In Memory of our House – ECA’s Post!

Part 1. Why do we move?

· We enjoy the flexibility of renting. We always like living an adventurous life. We wanted to sell our house last year. Back then our plan is to wait until it’s time to move to Europe, so we don’t need to move twice. This April, I got the opportunity to work in Luxemburg, but we did not end up going due to COVID. We figured there will be other chances post pandemic. Not being tied down to a house will make things easier.
· Our house is too big for us. We always have one bedroom and one bathroom completely empty. When there is empty space, people tend to fill it with things. Being minimalists, we fill it with thoughts and meditations instead. The empty room become my aerial yoga room. It just seems quite wasteful, especially after I started doing yoga with my dear neighbor Rebekka on the grass by the lake. Nature is just more inspiring~
· We dislike the responsibilities of homeowners. Since we bought the house brand new, we were lucky that there has been limited issues with the house. The washer was clogged once, a few light bulbs went out, and the garbage disposal got stuck a few times. Nothing major, but who knows what will happen as the house ages. Our HOA was also quite annoying with very strict rules and of course the HOA dues.
· We are in Seattle city proper, and I dislike the politics of the Seattle city council.
· So why did we buy in the first place? We moved to Seattle in June 2012 and really love the city. We know we will stay for a while. By late 2012, the city’s housing market was booming again after the housing bubble burst. It was the time to buy. After shopping for a few months, we bought this house being constructed in March 2013 and moved in on Halloween 2013. The decision to buy back then was driven by the market boom, our love for the city, together with the notion of “Owning a house is a big life milestone”. After completing the milestone, we feel it is highly overrated. I don’t need to own a house to feel like home. My home is wherever my baobei is. It is not even a good financial decision for us, contrary to what mass media suggested. What fits for most people does not seem to be a good fit for us for this period of life.

Part 2- what I loved about our house

· The neighbors and friends – over the years, I have made so many great friends with our neighbors. Doing yoga together, having a clothes exchange train, playing board games in the back porch, holiday party, sharing harvests from the p-patch, so many fun memories I will miss so much. While a lot of the other things I love about the house can be found in the apartment I am renting, I definitely can’t take the neighbors with me. I wish I could!
· The memories we have made – good thing the sweet memories are not tied to the house, we have them safely packed and are taking them with us for sure.
· The convenient location – we are only a few minutes from the light rail. Prior to the pandemic, the light rail runs every 5 minutes at its highest frequency – quite impressive public transportation for the US. I use it to go everywhere. It’s perfect since we only have one car. We were within walking distance to the cute Columbia city downtown, groceries stores and lake Washington.
· The neighborhood shops and restaurants – Joy Palace (IMO the best dim sum in Seattle), Kauai Family Restaurant (IMO the best Hawaiian place in mainland US), Seattle Super Market (close by with every Asian grocery I need), McPherson’s (produce that’s incredibly good and cheap).
· 9 ft. ceilings, open floor plan and big windows – I have never lived in a place that does not have 9ft ceilings. I did not even know that ceilings can be shorter until we were house shopping. After seeing the difference, I can’t take it for granted anymore. I really like a space that’s bright and open. Our entire downstairs is one big open space. I like how we can cook together or just talking to each other when one person is cooking and the other is in the living room. I like how the sun shined into our rooms during the day. It’s magical!
· The modern look – I like how our house looked, although I prefer the kitchen to be of a lighter color and the countertop to be white like we have in our current apartment.
· 2 ensuite bathrooms – I like ensuite bathroom. Only one is enough though 😛
· Minimal work required – the house was new, and there is not too much yardwork required.

A Year Ago We Sold Our House and Started Renting. We Couldn’t Be Happier.

Home is where…

ECA and I have been renting a new 1-bedroom place on the outskirts of Kent, WA since October of 2020 after selling our townhouse we had lived in for 7 years in Seattle.  It’s not the most convenient location as public transportation is not as readily available, but with COVID still in full swing, there’s not as much to go out and do anyway.  It is right beside a golf course and a trail that follows the Green River, providing miles of paved bike/walking trails which we regularly go out on with our tandem bicycle.  It’s quiet and beautiful with a view of Mt. Rainier out our living room window, or while sitting on our balcony, although the view is a bit obscured by the trees in the spring and summer.  We also got to take great advantage of the pool and grills over the summer and there’s a nice gym and community room (although I never have the inclination to actually use them).  Perhaps the only downside is parking can be troublesome, but since I don’t go to the gym, the exercise from walking a bit further can only help me.

