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

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

Tax Time and Stoic Philosophy

From “The Daily Stoic” by Ryan Holiday

“Nothing will ever befall me that I will receive with gloom or a bad disposition. I will pay my taxes gladly. Now, all the things which cause complaint or dread are like the taxes of life – things from which, my dear Lucilious, you should never hope for exemption or seek escape.” Seneca

As your income taxes come due, you might be like many people – complaining at what you have to fork over to the government. Forty percent of everything I make goes to these people? And for what?!

First off, taxes go to a lot of programs and services you almost certainly take for granted. Second, you think you’re so special? People have been complaining about their taxes for thousands of years, and now they’re dead. Get over it. Third, this is a good problem to have. Far better than, say, making so little there is nothing left to pay the government or living in an anarchy and having to pay for every basic service in a struggle against nature.

But more important, income taxes are not the only taxes you pay in life. They are just the financial form. Everything we do has a toll attached to it. Waiting around is a tax on traveling. Rumors and gossip are the taxes that come from acquiring a public persona. Disagreements and occasional frustration are taxes placed on even the happiest of relationships. Theft is a tax on abundance and having things that other people want. Stress and problems are tariffs that come attached to success. And on and on and on.

There are many forms of taxes in life. You can argue with them, you can go to great – but ultimately futile – lengths to evade them, or you can simply pay them and enjoy the fruits of what you get to keep.”

In the end, we’ll pay our taxes, but nothing says we can’t do our best to keep them as low as possible.

Mr. 39 Months

 

 

Staying “up to speed”professionally, while working on FIRE

Most of us working on FIRE are not there yet. We have to continue to slave away at work while we build up our resources and dream about life once we are there. Or we have hit FI, but continue to work because we enjoy what we are doing. Either way, we need to continue to work on staying competent in our roles as the technology and work change (in some cases, very dramatically)

Mr. 39 Months happens to work in the logistics industry (warehousing, trucking, etc.) – an industry which has started to feel the effects of the next wave of automation. Previously, automation meant conveyor systems to move packages, packaging machines to handle some of the mundane tasks, etc. The new wave of automation coming out is more heavily weighted towards robots and AI (an area that I am behind the curve on).

Every other year, my industry has a trade show, called Modex, in Atlanta GA. Imagine a floor about the size of 2-3 football fields, filled with the latest technology in pallet racking, conveyors, robots, software, hardware, etc. As an engineer, its like a kid in a candy store. The problem is having enough time to both see everything, and to talk in-depth with the vendors of technology you feel can be used in your company.

In addition, these shows have numerous seminars and training sessions that cover the technology, which enables you to better understand its uses, and how it might impact your company. While these sessions are put on by specific companies (who are trying to get you to buy their product) it still is a great way to train yourself in a new work method or piece of equipment.

I had a great time over the 4-days, learned a lot, and helped to improve my ability to assist my company. I would urge everyone who is working to seek out the professional society and trade shows for that group, and make an effort to attend. I don’t think you will be disappointed.

 

Mr. 39 Months

Rent a home vs Buy? The age old question….

There has been a lot of ink spent on trying to answer this most basic of questions. In the FIRE community, there are strong voices advocated each choice, and there are a lot of bloggers, even though their analysis shows that renting for them is optimal who choose to get a house anyway.

It is a decision that is based on numerous variables, each of which has to be determined for a market that is dramatically fractured. In my state of New Jersey, the price for the town next to mine is ½ to 1/3 the price of my own town. This is primarily due to the school system and the perceived value of that town.

Some of the monetary variables that need to be considered include:

  • Home value
  • Mortgage rate
  • Down payment
  • Property taxes
  • Repair costs
  • Condo fees
  • Decorating/remodel costs
  • Increases in home value
  • Increases in rent rates
  • Home insurance costs vs rental insurance costs

In addition, there are numerous non-monetary factors that impact this:

  • Neighborhood/School system – major factor with families
  • Closeness to other family
  • Not selling/owning home vs. continuing to rent into your retirement (i.e. if you purchase a home, its yours after 15/30 years, but if you rent, you are still renting at the age of 65)
  • Flexibility/ease to move (hard to move quickly while having to sell a home)
  • Ease of finding rental (in some markets, like Colorado, it’s almost impossible to find a rental. Home prices have shot up so much that it has forced out rental opportunities)
  • Rental increases in excess of model (you don’t have control of this, unlike a locked in mortgage rate – the owner could jump your rates 10% and you are out of luck)

I would say these intangible factors are what causes a lot of the FIRE bloggers who have done the math to buy a home anyway, even if the numbers say it doesn’t make sense.

In the end, the answer is – it depends. There are too many variables and too much personal preference involved in the decision. Everyone has to do the math for their specific situation, take into account the non-monetary factors, and then decide.

To help, here are some “make vs. buy” tools available for free on the internet.

NerdWallet: 4 years

Realtor.com: 9 years

NY Time: 9 Years

Zillow.com: 2 years

Smartasset.com: Depends on what you put in

I think NerdWallet and Zillow leave out a few things that need to be considered (Zillow has a hidden agenda to get you to buy a home). Realtor and NY times include a lot more items to be considered (maintenance of home, Condo fees, etc.). I like smart asset, because it lets you input a lot more of the data yourself (mortgage rate, repair costs, etc.) so you can match it easier to your current situation.

Other blogs to review:

Rockstar Finance: Pay off mortgage vs. Invest extra

Any thoughts on make vs buy for you?

