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05-15-2019, 10:55 AM
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#21
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Dryer sheet aficionado
Join Date: May 2019
Location: Harrison Township
Posts: 36
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Quote:
Originally Posted by Bigdawg
Just curious I guess but 40K/year on what? Essentials? Food, heat (you do live in Michigan), cable package?, Gas and car maintenance? You say you have no debt (house, car, etc...) Can't imagine 40K of essentials.
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This is what it looks like:
Condo Costs
Condo Dues 3,924
Property Tax 3,875
Homeowners insurance 630
Maintenance 500
Spider Control 365
Utilities
Gas 882
Electric 815
Water 525
Groceries 6,240
Dining Out 5,200
Coffee 500
Health Insurance 18,000
Dental Insurance 720
Deductibles 3,000
Prescriptions 1,200
My Vehicle
Insurance 1,065
Fuel 2,340
Car Lease 3,300 We have never leased before, but we budgeted for it
Tabs 140
Maintenance 200
Wifes Vehicle
Insurance 1,039
Fuel 2,340
Car Lease 3,300
Tabs 140
Maintenance 200
Clothing 700
Personal care 1,000
Essential Expenses Total 62,140
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05-15-2019, 11:05 AM
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#22
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Location: west bloomfield MI
Posts: 2,223
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Quote:
Originally Posted by downrod
Hello! Greetings from Michigan
Our planned retirement date is May 1st, 2023.
I will be age 64 and my wife will be age 57 at time of retirement.
I have calculated our expenses to be 90K per year, after taxes. I will need to withdraw 111K per year
Our essential expenses are 62K per year. The essential expenses include a budgeted 22K expense for health care.
The remaining 28K is spending on the fun stuff. Boating, vacation, 2 months rental in Florida, etc. (We hope to escape winter for a few months each year) These are expenses that could be cut back if necessary.
I have ran FireCalc a few different ways.
If I leave the cash in our bank accounts out of it and just run the 1M in retirement accounts, I get a success rate of 56% for 40 yrs and 83.2% for 30 yrs
If I add the cash in, it lowers my equity position to 40% and I get a success rate of 78% for 40 yrs, and 99.2% for 30 yrs.
Here are our vitals:
Tax Filing Status- Married- filing jointly
Current Tax Rate – 22% (19% Calculated)
Age – 60
Spouse – 53
Pension- None
Savings and checking accounts - 235 K (2.5 yrs. expenses)
Investment Portfolio - 1M
401K and Roth contributions - 60K per year until retirement date
Asset allocation- Stock- 49% Bonds-36% Cash- 9% Other – 6%
Annual Spending plan – 90K Essential Spending 62K
Calculated Overall Expense Ratio 0.11%
Vanguard Advisor fee – 0.3% on approx. 550K - $1650 annually
(Thinking about dropping this and proceeding on my own.)
My IRA
Vanguard Total Stock Market Index – 106K
Vanguard Total International Stock Index – 53K
Vanguard Total International Bond Index - 75K
Vanguard Total Bond Market Index -174K
Industrial Property Trust- Non-traded REIT- 29K
My Roth IRA
Vanguard Total International Stock Index – 27K
Vanguard Total Stock Market Index – 3K
Wife’s IRA
Vanguard Total International Stock Index – 21K
River Source Variable Annuity – 28K
Wife’s Roth IRA
Vanguard Total International Stock Index – 16K
Joint Taxable Account
Vanguard 500 Index Fund – 3K
Vanguard Growth Index Fund – 3K
Vanguard Total Stock Market Index Fund – 65K
Vanguard Prime Money Market Fund – 5K
My 401K
MFS Growth Fund – 53K
American Funds Euro-Pacific Growth Fund – 18K
American Funds 2025 Target Date Ret. Fund – 49K
Stable Value- Guaranteed Interest Account - 65K 3% interest
Wife’s 401K
Vanguard Total Bond Market Index Fund – 94K
Vanguard Total International Stock Index Fund – 48K
Vanguard Total Stock Market Index Fund – 72K
Please comment on the feasibility of our plan. Let me know if you see anything that I am missing in my calculations. Asset allocation, recommendations, etc.
I would really appreciate the input.
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Before I analyze the investments, could you explain why the $111k withdraw for 90K in expenses?
