Frugaldoc's journal

[frugaldoc]

My not so “early” and not very “extreme” financial independence journal.

I have been contemplating starting a journal here for some time but have delayed for several reasons:
1. My age of 49 doesn’t put me in the early retirement camp.
2. My financial independence spending goals aren’t extremely low.
3. The assets accumulated aren’t very impressive compared to many on here.

However, today I realized that I am exactly 100 days away from my 50th birthday and I feel like I need a kick in the backside and some accountability to push my life into the zone where I feel good about my situation.

A bit of background. I am a family medicine physician in the Navy but despite being 49 only finished residency in 2016 (age 42). I have taken a meandering path through life and arrived late at my chosen profession. After grinding away as a hospitalist (making my highest income to date) for two years I joined the Navy to have some unique life experiences. I certainly have had those in a brief 5 years. I am currently the Senior Medical Officer (SMO) on one of our forward deployed (Japan) large deck amphibious ships. With my previous Air Force time I will be hitting 15 years of active-duty service in March 2024.

One of the things I love about the ERE life Jacob advocates for is its holistic approach to being an independent person. He advocates health just as much as wealth, maybe even more so. We often get caught up on the financial aspect (which I am doing okay with) to the exclusion of health (which I am failing at miserably). Perhaps that is because money to such an easy metric to track while health and fitness are less amenable to tracking in a spreadsheet.

Before getting to some basic goals let me lay out what seems to be going well and what is not going so well.

On May 7, 2017, I was sitting in a hotel in Tokyo feeling fed up with my life and spent the entire day writing to give an honest appraisal of where I stood. One area I was failing in was financial. As I sat in Tokyo, I finally decided to make an accounting of all my debts: it was appalling. My net worth on that day was profoundly negative (-$354,047). I am proud to say that since then (6 years, 6 months, 19 days) I have increased my net worth by $1,101,157 so that it has swung to a positive $747,110. You may believe that is from a lot of market gains, but it isn’t. I run a pretty conservative portfolio (think Permanent Portfolio or Golden Butterfly) and most of my increase as come from high income and frugal(ish) living. The last year before the Navy I was a grinder: I took on as many extra shifts as possible to bump my annual compensation above $420k/year.

That’s the good. Now the bad. I am horribly out of shape and overweight. I hesitate to write about this lest someone I respect (like Jacob) view me as an abject failure. Every year I stress about passing the Navy’s BCA. I am always way over the weight standards but by virtue of the Navy’s horribly inaccurate body composition analysis (a waist and neck measurement) I squeak by each year (barely and after starving myself for a week). I love investing and finance in all its minutiae. I have given a lot of thought as to what constitutes a truly risk-free asset and my conclusion was that it isn’t T-bills but rather one’s health and fitness. I am truly puzzled by why I am such a failure in this area. My health metrics aren’t as pretty as my financial numbers. Today I took the initial measurements:
Height: 74”
Weight: 262.7 lbs.
BMI: 33.7!
Bodyfat %: 37.3!!!! (Like a small person of just fat)

This journal will likely be even parts a chronicle of fitness and financial goal attainment. In the coming entries I plan to provide some goals, further details of my life, and my plans for attaining said goals.

It is hard to get honest feedback in this world, so I invite all of you to share your opinions and advice without feeling the need to be kind. I thinking people being kind to me is what has allowed me to get to such a state.

Until next time,

Frugaldoc

[Ego]

The Tokyo moment is a good indication of your ability to decide, make big changes and stick with them. I look forward to watching this transformation!

[7Wannabe5]

Welcome Frugaldoc!

I also periodically and currently struggle with weight issues, although my related health metrics are apparently great at age 58. I wonder if your recent great success with increasing your net worth might be related to your current weight? As evidenced by the statistics, losing weight and keeping it off is such a tough challenge, requires so much focusing of will , it can be difficult to achieve while simultaneously focused on other challenging goals or a generally stressful lifestyle.

