Monday, May 08, 2017

More Thinking About Early Retirement

On the last post, bethh commented:

"I'm curious how you decided to set whatever goal it is that you have for retirement - is it salary times x, or spending times 30 years, or what? I feel pretty sure that if I were in your shoes I'd be retired already!" 
This kind of got me thinking about whether I could indeed be retired already. With about $1.2 million in assets and no debt, I already have a lot more money than many people do when they retire. But I'm still under 50, so I have a long window of time that money has to cover. At some point years ago, I had a somewhat arbitrary number of $2 million as my retirement savings goal, which I guess I had calculated would cover what I thought would be my desired retirement lifestyle. I can't remember exactly what math I did at the time-- maybe I should search my own blog archives to help my memory!
Some people use the rule of having at least 25x what your annual spending will be, on the theory that you can safely withdraw about 4% of your savings each year without eating into it too much, since it would hopefully have investment gains of more than 4% each year.
You also have to think about what "retirement" really means-- does it mean you don't work at all? Are you going to want to fill all that spare time with expensive hobbies and travel? Or are you willing to downshift to some other sort of work that will bring in some income, even if it's not much?
I've played around with lots of scenarios in a retirement calculator-- retiring now, retiring later, having a low income now and retiring in a few years, etc. I always felt like I was more or less on track but retiring early never seemed comfortably within reach based on my current lifestyle.
But here's something that I never added to the scenario: Sweetie.
One night when I was noodling around with all this, Sweetie said "does it let you input another person? You know, we're in this together..."
It's not that I didn't think we were in it together, but actually running the numbers this way made a huge difference. Sweetie owns real estate, and has savings, and a small mortgage. After being unemployed for a couple of years, Sweetie got a job that pays a low salary that covers some of our expenses. More importantly, at age 65, Sweetie will get a good old-fashioned defined benefit pension. And someday, Sweetie will most likely inherit a few hundred thousand dollars unless the family circumstances drastically change.
Plug all that in, and boom, we can both retire now.
Of course, this does not make me totally comfortable. We've talked about getting married at some point, but we aren't yet. Our finances are totally separate except for a token joint checking account with $2000 in it. And I just have this independence thing ingrained in me somehow-- the idea of being supported by someone else is just bizarre! But given how miserable I've been at my job, this is now making me think A LOT about quitting.  That may not be "retirement" just yet, but it's pretty amazing to realize that I may have the freedom to just walk away and not worry too much about what my next source of income is. I could try a new career, try doing consulting work, or just step back into a lower level job with way less responsibility. I haven't had more than a 2 week vacation since I was 22, and the idea of just having some time off is very appealing. Once you get this kind of thing in your head, it's hard to stop thinking about it...
So much in the world is uncertain right now-- would it be insane to just walk away from a secure six-figure job??

Saturday, January 07, 2017

Catching up on 2016

A few notes as I do my year-end accounting for 2016. 

The first thing I dug into was the trusts I manage for my mom. Their return was about 9% last year and I was about to pay Mom about $8,000 in dividends. I feel pretty good about this, especially after a shaky start in the first few months I was managing her money when the market was down and I was afraid she wouldn’t understand that it wasn’t my fault! I am also a bit less nervous about my mom’s finances since my grandparents both died in 2016 and she does not have to contribute to their nursing home costs anymore, which was a big expense.

My own personal investment accounts are a bit more aggressive and using the way E*Trade calculates returns, I actually beat the S&P 500 in 2016— 11.4% returns in one account, 10.73% in the other, vs. 9.53% for S&P 500.

I earned more money this year as a result of my new job, and decent investment returns. My total income including salary, bonus, investment income and other odds and ends such as employer contributions to 401k was over $214,000, vs about $188,000 for 2015. I also spent more on various things— food, wine, clothes and a few other small pleasures, but also taxes, as those increased when my income went up. But my total spending only went up by about $6,500, so my net savings for the year ended up being almost $85,000, vs about $65k last year.

I am thinking more and more about how to retire early, or at least downshift to a less stressful job. I like making more money, but it has come with a TON of stress and I’m not sure it’s worth it. Maybe I’ll eventually feel more comfortable in this position, but for these first few months, I’ve been struggling and really not feeling confident that it will ever get better. I’d love to quit, but I’m not ready to admit failure, and I keep telling myself that the longer I stick it out, the earlier I can retire! 

