We live in a master planned community of ~3000 homes and as such, we have a fairly thorough set of HOA covenants. They’re not idiotically written, but they can be a pain at times when you want to do something simple like put in a playset in your backyard. Recently, they sent out their monthly newsletter notifying everyone that they would be “focusing on fences”, as there have been some homes that are staining their fences (not approved – sealing is fine, staining is a no-no) replacing their cedar fences with non-approved woods other than cedar (gasp-the horror!) and have rundown fences that need repair or replacing. We didn’t think anything about it as most of our fence is in good shape. Although Mrs. SSC and I disagree on this, because our views of “good shape” are highly divergent. However, one of our neighbors want to replace their fence and split the cost to replace the side we share with them. Now we’re arguing discussing which one of us is right. Oh brother…
Well, another month has come and gone and we are now halfway through the year. So far tracking how our our “real” budget numbers compare to our anticipated Fully Funded Lifestyle Change costs we seem to be pretty close. We have been averaging $4035/month spending and that’s assuming no mortgage, which ends up being ~$48420/year needed. We like to add in a little slush/cushion to round up to $55k, which is what we are generally assuming our year to year costs to be and we’re right on track. Heck, we’re even under budget, which I will never complain about. So what were the big hits and little misses that we saw this month?Time to get into some details!
The painful wrap up of May. A lot of big rather unexpected expenses popped up, mostly in the form of auto related expenses. Although as a surprise, we did not dip into savings for these expenses and we still had $953.75 left over, Lol. I’ll highlight the big hitters, gloss over the little hitters and even more importantly, tell the story behind the really big expenses. Let’s start with the little stuff.
Soon we’ll be enjoying a week away from everything and go on vacation, and I realized that my brain is already there. Since vacationing is on my mind this week, I thought I would discuss vacations – SSC style. Taking vacations used to be no big deal, we would pick a place to visit, get everything lined up and then go. Yeah, easy!! Add 2 kids in the mix and everything gets a lot harder to manage, and WAY more expensive. Plus, get kids out of their routine and schedule, and OMG things can get crazy pretty quickly. So how do we deal with this and what do we do to keep the costs down so we can vacation more, let me tell you.
Hooray us, as it has been a nice and fairly uneventful month financially! Any questions? See you next month then! Kidding… Personally, it was a pretty exciting month though. Mr. SSC completed his first half-marathon, and Mrs. SSC is gearing up for a new job (hopefully, because so far only a verbal offer has been given, and the school seems completely bogged down in their bureaucratic hiring practice – but she is assured weekly a legit offer is on the way…). Only time will tell how that plays out, but is it an omen of disappointment and frustration that they’re that inefficient? Here are the highlights and how it all panned out.
As you may know, Mrs. SSC has been looking for teaching jobs, so every week she gets emailed new postings and if she sees something that looks interesting for me, she will also forward it along. I had an interesting job opportunity forwarded to me from Mrs. SSC that we both would seem to fit, and the company wanted both a geophysicist and a geologist. Double bonus! We figured it could fit our needs if we both got an offer, so we applied.
Last week, I got an email from that company saying that they would be interested in talking with me about the position. I returned the email and gave them some open dates and they responded with, “Would you be free tomorrow morning around 9am?” I was excited because who doesn’t like getting picked, but the down side was that Mrs. SSC hadn’t been contacted, bummer…
During the call, I found out about the position, job responsibilities, office setup, and more and it sounded great. Better yet, I qualified to start on the upper end of the pay spectrum, around $95k/yr! My schedule would stay the same with 9/80 style, and there were some other Lifestyle Change perks as well, but it was looking pretty good.
Then, reality struck, hard and heavy. We had already vetted some cost of living (COL) increases in this area, assuming we would both get offered positions. Even then, we knew that with 2 salaries it would be tight, because I haven’t mentioned this part yet, but this job was in California… GAH!!! We thought it would be worth it though, because we could start our Lifestyle Change a bit early, but just take a different path than we planned. I mean who wouldn’t want to live in California for a few years? This would be in Camarillo, which is near Ventura and Oxnard, and has topography, and well a milder version of seasons, but at least different from Houston. Also, there are a lot of parks and hiking around there, as well as the beach, and other fun stuff to do with the kids. You can even see snow on the surrounding mountains in the winter! Oooohhhh….. 🙂 Based on those types of things that we want in our Lifestyle Change, we thought it would be fine to go there for a few years, even if it would delay things a bit. We’d have better work schedules, and be living in a better geographically pleasant area.
