Dealing with depressive thoughts as you close in on FIRE

Sorry the posting has been a little late. I’ve been on the road traveling (11 hours in the car on Wed, 7 hours yesterday) so it was a little difficult to get posting up.

I’m traveling down to North Carolina to take a woodworking class (You’ve got to have hobbies!) and took the opportunity to stop off and see family in Knoxville TN on the way (Mom, Brother, other folks). It’s always great to have the opportunity to see family, especially when you are living 11 hours away by car.

Family has always been important to me, or at least I think so – but you couldn’t tell by my life choices. Mrs. 39 Months had a mother who wasn’t in the best of health, so we ended up moving to a place a little closer to her (3 hours) than my family. Even then, we would see her side maybe twice a year. Mine I would see, if I was lucky, about once a year. We always complained that nobody came to visit us, that we always had to be the ones traveling – but we also didn’t have any children to draw the grandparents to us.

Visiting my old homestead, where I lived for 18 years and was formed (and which I still feel is my home state) brings up a lot of memories. I see the choices I made growing up, and think about what could have been, had I made a different decision. I see places I enjoyed as a youth, and it brings back memories of old friends, lots of fun, and sadness at the passing of time. I have a tendency to be morbid about the past at times (something that Mrs. 39 Months chastises me about), but its part of my character. It doesn’t last very long, and typically I return to my usual upbeat self after only a short time.

That is why I have embraced stoicism with some vigor. The teaching help me deal with these feelings, as they show that what is past is gone, never to return. The decisions made then have gotten you to where you are now, but all you can control are your decisions now. It is useless to spend time and emotion on something you can no longer control. I know the logic behind it, but still have moments.

I also have been reflecting on what I’m going to do once I hit FI. I believe this is a topic that many folks explore vaguely, or in their first couple of years. They do all the things they have wanted to do all their lives (travel, hobbies, etc.). Then they look in the mirror, after a decade of pushing like crazy to reach FI, and see that they no longer need to push. They have to alter their personality, and it’s tough. That is probably why some of my favorite blogs to follow are those folks who have reached FI, and what they are doing now – years afterward.

I am still working that out.

 

Mr. 39 Months

Frugal Tip – Bad Movie Night with Friends

A lot of folks are looking for things to do for fun that aren’t going to cost them an arm and a leg.  The amount typical Americans currently spend on dining out and entertainment  is something much talked about in the FIRE community, and many folks discuss ways to reduce their entertainment/dining out costs dramatically.

For Mrs. 39 Months and I, we just had a pot luck dinner at our friends house (we brought desert, others brought sides, and the host had the main course). Total cost for us was less than $10, the most was probably $15 for the hosts for the ingredients for the main course.

For entertainment, we all gathered round the TV and watched a pair of really bad movies. For many folks who are old enough, they remember a TV show called “Mystery Science Theater 3000” where a group of characters would play a bad movie, and snipe at it from the side. It was incredibly funny, and stayed on the air for many years (I think they may be trying to recreate it now).

The original team has re-united and has started a series called “Riff Tracs” where they pretty much do the same thing, on special nights. You’ve got to go to a movie theater to see it, but its very funny. You can also see it online a little later (Netflix I believe).

For last night’s viewing, we watched the Rifftrax take off on “Plan 9 from Outer Space” – one of Tim Wood’s movies and often considered the worst movie ever made (It makes Sharknado look like high cinema). After that, we watched “Amazon Women on the Moon” a movie similar to “Kentucky Fried Movie” and “the Goove Tube” – takeoffs on early 80s television shows & commercials, rater R with some nudity and adult situations.

In the end, it was a lot of fun, and a pretty cheap night out. I’d recommend it.

 

Mr 39 Months

 

Ya Gotta Have Hobbies! Part 4

I’ve talked before about hobbies, especially in terms of finding things to do once you achieve FI. One of my major interests in woodworking.

Most hobbies or interests, no matter what, have some sort of professional/amateur show, where folks who are interested can gather, take classes, purchase materials, etc. Heck, even the FI community has Camp Mustache, Chataqua, etc. For me, there is a show that travels the country called “the woodworking show” that goes throughout the US. It has about 100 different vendors, runs about 30 different classes, and enables you to be around, talk with, and generally mingle with your woodworking “tribe.”

As you come onto floor. Look at all the vendors!

Vendor selling a wide variety of materials (sanding paper, hand tools, etc.)

Classroom on floor

Wife knitting, while her husband was out having the time of his life. This is how Mrs. 39 Months would pass the time, if she had come.

It was a lot of fun, and I encourage everyone to seek out these sort of events for their particular interest. You will be amazed at how much you learn, and how much fun you will have.

