FI is great when life throws you a curve ball!

Well, last night was fun! Yesterday, my town tore up some of the streets around us and shut off the water to our local houses. Not sure the reason, probably just repairing something, now that the weather is getting nicer. By late afternoon it was back on. When they turned the town water back on, our toilets and sinks burped and popped a bit as the air was let out of the system. Just around dinner time, we found that the area around our water heater had a small puddle around it. We cleaned it up, put a pan underneath it and watched it. We figured that the disturbance from the water coming back on may have loosened a valve or something.

No such luck. Our water heater is 15 years old, and after 10 years, they start wearing out. That was this one’s problem. It turned out that our tank had a small crack in it that wasn’t fixable, and was only going to get worse. We were having to clean up every hour or two – not the sort of thing you can live with.

Luckily, we were able to get a plumber out to remove/replace the water heater (with my work schedule the next couple of days, I didn’t think I’d be able to do it). While the cost was pretty expensive ($2,300 with permits!) we knew it was an expense we were going to have to pay pretty soon – and we’d been saving up for it.

So we plopped the money down, had an expert do the work, and got it all fixed by dinner time. That is one of the hidden joys of FI – it leads to a much less stressful life, because you can be prepared for this minor emergencies.

Stay Healthy!

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Mr. 39 Months

What will you regret at the end of your life?

I was taken with an article recently that linked back to Bronnie Ware’s blog post (and eventual book) about the top five regrets of the dying. For those who don’t know, Bronnie worked for many years in palliative care, with patients who had gone home to die, usually within 3-12 weeks. From her comments:

“ People grow a lot when they are faced with their own mortality. I learnt never to underestimate someone’s capacity for growth. Some changes were phenomenal. Each experienced a variety of emotions, as expected, denial, fear, anger, remorse, more denial and eventually acceptance. Every single patient found their peace before they departed though, every one of them.’

‘When questioned about any regrets they had or anything they would do differently, common themes surfaced again and again.”

She then goes on to list the top five regrets of the dying:

  1. I wish I’d had the courage to live a life true to myself, not the life others expected of me.
  2. I wish I hadn’t worked so hard.
  3. I wish I’d had the courage to express my feelings.
  4. I wish I had stayed in touch with my friends.
  5. I wish that I had let myself be happier.

I looked back at these and thought about what I could do to reduce/eliminate these regrets:

  1. I wish I’d had the courage to live a life true to myself, not the life others expected of me: While I have enjoyed (for the most part) the work that I’ve done and the life we have built, I have always wanted to do two things: Travel and research/embrace history and remodel houses (at least one house). While we had the chance to travel a lot when I was in Europe with the Army, we haven’t been able to travel anywhere near as much as I’d like. Current plans
    1. With Covid ending, the plan is to do at least one major trip a year, and other side trips, to national parks, historical sites, etc. While I may not be able to visit everything, I’ll visit a lot
    2. I’ve saved up a significant chunk of $ that I could use to fund the purchase and remodel of a home. When I decide to retire early, this will be one of my post-FIRE projects. Looking forward to it.
    3. Continue to work on my “side hustle” (TKD Woodworking) that I can enjoy once I retire
  1. I wish I hadn’t worked so hard: Not sure this is a major regret of mine. While I have worked hard, moved up the ladder, and been successful, Mrs. 39 Months has pretty much ensured that I didn’t become completely wrapped up with work at the expense of our lives together. The work has enabled us to build a tidy nest egg while still enjoying life, and now we are in a position of financial independence.
  1. I wish I’d had the courage to express my feelings: OK, this is a regret, somewhat. While I’ve never had a problem expressing affection and love to Mrs. 39 Months (lots of hugs & kisses) and telling my family I love them – I have issues in expressing my opinions in situations at work and with others. I’m a middle child, and apparently we typically try to be the peacemakers in the family. I’ll subsume my opinions and feelings for the group in order to make it peaceful. One of the results of this is an explosive temper at times, which is a real issue. Current plans:
    1. Need to start daily meditations to deal with anger
    2. Need to speak up more when I have issues with friends & family – in a polite way
  1. I wish I had stayed in touch with my friends: Big problem with me. I typically don’t form close bonds with others, and usually once someone drops off, I don’t seek them out. I have one (only one) friend from high school/growing up, and we talk maybe once/quarter (if that). No college or military friends (which is odd, if you think about it), and only 2 real friends now. No work friends. As you get older, it gets harder and harder to build friendships. Current Plans:
    1. Increase frequency/number of phone calls to friends
    2. Try to schedule times to get together with local friends
    3. Make concerted effort to add to friends in current list of hobbies/professional organizations
    4. Attend college reunions, when possible, in order to try to reconnect with friends
  • I wish that I had let myself be happier: Not sure about this one. I believe I’m fairly happy, for the most part. Part of that is my embrace of Stoicism, as I am getting less interested in things I cannot control. Stopping to look at the news and politics has helped this a lot. Current plans:
    • Continue to practice Stoicism and enjoy what I can control
    • Keep away from areas that just “wind me up” (politics, social media, etc.) with no real impact on my life
    • Pursue areas that will make me happier (see #1 and #3 above)