I started doing some rough calculations based on what we spend now per month on essentials to see where how good or bad it might be. Since we’ve got a solid year plus of tracking that info, it was easy to ballpark the COL in California. When I started adding these up we were left with about $265/mo left over. This was assuming no daycare costs with Mrs. SSC staying at home, and other minor adjustments like no maids, no cable, no gym, etc… When I got to the end of the month, I had very little left over… It was depressing, as you can see in the chart below.
Even with big unrealistic cuts, it’s tight.
Between taxes (27%), 5% contribution to 401k, and housing which was about $2600-$3600/month for a 3 BR house, we were left with enough to survive and that’s about it. This would mean that we wouldn’t be able to add anything to our “extra” retirement savings, no college savings for the kids anymore, no allowance money, no replenishment of the emergency fund if/when something happened, and no extra money for anything. It’s good we’d be in beautiful CA, because we couldn’t afford to leave to travel anywhere else. With realistic tweaking of the budget averages from last year we would only have an extra $3100/year. Per year… That was not adding in the real adjusted COL to our averages, rather assuming we could cut ~10% and the rest would take care of itself in the wash.
I looked at our highest spend categories to see what other cuts could be made. Our car insurance is about $182/mo for both cars, but we have another year of $323 car payment on Mrs. SSC’s vehicle. So even if we paid it off before we left, which would be entirely doable, that still only frees up another $3900/yr to buffer the budget. Also, I asked Mrs. SSC, “What’s the house and misc. shopping, do we spend that much just shopping?” She said, “Well, that would be your clothes, my clothes, the kids clothes, light bulbs, toilet paper, stuff like that… You want toilet paper right?” Hahahaha Not a whole lot of wiggle room there either, especially since our allowances wouldn’t exist and they used to cover our clothes. We don’t want to derail our FFLC plans this close to the goal, so I ultimately had to turn the position down because it would put us in a negative/neutral financial position.
Thinking about this from a standpoint that we’re in now though brought me back around to the positive side of things. First, it’s good to know that in a few years, this position might be open again, and I would be an effective shoe-in to get that spot. Second, since we’d be at our FFLC number, we wouldn’t have to worry about whether we have extra savings to add to it, because according to our plan, we’d be living off of it solely without any extra income. A position like this would effectively allow us to live in CA with the only real expense being me working for a year or so. Since we wouldn’t be touching our savings, they’d just grow too. Now that’s a win! Third, this is exactly what Mrs. SSC has been talking about in the sense that if a geologist job or other random teaching type of position opens up, it’s fine if it only offers $30-$40k/yr if it’s somewhere that we would like to live for a few years. We could live somewhere fun and interesting, explore around there for a few years or more, and then move on to the next cool place.
This whole exercise did make me realize that our budget for FFLC is looking pretty nice though. Even with it re-adjusted since we’ll be renting for a couple of years, and then possibly buying in a more long term area, we should be doing well and living fairly comfortably without a lot of worries about needing extra income. Also, I realized that if any unexpected expenditures that come up, we have our allowances to use as a buffer, which is comforting too. In the end, it did end up with me feeling a lot better about our numbers, plans, and expectations of our Lifestyle Change. I’m even more excited now, knowing in another year or so, we’ll be in full control to do what we want, and not have to be constrained by the thoughts of “Can we afford to live there on that salary?” That is a pretty cool feeling. Until then, we’ll just keep sticking to the plan and counting down days. On the plus side, we’re under 850 days to go until then…
breakdown from Smartasset.com and their tax calculator
This past President’s Day I had the day off. Yep, I’m at one of the odd oil companies that still honors this day, which meant Mrs. SSC was at work, and the kids were at daycare, so I had a real free day to myself. I decided I would take the opportunity to go fishing, since I hadn’t been on the water yet this year. The weekend before, I checked my fishing tackle, read up on some new rigging techniques and made a list of things I needed from our local outdoor store. I got some different hooks, weights, and other items so I could try a new fishing technique. It’s actually old as dirt, but since I’m new to freshwater – non-fly fishing style fishing, it’s been “learn as you go”, and I have no one to teach me anything. That equals a lot of fishing, and just a little catching.
