Category Archives: Financial Independence

January 2018 Financial Update

Wow, January flew by! I can’t believe it’s already February.  Here in North Carolina it was a rather frigid January.  We experienced not one, but TWO (!!) snowstorms during the month which is a rare occurrence.  If you’ve never experienced snow in the South, it’s a treat. Everything shuts down and the kids get a few days off school.  We busted out the sleds, bundled up, and made the most of it.  Ironically we ended up at our neighborhood elementary school where we hit the slopes hard.

January was a fun month for our finances, too.  The market continued its upward trajectory throughout the month and left us much wealthier.  Our net worth climbed $77,000 to $2,114,000.  Income remained strong at $4,055 which more than covered our spending of $1,281 for the month.

Income

Investment income totaled $345 for the month of January which came from our money market account, CDs, and bond funds.  Our equity mutual funds and ETFs pay dividends quarterly in March, June, September, and December which leaves us with much lower investment income in the other months.

Blog income, shown as “other income” in the chart, remained roughly the same as last month, at $2,377 for the month of January.

My early retirement lifestyle consulting income (“consulting”) dipped slightly to $728 in January compared to $843 in December.  That works out to almost two hours of consulting per week which is what I’m targeting.

 

Don’t want to “work” too much or I can’t do this kind of thing when the opportunity presents itself.

Deposit income of $604 was mostly cash back from a credit card sign up bonus from the Capital One Spark Business card.  I completed the bonus offer in November and the cash back check finally showed up in January.  If you aren’t already enjoying the free money and free travel from credit card bonuses, click here to check out the latest bonus offers.

Another small portion of the deposit income was cash back from the Ebates.com and Mrrebates.com online shopping portals.  If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card.  We scored a decent amount of cash back while shopping online over Black Friday and leading up to Christmas and that cash back is getting paid out right now.

If you’re interested in tracking your income and expenses like I do, then check out Personal Capital (it’s free!). All of our savings and spending accounts (including checking, money market, and five credit cards) are all linked and updated in real time through Personal Capital. We have accounts all over the place, and Personal Capital makes it really easy to check on everything at one time.

Personal Capital is also a solid tool for investment management. Keeping track of our entire investment portfolio takes two clicks. If you haven’t signed up for the free Personal Capital service, check it out today (review here).

 

Expenses

Now let’s take a look at January expenses:

Our spending totaled $1,281 during January which is a little less than half our budget of $3,333 per month (or $40,000 per year).

 

Groceries – $563:

A fairly ordinary month of grocery spending right at our long term monthly grocery average.  Lately we have shopped at the new Lidl grocery store that opened up in Raleigh in November. Their regular prices are about the same as Aldi, and they offer weekly sales on their already competitively priced products.  We still visit Aldi but find ourselves spending less there for some reason.

 

Yeah we eat rice and beans. With a side of Tikka Masala and Butter Chicken Curry. Try this curry paste if you want to make delicious homemade butter chicken curry too.

 

And thai coconut shrimp curry.

 

I usually buy jars of Maesri pad thai sauce. This time I made the sauce from scratch using tamarind concentrate. Tastes amazing and costs less (about $3.50 for a 16 ounce jar at our local Asian grocery).

 

Steak fajita time!

 

Healthcare/Dental – $364:

We spent $364 for our monthly health insurance premium.  That’s the premium after we get a $700 per month ACA premium subsidy based on our income.

 

We spent two days this winter cleaning up the bank along the lake. Technically we’re trespassing on city property but they’ve pretty much abandoned it so we clear cut the trees and weeds each winter to maintain our lake view.  In the process, we get tons of free firewood.

 

Taxes – $300:

State of North Carolina estimated quarterly taxes for Q4 2017.  We paid for the federal quarterly estimated taxes using Visa gift cards purchased (at a discount) in December so that expense doesn’t show up in this January financial report.

The state taxes came with a 2% fee (totaling $6) that I’m allocating to the “Travel” category of spending.  We pay the extra fee to generate spending on credit cards so we can qualify for more sign up bonuses each year.  That’s how we get $5,000 to $10,000 in (mostly) free travel or cash back each year.

