Portfolio loss means cut my expenses?

[Gardnr]

I think that there is fear that the recession will be protracted. By cutting expenses now, a 5-year cash stash may last a few years longer therefore further delaying the sale of other assets like bonds and stocks which should improve a portfolio's longevity. I don't think that this is a bad idea. Agile, mobile, hostile...

Sure, theory is great, take your 4% SWR, live it up and chances are you'll be OK. But in practice, I think that a bit of flexibility and caution probably doesn't hurt.

Yep, the tendency is to act conservatively to guard against the failure that could result from a period of time that's worse than anything in FC. With all that's occurring right now it's prudent to do so.

 

[W2R]

I am still working and will be for about a year. If this economic mess is just beginning, I plan to retire anyway but will cut back as necessary. I have worked on how I will cut back as part of my retirement planning. I have a separate sheet in my retirement Excel workbook devoted to budgets, including a bare bones budget.



I don't have a very big budget, but even so I can cut back by 40% by just giving up a few things.

• cancel my cell phone and keep my $22 landline
• no unnecessary house improvements, and only minimal maintenance
• no more gym, eliminating gym fees
• walk more, cutting back on gas
• cut my electric/gas bills in half by wearing skimpy clothing in summer, and drinking icewater to cool down; and wearing warm clothing in the winter and moving around more (thus minimizing energy usage for heating and cooling).
• shop for cheaper food than what I am presently eating; spend 60% of present fairly excessive/lavish amount
• cut back discretionary spending to 60% of present level

I could cut back even more if I cut my own grass but I would choose to maintain that expense as long as possible. I think that I could be perfectly happy with the above economies, though. They really aren't very severe.

 

[FIREd]

I am still working and will be for about a year. If this economic mess is just beginning, I plan to retire anyway but will cut back as necessary. I have worked on how I will cut back as part of my retirement planning. I have a separate sheet in my retirement Excel workbook devoted to budgets, including a bare bones budget.



I don't have a very big budget, but even so I can cut back by 40% by just giving up a few things.

• cancel my cell phone and keep my $22 landline
• no unnecessary house improvements, and only minimal maintenance
• no more gym, eliminating gym fees
• walk more, cutting back on gas
• cut my electric/gas bills in half by wearing skimpy clothing in summer, and drinking icewater to cool down; and wearing warm clothing in the winter and moving around more (thus minimizing energy usage for heating and cooling).
• shop for cheaper food than what I am presently eating; spend 60% of present fairly excessive/lavish amount
• cut back discretionary spending to 60% of present level

I could cut back even more if I cut my own grass but I would choose to maintain that expense as long as possible. I think that I could be perfectly happy with the above economies, though. They really aren't very severe.

Wow, W2R, those are pretty drastic cuts! I thought I was a pretty aggressive budget slasher, but you my dear... I don't know if I could cut back on the A/C if I spent the summer in NO! And for me cutting back on food would be very depressing. The day I have to lower our food budget, then I'll know, we are in deep, deep trouble!

Bah, put a bit more money in Wellesley, watch the dividends roll in and don't cut back too much on the cafe au lait and beignets...

 

[W2R]

Wow, W2R, those are pretty drastic cuts! I thought I was a pretty aggressive budget slasher, but you my dear... I don't know if I could cut back on the A/C if I spent the summer in NO!

You get used to it, after a while. I normally keep my thermostat around 78-80 during the summer anyway. One summer I went without A/C while I was paying off my house, since I just didn't want to put off paying it down in order to buy a new A/C system that year. It really wasn't that bad, though I prefer having A/C. I took a lot of cool showers, closed most of the blinds and drapes, drank a lot of ice water, and wore nearly nothing (since I live alone). People lived here without A/C for centuries, and if they can do it, I can too in a pinch.

And for me cutting back on food would be very depressing. The day I have to lower our food budget, then I'll know, we are in deep, deep trouble!

I choose a lot of luxuries when it comes to food. For example, tonight I had Steamfresh veggies with my grilled salmon (yum!), and I would imagine canned veggies would have been cheaper and just as healthy.

Bah, put a bit more money in Wellesley, watch the dividends roll in and don't cut back too much on the cafe au lait and beignets...