NM saw these replies
Quote:
Quote:
Originally Posted by HNL Bill
$111,000 income (assuming all comes from tax-deferred accounts), less MFJ standard deductions $24.4K = $86,600. Taxes are calculated as follows (2018 rates):
- First $19,400 at 10% bracket: $1,940
- $19,400-$78,950 at 12% bracket: $7,146
- $78,950-$86,600 at 22% bracket: $1,683
TOTAL: $10,769
Effective tax bracket = $10,769/$111,000=9.7%
IF you take some of your income from your taxable accounts, then the principal won't be taxed, and this will lower your income taxes further.
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Quote:
Originally Posted by downrod
By calculating my taxes correctly, (thanks to HNL Bill) I am able to lower my annual withdraws from 111K to 99K. I ran the new values through FireCalc and my new success rate is 100% for 40 yrs. I feel much better about things now. I will also deep dive the ACA information to try to get a better handle on what my actual health care costs might be.
Great stuff!
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I assume this is for taxes?
What is the Roth contribution per year?
What is the expected Roth balance at time of retirement?
I would reallocate the highest expected return investments to the Roth.
Have you tried the flexible retirement planner?
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
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05-15-2019, 11:23 AM
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#23
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Dryer sheet aficionado
Join Date: May 2019
Location: Harrison Township
Posts: 36
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Our Roth contributions will be around 5K each. Last year we were over the limit and had to take money out of the Roths. Our Roth accounts are severely lacking. This has been a mistake on my part.
I am guessing that my Roth will be worth about 55K at retirement and my wifes approx 35K
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05-15-2019, 11:46 AM
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#24
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Recycles dryer sheets
Join Date: Aug 2008
Posts: 251
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Quote:
Originally Posted by downrod
Maintenance 500
Spider Control 365
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Ew, the $365 a year for spider control makes me shiver!
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05-15-2019, 12:00 PM
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#25
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Dryer sheet aficionado
Join Date: May 2019
Location: Harrison Township
Posts: 36
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Quote:
Originally Posted by Mmm Rrr
Ew, the $365 a year for spider control makes me shiver!
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We live on the lake. they are huge and they are everywhere! I have the exterior sprayed once per month from May to October
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05-16-2019, 02:15 AM
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#26
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Full time employment: Posting here.
Join Date: Oct 2018
Posts: 530
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Why only 60 k more in 401 k over 4 years? Since your over 50 are you maxing contributions plus cach up contributions? You should be able to max out at almost 25 k a year for you alone. If you max out your 401k's then you AGI should be low enough to max out both Roth's.
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05-16-2019, 06:02 AM
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#27
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Dryer sheet aficionado
Join Date: May 2019
Location: Harrison Township
Posts: 36
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Quote:
Originally Posted by Vacation4us
Why only 60 k more in 401 k over 4 years? Since your over 50 are you maxing contributions plus cach up contributions? You should be able to max out at almost 25 k a year for you alone. If you max out your 401k's then you AGI should be low enough to max out both Roth's.
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Its 60K per year. 25K each for 401K, 5K each for Roth. Even maxing out the 401Ks, we each had to pull 1500 from our Roths last year.
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05-16-2019, 06:16 AM
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#28
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Feb 2007
Posts: 9,958
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Quote:
Originally Posted by Vacation4us
Why only 60 k more in 401 k over 4 years? Since your over 50 are you maxing contributions plus cach up contributions? You should be able to max out at almost 25 k a year for you alone. If you max out your 401k's then you AGI should be low enough to max out both Roth's.
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The spouse needs 7 years of ACA coverage when they retire..I wouldn't max out those 401's IMO I'd work on getting together enough after tax money to ensure they stay under the cliff for her insurance...
As a side comment the budget looks good and includes a 100 bucks a week for eating out, so the even the bare bones isn't that restrictive.
OP when you retire your car needs might change and the two leases payment or the 6,600 you are paying annually could be lowered. I notice you have the exact same expenses for both cars not likely that would happen if neither of you is driving to work.
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05-16-2019, 07:50 AM
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#29
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Dryer sheet aficionado
Join Date: May 2019
Location: Harrison Township
Posts: 36
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Quote:
Originally Posted by ivinsfan
The spouse needs 7 years of ACA coverage when they retire..I wouldn't max out those 401's IMO I'd work on getting together enough after tax money to ensure they stay under the cliff for her insurance...
