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Old 12-16-2012, 09:48 AM   #21
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To track expenses and to know where one's money goes, one should spend a bit of money to get software to automate the job. I use Quicken, which downloads my expenses from the bank account and our credit cards. The software "knows" about the payees, so that it automatically classifies most of my expenses. There are occasional manual interventions, such as reclassification of fuel expenses for my RV under travel expenses rather than automobile expenses, for example.

I have often told about my situation before I came to this forum. As I practice LBYM over the years, I have never had a budget. I always underspent my income, and had plenty left over for savings. After coming here and seeing how people got a much firmer grip on their expenses, I wondered about my own. Then, I found out that, gosh, I actually spent more than I thought. Yes, I was LBYM, but not as frugal as I imagined.

After watching my expenses for 2 years with Quicken, I now feel a lot more comfortable that I can stay at a low WR. Yes, there are unknowns in the future, but all that uncertainty is taken care of by the low WR, plus the SS that I will be getting, plus the highly likely reduction of expenses as I get older, such as lower travel expenses, etc...

There is no need to count money to the pennies. If one has to, then it might be better to work a few more years, or to reduce one's expenses by a drastic and major financial decision such as moving to a lower cost area, selling one's McMansion, getting rid of car loans, etc... Without knowing the exact expenses, one does not know if a lifestyle change is needed or not.
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Old 12-16-2012, 09:48 AM   #22
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Looks like all this good advice for rocks911 is for naught. He hasn't returned to the forum since his "I dont think this is for me" post yesterday. Guess he heard all he wanted - apparently far more than he wanted.
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Old 12-16-2012, 09:52 AM   #23
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Originally Posted by MooreBonds View Post
In a matter of 30 minutes or less, you could figure out to within 1%-2% of what you spend each year. Just total up your monthly credit card statements (some even make a handy year-end summary for you), and look at your monthly checking account bank statements to see your total ATM cash withdrawals and total checks/bill pay checks written. Total 'em up, and you'll know pretty damn quickly what you spend each year, and have an easy gauge of what you will probably need each year in income for your basic needs with some fun money thrown in.
Good response and advice.
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Old 12-16-2012, 09:58 AM   #24
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Looks like all this good advice for rocks911 is for naught. He hasn't returned to the forum since his "I dont think this is for me" post yesterday. Guess he heard all he wanted - apparently far more than he wanted.
Unfortunately some newbies, many with good intentions, come looking for easy universal answers, thinking it's just some silver bullet we've just lucked into knowing - if only. Ironic 'the answers' aren't rocket science, but it takes a little effort. Face it, we're a community of odd but happy ducks...
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Old 12-16-2012, 10:09 AM   #25
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Originally Posted by REWahoo
Looks like all this good advice for rocks911 is for naught. He hasn't returned to the forum since his "I dont think this is for me" post yesterday. Guess he heard all he wanted - apparently far more than he wanted.
It is easy to shut the brain down, when one hears about what needs to be done, but doesn't want to do it. Lord knows I do that all the time if someone is explaining something I have no interest in. I am optimistic for rocks though. The seed has been planted and he is aware now. I wouldn't be surprised it he doesn't do some projections down the road. I have had friends who gave me the glazed looked, but some have finally took stock of the situation and adjusted.
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Old 12-16-2012, 10:37 AM   #26
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Without tracking we are mostly flying blind. I started tracking expenses in the late 80s, not having anything to do with retirement at that time, but only to answer my annual yearend question-where did all my money go? I found that I really had no idea. I got interested in accounting and set up some double-entry books which answered that question, and a lot of others too.

Now I just use a complete but simple single entry Excel sheet. The hazard here is that I could and sometimes do miss some expense, and never know or find out only by chance. There is no error checking built into the system. (If anyone is using an Excel double entry simplified ledger, please let me know! I would prefer it.)

Even with tracking, I believe that there is much more unpredictability in one's financial comfort when retired without a pension than when working, or having a government pension.

Four years ago when stocks were way down, people talked pretty much like OP on this thread- "if I need to cut back, I'll find a way". And I think with respect to the pretty well off crowd that hangs here now, most of us could do this reasonably well.

Once we are retired, what other way can we be emotionally comfortable? I believe however, that in an big economic squeeze, many of us will find this harder to do than to plan to do. While I do most of the usual things that we do, like try to minimize expenses, get value for money, etc- I think that philosophically I come from a somewhat different place. It is my belief that God's idea of the proper variance and volatility of life events is quite a bit wider than ours.

There is really no very good way to hedge this. If someone has $10 million does he really want to live as if he had $3m, just to have a greater margin? Most of us would not.

Note: When I post, I often say "I believe (whatever)". I notice that not many posters use this construction. More commonly a post just gives "how things are", according to the poster. But I feel that very little can be said that is in reality anything more than a belief of the speaker. So when I say I believe, it is because I don't know, and I know I don't know, but like anyone else I am always making working hypotheses, most of which get changed or even totally rejected with more information and experience.

