Articles with decisions

If I had a million dollars…

If I had a million dollars, I'd move here.
If I had a million dollars, I’d move here.

The other day I was working in the yard, and I had a song pop into my head that I hadn’t heard in forever. After singing through a few verses of it, I got to thinking, “Yeah, that’s not a lot of money anymore. Or is it?”

If you haven’t guessed the song by now, it’s Bare Naked Ladies’ “If I had a million dollars.” https://www.youtube.com/watch?v=B4L3ls_6UYg

The lyrics are funny and whimsical, and if you’re not familiar with it, it’s a song musing about everything that they would do if they had a million dollars. There are some of the usual things you’d think of such as, “I’d buy you a house… Some furniture for your house… A K-car, a nice Reliant automobile… a monkey, haven’t you always wanted a monkey?” Then there are the “extravagant things” that would be bought such as; “I’d buy you a fur coat, but not a real fur coat that’s cruel… A tree fort for your yard… an exotic pet, like a llama or an emu… and my personal favorite, we wouldn’t have to walk to the store; now, we’d take a limousine ‘cause it costs more…” That got me thinking, if they bought everything on this list, how far would their million dollars get them vs how far would it get the SSC family?

How far would a million dollars go if you spent it like the song suggest? Well, let’s see.

For simplicities sake, we’ll assume this is a post-tax million dollars. Where we would like to retire a house can range from ~$160k upward. We’re looking in the $200-$250k range. Let’s say they want a nicer house (they are millionaires now) and go with a newer $300k home. Then you add in some new furniture, because you don’t want any shabby digs in your new house. I’ll stay conservative and say maybe $20k, for furnishing a whole house. That should cover most of a house if you’re not shopping at Ethan Allen. Now if we look at the K-car, let’s say this is a modern day Hyundai/Kia equivalent, and go for $20k for the car, with tax, title, license. We’re at $340k spent, but our main cost of living things are covered right? Now for the fun things! Llama is about $400-800 with about $20-$30/month costs not including vet trips. In the grand scheme of things, not too much there. A monkey is about $4000 – $8000 though! Holy cow, that’s way more than a llama, and it sounds like they have way higher maintenance costs too. A tree fort for the yard, can cost as much as a house. Since they want to “take a limousine ‘cause it costs more” they’re probably not going to DIY the tree fort. Those costs range from a couple thousand on up. One of our co-workers is looking at a $5k playset for their 1 year old. Let’s just say $5k. Back to the limousine, when I had to take a car to the airport due to company policy and safety, it was about $70 each way. Let’s say that would be the average limo cost to go to the store, that would be an extra $75 a week added to the grocery budget, or $3744/year. They’ve already spent almost half of their million dollars and they still need to buy fur coats, John Merrick’s remains, some art (a Picasso or Garfunkel), a green dress, but not a real green dress, that’s cruel. Yipe, that’s a lot of spending!!

Let’s see how the SSC family would use this. Our number for FIRE is essentially a million dollars. HOWEVER, this is a million dollars NOT including our 401k’s. Oh, tricky, tricky right? Well you see, because we have been building and growing our 401k’s for a while now, we see that as money that left to grow on its own should be able to afford us the lifestyle we have now. Pushing that aside, our ER/FFLC number is roughly 1 million dollars. Maybe this is still a lot of money, even 23 years after this song was first recorded.

This should cover a mortgage outright first of all. Yes, we have equity in our house and based on the growth around our current area, we are assuming we will at least be able to sell it at a break even for what we paid for it, fees included even though we will most likely get more for it. We like to play it conservative assume break even and not count on any home sale profit. We are now down to ~$800k left over from our “million dollars” for us to live off of until we get to age 60/62 and can start drawing off of our 401k’s. I am aware of the Roth ladder and other options to draw on them earlier, but again, I’d rather plan so we didn’t have to count on that. Looking at our budgeting we have been spending roughly $56k per year. This is with about $8500 per year assumed in health costs, and $1500 per year assumed in dental. These are just ball-parked based on what we could glean from the Government health care website market options.

Breaking our budget down and having a floating yearly spend based on how well the market is doing, the cFiresim calculators show a 98% chance of success with our plan and investments as they are now. That’s not too bad really. This is assuming a 4% Standard Withdrawal Rate (SWR), and 7% growth, along with 4% inflation. We’ve accounted for higher inflation in healthcare at the urging of Mrs. SSC’s parents. Having survived a bout with cancer, their costs have increased dramatically. We also have a 5% cushion built in, and will most likely have a year of cash as a safety net. Yes, yes, there are better ways we could probably have that cash as a liquid asset but for now, we’re thinking cash. This is all NOT taking into account any side income, part-time or full-time jobs we may pick up. Also, not accounting for any pensions or even social security, which seems to be probably another $1-$2k per month each. Also, we account for $12k/year for our personal fun money/allowance/sanity fund, whatever you want to call it. So if things got tough, we can automatically “cut” $12k of expenses just by not using allowance type money for our hobbies and stuff. Then our yearly spend would be ~$44k assuming nothing else changed.

There are times I review these numbers and think, “Why the hell are we still working?!” Then I remember, “Oh yeah, we still have a ways to go!” We currently can just buy a house…. Then we’d have no jobs, no security money, and we would be watching the clock like a hawk to tap into our 401k’s then wake up broke and sad at 75… Booo…. So, we stick to the plan. Remember though, most of our investments will get the glorious benefit of compound interest, so it isn’t as if we will be setting aside a full $1,000,000.00. No way, man! Let that grow and earn, and grow and earn, and grow. Please for the love of God, grow!

The point I’m trying to drive home, is that you could spend a million dollars like the Bare Naked Ladies suggest, and you’d be back to broke pretty quickly.