Our townhome was also quite nice, close to the light rail station and easy to get downtown.  Although it was usually quiet, there was still a lot of foot traffic for people heading to the station to and from their homes.  The place was bigger, but we had a lot of unused space.  Style and furnishings are pretty much equal.

All in all, I would say the place we live in now suits my tastes a little better, but this is just one piece of the puzzle, and if it weren’t for COVID and the working from home situation, the location of where we’re living may have had a much bigger impact on how we feel about it.

Intangibles:

I think the biggest reasons to dislike homeownership are all the things you can’t really put a price tag on.  Probably the same could be said for why most people want to own a place too.  For me, homeownership was extremely stressful, and I feel much more liberated renting.

Owning a home ties you to it.  If you have an opportunity you want to follow, or if your neighbors suck, or your financial situation changes, or whatever happens, you’re stuck.  Even after we had decided we were going to sell it took a month or so to actually sell it.  During that time, we were still living there, but we had to leave to allow interested potential buyers to view the property.  I guess, you could be in a situation where you have two bills to pay for an indeterminate amount of time.  Regardless, until it’s sold, it’s your burden and you have to continue paying the bills on it.

Maintenance.  The washing machine will act up.  The dishwasher will start leaking.  Gutters need cleaning.  Interiors need painting.  Yardwork needs done.  Et cetera, et cetera.  There’s no end to these and the time and money they eat up could be used for so many more enjoyable or productive things! 

Insecurity.  I’m not usually an anxious person, but for some reason, I often felt anxious in ways that I didn’t expect when we were living in our old place.  I would often hear noises and think someone might be trying to break in, or already be in.  I would worry about the place when we were gone.  I feel that somehow, the apartments I’ve lived in have been far more secure than my house and even if someone were to burglarize the apartment, our losses would be less simply because most of the losses would be from damage to the house, not things stolen!  I don’t think this is universal, but I feel I sleep easier now than I did before.

Financials:

People often say that renting is throwing money away, but the costs of maintaining a home, plus the costs of insurance, HOA dues, taxes, etc. often hide the true costs of homeownership.  For 2021, our property tax would have been nearly $6,000 and our HOA fees were nearing $400/month.  Insurance was somewhere around $700 for year.  These together come to about $950 per month not counting any other incidentals such as repairs and of course, most people have a mortgage, so they’re paying a few hundred bucks in insurance.  Our rent was $1500/month over the last year (although it’s gone up for the last few months we’re going to be here).  So we might be paying $550 more per month, clearly renting is worse, right? 

Of course, that’s not the whole story.  All the money that was tied up in our home’s value instead is invested in the market, which over the past 12 months is up somewhere around 25%.  If we would have stayed another year and assuming Zillow’s accurate in their appraisal, our home would have gained about 16% of value in that time, so we did about 9% better.  And 9% on $585,000 is more than $50,000, or more than $4100 a month in gains.  Some of these gains are taxable, so that number could be knocked down a bit and the nice part about home ownership is that with a mortgage, you could effectively leverage and take advantage of the gains in both, but in our situation, selling seems to have been the best possible route for us to have taken.

Conclusions:

Many people will continue to love owning a home, but I really don’t think it’s for everyone.  There are many benefits, sure, but I think they’re mostly overhyped.  A lot of the true costs and impacts of owning are hidden and unless you’re really paying attention you won’t notice them.  And you give up a lot by tying yourself to the land.  Homeownership is one of the quintessential parts of the “American Dream”, but I’ve been there and done that and I don’t think it’s part of my dream.  I’m not sure when, if ever, I’ll go back.

2020 Savings and Growth

We have had another great year financially despite the issues in the world.  Markets somehow have continued to climb and ECA and I were both extremely fortunate to be able to work from home full-time during the COVID pandemic.

We sold our house!

Our contributions this year include the value of selling the house which we put into the market.  The final value we received after all closing costs were included was $537,860.  Aside from this, we contributed $279,500.  This was a bit lower than our previous year, but that can be racked up mostly to the fact that ECA is no longer receiving her sign-on bonus and thus has reduced her income somewhat considerably, although my income did increase a bit.