This was some catching! Yeah!
When I got to the lake, I talked with a guy, Cowboy, and he was telling me about a website that had all of these crazy expensive reels on sale for less than $50. Line, rods, reels, lures, anything you would ever need. He mentioned that he found it over the holidays when his house had been robbed and they got $1000 worth of tackle from his place. My first thought was, Holy crap, including my kayak, I don’t have $1000 worth of tackle! When he described his reels that he had stolen he talked about how he’d paid $400 for one, $200 for another, $300 for one that was on sale… Then I realized, I must be pretty cheap when it comes to buying gear. My whole rod/reel setup was less than $60, although I did get it on a great 40% off sale. It’s worked great and I’ve caught some really big fish on it. My other rod and reel, was one my mom used back in the day, and with a little reel lube and occasional line replacement, it is still catching fish at over 30 years old… My kayak, I got on sale for $150 off, along with all the accoutrements. Then I realized what the difference was in my shopping habits and Cowboy’s shopping habits.
I shop for value on my money spent balanced with the return I’ll get out of it. Hmm, that sounds like a lot of jibber jabber, so let me explain what I mean. I’m just an average Joe fisherman that probably couldn’t tell the difference in quality between a $400 reel and my current reel. Okay, I could, but I wouldn’t see it being worth the extra $340. I understand that the $400 reel will no doubt be “better” than my reel that I use. If Cowboy values that extra quality, then that’s awesome it’s his hobby, he should be able to enjoy it with whatever tackle he finds makes it more enjoyable for him. I would find a lot more enjoyable things to do than spend an extra $340 on a reel, so for me, it doesn’t pay out a positive return. I also understand that in general more expensive means better quality, but it doesn’t mean you have to overbuy. For less than $60 I’ve had a rod and reel that has worked great for over 3 years now. I didn’t overbuy but I didn’t buy cheap either.
I’ve found buying “cheap” leads to more spending than buying quality because cheaper things break quicker and need to be replaced more often. However, there are plenty of middle of the road companies that make great products for fair prices. I tend to stay in this path, unless I find a great sale. Even then, just because something is on sale, doesn’t mean you need it.
I’ve come to find that’s the key with spending and not just related to hobbies. It’s not about “how much did it cost”, even though it seems like it for some people. I’m not one of those people. I’d rather get a fair price for good quality than spend more to have a name brand. When we were kids, my Grandad would give us $100 for Christmas. The stipulation was that you had to use it on shoes first, then you can do whatever you want with the money. My brother would invariably get the new Nike Jordan’s and still need an extra $10-$20 bucks from mom or dad. I’d hit Shoe Carnival and get 2 pairs of shoes, and have $60 left over to spend on whatever I wanted. I didn’t overbuy, my shoes lasted the year, and I got to get more toys or what not with the leftover.
Have you ever found yourself overbuying on things? Is overbuying worth it for you? It was for my brother, and he got his return on enjoyment from the money spent by having Air Jordans, even though they wouldn’t always make it a full year…
So we’re not sure what the best budget format to use is, and while we are sure that some of you out there like poring over the nitty gritty and seeing if our daycare exceeded our mortgage this month (it typically does), or what our groceries did this month (it’s usually our stumbling block), we know some of you couldn’t care less. We decided to retool it and give you more of an overall view and maybe just put out hard numbers quarterly. This is where you can say, “Please, don’t take away the numbers!!” or “Thank-you for taking away those stupid charts and monotonous budget drivel” or maybe you’re in the middle and just skim most of it anyway. Let us know and we’ll see what happens in February.