I’m fortunate that we are in a situation to be able to plan, save, and get towards our FIRE goal but it comes through diligence with spending and saving and staying on track. We could derail it at any point by getting back into the consumer mindset, but we stay the course. Why, you ask? Well, even though I love my job and get satisfaction out of it, I have other things I’d rather be doing with my life that would fulfill me more. Who reading this now doesn’t have at least 2 other things they would rather be doing than sitting in their office at work? Who would rather have free time to fully pursue their passions and not try to cram them in with a “Go, go, go, Lifestyle?” You’ll see one raised hand at this keyboard – if you could look through the screen that is. Although then that would be a little creepy… Hopefully, you get the point.

How would you spend a million dollars?

Would you spend it or just live of the interest or dividends it brought you each month?

We’re headed to the track!

Best new investment strategy around!
Best new investment strategy around!

A while back I noticed a lot of bloggers talking about what you should do with your tax return, as opposed to what most people would actually do with their tax returns. As a kid, this was always a nice time of year because we generally got a fairly healthy tax refund. It was like a financial Christmas, and presents would be bought, we’d get treated to some dinners out, and usually within a month or less, it would all be gone. Nothing invested, maybe some immediately pressing bills caught up, but generally, it was frittered away here and there. As an adult, I’ve tried to be more fiscally responsible, which is why we invest our tax refund. This year instead of putting it into our usual investment hidey holes, I convinced Mrs. SSC to go a different route and diversify our investments. Being from Kentucky, where we’re most famous for horses and bourbon, I decided investing in bourbon wasn’t up my alley, but how could you go wrong with horses?! It’s like they say, “How do you make a small pile of cash off horse racing? Start with a big pile of cash.” So that’s what I plan to do!

 

That’s right, I’m putting it all into horses. I’m sure you’re thinking, “Wait a second, most horses are privately owned and you can’t really buy shares of them, can you? Are you planning on investing in a horse training facility, or farm?” You’re right, I can’t diversify our portfolio with “shares of a horse” so I’m heading to the tracks baby! I usually do pretty well on Kentucky Derby day investments, and over the last few years I’ve managed to clean up. I did some calculations and my investments at the track have yielded over 200% return year to year. I did have a down year here and there, but modeling the amount invested against the returns, makes the stock market look paltry in comparison. I mean really 7% is supposed to be a “good” number? I’m talking averaging 200% returns. If you put that into my other modeling spreadsheets, I can have us to our FI/FFLC goal 2 years earlier!! 2 years!

 

Now that I’ve piqued your curiosity, you’re probably wondering, “How can you do this though, because The Kentucky Derby is a month away, PLUS it is only once a year. You won’t be able to make that much on one race, right?” You’re right again, I knew we had some smart readers! Plus, like I’ve found on all the FI blogs I read, you don’t want all your eggs in one basket, so I’ll be diversifying and spreading my investments over MANY races. I have taken our tax refund and parlayed it into a side hustle of betting on horses! We’re midway through the racing season, so I only have a half a season left, but I’m confident that I can more than double our refund. Already, I’ve been able to get a 30% return on my “investment choices”. 30%!! Our portfolio hasn’t done that yet! It makes me want to show our portfolio my winning stubs investments and say, “Get with the program, portfolio! What have you done for me lately?! Slow and steady, more like, Slow and Slower… sheesh!” I digress…

 

This weekend, I plan to get the investment action in full swing though. I’ve been researching the upcoming races around the country, track conditions, racing surfaces, horses, and put them all into a spreadsheet. Then I run a few Monte Carlo scenarios and pick the new members of the SSC Investment Portfolio. It has worked well so far with predicting which “investments” I should be making, so I will continue to follow it. I diverged from this method last weekend and I found that picking a horse with a funny name isn’t the best investment strategy, so I’ll keep science-ing it up. Not sure why I thought “Pajama Pancake” and “Tweedling Peanut” would pull out a win, when my spreadsheet said otherwise, but I know better now. Seriously though, I don’t know why people haven’t thought about this before, it’s pretty dang easy once you get all the variables accounted for.

 

I’m excited about keeping this train to FI rolling and get us retired a few years earlier than we’ve planned using traditional methods, and now I get why more people aren’t doing this whole FIRE thing. They’re sticking to slow methods with even slower investment return times. No wonder everyone works until they’re 60 or older, it takes that long for the stock market to work! Ain’t nobody got time for that! Certainly not this household. While the stock market keeps trying to make me some coin, I’ll be laughing all the way to the bank with my new diversification strategy!

 

Do you have a unique side hustle that outperforms the market?

Do you want a copy of my Horse Racing spreadsheet, so you too can be more diversified?

Have you realized today’s April 1st yet?

 
image from hdwallpapersnew.net

Dream vacation: What’s the rush?

Recently, I came across an article about “Fly-in, Fly-out” fishing trips in Canada. These are mainly to go after pike, walleye, and grayling, and all the pictures show people holding big, toothy, 40” long fish. A trip like that seems like it would be a blast, so I began to investigate the options. I invited a couple of friends along thinking it could be a good “guy trip”, you know, travel, fishing, some camping or relaxing in a lodge each night, and general shenanigans that end up with some great stories. The guys and I have done other charter fishing trips in the past, so I figured they’d be on board. However, the price can get a little ridiculous, Heck, it can be a LOT ridiculous, so I sold it to them as, “Hey, I think we should take this trip to Canada and get some monster pike! Fly-in, fly-out style in a bush plane! Doesn’t that sound awesome?!” Little do they know that my main motivator for doing this trip sooner rather than later is that in a few years, I’ll be retired and money will be a little tighter. So, how do I tell them that?

