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Old 09-18-2018, 07:38 PM   #21  
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Increased income yearly is exactly the issue/problem. You cannot index yearly to inflation unless you have returns measurably over and above inflation. While that has been very easy for the last ten years that wonít always be the case. Soon (?) that will flip flop for a time and portfolios will decrease, but your minimum expenses will continue to increase, eating into your principal (unless youíre working some); the boat will take on water faster than you can bail without a bigger bucket (other income). Thatís why the best of the promoters are quick to disclose that itís more about FI than RE.

Yet this is what I worry that many of the younger FIRE folks really donít get, because they havenít lived a couple of market cycles as investors (or even employees). For instance, I can assure you that spending more by converting to a ROTH during my two furloughs was the last thing on my mind, tax savings be damned. Even Mr. Money Mustache, with whom Iím sure youíre familiar, is wishfully thinking on their expenses as they age. I have probably never been healthier, but passing 50 I also have more medical expense than ever, some almost directly attributed to an active lifestyle. My kids are about to go to college and I refuse to have them graduate with lots of debt, so if they stay good then I help out significantly. Not to mention the costs of their four years in HS marching band, a couple of ten year old cars to buy, maintain and insure, etc.

There are so many FI blogs and podcasts by young folks that are a bit idealistic compared to the buckle down mentality of a Dave Ramsey, and Iím afraid time will hurt some folks who think theyíre prepared but really are not.

No doubt tough, there is great value in subscribing to many of these tenets (of both generations', the MMM and the DR). Although I donít really expect, or even truly want, yet, to RE, I DO wish quite frequently that I already had FU money in the bank.


BTW: when I say ďyouĒ Iím being generic, not pretending to know how you specifically will fare. Sounds like your expenses are well controlled.
Actually it's not a problem. FireCalc will calculate your success rate and with proper asset allocation a 4% withdrawal rate will give you success over your planned lifetime of 99%+.

You are correct about healthcare, but the ACA hopefully would help with that. The key is keeping your taxed income low.
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Old 09-18-2018, 08:25 PM   #22  
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And finally a nosy question (feel free to tell me to bug off, though it is genuine and I feel that I can learn from you; but still has a point if rhetorical):

You mention lowered expenses by $1000/mo if/when you pay off your mortgage, but expenses of only ~ $3400/mo now. So if your P&I is $1000/mo I assume you are probably spending almost that much each month on property tax and insurance (assume youíre in DFW from your earlier references, so maybe $600-700 at the least). How the heck do you spend only ~ $1800/mo on everything else? We spend that on utilities, auto gas, and other insurances alone (disability, life and auto - we're well covered, but all are necessary imo). Notice we havenít eaten yet!

This is what I mean by expenses rising. I can see it if youíre a young, healthy single person, but add in a spouse and kids and ooooh boy do things change.
Our mortgage is around $1100 but not in Texas. So total expenses outside that are around $2,300/month. $400+ is food, that is the budget buster!

We don't have any disability or life insurance but do have 300/500 on our autos plus another $1m in umbrella.

No kids but we do have an old dog that is getting expensive!

Our budget is pretty bare bones by what most would consider "required spending". I am very driven to reduce costs and will spend money to do so. Example, several years ago I dumped about $1500 into a car that wasn't worth that on paper, but continues to perform well as a daily driver/airport car to this day. We cook the vast majority of our meals which we enjoy doing. Prepaid cell phone plans. Lots of DIY work. I even (gasp) mow my own lawn. I don't think I've talked to a single guy who does that here!

I get my shopping fix by buying stock.

If you have the assets you really don't need most insurance besides auto and home. IMO. Most guys way overbuy insurance but that is also coupled with their inflated lifestyle spending levels. I see budgets of $6, $7, $8+ a month and wonder what they are thinking. Who knows maybe most people have several million. I really don't know. But it would freak me out, in our industry, to know you have to come up with that kind of money every month just to pay bills.
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Old 09-18-2018, 08:45 PM   #23  
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Had heard of FireCalc, just went and checked it out briefly. Very interesting. Controlling spending definitely seems to be the key.

Youíre right: IF you only spend $30k/yr (indexed) for the rest of your life and start with $1M at 35yo expecting to live to 85, itís a very high probability of success.

Itís that expectation to keep spending that low that I think is naive, unless you are VERY frugal and VERY fortunate. But I agree, it does seem likely to be doable if so.

Plugged in some non-frugal numbers (used $60k/yr spending, which I could likely undercut noticeably with a little effort, but figure this provides a buffer) for retirement at 50 with a 35 year expectancy. Iíd need $1.5M to get a 93% probability. Back to work....
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Old 09-18-2018, 09:05 PM   #24  
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Well, just posted that but hadnít seen your follow-up.

I mow my own lawn too, heaven forbid. Tons of DIY on the home and autos, now if I could just learn to enjoy DIY in the kitchen....

Got a lot of life insurance now, since wife isnít working and weíre still a long way from 65 with two college educations to help fund. Those expenses will drop somewhat over time, eventually to zero. The expensive own-occupation disability and our auto and umbrella policies (sky high thanks to the two teens covered) will eventually drop as well.

Property taxes and utilities are killers in TX. That, our high medical expenses, and too much eating out are our weak points. The rest of our spending is pretty minimal by todayís ďtypicalĒ standards.

The FireCalc scenarios are a sobering illumination of how important the spending is in making the money last. Gonna have to spend some more time there.
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Old 09-20-2018, 11:47 AM   #25  
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FireCalc is interesting in it's non-standard methodology and when using the same assumptions and cross checking against my favorite financial calculator (below) it is quite reassuring.

Try this one:

https://www.bankrate.com/calculators...alculator.aspx

I like to use dismal, worst case, predictions/assumptions such as:

- Inflation at 3%

- Earnings in retirement at 4%

- NO S.S.