[Veronica]

Welcome back Frugaldoc!
I'm a bit younger (31), but also feel like I "arrived late" in many ways, especially financial and fitness.
Looking forward to following along.

[frugaldoc]

Goals:

With this entry I want to flesh out some of my goals so that I have something to measure and be held accountable for. In the past I have often worked on too many goals at once with a predictable lack of success. I don’t suppose two goals constitute a web of goals, but I believe the behaviors and processes that will go into achieving them might constitute a web.

1. Spend < $40K (USD) in 2024
2. Weigh less than 230lbs by March 6, 2024

The reason for the first goal is that I want to mentally decouple my spending from my income. I will set aside $40k at the beginning of the year and live off that and have my paycheck automatically deposited into my investment account without it running through my budget. I once heard someone jokingly say that the two most addictive things for humans are heroin and a regular paycheck. I believe I suffer from an addiction to the latter.

I chose $40k because even with a market return of 0% my net worth should surpass $1 million by the earliest date I can resign my commission (Oct 2026). If I can train myself to live on an amount equal to or less than 4% of my assets I will feel financially free enough to approach the decision on whether to stay in the Navy until I can receive a pension (April 2029) from a position of strength. I also will likely enjoy my work more knowing that it is optional.

I am not targeting a particular savings rate because for me it does not provide much actionable information. Circumstances can wildly affect the taxability of my income from year to year: Roth vs. Traditional TSP (gov’t 401k) contributions, whether I am in a combat zone, etc. Regardless, I plan on maintaining a high savings rate even if my savings percentage is lessened for the sake of long-term tax optimization.

Goal number two is rather easy to explain. I am trying to get my BMI to less than 30 by my birthday. I have become more of a fan of process goals than outcome goals so will develop some process goals to support the weight outcome. That weight goal also merely represents an interim goal. Once it is achieved a new goalpost will be erected.

Moving to Japan has allowed me to be more conscientious about setting up my environment to support my goals. Before leaving the U.S. I sold my car and have elected to lead a car free lifestyle here in Japan. My house is 1.25 miles from the ship so within easy walking distance. I believe this choice will positively impact both my health and pocketbook. To go eat at a restaurant (which is very cheap here) I must walk 4 miles round trip minimum. That will certainly cut down on any boredom eating.

[frugaldoc]

Spending and Wheaton levels

I have been reading more about Wheaton levels to figure out where I fall on the spectrum. I thought it would be easy given that N +/- 2 is supposed to seem a little extreme. However, with the exceptions of the highest levels I can see myself at all those levels. When I read the Wiki on Wheaton levels, I even find that I do things that are supposedly level one behaviors (although I don’t know why budgeting with YNAB is level one). And when I compare my spending levels, I am not doing too well either. But this got me thinking:

Does spending reliably correlate to Wheaton levels?

Last year I spent $66K but still managed to have a 74% savings rate. Spending $66k/year places one at a pretty low Wheaton level….or does it? Of that $66k, I spent 42k on housing. It was a very modest place (850 square ft) but I was 4 blocks from the beach in north San Diego County (Carlsbad Village to be precise) and had a walkability score of 97. Yes, 97!! My car sat unused for large portions of time. I air dried my clothes, made my only laundry soap, and covertly gardened on my patio even though I wasn’t supposed to. I am known for my frugality and my friends laugh at the things I do. But I also will spend large chunks of money on things like skills training (9k in 2022), leadership training (8k this year), etc.

I am not sure the point I am trying to make here other than perhaps Wheaton levels aren’t as clear cut as they seem. I spent large sums to live in a prime spot in California, but I also lived in a tent for eight months in Saudi Arabia in 2021 with only about 50 square feet to myself and was content. I currently spend 6 months of the year sharing a 60 square foot stateroom on a ship and tolerate that just fine. I seem to move up and down the scale with great rapidity.

