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!

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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).

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

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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.

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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.

Side Gigs and Risk

I guess blogging is a side gig, but I don’t know if I will ever make this blog into anything remotely profitable, I am not deluded to think that this will ever generate a passive income by which I can live off of.  Mainly, I write when I’m feeling inspired or when some ideas I have been thinking about need to be solidified in writing.  I write for myself and, to some extent, for ECA.  But for our retirement, ECA and I plan to disburse our investments to pay for our expenses.  I don’t know if I’ll give up side gigs, and I do have a bit of an entrepreneurial bent, but something has nagging me lately and that is risk.  I know that I just went on a tirade about how “peace of mind” is bad, but this risk is a bit different, it’s the risk that comes with doing something unnecessary that won’t further our goals, but could compromise them.

I’ve mentioned before that I host on Airbnb and had been doing so for quite a long time.  This has made owning a home very lucrative.  We could nearly live off what we made through our Airbnb.  However, I’ve come to the conclusion that it’s not worth continuing.  Firstly, the costs to run it are increasing due to some changes in local laws, lowering our potential earnings.  But, more importantly, I’ve become worried about the potential risk that we face.  Yes, there are protections offered by Airbnb and our insurance, but those protections are ultimately limited.  We already have a lot of house rules limiting what guests can do while staying which lowers the chance of damage, but there’s always the chance that a guest could get injured while on the property, or something we haven’t considered yet could happen.

When we started doing Airbnb, we didn’t really have a lot to lose, but had a lot to gain.  Now that we have begun to exceed our financial independence goals, we now have not a lot to gain and very much to lose.  I think we’ve also run the course with hosting, it was fun to manage and meet so many people from all around the world, but the only thing left for us to  get out of this endeavor is more money, and I think we’re doing fine there.  ECA and I plan to continue hosting until the end of the year, but the new year, we’ll be done and our home will be slightly more empty and we’ll have slightly more free time.

Another side gig I’ve been doing lately is dog-walking and house sitting.  I grew up with pets, but I have been putting off getting my own because I want to travel and having a pet adds a lot of complication to this.  Dog-walking is a way for me to spend some quality time with a dog, but not own one and also provides a financial incentive to do so.  So, I signed up with Rover and became a sitter/walker and completed a few walks and stays.  It was fun, I had a really good time, but again, there’s a risk.  If something were to happen to the dogs while they were in my care, I could be responsible.  And while I like to consider myself a responsible person, the dogs can be very unpredictable (especially when they grab and eat stuff you can’t see in the grass)!  Nothing bad has happened while taking care of other people’s pets so far to me, but I do worry, so I don’t think I will continue doing it.  It’s also not very lucrative, well at least with Rover.  For a half-hour walk, you get about $12, around $18 for an hour long walk.  Which sounds good, but when you factor in the time to get to the owner’s place, time messing with tracking on the app, finding walks, etc. it’s simply not very much compensation for the time put in.  Fortunately, if I want to get some quality time in, I can do so by volunteering at a shelter, or even fostering pets, so I think I will resolve to follow my heart and not the money and volunteer (I just need to get ECA up to the point where she’s not scared of the dogs so she can do it with me).

I don’t think that we’re losing much by giving these gigs up, but I am worried that the risk of losses may hold us back in future endeavors.  I hope that if and when we have a great idea to create something, we won’t let our fear of loss hold us back too much.  I also hope that we can find a balance between doing things and living well.  Gigs like this are tempting because the financial incentive, but now that we have enough, I hope to be more driven by things that we really want to do, things we can find meaning in.  A big part of financial freedom to me is this.  It’s not pursuing the largest possible number in our bank accounts, it’s having the freedom to do that which fulfills us the most.  And this is something I’m not willing to risk losing for a few more bucks.

Suffering Well

I tend to be a bit of an evangelist about financial independence.  I like to help people and I like to talk about money since it’s something that’s often on my mind.  Often, I receive a lot of push-back in the ideas that I espouse, although I think that they’re very well-reasoned.  A recent example was a colleague of mine was buying a seasonal ski pass and was trying to figure out whether he should spend the extra amount to buy insurance that would refund him a pro-rated portion of his ticket if he were to be injured and not able to continue skiing for the season.  I told him, of course he shouldn’t be wasting his money on something like this, his chance for injury is low and the amount he would receive is low.  The cost wasn’t high though, so he bought it “for peace of mind”.

