Author: kdrevik

Travel Hack Completed …..Somewhat

As folks know, Mrs. 39 Months and I took the opportunity to travel to Northern California and Oregon recently, both to enjoy the scenery and for her to take a class in shoe making. It was a great time, and one of those opportunities everyone should take advantage of if they get the opportunity.

I also wanted to use this trip to put into practice some of my travel hacking skills. As you may remember, I’d worked hard on the two Southwest Airlines cards in order to get to 110,000 miles and get the companion pass. I have now been working on the Chase Sapphire card, to try and nail down the 60,000 bonus points for that.

Overall, the trip consisted of 10 days (2 days in the air, 8 days on the ground). We flew into San Francisco, saw a few sights (Cathedral, Fisherman’s wharf, etc.) and then hit the sack. The next day, we visited Alcatraz, and then headed north. The following three days were spent in Northern California and Oregon, visiting national parks and enjoying the outdoors. We ended up Wednesday in Portland, where Mrs. 39 Months spent the next 4 days in class, while I traveled about and saw the city and surrounding area (Columbia River, City of Portland, etc.). We finally headed home on Monday (long flight).

So how did my hacking do?

  • Air flight: free (except for some fees) – savings of $1,088
  • Rental car: paid $338 for 10 days through Alamo, plus gas (about $120). Didn’t use any points, but all the cost got onto my Chase card, helping me towards my goal for the free 60,000 points.
  • Hotel: Due to where we were staying in the national parks, I couldn’t really use any points on stuff, but we did get the hotel in Portland for free: savings of $745
  • Food, Gas, other: Couldn’t use points on these, but again, was able to use the charges on my Chase card to hit my goal. By the end of the trip, I had achieved the usage on the card to get my 60,000 free points!

Overall, trip for two, Philadelphia to San Fran, travel to Portland, and then back cost around $1,512. I’m sure many of the really experienced travel hackers could have saved even more, but I’m pretty happy.

Some lessons learned:

  1. Southwest companion pass is awesome. Wife traveled across the country and back for free!
  2. It pays to get points from various vendors, not just the ones with Chase. I had several hotel options in Northern CA/Oregon that I could have used points for (ex. Holiday Inn express) that I didn’t have points for, so I had to pay cash for.
  3. Haven’t figured out a way to pay for car rental with points yet. Maybe used my 2% cash-back Citi card to pay for it.
  4. Food/Dining out is difficult to use points for – better to use card to pay for it with case and collect the points.

We had a great time, and I learned a lot about travel hacking. Time to plan the next big trip (probably 2019). Maybe the Grand Canyon?

 

Mr. 39 Months

Taking time to smell the roses II – Portland OR

Again, one of the key points of FIRE that I agree with is the idea of not putting off things you want to do today, just to try to achieve FI earlier. It leads to a sense of deprivation which often can make the individual (or family) stop pursuing FI and falling back into their old habits. Yes, save as much money as you can, but also try to enjoy life as you go through it. We only go this way once (if you agree with Western philosophy) so you should work to enjoy every day.

Just ask the Stoics about that: “Were you to live three thousand years, or even a countless multiple of that, keep in mind that no one ever loses a life other than the one they are living, and no one ever lives a life other than the one they are losing. The longest and shortest life, then, amount to the same, for the present moment lasts the same for all and is all anyone possesses. NO one can lose either the past or the future, for how can someone be deprived of what’s not theirs.” Marcus Aurelius

One of the places Mrs. 39 Months likes is Portland, OR. As noted in a previous post, we took the opportunity to see a couple of national parks and then headed to Portland so she could take a class on one of her hobbies – making leather shoes. A 4-day course where, at the end, she’ll have a pair of boots once she is done. We also took the opportunity to do some travel hacking (more on that in a future post).

