You’ve got to have hobbies 2

Sorry for the lack of postings, but I’ve spent the last week backpacking the Appalachian Trail (AT) in Shenandoah National Park, Virginia. In seven days, a group of six of us hiked 69 miles southbound on the AT. The group had a wide variety of ages and experience – from 31 to 61, from only having hiked before (no backpacking) to 14+ years of backpacking experience.


For those of you unfamiliar with the AT, it was originally created back in the 1920s and 1930s as a series of trails and small wooden 3-sided shelters (capable of holding 7-14 people) for people to be able to use on the weekends to get away to nature, get to the outdoors. Shortly after it was created, someone came up with the idea of hiking the series of trails in some connected fashion, and thus was born the idea of “through hiking” the AT.


The AT stretches from Georgia to Maine, running along the Appalachian Mountain chain for over 2,100 miles. Backpacking its length has become a sort of “rite of passage” for some people, where folks who are facing significant changes in their life (graduations from school, going out into the work world, retirement, job loss, death of a spouse or loved one, etc.) go to travel alone and experience nature. Many folks have called it “America’s Camino”.


Another way to through hike it, which I’ve chosen, is to section hike it, where you hike portions of the trail on the weekends and for weeks at a time, over a period of time. I’ve spent the last 14 years doing parts of the trail, and have racked up almost 800 miles so far. It’s a good way to experience the trail, without committing to the 4-6 months that it would take to through hike it.


I’ve said before that you have to have something to do (hobbies, part-time work, volunteer work, etc.) to keep yourself occupied once you “retire” or you will go nuts with boredom. I have woodworking, backpacking and some other interests. Whatever you want to spend time on, go for it. It’s one of the primary reasons to become financially independent – to get your time back.


Have fun out there.


Mr. 39 months


Book Review – Work Less, Live More by Bob Clyatt

Bob Clyatt wrote this book in 2007 to detail his journey through early retirement (at age 42) back to semi-retirement. His definition of “semi-retirement” seems to be in line with a lot of FIRE writers – a part time or temp position that allows you to earn additional hours performing work that you generally enjoy. He is another individual who achieved financial independence, but after retiring early, he found that his worry about money and his desires to stay involved led him back to the work world – but only partially.


The books starts out with working on the “whys” of early/semi-retirement (stale work, new ideas, etc.) and then goes into how to prepare for it. He covers some of the difficult steps of moving from work to semi-retirement. A significant portion of the book is dedicated to setting your spending plan and living beneath your means (determining annual spending, retiring outside the US, etc.)


He then goes into investing strategies for the semi-retired, including portfolio theory, rational investing and rebalancing. He provides concrete examples of various portfolios, based on the individuals he interviewed. He also discusses the 4% safe withdrawal rate, and provides backup for the data and results.


Finally, he goes through other aspects of early/semi-retirement. He talks about the advantages of part-time/temp work, volunteer work, health care, etc. In the end, he urges everyone to take simple steps to make their life well-lived.


One of the best parts of the books  are the numerous resources, links and web pages  for the various topics covered. It is here where the  book really proves its value, and it becomes a good read for those of us seeking financial independence and an early or semi-retirement.

Rating 4 stars out of 5

Final Ratios

The final ratios I want to discuss are Savings ratios and Growth ratios


Savings Ratios


You can use current income to pay for current consumption or to pay off past debts . The other option is to purchase assets that grow and create wealth – wealth that will provide financial security. This wealth is acquired by deferring current consumption and diverting income into long-term investments. The savings ratios measure the amount being saved and invested.


The first one is investment assets-to-net worth ratio = investment assets / total net worth (both items from net worth sheet).


This tracks increases of income and wealth producing assets. Many people have a significant amount of their net worth tied up in their personal homes (and when that value drops like in 2008, it can be catastrophic). This ratio helps to show improvement in non-real estate assets.


Based on our previous statements, the ratio would be $165,000 (investment assets) / $298,700 (total net worth) = 55.2%. This ratio should increase over time as you close in on retirement


The second savings ratio you should track is the savings-to-income ratio. It is a simple one, and its purpose is to determine the percentage of your income you save each year. You gain the data from your cash flow statement.