We broke $2 Million in net worth!

A pretty big milestone, if I do say so myself! We are well on our way to hit the coveted “fat-fire” number of $2.5M, which if using the 4% rule, would produce an income of ~$100,000 per year. I doubt we will actually ever inflate our lifestyle to meet this kind of spending, but more importantly, I somewhat adhere to the idea that a 3% spending rate is an almost guaranteed safe rate for a long retirement (which being in our early 30s now, means we will hopefully have). This means with our current non-cash investments, we should have a reliable income of around $67,000 per year. Of course some of that is tied up in retirement accounts, and not wanting to have to do complicated things like a backdoor Roth ladder, we could stick to spending somewhere around $50,000 per year which can definitely support our current lifestyle and then some.

Setting aside cash

Considering it appears we seem to have enough wealth generation to support us indefinitely, we have started to set aside a few year’s worth of our normal spending rate to ensure we can ride out downturns in the market. This cash is more of a hedge against market downturns than something like an emergency fund. We don’t want to have to withdrawal from investments if their values are temporarily depreciated.

2020 Expenditures Review

Bills & Utilities:  $5,704

More of a regression to the mean than anything, our bills and utilities cost returned to a level we had in year before 2019.  Still not confident what caused the massive spike we saw last year, but the level that it is now seems to be right around where we should expect it to be, but I expect that this will drop a little now that we have moved into an apartment.  Smaller area to light/heat, no HOA bills, and a much lower cost for insurance will contribute to these reductions.

Housing:  $7,132

With the selling of our house (which I haven’t even written about here), the amount we paid for housing went up.  This is exclusively due to the fact that we have rent and property taxes this year.  Next year, we can expect this to be a bit higher, but it will be exclusively the cost of rent.

Food:  $5,628

Our food expenditure went up considerably this year.  This was pretty much exclusively due to the fact that with the COVID pandemic, we decided to spend more on take-out and fast food since we were not spending money on things like vacations.

Shopping & Entertainment:  $2,323

Pretty much on-par from the last couple of years, nothing particularly interesting.

Transportation:  $1,517

A drop from last year, due primarily to the fact that I started working from home with COVID going on.  I’m still waiting to add in the cost of the car itself, which hasn’t fully played out, but if we were to apply it over the 5 years we’ve owned it, this cost would be raised by only $2,000.

Vacation:  $394

Our ability to take vacations was also greatly impacted by COVID.  This year has the lowest spending since we started working professionally and tracking this data.  The only vacations we were able to take was a hot springs trip we took for our anniversary and a few times we went camping.

Other Expenses:  $2,954

There were several expenses that don’t fit into the categories above.  Normally we have these, but I just lump them into our shopping expenditures, but these were significant enough to warrant some discussion.  I had a gastrointestinal issue at the beginning of the year which I tried to get treated.  I say tried, because I think in the end, it was my own self-diagnosis and care that has helped me overcome the worst of it, but in the end this cost $2,420 out of pocket since I have a high-deductible plan.  Not a big deal though because in the future, I can use this to reimburse myself from the HSA if needed. 

Additionally, we had expenditures of $534 related to selling the house.  There were more costs than this for selling, but they were taken directly out of the escrow, so we didn’t pay them out of pocket.  This includes stuff like paint, lightbulbs, repairs, costs for getting documentation, etc.

I don’t anticipate either of these expenditures to be recurring in any way, so I’ve separated them out.  That said, having an extra buffer to be able to handle unexpected expenses is always a good idea.

Trends

Summary: $25,651 spent in 2020!

Although I can’t say much for the rest of the world, but overall, 2020 was a pretty good year for us financially.  We spent a bit more this year than last year, but only because we had some unexpected expenses.  After taking these into consideration, our average expenses are around $27,000 a year including the cost of our car and unexpected costs.  With a 4% rule, we would only need $675,000 to retire, suggesting we should be safe to pull the trigger any time we want!  Still, without the ability to travel, I think for now, we’re going to stay the course and hopefully not fall into a perpetual one-more-year trap! 

2019 Savings and Growth

 

Steady Savings:

We held pretty close to last year’s saving rate.  We stopped doing Airbnb, so no side-hustle income, but with vesting and raises, we were within the range expected for our contribution rate, no surprises here!