I took the opportunity to run around Portland and see some of the sites. The city boasts the largest number of brew pubs and coffee bars of any city in the US (supposedly). The drive up the Columbia River was gorgeous, with lots of information on the various dams on the rivers (there are 11) which have helped tame it, while allowing the salmon to continue to climb up it and spawn. The drive ended about 100 miles up, with a remake of Stonehenge, which was made to commemorate the dead of the county in the state of Washington in WW One. Pretty cool.

In the city, every Saturday, they have the craft market down by the river. Last Saturday, they also had the first annual “doggy dash” to raise money for animals care. The market has all sorts of vendors, as well as excellent food.

We had a great time, even after I came down a little sick the last couple of days, and we’ll always have this trip together.

And here are the shoes!

 

 

Mr. 39 Months

Taking time to smell the roses (or get some of your non-financial goals accomplished)

One thing every FIRE person needs to guard against is getting so tied up in the financial side of FI, that they neglect other aspects of their life that are equally or even more important (can anyone say “family” here?).  One should never neglect their other goals in life just for financial gains – or you might end up at the end regretting a life of emptiness.

That is why your goal setting for the year should include a healthy set of non-financial goals, and you should strive mightily in order to meet them. For me, my non-financial goals are:

Personal:

  • Increase weight lifted by 10% from 2018 (increased by 12.7% in 2017). I want to continue to improve my strength as I get older, instead of just wasting away
  • Average 3 hours of cardio per week (currently averaging about an hour). Again, want to improve my fitness
  • Take part in at least one long bike ride, like MS bike-a-thon (80 miles)
  • Backpack over 100 miles on AT (did over 100 in 2017)
  • Begin volunteering at Pennsbury Manor at their joiner’s shop (woodworking)
  • Reduce weight by 20 lbs. from Jan 2018 (lost 9 lbs. in 2017). Again, I want to get in better shape as I get closer to financial independence
  • Read at least one book a month. Trying to learn new things and keep my mind shop. Started this in August 2017, and I’ve been doing fairly well with it.

Travel:

  • Visit a national park (visited Shenandoah NP in 2017)
  • Visit family in Tennessee, Vermont and New York. Family is very important to me. One of the things I am looking forward to with financial independence is the opportunity to visit family more often
  • Visit Portland, OR and northern California. Mrs. 39 Months has a craft class she wants to take in Portland, so I’ll go as well, and run around in Portland, when it’s over, we want to visit the Park in Northern California with the Redwoods.
  • Visit Ellis Island. Wanted to do this in 2017, but didn’t make it. As 50% Czech from immigrant great grandparents from the turn of the century, I believe they went through there, and I want to see it
  • Go on an international trip. Not sure which one (Canada, Caribbean, etc.) but I’d like to get out this year.
  • Visit the Asheville NC area. It’s one of the areas that we are considering retiring to (close to my old home in Tennessee, interesting crafts, shops & outdoor sports, etc.). Trying to learn more about the area (we’ve been there a couple of times).

For the year, I have worked as diligently on these as on my financial goals (well…. Maybe not the weight loss as much). Still, I have knocked a lot of them off/made progress.

This week, I had the opportunity to visit two National Parks, which helped me check off a travel goal for 2018 – and gave Mrs. 39 Months and me a lot of pleasure.

We visited the Redwoods National Park in Northern California. Mrs. 39 Months has always wanted to see these big trees, and they didn’t disappoint. It was great hiking around and just taking in the grandeur of it all.

We also visited Glacier Lake National Park, in Southeast Oregon. It was formed when a volcano exploded about 7700 years ago, and then collapsed in on itself and the caldera. The result is a beautiful lake at 8800 ft. altitude, which is just fed by rainwater. Nothing drains out, nothing drains in, and so it has some of the most pure water in the world. You typically can see 140 – 180 ft. down into it, and it is also about 1900 ft. deep.

When we visited, there was still snow on the ground and blocking the road which goes around. We took pictures in freezing rain, and then headed out. Still a lot of fun.

What non-financial goals do you have this year, and what have you gotten done so far?