 

Restaurants – $32:

$32 for Chinese takeout for our family and my parents.

Sushi takeout from the Chinese restaurant. Good stuff!

 

Cable/Satellite – $14:

$14.99 per month for 30 mbit/second download speeds and 4 mbit/second upload speeds with no data caps.

 

Travel – $6:

$6 fee for paying State taxes with a credit card.  Credit card bonus here we come!  Travel plans for 2018 include a month in an oceanfront condo in The Bahamas this summer and a week long cruise in the Caribbean on the brand new MSC Seaside over the Christmas holidays.  The Bahamas trip is all booked and paid for other than a rental car, whereas I still owe about $1,000 on the cruise (due by October).

 

We “traveled” a few miles up a greenway trail to stumble on this beauty. Lassiter Mill dam in Raleigh.

 

Gas – $0:

We didn’t buy any gas in January. The last time we refueled the van was December 10.  It’s looking like we’ll make it almost two months between fill ups!  The snowy conditions in January certainly helped conserve gas since it’s no fun to drive around on slippery roads and many places close for inclement weather anyway.  And who has time to go driving around when you can walk to some fun sledding places for free?!

 

Weeeee! Getting mad slope time at the elementary school.

 

I like snow in North Carolina. It’s beautiful for a couple of days then it all melts and goes away and it’s 70 degrees within a few days.

 

But before it warmed up, it was REALLY cold. Like below freezing cold. For more than a week straight, which was a new record in Raleigh. I’ve never seen our lake freeze this solid.

 

Summary of annual spending from all years of early retirement:

 

Net Worth: $2,114,000 (+$77,000)

Another crazy month in the stock market. It seems like the market only goes up. Until it doesn’t (like last Friday’s 2%+ drop).

During 2017 we moved to a slightly more conservative asset allocation that now includes about $125,000 of bonds and $50,000 of money market and CDs.  The remaining 90% of our assets are fully invested in the stock market which means we do really well when when the market goes up but we suffer quite a beating when the market drops.

This aggressive asset allocation was responsible for a half million dollars worth of investment returns since October 2016. I’ll take it. I might also give it back in the next stock market correction.

View from our bedroom window. Guess how glad I am that I don’t have to get up and go to work in this mess?

Financial goals in 2018 are to have fun, spend on what we want, and enjoy our wealth.  I might sell another chunk of equities if the market continues it’s upward trajectory.  If I sell more equities, it’ll be a speculative play (instead of a defensive play like my sales in 2017) where I’m building up a source of “dry powder” to deploy in the event of a steep market correction.  We’re sitting on around five years of living expenses in cash/bonds/CDs right now and that should cover us through any kind of recession smaller than the Great Depression.

And that’s how our January went! I’m glad that February is here since that means nicer spring weather isn’t far off. In other news, Mrs. Root of Good celebrates two years of early retirement today!  It’s hard to believe we have both been doing this whole not working thing for so long.

 

 

Are you making progress on your 2018 goals?  Still striving to make good on your 2018 New Year’s Resolutions?  

 

 

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Is Hygge, or “Social Coziness”, Denmark’s Best Export?

Visiting us this week is Bob Lai, the blogger behind Canadian Financial Independence and Early Retirement blog “Tawcan” with an important message on living the good life with a Danish influence.

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Unless you have been living under a rock the last few years, you probably have come across the word “hygge.” Hygge is a concept that comes from Denmark. Directly translated, it means cozy. For some reason, hygge has been the hottest craze lately. Everywhere you look you can find hygge related items, being it a flood of books, countless top 10 lists or how-to website articles, department store displays, and even Japanese bakeries.

What exactly is hygge? Does it simply mean cozy? Or purchases of things to create a cozy environment?

I will explain to you what hygge is to me and my family.

Before I get into what hygge truly means, you are probably wondering, how would a Taiwanese Canadian know anything about a Danish concept? What qualifies me to write about hygge?

Well, I met a Danish girl back in 2009 and fell deeply in love with her. One of the first things that she taught me was hygge and what it means to have a “hyggelig” time. I asked her to marry me, at her 30th birthday party, in front of our close friends. Nobody had any idea that I was going to propose to her. Fortunately, she said yes. After we got married, she told me that one of the key reasons for her saying yes was because of my excellent hygge skills.