Putting Wheaton levels aside, I had an enjoyable weekend of reading. I read “How to Survive Without a Salary” and really enjoyed it. I also started rereading Walden which has proved a pleasure. In my second year of undergraduate I attempted to recreate the Walden experience by living in a tent in the woods while going to school. I quickly learned that living rough during August in Kansas is a bit different than setting up shop in New England. Still, it was an adventure and I made it until near the end of November when I was flooded out of my camping spot in the woods. 16” of rain over a weekend tends to make creeks swell beyond their banks.

[mathiverse]

Each level transcends and includes the lower levels, so the fact some of your behavior is characteristic of other levels doesn't mean you are at a lower level. It is also the case that most people span levels rather than being clearly at one. A little more on this is here: https://wiki.earlyretirementextreme.com ... re_&_Rules

Also the levels are mostly about your focus, how you think, how you make decisions. The column in the table that matters most when considering your own level is the "Focus" column rather than the spending column or the other columns. For example, WL8 may go to Myrtl beach for vacation because of a series of circumstances that means it fits their web of goals, that doesn't mean they are WL1.

[Veronica]

Does spending reliably correlate to Wheaton levels?

Last year I spent $66K but still managed to have a 74% savings rate. Spending $66k/year places one at a pretty low Wheaton level….or does it?

My understanding of the ERE Wheaton level framework is that it's not so much about raw dollar amounts, or even percentages of income that you spend (though it correlates) as much as it is an "overall relationship with money". That is, if your income were to increase by a modest amount (say, 100 dollars a year), how would this change or affect your behavior?

I would say that someone who thinks "I have a little bit more to pay onto my credit cards now" would be a stage 1, while someone who thinks "I bet I could buy a really nice apple tree for the backyard with that" is probably more like a 5+ stage-wise.

Since you're spending rather large amounts on self improvement (skills training, leadership programs, etc), it seems to me like you are actively working on increasing your personal wheaton level; trying to transition from a person who has money to a person who can obtain money whenever they need it (through application of their skills), which is a 8/9 type behavior.

[jacob]

[...] trying to transition from a person who has money to a person who can obtain money whenever they need it (through application of their skills), which is a 8/9 type behavior.

Negatory. "Spending to invest in one's career in order to make money" is WL3.

Professional goals, if any, at WL8/9 would be different and unrelated to money.

Recall that the table is intended as a communication tool to avoid miscommunication(+) and NOT a quick reference to look up one's developmental "ranking"(*). In other words, it indicates what kind of conversations would be interesting/inspiring and what kind of conversations would be mundane, trite, or "been there, done that" for a given person. Also what kind of conversations are best avoided because they're too far outside the Overton window and thus likely to be misunderstood. The purpose of the table is to figure out/realize that people see the world (money and other resources) in entirely different ways. As such, the key to the v2-table is the "focus & frequent talking points".

For example, OP (@frugaldoc) talks a lot about setting and meeting quantitative goals---by increasing current numbers. (Hint! Hint!)

The insight of the Wheaton table is that not everybody has that focus.

As mentioned above (and on the wiki), each stage includes and transcends the previous one. This also implies that at some point, "increasing the numbers" will no longer be the main point of interest. IOW, a higher stage sees "more and differently" including the old way ... but it also has increasingly less interest in what was fascinating at previous stages. That's not to say that a glimpse of "higher" stages are impossible, but lacking the "meat" for the "bones" probably means that any such high-level talk will be heard as a bunch of "overcomplicated woo".

(*) Since it typically pops up around the internet being misused out of context like that, I might have to put a big disclaimer right across the middle rather than as small print at the bottom.

(+) Because early on, a common problem was that someone discovered ERE (or FIRE) and proceeded to try to convince friends&family---in particular their spouse---to get on board only to very often get stymied by their seeming lack of interest/comprehension. Thus, the WL table was constructed as a pedagogical tool in order to "meet everybody where they are". Not much differently that how, e.g. 1st graders are better off learning addition by counting on their fingers first instead of being hit with the vastly more powerful algebraic set theory. Basically, talk about "how to walk" before talking about "how to run".

