What you do in good times to prep for the bad?

[NYEXPAT]

Suppose I'll have to "crack the whip" on the YW and get her to earn more money.

 

[hesperus]

Another good plan, I think.

Are you concerned that you might be moving $$ from one bubble into another?

It's certainly crossed my mind. The decision was also based on the fact that we're light on physical real estate as a part of our overall asset allocation, so I feel that the decision contributes to our diversification goals. They say all real estate is local and I've done my homework on this. That said, we are planning on using the property for our enjoyment, too.

 

[audreyh1]

We also regularly trim routine expenses as opportunities arise. But this is just our normal mode of operation, not something we're doing to protect ourselves in bad times. Whatever savings we gain gets spent on other, more important things.

We tend to spend little when we are at home. We've gotten into the habit of eating almost all our meals at home. Partly for health, weight maintenance, and some dietary restrictions, but also because we eat so very well at home and most local restaurants can't touch Chez Audrey. I do spend several hours each day on meal prep.

But we love to travel, and that's where a bunch of the spending goes. We are also generous with siblings and give to charity.

So, if suddenly faced with a big income drop, we can simply reduce travel. But we will only do that if we absolutely have to - using up reserves first. Life is too short.

 

[kcowan]

Our commitment to gifting to kids and GCs is unlikely to be impacted. But the gifts to charity are easily adapted. Some are not but we have a wide discretionary group. Another pension kicking in this year is giving us an opportunity to ride out any storm. We expected the storm to have hit already, so is this the calm...

 

[2017ish]

Appreciate the reports on this thread, from W2R in detail, about cutting expenses. I'm close to retiring and LBYM has been my practice forever, but LBYM for an extremely busy professional (who sells his time to earn dough) means there is always plenty of fat that can be trimmed. It will be a comfort and a pleasure, when at last I have time to do as I please, to cut needless expenses (as folks like you instruct), thereby freeing up some cash for our most highly valued experiences and also creating even more of a cushion against SOR risk.

Thanks for all the great advice.

+1. And continuing our slow move from 100% equities to 70%, or maybe even 60%. Probably won't yet be there by end of July, but we are in the ballpark.

 

[GravitySucks]

Don't worry about me I'm used to it. Ever since I've been here "helpful" people have been trying their very best to "correct" my errant investment practices.

FA at % of AUM at a full service broker?

Yeah, works for me -

Not concerned about your use of an FA,But your still throwing those nickels away not bringing the beer and soda bottles back. How can you be so reckless?!?

As to the OP, I keep my AA the same but buy another wrung on the bond ladder.
It's been easy to rebalance while the markets been good, wonder if I'll be so good rebalancing when it comes to selling bonds and buying equities....

 

[iloveyoga]

I keep my asset allocation steady. I always watch my spending, so I can spend on the things I really want.

 

[latexman]

I just peeked at my accounts on Fidelity. Up 11.21% YTD!

 

[rayinpenn]

I have not done a thing - zero. I'll stay the course. I don't care how much my portfolio is valued at dad by day I care how much it earns.

Edit: yeah the Mrs will definitely cut back on spending if things get tuff..we are generally pretty frugal most of the time anyway..

 

[SecondCor521]

"Don't just do something, hurry up and stand there!" <- I don't know why stuff like that amuses me, but it does.

There are a few things I am doing that will help, but I would do them anyway so I'm not sure how much they apply:

1. I spend what seems reasonable to me, even though FIREcalc says I could spend more and remain 100% safe. Currently I'm around a 2.2% WR.
2. I do a few side gigs that bring in some of what I call non-portfolio income (NPI). These NPI opportunities are variable but create about a -1.9% WR tailwind, so my net actual WR is about 0.3%.
3. I watch how things are going in the financial world, so when the next downturn comes I can react quickly to it. I've said before that I think that one of the best things one can do to maintain portfolio survivability is to adjust to one's changing circumstances. Much like a one-income family where the breadwinner loses their job and the family either parties on like nothing happened or immediately tightens their belt.
4. I did move some college money from my youngest's account to my middle child's account. Since they are target-age-based accounts, this de-risks things very slightly and also matches the predicted liability timelines better.
5. I've tried to ensure that my AA is appropriate for my personality and situation for when the next downturn comes. It is hard to tell as I have never been retired when the market is dropping. But with a low WR, lots of backstops and contingency plans, a familiarity with history, a fairly strident optimism about the future, and an Aspberger's-style personality, I think I'm good. We'll see.

 

[daylatedollarshort]

Tedtalks and related books on the science of happiness has also been a real money saver for me. I still feel like I'm trying to get over a lifetime of conditioning by advertising on how to increase happiness when the science of happiness can have very different recommendations, and ones that are often inexpensive. On brain wave studies, the happiest man in the world discovered so far is actually a Buddhist monk.

 

[kcowan]

I only adjust my AA in November. I only update my long range financial plan in February.

What me worry?

 

[Lsbcal]

Using VPW I looked at a few post WW2 declines. Here are some for a 60/40 AA and 4% withdrawal:

1969-1970 (1 year)..... -15%
1973-1975 (2 years).... -40%
2000-2003 (3 years).... -30%
2008-2009 (1 year)...... -25%

All were official recessions.

Reducing spending a bit would not really smooth these out. Might make you feel like you are doing something though. Best to have plenty of money to weather the storm or maybe reduce AA ahead of time if one doesn't have enough money going into these declines.

My simulations seem to indicate we have enough but the portfolio could decline by 50% or even a bit more should we get a future sequence that had multiple recessions close together.

Or we could just get a "normal" sequence of returns going forward. That would be nice.

