The joys of reading

One of the things I am really enjoying about my goals this year is the one for me to read at least one book a month. I have rediscovered how much I really enjoy reading books. All manner of books (history, fiction, financial, etc.) I did this a lot as a kid and in my early adulthood (when Mrs. 39 Months and I first married, we didn’t have a TV, so we ended up reading a lot.

Every so often, you decide to take a weekend and just relax. As those who have read the blog before know, I am a bit of a “type A” personality (very goal focused, want to stay busy, can’t let a day go by without trying to get stuff done). Mrs. 39 Months believes it will be impossible for me to “kick back” and retire once we hit FI. She is probably right.

This morning, before we set off on our day, I was waiting for Mrs. 39 Months to get ready.  had the opportunity to watch TV, play games on the computer or read – and I chose to read. In this case, I was finishing Carl Richard’s book The One Page Financial Plan (book review to follow in a few days). I was able to finish it up (it’s a good read) while waiting, and I enjoyed it a lot. It will also give us something to talk about in our drives around today.

So don’t neglect to make some goals for the year that you will enjoy. Look for old hobbies you had earlier in life that you really enjoyed, and try and “re-discover” them. You will probably find the love is still there.

 

Mr. 39 Months

Thank you all!

Well, will you look at that? One of my goals for 2018 was to double my traffic at the blog. In 2017, I was just over 2,000 visitor. As of July 25th, I had over 4,000 visitors for the year – just seven months in!

I wanted to take the opportunity to thank all of you who have read, and who have commented. For those of you who are bloggers, you know that sometimes in seems like you are just writing to “the air” and not sure if anyone is paying any attention to your thoughts and ideas. Sometimes you spend a lot of time on a topic, craft your message exactly, and then …. Nothing.

I would also like to thank all the folks whose blogs I have read, thought about, and commented on. I do love the community that has been built by FIRE folks. The ideas, the feedback, and just the life stories. I especially like it when folks write about their struggles, and how everything isn’t perfect.

In our “facebook and twitter” universe, it is often easy to feel that everyone else is doing it better, and is having a much better time. All you see are their vacation pictures, great restaurants, and great times. Yet I am sure they are having their own struggles and challenges. That is why it is good we can be so frank in our community.

So thanks again for tuning in, and I’ll continue to write and reach out to you as I can.

 

Mr. 39 Months

Now I’ve got Mrs. 39 Months thinking….

As we’ve approached FI ever closer, I’ve tried to engage Mrs. 39 Months in conversations about key aspects of our lives once we hit FI (where will we want to live, what do we want to do, how will we occupy our time, does she want to continue to work, etc.).

For the most part, she has resisted these conversations, and has even questioned my willingness to kick back & retire (She doesn’t think I can do it). Her greatest fear, like so many of us, is running out of money as she gets into her late old-age, and is unable to deal with it easily. She also knows that I have been a typical “type A” personality (take charge, prefer action, can’t sit still) and so believes I will go nuts if I retire.

At her place of work, they (like so many others) play the lottery as a group. As she was there talking with a coworker in the break room, they stated that they had a small winning at some part in their lives (about $600,000). That got Mrs. 39 Months thinking about what she would do if she won something like that in the lottery. When a group plays, you obviously don’t win the whole $100M, you win that divided by all the people in the pool.

When we discussed it while cooking dinner, she wondered what sort of income stream she could get off that. I talked with her about the 4% rule, and this would be about $24K a year/$2K a month. She then asked about how you go about creating that sort of income stream, so I had to go into the “3-bucket” method (2 years of cash, 3-5 years of bonds, rest in stocks) to create a safe method for withdrawing.

Suddenly, we were talking about our lives in the near future, whether we would work in low-stress jobs, etc. Its been some interesting conversations over the last week.

As we close in (just a little more than 23 months to go) I’m sure these conversations will get a little more intense and involved. Looking forward to it.

Along those lines, Minafi has an interesting article for dreaming about your FI lifestyle – writing up your perfect week

 

How have your discussions gone with your significant other?

 

Mr. 39 Months

 

 

 

How do I track my investments?

There are all sorts of investment tracking systems, software and websites out there, and I’ve tried several. I really put a lot of effort about ten years ago into using Quicken’s software, which allowed it to download from your various investment and bank accounts and automatically update. The problem I had was when it mis-allocated some spend I did (calculating a grocery bill as something else, etc.) it was difficult (for me) to alter it. Within 6-9 months of getting it started, my bank accounts were not matching up with the downloads, and there were all sorts of issues.

