The ‘lightbulb’ emails

Since Mrs. SSC and I have been together she has been in charge of the finances, investing, etc… It just works great for us, and if you read any of my posts, you’ll realize why it works well financially. The interest in this “lightbulb going off” moment has built to a head, so we thought a quick post might make this easier. Here’s my version of how we got to the email chain and spreadsheet listed below. It all began back in Fall of 2009; we had been at our jobs for a year, and open enrollment was upon us at our company and that brought up conversation around HSA elections, and other investment money types of questions. Since everyone knew Mrs. SSC was the human calculator and investment maven for our household, they asked her advice on how best to diversify their 401k portfolio’s, and other investment strategies. She passed around her investment spreadsheet which was an excel spreadsheet that made my eyes glaze over anytime I’d look at it. But, what it did have was years and dates and when we should hit our number for retirement. I knew it was around age 45, and the numbers played out, but her assumptions for cash available to live on seemed scary low, and I wasn’t going to quit a good job with a nice paycheck to eat Ramen and live in a trailer (not that there’s anything wrong with that, if it works for you).  So, except for getting emails from our friends amazed that we were going to retire at 45, I’d roll my eyes and think, “Sure, sure, 45, uh huh…”

Last summer, I started paying attention. There was plenty of back and forth, and when Mrs. SSC was talking about “We only really need ~$60k/yr to be comfortable” I had to put the brakes on this crazy train, and I began to argue debate her assumptions on how much we would really need to live off of.

And this is where the story picks up with the email exchange below….

 

To: Mr. SSC
From: Mrs. SSC
Sent: August 13, 2014 9:05AM

Oh – I’ve accounted for tax, don’t worry – I added in 10% of federal tax, and 7% State tax (for Idaho – they are high!), and then also property tax.  So that is all in the formula. It’s just I wonder if there are ways to avoid paying taxes…

Yeah – I like a 15% cushion.  Some years we may need it, some years not. In my new & improved spreadsheet (still working on, it’s complicated) I’m adding in cash – setting it at 2 years cash (maybe we can have 1 year cash, 1 year CDs, and then our normal emergency fund in cash).    Plus, if we need to tighten up, that 2 years of normal cash would last us at least 3, maybe 4 years in a bad economy – without us getting jobs, and without us taking money out the investments.

So – in the budget I’ve made a few adjustments. Note that cable TV isn’t included, I’m assuming in 5 years you will have found a way to get football streaming. Note also how I’ve added in $500/month on misc. stuff – like house misc. (broom, furniture polish, picture frame, new garden hose, etc), shopping (I guess pharmacy type stuff or just random shit), and kids’ stuff (clothes, school stuff, sports, etc.).  So that is almost $6k/yr. of mostly optional crap built in Plus, I am rounding up to 65k with my calculations anyways.

 

To: Mrs. SSC
From: Mr. SSC
Sent: August 13, 2014 10:14AM

What I’m worried about is saying, “yeah see we can retire even earlier, we just have to tighten the belt even more. Let’s quit now, we can do it, we’d just have to tighten the belt even more, and move it up to our neck, and tie it to something high….” I’m just saying I don’t want to move our budget so far down that we retire, things go south and we’re struggling week  to week. And worried about money. Especially If we live somewhere that we can’t pick up oil jobs, I’m a bit more skeptical of the 2019 date.

Just something to think about to let you know where I’m coming from. Xoxoxo

 

To: Mr. SSC
From: Mrs. SSC
Sent: August 13, 2014 10:41AM

I know.  But don’t worry – we will have a nice big buffer in there by the time it all comes around. All I’m saying is 2019 is possible. Do you see anything missing from the ‘budget’ or what makes you think 65k wouldn’t be enough? (this is just a conversation , not an attack).  The way I see it 65k has a ton of money built into it – 10k of ‘fudge factor’, 2k in rounding –up, maybe 2k in tax deductions, and if things get rough – up to 12k in deferred ‘allowances’. That is $26k of leeway even before cutting-coupons and turning town the AC/heat and duct-taping shoes to make them last…  😉

Here is a comparison… showing all our expenses currently.  The credit card goes down ~$500 because no maid, cheaper cell phone plan, online TV instead of cable, less car expenses (commute/tolls gone).    This is what I mean by we aren’t going to need to change our lifestyle much.  The July 2014 credit card amounts shown are the average of what we’ve spent the last 6 months – and there were some pricey months…   I mean daycare, mortgage and college savings are over $4k themselves that we won’t be paying when we retire early.

THE spreadsheet

Trust me – I’m not trying to fudge numbers to get out of here earlier… I am just trying to understand the actual costs and balance them with being conservative, our comfort level with ‘risk’, and how much time an extra year in the office vs in the mountains hanging out with the kids is worth 😉  I hate cutting coupons!!!! Lol   And honestly – there is no way I am not going to have some part time job.  I might not get it until the kids go to middle school, but I will have one just to stay busy.  Plus, there are ways we can start tapping the 401k early.

 

To: Mrs. SSC
From: Mr. SSC
Sent: August 13, 2014 12:12 PM

Ok, so you’re saying that right now we have ~$8k going out each month, BUT that includes stuff that won’t be there in 5 years or less. So essentially we drop out ~$4.5k each month. SO, make sure I’m doing this right… with those bills dropped out we are at ~$3700/mo in bills. Then you add a 15% buffer to that to get to $51k/yr for our “pseudo-minimum” needs. Then you add in taxes to work back to where that would put us “pre-tax” which is ~$63k. Then you’re rounding up to $65k as another small buffer. Hence the target of $65k/yr. Huh…

What you’re saying in the right column is that if things get really bad, we cut out allowances, and other things to get to $35k BARE minimum need, but those would be some really sucky times. But, targeting 65k/yr, we would only need about half that to cover the “non-bankruptcy option”. That’s assuming neither of us is working, just living off our saved income. So if we got any jobs that would be on top of this, and if they covered any health care, that would be less overall number.

So then, essentially, this doesn’t even factor in 401k’s because that’s “future money” not included here, this is just the “getting to 401k” type budget, not factoring in any sort of part time work, or other income? Holy shit! Seriously, if this is the budget from now until then, and we both plan on working part time or side gigs, why in the hell are we still working?! Oh right, we need to hit our number first…

I can’t believe that’s all we’d need though. I mean it’s all right there, but yeah, I’m just amazed that the number is what it is, with all those buffers built in and not counting any side income or jobs. I just thought it’d have to be higher… Seriously, I figured it’d be higher…

 

I think at this point Mrs. SSC read this and smacked her palm to her forehead while rolling her eyes. On the plus side, she was probably happy I finally got it and was on board.

It seems like this is common amongst FIRE couples, with someone pushing the issue and the other person is in my position until they have their own “lightbulb” moment.

Do these types of conversations seem familiar with your better half? Please let me know we aren’t the only ones out there that went through this…