Based on the previous statements, the ratio for the previous documents would be $13,500 / $79,100 = 17% of their income, which is good for normal folks. However, for FIRE people, the percentage is a little low – most FIRE folks shoot for 30% – 50% or more. The ratio of savings you need to perform is based on your overall financial goals.


Note that this ratio should increase over time, especially as you pay off debts and the mortgage. Don’t just take pay increases and increase your lifestyle – always take some (or all) of it and put it aside into savings.


Real Growth Ratios


Inflation is the killer of savings, slowly bleeding your savings down until you have nothing left. If inflation is 3%, the price of a product will double in 24 years. How do you deal with this?


You save enough and invest correctly, so your money grows faster than the rate of inflation. You should use the growth of Net worth ratio to make sure you are keeping up with inflation.


Growth of Net Worth Ratio =[(Net worth this year – New worth last year) / Net Worth last year] – inflation rate

Example: [( 298,700 – 275,000) / 275,000] – .03 (inflation rate) = 0.056 or 5.6% Net Worth growth.


Then once you retire, you follow the 4% rule, adjust for inflation, and enjoy the good times!


Think of your financial ratios as a report from your annual financial health checkup!

First two financial ratios

In my last post, I wrote about the two basic financial reports, net worth and cash flow. These are the building blocks for understanding your current (and potentially future) financial status.


The next things to consider are important ratios, where you compare key parts of the main two reports to determine specific financial status. Like Net Worth, ratios are static “snapshots” of current financial status. The important thing with ratios is to track them over time, and see if you are improving your financial situation.




Liquidity is a measure of the speed at which an asset can be converted into cash without loss of value. Cash, savings, checking and money markets can be quickly turned into cash. Stocks and Bonds (and real assets like gold, real estate, etc.) are more difficult to turn into cash at short notice.


Most people require a little bit of liquidity in order to survive (purchase food, pay bills, etc.). The key is to keep your liquidity in line with your other financial goals, and to keep your liquid assets as low as possible (while still being able to sleep at night).


The basic liquidity ratio is:

Liquidity Ratio = liquid monetary assets (from balance sheet) / average monthly expenses (from cash flow statement)


Liquid assets: Cash, checking, money market accounts, and savings

Two months recommended


From our previous post, the individual has a liquidity ratio of $22,200 (from Net worth) / $6,414.58 (annual expenses divided by 12) = 3.46 months for liquidity.


If your income is steady and your job secure, with predictable expenses, you probably don’t need much more than 2x your expenses in liquid assets. Many financial advisors (like Dave Ramsey) recommend building up this “emergency fund” to as much as 6 months. Some folks (like Mrs. 39 months) like it as high as 12+ months.


Debt Ratios


The purpose of debt ratios is to determine the amount of financial leverage you currently use, and to track as you (hopefully) improve. The objective is obviously to become debt-free, especially if you want to be financially independent. The debt-to-asset ratio is very useful for tracking progress.


The data source is entirely the balance sheet. Debt-to-asset ratio = total debt / total assets.

From our example last post, $96,500 Debt / 335,300 Assets = 0.288


Another Debt ratio that is good to track is the Debt-to-Gross income ratio, which is the total debt payments / annual take home pay (pay after taxes, medical, etc.). It is used to help determine your ability to pay the debts off.


The source of the data is the cash flow statement.

From our example last post, $$11,400 (mortgage & debt payments) / $45,925 (total take home pay) = 0.248 or 24.8%. This is pretty good, as you should never take on debt payments (including student loans) of over 36% of salary.  Another recommendation is not to take on housing costs (mortgage or rent) of more than 28% of salary.


For my next post, I’ll talk about Savings Ratios and Real Growth rate ratios.


Mr. 39 Months

Basic Financial Documents

Basic Financial Documents


I was going to start some postings on basic finance documents and ratios, for a FIRE reader to use to start tracking their performance and see how they are doing over time. The key with all of these is that they are “snapshots” in time, which give you a single image. You have to rack them, over time, to see how you are doing.