So what are you doing in life to reduce potential future regrets?

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Mr. 39 Months

Getting interviewed by my professional magazine on finance

Back in May of 2011, I wrote an article for my professional society (www.IISE.org) magazine, titled “Graduate Finances.” After the 2008-2009 recession, I wanted to share some basic financial ideas with future graduates, so they’d have an idea of what to do when they get their first job. The article covered basic budgeting, investing, benefits. Etc. In the years since, I  have had folks comment positively on the article.

Just recently, IISE has reached out to me for their new Podcast, and asked me to interview and discuss the article, and recent changes that might be made to the advice. The provided a list of questions they would be asking. I’ve included them below, and my answers to them.

Below are some starter questions to help prepare you for the interview, though I will surely ask additional questions based on the course of the conversation:

  1. This conversation surrounds an article you wrote for Industrial Engineer magazine (now ISE magazine) called “Graduate Finances,” and we’ll provide a link to the article on our show notes at the podcast website. You initially wrote it in early 2011, which was just a few years after the punishing fiscal bomb that was the Great Recession. What prompted you to give this advice to young engineers starting out?
    • I had become very interested in investing and saving for retirement around the year 2000 (dot.com bust). When 2008-2009 hit, I saw a lot of people jump out of the market (rather than just let it sit) and knew that was the wrong answer.
    • My professional IISE chapter often goes to our local colleges and presents/discusses issues with students, and I’ve spoken at regional and national conferences before. I found that most engineers didn’t have any financial knowledge from college or high school (almost no graduate does).
    • I often got questions about what to do with their first job, and I wanted to provide some guidance.
  1. You open the article with “Day 1,” which typically involves an introduction meeting with a company’s human resources representative. Obviously, we’ve each been through this more than once in our careers, but for our younger audience who may be entering the real world soon after listening to this, what should they expect to learn about in that initial HR meeting?
  2. I’m assuming we are talking about financial aspects of HR. There will be a host of policies and programs that are not financially related that HR will bring forward.
  3. Other benefits that will save you money (insurance, legal, education, medical)
  4. Medical benefits – look for high deductible plan and an H.S.A. (Health Savings Account). This is almost a super Roth-IRA. You can save it before taxes, invest it, and then use it to pay medical bills later on
  1. I faced a battle with cancer a few years into my career and after joining my third employer (which just happened to be IISE). Before that, I will admit that I didn’t pay that close of attention to medical benefits and insurance details. Between youthful ignorance and newspaper veterans telling me that the insurance covered “next to nothing,” I lost sight of its value. Having cancer changed that for me. What would you suggest engineers ask HR about on Day 1 regarding their medical coverage?
    • They need to understand the costs involved and relate that to their potential budget. Coverage is a key point. Most company’s benefits will cover catastrophic issues, but the key is the deductible. How much do you want to pay out of pocket before the medical gets picked up.
    • Often you can get a benefit/cost reduction for regular checkups, not smoking, etc. Look into this.
    • For the younger ones, most feel their invulnerable, so they don’t pay much attention to medical.  I would suggest they look into a medical plan with a high deductible with an HAS – a Health Savings Plan. This lets you save money before taxes, and you can invest it in the market and let it grow. It can be used to pay medical expenses now, or 10+ years from now.
    • I don’t recommend an FSA – you have to spend that in the calendar year, and it’s a tracking nightmare. 
  1. I started my career in newspapers (back when people still subscribed to their local paper en masse) and I remember feeling a lot of pride when I received my first paycheck. It said to be that I was an adult and a working journalist. Unfortunately, it was only around $750 after deductions for two weeks of work and I didn’t fully grasp the expenses that were about to be dumped on top of me, like student loans and living expenses (my folks weren’t all that cool with me living at home after graduation). What was your experience like as you were coming into adulthood and suddenly trying to learn your new job as well as set yourself up for a financial future? In what ways did you feel like you got it right early on and where did you make your biggest errors?
    • I was an anomaly getting out, because I went into the military, so the first 5 years I had government housing, medical, etc.