This month was ridiculously boring on a budget and spending front! Yeah, I count that as a win!!! Comparing January 2015 to January 2016, we overspent in Jan. 2016 by $55. Most of this was attributed to a new haircut for me, and a set of clippers for cutting our oldest’s hair at home. I went from a longer sort of hairstyle to a shorter more trim style, but I didn’t want to end up like Mrs. SSC and have to get it redone once or twice, so I went to a good stylist to start with. Now that it is cut well, I can resume my usual haircuts at the cheaper places. Cutting our oldest’s hair was actually easier than I expected, and it should get easier the more we do it. Plus, Mrs. SSC decided that now that her short hairstyle is dialed in, she can also go back to the cheaper places. She has figured out that it currently costs about $1/day for her new haircut, so she is shopping for a lot cheaper place to get it cut. Plus, she trusts me, so I can trim it in between cuts now that we have clippers. Mwahahaha…..
The trend has crested and is now falling! Sigh….
As you can see in our overall chart of “% to FI Goal” – our numbers are dropping, and no longer climbing. Booo….. That was expected after our year review showed that our only growth in 2015 was essentially from our contributions. Whoa! Oh well, markets are out of my control, so whatever… As far as our “how to deal with the market” approach, I’d be in the BUY, BUY, BUY camp, and get stuff on the cheap, which we are. However, for the immediate short term, we’re stocking up our cash reserves more than investing in the market. We have a decent nest egg, but since savings accounts have such a low return, we don’t like keeping a lot in there. With our industry being where it is (in the toilet, and today I saw gas was $1.49/gallon) and the stock markets tanking as well, we decided we’d rather know that our $5k will still be $5k in 6 months if need be, and not $4.5k or less. Don’t worry, we have more than $5k saved, it’s just an example number. If it wasn’t for hedging our bets that we would need to tap into some of those investments in the next 6-12 months, we would still be throwing more money into the stock market and not building up our cash reserve above our normal emergency fund amount. Especially, if we just throw in the towels and decide to become ski/snowboard bums for a few years.
Time for a new segment we’re rolling out called, “Crazy stories from Lay-off land!” Yes, as people are getting axed left and right, the water cooler talk is getting more and more crazy. For instance, I heard of a couple that had both gotten laid off, and burned through all their savings in about 3 months. Now they’re really scared, because the industry hasn’t picked up, neither one has gotten a job again as they were banking on (literally), and they’re out of savings. The main reason this happened, they didn’t cut spending back immediately and just kept spending and living like they were still getting paychecks…
On a similar thread, a friend of mine at work is about to commit to a $300k mortgage, even though he thinks buying is a bad idea, and renting is better, he is still proceeding with buying a house. This is compounded by his wife interning for a company where if she gets an offer, it will be in a town and state that is not Houston, TX and they would move there rather than stay here. Mind-boggling!
Another friend of mine got caught in the middle of leaving his company to join a new one. He’d gotten approved for the job and it just needed the CEO’s approval (smaller company). He hung up the phone with his “new company”, went to tell his current boss he was done, and by the time he got back to his office he found out the “new company”, had cut the department he had gotten a position in. They sold the asset and were exiting that whole area. So, he was told there weren’t any positions available for him now, because that boss now had to find spots for his current employees that didn’t have an asset to work anymore. Sorry about the timing. Oooops…
Finally, my mentee/protégé was at a party this weekend and she was the only one of her friends that wasn’t laid off yet. At the whole party… It was about 20 other geologists and engineers. She said it was a bit awkward, especially when they started asking, “Well, why haven’t you been laid off yet?” Yipes, I think I’d need a few cocktails to stay at that party!
On a lighter note, a group of us have decided that if we all get laid off, we will follow one of our colleagues back to her parent’s farms, start a co-op, and we will just farm. She has 300-400 acres and farm equipment that we can use that is just sitting idle. The only draw back – none of us know anything about farming, especially, “what do you farm in Michigan in the middle of winter?” Answer – “I don’t know, use a greenhouse?” (shrugs shoulders) Oh, and it’s in northern central Michigan, so, there’s that down side as well. Laurie at Fruclassity was just mentioning the unseasonably warm 40 degree weekend in neighboring Minnesota, so maybe not too high on the list of back-up plans. Brrr…. It would be an exciting one I bet!