Comparing yourself to others is madness (and is the heart of the “keeping up with the Joneses” spending which has caused so many issues in the current culture.


Instead, track yourself, and see yourself improving. By doing that, you can see your improvement over time. That should provide motivation enough to keep moving forward.


Net Worth

  1. Assets: Items you own. Don’t get too complicated here, because you will have to maintain it regularly. Keep it as simple as possible
    1. Liquid assets (cash, checking, savings, money market)
    2. Investments (stocks, bonds, real estate, etc.)
    3. Personal assets (home, cars, property, etc.) – be very realistic here. They aren’t very liquid, so difficult to generate cash from them
  2. Liabilities: Debts or amounts that you owe
    1. Short-term: pay off in next 12 months (credit card, utility bills, etc.)
    2. Long-term: payoff that requires more than 12 months (auto loans, mortgages, student loans, etc.)
  3. Net worth:

Net Worth = Assets – Liabilities


Here is a sample Net worth Statement (not mine)

Assets Total
Financial Assets
Cash $200
Checking $3,000
Money Market Accounts $7,000
Savings $6,000
Certificates of Deposit $6,000
Total financial Assets $22,200
Personal Assets
Clothing $12,000
Furnishings $15,000
Auto $20,000
Home $150,000
Other $1,100
Total personal assets $198,100
Stocks $0
Bonds $0
Mutual Funds $25,000
Retirement Plans (401K, IRA) $90,000
Life Insurance Cash Values $0
Real Estate $0
total Investments $115,000
Short Term
Utilities ($500)
Credit Card ($2,000)
Other $0
total short-term debt ($2,500)
Long Term
Auto Loans ($3,000)
Student Loans ($15,000)
Home Mortgage ($76,000)
Other $0
Total Long-term debt ($94,000)
Total Assets $335,300
Total Liabilities ($96,500)
Net Worth $238,800


The Net Worth is a snapshot in a period of time (I take mine on Jan 1 of each year). You should track it at regular intervals. Your Goal is to increase your net worth to achieve a desired degree of financial security, and to eventually be able Financially Independent.



Cash Flow Statement


The Balance Sheet lists values for a single point in time. Your Cash Flow statement will show activity over a period of time, like a year. It has two sections – sources of income and expenses. Sources include any activity that produces cash for you to spend. Expenses list your expenditures (mortgage/rent, food, auto loan, insurance, etc.)


It’s helpful to divide the expenses into two categories – fixed and variable. Fixed are often non-negotiable (mortgage, insurance, etc.) while variable expenses are often under your control (dining out, vacations, etc.). Note that developing the cash flow statement can be difficult for many, as tracking your expenses at first seems to be a monumental task. Start with a shorter time frame (a month, or a week) and build from there.


Cash Flow

  1. Income: Includes all sources of cash
    1. Wages
    2. Pensions
    3. Investment income
    4. Cash gifts received
    5. Loans
  2. Expenses
    1. Payroll deductions (taxes, health insurance, Social Security, 401K, etc.)
    2. Fixed Expenses (mortgage payments, loan payments, utility bills, property taxes, etc.)
    3. Variable Expenses (Food, dining out, clothing, gifts, etc.)
  3. Cash Flow

Cash Flow = Income – Expenses



Here is a sample Cash Flow Statement (not mine)

Sources of Cash
Wage/Salary $77,000
Interest $900
Investment Distributions $1,200
Total Sources $79,100
Payroll Deductions
Federal Income Tax ($14,000)
Social Security Tax ($5,775)
State Income tax ($3,500)
Medical Insurance Premium ($2,400)
401K plans ($7,500)
Total Payroll Deductions ($33,175)
Fixed Expenses
Mortgage ($7,800)
Loan Payments ($3,600)
Utilities ($5,000)
Insurance ($3,000)
Property Taxes ($3,000)
Investment plans ($6,000)
Total Fixed Expenses ($28,400)
Variable Expenses
Charitable contributions ($2,400)
Clothing ($3,000)
Education $0
Food ($5,000)
Gifts ($2,000)
Travel/Vacation ($3,000)
Total Variable Expenses ($15,400)
Total Sources of Cash $79,100
Total Expenses ($76,975)
Cash Flow $2,125


Again, keep your cash flow records as simple as possible. Excessively detailed records require more maintenance, increasing the chance that you will get tired of updating the information. It is better to have a simple statement that you update regularly than a complicated tracking system.