    • Once I got out, my wife and I had to learn a lot of this (housing, medical, etc) but we were a little more mature, and had our spending in line.
    • For someone starting out, I’d look for someone maybe 5 years older they could use to mentor them on this. There is also some good information on the internet. I’d look into the FIRE community for this.
  1. What insights should young people entering the American workforce understand about deductions removed from their pay? Where is that money going?
    • Taxes (Fed, State, local) – obvious. Should be considered when you are looking at jobs.
    • Social Security/Medicare – Tax to pay for benefits to older Americans
    • Unemployment – paid into by you and your company
    • Other – state dependent (my state has Family Leave, Disability, Workforce Development)
    • Your choice in benefits – Medical, Dental, Vision, 401K, Insurance, etc.
  1. The combination of career success, bad luck on the health front and poor decision-making, among other factors, led me to a lifestyle rooted around minimalism – not in the “live like a hermit” context that many people believe it to be, rather to develop an ability to determine what has the most value and what has no value. And it’s become evident to me over my adult life that budgets, even simple ones drawn on a napkin, can go a long way into showing me just where I stand when it comes to income and expenses. What budget methods would you recommend to graduating students, such as the “60 percent” rule or the “50/20/30” model?
    • I gave several versions in the article, but I am a real enthusiast for the “pay yourself first” model. Do your investments first (401K to at least the match, HAS, Roth IRA) maybe 10% – 20% of your paycheck.
    • Every year from that point bump it up at least 1% (i.e. if you get a 3% pay raise, one third of that goes to new investments like 401K or Roth IRA)
    • Then you have your 80% – 90% left to spend.
    • Budget for any debt (student loans, etc).
    • What is left over is what you have to live on (housing, food, transportation, etc)
    • Remember that, unless you have a real disaster, the first couple of years will be the tightest. Every year, every pay raise, every debt payoff, it will get  a little easier
  1. For anyone who has been out of college in the past 20 years, we’ve witnessed a lot of events that have made an impact on the national and/or global economy – the Sept. 11, 2001, attacks; the housing market crash in 2008; and our current pandemic. These types of events have made investing a shaky proposition for me personally, but I’ve done more of it in the past few years albeit conservatively. I’m fairly certain you’re not one to recommend investing in Bitcoin or other risky ventures. Unless I’m wrong, what factors do you recommend young graduates consider when it comes to investing? Should they start investing in stocks and bonds right out of the gate or focus on their 401Ks and/or Roth IRAs, or anything deemed low risk?
    • The biggest issue, I think, for young engineers is the long term nature of investing. Most people at 22 can’t envision 10 years from now, let alone 40 years.
    • I’d have a “core” of investments in the basics (401K, Roth IRA, etc) and if you’re young, I’d invest almost 100% in stock index funds. The market has never been down over a 20+ year period, and young folks have that sort of timeline for their investments. As you get older, you can shift more to bonds or other fixed investments.
    • Index Funds/ETFs!
    • Maybe have 5% – 10% of your funds for “fun money” where you invest in Bitcoin, Tesla, etc. Just assume that you will be gambling.
    • Again, I’d do some reading on the FIRE movement (Financial Independence, Retire Early). The concept there is that if you bust your butt to pay off debt and invest, you can get yourself into a situation where you are Financially Independent and don’t have to work. Then you can do the sort of work you really enjoy!
  1. In the original article, you listed about a dozen sources for further reading and education on money and personal finance, but it’s been a long decade since “Graduate Finances” first published. Do you have any new favorite digital resources like websites or podcasts that have a better reach on younger generations? Any books or authors that you would recommend as well?
  2. Take everything with a grain of salt. Everyone’s situation is different, and some folks like to take more risk than you may be comfortable with.
  1. As you wrote in your article, ISE students graduate with a strong foundation of functional knowledge applicable to their careers – the ability to research and investigate, to analyze data, etc. Should colleges and universities provide more opportunities or add emphasis on personal finance education? Are there opportunities for parallel teaching (think the Daniel/Mr. Miyagi relationship in “The Karate Kid”… “wax on, wax off; sand the floor; …”)?
    • I think there should be a personal finance course as an option, but that is just me.
    • If not, at least provide additional opportunities to study this
    • The issue is that most young folks just don’t think personal finance is an interesting topic. Often discussions of money are considered “dirty” in our culture. 