 

Mr. 39 Months

Post where I disagree with Ric Edelman

Many folks know of Rick Edelman. Noted financial advisor, owner of Edelman Financial, author of numerous books on finance (investing, saving, homes, etc.), he runs seminars all over the US, and hosts a weekly 2-hour radio talk show. His book “The Truth about Money” has been a bible for many people in the US, as they seek to decipher the labyrinth of their money. For many folks, Ric is the voice of financial planning.

Like most financial advice, it is difficult to get too general in the rules of finance, and you often need to get a lot of an individual’s specific details to give accurate advice (something that Ric and his team say many times on their radio shows). Still, in his book, Ric does offer some advice that, while it might work for most folks in the world, does not match what I think works (and I think many in our FI community would agree).

In the real estate section of the book (that I was reading last night), Ric calls for you to:

  • Pay as low a down payment as possible on your home and get as large a mortgage as you can(leave your remaining cash for investment)
  • Go for the longest mortgage period possible (30 years+)
  • Don’t  make extra mortgage payments or pay bi-weekly, i.e. don’t pay your debt off sooner
  • Don’t work on becoming debt free with no mortgage (rates are low, invest that money, use mortgage deduction to reduce taxes).

Some of his points to this are that if you pay your house off, it’s not liquid; you can’t sell portions of it to pay bills. You also don’t have flexibility if you want to move – you’ll have to sell the house (or rent it out, which can be a pain). Home price increases often merely track inflation, so you won’t gain there. Finally, a home will continue to cost you money (repairs, decorating, etc.). It is not an investment, and should not be considered one.

I have the same problem with him here that I do with folks that criticize Dave Ramsey’s debt snowball (“you should be paying off the highest rate credit card, not the one with the lowest balance”) – while the numbers are correct and make complete sense, it doesn’t take into account human psychology.  We are emotional beings, not Mr. Spock, so we need to understand how keeping a mortgage forces us to behave & think, versus being debt free.

For many folks in the FI community, the path to financial independence is reached by keeping a close eye on their expenses, and finding ways to reduce these costs. Once we get our spending under control, we work to hit that 25X / 4% amount in order to achieve our freedom. Since Ric’s books says that 40% of a person’s spending is going into their home (mortgage, rent, taxes, utilities, furniture, etc.), by reducing this number, it suddenly opens up a big lead in our race to FI.

It wasn’t until Mrs. 39 Months and I paid off mortgage that I caught the FIRE bug. It suddenly seemed possible. When Mrs. 39 Months lost her job, we were just finishing up paying off the mortgage. She told me she felt much less stress about her job loss, knowing that we had the home paid off.

We all saw the possible disaster that could befall you if you followed Ric’s advice completely. We suffered a major crash (2008/2009) with job losses and a dramatic drop in home prices. There are a lot of folks with the huge mortgage that is “smart” that, when the market’s crashed 50% and they lost their job, were in a terrible spot. Don’t tell us “this could never happen” – we saw it happen.

For most folks who are ok being on the treadmill, who are fine with getting the large mortgage and house and paying it off over 30 years while saving for a retirement in their 60s, Ric’s ideas work. For those of us in the FIRE community, who want to get our independence early, the idea of tying ourselves down to a huge mortgage for the next 30 years really doesn’t look that “smart.”

 

 

Mr. 39 Months

Status Update, Mar 1 2018 – OUCH!

Well, that hurt a little! As with most of us in the US, the markets were not kind to us in February. I thought we’d have a dip and then push back up a little before the end of the month, but it went down a lot at the end as well.  I lost about $38.3K (3.8% of invested assets) and dropped back below the $1M mark for assets, right as I hit it in January. Sad face!

The S&P 500 benchmark dropped 3.9% in February, so I guess I should consider myself lucky that I didn’t do as bad. I had hoped that with my larger % of bonds (30%) and REITS (17.5%) in my retirement accounts, it would buffer it a bit, but that didn’t work out. Let’s break it down.

Retirement Accounts: Remember, my allocation for these is:

  • 30% Bond Index Fund
  • 17.5% S&P500 Index Fund
  • 17.5% International Index Fund
  • 17.5% Small Cap Index Fund
  • 17.5% REIT Index Fund

They all ended up losing money, but the big losers were REITs and International. Bonds actually didn’t lose too much, so they helped offset some of the losses. For REITs, there was a broad market selloff in February, and Mall REITs really tanked (down 23%). Though many earnings reports beat analyst estimates, the potential for a pending rate hike really hurt them.

Dividend Income Account: Allocation:

  • 25% Dividend Stocks
  • 25% REITs
  • 50% Bond Index Funds

Some of my stocks went up her (Cisco, iShares) and the bonds only dropped a little. Still the REITs hurt it. What’s interesting is that, while I’m down 3.8% overall, this account is only down 3.4% – and the dividends for the holders actually were raised for 2 of them.