 

Mr. 39 Months

Status Update, May 2018

Well, another month, another period of not much progress. Again, I didn’t lose but didn’t gain much either. Looks like last years big “bump” is going to be offset by a flat year in 2018? We will see, still got 2/3 of the year to go. Thanks to putting all my bonus money into my investments, I’m back to being over $1M in assets, so that is a plus.

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

I ended up being about 0.3% up here, after my monthly inputs into the various accounts. My bond index funds dropped a bit, but my international and REITs were up, bringing me to a +0.3% for the month. For the year, I’m a little up, while the market in total is a little below Jan 1. Another reason for asset allocation. Note that these returns include reinvesting dividends.

My 401K/Deferred account at work was up only 1.1% for April – but this one doesn’t have a REIT option in its choices, so I didn’t get the benefit of the REITs for April (but didn’t suffer from this in this account for 2017).

Dividend Income Account: Allocation:

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

Up about 0.2% including dividend payments.  Bonds (50% of allocation) got hit, but my 25% REITs helped to lift me into the positive. Most of the dividend stocks (Chevron, Verizon) were up significantly, which helped.

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

  • 40% in individual value stocks I picked myself (2 each, 20% for each) – SBS and GILD
  • 20% USAA Market Index (my brokerage is USAA)
  • 40% in Vanguard Value Index fund

Another bad performance for the stocks that I picked myself. Down 2.5% for the month of April. The big losers were my two stock picks. It is becoming very clear that I am not a good stock picker (as most folks in the FIRE community can attest to). If I don’t see a major turn around in fortunes by the end of the year, I’ll just sell my stock picks and go to index mutual fund investing (like so many other folks). Again, this is more of a “fun money” account where I experiment.

The allocations are not too much “out of whack” so I don’t intend to rebalance until July (unless something major happens).

 

How did you do in April?

 

Mr. 39 Months

Update to draw down plan – May 2018

Okay, as I get more information, I continually have to look at adjusting my draw down plan – even as I hit 26 months to go. If you remember from my previous draw down update, the desire of Mrs. 39 Months to continue working, combined with the $64K limit to income for maintaining health subsidies had put me in a bit of a quandary. How do I match my spending to the need for health care? Spend too much, and I end up needing an additional $12K a year.

Well, I got a bid of a surprise with one of my company retirement accounts a week ago, which meant that I would be paying a large lump sum when I left the company (instead of being able to draw it out over time). However, this meant that the remaining funds were “post tax” and thus could be used without endangering me going over the $64K limit. Sweet!

So, based on that, updates on my current investments and plans for deposits over next 26 months, here is what I am looking at:

  • Savings: $132K (can spend without having to pay taxes)
  • Deferred Income from work: $156K (after taxes withdrawn – don’t have to pay taxes on it)
  • Brokerage Account: $87K (can spend about $60K of it without paying taxes. The rest will be taxable.
  • Inherited IRA from my father: $137K (taxable when we take it out)
  • 401K/IRAs: $613K (taxable + penalty)
  • Roth IRAs: $298K (non-taxable)
  • Total: $1,445K liquid assets (350K with no tax)
  • House: $298K (not depending on it unless absolutely necessary, i.e. no reverse mortgage
  • Expected expenses $54K + Mrs. 39 Months spending (assuming equivalent of her take home pay). This assumes having a taxable income below $64K, and thus keeping the subsidies

 

As you can see, I’m actually in pretty good shape. Current plan:

  • For first 6 months, pay for medical with Cobra and take $18K from Deferred (tax free) and mandatory $9K from inherited IRA
  • For each year following, Take $12K from inherited IRA each year, and pay very little tax on it. Should last for 10+ years (till I hit 67)
  • Take $42K from Deferred/post –tax. Should last at least three years (till I’m 60)
  • Move to my investment account. Should last for at least two years with limited taxes (Gets me to 62 and Mrs. 39 Months to 64). At this point, I’m assuming Mrs. 39 Months wants to stop working, so we bump up expenses to $72K a year
  • Draw down 401K at $72K a year. This should last us for 16+ years.
  • At that point, switch to Roth IRA, which has been growing for 20+ years without getting tapped, so it should have over $800K. This should last us for the rest of our lives.
  • Never touch the savings account/emergency fund, or the home value (these are our backups).