As a side comment the budget looks good and includes a 100 bucks a week for eating out, so the even the bare bones isn't that restrictive.
OP when you retire your car needs might change and the two leases payment or the 6,600 you are paying annually could be lowered. I notice you have the exact same expenses for both cars not likely that would happen if neither of you is driving to work.
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I was wondering about that. I am still gathering info about ACA, but I was wondering if it made more sense to prioritize after tax savings to draw on, to reduce taxable income for 7 yrs.
As far as the cars go, I was just throwing in a budgetary figure. We have never leased. Typically we buy our cars outright and keep them for 7-10 yrs.
My guess is that my wife will be ready for a new vehicle around our retirement date, we will probably buy her a new vehicle, and I will take over her existing vehicle. I always get the hand me downs, and I am just fine with that. I didnt really know how to budget in a large expense every 7-10 yrs into the plan, so I factored in a monthly lease cost.
Thanks for the input!
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05-20-2019, 07:55 AM
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#30
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Dryer sheet aficionado
Join Date: Sep 2018
Location: SE Mich
Posts: 38
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Welcome. We're "just down the road a piece" off M-59. Within a year or two age wise and just starting into the snowbird thing as we figure out how much longer to stay employed.
I'm not sure I have anything to add, but I definitely learned from your work and the comments.
Thanks for posting, I will be going through very similar calculations, probably when I get more time at the end of the summer and it was beneficial to follow through your thought process.
If I did the math correctly, this is the week you'll find out how things are going with your job and the cutbacks. I wish you luck. My father got shown the door at 57 or 58. He wasn't happy about it at the time, but as we both look back on it now (he's 88), it was one of the best things that happened to him in life. As one door closes, another opens.
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05-20-2019, 09:12 AM
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#31
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2014
Posts: 7,045
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With SS covering your essential expenses and savings you look good to go.
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05-20-2019, 09:23 AM
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#32
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Recycles dryer sheets
Join Date: Mar 2019
Location: Pearland
Posts: 100
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Quote:
Originally Posted by downrod
This community is awesome! So much great information!
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+1 This community really is awesome. You're very wise to come to them BEFORE retiring and getting advice.
I just get to read about the things I should have done better...
__________________
Retired 2015. Jesus follower. Author, Husband, Dad, Futurist, Dreamer.
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05-24-2019, 04:12 PM
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#33
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Thinks s/he gets paid by the post
Join Date: Dec 2017
Posts: 1,616
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Quote:
Originally Posted by downrod
My wife and I make good incomes for the area that we live in. My income is approx. 110 K, My wife’s income is approx. 116 K. My job is not secure. As a matter of fact, there is a large cut coming next week and I do not know if I will survive the cut. My wife’s job is much more secure.
...
Vanguard Advisor fee – 0.3% on approx. 550K - $1650 annually
(Thinking about dropping this and proceeding on my own.)
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I hope you survived the cut! We are fortunate to have just 4.5% state tax in Mich. As others have pointed out if you can save more including in non-tax advantaged accounts that would be great. I wonder if Vanguard is helping enough to justify the fee.
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05-24-2019, 05:14 PM
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#34
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Full time employment: Posting here.
Join Date: Dec 2018
Posts: 966
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My 2 cents........I suggest reading the following link:
https://www.cnbc.com/2018/12/24/what...lly-last-.html
The above link indicates that worst bear market and recovery time since WW2 is 7-1/2 years or 90 months. Do you have a rainy day fund that can last that long?
The second link on bonds during a crash is as follows:
https://obliviousinvestor.com/what-h...-market-crash/
The above link shows that some bonds can decline in a stock market crash...except for Government Bonds.
In general, most bonds do not decline as much as stock. However, certain bonds do decline and bonds can give you a sense of false security if you do not select the right type of bonds.
In general, Short term bonds are less risky than intermediate and long term bonds.
Total market bond funds co-mingle of short term, intermediate and long term bonds, government bonds, corporate bonds so a total bond fund may not perform as well as a short term government fund in a crash. In the long term, a total bond fund perform better than short term government fund but I don't believe that you can have both. (Safety during a crash and good long term performance)
You must feel comfortable with your portfolio having a sufficient safety net during a crash or bear market. Otherwise, you may have a hard landing.