Rampant Growth:

Markets were quite kind to us this year, but those blessed with a memory longer than a year will remember the sourness of 2018.  We’ve taken the market set-back in stride though and didn’t stop investing.  After all, you can’t time the market!  And we’re very happy that we’ve taken this to heart.  That said, as I wrote last year, we are investing in more than just the S&P500, although it’s still my primary bet.  The biggest problem with this is that most “safer” investments result in taxable income, which is a major detriment to us since we are still in a high tax bracket.  Fortunately, we do have a lot of money in 401ks and IRAs which are a prime target to use for investing in yield-based investment vehicles.

Predictions for Next Year:

We surely won’t be able to maintain the same level of contributions next year.  ECA’s vestment will be fully realized in April, so her income will drop precipitously.  I expect that movement in our accounts will start to become dominated by movement in the market.  We are also considering some big changes which may lead to me not working for at least half the year as ECA is really wanting to try to work in Europe (and I won’t want to be apart).  This might be a year of slow-travel in Europe if everything goes according to plan, with us visiting a different city nearly every weekend!  Regardless of what becomes of that, we’ve built a nest egg large enough to weather any storm, whether we both continue to work will depend on the quality and enjoyment of our work.

Comments on the decade:

In 2012, we graduated, moved to Seattle, and started working full-time.  I remember from when I was still in college, I had once run some numbers and I expected that it would take about 20 years to become a millionaire.  I can’t believe how far off I was when I estimated that.  I think that I’ve been incredibly lucky, but I can’t owe it all to luck.  I’ve worked hard to achieve what I have, to remain diligent, to manage my finances well, but most importantly, I’ve also had the best partner I could have had for this endeavor.  Someone who shares my vision and goals for life, someone who always pushed me to be as good as I could be.  Someone who is actually even better than I am at most of these things when they really count.  I think we can rest some, give ourselves a chance to relax and enjoy what we’ve done, but I also am not done working hard.  I hope you will continue to put up with me.  Love, ERU.

Cheers to a happy new year, and new decade!

2019 Expense Review

The results are in:

Bills & Utilities:  $7,764

Up considerably from last year (and predictions) was our bills and utilities.  This is partially due to rising costs of utilities, a marked increase in HOA dues (which was expected), increases in our home insurance, and I lumped a few home maintenance items since this makes the most sense for the categories I have created (although perhaps housing makes sense too).  We were hoping with us no longer doing Airbnb, this cost would go down, but now it’s not so clear what the impacts of doing the Airbnb were.  Regardless, this is the category that is giving us the most grief and the least control.  Owning a house with an HOA creates a lot of extra costs that are not readily apparent until you sit down and dig into the details.

Housing:  $4,785

This is only the cost of our property tax.  We don’t have a mortgage, and everything else related to housing is wrapped up in the bills and utilities.  Really nothing to say about this one!

Food:  $4,088

How much we spend on food seems to be most consistent out of any other category.  We spent less this year than expected, but on average, we’re always right around the same amount.  I’m not really sure what is going on here, but the best guess I have is that I basically have stopped bringing in lunch, but instead eat food left-over from meetings at my work (which is surprisingly often), or subsisting off the healthy snacks we have.  I think we cook about the same amount as last year and we rarely go out to eat, but we do occasionally when the mood strikes us.

Vacation:  $2,982

This is the most interesting category by-far.  This year we went on more trips than ever before, but we didn’t spend a ton of money.  The main reason for this is that we were able to combine work travel with vacation, ECA tagged along for one of my trips and I was able to come with her on several trips as well.  This means for these trips, we only paid for one plane ticket and one person’s food was still covered by the company.  Of course, we didn’t get to play as much as we might have otherwise (one of us was working after all), but we easily could extend our stay a few days to go and take some time off.

Now, although we had a great time and got to travel to a bunch of places for quite cheap, I don’t think we can use this as any kind of baseline for post-retirement expenses.  But, I do think this just goes into the mindset of frugality.  When opportunity arises, take advantage!  Stock up on things you use when they go on sale, wait for good deals, combine trips together, etc.

Shopping & Entertainment:  $2,197

This category was dominated by fun activities this year!  ECA got into water coloring, bought a bunch of supplies and even took a class.  She’s gotten to be quite good, if you ask me!    The rest was primarily things that ECA and I did together.  Lots of Groupons, some Goldstar events, outdoor activities, oh and we bought an inflatable kayak to paddle around some of the waterways around Seattle and even took it with us on a trip!