As an engineer, I finally threw up my hands, opened up MS Excel, and created spreadsheets to do my bank and investment tracking myself. Since I’m a bit of a money nerd (like so many of us in the FIRE community) I started tracking my banking (both family and personal) in a spreadsheet to see how I did. That led me to get a better handle on my spending, and a better estimate for future spending & goals.

I also started tracking my investments with my own MS Excel spreadsheet. Again, I felt I had more control of the results, rather than a specific, cookie-cutter approach from someone’s software package. I could create my own reports, modify how I calculated results, etc.

So how do I use my spreadsheet? I’m going to assume everyone here has a basic knowledge of spreadsheets and can calculate (either by computer or by hand) the results.

I set my spreadsheet up with each investment on the X axis (i.e. down the left side of the paper) and my info for each investment on the Y axis at the top of the page. For each investment, I had the following categories:

  1. Name (ex. Vanguard 500 Index Fund)
  2. Note, i.e. information on where this investment was (ex. Wife’s Roth IRA, Mr. 39 Months 401K, etc.)
  3. Symbol for investment (ex. VFIAX for Vanguard 500 Index)
  4. Current price, updated at the beginning of each month
  5. Current Shares, updated at the beginning of each month (in case I invested, or dividends were paid)
  6. Current value (a calculation, price * shares)
  7. Value at the beginning of the previous month
  8. Additions/subtractions from investment during previous month (ex. Putting monthly investment into Roth IRA)
  9. Cost basis for investment (calculation of previous two, value at beginning of month + additions/subtractions)
  10. Gain/loss for previous month (calculation, comparing #9 to #6)
  11. Percentage gain/loss

Every month:

  • I take the “current value” from the previous report, and copy/paste the numbers to #7 (note: you need to copy the actual numbers over. If you copy the calculation, it will go haywire on you)
  • I put in how much I’ve added/subtracted from that investment in #8
  • Updated the shares & price

This gives me, for each investment, how much I made, and the percentage gain/loss (#10 and #11 above). I can also look at the values in #6 to determine my asset allocation, and if something needs to be changed.

It typically takes me less than 30 minutes to do this, and I’ve got about 45 different investments (counting 2 sets of IRAs, 2 sets of Roth IRAs, my 401K, Deferred, dividend account and “fun money” account). I find that I enjoy doing this, and it keeps me in better contact with my investments than just going to a website and looking at a report.

Guess I’m just a number’s junkie.

 

So how do you track your investments?

 

Mr. 39 Months

Six Month Review Template – Celebrate

This is the Fifth and final part of my “Six Month Review” template. Previously I looked at the performance of my investments, re-balanced them, and then reviewed my budget and goals. For those that followed along, you could see that I had some ups and downs (especially with investments), achieved some goals, and decided to alter/drop a few others. The final step, and one often not done by FIRE people, is to celebrate my “wins.”

Too often folks fail to give themselves credit for when they achieve goals. Giving thanks is a major reinforcement for keeping going along a path (as I’m sure many of you have read before). If you give yourself credit, you’ll be surprised how “pumped up” you continue to be. For those of us on the path to FI, who have done most of the steps to put us there, but who now have to wait as we accumulate, this is one of the things we can do to keep going.

So how are Mrs. 39 Months and I celebrating?

We look for things that we like to do, and we do them.

 

  • Travel: Headed out for 3-day weekend to Lancaster County, PA. Lovely country. Mrs. 39 Months is attending a Dulcimer convention and I’m going to attend a wargaming convention called Historicon, going on at the same time.
  • Hobbies:  As part of our trip, we’ll both be engaging in hobbies we like. In addition, I’ll probably be on the lookout for some antique hand tools for my woodworking hobby (Lancaster has a lot of them).
  • Reading: I’ve brought along 3 books to read, one classic, one historical, one about finances. I hope to have time to knock some major reading out.
  • Good discussions: Mrs. 39 Months and I have a 2 hour drive there + 2 hours back. We’ve been talking about our lives after we hit FI, what we might do, where we might travel, etc. Fun discussions.

While we are spending money on the two conferences (and maybe a spare tool or two) we aren’t really going to burn up the bank with spending however. Guess we really are interested in FI.