Your first cash flow statement is often the most difficult to develop. As you do more, you will find it easier because you have a starting point to go off of.


Understanding your cash income and your expenses is a critical step to taking control of your finances. From here, you can make plans, determine tradeoffs, and make educated guesses on where to add and where to cut back. This will enable you to focus your expenditures toward your financial priorities.



Financial Independence Reading List

Here are the books (physical and electronic) that I’ve managed to accumulate over the last 15 years, as I’ve made my way towards Financial Independence.

In the months ahead I hope to be able to give book reviews on them and other books, so you can have some idea of their potential use for you.

Area Title Author
Business Street Smarts Brody and Burlingham
Business The $100 Startup Chris Guillebeau
Financial Planning Fast Forward MBA in Financial Planning Eugene McCarthy
Financial Planning I will teach you to be Rich Ramit Sethi
Financial Planning Multiple Streams of Income Robert Allen
Financial Planning The fast forward MBA in Finance John Tracy
Financial Planning The Simple Dollar Trent Hamm
Financial Planning The Total Money Makeover Dave Ramsey
Financial Planning Your Money: The missing Manual J.D. Roth
Frugality Living Large in our Little House Kerri Fivecoat-Campbell
Frugality Scratch Beginnings Adam Shepard
Frugality The Autobiography of Benjamin Franklin Benjamin Franklin
Frugality The Millionaire Next Door Stanley and Danko
Investments A Random walk down Wall Street Buron Malkiel
Investments Fail-Safe Investing Harry Browne
Investments Safe Money in Tough Times Jonathon Pond
Investments The Intelligent Investor Benjamin Graham
Investments The little book of Value Investing Christopher Browne
Investments Value Investing for Dummies Janey Haley
Investments Yes, you can be a successful Income Investor Ben Stein and Phil DeMuth
Investments Yes, you can get a financial life Ben Stein and Phil DeMuth
Investments Yes, you can supercahrge your Portfolio Ben Stein and Phil DeMuth
Philosophy A place of my own Michael Pollan
Philosophy Chop Wood, Carry Water Rick Fields
Philosophy How to win friends and Influence People Dale Carnegie
Philosophy Life 101 Peter Wallace
Philosophy Shop Class as Soulcraft Matthew Crawford
Philosophy The Four Hour Workweek Tim Ferriss
Philosophy The Right Way to Hire Financial Help Charles Jaffe
Philosophy Think and Grow Rich Napoleon Hill
Philosophy What color is your Parachute Richard Bolles
Retirement Retire Early and Live Well Gillette Edmunds
Retirement The WSJ Complete Retirement Guidebook Ruffenach & Greene
Retirement Work Less, Live More Bob Clyatt
Retirement Yes, you can still retire comfortably Ben Stein and Phil DeMuth



Monthly Update for May 2017 (Month 38)


So how am I doing vs. my goals for 2017?


  1. Invest $33,000 in tax-advantaged accounts in 2017: Put in $4,660.87 into my 401K and Roth IRAs. Currently have put in $18,084 for year (including a 5.7K bump from part of my bonus). On track to hit it
  2. Invest $26,000 in regular accounts in 2017: Put in another $1,376.29 (my old mortgage payment). Currently have put in $16,881 (rollover money from Pop’s IRA and bonus money)
  3. Increased dividend income to $18,000: Won’t figure dividends till end of quarter, when a lot of them pay out
  4. Passive income covers 65% of base living expenses: Again, will wait till end of quarter to figure out
  5. New worth beats 6% growth figure: Assuming house worth stays equal (hard to figure out in this market), my net worth is up 5%, primarily due to investments. Looks like I should be able to hit my goal here.
  6. Begin attending REIA (Real Estate Investor’s Association)  Meetings: Will start in July
  7. Start a blog: Done in April
  8. Publish Student Finance Book: Done in April
  9. Increase weight lifted by 10%: I’m up 6% for year, but have plateaued for last 2 months. Part of it is just sticking to regular exercise
  10. Average 3 hours of Cardio every week: Currently doing a little over 1 hour. Not good
  11. Go on an international trip: Wife’s job status doesn’t allow for vacations till Oct. Will try to squeeze something in
  12. Visit a national park: Again, wife’s job status. Will probably try and hit Ellis Island this summer
  13. See the 2017 Solar Eclipse: August 21st! Unfortunately, we won’t be in the direct path, but I have family in Knoxville TN that will.