Aside from the fun stuff, ECA sells quite a bit of her old things online, which we’ve been tracking the expenses for shipping  for in this category, resulting in about $120 of cost there .  We also bought a robot to sweep the floors (a chore I normally did, but ECA wanted to be done more frequently).  We named the robot Obama (the brand is Roborock, so it’s Roborock Obama), so now we can say “Thanks, Obama” whenever we use it.

Transportation:  $1,816

More of a “regression toward the mean” than anything here.  We spent less than we did in 2017, but considerably more than in 2018 (which was crazy low).  We’re still even below what I guessed for the last two years.  That said, our car, Sparky, is more bruised up, a rock hit the windshield, causing a nasty crack.  It’s also got a few slow leaks, which may be hard to track down and repair.  Still, I really cannot complain about the car.  At some point, I need to go back and factor in the price of the car over the years we’ve had it, but it’s hard to do so without truly understanding how much it cost us.

Trends

Summary:  $23,632 Spent in 2019!

I guessed we’d spend $22,950, so I was quite close in my estimation, and I think I can conclusively say that we have really hit our groove in that our lifestyle costs about $25,000 a year to maintain.  Now, we’ve continued to live in an extremely manageable range, but I think it’s also become clear to me that we are able to save a lot of money just due to us having jobs.  We get a lot of food, entertainment, and even some vacations paid for (at least partially) that we would otherwise pay out of pocket.  We’re also quite lucky to both have jobs that we reasonably enjoy.  And although I believe we have enough money in the bank to retire early, I worry we may have to cut back on some things we really enjoy (like traveling), or we may need to find other ways to fill the time in our days that was once filled with work.  Unfortunately, many of the things we would like to do are not free (although plenty are).

 

 

The Airbnb Aftermath

I think the title of the post is wrong.  It sounds very foreboding, but I kind of like it, so I think I’ll keep it!

ltba

As I already wrote, in my Side Gigs & Risk post, compared to our salaries, and the overall decreasing income we actually received from doing Airbnb with the rising costs of utilities and taxes, it’s simply not financially worth it for us to continue.  I think it’s nice to know that we could use the experience we gained by doing this to run an Airbnb again in the future if we ever wanted to.  With this in mind, I wanted to reflect on the experience since it was such a big part of our life for several years.

ECA and I started hosting on Airbnb in May of 2015 and it was immediately a runaway success.  We had been using Airbnb when we traveled for a few years and we had an empty bedroom we weren’t going to do anything with.  We had owned our home for a little more than a year at the time and we had no intention of getting a long-term roommate.  Our reasoning was that it could make good money, and if we wanted to stop, we could at any time.  We don’t have to share the kitchen, and the relationship is really clear.  We’d be doing all the cleaning and the guests would be here to enjoy themselves and rest, no fighting over chores (something that has caused a lot of strife with roommates in the past).

Once we listed our place, we immediately we began to be booked up.  In 2015, we had 204 nights booked considering we started in May, that means we were full nearly every possible day.  2016, the trend continued with 339 nights booked, 2017 was right on track with 338, and 2018 we had 303 days booked, mostly thanks to a big drop in November and December.  Our revenues were quite good too, we made around $65 per night booked on average (before any taxes and expenses).

money

Not only were we successful financially, I think we were legitimately good.

rating

About half of our guests elected to review us and out of that group, about 84% gave us a perfect 5-star score.  Initially, we actively encouraged guests to leave a good review, but over time, we would only do that to those we felt really had a great time, and eventually, we stopped asking for reviews since we had so many.  The worst review we got was one note1complaining about planes flying overhead, but the majority of our reviews were full-hearted, shining recommendations.  When hosting, I often felt like we weren’t doing enough, that we could have provided a better stay, but I guess we did plenty, I think we made most of our guests really happy and they seemed to have a great time.  My style was pretty hands-on.  I always gave some time to talk with the guests each day they were around, although there were occasions our times didn’t quite work out for whatever reason.  And besides a few rare mistakes, I think guests pretty much always had everything they needed.