I suggested to my friends that we plan for 2016. I need to save up for it, because this trip will require some hustling, both financially and getting Mrs. SSC’s mother to visit to help with the kids. I found fishing outfits that had 5 day fishing trips from $800/person up to some ridiculously expensive all-inclusive trips that are way more than I could afford. The big catch here is figuring out what I get for my money. The all-inclusive package is all your meals are cooked for you, all amenities of home, fishing tackle and lures are provided, and a guide every day in your boat. The guide alone accounts for ~$900 of the cost. The $800 trip is more my style though. We get our own outpost cabin that we get flown to, and then the boat is sitting there waiting for us. We have to provide our own tackle, lures, fish finding, cooking, and groceries. While it is more my style, do I want to trek from the Gulf of Mexico to Upper Saskatchewan with enough fishing gear, clothes, and food for a week all the while just hoping the airlines actually keep it all with me? Short answer, No sirree Bob! It would be fun, but not the first time out.

Hopefully I'll catch fish bigger than this!!!
Hopefully I’ll catch fish bigger than this!!!

Plus, it’s still a lot of money, and I’d feel better saving up and spending it now, rather than in a few more years when I will be retired. I’m still not sure how to impress upon them why I want to go on this trip now rather than “in a few years.” I suppose my main urgency in trying to schedule a long-lead-time trip like this is knowing that I may not have the extra cash sitting around in 5 years. However, in my friend’s cases they will have more time and money in a few years… I mean, these guys aren’t planning on retiring for another 20-25 years, so what’s another 3-5 more years? They’ll have earned another week of vacation, and more money from promotions and raises, so they don’t have the same drivers as me. I almost feel deceptive, like I am trying to ‘trick’ them into taking this trip before 2018.

Then, my buddy Ted proposed another trip idea*. His uncle takes groups of guys fishing in the Wind River wilderness, 1 day in, 3-5 days fishing, 1 day out. We’d take horses instead of hiking to be more efficient, and increase the cool factor, and since it’s his uncle the cost is, umm, well, practically free. I guessed at $200-$500/person and Ted replied, “Well, we essentially have to get there and pay for food.” And his uncle doesn’t even fish! That sounded like a slam dunk, but then I’m back in the “I want to do the Canada trip before retiring, which could be as soon as 2018. The Wind River trip would push my dream Canadian fishing adventure back to at least 2017.” Gah!!!

Maybe I’ll tell them we expect money to be tight in a few years, but that sounds even odder, as Mrs SSC works with both of these guys. That alone would raise a red flag that might take some explaining. Maybe I’ll have to “Goonie it up” with a speech like, “Come on guys, this is our time. It’s our time to go fishing now. We may not get this chance again.” While I feel it’s a bit deceptive to not come out with it and tell them, “Look man, we’re planning on quitting the oil industry and moving to Virginia in a few years, and things may be a little tighter with funds. If I don’t do this now, it might be a lot more years before I get the chance to do this again.” In reality, this probably wouldn’t be a big deal, but I’m not comfortable enough with co-workers and even ex-co-workers knowing about and starting to gossip about my 5 year plan. Ultimately, if things don’t go as expected, I’d like to keep working where I am and not have my boss think I have one foot out the door. I’m not sure how I’m going to approach it, but I’ll be sure to let you know how it plays out.

* – Names have been changed to protect the innocent

Have you run into this in any situation with co-workers?

Have you told anyone about your FIRE date, and plans to abandon work?

Anyone have any better ideas for some good Pike and Walleye fishing trips?

Commuting takes its’ “Toll”!

 

Man, commuting together did make a big difference!
Man, commuting together did make a big difference!

When we knew we were going to be moving to Houston, our biggest worry was about the traffic and commute distance. We limited our housing search to within 30 minutes of our office, while still being within a good public school district. Man, did that limit our choices. After finding lots of houses with aluminum wiring, or needing tens of thousands in repairs and upgrades, we started looking at the suburbs… Gah!!! We realized this would cost more in the way of gas, tolls, and time in the car, but ultimately, we were able to spend almost $100k less for our house.**

I mention this because I recently looked at our toll usage on Harris County’s Toll Road Authority page and I noticed it was easy to put a narrative to. When I switched jobs, you can see the  increases associated with trying to figure out a best commuting route, and even the effect of airport trips and other around Houston travel. It was eye opening and amusing.

When I was looking for a job, I needed it to be near downtown since we do not live near the energy corridor. I found a company with a great job opportunity that fit that criteria, and the only downside was that we wouldn’t be able to commute together anymore. Well, there was more than that, but that was the biggie. Mrs. SSC had calculated it would be about $8,000 more per year in commuting cost, post-tax (~$12k/yr pre-tax) if I took a new job. This was assumed wear and tear on the cars using online calculators, and doubling our gas usage, and toll costs, since our commute was still almost the exact same distance just to different places. Also, Mrs SSC would have to pay $70 a month to park, since we wouldn’t get the free carpool parking. Ouch!

You can see in the first months on the graph, we’re at an even $45 +/-. This was commuting together and the occasional use of the toll road on the weekends, but it was fairly consistent. In June, I started my new job and you can see the toll bill almost double, and I didn’t even start until Mid-June.

In July, it actually doubled… Something had to be done, because this was ridiculous. I’m all for efficiency but at what cost? Not this one. I first noticed that by getting on one exit later, the toll went from $1.15 to $0.75, which would save about ~$8/month or $96/year. This is assuming 4 weeks off due to holidays and vacations. Every little bit helps though.

