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Re: I'm going to FIRE soon at 35.
Old 12-30-2005, 02:17 PM   #21
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Re: I'm going to FIRE soon at 35.

Hi fireme,

Here is some feedback on the budget, since I have gone through the same exercise:

* Condo maintenance, at $600/year, seems low. Think back to the 70s, you would have wanted to upgrade some decor by the 90s, for instance. There are issues like hot water heater, carpet, furniture, plumbing problems, etc.

* There is no entertainment budget: going to the movies, DVDs, playing pool with friends, going skiing for the weekend, having a few drinks with friends, golfing, bowling, dating, etc.

* Gifts and charity: You probably have family and friends that you might buy birthday and Christmas gifts for.

* Your medical costs will increase as you age, possibly significantly, so this is something to keep in mind. Getting dentistry done in Mexico can save a lot on costs (Tijuana, Algodones). The latter claims to have more dentists per square mile than any other city on earth.

* Auto maintenance (I use $60/month for this)

* Household items: New appliances, vacuum cleaner, luggage for travel, new computer and anti-virus software, postage, camping supplies, theft loss, etc., etc.

* Income tax: This can be significant, like 10% of your budget in some cases. It could increase over time as your taxable account grows with respect to your tax basis.

* If you travel for long periods of time, some of your home costs will decrease, allowing you to spend more on travel: monthly utilities, food, gas, entertainment costs can be applied to travel while you are gone, increasing your effective travel budget.

Hope that helps.



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Re: I'm going to FIRE soon at 35.
Old 12-30-2005, 03:28 PM   #22
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Re: I'm going to FIRE soon at 35.

Thanks Kramer for the feedback on the budget.

As far as the condo maintenance, I think you're right that $600/year is too low. Most people seem to use 1% of home value per year for Single Family Residences, but my condo association handles the maintaintenance of everything outside the drywall so I can get away with considerably less. Probably $100/month would be more accurate.

I lumped my entertainment, gifts, furnishings, and household items into the "Misc" category, but on reflection it's clear that $250 for all misc expenses is pretty thin. I'm going to be getting my end of the year credit card report of my spending soon and that will help me to get a better sense of how much I'm spending on such items.

I have a separate vanguard charitable trust account that will be used for some charitable contributions, so that isn't included in this analysis.

Auto maintenance is a good catch. I'll definitely have to add that in.

I've left income tax out of this analysis intentionally; I'll pay that separately and it shouldn't be much because much of my equity has a taxable basis similar to the current value, and the rental always runs at a loss under IRS rules.

It is becoming more and more clear that living in my current place with my current car is not very feasible on $40k/year. For me this whole process is about figuring out how to set my expectations, so that I know what will and won't be possible over the long term.

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Re: I'm going to FIRE soon at 35.
Old 12-30-2005, 06:11 PM   #23
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Re: I'm going to FIRE soon at 35.

This post is mostly about minutiae of my personal situation so I won't be offended if some people don't read it...

It occurs to me that the $1300 mortgage payment includes about $450 of principal payback that I'm paying back to myself. I suppose I don't really have to count that as spending since it's not really monetary outflow. Perhaps for the purposes of estimating my spending I should only consider the $850 interest portion of my mortgage payment. If I'm going to be less conservative that way, I should be more conservative in terms of using the interest after my 5/1 ARM adjusts, which I estimate will be about $1150 interest (as opposed to 850 before it adjusts).

It's not quite right to ignore the $450 principal payment since I do in fact have to take that out of my liquid savings every month to pay the mortgage and so it is in fact a withdrawl for SWR purposes. However by rebalancing, remortgaging over time, or perhaps getting an interest only loan later, it's somewhat mitigatable.

So using that interest only number and including the factors Kramer mentioned, my budget looks like this:

Income: $3330 from nest egg + $680 rent = $4010

Mortgage interest: $1150
HOA dues: $380
Prop Taxes:$280
Condo insurance: $20
Condo maintenance: $100
Condo subtotal: $1930
Car depreciation: $200
Car insurance: $80
Car maintenance: $70
Gas $70
Car subtotal: $420
Internet: $20
Electric & Gas: $80
Phone: $40
Cable TV: $50
Health Insurance: $350
Monthly bill subtotal: $540
Medical: $100
Food: $440
Clothing: $50
Travel: $200
Entertainment: $100
Gifts: $30
Household items: $100
Other: $100
Variable expenses subtotal: $1120
Total Spending: $4010

It is kind of thin but I'm adaptable and having my days free sounds like it'll be worth it!
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Re: I'm going to FIRE soon at 35.
Old 12-30-2005, 06:27 PM   #24
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Re: I'm going to FIRE soon at 35.

