A pre-retirement test you should add to your “prep list”

I was listening to one of my FIRE/Finance podcasts this week, and they discussed an interesting test or quiz you should consider as you prepare for early retirement. A lot of us who have caught the FIRE bug dream about our time post-FI, and do a lot of thinking/considering/planning for what we will do, what our day will be like, and how we will occupy our time. For many of us, it is the fuel which keeps us going as we accumulate the resources to be financially independent.

Yet a lot of folks who are in the community have not been able to get their significant other as “pumped” as we are in reference to this, and often discussions do not go very far. A lot of our spouses just aren’t that turned on by finances, Roth conversions, and travel hacking. I know, because I have constantly tried to involve Mrs. 39 Months in our finances, but she resists. The best I can get her to do is look at our net worth statement at the beginning of each year and file it away.

So the podcast suggested you ask your significant other a simple question, one that they probably could wrap their heads around and provide feedback on. The question for your partner was “describe a typical day for yourself post-retirement.” From this, you should be able to tell a lot about the sort of life you may lead, some potential budgetary points, and how compatible your plans are with your partner.

Well, for Mrs. 39 Months, I got this:

  • “Wake up late”
  • “Spend time in morning to meditate and stretch”
  • “Leisurely breakfast”
  • “Time to take walks outside”
  • “Time on my arts & crafts (she plays the dulcimer and makes leather shoes and jewelry)
  • “Some travel”

For a little background, Mrs. 39 Months worked for a company for 18 years, where her hours were 10am – 6pm. She had time for a relaxing morning, and she enjoyed it. Eventually the company was bought and moved, and she didn’t like the commute, so she left. Now she has to head to work at 8am, and she doesn’t enjoy the earlier mornings, and how it affects her schedule. Thus, her desire for a more leisurely morning.

It also shows that she doesn’t have a desire for a lot of money-intensive actions in our retirement. We can probably maintain our current lifestyle (though I’ll probably bump up the numbers for travel in our budget). This will help me plan better and keep on track.

So I’m glad I asked, and I hope this will help spark a continued interest by her in our retirement plans.

I hope you folks are communicating well as you progress!

Mr. 39 Months

OK, you really need to go see this movie…

Its called “They shall not grow old” and it was created by Peter Jackson (Lord of the Rings, The Hobbit, etc.) and the British War Museum to mark the end of World War I.

World War I really was the turning point of the modern world. What Peter Jackson did was take the footage from the British Museum (the old, grainy black & white, silent movies) and digitize it/clean it up so it can be viewed today. He then colorized it and added sound effects/voices so that it is just as good as movies made today.

All the voices are from actual WWI veterans, recordings the BBC had from years ago.

Its a monumental task, and it makes a gripping movie. At the end, Peter Jackson spends about 25 minutes going through all the technology that was used to make it happen – and a great & funny story about how the closing song for the credits was made.

All the reviews are 5 stars on Rotten Tomatoes, and I can’t recommend it enough. It had a short run (one weekend) back in December, but it is back in the US for another short run. Go see it!

W

Keeping your professional knowledge up to date while working on FI

As I spoken about before, I’m an engineer in the supply chain field. My primary role is to design warehouse operations and equipment, so that the operation can operate as efficiently as possible and be successful. In order to do this, I need to continue to learn new methods of work, as well as work to better understand existing equipment and work methods.

As part of that, I took a trip the first half of this week to a racking manufacturer in Wisconsin.  This company takes spools of steel in long runs and bends them into rectangular tubes (after which they weld them). From there they either punch holes at regular intervals (for uprights) or weld hangers on the end of these rectangular lengths (for horizontal beams).

Once this is done, the run them through an oven to burn off the impurities, let it cool a bit, and then powder coat/paint them prior to running them through an oven again (to set the paint). Once that is done, they stack them up and prepare them for shipment.

These are the storage systems that we are all used to seeing in the big box stores, Ikea, and many retail establishments. They can be setup to hold cases below and full pallets of merchandise above. Depending on how you want to set it up, they can be very complicated, or very simple.

The operation we visited had two sides, one that had been in operation for 30 years, and one recent addition with more modern equipment (5 years). What was fascinating was that the basic processes were the same, but the more modern operation had only 40% of the workers. A lot more of the work (especially the welding) was being done by robots and more of the product movement was done by overhead conveyors and automation.