Also, I found that my normal route of egress from the neighborhood had turned from 3-4 minutes to upwards of 8-10 minutes due to heavier traffic. I started taking a back route that got me to the same point consistently 4-5 minutes faster than going “the old way.” Plus, it avoided the toll roads totally. This was in August and you can see a big drop on the graph from ~$88 to $65. So that little measure saved $0.75 each day. Which is ~$15/month or $180/year saved. That’s getting better!

September, Mrs. SSC decided that getting on an exit later in her direction was costing more time than the $0.40 was worth so she began resuming that route, but still getting off an exit early coming home. There was a little increase, nothing big, just the ~$8 of savings previously.

It all looks red or orange, every day....
It all looks red or orange, every day….

October: I have no explanation. None, I can’t remember anything going on in October commute-wise or otherwise that would drive that up. Let’s see…. We did do a mini-surprise anniversary vacation on a cruise, so that entailed tolls down to Galveston and back. That was a bit of it, we did a lot of play-dates, and I think just got really lazy with avoiding the toll road on the weekends, and look how it added up. Almost $25 higher than average. Not counting Galveston, that would be about $20 of tolls related to not avoiding the toll road on the weekend. Maybe the kids were especially cranky when we got to that junction each time in October and the 5 minutes less in the car was worth $1.15. I’m SURE that was it, or something similar. J

As the graph points out, you can see the average levels off to ~$67/month except for months when we are flying places or have training classes in other areas of town that are easier to access with more tolls. Booo…. In general though, the overall tolls came out way better than expected. I’ve looked into getting off at earlier exits, but those Highway Robbers have the 3 closest exits to my neighborhood costing the same amount to get off. So, I skip 6 more stoplights and stay on the toll road doing 70 mph for a few more miles.

Overall, I’m still glad I switched jobs, as I really like my new company, new position, and all the people I work with. Had I drug my feet and waited until this oil price downturn, I might have missed my opportunity to leave altogether. While it did have some financial costs associated with it, I feel they are more than made up for with salary, job satisfaction, and the extra amount we are able to save towards FIRE.

** I know this strategy doesn’t fit with the MMM philosophy of live within walking distance to work, but for us that would be an extra $100k in housing costs, plus ~$12-$15k per year per child for private school when they reached school age. The public schools close to our work were rated horribly, and we didn’t see the payoff for closer living to the office.

Have you had a similar experience before with new costs associated with a new job?

Does anyone else have commuting issues like this that you deal with?

Have you been able to escape this part of the rat-race already and this post makes you even more glad you did so?

 

Retirement Quest: Where to live?

Where to retire is a big question that only you and your family can answer. Maybe you plan on staying where you are now because you’ve already built a life and social network there and don’t want to disrupt it. My dad never moved away from his hometown his entire life, so retirement for him meant not working and getting to enjoy the same social network and activities he did while working. My mom, on the other hand, is more of the wandering artist type that has lived all over and doesn’t seem to stay in any one place too long. She is currently back in my hometown, but I doubt she’ll be there too long, because it gets too cold for her to want to stay too long. That led me to think of what people look for in a retirement town, or even more so, a “pre”-tirement town.

Mrs. SSC and I have been researching different towns and cities to relocate to when we pull the plug and switch to stay at home parents, since we have no desire to remain in Houston. For us though, it’s not as easy as Googling, “Where are the best places to retire”? Mainly, because the word ‘retire’ is associated with people decades older than we will be.  We want an active community, trails to hike, and rivers to fish.  A place that is overflowing with families and good public schools for our kids. A good education is essential to us, and one of the reasons we have a longer than ideal commute currently in Houston.  Sure, we could have afforded to live close to work, but those public schools closer to downtown are horrid. Meaning we would need to move or pay almost $15k/yr/kid for private freaking grade school when our kids got to school age. That’s ridiculous! My college tuition wasn’t that much per year!  Also, in our future pre-tirement town, we want topography and four seasons. After spending 6+ years in the Gulf Coast, we both miss snow, Fall, leaves changing, and seeing bumps in the horizon that aren’t overpasses or buildings. I have really appreciated being able to fire up the smoker on Thanksgiving in flip-flops, shorts and a nice Hawaiian shirt, and be perfectly comfortable outside, but I also miss getting to wear sweatshirts, sweaters, and the feeling you actually need a fire to cozy up to, and not just turn on the gas fireplace because it’s sort of cold out (it dipped below 50!! EEEEK!!!).

How have we figured out where we want to move when we depart Houston? Well, we haven’t yet, but we’re down to our short list. We started by taking those things mentioned above (topography, four seasons, education) along with our knowledge of places we lived or visited and started doing research. Combining our wants with stats on cost of living, home prices, taxes, school quality, and weather helped us cross entire geographic regions off of our list.  Take New England for instance. We both love it and think it’s pretty, even with some harsher winters, but we’d rather not incur such a high cost to live there between taxes, housing, and heating. Another region is California; it’s beautiful and the northern part of the state would be nice, however, it’s expensive, has water issues, and doesn’t meet some of our criteria.

After some time, we narrowed our scope down to the Appalachians, the Rockies, and the Pacific Northwest.

North Carolina has some appeal for us and there are some nice towns there we think could work. So we have a town or two still on the list, but we kept looking. We both liked Oregon, but man, so do a lot of other people, and some of our towns that popped out ended up seeming like Boulder,CO in terms of excellent outdoor activity but ridiculous housing cost. So there are a few Oregon towns on the list as well, but we still kept looking.

Same with Colorado; it fits a lot of criteria, but ultimately the towns we looked into got put into the B list category. Some Colorado Front Range towns are nice and fit a lot of our criteria, but if we’re in CO, we would like easier access to the ski resorts, and if we want some type of mountain living or mountain views, we thought we could find some other places that could be a better fit. Again, there is a drought/water issue that persisted for the 9 years I lived in Denver through to the present.