That was our January, fairly mundane, thank goodness. Hope your January was pleasantly uneventful too! Let us know if you want more number details, even less number details, or if you’re still reading. For those still reading – congrats, you made it!
We are going to try to not make this a long post – please forgive us if it is. But, we are just so excited with our new Fully Funded Lifestyle Change (FFLC) plan, we can’t keep it from the world anymore!
You may have noticed we’ve been somewhat silent the last month or so… just a budget update and what not. Well, we’ve been busy doing some thinking about some circumstances in our lives and gotten a little distracted:
As you all know the markets aren’t great… no biggie, it happens and we don’t need that money for a while, but that does change our hope from hitting our FI number from mid 2017 to likely sometime in 2018 or later.
With the declining price of oil, it is likely one or both of us may get laid off this year. If it’s Mrs. SSC that is actually a good thing, since she would love to spend more time with the kids. If it is me – well, I like my job, and I am not 100% sure I can do the stay-at-home thing.
When we tallied our 2015 totals we realized that we spend a lot of money maintaining our house – and we began to question the rent vs. buy. This was mainly due to realizing we spent the equivalent of ~$1.3k per month on top of our mortgage for maintenance, and this house is only ~10 years old. That’s a lot of coin and it got us thinking. A lot. And this, is where it gets interesting…
#1 and #2 made us realize that we may have to wait to FI longer than we want, or that we may be forced into a move and a job hunt at any time. We don’t necessarily want to wait possibly years for a market rebound and personally, we need a finish line that isn’t floating. So, we have decided to pick a new date. July 31, 2018, it’s a Friday. There it is, our new FFLC date. Well, unless we get laid off. But, we think that date will get us close enough to our FI number even if one of us gets laid off this year. So, July 31, 2018. We will both still be 40 – just barely for me. We will have spent all of our 30’s working big corporate jobs and the beginning of a new decade for us seems like a great time to make a huge change.
Because of #2 we are also changing our investing strategy for the near term. We have 75% of our FI goal invested, which is awesome. But, with the possibility of impending layoffs, and having two children we need to support, we are going to spend this year being more conservative and increasing our cash reserves in case our income is cut off, we will at least have some easier money to access without having to sell investments at a loss. This could lead to our backup plan referred to as our MFLC (Mostly Funded Lifestyle Change). The main goal being a Lifestyle Change, come hell or high water.
OK, because of #3 now let’s address “rent vs. buy”, because this is where our big “A-ha!” moment came. I’ll try to explain it briefly, but to get a better understanding, feel free to click through to these links. Go Curry Cracker and MMM have written good posts about this choice, and they’ve made great cases for renting and not buying. However, the ones that really resonated with me are these posts by Can I Retire Yet, along with a post about house maintenance by Money Smarts.
The numbers seem to work out…
Using some of Money Smart’s numbers, along with some of our own, Mrs. SSC made a spreadsheet – which is essentially how we make every decision. What we realized is that owning a house isn’t that financially awesome, no matter if it is “the American Dream”. You can see from our chart that we estimate that the cost of maintaining a house is close to $6000 a year- probably more when you include the yard and random stuff like re-staining a deck or fixing a shower door or replacing a ceiling fan. Looking at a quick estimate of the difference of the cumulative cost of buying a house vs. renting is almost $200,000 for our time frame!!! Whoa! That is nothing to sneeze at, that’s a lot of dough!
Lot of upkeep here…
Maybe someday when we want to settle somewhere it would be nice to own a house for the stability, and it wouldn’t be in limbo that we may want to move in ~5 -10 years and take a big loss. We also dream of a non-traditional rental house with acreage that Mr. SSC could build a woodshop on, or build a tiny house for guests/renters. Realizing that we don’t have to immediately buy a house when we FI kind of opened our eyes to the possibility that we can go live in a “dream location” for a few years while the kids are still in elementary school, before moving somewhere that’s maybe more practical (for us Virginia or North Carolina) to settle while the kids are in middle and high school.
