With our FIRE goal date at the 3 year mark I got to thinking that now might be the time to reevaluate our portfolio’s allocations and start to make some changes. I am not talking big overhaul changes, but little tweaks to our allocations. I should also state that I am making these changes because our FIRE goal is approaching and not at all due to some of the volatility we have been seeing in the market recently.
One of the first accounts we are going to be tapping once we hit FI, other than our cash, is our joint NQ brokerage account. Our total investment portfolio is somewhere around 80% equities/20% bond holdings but the JT brokerage is more aggressive with a 93% equities/7% bonds mix. And moreover 35% of this one account is just in Apple. That is way more aggressive than this account should be if we are going to start tapping it in 3 years. Continue reading “Making Things More Conservative”→
Many in the FIRE community will talk about “one more year” syndrome. This is the idea that you work for just one more year and save a little more money before pulling the plug. There are likely many reasons for this including fear of not having enough saved, actually liking your current work, or maybe just general fear of this massive life change. Many of us are planning on leaving full time employment decades sooner than the average person so is one more year really all that bad?
At this point we have less than 2.5 years left to go until we hit FI based on my current estimates (this is our comfortable coasting FI number) but I have already started to think about how much one more year, or even one more month, could affect our finances. Based on very rough numbers and of course greatly depending on market conditions every year we delay leaving our full time jobs would give us an estimated $2,000-$6,000 additional annual income for life. Now I realize this is a huge range and that is very much because we have no idea what the market will do or even our exact savings every year. But I will explain a little further so hang in there. Continue reading “Calculating “One More Year””→
Auto insurance is one of those necessary expenses in my opinion. But at the same time I recently came to the conclusion that maybe I don’t need as much coverage. You see I own a 2007 Honda Fit and it has been truly an amazing car. It still runs really well but it is getting old and the age is starting to show. It has some rust spots that have started in the wheel wells and the interior, although I try to maintain it, is also showing some signs of wear. When you put this together with the mileage of 135,000+ it isn’t worth a whole lot. After doing some calculations on Kelley Blue Book I determined my resale value is anywhere between $2,000-$3,000. Now this car likely has many years left and I am not ready to get rid of it but it did make me think when my semi-annual auto insurance renewal came in this summer. Is it really worth paying $355.83 every 6 months when the total value isn’t all that high?
My first step was to go to another insurance carrier to get a quote matching my current policy. I was able to find something less expensive so my next call was to my existing insurance agent. Although I might be able to move my auto coverage to another carrier there was a huge downside. We currently have the property insurance for both properties as well as the auto insurance all with Allstate. If I were to move my auto insurance to another carrier I would lose my multi-policy discount on the homeowners policies. This difference was more than the savings I would receive for switching the auto insurance. No go with that plan. Continue reading “Penny Wise, Pound Foolish? – Auto Insurance Renewal”→
I am going to be honest, July was a brutal month when I look at my spending and my resulting savings rate. Twice per month I automatically transfer $250 to our savings account. This helps to make sure that no matter what I am putting some money away. At the end of the month I will transfer any additional money over into savings. Well when the end of July rolled around I had no money left to transfer. My heart sank a little as I looked at my dismal savings rate of only 26%. Last year I saved an average of 42% of my take home pay and yet here I was saving only 26% of a much higher amount. WTH? Has lifestyle inflation really gotten the better of me?
When I got my promotion last fall initially thought I would be save almost 100% of of my raise which would amount to a nice little sum of money by the years end. Yet it appears that lifestyle inflation has hit me a little as I am not saving as much as I should/could be.
This spring my husband introduced me to the subreddit board for Financial Independence. Although it seems the majority of those who post are males in the tech field (my husband fits this category) I have started to read the posts regularly. Since it is much smaller than the Mr. Money Mustache forum it is much easier to manage. I get too overwhelmed sometimes trying to find topics of interest when I go to the MMM forum so Reddit has been my go to recently.