We even came across a town in northern Idaho that seems to have stayed at the top of the short list. Idaho… I still cringe when I look at a map and see that we’re basically looking at Southern Canada. Seriously, talk about one extreme to another. I’ve been monitoring the weather for this area, Denver, and Chicago, IL as these are all points of reference to climates Mrs. SSC and I have lived in that we liked or don’t want to be as harsh as. So far, it’s been trending just like the historical weather data has shown. Which is still pretty, pretty, cold and with a long winter season. So, lately, we are  looking back at the Appalachians with its more moderate winters, and think we may have found a good spot in western Virginia.

We both spent a lot of time in the Appalachians either growing up in the region (Mrs. SSC) or just hiking in them (Mr. SSC). Roanoke, VA has good school ratings, good home prices, good home layouts (yes, I get bored and house shop on Zillow). I find there are a lot of houses out there that would work great for us. Some of the houses need some updating, which is ideal. We want to do remodeling to make the home reflect more of our personalities, without having to redo the whole house.  Many homes have workshops already built, which is ideal for my woodworking equipment and projects. Also, there are some houses with killer views and a little land, so no suburbia feel to it either. Now, to hope the perfect house pops up on the market in another 3-4 years!

So, here is our current short list – I’m curious to see how it evolves over the next several years:

  • Roanoke, VA
  • Boone, NC
  • Coeur d’Alene, ID
  • Bend, OR

Our “long” list includes satellite towns near these, or other “B” locations in the same state. For instance, most of the smaller areas around Roanoke (Salem, Cave Springs, etc..) have good schools and housing options. The same is said for Boone, NC and Bend, OR. Mrs. SSC’s family likes to play “what town are you guys retiring to this month?” when they visit as the short list gets shuffled occasionally. It’s fun for us to research different areas, and it keeps the reality that soon, we can permanently be in one of these places at the top of our thoughts.

I think Virginia could be a great fit, and can’t wait to check it out from a “we could be living here” perspective. It feels more like home to us, and we love the green landscape of the Appalachians. This is the 6th town in the last year to top out the short list, and so far we haven’t found a deal breaker yet. They have a good tax situation, and pending Mrs. SSC’s “dry-run” for what our tax situation could be like when we retire, it might be a bonus for that state.

What is it you look for in your perfect retirement place? Someplace warm, or cold, or with abundant water, maybe abundant golf, maybe a nearby college that allows for a steady stream of renters if you are going the property investment route? Let me know, I’d love to hear about some things I may not have thought about. Does anyone else house hunt on Zillow to check out what type of houses to expect in their retirement destination, or is that just me?

Decisions, decisions…

Which would you chose?
Which would you chose?

This past weekend, I was at the grocery and had an interesting moment arguing with myself over a dollar fifty… Yep, a dollar fifty… It started like this.

I was in the potato chip aisle looking at which options to get for my lunch the upcoming weeks. I usually tend to get the mix bags of 20 or so bags to keep up variety. I’ve tried buying a big bag of the same chip and parsing it out, but it never tends to last as long, because I overfill and then I get bored of the same chips all week long. Anyway, as I’m contemplating the different flavor combos for the next 3 weeks, I notice the price difference in store brand versus name brand. I’ve noticed this before, but rarely pay too much attention to it. As I stared back and forth, I was thinking, “Hmmm, $4.98 vs $3.48. The bags are the same size, flavors are mostly the same. I’ve tried these before and they’re ok, I mean it’s hard to screw up chips.   Hmmm, no Cheetos in the store brand, or equivalent… Hmmm, $3.48 or $4.98? It is $1.50…. We could save that just by choosing different chips…” At this point Mrs. SSC had moved on to the dairy section while I stood locked in debate with myself over which brand to choose.

Suddenly, I felt this sharp stinging sensation like I’d been slapped. Startled, I was like “WTF?! Where did that come from?” Then I realized it came from me. Not my logical side, but my more practical side which just entered the debate. Apparently, this whole chip debate had only included the frugal side and the logical side and they were both about to agree on store brand when the practical side jumped in and literally knocked some sense into me. It went like this, “Slap! Seriously? $1.50?! You idiot just wasted 3 minutes standing here debating about chips over $1.50?! Look dummy, you’ll have the rest of your life on a budget when you can eat store brand chips. Right now, you can spend a $1.50 and get the name brand chips. And QUIT standing in the chip aisle looking slack-jawed at the chips. This isn’t a groundbreaking Supreme Court decision, it’s chips!”

So I grabbed the name brand and wandered on with our grocery shopping. That got me thinking. I’m at least becoming aware of being frugal, and have worked it into my life in many other ways. Recall the tolls and money saved by using the next on-ramp? Now, I skip the morning tolls altogether due to finding an even better route. But back to the point of this post. I have no problem eating store brand on a lot of things. Our local grocery makes awesome store brand foods, and they’re almost always better quality and price than name brand. I also don’t like the feeling that I’m shorting myself just to save a buck. It  makes my skin crawl and reminds me of the times growing up when we had to short ourselves because there were no bucks to save, much less spend on things other than rice, beans, other staples, and utilities. So I find it’s worth the $1.50 to “treat” myself to something that yes, I could buy cheaper. If everything is save here, pinch there, cut this out, cut that out, I tune out and lose interest in any savings because there’s nothing that bring a little joy.

What are the little things you still get even though you know they could be cut out? Do you have any things like “my chips” that give you a little smile when you enjoy them?

Let me know, I’d love to hear about them!

Lifestyle creep: Is it killing your early retirement?