Note: all growth, expense and investments assume a 3% inflation rate.

Overall, I’m more confident now that I was a couple of months ago (even with the market not going anywhere). I could conceivably take a few months off my count and go earlier, but I don’t want to do that just yet.

How have your plans changed?

Mr. 39 Months

Original Draw down plan

Updated Draw down plan Mar 2018

 

When the World gives you lemons, FI people make Lemonade

As everyone knows, life gives you little “surprises” now and then, and folks have to be flexible and learn how to “roll with the punches” when that happens. Sometimes it’s pleasant surprises (hey, my company is giving out one-time bonuses) and sometimes it’s not (hey, my basement flooded).

Just recently, I found out that my company made a change to their deferred income (one of the ways they help with retirement planning). Previously, you could draw it in equal parts over a period of time (I believe the max was over a 5-year period). That was my plan, as it would enable me to keep the taxes on it low, and stay under my threshold for medical care (hopefully).

Well, apparently at the beginning of the New Year, they killed that option. Instead I have to take it as a lump sum when I leave the company. So, when I currently plan to hit FI (26 months away) I will take a sudden, massive $200K bump in my pay (in addition to my first six months pay for 2020). The taxes taken out will be nothing like I’ve had to pay before. Ouch!

I took out my pencil and paper (or computer and mouse) and started the calculations. I would end up giving up roughly $50K to Uncle Sam, just on this money alone. Yet, once I had paid it out, that money would become “post tax” money, so if I used it to live on over the next several years, I wouldn’t have to state it on my income taxes (just any interest/capital gains if I had invested it). If you remember the update to my draw-down strategy, I was very concerned about going over the $64K line for income, as this would cause me to lose subsidies for health insurance. I could use Cobra insurance (the insurance you can get from your former company for up to 18 months after you leave your job) – and then transition to paying my own insurance, with the subsidies.

Well now, I will have a pot of $150K (plus the expected $90K in my investments) that is post-tax. Even if Mrs. 39 Months works for several years, I don’t see a reason why we can’t keep under the $64K cap. If she gets a really great job, then I’ll just force her to pay for benefits!

So in the end, it all ended up being OK. Actually better than OK – because the money I save for the subsidies more than offsets the additional up front taxes.

So always look at your finances and play off different scenarios. If I had, I would have determine that, even if the company still had the 5-year stretch out option, it was better to take the money up front.

How have you made lemonade this year!

 

Mr. 39 Months

Giving Back – an important part of FI

Another aspect of our community is the idea of “giving back.” Whether its volunteering for charities, writing and speaking at conferences to spread the gospel of FIRE, or just participating in our communities, there is a strong theme of sharing/caring that you can witness is people’s actions and writing. Its one of the parts of our community that I really like.

Note: Not Mr. 39 Months. With my Native American ancestry, I can’t grow a beard at all.

About a week ago, I was invited as a member of my local professional society to speak to current college students on networking and interviewing for job prospects. While the majority of the students will probably enter the daily grind, and work 40+ years, I did take the opportunity to sprinkle in a few FI comments and encourage them to start saving money at the beginning of their careers.

For networking, we went over the various ways they could start building connections to people and businesses in their lines of work, and how they could use simple investigatory interviews/phone calls with people to determine if certain jobs suited them, and others didn’t. I suggested that they find an industry they were interested in, find (via the internet, linked in, etc.) someone in that industry, and ask them 3 questions:

  1. What do you like about your job?
  2. What do you not like about your job?
  3. Who else could I talk to about a job similar to yours?

People like to talk about themselves, so it should be hard to get people to answer these. With those questions, the student should be able to weed out jobs they don’t like, and discover new fields of work that they might enjoy.

Overall the students had a good time, asked a lot of good questions, and hopefully will take some of the ideas and move forward with them.

 

Mr. 39 Months