I am retired and I have 7-1/2 years in liquidity consisting of short term government fund, short term corporate funds, money market funds and CDs. This is my safety net. The rest of my portfolio are in stock investment because of my safety net. If you have SS or other reliable income you can adjust your safety net accordingly.
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05-24-2019, 06:15 PM
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#35
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Recycles dryer sheets
Join Date: May 2019
Location: Living room couch
Posts: 153
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The massive trap with ACA is that no state other than Florida (I think) mandates that the offered coverage works outside of the area or state where you live. Apparently the loss of nationwide coverage started around 2016. We live in Ohio and I had to stop working a year before I'm Medicare-eligible. My wife is also five years younger than me.
For NE Ohio we only had ACA choices for NE Ohio coverage. Period. We went to a couple of health care brokers and they both confirmed that. The only out-of-network coverage we would have with ACA is if it were a life-threatening injury or illness.
We're going with United Healthcare 360-day short-term coverage to get us through this. About $850 a month for the two of us with a $2,500 per-person deductible. It does not cover prescriptions or pre-existing conditions but we have nothing of significance in either of those areas. Yet. So about $425 per person. With Medicare I would be looking at $135 + $150 for a supplement or roughly $285 a month so I don't think I'll see a significant decrease in cost with Medicare, especially since I'm on the UH Short Term Elite Plus program that covers everything after the deductible.
One thing to remember as you get within two years of Medicare is that your Medicare premium is based on your Modified Adjusted Gross Income (MAGI). If you exceed the MAGI limit then your Medicare premium goes up for that year. So for a 2019 Medicare user your MAGI for 2017 usually determines your 2019 premium. You can push your MAGI past the no-surcharge limit by having too much in pre-tax withdrawals. I think it's $170,000 for joint filers for this year.
Ray
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05-24-2019, 09:05 PM
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#36
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Location: west bloomfield MI
Posts: 2,223
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Quote:
Originally Posted by RetMD21
I hope you survived the cut! We are fortunate to have just 4.5% state tax in Mich. As others have pointed out if you can save more including in non-tax advantaged accounts that would be great. I wonder if Vanguard is helping enough to justify the fee.
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If it was black Tuesday, it affected senior leaders more than salaried engineers like me... I look forward to knowing if Downrod is still employed. It was only 500 (ONLY!) this week, but 5% were cut since year began.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
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05-24-2019, 11:24 PM
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#37
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,087
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I use a pellet gun, or gas sprayed out of a dish soap bottle, but only outside.
Inside, I jump on them with shoes, or pour boiling water on them if they are in the sink.
__________________
Fortune favors the prepared mind. ... Louis Pasteur
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05-25-2019, 04:32 AM
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#38
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Dryer sheet aficionado
Join Date: May 2019
Location: Harrison Township
Posts: 36
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Quote:
Originally Posted by jIMOh
If it was black Tuesday, it affected senior leaders more than salaried engineers like me... I look forward to knowing if Downrod is still employed. It was only 500 (ONLY!) this week, but 5% were cut since year began.
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Yes, I made it through the cut. Didn't see much activity at my level or in my immediate area. Whew...
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05-25-2019, 04:34 AM
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#39
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Dryer sheet aficionado
Join Date: May 2019
Location: Harrison Township
Posts: 36
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Quote:
Originally Posted by Sunset
I use a pellet gun, or gas sprayed out of a dish soap bottle, but only outside.
Inside, I jump on them with shoes, or pour boiling water on them if they are in the sink.
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The pellet gun sounds like fun!
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05-25-2019, 05:52 AM
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#40
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Thinks s/he gets paid by the post
Join Date: Dec 2015
Posts: 1,166
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I'm actually impressed OP can get to $40K in "essential" expenses, as our essential expenses (ie: not including healthcare coverage, taxes and travel) are roughly $20K more than that - and we buy our clothes mostly at Kohls, eat out < 2X/month and do not drive fancy cars. And that's in a MCOL area in the Midwest. But then again, I track every penny in Quicken and know what our real - not estimated or pulled off of bank statements - yearly expenses are..
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