Mrs. SSC has always wanted to live out West in the mountains with big snows and big sky, surrounded by pine trees without a Walmart in sight. I got to live in Denver for 9 years before the Gulf Coast move, and while it isn’t “in the mountains” I did work for a company that allowed me to spend most workdays in the mountains. It was awesome, because I caught myself a lot of times, looking around thinking, “Ah, this is one hell of an office view.” On weekends I would take advantage of hiking (I climbed 23 – 14’ers), snowboarding, fly-fishing, snowshoeing, backpacking, it goes on and on. However, Mrs. SSC hasn’t had that experience or lived in a place close to the Rockies to get those same types of experiences. Recently she has been even getting kind of down on the NC/VA idea just because she felt like she would be settling and tampering her mountain dreams.
Mrs. SSC wants to do this more often!
With the realization of the relative lower cost of renting and with the kids still being young’ish, we decided – why not go live in a mountain town? Maybe near the base of some ski slopes where we can drop the kids off at school and do a few runs before lunch. Teach the kids to ski or snowboard all winter long, and camp and hike all summer long! By the time we get to our FFLC or even MFLC we will have put in 10 years on the Gulf Coast and we feel we deserve to be ski bums (and snowboard) for a few years!
Mr. SSC never learned to ski… 🙁
Thinking that our new date is only 30 months away – we realized we need to start traveling ASAP so that we can find our dream town! Right now we have 3 contenders on our list – Couer d’Alene, ID; Whitefish, MT; and Durango, CO. I’ve gotten to spend some time in Durango, so it’s on my “Oh yeah, that’s a good front runner” list, but I’m intrigued with trying somewhere new too. We have more on our list, but these are the top ones we want to try to get to this year.
Do you all have any suggestions? Our fairly short wish list is – good elementary schools, close to skiing, hiking and fishing, and house rentals (3 bed w/garage) for around/under $2000/month. Give us your ideas so we can start to book some plane tickets!!!
Recently, we’ve been discussing our Fully Funded Lifestyle Change (FFLC) date and we’ve going back and forth about what is the earliest date this could start. See, it started when I bought a retirement countdown clock. I had to set it to a date in the future, then set today’s date, and voila! You have a countdown to retirement. I decided to settle on July 13, 2018, as my last day in the office. How did I pick that date and more importantly, how has it changed from 2010? Let me explain.
It’s been updated since this pic and is now under 600 days!
I’d heard Mrs. SSC talking for years that we can retire at 45. She had it all planned out in our “investment and retirement planning” excel sheet she would share with our friends when they would ask her advice on retirement planning. Then they would exclaim, “Wait, you’re retiring at 45?!” Well, that would be the year 2022, so clearly things have improved. How were we able to move up the date so dramatically? Well, since then, we’ve tracked budgets better, saved more, and refined our excel sheet to match reality. But, the single biggest thing we have done is assess and account for our risk tolerance. That’s right, risk tolerance alone has accounted for dropping almost 4 years off of our original FFLC date, and just this weekend, we potentially shaved another year off.
See, originally, we’d accounted for a 10% cushion so we could deal with any economic maelstrom that might occur. We also didn’t account for ANY side income, or Social Security, or our pensions (meager as they may be). We just looked at that as buffer money, in case it all goes pear shaped economically. We wanted to be able to take care of ourselves even if Social Security died, our companies failed and pensions didn’t exist (thanks for that lesson Enron), or any other myriad of calamities.
All these buffers and assumptions just added more money and time to our savings and FFLC date. Then I remembered a post by Mr. Maroon (they’re no longer active or I’d add a link, but they were a great source of inspiration for us) in which he described how he had shaved off 3-4 years from their planned FIRE (Financial Independence Retire Early) date, just by sitting down and doing a more detailed analysis of their budget and assumptions. The biggest thing they adjusted was their risk tolerance. This got Mrs. SSC and I to re-examine our own assumptions, and BAM! Overnight, we went from “retiring” at 45 to targeting 42! Woohoo! That got us to 2019 which is still 4 years away though and it’s still a fairly conservative estimate, because we don’t like to count our chickens before they hatch.