What would you add or change to these?

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Mr. 39 Months

Measure Twice, Cut Once

In woodworking, there is an often used phrase “Measure Twice, Cut Once.” The concept is that when you do your first measurement, you should check it a second time a little later, just to make sure you didn’t make a mistake, before you cut something. When you cut a piece of wood (or metal, cloth, etc.) you pretty much are committed at that point to wherever you have measured to – and the world is full of people who measured an inch (or centimeter) too short. The result – something gets tossed out because it isn’t useful.

I was reminded of this recently while doing some woodworking in the shop. I was building a couple of doors for the kitchen island I was making. The doors used a framing joinery style called “mortise and tenon” which is very old (1,000s of years) in which you create a tenon (sort of a wooden tab) which gets inserted into a mortise (a hole you’ve carved into the wood). It results in a square frame, sort of like a picture frame. You can then insert a flat panel into the middle, which “floats” between the four pieces. This is key, because wood has a tendency to contract and expand as it releases/takes in water throughout the year. If the center panel can’t move, things have a tendency to crack.

Well, in rushing things I took the measurement for the panel and cut them while I had some glue drying on something else. Guess what? The panels are too short, on both ends. Exactly one inch too short!

I had to go purchase new wood to go into these, and the other ones will go into my wood pile, where I hope to find  a new use for them.

For many of us in the days of Tesla and GameStop, there is the urge to shoot first, then aim. While this can pay off occasionally, I would still urge others to “measure twice, cut once” and double check your assumptions and decisions a second time before acting on them. A lot of trouble in this world can be bypassed if we just take a second look at things.

I hope everyone is healthy and happy!

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Mr. 39 Months

Goals/Objectives for 2021

I’ve done the goal setting posts before and gone over my 2017, 2018, 2019 and 2020 goals in previous posts. For 2020, most of the financial goals were accomplished, but as with many people, the non-financial goals were mostly listed as “incomplete.”

For 2021, my financial goals have one key goal that I have removed – increase in Net Worth. The lessons from 2018 to 2020 is that the finance markets will be driven up & down, sometimes on a whim. With over 83% of our net worth as investments and savings, a stock drop of 20% (or gain of 20%) will dramatically decrease/increase our net worth – without me being able to control it at all.

One thing about goals, they should be meaningful, but they should also be something you can drive. Our Net Worth is really beyond our control right now. What I can control is the amount we continue to save as we close in on retirement – and that goal will remain.

As I noted back in July 2020, our expected FI date was past July. The crash of March/April certainly cut into that, but with the big rise in Nov-Dec, we could officially retire today (according to my numbers). Can you say “sequence of return risk.” However, I think the market is overpriced and due for a correction, so I don’t really feel comfortable retiring now. The job I’m currently doing is enjoyable, and I’m due a decent bonus payment in early April, so I plan on staying on for the moment (can you stay “one more year syndrome?”).