As an engineer, watching this manufacturing operation, where raw materials come in and finished goods go out, is thrilling for an engineer. I could tour sites like this all day.

So what do you do to keep yourself “up to date” in your profession?

 

Mr. 39 Months

How will the new tax bill affect you if you live in the US?

There has been a great deal of conversation and writing on the new tax bill, and its effect on individuals and families. Some have spoken about it being as consequential as the 1986 tax reform bill (which dramatically changed the tax landscape right as I was graduating from college). I wanted to take the time to discuss some key points, and then to provide some links for deeper analysis if folks are interested in “getting in the weeds”

The biggest part of this tax reform, in my opinion, was the dropping of the business tax rate from 35% to 21%. While this won’t affect folks in the FIRE community directly (for the most part) it will have a dramatic effect on the country and its business climate. States in the US have been dropping their own business taxes for the last decade, in an attempt to be more competitive and to bring businesses into their states. Now the US federal government has clued in that its 35% rate (vs a typical 20% rate for most of the developed world) has been seriously impeding the maintenance of business in the US.

What this will do, in my opinion, is lead to more business and job growth in the US, as companies evaluate their costs to offshore (cheaper labor, more transportation expense, higher inventories due to longer lead times, etc.) versus keeping some or all of the business in the US. I’m in the logistics industry, and I know the cost of shipping stuff by boat from China/Vietnam/Europe – and it is significant. If you live outside the US, be prepared for your companies to get additional business pressure due to this.

For folks in the FIRE community working on hitting their goal, this should translate eventually into higher wages and benefits, as companies grow, and the competition for labor (especially skilled labor) increases. I’m already seeing this in the logistics industry, and typical warehouse workers & forklift operators have seen their starting wages rise by 20% over the last 2 years. Competition for these folks is tight, especially in key markets (So. Cal, Northeast PA, etc.)

For individuals, the rates for FIRE folks have remained at 10% for the first bit of money, but the individual rates have dropped 2% – 3% for all levels beyond that. It should result in some tax savings. One of the key items is the increase of the standard deduction to $24,000 for couples, with the exclusion of the individual deduction. This will dramatically change how some folks do their taxes, specifically those who itemize.

  • For those families in the lowest income level (under $44,050) the 10% rate didn’t go down, but the standard deduction raise to $24K may cut their taxes somewhat.
  • For the next level, those married couples claiming income up to $96,400, the 15% rate dropped to 12%, so there are savings there.
  • Those with higher income levels saw reductions of 2% – 4% in their tax rates.

The cap/elimination of some property tax deductions, state income tax and mortgage will cause a lot of heartburn in high-tax/high cost-of-living states (CA, NJ, NY, and Northeast US). I live in New Jersey, and it looks like it will definitely cause issues here. Still, the folks affected by this are the typical big-house/expensive car kind of people, not the FIRE-type of folks who want to save money and get out of the rat race.

For Mrs. 39 Months and I, our deductions for next year (including the soon-to-be-extinct personal exemption) look like they were going to be around $23K, so the $24K standard deduction appears to be where we would end up, saving us a little. The reduction in rates looks like it will save us $2K – $3K a year i total taxes.

If you’d like to see how it might affect you, there is a good Tax reform calculator at CalcXML. 

Some further analysis:

  1. Go Curry Cracker: Good general analysis
  2. Nerd’s Eye View: Great In-depth analysis
  3. Physician on Fire: How self-employed are affected:

So what are your thoughts on the new tax reform, and how will it affect you?

 

Mr. 39 Months

Reaching FIRE through Company Business Trips

For some folks, our work requires us to travel, either by car or by plane, to other parts of the country, where we perform our job duties. This travel can be both a pain and an additional source of income. I wanted to discuss some of the financial advantages of corporate travel, and how someone seeking financial independence can benefit from it.

Extra Salary

For the corporate world, travel is seen as a burden, something which has to be done, but which causes a hardship on the employee. Many folks have spouses or significant others, children, pets, etc. These have to be taken care of while the worker is “on the road,” which causes stress and problems for the worker. Because of this, companies are willing to pay extra for workers who are “willing to travel” and this can be quite lucrative.

I knew two engineers who graduated the same year, same school, and same degree. One got a job as an engineer locally, and was offered $50K/year + benefits. The other got a job with a consulting firm that required 90% travel – so they offered her $70K/year + benefits, and she got to take advantage of all the “travel hacking” that you have seen in the FIRE community. A 40% bonus just because, at 22, she got to enjoy all sorts of travel throughout the US.