I probably won't have to cut back, especially at first. I have a lot of years' worth of expenses in money market still. And really, if Wellesley keeps pouring out dividends, I will have more than I presently live on. I'm mostly talking about really bad economic collapse and possibly runaway inflation, which I fear is the next shoe to drop.

 

[FIREd]

Well, I guess you are right, if we are talking economic collapse, then canned veggies will probably do for me too.... But here is northern Alabama, I could never keep the A/C above 75 in the summer. It's just too darn humid. I don't know, might have to sell a kidney to keep the A/C going!

 

[Dawg52]

I am still working and will be for about a year. If this economic mess is just beginning, I plan to retire anyway but will cut back as necessary. I have worked on how I will cut back as part of my retirement planning. I have a separate sheet in my retirement Excel workbook devoted to budgets, including a bare bones budget.



I don't have a very big budget, but even so I can cut back by 40% by just giving up a few things.

• cancel my cell phone and keep my $22 landline
• no unnecessary house improvements, and only minimal maintenance
• no more gym, eliminating gym fees
• walk more, cutting back on gas
• cut my electric/gas bills in half by wearing skimpy clothing in summer, and drinking icewater to cool down; and wearing warm clothing in the winter and moving around more (thus minimizing energy usage for heating and cooling).
• shop for cheaper food than what I am presently eating; spend 60% of present fairly excessive/lavish amount
• cut back discretionary spending to 60% of present level

I could cut back even more if I cut my own grass but I would choose to maintain that expense as long as possible. I think that I could be perfectly happy with the above economies, though. They really aren't very severe.

I can't imagine you having to do all the above. A couple of weeks ago you said you have enough cash to last several decades. Which is good thing.

"If the market completely crashes, I still have enough in cash to last for several decades at my present level of spending so my plans to ER next year would not be endangered. That matters a lot to me."

 

[W2R]

Well I do have a lot in MM (well maybe a little less because I invested over five years' expenses in the past two weeks), and I'm doing fine, but I don't like to take things for granted.

Life has a way of reversing on us when we least expect it. A month ago all of us had a lot more $$ than we do now. I am still sittin' pretty, but who knows what the future will bring? I sure don't.

The OP wanted to know ways to economize - - these are the ways I could economize if I ran out of MM funds at some point. That could happen pretty fast if we had runaway inflation. Let's see - -with a mere 1000% inflation, a $25K budget could expand pretty fast.

I have always planned expecting a market crash worse than the Great Depression, and runaway inflation that would decimate any savings, all starting in 2010 since I always planned to retire in 2009. Looks like things got an early start. Probably it won't be as bad as what I had planned for, and then I can be relieved and happy about it.

 

[unclemick]

I can't imagine you having to do all the above. A couple of weeks ago you said you have enough cash to last several decades. Which is good thing.

"If the market completely crashes, I still have enough in cash to last for several decades at my present level of spending so my plans to ER next year would not be endangered. That matters a lot to me."

The shear joy of being really really cheap brings a tear to my eye.

Ah the memories! .

heh heh heh - they say you can never go home - inflation being what it is and all.

 

[W2R]

You guys are making me feel eccentric!

I didn't think the above ideas were THAT extreme. I didn't even suggest doing without my lawn guy. I guess if things get really bad I could get out the lawnmower and do it myself!

 

[ejman]

You guys are making me feel eccentric!

I didn't think the above ideas were THAT extreme. I didn't even suggest doing without my lawn guy. I guess if things get really bad I could get out the lawnmower and do it myself!

Well let's see... If things got really really really bad:

Use the hand pump in the secondary well for water (only problem, it's 900 ft down the hill but as a bonus I can drop my gym membership just carrying water uphill)

Wood from the woodlot for heat. As a bonus multiple sources of heat: you sweat when you cut the tree down, you sweat when you cut the tree into logs, you sweat when you split the logs, you sweat when you stack the wood.

Expand the garden currently 1/4 acre - not only healthy but another reason to drop the gym membership.

An finally, the coup de grace: I've been feeding all these deer, wild turkeys and other creeters around the place - They keep coming over for dinner in spite of my best efforts with fences and such. BUT, I see a bright side and some wonderful meals in the future

 

[slimm]

I am still working and will be for about a year. If this economic mess is just beginning, I plan to retire anyway but will cut back as necessary. I have worked on how I will cut back as part of my retirement planning. I have a separate sheet in my retirement Excel workbook devoted to budgets, including a bare bones budget.