I have recently come to realize a couple of key things about the SSC household finances. First of all, I realized how out of touch with them I really was… Bad Mr. SSC! Secondly, holy crap are we living way below our means! Way to go SSC family! “Why do I bring this up?” you ask, well… let me tell you. I am personally shocked by how little we live on, given the state of our financial comfort and relatively decent salaries. Yet, I don’t feel slighted, I don’t feel broke, and even more importantly, I don’t feel like I’m wanting for anything. We’ve discussed in other posts, where the money goes, and what our budgets are, and how we got to where we are by diligent saving, and yada, yada, yada. I point to something else as a larger reason that we are in the situation we are today – I think it’s that we have mostly avoided lifestyle creep. That’s year to year creep, like my waistline, slowly expanding until one day I wake up and think, “When did I get fat?!”

I started thinking more about lifestyle inflation the other day after a late night of perusing Facebook. I noticed a friend, let’s call her June,  offering up her used clothes dryer for sale for $150 obo. She also offered the washer with it because it was broken, and since her new washer didn’t match her old dryer, well of course she needed a whole new set. June listed the make, model and all that, so being bored I decided to look it up. It was an $1,100 dryer! That got me thinking, “Man, I bet the washer could be repaired for less than $500 even if it was a motherboard replacement or some other circuitry issue.” Another friend pointed out “the steal” and the fact she was giving up an $1,100 dryer for 10% of the original cost. She pointed out that the new wouldn’t match the old, so please someone come get them.

Then, I thought back a few months ago to June lamenting being “car poor” because she had a plumbing issue come up and needed funds to fix it and repair the damage to her ceiling, dining room, etc… This was after she had just bought a new Camaro convertible and her husband bought a new BMW X5 within the same month. Sure, the SSC family could be doing the same thing, but I realized that we have avoided a lot of that buying for buying’s sake. We caught ourselves doing that early on, and realized we could cut the credit card by 20% each month just by asking, “Do I want it or do I need it?” We found out we don’t need a lot of things we had been buying. Also, by being mindful of our eating out, and switching it to allowances, we were able to cut a lot of spending there. So now, it’s pseudo-date like in that if we eat out, one of us pays from our allowance. Unless it’s sushi, when Mr. SSC always pays, or now we’ve decided going dutch works too, mainly because, “I eat 3x as much as Mrs., SSC.” But to the real point, we’re accountable for eating out and that saves a lot of $$.

Here’s where I am going to go on a sidenote rant though. Mrs. SSC was just telling me about having lunch with some co-workers and how they were talking about all the restaurants they go out to eat at, and have you tried, here, there, etc… These are all people a little older than us, but basically single income providers with stay at home counterparts. Let’s call one of them, Ted. Ted was talking about how he buys breakfast and lunch at work. That has to be about $15-20/day! I know, I’ve also eaten there, never for breakfast, but for lunch, and it’s essentially restaurant prices. So ~$100/week for food at work. That’s almost $5200/yr to eat at work. Ok for me to hear it put like that, it doesn’t sound like much, but that’s because I have no good sense about money. BUT, if you think of it in terms of, if you invest half of that, assuming you bring your lunch, and save $2500/yr those investments can add up to way more than a “tasty” lunch and breakfast each day. Back to the “creep” talk.

Another way we avoided creep was technology creep. I just don’t get keeping up with the Joneses in regards to Apple’s latest iPhone, or Samsung’s latest phone or the newest tablet, or anyone remember the days of GPS? When Apple came out with the first iPhone, so many people I knew, broke or not, were suddenly coming up with $300-$400 for a new iPhone, even though their old phone worked great. They were showing off apps and having loads of fun with it and I thought, “But my phone is fine, and doesn’t eat up a lot of pocket space, and works great for me.” Even with subsequent releases I would hear people lament, “Oh woe is me, I have an iPhone 4 and they just released a 5! I knew I should’ve waited, and now I have to wait 6 months to turn this old 4 in for a brand new 5!” And they had just gotten their iPhone 4. My family (blood related not SSC family) is notorious with getting a phone and using it for maybe 6 months or less, and getting another phone, not realizing the crazy costs associated with constant phone upgrades, but they add up! The “free phone” with a 2 yr contract is ridiculously expensive, when you price out buying it like on T-Mobile’s plans. (this is not an endorsement for T-Mobile. I don’t like them, but they’re lower cost, so it’s a concession I made with Mrs. SSC).

The point of how much we’ve avoided lifestyle creep was driven home to me the other day when I got an update on numbers, retirement dates, retirement income possibilities, etc… from Mrs. SSC. She’s constantly running numbers, adjustments, different forecasts and the like and letting me know where we stand and whether or not 2018 or 2019 is doable for retirement, or if it’s as late as 2020! Gah! She sent me a number and pointed out that in our early retirement, we’re going to essentially be living with an extra ~18% of buffer money than we currently are living now. 18%! I was shocked! Not that we’ll be living more comfortably in early retirement, because it’s pretty comfy now, but just that we’ll have that buffer there and it will be more than we live off of now. Ridiculous… When we get to 60 and our 401k kicks in, it will be an even bigger cushion, restaurants here I come! I’m just astounded that by avoiding throwing away money on things like new cars every 3 yrs, or new phones every year or new tablets every year, we have been able to get to early retirement that much sooner.

And getting back to that lunch Mrs. SSC was having with her colleagues. Besides Ted and his food habits, there was “Mary” who was talking about having a rotating shoe rack in her closet so she could store and view all her shoes. WTF, who does that? Do you do that? Better yet, who needs that? Another one was talking about something else that made Mrs. SSC think, “Are we cheapskates?! Are we living like suckers, “cheaping” it up to retire early?!” Then she realized, by the time we’re their age (~6-8 yrs) we will have been in our retirement home for hopefully 1-2 yrs relaxing fixing it up and spending more time with each other and the kids. So, no, like I’ve said, I don’t feel deprived, or broke, or like I want something and can’t afford it. I am looking forward to being able to house hunt for our retirement place in another 5 yrs, and enjoy sitting on a back porch or deck somewhere soon, just slowly sipping my coffee.