One thing I think I will miss is that our guests usually did have great times when staying with us.  It was a pretty common occurrence for the guests to come back and we’d ask how the day went and what they ended up doing.  They would often ask us the same, and our answer was usually, “Uh, you know… work.”  It was always kind of funny since they were in a very different mindset, they were in touristy vacation mode while we were just working, but it did raise our spirits from time to time.  It wnote2as also a lot of fun for us to talk to guests who had traveled a lot, or those who were coming from overseas.

I won’t miss having to clean the room between guests.  It was almost every other day that I was going in and cleaning the room, changing sheets, vacuuming, etc.  The room stayed pretty clean, so it wasn’t very hard work, but it was about a half hour every day on average that was being eaten up by this (a very fair exchange of time when considering the compensation we received).  One thing good about this is that we have developed a habit of cleaning, which hopefully we will stick to.

I also won’t miss the constant worry that I would have when we weren’t home for a night while we had guests, or if the guests were late coming in for check-in.  We had a key box for self-check in, but I still lost a lot of sleep worrying about these things, although it very rarely actually caused problems.  And of course, I definitely won’t miss the complications added at tax time!

But, my favorite thing we have from hosting is our guest book, (which is what these notes note3are coming from).  I guess I should say “guest books” since the first booked was filled up and we had to start a second one.  We initially started the guest book as a novelty, but we had no idea it would become an improvised guide book of Seattle with wonderful artwork from some very talented people.  It was also filled with kind words of gratitude from guests who, unfortunately, I can barely remember amongst the sea of faces we hosted.  We hosted about 1000 people in our home over the years we hosted on Airbnb, and despite my pessimism, most of the people we hosted were great.  I didn’t make any long-term friends myself like ECA did (including at least one who moved to the Seattle area), but I did have a lot of genuine and deep conversations and that’s something I will probably miss.

All-in-all this was a highly successful, somewhat eccentric, occasionally frustrating, sporadically exhausting, but often touching chapter in our lives and I’m really glad we did it.

2018 Savings & Growth

Despite a rocky time for our investments, 2018 has turned out to be a very large jump in our wealth.  We finished off the mortgage and managed to save more money than I would have ever dreamed possible.

savings&growth

A Marked Increased in Savings

Last year, I made a prediction that we would not be able to substantially increase our saving rate again this year.  Boy, was I wrong!  In 2017, we saved about $233k which was up from the $170k we saved in 2016.  In 2018, we managed to save right around $305k.  We somehow managed to further increase our saving rate by a $70,000.  My former self should have foreseen that this would happen…  We held our expenses constant (as more or less expected), we had some slight raises, our tax rate was lowered and the marriage penalty eliminated (perhaps the only things I can thank the Republican party for), and the biggest impact that I should have saw coming was ECA’s stock bonuses being vested and payed out to her.  It still feels remarkable that this has happened.  Every day I feel extremely fortunate, unbelievably lucky, and extremely surprised even though last year I felt the exact same way.

 Losses in the Markets

Unfortunately, 2018 was not a good year for us for our investments.  Practically all of our gains in 2017 have evaporated and overall in 2018, we had losses in all of our investments.

One solace is that although I had previously lamented paying off my mortgage early, thanks to the disappointing performance of the markets, we are actually now better off having paid it off than investing.  That 3.375% ROI on paying the mortgage suddenly looks pretty good!  Regardless, since we haven’t retired yet, none of the losses need to be realized, and our positions are good for moving forward (fingers crossed things will settle down).  If the markets drop further, it shouldn’t affect our retirement goals or plans, but it can be depressing to see it drop.

If anything, this is a good warning to us to ease our optimism, fully accept lower, but safer returns, and going forward we plan to continue to further diversify and protect our looming retirement.  We’re nearing the point where we have enough to support ourselves indefinitely.  I think that going forward we need to curb our greedy optimism that we can have more if we just gamble a bit more.  Looking back, yes, we did well and looking forward, we can do really well again, but I think we need to really ask ourselves, why risk it?

Prediction for 2019

For next year, I think we will save between $275,000 and $325,000 in 2019.  We’re not doing Airbnb anymore, so no extra income there.  I think the loss of this income will be made up for by increases in our salaries.  I expect our expenses to hold pretty steady.  The biggest wildcard to our exact amount of savings will be the value of ECA’s stock options when they become vested.  Considering the volatility we’ve had over the last few months, predicting this is very difficult.

I think the results of 2018 lead me to a more guarded, but still very optimistic outlook for this upcoming year.  I guess, we’ll just see if my foresight is 2020, or if that’s just limited to my hindsight in… well… 2020!