If your numbers crunch okay with these variables, look how nice they are using 6-8% returns , S.S., and inflation at 2.5%

Life Is Good.






Stimpson

Last edited by Stimpy the Kat; 09-20-2018 at 12:06 PM.
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Old 09-20-2018, 12:19 PM   #26  
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" I see budgets of $6, $7, $8+ a month and wonder what they are thinking..."

Well, the truth is MOST Americans have no idea what a budget is, or where there money goes, or how money works.

I asked a friend who was losing his job what his monthly financial needs were and he told me about 10k per month.

I knew the cars he drove, the house he lived in, etc. and that made NO sense whatsoever. (?)

Upon further questioning his reasoning was this:

" I make about 120k a year, so yeah, about Ten Thousand a month is what I need to live on ! "


Absolutely clueless as to actual requirements and / or how money, taxes, budgets etc. actually work.

This is an intelligent man...otherwise.

It's frightening.




STK
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Old 09-23-2018, 01:01 PM   #27  
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Wow, thatís pretty sad, and I suspect way too common.

I too prefer to assume minimal returns, and zero SS. However Iím old enough now that I do think that SS will provide a portion of what I am promised, so Iím starting to be cautiously optimistic that Iíll get about 2/3 of the estimate. I cannot fathom planning to earn 8-10% on retirement funds (I certainly think itís doable for shorter time periods, and of course Iíll be trying, but thatís just unreasonable long-term planning in my opinion). 6% is the upper end of what I use as an expect, but again I hope Iím very wrong and pleasantly surprised.

The FireCalc backtesting method IS quite reassuring, Iím just not convinced that it will hold up. Weíve been through an industrial revolution and a tech revolution that have created great gains, but will the automation revolution help or hurt? Probably help the early investors and the well educated, but I do fear for the availability of decent jobs for the majority of people which could lead to overall economic drag and market lethargy.
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Old 09-23-2018, 01:27 PM   #28  
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So a sidetrack:

What sources do yíall recommend?

I have a few that I regularly check out but really havenít tried too many in the FIRE area.

PODCASTS:

Better Off - not FIRE at all, in fact she just told some poor 50yo guy with almost $3M that sheís not sure heíd be safe retiring. WTF? Obviously sheís way too conservative but the info is often good and it balances in my mind the very low numbers some FIRE folks put out there.

Listen Money Matters - was bad, then pretty good, now not as good again. Entertaining more than highly educational to me.

ChooseFI - just tuned into this one recently, seems promising

BLOGGERS:

Mr Money Mustache - Obviously. Entertaining, informative and not just about FIRE or even money. Dishes out face-punches and leaves me asking ďThank you sir may I have another!Ē

Heís the only one Iíve completely followed, though Iíve heard of many other standards like ERE, GET RICH SLOWLY, MAD FIENTIST, FRUGALWOODS. Any of these worth following religiously? Others?

Of course Iíve been reading financial info for 30 yrs. (Charles J Givens and Carlton Sheets anyone?) Tuned into Dave Ramsey almost daily for a year or so and like his common sense, no nonsense attitude but it got old and redundant. So Iíve got a pretty good knowledge base but I find that seeking new points of view and different paths keeps me motivated to not get out of control (Iím finally making good money and feeling some temptation after many years of making not-so-much money, which made serious discipline mandatory).
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Old 09-24-2018, 02:50 PM   #29  
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Quote:
Originally Posted by swaayze View Post
So a sidetrack:

What sources do y’all recommend?

I have a few that I regularly check out but really haven’t tried too many in the FIRE area.

PODCASTS:

Better Off - not FIRE at all, in fact she just told some poor 50yo guy with almost $3M that she’s not sure he’d be safe retiring. WTF? Obviously she’s way too conservative but the info is often good and it balances in my mind the very low numbers some FIRE folks put out there.

Listen Money Matters - was bad, then pretty good, now not as good again. Entertaining more than highly educational to me.

ChooseFI - just tuned into this one recently, seems promising

BLOGGERS:

Mr Money Mustache - Obviously. Entertaining, informative and not just about FIRE or even money. Dishes out face-punches and leaves me asking “Thank you sir may I have another!”

He’s the only one I’ve completely followed, though I’ve heard of many other standards like ERE, GET RICH SLOWLY, MAD FIENTIST, FRUGALWOODS. Any of these worth following religiously? Others?

Of course I’ve been reading financial info for 30 yrs. (Charles J Givens and Carlton Sheets anyone?) Tuned into Dave Ramsey almost daily for a year or so and like his common sense, no nonsense attitude but it got old and redundant. So I’ve got a pretty good knowledge base but I find that seeking new points of view and different paths keeps me motivated to not get out of control (I’m finally making good money and feeling some temptation after many years of making not-so-much money, which made serious discipline mandatory).

My take:

IF IT'S COMING FROM SOMEBODY ELSE'S MOUTH...THEY ARE A SALESMAN. THEY MAKE THEIR LIVING STEALING YOUR MONEY BY TELLING YOU THAT YOU HAVE NO IDEA WHAT YOU ARE DOING WITH IT.

THINK ABOUT IT.

Common Sense, Grade School Math and, a few simple online calculators...Will give you all the Answers you need.




Peace.

P.S. - Historically, you will see 8% annually in the U.S. Markets. Plan on 4%. Live on 2%.
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Old 09-24-2018, 03:24 PM   #30  
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Ha ha, I hear you, but Iím not sure weíre talking about the same things. Blogs and podcasts typically donít sell anything, though they do have sponsors. I just listen for entertainment and to gather intel and ideas, not stocks.

Now Dave Ramsey otoh.....
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