January 2016 Financial Update

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One month down, eleven to go. With the new year came a significant drop in the markets that left our portfolio a little lighter than it was during most of 2015. We suffered a $64,000 net worth decline during the month of January.

Our income remained steady at $6,912 while our expenses ended the month at a modest $2,293. In cash flow terms, we made much more than we spent. However that didn’t mitigate the stock market losses to any real degree.

We were due for a stock market correction for a while and it’s finally here now. Whether this is a real recession and how deep it might become remains to be seen.

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Book Review and Interview – Job Free: Four Ways to Quit the Rat Race

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I recently had the opportunity to chat with Jake Desyllas, another very early retiree. Jake hosts The Voluntary Life, a podcast about entrepreneurship, financial independence, and freedom. In 2000, he founded Intelligent Space, an award-winning consultancy in the UK, that led innovation in the field of pedestrian movement simulation and analysis. In 2007 he sold his business and in 2010 he retired early, at the age of 38. He is the author of Becoming an Entrepreneur and his new book is called Job Free.

Since achieving financial independence, his adventures have included becoming a perpetual traveller, going minimalist, playing in a band, writing books, and creating a podcast. He currently lives in Panama with his wife Hannah.

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Budgeting in Retirement – 2016 Edition

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It’s a new year so it’s time for a new budget. For the past two years I used this budget of about $32,000 per year. We spent $34,352 in 2014 and $23,802 in 2015, for an average of $29,077 over the last two years. We ended up an average of $3,000 under budget in spite of undertaking a major home renovation including new siding, new windows, and a roof repair in 2014, and a seven week trip to Mexico in 2015.

The $32,000 per year budget was my first attempt at developing an early retirement budget. I tracked our expenses for a few years before I retired in 2013 and figured out that we spent about $24,000 per year on core expenses that would continue into early retirement. To that $24,000 figure, I added extra expenses to account for increased costs in early retirement like health care and traveling the globe.

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Living on Dividends in Early Retirement

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Dividends are a popular source of income in retirement. We rely on them for a part of our annual living expenses. Dividends provide a relatively steady stream of income regardless of the fluctuations in the stock market.

It’s worth stating that I’m not exclusively a dividend focused investor. Instead I focus on the total return of my portfolio. I’m an index fund investor with a fixed asset allocation that I use to periodically rebalance my portfolio. Right now I’m almost entirely invested in equities through mutual funds and ETFs. All of those investments pay dividends ranging from 1% to 4% per fund.

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