2018 Expense Review

2018 has come to a close and the results are in:  Another excellently frugal year!

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In addition to being able to compare the last 5 years of expenses to this year, last year, I made estimates on how much we would spend and now I get to compare them to our actual expenditures.

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Bills & Utilities:  $5,668

We saw a marked reduction in our cost of bills from last year spending about $5,700.  Still not sure what happened in 2017, but at least 2018 bucked the terrible trend we had been seeing of ever-increasing costs.  We still spent much more than the average, but one big portion of our cost for this category is that our Airbnb guests do use electric and water.  Since we no longer plan to do Airbnb in the coming year, I expect to see a reduction in costs, hopefully going back to around 2014 levels.  Optimistically, we’ll see this go back to around $4,500, but due to increasing costs in general, I would expect this to most realistically land around $5,500.  This is primarly thanks to our increasing HOA dues which are going from about $180 per month up to about $300 per month.  The reason for the increase is acceptable, but it stings just the same to have that cost.

Food:  $4,614

We spent about $4,600 in food and groceries this year.  I had guesstimated that we would spend $4,359.  So, I was a little short, but not too far off.  I’m still pretty happy with our food costs as they stand.  We eat well, and I feel we eat out as often as we would like.  The average is still hovering around $4,100, but I expect that we will spend somewhere around $4,500 again next year, for my estimate, I’ll set it at $4,600.

Shopping & Entertainment:  $2,836

ECA got the iPhoneX this year and I got a Nintendo Switch!  Oh, luxury…  Still, we did well in our discretionary spending.  We ended up spending about $650 less than what I had guessed we would last year at $3,500.  I don’t think we will have any big purchases this upcoming year…  So, I’m going to guess that we hit somewhere in the ballpark of $2,000.  This is still well below our average, but pretty much all our gadgets are doing what we want them to, so I’m not sure that we are lacking, if anything in this category.  ECA has also decided to cut back more in her clothes budget.  She’s been active on our neighborhood’s “Buy Nothing” Facebook group and has found several neighbors that share her style and can wear the same clothes.  It’s worked out very well.

Vacation:  $3,641

We spent a bit over $3,600 in vacations this year, but we did a ton of stuff!  We went to San Fransisco, saw the sights, and then drove down highway 1.  We went to Glacier National Park, to camp in the mountains and hiking.  We went to Universal Studios in Orlando and spent 3 great days playing there!  Some of these were a bit impromptu, busting my guesstimate by about $650, which is balanced pretty well by the over-estimate I had of our shopping & entertainment spending.  With these together, I think we were right on-track for our discretionary spending.  And for all intents and purposes, entertainment and vacations are very closely related.  If we spent more on entertainment, I think we could spend less on vacation (our spending history begs to differ with me though!).  For next year, we’ve got a couple of vacations planned (or payed for), I expect to stay at about the same level of $3,500.

Transportation:  $1,167

I’m awestruck by how little we spent this year for transportation.  I had guess we would spend $2,100, but we spent about half of that.  This does not include the depreciation of the car, which is starting to show its age a bit.  The Spark is an excellent commuter car and it’s still one of my best recommendations for anyone who is buying a car and living in the city.  It can fit in many places other cars can’t, so finding parking is much easier, it handles well, it gets great gas mileage, and it’s low-maintenance.  But, like all things, it has wear and tear, I’m sure I’ll need new tires before the end of the year, and I’ll need to do some more repairs and maintenance.  Gas prices have been holding pretty steady, and hopefully that will continue, so I’m going to keep last year’s Guesstimate at $2,100.

Housing:  $4,676

Our housing cost has stayed very steady over the last 2 years.  This is kind of misleading though, we payed off the mortgage, so we had less than $100 in interest.  This was off-set by the massive increases to our property tax (which will likely go up yet again).  This was more than I had guessed by about $700, making our housing cost the most unexpected hit to our budget.  Unfortunately, we expect that this cost will increase even further with the years and with Seattle’s housing market as it is, we’re strongly considering getting out of it.  For next year, this might throw chaos into the mix of prediction of costs, but housing is a big wild card right now.  If we don’t change our living situation, it think it will likely be somewhere around $5,250.

Summary:  $22,602 spent in 2018!