So what about goals for 2021

Finance:

  • Save $29K in tax-advantaged accounts. 401K, and Roth IRA.  
  • Save $41K in regular accounts.  Starting to build that bucket of funds we’ll need prior to hitting age 65.
  • Increase dividend income from all accounts to $29K/year (compared to 28K in 2020).
  • Passive income covers 38% of base living expenses in retirement, estimated at $78K per year (hit 37.1% last year). My long-term goal is to get my dividend/passive income up to where it covers over 100% of my expected retirement living expenses, so my investments can continue to grow.
  • Did not put in a Net Worth Growth goal.

Business:

  • Attend at least 12 SJREIA meetings (my local real estate investors association) this year. They’re holding regular online meetings now, and eventually we’ll get back to live meetings.
  • Increase the number of blog visitors by 10%. Actually lost -18.5% from 2019. Not sure if this was poor writing, not commenting on others work, or just Covid. I want to grow it in 2021.
  • Build TKD Woodworking (my side-hustle name) with in-person sales (craft fairs, farmer’s markets, etc.).
  • Make $1,000 in sales (not necessarily profit) on items with TKD woodworking
  • Write/publish a book on finance.  I wrote one for new graduates in 2017, but I have identified an area of the community which hasn’t been served as well in the past. Hopefully I can assist with something here.  I’ve got the first five chapters outlined/partially done, but still have a ways togo.

Personal:

  • Continue to work with www.Gymnasticbodies.com to stay fit at home. Get to constant use of level 1 of exercise. With Covid, attending gyms just doesn’t appear to be in the cards.
  • Average 2 hours of cardio per week, which is about what I’m doing now.
  • Backpack over 100 miles on AT (did around 60 miles in 2020). The trail that I haven’t hiked is getting further and further away, making it impossible to do weekend trips. Right now I’ve got over 150 miles scheduled for 2021. .
  • Reduce weight by 20 lbs. from Jan 2021 (lost 8 lbs. in 2020). Again, I want to get in better shape as I get closer to financial independence and retirement
  • Read at least one book a month. I surpassed this goal in 2020, and re-learned the joy of reading.

Travel:

  • Visit one national parks (that is the plan, right now)
  • 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. Need to get up to see my brother in Vermont.
  • Week with Mrs. 39 Months for our 35th wedding anniversary in July. Not sure where we’Take a week at the shore and just relax with family. Currently planned for July, but we’ll see how many family members can come.
  • Visit Ellis Island. Still want to do this – its so close. 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

So those are my somewhat ambitious goals for 2021. I am going to do my best to hit them, so wish me luck.

What are your goals for 2021?

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Mr. 39 Months

Do you have a SHTF plan?

For many folks, the advent of Covid played havoc with their work status, with layoffs, reduced hours, or just getting let go/company failing. This isn’t fun, and the economic fallout from the Chinese Flue hasn’t ended yet. The number of people who have chosen this time to retire (or had the time chosen for them) is large, and probably growing. Even if you don’t assume a virus causing havoc, you should still have a “S&$t Hits the Fan” plan. You never know when your company may fail (Enron?) or a change in management happens which causes job changes.

The first step is to try and understand how much money you may receive, both upon being let go, for the next several months, and then beyond.

  1. Vacation time: Check to see how much vacation time you have remaining. If you do, you’ll get paid this out with your last paycheck.  
  2. Severance/Separation Package: Its possible that the company letting you go  will provide you with a package, depending on your years of service. I’ve seen as much as 1-2 years, though the standard appears to be one weeks pay for every year of service. This package could also include medical care for a period of time, or other benefits.
  3. Unemployment: In the US the have unemployment insurance, which pays a percentage of your income (up to a certain max). As a US worker, you pay into that with your paycheck every week, so its not exactly “free money.” I’ve been paying into it for 30+ years, so I don’t feel guilty collecting it. The unemployment period can be up to 26 weeks, though it has been extended to longer in times of extreme distress for the US economy.
  4. Personal Investments: Its possible that your investments (dividends, real estate, etc.) is already paying you and income stream. Take this into account as well.

Now its time to look at your expenses. Are there specific expenses that you can cut out in order to reduce the outflow? Is there additional expenses that will hop up due to your being let go?