My net worth was about $1.17 million at the end of 2016. I’m on the right track for my retirement goals, but not so much so that I can totally relax. I’ve played around with a lot of scenarios in a retirement calculator— the good news is that it does seem like I’d be able to retire at least a few years early, even if I go back to making somewhat less. If I was willing to move to a different part of the US with a lower cost of living and make some big changes to my lifestyle, I could probably retire tomorrow if I felt like it. But I’m not willing to do that just yet, and who knows what the next few years will bring, in terms of my own career, my family, and the political and economic uncertainty in our country.

2016 was a pretty shitty year. It was bad enough that David Bowie, Prince, and Sharon Jones died, not to mention various other iconic celebrities. I lost some dear friends and beloved family members, which of course was more important to me, and I lost a lot of faith in American democracy in seeing Donald Trump elected President. In most other ways, I am happy, pretty healthy, and generally feel incredibly lucky that I have the life I do. When I started this blog, I still thought of myself as “young”— now I’m middle-aged! It’s weird to feel like I’m shifting into a new attitude towards the future, at exactly the point when the future looks bleak in some ways. But I still keep thinking “onward and upward!” Wishing you all, dear loyal readers, the very very best and a happy New Year!

Tuesday, August 23, 2016

2015 Income and Expenses

I never recapped last year's income and expenses, so here's a very simplified version:

Salary and bonus and 401k match $144,061
Investment income and interest $42,515
Gift rec'd $100
Blog income (net of expenses) $1,018

Housing incl. utilities, phone, internet and other household expense $26,465
Food and liquor $14,881
Entertainment & subscriptions $1,911
Charity $707
Clothing $2,802
Education $1,347
Gifts given $1,753
Gym $2,389
Medical/dental $5,679
Travel (incl vacation) $5,244
Taxes (Payroll deductions and payment of 2014 taxes owed) $55,482
Other misc $4,441

Net Savings $64,594

A few observations:
I continue to be amazed at how much income I get from my investments alone. It is more than Sweetie's salary at the moment! Every time I see that investment income, it is another reminder of how important it is to save money and invest it wisely.
Food and liquor is very high, but I cover all of that for both Sweetie and me. We eat dinner out from time to time, but not all that often. We've been using Blue Apron for a couple of years to encourage us to cook at home more. Blue Apron isn't super cheap, but it's cheaper than takeout or eat-in restaurant meals. Where I've been splurging a wee bit is on lunch, sometimes spending over $10 by going to a more upscale place and buying a drink instead of just having water from a cooler in the office.
Gym-- I pay in advance for 2 years at a time, so the true annual cost is only half this amount.
Medical/dental includes Sweetie's coverage, and an expensive crown.
Taxes-- I owed taxes in 2014 due to the extra income I had from selling my condo, so that was a hit this year.
Other miscellaneous includes things like haircuts, art supplies, postage, etc.

I saved 34% of my gross income, which is good, and I never particularly felt like I was having to make an effort to save-- if anything it's been the opposite, feeling like I could give myself permission to spend a little extra from time to time. But I try to keep that feeling in check! I am thinking a lot about early retirement and trying to balance that against enjoying life now. Always a tough question!

Sunday, August 14, 2016

A Lot Can Happen in 6 Months!

Might be my longest ever lapse in blogging! Plenty to catch up on but I will check in with a couple of positive bits of news. 

My net worth is still over $1 million, and I don't think has dropped below that level since I last posted. It is an arbitrary number and doesn't mean I can stop worrying about money, but it is still a milestone to feel good about. 
And... It should become easier to maintain growth in my net worth because I got a new job that came with a big raise! I had been letting my career momentum stagnate a bit over the past few years-- perhaps because of hitting that other milestone of a 6-figure income and realizing I didn't desperately need to make a huge amount more money to reach my goals. But now I will be making 30-40% more depending on my bonus. And depending on whether I get fired for failing at my new job! I hope that won't happen, but it will definitely present new challenges, and more stress. I think more and more about retiring early, so I need to stay focused on saving my extra income to reach that goal. 

I will try to get back to posting more about other issues. If any loyal readers are still sticking around, thanks for bearing with me!

Monday, January 25, 2016

Wallet Woes

Given the title of this blog, you’d think I’d write more often about my actual wallet. I’ve been using the same one for most if not all of the time I’ve been writing this blog. In this post from almost 10 years ago, I talked about my wallet and what was in it. The contents today would be almost identical, except for the Blockbuster video card!