Extra Income

Often you get the opportunity to gain extra income while traveling. This primarily is done by being offered a stipend for travel. Companies use stipends because it is easier to budget for travel that way. An example would be a food stipend, where, instead of you submitting receipts from restaurants, the company just gives you an amount of money each day to pay for your food – for example, $45/day. If you stay at a hotel that serves breakfast and eat/drink reasonably, you can pocket the remaining money as extra income.

I’ve seen companies pay for just the airline travel, and put in a stipend for the hotel, food, car, etc. Since a lot of travel is done by corporate execs, these stipends can be rather large, because the execs don’t want to stay at a Motel 6. You can take full advantage of this and make some dough.

Another form of extra income is the auto mileage. Most companies have a standard rate per mile that they will pay you for business travel, to cover fuel and maintenance of your car. This is based on an average mid-size car, with average gas mileage and maintenance costs. If you have a more fuel-efficient car (like most FIRE folks who judge purchases on things like that) or a car with less maintenance costs (maybe you do some of it yourself to save $) you can book some significant extra income from a company’s mileage reimbursement

Reduced Expenses

This is the area where you can get real “bang” for your travels. By taking time to be somewhere else, somewhere that a company is paying you to be, you can significantly reduce your expenses – all money that goes tax free to your bottom line. Some examples:

  • Home: If you travel extensively and are single, then there is no reason to get a large place to live, or buy expensive items for it – You won’t be there most of the time! Get a smaller place, furnish it sufficiently to take care of your needs, and pocket that money for the next several years. Keep the heat/AC turned down as well.
  • Auto: Instead of having to pay for fuel, tolls and maintenance to commute to/from work, your car sits and doesn’t cost you this. Maybe you don’t even need a car at all, and can just get by with Uber/Lyft and a bike?
  • Food: For periods of time, the food is on the company, so you can save on your food bill.
  • Entertainment: Again, your company is paying for you to be at another place, so you aren’t spending money on a lot of entertainment options during the week

All of these are ways to drop money into your FIRE accounts and get there earlier than expected.

Negatives of business travel

The reason that companies pay more for folks who travel is because it does suck at times. Sitting in airports or driving long distances, being away from family, strange hotels, strange food, etc. This can all wear on a person over time and that is why many folks do it for short “spurts” of a few years, and then move to a job with less or no travel. This is especially prevalent when someone wants to start a family. I have a peer who consulted for 4 years, and did 95% travel. Woke up early Monday morning, kissed his wife, on the road Mon-Fri, and got back late Friday night. He joked that he was a “weekend husband.” He finally joined my company when they wanted to have kids, and now travels about 25% = 30%. They just had their second child and are much happier.

I always told my students when I was counselling them on a job search to put “willing to travel” on the bottom of their resume. If you are young and want to make some money fast, consider extensive travel. Even if it isn’t for you, take the opportunity to do some travel for your company and pocket some additional funds to help you on your way to financial independence.

 

Any good road stories out there?

 

Mr. 39 Months

Gone Fishin……

Actually, Mrs. 39 Months and I have taken a week off to visit North Carolina.

She is attending a Dulcimer conference, and I am scouting out potential sites to move to after we hit our FI goals. Geoarbitrage, baby!

This is Chimney rock, NC – quite a hike to get up and out there.

This is Hendersonville NC, a nice town with a thriving downtown and lots of shops, coffee houses and restaurants. Potential new home?

Hope everyone is enjoying the fall weather.

Mr 39 Months

Good post on what to do with the credit breach at Equifax

Its been a topic of discussion among the folks I talk with, and its a real cause for concern among many people.

This article goes over some good steps you can use to help remove/reduce the potential for loss. It pretty much breaks it down into:

  1. Finding out if your information was exposed
  2. Getting a free year of credit monitoring (but be careful & read the fine print. You may be giving up your right to sue Equifax)
  3. Check your credit reports often (you can check each of the three sites – Equifax, Experian and TransUnion once a year for free).
  4. Consider placing a credit freeze on your files
  5. Or consider placing a fraud alert on your files
  6. File your taxes early (so frauds can’t cheat you out of your money)

No matter what, keep an eye out for thieves on the net. They’re out there, and its just smart financial sense to be ready for them.

Mr. 39 Months