I had guessed we would spend almost $24,000, but to my surprise, we undershot that by about $1,400!  This is also well below the average of about $26,000 we’ve been spending over the last 6 years.  This is neglecting the cost of the depreciation of the car still, which will bring those costs up a bit.  Still, even if spread that out over 3 years, that would put this year’s cost up to right around $25,500 (and an average annual expenditure over the last 6 years of $27,750).

Using the 4% rule, we’d only theoretically need $693,750 of investments to maintain this standard of living (excluding medical costs and some uncertainties which surely brings up the amount we need to about double that).  Overall, I’m highly satisfied with our spending and our progress towards financial independence.  Lifestyle inflation has not been a factor in our journey and I think we really got things figured out.

Trends

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I can’t really say too much regarding the trends we’re seeing.  There doesn’t really seem to be much of a rhyme or reason to a lot of the movement from year-to-year for our expenses.  Overall, they all make sense when examined in detail, but I don’t think we can really use this to make any sensible predictions.  It looks cool though!

Prediction for next year?

Assuming I’ve got a good handle on all the categories, my estimation for next year is…  $22,950!
Well, that seems right in the ballpark of the last 3 years, so we’ll just have to see what 2019 brings!

How FI has changed my life?

Post from ECA

For as long as I can remember, I have always been an optimizer optimizing for the best return on investment. Yes I have always been a big fan of the Pareto principle (known as the 80/20 rule). When in school, I studied 80% of content that’s most important to the course with only 20% of effort. This allows me to graduate with an engineering degree and a minor in 6 semesters while doing research, TA and having lots of fun. When working, I focus my efforts on the visible projects allowing me to shine and differentiate from peers. This (together with lots of luck) allows me to climb the corporate ladder relatively fast and quadruple my salary within 6 years of graduation.

While my fundamental belief of optimizing for ROI hasn’t changed, FI has changed my way of evaluating the returns and my approach to life, ie what matters to me has changed.

Like most people pursuing/achieving FI, the old me tends to live more in the future. The trait of living in the future allows us to set up a goal, plan and follow through to achieve the results. With the future in promise, delaying gratification which is crucial to traditional successes becomes pretty easy. However, it can be detrimental when in extreme. One example is eating rice and beans every day to get to FIRE in supersonic speed. The other end of the spectrum is living in the present. Being present gives us great satisfaction and contentment which is the key to happiness. It can be detrimental when in extreme as well. The splurge today (or every day)/ YOLO attitude can get us into deep debts and digs us into holes our future self may never able to climb out. Truth is somewhere in the middle, moderation is gold!

The new me post-FI is slowing moving into the spectrum of living more in the present. One examples, earlier in my career, I was willing to take on 2 people’s responsibilities for 5 months so I can get promoted. Granted, I was not that busy anyway even with 2 people’s responsibilities. I still actively made my choice to “sacrifice” for 5 months, so I can harvest the return of higher pay in the long run. The same example, recently I had an opportunity to decide between 2 job opportunities. One was foreseeably harder than the other but with the promise to be promoted within 1 year. I did not even blink and picked the easier one that allows me to work from home but with no direct route to a promotion. Maybe this is the result of diminishing marginal returns. Maybe this is because over the years, ER uncle and I slowly influence each other. As I feel pretty comfortable with our net worth and the potential to quit working as a whole, getting promoted is no longer as important to me as before. I become more chill and more genuinely interested in learning new things vs learning to gain a skill to be promoted (which is exactly why I got my MBA. I did not get an MBA because I am passionate about business. I got it because I was able to make more money). With this new role, I am getting into a new field I am always curious about but don’t have any experience in. So I am grateful to stay in the same company and move to this role. Also, as I considered what to do after we reach our fat FI number, am I really going to quit? Or if I am working from home comfortably doing things I am fine with, should I even quit?

Do I regret the old me? Absolutely not. It is the future oriented thinking that set the foundation for today. If anything, the new me today is very thankful for the old me for the past 10 years. The motivation, persistence, effort, skill (and of course luck, lots of it) of the old me builds the landscape today I get to enjoy. Now, the new me is going to enjoy the fruit of labor and live a happier and more chill life, so hopefully the EC in 10 years can age gracefully and becomes a woman full of adventure, happy memories and passion for life. The future me will thank the present me as well for an amazing next 10 years to come.