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Old 01-25-2014, 11:54 AM   #21
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Time for a confession - I have never created a spreadsheet, and don't know my way around Excel. How's that for an admission of guilt and incompetency in a group such as this? Just as, by the time I acquired my first cellphone, I felt as if I were the last person on the planet to get one, I now feel as if I am the only person left alive who doesn't know his way around spreadsheets. There is something about the rigidity of those cells that rubs me the wrong way. I know, I know, there is some strange type of stream-of-consciousness thinking going on in my head regarding spreadsheets but once I get it into my head that I don't like something, I'll do almost anything to avoid it.

I don't do any kind of formal planning for major expenses, other than to keep a cushion of a few thousand in my checking by saving from my monthly income (which consists of a monthly transfer of $1300 from savings to checking plus the odd bit of income from part-time work, which amounts to an extra $100-150). This small cushion serves for the minor major expenses such as vet bills, dental work, emergency trips back home to England etc. As a single renter with no kids who doesn't own a car, I have fewer major expenses than most ER's. The biggest upcoming major outgoing will be the purchase of a used Lazy Daze RV in a few years, if my plan to live in kitty heaven on 4 wheels with my cats comes to fruition. As this plan can be delayed or even abandoned at will, I am simply going to see how the market performs over the next few years and if things look doable, will take the money out of the portfolio. With a WR that is ~2.5% of the starting portfolio value and ~2.1% of the current portfolio value, I think I stand a good chance of being able to take a one-time 20K withdrawal without upsetting the apple cart too much. Or 25K. Or maybe I'll take 20K out and get a part-time job to make the other 5K.

All my withdrawals for at least the next 12 years will be entirely out of taxable accounts, and my income is sufficiently low that there is not as much need to carefully plan them so as to avoid pushing myself into a higher tax bracket. Little need for different "buckets". With the exception of a few thousand in checking, I just have one bucket - my portfolio.
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Old 01-25-2014, 12:00 PM   #22
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Out of my 98k budget I'd call 11k "accrual type" expenses. I can easily see going over that amount in any particular year but my 4 -5 years of cash/short term bonds gives me 44 - 55k and I'm more than comfortable with that. In fact, I'm thinking that's too much and maybe I should keep only 4 - 5 years of non-discretionary expenses plus 25k for accrual type things. After all, in a down market I would probably tighten my belt despite all the calculators in the world telling me I don't have to.
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Old 01-25-2014, 12:04 PM   #23
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+2

When I retired I had considered setting up seperate accounts, but while figuring out the mechanics it became obvious that it was a silly thing to do. Like what do you do if you need a new car 3 years into the 7 year period, or a new roof 15 years into the 20 year period? You don't have enough, so you've got to "borrow" the shortfall. From yourself.

Say you "borrow" a $10K shortfall from your investment portfolio to pay for the rest of the car. Now the car account has to "repay" the loan back to the portfolio. But that's where all the money comes from in the first place, so you're just shuffling money from the portfolio to the car fund and then back to the portfolio.
Or maybe the car account borrows from the roof account. Now every month the car account gets its allocation but has to pay some of it to the roof account. Now what happens when a new roof is needed and the roof fund would be fully loaded except for the money it loaned to the car fund? Does it issue a demand notice to the car fund? Or does it borrow the shortfall from somewhere else? Where? the New Furnace Fund?

Working thru all the permutations convinced me that the idea of having seperate accounts was just a very complicated way of fooling myself for the sake of an illusion. In fact there is just one pot of money (your total net worth), and mentally subdividing it into seperate chunks is just a mirage.
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Old 01-25-2014, 12:06 PM   #24
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All my withdrawals for at least the next 12 years will be entirely out of taxable accounts, and my income is sufficiently low that there is not as much need to carefully plan them so as to avoid pushing myself into a higher tax bracket. Little need for different "buckets". With the exception of a few thousand in checking, I just have one bucket - my portfolio.
Don't feel bad about not using spreadsheets. I need them for work so they are totally ingrained into my life and it was easy enough to use those skills for my personal stuff also.