For those who don’t click through the link, my daily carry wallet is a small nylon zippered card size pouch that I bought at Muji many years ago. It has a flap pocket on the outside secured with a Velcro tab— I keep my Metrocard in there as it’s easy to slide it out when I ride the subway. The zippered part has a little mesh divider to keep my coins separate from my cards and cash. I always have 2-3 credit cards, drivers license, gym card and a few other cards in there, as well as cash. The cash has to be folded in half, which isn’t ideal but I usually don't mind. I also stuff receipts in there, so the wallet can get a bit crowded sometimes and I regularly clean it out and reorganize it.

This wallet system has really worked for me— it’s lightweight, very pocketable, and unobtrusive. I’ve gotten so used to it, I rarely have trouble digging around to find anything even though it is small and a bit cramped. And the wallet has been surprisingly durable given that I am using it so much.
But nothing lasts forever— the velcro tab on the outside hasn’t really worked for a while, but now, more importantly, the zipper is tearing. In anticipation of this day, I”ve been checking Muji on a regular basis to see if they sell anything like this anymore but they don’t. And now that I’ve been more desperately looking for a replacement, I’m discovering that one one else really has anything like it either! Everything I've seen is too big, too small, lacks pockets, has too many pockets, etc. So I’ve been trying to open up my mind to the idea of using a different kind of wallet.

I’m trying to remember the other wallets I used earlier in my life. The earliest one I remember is one of those Velcro-closure wallets with contrasting trim, made out of the same sort of woven synthetic fabric as many backpacks. That would have been what I used in junior high, and maybe into high school. Sometime in high school I was given a full size women’s wallet, in a faux leather grey and black pattern, made by Liz Claiborne. I think I used that into my college years.
After college, I had a period where I used a pocket size Filofax to carry my cards and bills, and just put coins in my pocket, which was one of the reasons I always hated shopping for clothes, as many women’s pants don’t have pockets!
At some point, I started preferring a small pouch style wallet, starting with a little card size one made of some kind of Guatemalan or Mexican textile, which I probably received as a gift. It was cute and colorful, and I still have it somewhere. Because that wallet was so small, I supplemented it with a leather card holder from Coach to store things like insurance cards, business cards, and backup credit cards that I don’t use as often. The Mexican textile pouch was replaced with the Muji pouch.

I’ve experimented a little with other wallets. When one of my grandfathers died, I was given a wallet he’d owned— a pretty typical fold-over men’s wallet. I tried using that briefly but never really liked it that much. I also tried to used a different style of Filofax that had a full zipper around it and more pockets, as the idea of combining a notebook and wallet into one always seemed appealing, but in practice I found it too bulky.
The other wallet I currently own and use on occasion is a Bellroy passport wallet. Bellroy advertises a lot online, and I was sucked in enough by it to purchase their Travel Wallet. It’s actually a brilliant wallet— I love how it can hold boarding passes, all sorts of currencies, a passport, an extra SIM card (even though I haven’t had a use for that in years), and even comes with a mini pen. But I only use this wallet for international travel— if I'm not bringing my passport with me, the wallet just seems too big to carry all the time. Despite the size, I did try to carry it as an everyday wallet for a few days, mainly because I just loved it so much I wanted to touch it more often! The leather is really nice, and I wanted to break it in more. But the problem was that it had no space for coins. Most of my pants do have pockets at the moment, but I really don’t want to walk around with change jingling in them. And I don’t want to have to use a separate change purse. I use my coins as much as possible each day and don’t accumulate them but I still need someplace to put them.

In searching around online for a new wallet, of course those Bellroy ads starting popping up again so I took a peek at their website… and lo and behold they have a new wallet that is designed to hold coins: the appropriately named Coin Fold. After much deliberation, I ended up ordering one. It holds flat bills, cards, a SIM card should I ever have a spare again, and there’s a clever little coin pocket. I’ve been mentally enacting how I would use this wallet in my day to day habits. I think it will hold what I need it to hold, but will it be awkward to use? Will there be enough space for the coins? Will I be able to pluck them out efficiently when I’m trying to pay with exact change and there are 10 grumpy people in line behind me at the deli where I get lunch? As of this writing, that remains to be seen…  and I know I’ll have to adjust to one feature this wallet is missing, which is that there is no separate external pocket where I can stash my Metrocard. Will I be able to whip out my Metrocard fast enough without fumbling in front of the turnstile?

It’s funny how nothing is ever perfect in life. If you say you want A, B, C, and D, you’ll only find things that have A, B, and C, or A, B, and D, or B, C, and D… plus E, which you never cared about before, but now you are swimming in doubt because maybe E is better than A anyway, or is it??? I have probably looked at a hundred wallets, and all I really want is the one I have, even though I’m lusting over this new thing because it’s made of pretty leather.