I don't have a very big budget, but even so I can cut back by 40% by just giving up a few things.

• cancel my cell phone and keep my $22 landline
• no unnecessary house improvements, and only minimal maintenance
• no more gym, eliminating gym fees
• walk more, cutting back on gas
• cut my electric/gas bills in half by wearing skimpy clothing in summer, and drinking icewater to cool down; and wearing warm clothing in the winter and moving around more (thus minimizing energy usage for heating and cooling).
• shop for cheaper food than what I am presently eating; spend 60% of present fairly excessive/lavish amount
• cut back discretionary spending to 60% of present level

I could cut back even more if I cut my own grass but I would choose to maintain that expense as long as possible. I think that I could be perfectly happy with the above economies, though. They really aren't very severe.

W2R, I agree with your sentiments wholeheartedly! I've always maintained a LBYM lifestyle - retired at 42 and immediatley received "flak" from friends/family for continuing to pinch pennies, although my portfolio was in the 7 figure range. I was living in a suburb of San Francisco at the time & my pals were dismayed at the old car (parents hand me down)I drove and the clothes I wore from resale shops. Fast forward 10 years..
I invested in 3 cattle ranches in Oklahoma....having the time of my life, although, it is really labor intensive, I adore the freedom & wide open spaces.
Your notation about reducing spending resonated with me esp. about the utilities. My BF owns an oil company & lives in Dallas - he spends weekends at my ranch. Our first (and biggest!) disagreement happened during a heat wave (July in Oklahoma) and I refused to budge the thermostat from 80 degrees...omgosh, it got ugly!
It's non negotiable about wasting resources AKA money and the thought of dipping into principal is against my principles. The merciless teasing I've received over the years has resulted in several friends asking me for budgeting advice, esp. in the past month.
As an aside, I'm mindful - not miserly....there is a difference!

 

[youbet]

You guys are making me feel eccentric!

I didn't even suggest doing without my lawn guy.

Is Frank aware of this passion for "my lawn guy?"

 

[Dawg52]

I could give up golf.

 

[W2R]

W2R, I agree with your sentiments wholeheartedly! I've always maintained a LBYM lifestyle - retired at 42 and immediatley received "flak" from friends/family for continuing to pinch pennies, although my portfolio was in the 7 figure range. I was living in a suburb of San Francisco at the time & my pals were dismayed at the old car (parents hand me down)I drove and the clothes I wore from resale shops. Fast forward 10 years..
I invested in 3 cattle ranches in Oklahoma....having the time of my life, although, it is really labor intensive, I adore the freedom & wide open spaces.
Your notation about reducing spending resonated with me esp. about the utilities. My BF owns an oil company & lives in Dallas - he spends weekends at my ranch. Our first (and biggest!) disagreement happened during a heat wave (July in Oklahoma) and I refused to budge the thermostat from 80 degrees...omgosh, it got ugly!
It's non negotiable about wasting resources AKA money and the thought of dipping into principal is against my principles. The merciless teasing I've received over the years has resulted in several friends asking me for budgeting advice, esp. in the past month.
As an aside, I'm mindful - not miserly....there is a difference!

Thank you! I couldn't agree more. Those who choose to spend their money on what they really want, and cut back on the rest, can live on very little. In honor of this thread I temporarily added a line to my signature, which has inspired me in the past.

Is Frank aware of this passion for "my lawn guy?"

Well, he hooked me up with my lawn guy to begin with, since he has mowed for Frank and his family for decades. There is no story here, move along, folks...

I could give up golf.

Ouch. Or how about this? You could set up a putting green in your back yard, and intensively focus on improving your putting, for a year.

 

[Dawg52]

Ouch. Or how about this? You could set up a putting green in your back yard, and intensively focus on improving your putting, for a year.

I said could.

 

[W2R]

I said could.

Oh, OK!!! Good. I was about to take up a collection.

There are a lot of other things for a golf enthusiast to cut back on, other than golf, if they even need to cut back in the first place.

 

[Independent]

Just a technical note on using Firecalc. Most people solve for a success rate of 95%, not 100%. The 5% failures have historically occurred in years when the market went down soon after retirement. Therefore, cutting spending is part of the "Firecalc Plan" if you think that the market results since you retired have been bad enough to suggest that your retirement date is in the worst 5% of the possible cases.