Bad Decisions Part 3: Easier credit, harder payments

So, when I left off in “Bad decisions Part 2: Easy credit, hard payments” recall, I had just started using my credit card how the credit card companies wanted me to use it. Racking up debt way beyond what I could pay off each month, and continually adding to it, to inevitably have a lifelong bill and interest payments to “the man”. Remember, they have all the loopholes and technicalities taken care of so a late payment, jump interest to 14%, another late payment, 16%, it rained today? 22%, haha! Okay that didn’t happen, but it sure seems like it could have with the ways the interest rate would keep increasing.  I didn’t really understand that higher interest rate means I’m paying way more for my borrowed money than it’s worth.

 I lived on the edge like that with no savings per se (recall the student loan post) but then, I broke my collarbone mountain biking. At the time, I had decent health coverage through work, but it didn’t cover the unpaid time-off that I had to take to heal. So, while I spent 12 weeks healing, my bills grew higher and higher since I no longer had any income. After that incident, I had a temporary glimpse of how bad the situation was.  I focused and was eventually able to catch up on rent and utility bills, and then I declared in earnest to pay off the credit card.  Well, I didn’t, and I kept using it like it would never have to get paid off. I’d get it close, but then the alternator would go out on the car, or I’d have to fly home for the holidays, or Widespread Panic was in town for a show… I blame myself, but also the company I kept. They lived by the “we can make more tomorrow” philosophy since they were mostly restaurant servers and could pick up extra shifts and have $100-$300 cash in hand at the end of the night. I was in the kitchen, paid hourly every 2 weeks and had no hope of earning extra cash…

What happened next, wasn’t me putting the card away and paying it off. Instead, I got ‘ smart’ and thought I’d go a different route and play the credit card game against them. Remember, I suck at good financial decisions, I can make bad ones all day long.  Anyway, I decided  that I’d get a NEW card and transfer the balance to that card for 0% interest for 12 months, and pay it off that way. I planned to take that extra $100 from interest on the old card that I was now saving, and use it to pay down the principle on the new card. Except, now I had TWO credit cards, and one was empty! I told myself that I would just use the old card a little bit. But next thing I knew, I was in a restaurant ordering microbrews and dinner and realizing, “I don’t have the cash for this, I should go before the tab gets too big.” I was constantly telling myself that this was the last time – tomorrow I would stop spending and pay down the bill…

But, the credit card didn’t get put away, and it became easier to use that card too. Except now, I have two cards, and I’m putting more and more on them. Enter Christmases, birthdays, Opening Day at Coors Field, subsequent ball games, plus music at Red Rocks, Filmore East, The Bluebird, and Boulder Theater! (Have I mentioned how much I love seeing live music?) I love it!  Denver has a great music scene and man did I revel in it. But it costs a lot. The best example of this was when Neil Young came to Red Rocks for a 3 day show. For the first time ever, I wistfully sat to the side and said “I don’t have enough $$ to go. I can’t afford it.” I was in school with some people that went to the first night and it sounded epic, a first set of all electric, then acoustic, then electric (did I mention Chrissie Hynde and the Pretenders were there too?) So, come the third night after hearing stories of these epic shows, I decided this is it! I’ve had all I can stand, and I can’t stand no more! I’m going to the show! I marched downstairs after class, went straight to the ATM and it said Checking: $23…. damn…. Savings: $60…. double damn… Well, I get paid Friday (this was Wed) I’m working the rest of the week, what the hell. I emptied my savings and walked out to my car. I stopped at a store to get a sixer for the show, and headed out to Red Rocks. I hit the off-ramp and found many people willing to sell tickets, but I was down to $40. After some haggling I got my ticket for $40! It was an amazing show, one of my top 5 ever, but this was typical of most of most of my financial decisions. Impulse, impulse, impulse, and no thought to future.

Eventually, I set up a system to pay the cards down. I would always write a check towards the cards first thing when I got paid. This worked, but it took $750 off the top of each paycheck just to pay down debt. That’s ridiculous! That’s about  $9000/yr towards paying down debt, so why wasn’t it all paid off in a year? Well, I had a LOT of debt, and instead of “sniper-ing” one card at a time, I was paying $300 to Discover, $300 to Visa, and $150 to Target, yep I even got a Target card…. I mean for 5% off purchases? Yeah, it didn’t pay out for me at all. Plus, by splitting it up over 3 cards, I still spent close to the amount I paid for each card each month through dumb decisions. Maybe one month I’d spend $300 on Discover, then the next month on Visa, the next month on Target. This was not helping me pay down debt.  I at least had been at this a good year or so before I met Mrs. SSC, and when we joined financial forces, I still brought in almost $9,500 of credit card debt to the relationship alone.

Looking back, I realize I could’ve been more efficient with my attempts at paying the credit cards down. By going after the highest interest first, then the next I could’ve save us a year or more of work, but no…Spreading it around and paying a little toward each card just wasn’t effective. However, on the bright side, I was consciously working toward paying them off.

What do you notice that tends to be a recurring negative trend in your finances? What, you’re not tracking them? At ALL?! Whoa, right now, open an excel sheet and type “My money” in the upper cell, and start listing where your money goes each month. It’s that simple. Even starting with large categories like, credit card, mortgage, car payment, insurance, etc… can be eye opening as to where you can cut costs. You’ll probably be as amazed as I was when I actually started “budgeting”. In a few days, I’ll be posting about my relationship with budgets in my Bad Decisions Part 4: Budgets are a four letter word!