Investment Returns for May:

  • IRAs (30% bonds, rest split between S&P500, REITs, Small Cap & Int’l): +0.87%
  • Roth IRAs (30% bonds, rest split between S&P500, REITs, Small Cap & Int’l): +0.75%
  • 401K (30% bonds, rest split between S&P500, Small Cap & Int’l): +0.80%
  • Deferred compensation from work (30% bonds, rest split between S&P500, Small Cap & Int’l): +0.87%
  • Inherited IRA (set up for income; 25% REITs, 25% dividend stocks, 50% bonds): +0.78%
  • Personal investments (26% stock, 44% REIT, 30% bond ): -0.92%


Apparently, I continue to do poorly at picking stocks, REITs and bonds for my personal investments. I doesn’t help that I’m trying to get my personal investment allocation to match my inherited IRA. That means I’ve been buying a lot of bond index funds – and with rates going up, I’m getting hammered.


Overall, I’m pretty happy with May, and with the year so far. Month 38 is “in the can” and retired.


On to month 37!


Mr. 39 Months





Why the painting “The March to Valley Forge” by William Trego?

I have been asked occasionally why I chose the picture at the top of the blog, William Trego’s “March to Valley Forge.” It’s a picture of a key point in America’s war for Independence, created in 1883.



The oil painting was painted by Trego in Philadelphia in 1883 and exhibited at the Pennsylvania Academy of the Fine Arts, where he studied for three years under Thomas Eakins. It is made even more impressive by the fact that Trego’s hands were nearly paralyzed – possibly from polio – at the time that he painted it, forcing him to hold a paintbrush with one hand while guiding it with the other. Trego’s inspiration for the painting was a passage from Washington Irving’s 19th century biography “Life of Washington”: “Sad and dreary was the march to Valley Forge, uncheered by the recollection of any recent triumph. . . Hungry and cold were the poor fellows who had so long been keeping the field . . . provisions were scant, clothing was worn out, and so badly were they off for shoes, that the footsteps of many might be tracked in blood.”


While I don’t place my efforts anywhere near on par with the struggles at Valley Forge, I do want to point out that getting to financial independence is a struggle.


  1. We are constantly being bombarded on media with the consumer culture, how buying this item or that one will make us happier, sexier, more fulfilled, less stupid-looking, etc. The marketing departments in the world have had over 100 years to perfect this, and they are very good. They especially target the 18-35 year old crowd because their purchase preferences have not been set yet. As one gets into their 40s and 50s, you tend to purchase the same cars, same cereal, and same toilet tissue. That is why so many shows market to the younger generation, because that is what the marketers want.
  2. The desires of Family (especially your significant other) play a massive role in gaining (or failing to gain) financial independence. The biggest financial decision you make in life is not your career, your school, or where you live – it’s who you choose as a spouse/significant other. If you choose someone who likes to spend, run up credit card debt, and live an extravagant lifestyle, you will not easily be able to achieve financial independence.
  3. Expectations of society (neighbors, work, etc.) also play a significant part in your spending. If you are a lawyer, doctor, etc. you are expected to dress a certain way, drive a certain car, and live a certain lifestyle. It is really difficult for someone in that situation to buck the trend and concentrate on achieving financial independence. That is one of the reasons I like being an engineer – our societal expectations are much lower.