 

How do you pronounce hygge?

Before getting into what hygge is exactly, let’s go over the pronunciation because almost every non-Danish person I know is messing up the pronunciation.

One thing I have learned as a non-Danish person trying to pronounce the word hygge is that it is a hard word to pronounce. For example, my wife (I’ll refer to her as Mrs. T from now on) has taught my parents numerous times how to pronounce the word, but they still butcher the word by pronouncing it like “hoog.” I think my pronunciation is quite decent but probably still not quite like a true Dane yet.

Contrary to belief, hygge is not pronounced like hoog, hoo-ah, hoo-gah, or hig. Unfortunately, it is nearly impossible to write it out phonetically in English because there are no characters to reflect the actual “hy” sound. The closest phonetic pronunciation is probably a mix between “hue-gah” and “huh-gah.” Since it is so hard explained in words, it is best to listen to the audio pronunciation here.

 

What is hygge?

Hygge to Danes means a lot more than just cozy or coziness. It is about quality time, whether alone or with friends, at home or out. It usually involves some sort of food, candles, some sort of activities like playing games, doing creative stuff, or working on a project together. Hygge can also be as simple as wrapping yourself in a big warm fuzzy blanket, having a cup of hot chocolate, while sitting in front of the fireplace, and enjoying the moment.

 

 

As an honorary Dane, hygge to me is about slowing down and spending quality time with the important people in my life. It is about having good food and having a good time; it is about having a deep conversation with someone while enjoying a nice cup of tea/coffee, it is about taking time to enjoy the simple pleasures in life. To qualify something as “hyggligt,” it requires slowing down, being completely present in the moment, and enjoying it fully.

Therefore, hygge is not about buying cashmere blankets, candles, wine, furniture, pastries, yoga pants, or other material things.

Hygge cannot be purchased.  It has a much deeper meaning, a higher purpose.

 

Danish hygge life vs. North American life

Having lived with a Dane for the past 7 years and stayed in Denmark multiple times over a month each time, I have noticed some major differences between how Danes incorporate hygge into their daily lives and the drastic contrast with how we North Americans operate our daily lives.

For example, Danes can sit for hours over a meal. Whenever we celebrate Christmas with Mrs. T’s family, Christmas meal typically starts around 5 or 6 PM and we usually won’t finish the meal until 10 PM. It does not mean we eat food nonstop for 4 or 5 hours. It has more to do with having different food items slowly and having different conversations along the way.

Mrs. T’s family has a tradition of inviting relatives over for Christmas lunch on the 26th of December (Danes celebrate Christmas on the evening of Dec. 24th). The Christmas lunches I have attended, we would start around noon, often going past 7 or 8 PM. Essentially lunch and dinner would merge into one giant meal. To my wife’s family, these long meals are hyggelige. We sit down together, talk, eat some seafood dishes, talk some more, eat hot dishes, talk some more, eat cheese platters and fruit salad, get up for a walk around the neighbourhood, come back to the living room to have some coffee, more talks, have some desserts, more talks, have some more coffee, etc… well you get the drift.

 

 

And it is not just special holiday meals that the Danes would sit down for, for hours. Everyday meals are much slower and last longer compared to what I have been used to here in North America. The Danes aren’t in a hurry to finish up their meals so they can move on to the next task. They consciously slow down to enjoy the moment and each other’s company.

This concept of slowing down to enjoy the moment is still a learning-progress for me. When we eat meals at home, I would often try to finish my food quickly and start cleaning, so we can move to the next activity or task on hand. When my phone rings or beeps, I would have the strong urge to step away from the table and check my phone. “Sit down and wait till everyone’s finished! We are having hygge!” Mrs. T would often remind me. I am better now today, but I am still learning. 😊

Thanks to Mrs. T, I have been learning how to incorporate hygge as part of my everyday life and to spend quality time. I have learned to take the time to consciously slow down so I can enjoy things that I truly enjoy. This can be playing a video game, watching a hilarious movie, taking the time to meditate, reading a book, playing silly games with my kids, or laughing hysterically over something completely silly and stupid.