I agree that you don't need to fret over this stuff as much as others. My annual budget is 98k (because it includes 30k of healthcare expenses) and if I could keep it below 64k then I could get ACA subsidies, which would reduce that 30k by a boatload. Withdrawal strategies are becoming more of a focus for me now that my "time is drawing near".

I love the simplicity of your life that gives you so much freedom from financial worries. Kitty heaven on wheels sounds idyllic.
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Old 01-25-2014, 12:13 PM   #25
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... having seperate accounts was just a very complicated way of fooling myself for the sake of an illusion. In fact there is just one pot of money (your total net worth), and mentally subdividing it into seperate chunks is just a mirage.
+1

Like you, I toyed with the idea and discarded it as busywork.
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Old 01-25-2014, 12:32 PM   #26
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+1 Like you, I toyed with the idea and discarded it as busywork.
I am slowly reaching that conclusion with my HSA money. Even though I long ago determined I would pay all expenses out of pocket until 65, I could not get myself to take the money out of the low interest bearing account because I couldn't stand the thought of losing money in my medical account. I am now mentally ready to just shift it all into mutual funds, but I need the market to drop at least 10% before I can make myself do it.
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Old 01-25-2014, 12:32 PM   #27
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I do not have a separate account for major expenses. My current cash of 26% should be plenty if I need a new car, heck even another home. And I have always had a lot of cash on hand.

Even as I cried "buy, buy, buy" in the past acting tough, my cash level has never been below about 15%, I don't think, and then not for very long. I am actually a scaredy cat despite my talking tough.

PS. The HSA account has been there for tax reasons when I still had earned income. It has lost its meaning, though it may be useful for other purposes.
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Old 01-25-2014, 12:34 PM   #28
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Live and Learn - I have a feeling that if I needed to learn the use of spreadsheets for work, or for a specific non-work task, then I would become a near-instant convert.

I used to read this board and wonder if I was doing something wrong by not concerning myself more with the tax implications of what I did, and by not taking a more analytical approach until it dawned on me that with my low level of income (interest and dividends from my taxable accounts put me below the Federal poverty level) I had fewer tax implications than most others here. It is one of the reasons I attempt to share some of the details of my finances here - and to quote dollar amounts. It is not because of any type of inverse snobbery (as in, "Look at me - I'm so virtuous and frugal and low income!") but rather because as someone on the edges of the bell curve (i.e. not the average financial situation of members here), relating my experiences may be of use to others in a similar situation.

However, I'd be happy to have the need for the more thought-out approach that is usually necessary with a higher income

And yes - kitty heaven on wheels does sound good doesn't it? I'm looking forward to mornings spent drinking coffee and casually browsing the pages of E-R.org while looking out at beautiful vistas through the large windows of my Lazy Daze RV in the company of my kitties. It's pretty close to the life I have now, except with the ability to change the view through the windows at will!
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Old 01-25-2014, 12:36 PM   #29
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I do not have a separate account for major expenses. My cash allocation of 26% should be plenty if I need a new car. And I have always have a lot of cash on hand.
Such a large cash allocation does indeed make planning for major expenses very easy (as in - not much planning required at all).
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Old 01-25-2014, 12:38 PM   #30
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That high cash level should hurt the total portfolio return, one would think. However, as I quite often employ a barbell strategy and go for more cyclical stocks, I was able to beat the S&P in the last 15 years.
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Old 01-25-2014, 12:45 PM   #31
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I do not have a separate account for major expenses. My current cash of 26% should be plenty if I need a new car, heck even another home. And I have always had a lot of cash on hand. Even as I cried "buy, buy, buy" in the past acting tough, my cash level has never been below about 15%, I don't think, and then not for very long. I am actually a scaredy cat despite my talking tough. PS. The HSA account has been there for tax reasons when I still had earned income. It has lost its meaning, though it may be useful for other purposes.
The HSA has been a real positive for me as I continue getting the yearly tax deduction of 31% for me. Also it brings me under my 85k AGI needed to capture my $2100 pension state income tax credit.
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Old 01-25-2014, 12:47 PM   #32
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And yes - kitty heaven on wheels does sound good doesn't it? I'm looking forward to mornings spent drinking coffee and casually browsing the pages of E-R.org while looking out at beautiful vistas through the large windows of my Lazy Daze RV in the company of my kitties. It's pretty close to the life I have now, except with the ability to change the view through the windows at will!
If you want a used LazyDaze, you may have to watch the market and jump on one if the chance shows up. The problem with waiting to buy when you can use one is that it may not be available. I just looked and saw a few attractive deals. Finding a place to keep it may be problematic where you are though.
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Old 01-25-2014, 12:47 PM   #33
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That high cash level should hurt the total portfolio return, one would think. However, as I quite often employ a barbell strategy and go for more cyclical stocks, I was able to beat the S&P in the last 15 years.
If you can keep such a large cash allocation and still beat the S&P500, you've got it made. Good going!
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Old 01-25-2014, 12:54 PM   #34
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The S&P was not doing that well since 2000. I have been wondering if I beat Wellesley or at least matched it while having very little bonds.