  1. Possible expenses reduced/eliminated: Investments (401K, IRA, other), Gas, Dining, Charity, Hobbies, etc.)
  2. Expenses that may go up: Medical. In the US, you are eligible for COBRA insurance, which is where you can continue to get your former companies health insurance – but it will cost more, as you are paying for your co-pay and the company’s share

Once you’ve got an idea of what your inflow and outflow is, you have some idea of how long you can last until you have to really start dipping into your retirement/other funds. The key is to do this sort of planning well ahead of time, so that when SHTF, you don’t have to react entirely with emotion.

Example SHTF plan:

Severance$17,395.16
Remaining Vacation$4,348.79
Unemployment (26 weeks)$20,306.00
$42,049.95
Cobra (12 months)($16,961.36)
Remaining Funds$25,088.59
Monthly after-tax income$2,090.72
Property Taxes($534.47)
Utilities($506.00)
Insurance (home, auto, life, flood)($297.76)
Groceries($450.00)
Other expenses($300.00)
($2,088.23)

As you can see, there is sufficient funds in the SHTF plan above, primarily due to a generous amount of unemployment for 26 weeks. Based on this, you could last 9-12 months before having to pull money out of your investments. Hopefully this will help you find another source of employment. Of course, the benefit of keeping your expenses low and paying off your debts/mortgage dramatically help here.

Luckily, this hasn’t happened to me yet, but I will say that I am expecting it in 2021. They’ve moved several new, young engineers into my group and are starting to train them in areas that have been my specialty. My assumption is that when the time is right for them, management will let me go. Since we’re in OK financial shape right now, I’m not fearing it – I’m just hanging out, doing work I enjoy, and collecting the paycheck till they make the decision.

Kevin

Hope your holidays are going well!

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Mr. 39 Months

Is it the 4% rule, or the 5% rule?

The world of FIRE has been working with the 4% rule for a decade now. For those new to the concept, and analyst/statistician named Bill Bengen rocked the retirement planning world in 1994. He did an in-depth analysis on how much you could afford to spend of your “nest egg” each year, and still have money left over at the end of a typical retirement. He pretty much evaluated withdrawal rates every 6 months, starting in 1926 and going to the 1970s – and seeing what rate would allow you to still have funds at the end.

The rates ranged on average from 5% to 13%, depending on how lucky/unlucky your timing was when you retired. With the analysis he came up with the “Safe” retirement rate of 4% (actually a little higher). Even if you retired at the worst times in history to retire (1929, 1937, 1973, etc.), as long as you maintained a 60/40 allocation, you could safely take out 4% of your nest egg a year, and then adjust upward in line with inflation every year after that. This should leave you with  money at the end.

Since writing it, the FIRE community has lived by the 4% rule, or its derivatives (Fat-FIRE, lean-Fire, etc.). Most FIRE folks have said that, since we’re retiring earlier than 65, the need more than the 4% rule (some believe they can only spend 3% or as low as 2% since they’re retiring in their 30s). Bengen stated that the 4% rule was always the “worst case scenario” based on the worst time to retire (Oct 1968). This was when the stock market peaked, froze for 13 years, and inflation went through the roof..

Now Bill Bengen has gone back and relooked at his analysis in the time of low bond yields, low inflation, and high-priced stocks. He’s had another 25 years of data to crunch to add to what he already did. A lot of folks assumed he would drop the rate to reflect on these items. Instead, he’s come back and said the 4% rule is really now more of a 5% rule.

What?

In fact, he noted that at other points in history (when inflation was low and stocks/bonds were cheap) you could have withdrawn 7% – 13% and still been safe. With a 50/50 split of stocks/bonds, invested in index funds and US treasury bonds, Bengen believes you would be safe with a withdrawal rate of no more than 5%. He actually notes that “the average is 7%.” The key to the whole equation is the very low inflation right now.

Bengen does say there are still variables here (what will the Fed do, government spending, inflation, etc.) and the 5% rule should be a starting point in your analysis. Still, its nice to know that all of us panicking about saving 25X our spending (4% rule) might be ok with only 22X our savings.

Happy Veteran’s Day. Thank a Veteran if you can.

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Mr. 39 Months

What Assumptions are you making for your Retirement?