 

Why is hygge so popular nowadays?

The popularity of hygge probably has something to do with us living in a fast-pace-technology-driven-everyone-is-always-busy world. Everywhere we look, people are stressed about their jobs, stressed about their lives, stressed about money, stressed about putting a roof over their head, stressed about having the latest and greatest gadget, stressed about keeping up with the Joneses, stressed about saving up for retirement, etc. Somehow, we are looking for a way to detach ourselves from the daily grind and do something special for ourselves.

However, it is not just hygge that we need to incorporate into our daily lives. As someone who is involved with the Financial Independence Retire Early (FIRE) movement, I believe we need to incorporate hygge into our FIRE plans.

Why?

Because I believe incorporating hygge in our FIRE plans will make our lives more fulfilling.

The FIRE community has a tendency to focus on the FIRE date and the FIRE number. We are in a rush to get to FIRE so we can finally enjoy our lives. Some people in the FIRE community aren’t happy with their jobs, their fitness level, or their lives, and they believe that reaching FIRE will make them finally be happy. In addition, the term “FU Money” also has a bad vibe and can rub people the wrong way.

Rather than looking at FIRE as the end goal and having such a strong desire to not ever have to work ever again, let’s focus on what makes us happy and content right now. Enjoy the journey by having hygge along the way.

 

Incorporating hygge into our FIRE plan

You may wonder, how do I consciously incorporate hygge into our FIRE plan and everyday life?

 

  1. Turn off wifi and data on my cell phone

Mrs. T has been telling me that I check my phone way too much. Lately, I have become conscious how often I do that when I am at home. As part of my hygge practice, I started turning wifi and data off on my cell phone back in December when I am at home. This has allowed me to be more present with the kids and Mrs. T.

 

  1. Spending special time with my kids

Every day, I spend a minimum of two times 10 minutes each of special time with each kid. Each kid would decide what he or she would like to do with the 10 minutes. During the 10 minutes, I am completely present and play along. Some special time activities include playing Lego, playing Duplo, drawing pictures, reading books, pretending to be a horse while having the kid riding on my back, and building a mattress fort.

 

We build toilet paper forts here at Root of Good.

 

  1. Sitting down with Mrs. T every night to have hygge

Every night after the kids are in bed, Mrs. T and I would find time to have hygge. It can be sitting down and talking about our day or our future, having a nice cup of chai latte, hot chocolate or tea, watching a movie, or reading books. Having hygge with Mrs. T without the kids has helped us improve our relationship.

 

  1. Making meals or baking treats together

We aim to get everyone involved as much as possible when we make a meal or bake treats. Our kids are 4 and 1.5 and they have been helping with making cookie dough, cake mixes, and putting toppings on pizzas.

 

  1. Not having a fixed FIRE date

Unlike some FIRE bloggers, we don’t have a fixed FIRE date. Instead, we practice being financially independent, despite not FIRE yet. We don’t have a specific FIRE date because we understand things will change. We have two young kids and we also plan to live abroad in the future. We know we will reach FIRE eventually. Not having a fixed FIRE date has allowed us to be flexible with our FIRE plan while focusing on enjoying the special day-to-day moments.

 

  1. Say yes to pleasurable expenses

Being a saver at heart, it has taken me a very long time to learn that it is OK to have pleasurable expenses like having a nice cup of coffee while sharing delicious hand-crafted chocolates with Mrs. T. or going to a nice restaurant and ordering whatever I want without looking at the price. It is about slowing down and enjoying the moment with the special people in my life. FIRE often has a bad vibe because many people focus on extreme frugality and reaching FIRE as quickly as possible. FIRE is not a sprint, it is a marathon. It is totally OK to spend money occasionally.

These are just a small number of things that we have been doing. I believe they have allowed me to focus on the present moment, instead of rushing to the FIRE finish line for the sake of being FIRE’d.

 

 

Gotta go…gotta have hygge!