Couple of thoughts regarding your housing situation. Even though a fair chunk of your mortgage payment goes to pay down principal it's still a drain on cash flow and you can't pay the bills with home equity. Which leads to the second point. That quarter million of tied up equity would go a long way toward making ER more comfortable if you could free it up. The price of freeing it up most likely involves relocating. If you're happy in SF and prefer to stay it may be worth a few more years of work. On the other hand, if you could relocate your arbitrage opportunity may be at its peak. That is, the difference in housing costs between SF and other places is likely to narrow over the next five years. That last sentence is, of course, only my opinion.
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Re: I'm going to FIRE soon at 35.
Old 12-30-2005, 08:29 PM   #25
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Re: I'm going to FIRE soon at 35.

I agree with everything you say, califdreamer. I generally believe that renting makes more sense than owning for the early retired, and I see myself moving towards that eventually if I stay early retired. The possibility of a housing "bubble burst" in the near future is one good reason for me to take time off now and decide whether to stay or go, rather than staying at my current job.
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Re: I'm going to FIRE soon at 35.
Old 12-30-2005, 08:44 PM   #26
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Re: I'm going to FIRE soon at 35.

Here is my estimated retirement budget - I am not retired.
This is after tax dollars. I think you need to do a bit more work on you budget and estimated income.
Gasoline 2,000
Food/Wine 3,078
Dine out 2,400
Vitamins 63
Clothing 300
Education -
Travel -
Misc. -
Hobbies 75
State Park Pass -
Book/Movies 300
Magazines 50
Misc. -
Misc -
Auto/Mtc 400
Medication -
Exercise Equip -
Medical Services 400
Tax File/misc -
Vacation -
Bike parts 75
Computer program 75
Misc -
Total Credit Card 9,217

Cash-ATM 1,380
Water 264
Natural Gas 420
Electricity 300
Telephone 336
Auto Insurance 866
Car Taxes 136

Internet Access 180
GYM 480
State Park Pass 25
Misc 1,396

Subtoal 1 15,000
Medical Ins. 3,000
Subtotal 2 18,000
Travel 12,000
Education 3,000
Subtotal 3 33,000
Rent 9,000
Replacement Costs 3,000
Autoe/Computer/Furniture/Etc -
Grand Total 45,000
Excluding Rent
& Replacement $ 33,000
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Re: I'm going to FIRE soon at 35.
Old 01-01-2006, 09:31 AM   #27
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Re: I'm going to FIRE soon at 35.

You might consider paying for travel by earning some part-time income from your audio and photo hobbies and obvious writing talent. A few ideas...setting up home, small business, and vehicle stereo, TV, and computer systems; selling your photos online; keeping a blog of your adventures (if you allow advertising, you collect a few bucks each month); writing feature articles or even a book on early retirement, software, travel; teaching (HS substitute, college instructor, adult-ed photography or computer literacy, cross-country skiiing, rock climbing, and so on); helping take groups into the back country; even dog-walking/sitting if you like dogs.

If you volunteer at your local hospital, you can "earn" a free meal, meet people,* get free flu shots & TB tests(!), and feel good about yourself. I do one 5-hour shift a week and take off any weeks that aren't convenient for me. My mother enjoys her weekly shift for Meals on Wheels. The right volunteer option for you would likely lift your spirits.

You might consider relocating to a smaller home/condo/apt near the Central CA coast, Central Valley, or in/near the mountains. Watsonville, Los Osos, Yuba City, Merced, and Sonora come to mind.

To cut the food budget, you might try making more vegetarian or near-vegetarian meals (omelets, bean soups, stir fries, Indian dishes, salads, homemade smoothie for lunch, etc.). In fact I need to go do some more work on the Ribollita (Tuscan bean soup) I'm serving to company today, along with a pasta course w/Tuscan roast pork, pear & cheese appetizer, and biscotti.

I also hesitated to retire partly due to concerns about family. Decided they're smart and can manage, but I did give my mother $10k my last full year of (part-time) work to help her build a house next door to me. And gave my daughter $10k for her wedding in a few months. And earmarked the same amount for my son from the cash stash at ING.

Adding my kudos for your excellent post!
You can't always get what you want, but if you try sometimes, you might find you get what you need.
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Re: I'm going to FIRE soon at 35.
Old 01-01-2006, 05:24 PM   #28
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Re: I'm going to FIRE soon at 35.

Fireme, you are in a great situation not only because of your net worth but because of your age and the type of work you do.

Quit, travel do whatever you want.
You may get bored, but so what, get another job if you feel you need to work again or gain more structure in your life.
It should not be hard for you at age 35 with a salary requirement of 100k or less.

I think a problem many of us may have is we are over 50 and the workplace is not too keen on hiring workers that age. 35 to 40 is prime age in the business world if you need to return.

I would do it now.

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Re: I'm going to FIRE soon at 35.
Old 01-02-2006, 05:47 PM   #29
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Re: I'm going to FIRE soon at 35.