Was listening to an earlier podcast from the Retirement Answer Man from May of this year. His four Podcasts during that month dealt with the assumptions people make in planning for their retirement. Obviously these assumptions will greatly affect the amount we save, the timeline of our retirement, and the potential happy future we will have.

Some of the areas covered by

  • Life Assumptions (how long will you live, how long will you continue to work, who will care for you as you get older, etc.)
  • Costs (spending, regular inflation, healthcare inflation, use of averages, etc.)
  • Markets (returns on stocks, bonds, withdrawal strategies, etc.)
  • Rules for making assumptions (recognize these are assumptions, be flexible, beware of extreme assumptions, etc.)

It made me think of the assumptions we are currently using, especially after our meeting with the financial advisor at the end of 2019.

Our base assumptions:

  • Longevity: Me 97 Years old, Mrs. 39 Months 99 years old
  • Work till I am 58, Mrs. 39 Months is 60
  • Take Social Security at 67
  • Social Security annual increases: 2%
  • Inflation: 3.25%
  • Healthcare inflation: 6%
  • Investment returns (60/40 split): 7.2% before inflation
  • Budget and pay our own medical until we hit 65. Medical costs will be roughly what they are now (plus expected medical inflation rate)
  • Budget of $78,000/year for expenses (including medical for first 5-7 years) – adjusted for inflation
  • Move to new home at some point, but it will be roughly same cost as what we sell existing home
  • Place we move to will have roughly same living costs as what we currently have (i.e. no savings)

So what are the assumptions you are using to do your planning?

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Mr. 39 Months

Family

This week, I’ve had both of my brothers come by to visit us for the week. My younger brother is in town for business (his company does environmental testing, with software and hardware). He’s doing some software upgrades for one of his customers. He tried to get them to do it remotely, and offered to send them some pre-loaded hardware, but they wanted him to “do it live” so he’s up here.

My older brother, when he found out, decided to come down as well. His work allows him to travel on his own, and I think he just wanted to get out. His son is also a resident doctor, working just across the river, and this would give him the chance to see him. So my house turned into a hotel for the week. We were able to set it up so they each got their own room. Nothing worse than having to share a bed with your 50+ year old brother!

Its great having them here, although we get on each other a lot (politics!) We know and love each other, and while busting on each other constantly (as brother’s do) we know we would do anything for each other, including giving our last dime to help the other out.

Often folks in life lose sight of the family part of their social life, especially as they are starting out in life. They go to school, move away for a job, start their own families, etc. Its only later in life, as friends move away, as contacts fade, as job satisfaction ebbs, that we circle back to the ones that were always there, and always will be there for you. That is why, whenever asked, I urge others to make up with family members – because in the end, they are the ones who will always have your back.

Stay healthy!

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Mr. 39 Months

Sometimes the simplest tools are the best

       

The world of FIRE has developed a wide array of analysis tools and software methods to optimize your finances, your schedules, your travel, and your lives. That is why reading the blogs is so fascinating, because there always seems to be something new to learn, to try out, to experiment with. It can be dizzying at times, the pace of change and new technology.

However, there is an old bit of wisdom that states “sometimes the simplest tools are the best.” I’ve heard a lot of financial experts say that picking the best stocks/mutual funds/bonds is secondary – the key is to start investing, as early as possible, and to continue with it. For budgeting purposes, many folks do fine without budgeting by just “paying themselves first” and then surviving on the rest. To avoid “lifestyle creep” a simple method is to set your lifestyle, and then every time you get a pay raise, you just take the lion’s share of it and automatically deduct it from your account and invest it.

All of these are very simple methods to achieve financial independence, and if you perform them, you are 90% of the way towards achieving your goals. Do them early in your life, and you can achieve FI early.

In the photo above, I was working on boxes for TKD woodworking. In order to reinforce the corners, I needed to cut 45-degree grooves in the box corners and glue in “splines” of wood. By making these splines of a contrasting wood (in this case Walnut) it enhances the look of the box. The simple “jig” used to do this on the tablesaw is literally four pieces of wood, glued and screwed together, running across the tablesaw. Simple tool, but very effective!

Look at the simple things first in your FI work, and you will be going a long way to getting to your goals!

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Mr. 39 Months