing / expense related, but I’ll get there when I finish the expense thing. I’m just wired that way

I think an expense review has been useful to me, but only when I spent more time thinking about how I could have acquired or fulfilled the need without money next time rather than justifying why, in this case, I had to spend or it didn't matter that I spent money.

Another useful thing I've been doing is the buy nothing period. In my case, I use it as a way to force myself to think about: 1) non-monetary ways to get what I want, 2) my actual wants and needs, 3) the building blocks of the things I want/need to see if I can make them from parts I already have, and 4) what a good deal is on the things I do buy. Of course, a buy nothing period won't help much if you are good at justifying exceptions to the buy nothing period (which is what happened to me the first time I tried it).

[mooretrees]

Glad to read your thoughts about vision. I might be wrong but you could be approaching the “moat” that @AxelHeyst eloquently talks about in one of his many charts. Moving from Wheaton level 5 to the next level is a BIG change in how you think. I hear anyway, not sure I understand it that well. But as someone who is “winning” at level five, it takes a lot of vision to keep
moving ahead in levels. I think having a kid is likely a big enough disruption that it will be interesting how much your life and satisfaction with the current situation changes. April is very soon!

[MBBboy]

You're absolutely correct that if if we reduced our expenses significantly, we could be FI already. EDIT: We track two FI numbers. The two numbers were developed after extensive conversations with the wife, and she's still not completely sold on the lower of the two numbers (20% lower than primary). It's a two year difference in time. Both numbers are significantly higher than what people shoot for around here. Either way, we would be FI in our 30s.

I like your comment about how an expense review has been more useful when you think about how you could have done things differently without money. Looking at the construct that I chose, I've aimed myself into looking primarily backwards (not forward) and create a forcing mechanism to think about what I could have done differently. I'm going to add a new section going forward about what I could have done to reduce / avoid the spending. Thanks for that

[MBBboy]

@Mooretrees

I'll have to look for the moat discussion, thanks for the suggestion! I've read a lot of that journal, looks like I'm diving back in. And yes, I expect lots of disruption coming up soon! Who knows, maybe working instead of spending time with him will be rev up the dissatisfaction meter. My wife thinks she's going back to work after maternity leave, and I still don't believe her