“Peace of mind” can be a killer of frugality.  It’s a deviation of rationality, whereupon we sacrifice our hard-earned assets to avoid a potential, although unlikely, bad outcome.  I’m not immune to it either, for “peace of mind”, I have missed out on thousands of dollars of growth by making the sure bet of paying off a mortgage instead of wisely investing.  I’ve been thinking a lot about my relationship to money lately, and this is one of the ones that I want to work on, I want to eliminate my neurotic fears, and “what-ifs” that I have with money, I want to approach money in a more sound, more rational manner instead of an emotional one, and I think this is the way for everyone to go.  Something I want to continue to work on is “How I Learned to Stop Worrying and to Love Rationality”.

Another issue I’ve noticed when talking to others is not something that restrains me, but I think it might be the primary reason why it’s so rare to find others who are seeking to  retiring early.  Most people I talk to are simply not willing to make sacrifices to their lives.  They’re not willing to do the work to track their expenditures.  They’re not willing to downsize, or suffer in any way.  It stuns me that these very same people complain about how hard their financial situation is, that they have high debts from student loans to pay off, that they cannot afford to live where they want to, that they don’t have enough money to do anything fun, but they’re not even trying to make their money work for them.  To them, money comes, money goes, it never stays, and there’s never enough.  Oddly, I feel that I almost never have anything to complain about when it comes to money, and even though I may earn more than many of these individuals, I spend less.  Sure, some things are very expensive and therefore not worth buying, even some things that I would like to buy.  There are some things I am forced to pay for (I mean holy crap, ECA and I pay more than double in taxes than we do on our expenses combined)!  But, I don’t feel like anything is unfair about money in my life.  I feel that I could, if I wanted to, cut back more in my spending.  ECA and I could easily live happily based on our expenditures if we had a minimum wage salaries (of course, we don’t have kids).

When talking with and listening to those pursuing financial independence, I’ve notice quite the opposite than the non-financial independence seekers.  I’ve seen people who go much further than I, they truly put themselves through hell to reach this elusive goal of early retirement.  I’ve talked to people who have given up their car and commute and do groceries by bike (up and down hills in Seattle in the rain).  Some people have given up renting or owning a home and elect to live in a van.  I’m not willing to even go that far, but I think I could, if I had to.

I don’t usually read other bloggers.  I like to think that I come up with most of my ideas independently of others (but I am surely influenced through osmosis since ECA does and then permeates the knowledge to me), however we sometimes listen to some FI podcasts together when driving.  I don’t feel like I learn much most of the time, it’s usually just entertaining to hear other peoples’ stories, but one person’s words recently struck me because it was a succinct way that captured this thought I had been having for quite a long time.  Jillian from Montana Money Adventures (who has a very interesting story and obviously a huge heart) said she had learned to “suffer well”.

This was a bit of an “aha!” moment.  To me, it’s obvious, you suffer a little now, so you can be comfortable forever, but something interesting happens when you live this way.  You find that you get comfortable in what you once thought was suffering.  You begin to suffer well.  Your life may not be as comfortable as what it could be, but you are not trapped.  The daily stresses of the hedonistic treadmill are eliminated when you live far below your means and you find your center, what really matters.

I hope that I can figure out how to get people to take the chance on suffering well.  I think that it would help  a lot of people be much more satisfied with their lives.

The Double Comma Club – One Year After

About one year ago, we broke into the double comma club.  It was a strange feeling then and I still feel strange about it now.  Although we have reached a large net worth, I often feel that it’s not real, or like we didn’t really earn it.  Yet, there it is and still it continues to grow.

When ECA and I first started to discuss out our early retirement plans, we set a goal of $1,000,000 and our house (with a paid-off mortgage).  We figured (assuming a 4% rule) that $40,000 a year and having a home would mean we would be set for life.  When we bought our home, we paid $301,000 for it, so basically, we were shooting for a net worth of $1.3 Million.  At the time, we figured we would be able to retire in 10-15 years or so.