 

[ESRwannabe]

I'm not doing anything different right now. I will just keep building up my portfolio, focusing on income.

Once we get a crash though I will be watching the central banks. The first time they start doing QE again I will be buying 3x levered or higher ETFs.

I wish I had caught on earlier that QE means there will be no volatility and stocks can only go up. The smart thing to do is borrow as much money as possible and buy whatever is "cool". Earnings no longer matter.

 

[RobLJ]

I am harvesting gains above the 60% stock allocation to cash and short-term funds, in similar fashion to your B below. I allow a 60-66% band, usually rebalancing at the trigger points, so I'm hugging the minimum allocation, for similar reasons.
This allows stock funds to "run" but I'm keeping the allocation "tight"--I've sold/rebalanced twice in the last year, which is unusual. Cash is higher, only because bond yields have moved significantly downward; I'll move some cash to bond funds if/when yields move upward.

What tactical moves are others doing as their money grows in these good times?

As an example, here is what I've done:
A) Continued to stick with my current AA
B) In the fixed income part I moved some intermediate bond money to a short term investment grade bond fund. This should see us through the worst of the bad sequence years (like those starting in 1966, 1929, and 1906).

Regard (B), this is enough to cover:
(1) a Reserve account to boost normal portfolio spending should we have a very bad sequence of returns going forward
(2) the next 12 months of spending

So I think I've insured that even in a very bad sequence of return years we should be able to spend at levels that will please even DW. Now I can relax ... I think .

 

[RobLJ]

I started using one of the Vanguard Balanced portfolios that was close to a 60-40 allocation as my benchmark, a couple years after I started reducing stock allocation, which had been > 90%. I realized the S&P wasn't a good benchmark for a more balanced portfolio allocation. Given my foreign allocation and a couple other portfolio allocation, there was a divergence, both up and down, but it was a better benchmark.

So true. I never understood why the S&P500 had to be the benchmark for comparison. Always and everywhere there are other ways to invest and other things to invest in that could have made more money. If you have a balanced portfolio you will beat the S&P on the way. And be holding the bag for missed profits on the way up. And using a 100% S&P AA is fine too. I guess....? My personal benchmark is "Do I have enough money?"

Personally I couldn't do what robbie is doing. ie Take a lifetime of money and give it to somebody else and, "See ya later" But if he can, hey, it's his bread and I'm sure he's meeting his benchmark 'cause he has enough money.

As far as what I do in good times to prepare for the bad times: I try not to spend too much

 

[redduck]

prep for the bad

...but I have stockpiles of staples...

I googled "metal staples" and this is what came up. I guess if a person has to stockpile something to prep for the bad, this just might make the bad extremely pleasant.

 

[NW-Bound]

What I do in good times to prepare for future bad times?

I try not to let my spending go up to use up all that excess return. I try to remind myself that all good times must end at some point.

As a practical example, I do not stay too long in expensive Switzerland in this trip and prefer more time in France. Compared to the former, France is so cheap. Heh heh heh...

But as time goes on, I also realize that I am getting closer each day to that proverbial hole in the ground. Can't let financial worries detract from my remaining time too much. I still have that 25' motorhome to serve as the housing of last resort. No fear of living under a bridge for me. Heh heh heh...

 

[HadEnuff]

I've been stockpiling single malt scotches.

 

[Rickt]

Have been reducing risk exposure to stocks from 90/10 over the past year to 60/35/5 as we get ready to retire this month. With 2.5% WR we have 2 years living expenses in CASH. Also creating a Bond ladder with bond part of the portfolio to cover our living expenses thru age 70. Will not need to draw from equities in the event market dives and stays down for several years.

Cheers,
Rick

 

[bada bing]

I've been stockpiling single malt scotches.

Part of my being frugal is doing mail order from Masterofmalt.com. Quite a bit
cheaper to buy scotch from Scotland even though the shipping is killer. The
selection is better than any place I've shopped at a brick-n-mortar as well.

I like to keep at least 18 months ~ 2 years of scotch and bourbon stocked in
case there is a downturn in the market, hehe.

 

[UnrealizedPotential]

About the only adjustments I have made in the last year is to diversify away from some of the riskiest parts of my portfolio and add more to the stable bond fund and dividend fund. When we get a downturn, it will come as a thief in the night. It usually does. I am a little light on equities at 30%. Maybe that is not such a bad thing since the market seems expensive.

 

[HadEnuff]

Part of my being frugal is doing mail order from Masterofmalt.com. Quite a bit
cheaper to buy scotch from Scotland even though the shipping is killer. The
selection is better than any place I've shopped at a brick-n-mortar as well.

I like to keep at least 18 months ~ 2 years of scotch and bourbon stocked in
case there is a downturn in the market, hehe.

Brilliant! That's what I like about this forum. No matter how clever I think I am, there is someone out there to help me do it just a tad better.

 

[misshathaway]

Rebalance to stick to the boring safe AA, even though it is very tempting not to.

 

[athena53]

Part of my being frugal is doing mail order from Masterofmalt.com. Quite a bit
cheaper to buy scotch from Scotland even though the shipping is killer. The
selection is better than any place I've shopped at a brick-n-mortar as well.

Thanks- my favorite whisky dealer in Edinburgh (Cadenhead's, also in business as The Tasting Room in London) didn't ship to the US, leaving me to hope it made it safely home in the checked bags (it always did) or ship it myself but fib about the contents. MasterofMalt must have to jump through hoops to comply with applicable regs and that drives the shipping cost up. When I'm feeling extravagant I may order a few bottles!