In addition to the regular Financial Independence subreddit there are also a couple more specific pages. There is a page for LeanFIRE which is for those who are trying to reach Financial Independence and Retirement (FI/RE) but with smaller budgets. These individuals are trying to make it happen with $40,000 or less in expenses. For many this means they might need only $1,000,000 in investments as a 4% withdrawal rate would generate enough income for these individuals. Although I wish we could get our expenses down to that level it is just not possible where we live. We live solidly in a medium COL area and our mortgage and property taxes alone are almost $18,000 per year. No, we don’t live in an extravagant house. Our home is a very modest duplex where the majority of this cost is covered by the rental income but still, it demonstrates that where we live is not cheap. So as much as I would love to be after a LeanFIRE lifestyle it is just not realistic for us. Continue reading “Fit FIRE”→
We have our tax returns prepared by an accountant every year. I know, I know, many in the FI community do their own but with Mr. SFF being self-employed and now having two rental properties, I would just rather have someone else, who is may more knowledgeable, do the returns for us. Last week we got the returns back and were they a doozey! We usually try to plan our taxes so we end up pretty close to zero. We don’t feel the need to give the government a free loan throughout the year (getting a return) but we also don’t want to write a check huge check. But I guess 2016 was a year where we were off, by A LOT. It was bad enough that our accountant gave us a bottle of wine. Yup, some good old alcohol to drown out the pain.
The journey towards Financial Independence is all about saving money but what about once you hit your FI goal? That is when things change and you go from savings mode into spend down mode. When in the car the other day both Mr. SFF and I admitted that the thought of actually spending our hard earned money was a little terrifying. Yup, terrifying is the word we both used. When you are a natural saver, like both of us have been our whole lives even well before starting this journey to FI, the thought of not only stopping saving but spending that hard earned money is a completely foreign and scary prospect. I think this is part of the reason I am overestimating how much money we will need. But in addition to overestimating our needs we are also trying to create other income streams so that we don’t actually have to rely on just our investments.
Now I think the term “spend down” might be slightly misleading for us as ideally we don’t want the value of our investments to go down over time. Once we hit FI we need our investments to not only keep up with inflation but also cover any unexpected costs that could come up over the decades that we will be spending in our retirement. This is even more important for those of us who will be spending so many years out of the full time workforce. If you retire well into you 60’s and you haven’t been diligently saving over the years then you will likely be drawing down your money but as we likely have 40 or more years in our retirement we need to make sure our investments are still growing and ensure our needs are covered. This means either making sure we have more than enough saved in our investment accounts or create other income streams. Continue reading “Where Will Our Retirement Income Come From?”→
I will admit that I get excited about this post and, and more specifically the data it contains, every year. This is the one time where I really get to look at all of our information, jointly as a couple, rather than just my income and savings. As Mr. SFF and I keep separate checking accounts and credit cards so I don’t see the whole picture until I make him sit down and give me all of his data. I try to get an update mid-year just to see now we are tracking but it is year end numbers that I like to see. Yes, I know how much he has saved as he moves money periodically to the joint checking and then I move the money to our investment accounts, but I don’t how much he has made and if this is a large percentage of his take home income or not. Since all of our benefits and 401(k) savings comes out of my paycheck Mr. SFF’s savings makes the biggest impact on our overall savings goal. Continue reading “2016 Savings Review”→
Towards the beginning of the year I decided to set a goal of not spending any money on clothing. I didn’t set this goal on the first of the year so I did spend a whopping $3.49 on a new skirt in January but after that purchase I vowed not to purchase anything else. I didn’t actual post about the goal until the middle of the year but I had the goal in my head.
Now to be clear, I have never been a huge spender on clothing but it can be surprising how one little purchase here and there can add up which is why I set the goal. Plus, I have enough clothes so this goal has really shown me the true different between a “want” and a “need”.
I might be strange to discuss Medicare stuff as most of us on this early retirement journey are years from Medicare eligibility but as most of us in this community are planners calculating every need that might arise, I figured it was an important topic to cover (plus I have been doing some insurance CE on the topic so I figured I could share my wealth of knowledge).
Most of us don’t know the costs associated with Medicare and might even think that we just automatically get Medicare once we turn 65 for free. In reality, we have to “earn” this benefit by paying into the system over the years. For the average person this isn’t an issue because it takes them a few decades to amass enough money to retire but for those of us in FI community we have BIG dreams and those dreams often mean not working the majority of our adult lives.