I have not been keeping good records of my part-time earned income and expenses until recently to know the net in/outflow to my portfolio. However, I knew that I spent a lot in some years.
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Old 01-25-2014, 12:58 PM   #35
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If you want a used LazyDaze, you may have to watch the market and jump on one if the chance shows up. The problem with waiting to buy when you can use one is that it may not be available. I just looked and saw a few attractive deals. Finding a place to keep it may be problematic where you are though.
If the right deal came along, it would be worth renting a parking/storage space for a while.

There is a guy who previously worked for Lazy Daze who, for a few years, had a mobile business in California doing work on RV's. He would also perform inspections on LD's for prospective buyers. I can't think of a better person to advise me as to whether I found a good deal on a used Lazy Daze than someone who used to build them (he has a good reputation too). If you were looking for a used LD, you could let him know your requirements, and he'd contact you when he'd found something. He closed the business a couple of years ago and now works in sales at an RV dealer in the SF Bay Area but I imagine he's still a good source of information and help on used LD's.

When I'm ready for one, I'll be hunting him down to see if he can help. I figure that I should be able to find something not too far away within a year.
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Old 01-25-2014, 01:01 PM   #36
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There are a few good looking LazyDaze right now (to me), but not close to where you are. I have been curious and keep checking the market, but am happy with my generic class C which has not given me much trouble and not thinking of changing at all.

PS. Mine is the kind you can buy spanking new for a bit more than $60K (a 25-footer), quite a bit less than a LazyDaze.
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Old 01-25-2014, 01:05 PM   #37
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I wouldn't be opposed to a long trip if a great deal came along, though I'd like to be able to use my ex-LD guy to do an initial inspection if at all possible.
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Old 01-27-2014, 10:23 AM   #38
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Thanks everyone for your input this was very helpful.
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Old 01-27-2014, 03:29 PM   #39
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I have about $5K fat per year in my budget to cover major capital expenses and repairs. That was going to go entirely on a backyard makeover, but since discovering this thread I found the ridge capping on my roof is in need of fairly urgent repairs, which will lop $1500 off the backyard budget (which I will make up for by doing as much DIY as I can). No point having a budget if I don't stick to it.
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Old 01-27-2014, 08:46 PM   #40
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It is virtually impossible to properly budget an allowance for a large expense that comes every 7 years. What can you do, transfer money from your portfolio to a savings account each month? In truth, you don't have "buckets" -- what you have is one pot of money, your total net worth. An attempt to assign different parts of it into different buckets is just a mirage.

So....decide on your asset allocation. When you withdraw money, maintain your desired AA -- no matter if you take it out monthly or at 7 year intervals. Just make sure your average draw fits into the 4% rule....
I have come to the same conclusion. FI accounts just weigh down returns, but they do smooth them out. "Buckets" are a different way of looking at AA, is all, a visualization tool.
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