Value Investing Account: Allocation (remember I refocused this at the beginning of February):

  • 60% in individual value stocks I picked myself (3 each, 20% for each)
  • 40% in Vanguard Value Index fund

This was my worst performing group, dropping 5.3% for February. One of my picks (SBS) was up about 1.6%, but the others drove it down. Again, this is more of a “fun money” account where I experiment. It keeps showing me that I’m not a good stock picker.

So after losing a$38K in one month, what am I going to do about it? Not much.

I have an allocation strategy and a set amount I invest on a monthly basis. I’m going to stick with my plan, and revisit every 6 months.

 

How did February treat you?

 

Mr. 39 Months

Does pursuing FI mean a life of deprivation and extreme frugality?

One of the questions you often see from folks who just start is how far they should take their journey to financial independence. Most folks end up very quickly on Mr. Money Mustache or Early Retirement Extreme, and see a type of frugality that can be almost frightening. Getting by on $25,000/year (MMM) or $10,000/year (ERE) seems to be almost impossible for some folks, especially folks who come to us with a lot of debt (student loan, credit card, etc.).

In addition, many folks don’t get as energized by the idea of extreme frugality that some FIRE folks really enjoy. Let’s face it, some of the people in our community definitely take a “more frugal than thou” attitude, and compete for ways to show how frugal they are being.

Still, what I like about our community is the wide variety of options, of people, of circumstances, and of goals that are demonstrated by the various blogs. You can find single people, married people, young & old, folks with kids & with just pets, extreme frugality and “fat FI” people who like to spend. It won’t take you long searching on Rockstar Finance to find someone (or many someone’s) whose circumstances come close to your own. You can then settle in for some good reading, good ideas, and excellent motivation.

For Mrs. 39 Months and myself, we’ve been long on this journey, and only really got a push once we paid off our home mortgage and became debt free. That was when the numbers all suddenly came together, and we could take a good look at how long it would be to obtain FI.

What caused me to write about this topic today? Well, it’s a little cold & rainy here in Southern NJ today (Feb 24) – like it is in a lot of the country. Mrs. 39 Months decided we should go out and have a traditional English Tea (scones & the works) at a local restaurant that caters to British food. While Mr. Money Mustache might laugh at us for this (“make the scones & tea yourself at home – and here is a great recipe”) we are making the decision to go out and patronize a local establishment.

Many folks in the FIRE community talk about intentional living, making decisions based on your wants and needs. If you feel the money spent provides you value, then go and spend it. I happen to agree with this, and going for scones and tea looks like it will provide value today.

 

What is worth spending funds on for you?

 

Mr. 39 Months

Are FI people just parasites?

I have been “binge listening” to Choose FI podcasts, trying to get caught up (currently on episode 50 out of 62). I highly recommend them.

Recently finished what turned out to be one of their most controversial, episode 47 with Millennial Revolution, a young couple from Canada who achieved FI in their 20s. They lived in Toronto, and were seeking to purchase a home there. After saving up $500K Canadian to purchase, they realized the home prices were insane, and chose to hold off and rent.  They never purchased a home.

Once they achieved FI, they realized they could travel the world and spend $40K a year (or less) which they had the funds to support. For the last 2+ years, they have been traveling the world, visiting sites, and having a great time – certainly a goal of many FIRE folks.

One of the things they really push is that buying a home is a stupid/foolish move, the numbers just don’t add up. As I listened, I had numerous questions on things they didn’t seem to be taking into account. While I can agree that your own home should never be purchased for an “investment,” I still believe they didn’t account for a lot of rental costs, and didn’t give sufficient credit for a fully paid off home. Apparently I wasn’t the only one, because the episode ended up being one of the most commented on for the show, and the two hosts of Choose FI, in episode 50, apologized to the audience that they hadn’t asked the Millennial Revolution couple the hard questions on their math.

What struck me, during the discussion (and on many conversations about travel and other FIRE folks before and after) is how much FI folks depend on non-FI folks in order to live and enjoy their lives. For those traveling and enjoying low-cost living, they all depend on pilots, service personnel, restaurant owners, etc. to get homes, live in place, and do the 9-5 for most of their lives. Without a large percentage of the population dedicated to regular lives (home, kids, work, etc.)  the FI folks wouldn’t be able to do half the stuff we do, once we achieve FI.

Don’t get me wrong – the tenets of financial independence (frugality, intentional living, etc.) can easily be adopted by most folks and can lead to a more enjoyable, less stressful life. Just don’t get on your “high horse” about how much more superior you are to other folks. If we all really believe in intentional living, these folks have made their choice, and many times, we benefit off that.

I don’t think FI folks are “parasites” – we have just chosen to prioritize other things. We can happily co-exist with folks who have made different choices.

 

Mr. 39 Months