Incorporating hygge into my daily life and our FIRE plan has allowed me to find my personal balance between spending for today and saving for the future. What is the right balance for me, however, may not be the right balance for you. It is up to each of us to determine our own personal balance between spending and saving.

We all need to realize that we are extremely fortunate contemplating about FIRE, as there are many less fortunate people in this world that do not have a roof over their head and cannot even have a proper meal to satisfy their hunger.

Treat FIRE as part of life, slow down, have more hygge, and enjoy the present moment.

 

About the author

Bob Lai from Vancouver, Canada blogs at Tawcan.com. A millennial, frugalist, investor, photographer, author, and outdoor enthusiast, Bob started his financial independence journey in 2011 after a financial epiphany. Since then he has amassed a dividend portfolio paying over $1,100 per month and is practicing being financially independent every weekend.

Tawcan the blog was created to chronicle his quest for joyful life and financial independence from a Canadian perspective. Self-taught about personal finance and DIY investing without any formal training, his focuses include stock investing, passive income, millennial money, frugal living, self-improvements, and life philosophy.

 

Root of Good’s thoughts:

Love the message, Bob.  I’ve been enjoying hygge all along without knowing what it was called!

Family time at Thanksgiving. Many hours of eating, chatting, and relaxing with family.

Campfires must be hyggelig too, right?

 

 

Could you get into the concept of hygge in your own life? Are you already embracing hygge without knowing it?

 

 

December 2017 Financial Update

Happy New Year!  Another great year in the books for us.  Our youngest started kindergarten. We took an amazing nine week trip to Europe.  And with all the kids in school we were finally able to take advantage of a nice last minute travel deal when Mrs. Root of Good and I jumped on a cruise to the Caribbean for a week.  Our early retirement lifestyle is going well.

Here’s how our finances finished 2017.  Year end dividends rolled into the investment accounts in December pushing our total income to just over $14,000. Our spending was rather high at almost $8,000 (which needs some explaining). Another freakishly good month in the stock market pushed our net worth up another $26,000 to leave us with $2,037,000 at year end. Needless to say, our 2017 went remarkably well from a financial perspective.

 

Income

Investment income totaled $10,843 for the month of December plus a bit more from a 401k that didn’t show up in Personal Capital.  Our equity mutual funds and ETFs pay dividends quarterly in March, June, September, and December.  Some funds only pay once per year in December which explains why the December investment income is much higher than other months of the year. Mrs. Root of Good’s 401k doesn’t report the dividend income as dividends in Personal Capital. Including those unreported dividends plus all other investment income reported in Personal Capital, we earned a total of $36,234 in investment income during 2017.  That’s a little higher than 2016 dividend income.

Blog income, shown as “other income” in the chart, remained roughly the same as last month, at $2,294 for December.

My early retirement lifestyle consulting income (“consulting”) increased to $843 in December.  That works out to almost two hours of consulting per week which is the upper limit of what I’d like to do.  We’ll see how January goes before I finalize rate increases for 2018.

Deposit income of $51 was cash back from the Ebates.com and Mrrebates.com online shopping portals.  If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card.  We scored a decent amount of cash back while shopping online over Black Friday and leading up to Christmas.

If you’re interested in tracking your income and expenses like I do, then check out Personal Capital (it’s free!). All of our savings and spending accounts (including checking, money market, and five credit cards) are all linked and updated in real time through Personal Capital. We have accounts all over the place, and Personal Capital makes it really easy to check on everything at one time.

Personal Capital is also a solid tool for investment management. Keeping track of our entire investment portfolio takes two clicks. If you haven’t signed up for the free Personal Capital service, check it out today (review here).

 

Expenses

Now let’s take a look at December expenses:

December was a high expense month for us. Two main factors added up to much higher than usual spending. I paid the annual property tax bill of roughly $1,500. I also bought around $3,700 in gift cards that I’ll be using throughout 2018 for everyday spending.

The December total spending of $7,953 is about two and a half times our budget of $3,333 per month (or $40,000 per year).  Subtracting out the $3,700 in unused gift cards brings our effective spending to “only” $900 over budget.