 

[Dawg52]

Oh, OK!!! Good. I was about to take up a collection.

By all means start the process. I'm not opposed to sharing the wealth. Well....only if it means I'm on the receiving end.

 

[Billy]

Lol

In essence, have you lowered your expenses by 30%? What had to go? Also, if you increased your expenses, we'd like to know that as well.

Nords

Craigslist sellers are desperately reducing possessions to pay down debt.

Our approach has always been more along the lines of increasing the ‘Lifestyle’ portion of Retire Early.

To us this means not necessarily cutting back or giving up but rather looking elsewhere for entertainment, and ways to make our lifestyle more satisfying.

Like Nords said, Craigslist is a rewarding place to look for bargains. I recently purchased 130 baby clothing items plus a never used crib set and a baby sling tote (used once), all in excellent and stain free condition for $60. This was for my niece who just had her first baby, and had I purchased these items new, it would easily have been hundreds of dollars.

Since I now have the skill of doing Thai massage, I do a significant amount of trading with others which has been very enriching. For example, I just recently received the services of a seamstress who made me 3 dresses in trade for massage.

We are currently living in Mexico, and with the peso/dollar exchange now, our living expenses simply dropped 25-30%. Our rent, food, utilities and entertainment options are all in pesos.

Along with having our ‘monthly nut’ pretty low (for the home we keep in the States) this allows us personal freedom to be creative.

Instead of cutting back, we create more options for ourselves and try to expand our benefits in ways that are ‘outside the box‘. It works for us. Plus we do a lot of volunteer work, so we don’t have the ‘craving for having’.

I would encourage you to look at what you already have, the experience and talents you already use, and see how you could utilize them in different ways to make your lifestyle more fun or satisfying. To me, it's more inspiring than the thought that 'I have to cut back'. Just a suggestion.

Be well,

Akaisha
Author, The Adventurer’s Guide to Early Retirement

 

[Eagle43]

I've always lived below my means. Comes from growing up poor. So, I guess we could eat out a little less, if necessary. House is paid for. Vehicles are paid up. Credit card is paid monthly; no interest. Medical is accounted for, thank you medicare and tricare. Pensions and SSAN pay for our everyday living expenses. Now I do like my wine. That ain't going; even if the market craters to zero. I know it's heresy here, but if things got really bad, why I'd go back to w***. There, I said it.

 

[Ronstar]

Living below my means here as well, even though I've taken an income hit of 75k in 2007 and it looks like another 75k in 2008. Portfolio loss is also significant, but since I don't tap into it to pay expenses, I haven't had to really cut expenses. I've probably cut expenses about 10%

 

[haha]

I will probably come in about 2% under budget this year. I am not going to add an inflation increase for next year. I will be fine as long as dividends hold up. However, I have no experience with how dividends will react in this type of market.

Anyone been through a prolonged market downturn living on their dividends? UncleMick?

One would have to be quite old to make that claim. In 2000-2002, the stocks that crashed paid little or no dividends. Many old economy stocks chugged along paying well with modest or variable price changes. I laid the foundation for my personal dividend investing during this time, with large purchases of MO and UST. These proceeded to scare the hell out of me by continuing to fall in an atmosphere of extreme legal harrassment. Once the states got on tobacco's payroll I felt I was safe though. I think to set up a dividend retirement one either has to accept some risk along the way, or save like mad, as there will not be any Dell or Amazon multibaggers.

You also cannot be the type of person who seeks consensus. I see questions on this board- "Some say this, some that". I'd say buy yo' mama a brand new hat. Becasue when the dust settles, at least she will have had that. If you listen to what people say, you are screwed as an investor.

Although I was retired during the 90 recession, I was doing intermediate term swing trading. I remember that time as being an excellent hunting season for financials. No clue how dividends fared, though I imagine not too badly across the board.

My grandmother lived through the 70s on dividends. As I remember from family chat, her blue chips sailed along fine, but there were income cuts from the smaller number of mutual funds that she owned. My guess is that redemptions caused the managers to make suboptimal decisions- selling the good dividend paying blue chips because they could be sold. Dividends actually increased steadily during the 70s recessions, as companies had considerable pricing power in that inflationary economy, prior to the onset of effective foreign competition in many industries.

One of my uncles managed her money, and I remember that he did put her on an allowance, which she was not very pleased about.

Ha