[frugaldoc]

Unfortunately my spending on skills acquisition leads to no increase in pay. I am just trying to be a better doctor. Same, with the leadership training. Not sure if that moves me up or down the scale but it doesn’t really matter. But I do see how it is useful when choosing how to engage with others and explains some of the struggles I have had on the ship. I am used to dealing with residents with an N-1 knowledge of medicine but am now leading a department of 18-30 year old enlisted folks with N-4 levels of medical knowledge. Bridging the gap is difficult.

[bookworm]

I also started rereading Walden which has proved a pleasure.

I remember reading Walden a while back (after college) and getting caught up in the magic of it. Being able to visit Walden Pond in person definitely added to the mystique. Unlike you I never attempted to live in the woods for a long period due to salaryman life, but I hope to in the future.

[DutchGirl]

Unfortunately my spending on skills acquisition leads to no increase in pay. I am just trying to be a better doctor. Same, with the leadership training. Not sure if that moves me up or down the scale but it doesn’t really matter. But I do see how it is useful when choosing how to engage with others and explains some of the struggles I have had on the ship.

I'd say you're spending in line with your priorities.
The training allows you to do a better job, thus (maybe ever so slightly) decreasing the chances of being fired and (ever so slightly) increasing the chances of bonuses and promotions.

Also, it makes work more fun/less dreadful to be and feel more capable.
And finally, I'm sure that some of the training will also be useful outside of your work.

[Veronica]

Negatory. "Spending to invest in one's career in order to make money" is WL3.

Professional goals, if any, at WL8/9 would be different and unrelated to money.

Recall that the table is intended as a communication tool to avoid miscommunication(+) and NOT a quick reference to look up one's developmental "ranking"(*). In other words, it indicates what kind of conversations would be interesting/inspiring and what kind of conversations would be mundane, trite, or "been there, done that" for a given person.

Oh, this is a huge departure from how I was using it!

So you're basically trying to say that there's a "range of acceptable discourse" depending on where an individual currently is (ala Overton window)?
Or is it more along the lines of "here's a fairly typical path of progression from wherever you currently are on your journey", akin to a maslow's hierarchy of needs? Perhaps a bit of both?

Like, a person who is obsessed with collecting their used coffee grounds as mulch around their garden, in order to grow fruit which they will preserve and sell at the farmers market in order to buy more coffee... would be a wheaton level 7? So they only engage with content where other people have made similarly creative feedback loops and couldn't care less about people struggling with your typical boring "debt snowball payoff journey"?

[jacob]

So you're basically trying to say that there's a "range of acceptable discourse" depending on where an individual currently is (ala Overton window)?
Or is it more along the lines of "here's a fairly typical path of progression from wherever you currently are on your journey", akin to a maslow's hierarchy of needs? Perhaps a bit of both?

It's a bit of both. If it wasn't for the observed fact that many people tend to follow the same path, it would not have been possible to generalize the observations. The table grew out of having the same few different kinds of conversations with hundreds and hundreds of people over the years + the observation that those conversations would often appear in the same order for a given person when followed over the years. IOW, the table is both wide in people and deep in time.

The problem with using the table as a cheat code to speed-walk one's development is innate in the "include and transcend"-construct. In other words, perspectives are only clear in retrospect. It is only possible to see perspectives one has already included. Whereas in looking ahead, one will inevitably project one's current and relatively simpler perspective which will lead to a superficial understanding. For example someone believing that they're a systems-thinker because they have set up a "system of accounts on a spreadsheet" or organized their sock drawer. This is also why the last couple of stages are only vaguely defined. We simply don't know what they really look like because we haven't been there. We only have a vague idea. This is also why and how v2 was expanded from v1---because we eventually did go a bit further from v1.

A parallel problem is using the table to gauge someone's level by reading of each entry and then getting confused that someone appears to be "all over the map". This is due to not seeing the full picture or what the table is actually trying to describe. For example, a typical SNAFU is someone who has just discovered the table and dismissed it with "Well, I make $250,000 per year but live on $50,000 so my savings rate is 80% so I guess I'm WL7, huh?"