We use a mix of spreadsheets and online calculators to help us feel better about our FFLC situation. This isn’t saying we trust any of them blindly, but if we get agreement from multiple sources that our assumptions are fair, and our strategy could work most of the time, then it helps us feel more comfortable about all the assumptions we’re making when they are so far out in the future.
One of our fave’s is cFIREsim because you can put in your best assumptions and it runs your scenario against all historical data. For those that haven’t heard of it, cFIREsim is a crowdsourced FIRE simulator that works pretty well with letting you simulate and adjust your expected retirement lifestyle scenario. You can input as much detail or as little as you want and it gives you a sense of how your portfolio and withdrawal plan would fare. We targeted ~95% as our success rate, but it’s mainly because that is the number Mrs. SSC is comfortable with. This chart below shows a sample of one of their outputs run aainst various historical periods based on your inputs.
A version of our scenarios run against different historical periods
This past weekend, I was reading a link Mrs. SSC sent me that took me to the MMM forum with a good discussion about “choosing a success rate with cFiresim calculations”. It was pretty interesting reading, and eye opening in that most of the people on the site were targeting 80% chance of success. Some even as low as 50%, to which I say, No thank-you, I don’t like to gamble that much. They make some great points about what a 90% success rate means, and what an 80% success rate means, and how that relates to your comfort level. It’s a great discussion and I highly recommend bouncing over there and checking it out, because they explain it WAY better than I can. Don’t worry, I’ll wait. (twiddling thumbs, looking at ceiling, whistling…) Good, you’re back! For those who didn’t go there yet, I’ll try to sum it up below.
In essence, having a success rate of 90% is saying that you’re expecting the future to be as bad as the worst 10% of historical periods. Even through all of those bad times, you should have success for 90% of those occurrences.
After reading that, we re-ran our numbers looking for a 90% success rate, and adjusted it to account for some of our retirement benefits and social security, and holy cow, we’re looking at the end of 2017!! Yeah, that’s moved up our FI date another 2 whole years! Granted, the stars would have to align, and all of that for us to achieve FFLC in 2017, but it’s a new best case scenario. See the chart below for various assumptions made with the amount investment being the only change. We typically go for 4% withdrawal and set a max spend of $90k/yr and min spend of $50k/yr. for our scenario.
Various scenario outcomes
Another thing we took into account is if we have any side income. Most likely, we’ll be working in some manner, and it’s amazing how even a little money like $5k/yr can dramatically change your chances of success. These assumptions using the $1.1 million starting also assumes a paid off house, and the higher invested scenarios are dependent on how the market does. The $1.1 million is assuming the same savings as now and 4% growth in the market. I did say we like to be conservative in our assumptions….
More scenarios based on side income variability
The biggest change for us, is that our comfort level with our FFLC plan has dramatically increased, and our risk tolerance towards enacting this Lifestyle Change has dramatically decreased. By tracking our spending- our real spending with the lifestyle we want to maintain in our FFLC, and keeping the discussion about this plan in the forefront, it isn’t some oddball unconventional dream anymore. We’ve given a face to it and realized, it’s TOTALLY achievable. We have also realized that we’re both going to have a side income of some sort, and if it’s enough to cover expenses so that we don’t have to tap into our investments immediately, then we can watch those investments grow and grow. We’ve quit looking at this Lifestyle Change as “retirement”, because for us, that’s what it has become. Focusing on getting to FI so we can have the freedom to do what we want to do, liver where we want to live, and have more time to spend with family.
After all of these realizations, we accepted that 2018 is now our most likely scenario, and it could be as early as 2017 when we hit FI. I adjusted my clock to Aug. 3, 2017 which is just under 600 days from now, as our new target and the point at which if we wanted to we can start our FFLC. I just find it amazing how knowing your numbers, adjusting assumptions, and reassessing your tolerance for risk can dramatically impact your FI date. To which I say, “Go! Go! Quit reading, get your spreadsheet out and see if you can shave any time off. Why are you still reading this and not “spreadsheeting”? Go! Now! GO! For your own sake!”
What is the biggest factor affecting your FIRE date?
Have you had any big leaps forward in your date, just by adjusting assumptions or risk tolerance?