 

 

The Beginning: Mr. SSC – Jay

Mt HoodEarly Retirement? Riiiiiight….

This “early retirement” stuff, all started in 2014 when Mrs. SSC started throwing around phrases like “lifestyle creep” and “FIRE”, and talking about how we could retire from the 9 to 5 in maybe 5-7 years, instead of the ~20 years that had always been the plan. I mean, first of all, who REALLY does that, and how do they do it so easily? After checking out all the personal finance articles and blogs that Mrs. SSC was constantly emailing me, I realized that most people do this by living on extremely low, almost unbelievable incomes. Especially, the ones supporting a family. It might work great for them, and I applaud them for being able to achieve FI and retire early, but I just saw it as unfeasible for the lifestyle I want to live.

If only there was a way that we could “pre-tire” and transition from dual income parents to dual stay at home parents and not decrease our current lifestyle. Wouldn’t that be great?! Yeah, I agree. BUT, how does that happen? Can it work for us, and if so how? I plan on showing you our approach and how we are getting there- maybe it will help you get there also.

Let me qualify my opinion and statements on this blog with the fact that I’m horrible with money, budgets, and savings, but especially savings, and budgets, and money. My family was bad at it, so I didn’t have any good financial role models, however, I still thought I was pretty good, since I was the best one with money in my family. But the truth is, I just suck at managing finances. I can manage them, but I manage them right back into the economy and out of my checking account…

Enter Mrs. SSC

Fortunately, I married someone who is great with money, saving, and planning. Actually, she’s great at planning anything and everything and so we go well together. When we finished school and started working she already had a nice rollover 401k, and a little nest egg already built up. I had cashed out my 401k (seriously, I did that, the entire 12k…) and I had a lot of debt. Mostly from school loans, but the rest were simply self-induced due to poor spending habits through ease of spending with credit cards. By paying down ALL those debts month after month, and saving for newer cars, we never got the lifestyle creep that comes with most Dual Income No Kid couples.

While I’d been busy wanting a boat (kayaks are fun, but aren’t boats even more fun?), luxury auto (why not me? can’t we afford a nice car?) and wanting to do things other people were doing, my wife had been working her magic in the background.

I realized that while I’d jokingly referred to budgeting and investing  as Mrs. SSC’s hobby, it really was. She  would show me her graphs and spreadsheets and I’d peruse them and think, “why the hell can’t I buy a boat? I see it right there. This amount would cover the boat I want,  come on, one little boat?”  The conversation usually went like this:

Me: “We can afford a boat.”

Mrs. SSC: “Yes, but do we want to afford it?”

Me: “Of course we do! Boats are great, I like fishing, we could have fun on the water every weekend.”

Mrs. SSC: “Where would we keep it? What about tax, title, registration, insurance, gas?”

Me: “Fine, but what about a kayak?”

Mrs. SSC: “You can get a kayak, as long as your allowance covers it.”

That’s why we have an allowance system  that works, um, well it worked I guess…

Anyway, I still never realized this goal of early retirement/financial independence was being realized through Mrs. SSC’s planning. Essentially, when she showed me that this whole time we have been living our comfortable life on about 50% of our income, and investing the rest – I realized that our dream could really happen.

For us, it’s simple. We like our jobs, but love spending time with our kids more. We realized that we can keep our current lifestyle and become stay at home parents when we reach our “number” that lets us have enough money to live on from ages 43 to 60. Right now, that’s in 5-7 yrs depending on the stock market and other things out of our control. Best case scenario, in 4 yrs, we can start house hunting in our pretirement town. Worst case, it’s closer to 7 yrs. I say pretirement, because neither of us wants to stop working, however, if we can work at something we like and not worry about raising a family on that income alone, that’s what we’re looking for. Whether it’s teaching part-time, working in a fly shop, maybe a micro-brewery, essentially something that ties in with my likes and hobbies without worrying that it isn’t making much money.

A couple of weeks ago, my wife found a new financial planning/retirement calculator that she has been loving running different models with. It’s easy to use and you can set it to modes like “I always want to live off of $XXk/yr or I’m flexible to live off %/dividends in stock per yr”. You input your values and it runs it from beginning of stock market to current day and lets you know how many times your plan would fail. Through the 20’s, the 80’s, the recent downturns etc… you can see how you would fare. It also shows your ending wealth, assuming you die at 90. You may be able to change that age too, but again, Mrs. SSC’s domain tinkering with these tools, so I won’t quote anything. (OK, she just told me it is called cFIREsim)

However, what it showed me was eye-opening! It was the first time since all this jibber-jabber about ‘early retirement’ and ‘stay at home lifestyle’ was brought up that I realized “Holy Sh!t, we REALLY can retire before 45!” Seriously… Like a cold, wet fish smacked into your face. It is the first time I realized that this was a reality, even though I’ve been a silent conspirator for years now. For those of you with kids (sorry ladies, this is a guys only moment), it’s like when you’ve been feeling the babies kicks through the belly, see him/her moving around, deciding names, putting together cribs, painting rooms, coming up with baby registry lists, etc… It’s all still abstract until birth when you actually see your child, hear their cry, touch them, and it hits you, “this is real”.

Make your own Retirement Baby and watch it grow bigger each day!

My financial independence baby showed up a couple of weeks ago, and holy crap it’s REAL. We can do this without adjusting our current lifestyle. We found our number, worked backwards, and in 4-7 yrs, we can say adios to the 9-5 dual income lifestyle. Maybe you can do the same, but it will be your way, your pace, and your decision on what that number is and how quickly you want to get there. We found ours and are counting down to slowly sipping coffee on our back porch.