As I said in my earlier posts, I really didn’t get the FIRE “bug” until I hit 36. I lost a tremendous amount of time and wealth accumulation in the 14 years from graduating till then. When I talk with college students and emphasize starting off the bat with savings, I hit them with the chart below. It shows three options:

  • Starting at age 22, investing $5,000/yr. and then stopping at age 30 when life makes it complicated
  • Waiting till age 30, and then putting in $5,000/yr. until you retire
  • Starting at age 36 (when I did) and putting in $11,500/yr. until retirement


Graduate A Graduate B Graduate C
Age Investment Value @10%   Investment Value @10%   Investment Value @10%
22  $    5,000  $           5,000  $       –  $                 –  $          –  $                 –
23  $    5,000  $         10,500  $       –  $                 –  $          –  $                 –
24  $    5,000  $         16,550  $       –  $                 –  $          –  $                 –
25  $    5,000  $         23,205  $       –  $                 –  $          –  $                 –
26  $    5,000  $         30,526  $       –  $                 –  $          –  $                 –
27  $    5,000  $         38,578  $       –  $                 –  $          –  $                 –
28  $    5,000  $         47,436  $       –  $                 –  $          –  $                 –
29  $    5,000  $         57,179  $       –  $                 –  $          –  $                 –
30  $    5,000  $         67,897  $ 5,000  $           5,000  $          –  $                 –
31  $          –  $         74,687  $ 5,000  $         10,500  $          –  $                 –
32  $          –  $         82,156  $ 5,000  $         16,550  $          –  $                 –
33  $          –  $         90,371  $ 5,000  $         23,205  $        –  $                 –
34  $          –  $         99,409  $ 5,000  $         30,526  $          –  $                 –
35  $          –  $       109,349  $ 5,000  $         38,578  $          –  $                 –
36  $          –  $       120,284  $ 5,000  $         47,436  $  11,500  $         11,500
37  $          –  $       132,313  $ 5,000  $         57,179  $  11,500  $         24,150
38  $          –  $       145,544  $ 5,000  $         67,897  $  11,500  $         38,065
39  $          –  $       160,098  $ 5,000  $         79,687  $  11,500  $        53,372
40  $          –  $       176,108  $ 5,000  $         92,656  $  11,500  $         70,209
41  $          –  $       193,719  $ 5,000  $       106,921  $  11,500  $         88,730
42  $          –  $       213,091  $ 5,000  $       122,614  $  11,500  $       109,102
43  $          –  $       234,400  $ 5,000  $       139,875  $  11,500  $       131,513
44  $          –  $       257,840  $ 5,000  $       158,862  $  11,500  $       156,164
45  $          –  $       283,624  $ 5,000  $       179,749  $  11,500  $       183,280
46  $          –  $       311,987  $ 5,000  $       202,724  $  11,500  $       213,108
47  $          –  $       343,185  $ 5,000  $       227,996  $  11,500  $       245,919
48  $          –  $       377,504  $ 5,000  $       255,795  $  11,500  $       282,011
49  $          –  $       415,254  $ 5,000  $       286,375  $  11,500  $       321,712
50  $          –  $       456,780  $ 5,000  $      320,012  $  11,500  $       365,384
51  $          –  $       502,458  $ 5,000  $       357,014  $  11,500  $       413,422
52  $          –  $       552,703  $ 5,000  $       397,715  $  11,500  $       466,264
53  $          –  $       607,974  $ 5,000  $       442,487  $  11,500  $       524,390
54  $          –  $       668,771  $ 5,000  $       491,735  $  11,500  $      588,330
55  $          –  $       735,648  $ 5,000  $       545,909  $  11,500  $       658,662
56  $          –  $       809,213  $ 5,000  $       605,500  $  11,500  $       736,029
57  $          –  $       890,134  $ 5,000  $       671,050  $  11,500  $       821,132
58  $          –  $       979,148  $ 5,000  $       743,155  $  11,500  $       914,745
59  $          –  $    1,077,063  $ 5,000  $       822,470  $  11,500  $    1,017,719
60  $          –  $    1,184,769  $ 5,000  $       909,717  $  11,500  $    1,130,991
61  $          –  $    1,303,246  $ 5,000  $    1,005,689  $  11,500  $    1,255,590
62  $          –  $    1,433,570  $ 5,000  $    1,111,258  $  11,500  $    1,392,649
63  $          –  $    1,576,927  $ 5,000  $    1,227,383  $  11,500  $    1,543,414
64  $          –  $    1,734,620  $ 5,000  $    1,355,122  $  11,500  $    1,709,256
65  $          –  $    1,908,082  $ 5,000  $    1,495,634  $  11,500  $    1,891,681
66  $          –  $    2,098,890  $ 5,000  $    1,650,197  $  11,500  $    2,092,349
67  $          –  $    2,308,779  $ 5,000  $    1,820,217  $  11,500  $    2,313,084