The table is really no different that what one might see in a school to gauge which class level to enroll a student in. Each column would describe what the student would know and be able to do for e.g. reading, writing, math, science, sports. Each row would list what the student specifically can do, e.g. add two numbers, summarize a short text, read a measurement on voltmeter, .... and here students may be on different rows, especially if they're particularly "talented" in one of the columns.

But what the school really wants is not specific accomplishments, but to understand how the student thinks: Whether they are capable of following a simple instruction? Whether they are capable of combining two sets of different instructions? Whether they're capable of handling exceptions when instructions disagree? Whether they're capable of formulating their own instructions? Whether they can solve problems without being given explicit instructions? Whether they're capable of formulating their own problems to solve? And so on ... (Indeed, a student might be an idiot savant in one class... but what is relevant is how it all comes together to define them as a person.)

Note how each of these "instruction"-abilities transcend and include the previous. It's hard to follow two sets of instructions for someone who can't even follow one set. Someone, who needs a single set of clear instructions in order to do something, can not be expected to solve any problems by telling them to "just go read the book" or worse "go read a book". IOW, someone who struggles with debt due to lack of self-discipline and planning is unlikely to be helped by a "rocket science"-grade investment tool like, say, thinkorswim.

The analog is direct. There's a huge [mental] difference in perspective between "optimizing a budget to maximize a single kind of capital (money)" and "transforming between several different kinds of capital". The latter can see the reduced one-dimensional shape of the former ... but the former does not spontaneously comprehend multi-dimensional connections of the latter due to only being able to "follow the money" and thus blind to all the other flows and consequences.

When it comes down to it "personal finance et al." is an education that most consumers simply never learned. In that regard, we sometimes say that Dave Ramsey is middle school, Ramit Sethi is highschool, MMM is college, and ERE is grad school. It is not that it's unacceptable to teach graduate level course material to highschoolers ... it's rather that it's not a great learning strategy. Not only does it frustrate the teacher, it also annoys the student.

[frugaldoc]

An interesting discussion I inadvertently kicked off.

I think my curiosity regarding where I fell on the scale was derived from the feeling that it was a normative scale and I felt some need to be moving up the scale. I am now choosing to see it more as a descriptive scale and feel that at some point it okay to say “I am not interested in moving up the scale further”. So if I top out at WL 5/6, so be it.

When I inventory my skills and non-monetary capital, they are quite expansive. However, I am choosing to have quantitative monetary goals because I see the value in said goals. I have spent enough time in some sh*tty, f*cked up parts of the world where being a transcendent WL9 person is meaningless without cold, hard cash (or gold bullion, or a Rolex) to get you the hell out of that place. I am also a student of history and know that seemingly stable political regimes can degrade, and quite rapidly at times. The ideal for me is to have a balanced portfolio of financial and non-financial capital. I suppose I feel that my situation is out of balance with my financial capital not being appropriately balanced with my human/social capital. I aspire to have a life where I can take deep satisfaction from the systems I have developed to supply my needs on land I own (probably VT/NH) and only use money to pay the “poll tax” of living in our society. But I also want to have the financial capital be able to quickly relocate to distant lands if ever need be.

But all this is meaningless without the physical capital (robust health and fitness) to enjoy life to its fullest. That is the part of my ‘asset allocation’ that has been woefully neglected. I think the money stuff will take care of itself.