Ha
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Old 12-16-2012, 10:44 AM   #27
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Once we are retired, what other way can we be emotionally comfortable? I believe however, that in an big economic squeeze, many of us will find this harder to do than to plan to do. While I do most of the usual things that we do, like try to minimize expenses, get value for money, etc- I think that philosophically I come from a somewhat different place. It is my belief that God's idea of the proper variance and volatility of life events is quite a bit wider than ours.
Amen...

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Originally Posted by haha
There is really no very good way to hedge this. If someone has $10 million does he really want to live as if he had $3m, just to have a greater margin? Most of us would not.
Though I find it interesting that even here the "acceptable" (ie FIRECALC et al) probability of success seems to range from IIRC about 75% to 200%. And there is no right answer to be sure, a choice we all make and live with...
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Old 12-16-2012, 11:32 AM   #28
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There is really no very good way to hedge this. If someone has $10 million does he really want to live as if he had $3m, just to have a greater margin? Most of us would not.
If I had $10M, I certainly would not want to live like a guy with a mere $3M!

But if I had $10M, and my stash dropped down to $3M, would I be able to scale my expenses back to the level of the low-millionaire class, the ones with a 7-digit net worth, and not an 8-digit one?

I think I could. Of course, the only way to know for sure is to have $10M, then to spend or to lose some to be back down to $3M. Let me work on that. I meant the getting to $10M, not the losing $7M.

Just thinking of losing $7M gives me the shiver! Good grief! Forget about lifestyle cut back, but just the sight of the incredible shrinking Quicken total would cause me to vomit.

It would not be any different than a guy with $3M seeing his stash dwindling down to $1M, or a mere millionaire seeing his Quicken total down to $300K.

Oh wait! I have seen my portfolio dropped 50% before. It was over the 2000-2003 period! Arghhh! I hope that won't happen again.
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Old 12-16-2012, 12:04 PM   #29
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Without tracking we are mostly flying blind. I started tracking expenses in the late 80s, not having anything to do with retirement at that time, but only to answer my annual yearend question-where did all my money go? I found that I really had no idea. I got interested in accounting and set up some double-entry books which answered that question, and a lot of others too.

Now I just use a complete but simple single entry Excel sheet. The hazard here is that I could and sometimes do miss some expense, and never know or find out only by chance. There is no error checking built into the system. (If anyone is using an Excel double entry simplified ledger, please let me know! I would prefer it.)
I don't know anything at all about accounting and couldn't do a double entry sheet if my life depended on it. I'm not even sure what one is. However, I have a primitive sort of error-checking built into my Excel spending sheets in that I balance my checking account and my wallet contents. In Excel, I just put down where my money went (what I bought), but the bottom line is that it has to agree with what is left in my wallet and checking account. So far, so good.

I balance my wallet about twice a week, since mistakes are more likely there and I am more likely to remember an expense if it was just in the past few days. If my checking account spending doesn't balance at the end of the month, I can doublecheck by going over the online bank account records. I don't suppose that is what you meant, though.

In Excel, I record cash spending during a given month in blue bold font at the top of the month's spending, and checking account spending in regular font below. That makes balancing pretty simple to do, and easy to see.
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Old 12-16-2012, 12:10 PM   #30
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Oh wait! I have seen my portfolio dropped 50% before. It was over the 2000-2003 period! Arghhh! I hope that won't happen again.
Here's another example of having a written record, instead of relying on one's memory.

I just checked my record, and found the exact number regarding my stash.

From the top at 2000/03/24 to the bottom at 2002/10/09, I was down to 56% of the high. Not quite 50%.

From the next top at 2007/10/12 to the bottom at 2009/03/09, I was down to 63% of the high.
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Old 12-16-2012, 12:30 PM   #31
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I can figure out what I call our barebones monthly regular expenses in minutes on the back of an envelope from memory--utilities including cable and internet insurance, property tax, gas for car, ball park amount for food, health club. Same for estimating retirement income, to know that it exceeds the barebones amount enough to fund car and home maintenance, charity donations, minor travel, gifts, etc.

I confess we've never tracked anything (how come this board and the Interwebs didn't exist 30 years ago when we needed them to establish some normal financial habits! ), but we would never have retired without a pretty good feeling for what comes in and goes out, and to know how many years our cash bucket might last. I hope the OP, whether or not he returns, also has at least a feel for expenses before deciding on how to take his pension.
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Old 12-16-2012, 01:50 PM   #32
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Here's another example of having a written record, instead of relying on one's memory.

I just checked my record, and found the exact number regarding my stash.

From the top at 2000/03/24 to the bottom at 2002/10/09, I was down to 56% of the high. Not quite 50%.

From the next top at 2007/10/12 to the bottom at 2009/03/09, I was down to 63% of the high.