Notice how the person who started early and then stopped, still winds up with a lot more money than the one who waited, and then kept putting in. Also notice how much I have to contribute to “catch up”
I often see FIRE blogs that talk about their wonderful, frugal lifestyle, and I get it. I can see how being content with your life is a major point to make this work, and is a key part to happiness in life. I just want to make sure that everyone realizes that it is also a struggle against the current to make it happen, and it takes hard work and perseverance to be successful.

An interesting point. Washington and his army marched out of Valley Forge in June 1778, ready to continue the struggle. Roughly 39 months later, they (with the help of the French) were able to encircle Cornwallis in Yorktown, and after a siege, force his surrender – the final major battle in the war. After a long struggle, independence was gained!

I wish you luck on your journey.


Mr. 39 Months

Memorial Day 2017

Memorial Day, originally called Decoration Day, grew out of the sacrifices of the American Civil War. It is a day of remembrance for those who have died in service of the United States of America. The first place to hold services for it are in conflict, but by the 1870s, numerous cities and towns were taking part. In 1915, after the publication of the poem “In Flanders Fields”, Moina Michael came up with the idea of using red poppies to honor those who died serving the nation during war.


It is estimated that over 1.8 million Americans gave their lives in the wars from the Revolution till now. Most folks celebrate this day with a BBQ with friends and family, but with little thought to its significance. For me, as an army veteran and with family who served, it bears a slightly higher significance.


I had three uncles on my mother’s side serve in Vietnam, and have two Brother’s-in-laws who also served (one in Vietnam). While none of them died in the war, I still honor their service. As a West Point graduate, I’ve had a few of my classmates die in combat, and I am saddened by the loss. I remember them when they were young, 18-22 year olds with all the promise and passion of youth. I remember and honor them.


In today’s America, there are fewer and fewer people connected to the armed services, and the people who protect us. I applaud the fact that the society, for its part, goes out of its way to acknowledge the debt and celebrate the people who do this hard work. I make every effort to thank these folks, both active and veteran, whenever I see them, and I hope you do as well.


Politics has always been a divisive force in America, and it often has led people to hate the soldier, even though they are doing their duty to protect all. I guess that comes from our innate dislike of a “standing army” that we inherited from our British kindred. For the longest time, America did not “go overseas to seek out dragons to slay” as John Quincy Adams said in the 1800s. It was only with Woodrow Wilson and WWI that America really began to go out in the world and make their mark.


I am not going to get into whether this is good or bad – again this isn’t a political blog. Just take the time to remember the folks that gave their lives so we could live in freedom on Memorial Day. That is the greatest gift you can give them and their families.

Mr. 39 months


Note: A “National Moment of Remembrance” resolution was passed in Dec 2000 which asks that at 3pm local time, for all Americans “To Voluntarily and informally observe in their own way a Moment of remembrance and respect, pausing from whatever they are doing for a moment of silence.

Book Review – Retire Early and Live Well by Gillette Edmunds

This book could be classified as one of the earliest FIRE books I have seen. Written in 1999 (right before the dot com crash), the author details how he retired from financial journalism in 1981 at the age of 29, with a wife, two kids, and $500K in investments. In his first year, he suffered through a serious market downturn, and then the “flash crash” of 1987. Still he and his family were able to survive and prosper, and then participate in the great investment boom of the 80’s and 90’s. When he wrote the book in 1999, he had managed to triple his investments while living off them.