[frugaldoc]

Progress report

We have been underway for a bit over a week with the associated poor internet. Being December, I am preparing for my usual end of the year financial housekeeping so that I have a clean balance sheet on January 1. That includes:
-stopping all credit card usage on December 15th so all transactions can clear and I can zero out their balances before December 31st.
-switching to all cash spending on December 25th so all transactions clear my checking account prior to Dec 31

This year I have the added task of moving money out of accounts so that I start 2024 holding $40k split between physical cash, checking and HY savings accounts. As a reminder one of my goals is: Spend < $40K (USD) in 2024

For those who are living off their investments I am curious how you handle your yearly spending. Do you pull an entire year’s worth of spending out once per year and slowly see that dwindle down or do you replenish monthly (or quarterly, etc)? I have moved all future pay to my investment account so it will stay off budget. I had initially thought of starting with 40k on Jan 1 and then watching it slowly decrease as the year progressed and I spent it down. However, I am a person who typically keeps about $50k pretty liquid and seeing my checking balance wither as the year progressed makes me a little uncomfortable. I would love to hear how other people manage this.

My other goal: Weigh less than 230lbs by March 6, 2024. Hard to say how I am doing on that. The sea state makes getting an accurate weight on our scale difficult. They feed us well on the ship and I am paying a $370/month mess bill whether I eat or not so it can be psychologically difficult to calorie restrict. I am attempting to skip one meal per day and to make every other day a vegetarian day. I shall see how that affects my weight. Of course, I need to increase my activity level too. Unfortunately the gym is in the bowels of the ship and I use inconvenience as an excuse to avoid doing things quite frequently.

[Slevin]

Of course, I need to increase my activity level too. Unfortunately the gym is in the bowels of the ship and I use inconvenience as an excuse to avoid doing things quite frequently.

I assume the ship has some long hallways? Can you throw some weight in your pack and just ruck around doing laps of the ship? Can you do lunges down a long hallway (100+ per set)? Horse stance? Push ups? Single arm pushup variations? Bear crawl really long distances? L-sits, V-sits, weird pullups and rows on random railings around the ship? Lack of exercise because of a lack of a gym is failure of the imagination .

Also about that $370 / month mess bill... What??? They throw you on a ship where you can't eat anything else, and you get charged to eat all their food? Absolutely wild. Is it pre-tax at least???

[DutchGirl]

For those who are living off their investments I am curious how you handle your yearly spending. Do you pull an entire year’s worth of spending out once per year and slowly see that dwindle down or do you replenish monthly (or quarterly, etc)?

It would be preferable to "dollar cost average" also on the way out - you will reduce the chances that you have to take out a large amount at the most unfavorable time.
I would withdraw once per quarter. Once per month is "too much" - too much work. Once per year is perhaps too high a chance that you have to withdraw a lot at that unfavorable time.

So I guess I would see you take out $10k each on say Feb 1, May 1, Aug 1 and Nov 1.

[frugaldoc]

It would be preferable to "dollar cost average" also on the way out - you will reduce the chances that you have to take out a large amount at the most unfavorable time.
I would withdraw once per quarter. Once per month is "too much" - too much work. Once per year is perhaps too high a chance that you have to withdraw a lot at that unfavorable time.

So I guess I would see you take out $10k each on say Feb 1, May 1, Aug 1 and Nov 1.

Fortunately, I won't need to be selling anything for the time being to fund each years annual expenses. I run a fairly conservative portfolio, plus there is still approximately $175k per year flowing into my after tax investment account each year. There should be plenty of cash equivalents to draw from in January 2025. But I like the idea of 10k quarterly with the goal of keeping my rolling average at 40k.

It is amazing how our comfort levels change over time. When younger I felt good with $1000 in my checking account. Now I get uncomfortable when it dips below $10k.

[frugaldoc]

@Slevin Yes, we do have long hallways but they are narrow and there is a lot of traffic in the hallways and lots of stuff jutting out of the walls to run into. But you are right, lack of a gym is not an excuse (even worse, there is a gym...I just don't want to go down 60 feet of ladder wells to get to it). Summer time is a little easier with longer days and the ability to run on the flight deck before flights quarters.

I don't mind the mess bill each month. It is part of Navy life, just like wardroom dues. Plus, the convenience can't be beat. I can cook quite well and can eat cheaply if need be. However, when you work all day, seven days a week for most of the year, having to think about food preparation would suck. Meal times are our social time and the way to break up the day. I just need to make better choices: hence making 50% of my days vegetarian.