 

So how do you celebrate your wins?

 

Mr. 39 Months

Six Month Review Template – Goal Review

This is the Fourth part of my “Six Month Review” template. Previously I looked at the performance of my investments, re-balanced them, and then reviewed my budget. From that, I could see how I was doing on the goals that I set for myself at the beginning of the year. Now its time to review those goals and see if any need to be altered, dropped, or if new goals need to be put in place.

So how am I doing in comparison to my goals for 2018?

My Goals for 2018 (some financial, some not):

Finance:

  • Save $81K in tax-advantaged accounts (saved almost $37K in 2017): I’ve saved a little over $51K in them in the first 6 months (thanks to my bonus payment). On track to get around $81K.
  • Save $9K in regular: Complete
  • Increase dividend income from all accounts to $24K/year: Right now I am at $10.6K a year. Since I usually get a big bump at the end of Q4, I think I should be able to hit this.
  • Passive income covers 33% of base living expenses in retirement, i.e. $24K of my $72K expected expenses: As above, I think I’ll hit my $24K in dividends, which would put me over 33.3%
  • Beat net worth growth rate of 7%: Well, with the market only getting back to “0” right now, I am not sure I am going to hit this one. We will see. I’m not going to change it, but we will see.

Business:

  • Begin attending regular meetings of my local real estate investors association. I’ve attended six so far, but didn’t get to any in June. I plan to get to at least 2 in July. Still not sure of the value of these yet.
  • Double the number of blog visitors in 2018. Doing well here. I’m almost there, after the first six months. Should hit this before the end of July. Part of this is probably more info on my blog, more history. Also, I am linking to other blogs when I see good stuff, so maybe folks are paying me back.
  • Write/publish a book on finance.  Not doing well here. Haven’t gotten past the first couple of pages of notes here. I plan on keeping this one, but it may end of going into 2019 before its published.

Personal:

  • Increase weight lifted by 10% from 2018 (increased by 12.7% in 2017: Getting sick and then going backpacking didn’t help this. I was pleased to go back into the gym last week and find that I hadn’t lost that much muscle, and was able to keep the lift value about where it was. Need to start building back up.
  • Average 3 hours of cardio per week (currently averaging about an hour).Not doing well here. Getting to 3 hours is a struggle. I will drop this goal down to 2 hours a week for the 2nd half of the year – something that will probably be attainable.
  • Take part in at least one long bike ride, like MS bike-a-thon (80 miles): Going to drop this one. With everything else going on, I just don’t have the time to train for this.
  • Backpack over 100 miles on AT (did over 100 in 2017): Having to bail out a day early back in June put this in jeopardy. I will probably just get over 90 miles this  year, so I’ll adjust the goal to that.
  • Begin volunteering at Pennsbury Manor at their joiner’s shop (woodworking): Started volunteering in May, began training to be a guide at the beginning of July. I am enjoying this.
  • Reduce weight by 20 lbs. from Jan 2018 (lost 9 lbs. in 2017). Doing OK here. Down to 226 lbs (Loss of 11 for the year). However, I’m going to cut the goal to a 15 lbs loss for the year, because I think that is about what I can do for the last six months. We will see.
  • Read at least one book a month. Really kicknign this one out of the park. Got ten books done in the first six months, and already knocked one out in July. Starting Dickens David Copperfield today.

Travel:

  • Visit a national park (visited Shenandoah NP in 2017): Got two parks completed (Crater Lake and Redwoods NP in California). Really enjoyed them, and looking forward to next year’s parks
  • Visit family in Tennessee, Vermont and New York. Plans in place for November trips to NY and TN.
  • Visit Portland, OR and northern California: Complete and had a lot of fun
  • Visit Ellis Island. Still want to do this, just have to find the time. Its only 1-1/2 hours away.
  • Go on an international trip. Going to drop this one. Don’t think I will have the time for this in 2018
  • 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). Going to drop this one as well. Don’t think I will have the time in 2018 for this, and blew through all my work vacation time.

New Goals?

Nothing major, just to do some furniture projects that came up. Otherwise, just concentrate on getting done what I have above.

So you can see, I do a review, and I tend to drop some goals (3 or 4) that it turns out I don’t think I can hit, and alter a few (weight loss, cardio). This way, I don’t stress myself out over not hitting everything, and I give myself something to shoot for in the next year.