Thanks for all the comments. To respond to a few things...

Davew, my HOA dues include water, sewer and garbage. One of the things I like most about my condo is always having great hot water pressure. I think economically it's actually better for me to be in the HOA than to do all the maintenance myself; my condo association has 450 units and a budget of over a million dollars a year, so there are economies of scale that I couldn't duplicate. And they do a great job of keeping the place maintained. Not to mention the time I have that I would otherwise have to dedicate to maintenance.

Having said that, I do like doing handyman stuff. There are some times that being in the HOA can be frustrating like when I had to jump through a ridiculous number of hoops to get a satellite dish installed on the roof. The main reason I might prefer living in a place without a HOA is just to be able to do whatever I want.

Speaking of subscriptions, just today I was reviewing some old domain names that I registered but never used. I think I'll discontinue those. I only get a couple of magazines, Utne Reader and PC World. I recently became a Sierra club lifetime member mostly just to avoid the hassle of the membership renewals. I'll probably keep up IEEE membership to qualify for their age-independent, condition-independent health insurance in case I need it. They charge $78 per year if you are unemployed.

I haven't broken these charges out because I'm trying to keep this budget somewhat high level.

I should add car registration, and I generally spend $15 a month or so on bridge tolls so I should add that.

I have an amazingly good deal on cellphone service since I get corporate rates for my personal service. I think I will be able to keep that even after I stop working. $40 is actually my combined landline and cellphone cost.

astromeria, thanks for all the great ideas. I have had some ideas for small businesses I might like to do, and it's exciting that I may actually have time to do them if I leave my day job. Becoming an audio or home theater design consultant would be very rewarding to me. I would also like to design and sell audiophile speakers. I'm not sure about the teaching... I'm a stutterer and don't have great verbal skills. But I would definitely like to lead Sierra club ski trips and volunteer with inner city outings where we bring inner city kids to nature.

One of the best benefits of doing this kind of budgeting is noticing little ways that I waste money. In the past few weeks that I've been getting serious about it I've been much better about turning lights off in other rooms, and looking more closely at prices in the grocery store. And understanding that by eating less I save money, I have one more incentive not to overeat. Knowing that I likely won't have dental insurance I have been better about taking care of my teeth.

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Re: I'm going to FIRE soon at 35.
Old 01-06-2006, 03:56 PM   #30
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Re: I'm going to FIRE soon at 35.

Ben, i liked your post...i wish i had your nutz!
i sent you a personal email for some info
We should all feel blessed!
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Re: I'm going to FIRE soon at 35.
Old 02-02-2006, 03:09 PM   #31
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Re: I'm going to FIRE soon at 35.

I'm new to this forum but very glad I discovered it as I've been thinking and working toward ER for a few years now and am probably 4 or 5 years away (at some point soon I'll post my particulars). What I wanted to share here is a technique that could be useful to you. At least I'm finding it very helpful in getting a clearer picture of where I spend my money and what I could cut down or out in ER. Its borrowed from D.A., but I carry a small pocket notebook and log every purchase (it really doesn't take much effort to do this). Monthly I sum it up under categories that make sense to me (food: groceries, food: restaurants, health club, entertainment, transportation: subway, transportation: car, etc., etc. ) I've begun to see patterns over the half year I've been doing it and what I would and wouldn't be willing to cut back on or eliminate. In fact, I'm starting to cut down on certain categories now (i.e. Starbucks) just to see what effect it will have.
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Re: I'm going to FIRE soon at 35.
Old 02-02-2006, 08:53 PM   #32
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Re: I'm going to FIRE soon at 35.

Certainly cutting back those lattes can save hundreds of dollars (and in some cases thousands of $) in a given year.

Think also about how much money you might spend each week on buying lunch or dinner out. A colleague of mine buys lunch (approx. $6-10 each day) every business day - that's a whopping amount of money over any given year for the sake of convenience. Brown bagging it has a lot of advantages - increased health (depending on what you pack) and savings.
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Re: I'm going to FIRE soon at 35.
Old 02-03-2006, 01:08 AM   #33
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Re: I'm going to FIRE soon at 35.

great idea... i wonder if my wife would carry a notepad
We should all feel blessed!
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Re: I'm going to FIRE soon at 35.
Old 02-03-2006, 08:53 AM   #34
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Re: I'm going to FIRE soon at 35.

I visited my sister last fall in Austin, TX who lives right outside in Hill Country, and was appalled by the amount of traffic! Because so many people have recently moved there, and the highways were built for fewer people, it's a case of constant gridlock. I'm used to metro NYC traffic, and I thought Austin was much, much worse. Every time we went out, it was a 45 minute drive to cover a few miles. Any time of the day! Maybe if you lived in town it would be better...

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