 

Mr. 39 Months

One of the benefits of a major stock market correction…

A lot of folks have been bemoaning the drop in the market, talking about the billions of $ that have been lost, and how the market seems to been in danger of a major correction. The doom-and-gloom people have been out in force. Still, most folks in the FIRE community have taken in all in with a “grain of salt” because of our long-term outlook and our financial knowledge. We all remember that it’s all paper losses, until you sell.

One of the major benefits of a market drop is the potential to buy things “on sale.” If we truly believe that the long-term trend of the market is up, then this sudden drop gives us the chance to purchase something we wanted. I know most folks in the US flock to sales like crazy (especially around Christmas), but seem to shy away from “sales” on stocks. Seems odd, doesn’t it.

This has an added benefit when you find yourself with some excess funds, for some reason. Mr. 39 Months company paid out their bonus for 2017, and since the company did well, I got a decent amount of money. With the timing the way it is, I can drop that into the market and buy some items on sale at the equivalent of a 4.1% discount (based on Jan 31 prices). Also, since I put 100% of it into my deferred account, I am able to put that money into the market without paying taxes on it (I did have to pay Social Security and Medicare taxes).

The result was a nice bump in the money that I can access when I retire early, as part of my draw down strategy.

Find any bargains out there?

 

Mr. 39 Months

Update to draw down strategy – Mar 2018

After going through the health care analysis earlier, I (like so many others) have had to adjust my retirement plans and drawdown strategy to account for Obamacare and changes to it. Like so many others, as well, I will have to continually monitor the situation and make changes. In addition, Mrs. 39 Months looks like she wants to continue to work after we hit FI, but her job probably wouldn’t provide benefits.

The key issue is the provision for subsidies for individuals that do not make more than 4X the poverty level (the poverty level was around $16,000 for 2017). Thus, if your income, before deductions, is $64K or less, you can be eligible for subsidies. This may mean the difference between paying $1,400 a month and $600 a month for the same level of healthcare. Needless to say, if the situation remains the same, I’ll either need to make $64K, or $74K (the $10K necessary to pay the additional medical). I know many folks in the FIRE community knew this, but I thought it was $64K after deductions, not before.

Our initial budget post-retirement, was going to be about $72K, in order to pay for everything, including medical. This would provide for all bills, some travel, and $1K a month each for Mrs. 39 Months and myself in “fun money”/personal expenses. That would push us over the $64K figure. In addition, if Mrs. 39 Months works (earning around $24K), it adds a level of complexity. So how do I “square this circle?”

When we hit FI (27 months from now), we should have the following amounts.

  • Savings: $132K (can spend without having to pay taxes)
  • Deferred Income from work: $179K (when paid out, have to pay taxes on it)
  • Brokerage Account: $94K (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: $546K (taxable + penalty)
  • Roth IRAs: $257K (non-taxable)
  • Total: $1,345K liquid assets
  • House: $298K (not depending on it unless absolutely necessary, i.e. no reverse mortgage)

Complications

  • Mrs. 39 Months making $24K/year. Have to start from there
  • Inherited IRA will force us to take around $6K a year
  • When I leave company, I have to start taking my deferred amount. I believe I get to stretch it over 5 years, but that still winds up as a minimum of $36K a year

As you can see, I’m already up to $60K, without the ability to alter it. How do I get to $72K of income, without going over the $64K of taxable income?

Options

  1. Use the money in my brokerage account by selling some of the stocks there. I would only have to pay for any capital gains on it. Since it looks like about 2/3 of money in it will be basis money, I could take out $12K, and it would only show as $4K of income.
  2. Use some of my Roth IRA money, which is not taxable, to make up for the shortage. Even though I would only be 56 when I hit FIRE, I can still withdraw the money I put in, tax free. However, I am loathe to do this.
  3. Get myself a side gig/part time job to keep myself from going crazy from retirement boredom and pay for the additional medical costs. We will have to see about that.

What is my current plan? I’m going to plan for option 1, and if I get really bored in retirement, I’ll probably shoot for #3, with the understanding that I will be working half of my time just to pay for medical. Like so many others in the US, medical is driving the train!

Of course, all this could change over the next 27 months as we move forward.

So, any changes to your drawdown plans, folks?

 

 

Mr 39 Months
 

Great chart at “Four Pillars” on how long it will take to reach FI at certain income and spending levels   

I think the chart below is excellent. Its from FourPillarFreedom.com (a blog I’ve got to start reading now) that was linked to by The Simple Dollar. It shows, at certain income and spending levels, how many years it will take you to reach FI (assuming the 4% rule and a 5% interest after inflation). I believe it also takes into account taxes, etc. in the annual spending (i.e. your annual spend should include your taxes)

Many folks find it difficult to explain to people why they should save so much, and how it takes effort and sacrifice to reach our financial goals. This chart makes it a little easier to explain to people how long they would have to work in order to retire/reach FI.

Four Pillars has a lot of other tools (listed under his “Visuals” area) that help to show many of the FI concepts.

Check him out.

 

Mr. 39 Months

Interesting philosophical question on Root of Good…

What do you do if you have reached FI, but are scared to “pull the trigger.”

What do you do when you’ve been diagnosed with a terminal disease that might mean your death in the next 5 – 10 years – but you are still scared of leaving the workforce?

Should you retire early if you only have five years to live?

I think this is close to many FIRE folks big nightmare. They work and scrimp and save, only to have something come up right as they are heading out to their new life.

I hope your thoughts and lives are doing better than this!

Mr. 39 Months