 

 

Mr. 39 Months

Six Month Review Template – Budget review and adjustments

This is the third part of my “Six Month Review” template. I track spending both for our “family” account (groceries, home, utilities, etc.) and my personal account (auto, clothes, food/snacks, hobbies, etc.). Halfway through the year, I take the opportunity to look at what I expected to spend on, both in our family account and my personal account – and compare it to actual spending. From there I make adjustments either to the budget, or to my spending over the next six months, so I can try and bring it into alignment.

Family Budget

Typically what I do is compare my spending to the money that I budgeted at the beginning of the year. I usually use the previous year’s actual spending, with some adjustments, to create the budget. Some of the numbers I can predict in advance (insurance, charity, Roth IRA, etc.) but some vary somewhat, month-to-month.

 

Revenue Budgeted 2018 YTD Actual 2018 YTD Variance
Salary $24,850.32 $25,955.67 $1,105.35
Other $0.21 $0.20 ($0.01)
Total Revenues $24,850.53 $25,955.87 $1,105.34
Expense
Home
Property Taxes ($3,043.81) ($3,043.81) $0.00
PSE&G ($1,041.52) ($1,191.00) ($149.49)
Verizon ($1,722.10) ($1,765.21) ($43.11)
Water Bill ($163.80) ($183.85) ($20.05)
Life Insurance ($241.73) ($263.70) ($21.98)
Home/Auto Insurance ($1,375.97) ($1,302.70) $73.27
Groceries ($2,259.34) ($2,641.38) ($382.04)
Medical ($1,193.24) ($1,010.93) $182.31
Roth IRAs ($6,500.00) ($6,499.98) $0.02
Charity ($2,400.00) ($2,400.00) $0.00
Dining Out ($600.00) ($707.48) ($107.48)
Home Repair ($600.00) ($882.74) ($282.74)
Other ($600.00) ($233.01) $366.99
Total Expense ($21,741.49) ($22,125.79) ($384.30)
1.8%

 

I track each month separately for these categories, and the sheet has year-to-date budget & actual columns which sum up all the months together. That is where I got the data above.

As you can see, I ended up with about $1100 more in revenue, but spent about $384 more than budgeted (groceries, home repair and utilities seem to be the prime offenders). I always have difficulty at the start of the year estimating my revenues/pay. I get a pay raise in there, but the tax codes change and I ended up not getting it exactly right. Still, the family budget seems to be going well, and we are in the black. Since the variances in the categories are not dramatic, I won’t adjust the budget for the remainder of the year.

Personal Budget

I take $1,100 a month from my paycheck and put it into a separate account. This is used to pay my personal expenses (car fuel & repairs, lunch & snacks, hobbies, etc.). I’ve found that I work better when my personal funds are not intermixed with the funds we need to pay for things as a family. I also don’t feel guilty if I chose to spend some of this money on fun things for myself.

Revenue Budget 2018 YTD Actual 2018 YTD Variance
Salary from NFI  $      6,600.00  $      6,600.00
Travel Reimburesement  $         409.30  $                  –
Other  $                  –  $             3.36
Total Revenues  $      7,009.30  $      6,603.36
Expense
Auto
Auto Fuel ($720.00) ($833.62) ($113.62)
Auto Repair ($600.00) ($338.38) $261.62
Auto Registration ($30.00) $0.00 $30.00
Auto Tolls ($300.00) ($181.75) $118.25
Food/Snacks ($2,400.00) ($2,921.39) ($521.39)
Books ($150.00) ($179.64) ($29.64)
Clothes ($300.00) ($282.57) $17.43
LA Fitness ($194.76) ($194.76) $0.00
Postal/office supplies ($150.00) ($20.83) $129.17
Hobby ($1,200.00) ($1,208.08) ($8.08)
Outlooks for Hair ($120.00) ($129.00) ($9.00)
Other ($840.00) ($678.49) $161.51
Total Expense ($7,004.76) ($6,968.51) $36.25
Operating Revenue ($365.15)

So, while I was OK with the family budget, I’ve overspend by about 5% with my personal budget. This is primarily due to:

  1. Being about $400 short in revenue, because I haven’t been traveling much for work and getting reimbursed for mileage, tolls, etc.
  2. Way overspending on food/snacks for the last three months.