 

Groceries – $2,643:

This shockingly high grocery spending is easily explained. We bought $1,000 worth of Visa Gift Cards and $700 worth of Walmart Gift Cards to take advantage of some significant cash back opportunities and to meet minimum spending requirements on a credit card (to qualify for a sweet $1,000 cash back bonus!). We’ll spend these gift cards on things like groceries, household goods, and general merchandise over the next several months. I bought another $2,000 worth of Visa Gift Cards (that cost $1,963 out of pocket) and included those in the “General Merchandise” expense category.

Tracking spending with Personal Capital is easy since the data feeds in automatically from credit cards, checking accounts, and investment accounts.  With simplicity comes limitations. I don’t think there’s a way to add in expenditures manually after the fact as it’s basically a cash basis accounting system.  As a result I have to guesstimate where I’ll end up spending these thousands of dollars of gift cards in the future. Which is okay since I’m more concerned about tracking the total amount we spend instead of getting it allocated exactly between specific categories (= keep it simple).

Other grocery spending included a total of $363 added to our three kids’ school lunch accounts.

The actual grocery store grocery purchases for December totaled only $574 which is roughly what we spend on average in most months. More on how we shop for groceries without using coupons.  And why we never shop at Costco.

Rice and beans. And ribs. Hard to make fun of our frugal ways when there are tender juicy ribs next to the (imported from Thailand) rice and (freshly sauteed) beans.

 

Cooking runs in the family. We hosted potluck Christmas for almost 30 people in our family. We made lasagna and thai noodle cucumber salad, while guests brought egg rolls, spring rolls, salad, shrimp cocktails, broccoli casserole, and other delicious treats.

 

The monthly obligatory pho-to. This time at Mrs. Root of Good’s family’s house celebrating New Year’s Eve.  You can tell this is Mrs. Root of Good’s bowl because of the tripe on the left hand side (something noticeably absent from my own pho bowl 🙂 ).

 

General Merchandise – $1,963:

The $1,963 in this category represents the purchase of $2,000 Visa Gift Cards bought at a slight discount. I purchased these and other gift cards through the Ebates Cash Back portal and I hope to get $45 in cash back or possibly more depending on how they are categorized by the merchant.

 

Home Maintenance – $1,536:

Our annual property tax bill.  Even though our house is worth $200,000 or more, we are paying tax as if our house is worth $147,000.  They only reassess property values every eight years here, and the last re-evaluation came just before our neighborhood property values started skyrocketing as the wave of gentrification pushed east from the “nice” part of town.

 

Travel – $828:

It’s official.  Our 2018 summer vacation is booked!  We’re spending a month in an oceanfront condo in Freeport, Bahamas.  We’re staying in a ground floor unit of a 20 unit condo building that sits on a half mile stretch of undeveloped beach. Lots of bleached white sand, crystal clear water, and not much else.  If you don’t hear from us very much over the summer, just know that we’re relaxing working hard next to the pool or on the deserted beach.

We paid about $2,300 for the one month airbnb rental which includes a 50% “long term” discount.  It’s a 2 bedroom, 2 bath unit with a decent living room and dining room, washer, dryer, A/C, internet, full well equipped kitchen, and pool.  The cost breaks down to $828 out of pocket for Airbnb plus a big chunk of gift cards that I bought in 2016 (at a discount, of course) but didn’t use for our Summer 2017 trip to Europe.  If you want to take $40 off your first Airbnb stay, check it out!

The flights are booked except one flight for me on one leg because I’m being cheap and hoping it drops slightly in price.  I used a combo of Southwest frequent flyer points to for round trip tickets from Raleigh-Durham to Ft. Lauderdale then I used Chase Ultimate Rewards points (from last year’s Chase Sapphire Reserve signup) to get round trip Ft. Lauderdale to Freeport, Bahamas tickets.  Total cost out of pocket would have been around $500 per ticket but we managed to use points or other travel hacking to cover all costs in full (including the $56 tax at Southwest which the $300 Sapphire Reserve annual travel reimbursement covered).

I also used up $544 of remaining Sapphire Reserve travel credit to add to the deposit on our winter 2018 Christmas cruise on the brand new MSC Seaside cruise ship sailing out of Miami. Which means we’ll probably visit the Bahamas a second time in 2018.