The first part of the book covers how to determine if you can retire today. He goes through the process of determining your current living standard, tax multipliers, future spending and debt. He provides a chapter on the issues that might pop up with an early retirement (emotional issues, fee based investment advisors, life expectancy, etc.) In the end, he provides a formula for determining whether you can retire now, or how much more you need to save before you can, including suggestions on speeding up the process. It’s a good first start.


The second part of the book assumes you are ready to retire early, and works on how to set up your investments to supply you with the funds you need for the long term. He doesn’t assume a “4% rule” (it may not have been completely accepted in 1999) so his process is more along the lines of:

  • You need $60,000/yr. to live, including taxes
  • You have $1,000,000 in investments
  • You assume a 3% inflation rate
  • Thus you need investments that make 9% return historically (6% for your $60,000/yr. plus 3% to offset inflation)
  • Design your asset mix to make an average of 9%


This is a key plus for this book versus many other investment manuals. Most information available concentrates on the “accumulation” phase of life, where you are building your wealth. Very few cover what to do once you have achieved financial independence and just want to live off it.


Mr. Edmunds then takes the time to explain each of the asset classes, their strengths and weaknesses, and how they fit in with a retirement portfolio. One of the more interesting points he has in when talking about real estate. For most folks, they think of getting real estate with no money down or with 20% down payment at most – using leverage to maximize gains. What the book points out, though, is that you are now retired and don’t need to increase wealth; you need to generate cash flow. Thus, Mr. Edmunds suggests purchasing real estate with 50% down and 50% leverage, so that the property generates a good 10%+ case flow from day 1 (instead of waiting years). This fly’s in the face of current real estate planning, but it does have merit!


Edmund suggests you figure out the investment return you need, and then create a portfolio of 3-5 different asset classes that don’t move in sync with each other (ex. US Bonds and foreign stocks often vary year to year in returns). He provided what the average returns were for each of these asset classes are, based on the longest studies he had available at that time (1999). He does caution not to use the returns from 1984-1999 as he recognized they were an anomaly.


In the final part of the book, Edmunds helps you design your retirement portfolio. Here is his chart and a corresponding list of Vanguard Index funds and their returns over the last ten years (in case you want to do comparisons). You will note to start that his returns are higher for most items vs the last ten years (especially for bonds):

No Description Book Return 10yr return Vanguard
1 Emerging Markets 14% 2.42% VEMAX
2 US Small Company 12% 8.01% VSMAX
3 US Large Company 10% 7.30% VLCAX
4 Foreign Company 10% 5.68% VTIAX 5 year
5 US Real Estate 10% 5.00% VGSLX
6 US Oil & Gas 8% 1.26% VGENX
7 Corporate Bond 7% 5.75% VICSX As of 3/2010
8 Foreign Bond 7% 4.50% VTIAX as of 11/2010
9 Treasury Bond 6% 6.79% VLGSX as of 3/2010
10 Municipal Bond 5% 2.59% VTEAX as of 8/2015
11 Money Market/CDs 4% 0.76% VMMXX
12 Treasury Bills 3% 0.68% VMFXX
13 Gold 3% -5.62% VGPMX



Using his format, if you wanted to get a 9% return for the situation above, you could go with:

  • 40% Large Company stocks @10% return = 4%
  • 35% Foreign Company stocks @10% return = 3.5%
  • 25% Treasury Bonds @6% return = 1.5%
  • Total of 9% return, on average


I think the process has merit, but I’d like to see more studies post-1999 on long-term returns.


The epilogue of the book is possibly the most useful part for those of us retiring early. In it, Mr. Edmunds details his story and “How to live through a crash without putting a bullet through your head.” He had many ups and downs, made some mistakes, but eventually came out alright (even today, he is doing well, 35 years after retiring at 29). He talks about steps to take when the market is crashing, life planning for after retirement, and what lessons he has learned. If nothing else, look at it for this chapter.


Overall, I think it is an excellent book, though some of the percentages might be dated. Grade 4 stars out of 5


Mr. 39 months