After reviewing this, I decided to work on cutting back the snacks & food I was eating, buying it cheaper at the grocery store and bringing it in to work. We’ll see how I do for the last six months. Who knows, it might help me lose some more weight!

 

So how did your spending go for the first six months?

 

Mr. 39 Months.

 

 

Six Month Review Template – Re-balancing portfolio

This is the second part of my “Six Month Review” template. Previously I looked at the performance of my investments, with emphasis on what seems to be trending well, and what is not. Based on that, I can make decisions on whether to sell off certain assets or to put money into others.

The next thing I do is to look at my asset allocation, and determine if it has gone “out of whack” with certain investments performing well, and others doing poorly. If they vary too much, you want to sell off your “winners” (sell high) and use the funds to buy your “poor performers” (buy low). In this way, you get your asset allocation back in line with your plan, and hopefully set yourself up for when your “poor performers” jump up, and your “winners” lose steam.

401K/IRAs

My general rule of thumb here is that I only rebalance if they are more than 1.0% out of line with my asset allocation. If you remember, my planned allocation for my IRAs 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
Name Note Actual
TRowe Price S&P 500 Wife’s IRA 18.5%
Extended Equity Market Index Wife’s IRA 19.2%
International Equity Index Wife’s IRA 17.0%
Real Estate Wife’s IRA 18.2%
US Bond Enhanced Index Wife’s IRA 27.1%
Equity Index 500 Wife’s Roth IRA 17.9%
Extended Equity Market Index Wife’s Roth IRA 18.4%
International Equity Index Wife’s Roth IRA 17.1%
Real Estate Wife’s Roth IRA 17.5%
US Bond Enhanced Index Wife’s Roth IRA 29.1%
Vanguard 500 Index Fund My VG IRA 17.9%
Vanguard REIT Index Fund My VG IRA 17.5%
Vanguard Small-Cap Index Fund My VG IRA 18.5%
Vanguard Bond Index Fund My VG IRA 29.3%
Vanguard Int’l Index Fund My VG IRA 16.8%
Vanguard 500 Index Fund My Roth IRA 18.2%
Vanguard REIT Index Fund My Roth IRA 17.5%
Vanguard Small-Cap Index Fund My Roth IRA 18.3%
Vanguard Bond Index Fund My Roth IRA 29.0%
Vanguard Int’l Index Fund My Roth IRA 16.9%

For July 1, here is how they looked:The one’s highlighted in bold are the ones that are more than 1% out of alignment. I’ll sell a portion of those off to fund purchases in those areas below (typically bonds and/or international).

For my work 401K and Deferred, they don’t have a REIT option, so my allocation is a straight 25% for each area:

Eagle Small Cap growth My 401K 27.6%
Vanguard 500 Index Fund My 401K 26.8%
Vanguard Total International Index My 401K 21.4%
Vanguard total bond Mkt My 401K 24.1%
Eagle Small Cap growth My Deferred 27.0%
Vanguard 500 Index Fund My Deferred 26.3%
Vanguard Total International Index My Deferred 22.4%
Lord Abbot Total Return My Deferred 24.3%

Again, I’ve highlighted those areas that are above 1% in variance. I’ll sell those off and buy additional shares in the International and bond funds.

For my dividend account (my father’s inherited IRA), my allocation is 25% dividend stocks, 25% REITs with good dividends, and 50% bonds.

Pop’s IRA @USAA 26.6% 25.00% Stocks
Pop’s IRA @USAA 23.9% 25.00% REITS
Pop’s IRA @USAA 49.5% 50.00% Bonds

Usually for these, I use the dividend money they throw off to purchase additional shares in those that aren’t doing well. I’ll try not to sell of shares of stocks or REITS – just keep them as they are and use the dividends to re-balance.

Most mutual funds (Vanguard, TRowe, etc.) make it relatively easy to do the re-balancing, often on just one page. It’s when you are dealing with your own stocks & bonds (like in my dividend account) where you have to break out the calculator/spreadsheet and do the math yourself.

Overall, I have a few adjustments to make, but not as much as I have had to do in the past. Last January, after that great stock market climb in 2017, I had a lot of re-balancing to do to bring everything back into alignment. I sold off my stocks in Jan 2018 when high, and purchased other assets. The stock returns have just recently got back to above 0, so it was a good move.

Next time, we’ll talk about how I analyze my budget for the first six months, and make adjustments.

 

Mr. 39 Months.