Of course, we had no idea what the housing market or our jobs had in store for us.  Our home price doubled, we got much larger raises than expected (especially ECA).  So now, we’ve surpassed the net worth we were originally shooting for, $1.3 Million, and we did it 4 years earlier than we ever expected.

DoubleComma

Over the past year, our net worth has increased by about $326,000 from where I calculated it was last year. A few notable things about this.  First and foremost, we paid off the mortgage!  We are for all intents and purposes, debt free, although we are carrying some credit card debt on cards that have 0% APR.  The car is depreciating in value, but it’s still worth a little bit.  I moved over some money from my old 401k and into a new IRA.  I also didn’t change the value of the house over the past year, ECA and I figure this is what we will pocket if we sold today based on sales of our neighbors’ homes, so it’s probably about where it should be.

We’re not done though!

Although we *could* retire now, we’re going to persevere a bit longer, for a few reasons.  Firstly, ECA has a very good deal with her employer.  She received a stock bonus which will vest over the next year and a half, basically, there’s too much money to leave on the table at this point.  Secondly, we really don’t know what our true costs will be once we retire.  $40,000 seems reasonable, and is much higher than what we have been spending, but we may have been reducing our costs severely due to benefits we receive from working (looking at you, healthcare).  Thirdly, raising our net worth will allow us more luxury.  We can easily afford more vacations, more experiences, more toys if we so desire.  And as far as money can buy happiness goes, waiting the next year and a half, I expect that we will retire with about $2 Million, which would put us just over the threshold where people are happiest making around $75,000 per year.

So, that’s our plan.  Shoot for a fat-fire style retirement.  Never worry about money ever again and live happily ever after.

The Dead Pledge is Dead

Through fear of and obsession with paying interest on debt, ECA and I finally paid off our mortgage and we are the sole owners of our home.  I guess “finally” does really have as much impact to us as it does to most people as we only held the mortgage for a little under 5 years, but it was clear that it would be done within the year and could have been done even earlier thanks to our extremely, unnecessarily accelerated pay-off plan.  I’ve already scrutinized why we should not have paid it off so quickly, but something can be said for owning a home out-right.

I guess the weirdest part for me was going in to pay it off in person.  I was greeted at the door by a teller who I told I was there to pay off the mortgage and would need to speak to a banker.  She got the manager since this is pretty rare.  The manager was great though, super helpful and friendly.  I think she was more excited than I was.  I guess I didn’t really have the excitement since I knew it was coming for months and could have paid it off at any time.  If anything, I was slightly annoyed at the inconvenience of paying off the mortgage!  You see, when paying off a mortgage, you can’t simply make a payment for the remaining amount owed online like you do for normal payments.  I had to go in, get a pay-off statement sent from some other branch, and get either a wire-transfer or send a cashier’s check to them with overnight mail (both options had fees involved).  Additionally, there was a fee for paying it off to cover the legal documentation of the loan.

Well anyway, it took a while for me to get the statement back, and once I did, I ended up doing a wire transfer to pay for so it would be done that day.  The manager forgot to tell me about the fee for the wire transfer at the time, which I ended up getting billed for later, after I left (it wasn’t on the receipt or anything, so I didn’t know until I got the charge in my checking account).  Fortunately, she was honorable to refund me that cost after a quick call.  Very excellent customer service there, that’s rare!

A few weeks later, we got a check in the mail for the outstanding amount left in the escrow balance and a nice statement of Paid in Full now appears on the log-in portal for the bank.  We got lucky too with the timing since they had just paid the first half of the year’s taxes, so I don’t have to worry about that for a few months.

Unfortunately, all-in-all, paying off the mortgage feels like a hollow victory.  We had a good rate of 3.375% and that cash could have been better invested.  Now, that equity is locked up in our home and while we could do a line of credit or something, we won’t ever be able to get the rate that we had before.  Oh well, first world problems, huh?  My advice to others remains though, as long as you don’t otherwise blow your money, paying off the mortgage is a bad deal.