Don't think it hasn’t occurred to me that I could repair the zipper on the Muji wallet… but it pains me to think how much a tailor would probably charge me to replace that 3 inch zipper— less than a new wallet for $100, probably, but I’m sure the price vs. value would still annoy me, and I’d be hearing my mother’s voice in my ear, saying “see, I told you you should have learned more about sewing!” Though if I presented her with my Muji wallet and a 3-inch replacement zipper and asked her to fix it, she’d probably be totally annoyed, as she often was when I was a kid and would ask her to sew together fantasy wallets and notebook covers of my own design. Some things just aren’t fun to sew, even if you love sewing.

So we’ll see if this creature of habit can form a new habit with a new wallet… which will still be an open wallet, of course!

Tuesday, January 12, 2016


So, how crazy is it that the Powerball jackpot is $1.3 billion? Sometimes it seems like all anyone is talking about, though David Bowie's unfortunate death has managed to change the subject this week, at least among most of my friends on social media...
Anyway, for all that I try to be a creature of logic when it comes to finances, I had my little moment of madness last weekend when I decided to drop $10 on Powerball, when the jackpot was "only" $900 million. I of course knew I wouldn't win, but it's hard not to fantasize about these things, and while the odds of winning are incredibly tiny, even incredibly tiny odds are better than the absolute certainty of not winning if you don't enter. And since my lottery spending pattern is to spend about $10 every few years when the whim strikes me, I don't feel like I'm throwing away too much money.
It's funny to read some of these articles that try to tell you the best times to play the lottery-- actually, I should say "try to read," as I feel my brain getting numb pretty quickly. I guess the ideas fall into various categories-- since the winning numbers themselves are totally random, the best you can hope for is to strategize about not having to share the prize, or doing some sort of analysis of the cost/benefit of buying a ticket at different jackpot levels. No matter what, you are working with odds of winning that comparable to odds of being hit by lightning while standing on your head while serving as the first democratically elected president of the United Kingdom.
What struck me after I read the back of my Powerball ticket more closely is how relatively worthless the secondary prizes are for getting a few of the numbers right. After the jackpot, it drops to $1,000,000 (5 numbers right), and then $50,000 (4 numbers plus the powerball number), and then $100 (if you get 4 numbers, or 3 numbers plus the powerball number right). $1 million would be amazing and pretty life changing for most people, even if it's only about half that by the time you take out taxes, and even less if you take it all in cash up front. But I'm not sure it would be enough to make me feel comfortable quitting my job and changing careers. $50,000 definitely wouldn't be enough.

The other thing that interests me about lottery fever is how people talk about what they'd do with the money. at this huge a jackpot level, most people can't even get their heads around it. But they usually seem to start with thoughts of giving a lot of money to friends and family, which is nice. It makes you wonder about people who are billionaires already-- there are plenty of extremely expensive luxuries they can spend their riches on, and lots of charitable ventures, but even they must struggle to put a dent in it sometimes. I can only hope I someday have the problem of figuring that out myself!

If you've bought a ticket, good luck!

Wednesday, November 04, 2015

How to Teach Kids to Save When Interest Rates are Low

I was thinking about how I started learning to save money when I was a kid. At some point, my parents opened a savings account in my name, and I had a nice little bank book. No ATMs back then-- you had to bring your bank book to the teller, who would record your transactions in it. When I got money as a gift, or from my first babysitting jobs, some of it went into that savings account. 

I understood how savings accounts worked: you put money in the bank and the bank paid you interest. I was a kid in the late 1970s/ early 1980s when interest rates were high-- as far as I can remember, my savings account earned about 8%, and knowing that I could be paid 8 cents a year for every dollar in my account was actually meaningful to me-- I was earning money just for letting it sit there!

8% savings account interest seems outlandish today, and I wondered if my memory was correct. I think I am right-- the prime rate back then was between 10% and 21.5%! Today it is only 3.25%, where it has been since 2008. The average interest rate on a savings account today is only a fraction of a percentage point.  You might see a teaser rate of 1% or so, touted as if it's the best thing ever, but it will only be for a limited time, and only for opening a new account. 

So how do you get a kid to see the value of saving if you have to tell them that they will only get a fraction of a penny for every dollar they put away? You could try to teach them about investing in the stock market instead, and I do believe there is value in that, but it is a lot more complicated, and involves so much more risk. 

I would love to hear from readers with kids abut how they've handled this with their own families!