Your comments are an interesting side trip for this discussion. (I hope the OP may not mind the thread hijack since apparently no longer interested) This made me check my portfolio numbers and I fund that the top of August 2000 was followed by the bottom of September 2002 with a 29% drop. The top of October 2007 was followed by the bottom of February 2009 with a 33% drop. The current value is an 8% increase from the prior top of October 2007.
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Old 12-16-2012, 02:47 PM   #33
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Looks like all this good advice for rocks911 is for naught.
He might have returned to lurking, as far as we can tell. Otherwise we're just preaching for posterity to the other posters. Or to posteriors.

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If I had $10M, I certainly would not want to live like a guy with a mere $3M!
Yeah, I couldn't possibly do it on less than $5M. I mean, once you buy a NetJets share there's just no goin' back to coach.

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Oh wait! I have seen my portfolio dropped 50% before. It was over the 2000-2003 period! Arghhh! I hope that won't happen again.
Same here. After the first time we took pains to adjust our asset allocation to ensure that it wouldn't happen again. After the second time, now we're positive that it's really different...
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Old 12-16-2012, 03:48 PM   #34
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I can figure out what I call our barebones monthly regular expenses in minutes on the back of an envelope from memory--utilities including cable and internet insurance, property tax, gas for car, ball park amount for food, health club. Same for estimating retirement income, to know that it exceeds the barebones amount enough to fund car and home maintenance, charity donations, minor travel, gifts, etc.
.
Same for us. Several months ago, prompted by someone's post on another thread in this forum, I calculated our "cut-back budget" and our "bare bones budget." Cut-back is akin to what Clyatt recommends (5-10% reduction) and, Bare Bones is essential expenses + just a smidge. I started with our desired/forecasted retirement budget (which is based on current spending) and adjusted from there.

Of course, I hope to never have to employ either of them but, I have to say that the exercise brought me a lot of psychological comfort.
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Old 12-16-2012, 04:58 PM   #35
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I wish I had known about this board (and the bogleheads board too) before we retired.

Prior to DH retiring, we went to a financial planner. One of his first questions was, "How much do you need to live on, yearly?". I did not have a clue. He got me started on a basic budget.

We had been pretty good about finances. No consumer debt, always saved, put the max into our 401K, etc. But when I started tracking our spending, I was stunned (and embarased) to learn how much was just leaking through our fingers.

By the time DH actually retired, I had a pretty good handle on our expenses and now (beginning our 5th year into retirement), I am quite comfortable knowing what we have to live on and that we actually CAN live on that. I also have a "bare bones" budget that we could fall back to if the market tanked again (or should I say "when it tanks again?")

Now, when we talk about a large discretionary expenditure (usually a major trip) and DH asks me, "Can we really afford this"? I have the answer. We'd be afraid to spend a dime if I did not have the numbers showing that we clearly can afford it.
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Old 12-16-2012, 05:37 PM   #36
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We'd be afraid to spend a dime if I did not have the numbers showing that we clearly can afford it.
That's what planning is all about.

You can't plan for where you're going if you don't know where you've been .....

Too bad the OP left. OTOH, it might have been a good lesson (or shock treatment) of what planning for retirement is all about.
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Old 12-16-2012, 10:48 PM   #37
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The current value is an 8% increase from the prior top of October 2007.
In April 2011, my portfolio set a new high that was 11% up from the prior top in 2007. Then, all hell broke loose with the budget debacle in DC. At this point, I am still not back up to that level.

Blame it on foreign stocks and natural resources companies that have been trailing the S&P 500. But revenge will be mine!
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Old 12-17-2012, 05:43 AM   #38
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OK, this time wasn't different, but surely the next time will be!

One thing I learned a long time ago about looking at historical records (like a chart of my assets over time) is that I'm way more comfortable ignoring the ups and downs and just focusing on the moving average line.
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Old 12-17-2012, 06:58 AM   #39
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Rocks911, come sit at the feet of the Masters, there are lessons to be learned.

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Old 12-17-2012, 08:25 AM   #40
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One thing I love about using a computer program to record expenses is not only that it requires so little work on my part (there is very little data entry with the auto account download function), but also that I have all the info at my fingertip. For example, if I should wonder how much I spent for electricity last year, I can find out with just a couple of mouse clicks.

With the software, I can easily look at the expenses over last year, and also YTD to spot any alarming trend. Right now, I particularly love to look at the expenses totaled over the last 12 months, and see that it dropped as my children's past college tuitions scrolled past that rolling time interval. So much more money for travel and other indulgences for this couple. Still not enough money for 1st class seats though!

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OK, this time wasn't different, but surely the next time will be!

One thing I learned a long time ago about looking at historical records (like a chart of my assets over time) is that I'm way more comfortable ignoring the ups and downs and just focusing on the moving average line.
Perhaps I am masochistic, but I love to look at past crests and troughs, if only to tell myself "Gee, would it be nice to have bought here and sold there? Maybe I'll do better next time."

Hope springs eternal, but what does one do without hope?
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