Gotta love getting many thousands of dollars in free travel from credit card bonuses!  If you want to peruse the available credit card bonuses, check out my credit cards page.

 

Gifts – $357:

Most of this expense is cash gifts to our kids for Christmas. It’s one of their main sources of spending money throughout the year and preempts all those nagging “can I get this?” questions. It’s their money, they can do what they want (as long as it’s not dangerous or likely to lead to big problems).

We also bought the five year old a new bike for Christmas ($53). And phone cases for our daughters’ new phones ($3).

 

Christmas morning!

 

Little Dude’s sweet new 18″ bike from “Santa” (who doesn’t exist according to Little Dude). No training wheels on here!

 

Getting the hang of it.

 

Healthcare/Dental – $348:

Our 2018 ACA plan is about $60 per month more expensive than our $16 per month plan from 2017.  It offers nearly identical coverage as in 2017 except the deductible increased from $100 to $125 and the specialist office visits are slightly more expensive.  I decided to take less than the full ACA premium subsidy that we qualify for so that I can pay extra each month.

I figured out that I can in essence pay an extra $300 each month for my health insurance and that replaces the need to pay quarterly estimated taxes. In this case the health insurance company eats the credit card processing fees for the $300 per month instead of me paying the 1.87% fee. It’ll only save me $60 each year but it also eliminates the administrative overhead of making four estimated tax payments.  I feel kind of like a genius (a very stable genius).  In future months we’ll owe $364 per month for health insurance premiums ($64 for the actual policy plus $300 per month extra that will count as taxes paid once we get back a large ACA Premium Tax Credit at tax time).

 

Getting our tennis on during an unseasonably warm December afternoon.

 

Entertainment – $71:

Due to a quirky decision I made 8 years ago when I first started keeping detailed spending records, I include hard liquor purchases made at our state run liquor stores (the misleadingly named ABC Stores) in the “Entertainment” line item.  Good for entertaining and making a strong beverage at home for personal consumption I suppose.

 

Bought in November: a few bucks worth of craft supplies from Dollar Tree to make these adorable candy cane reindeer for all of our son’s kindergarten classmates.

 

We volunteered on the last day of school before winter break. The kindergartners needed some help from a retired engineer to ensure proper structural integrity in their gingerbread houses. The world has never seen such strength built from graham crackers, cake frosting, and gum drops.

 

In “real” entertainment spending, we went to The Nutcracker presented by the Carolina Ballet. These $500 worth of tickets were free. Fun story – we gave away an old 32″ CRT TV on facebook and the recipient chatted us up and ended up comping us some super expensive tickets to the ballet since she worked for them. It was pretty fun but wasn’t as exciting as the live performances we are used to on cruise ships.

 

Clothing/Shoes – $52:

A few random winter clothing items and a pair of shoes for Mrs. Root of Good.

 

Cold winter sky

 

 

 

Gas – $51:

Slightly more than one tank of gas. We drove to the North Carolina foothills to visit my grandmother and celebrate her 90th birthday!

 

My uncle’s little country retreat in the NC foothills. My first time driving a long distance in sort-of snowy weather!

 

Where do 90 year olds really really want to go for their big milestone birthday? The “fish camp” of course! Mmmmm piles of fried seafood.

 

Automotive – $44:

I paid $39 for an oil change at the dealership. This is the first time I’ve paid for maintenance on the minivan that we bought in 2016.  While there, we also let the dealer perform a few non-critical recall fixes.  They found a few things that needed attention on the van but otherwise gave it a clean bill of health.

One of those items needing attention was a burned out tail light. Instead of paying the dealer $20 to replace a single bulb, I bought a new set of tail light bulbs and a new set of license tag light bulbs (required equipment in North Carolina, and something that failed me on the annual safety inspection in the past).  Total cost: $4 shipped from Rock Auto online (or about $11-12 at the auto parts store).  In the minivan, it’s a pain to get to the rear light bulbs because the interior panels must be removed. As a result I wanted to replace all the bulbs in there at one time so that they will hopefully last the life of the van (and I paid a few pennies extra to get the “long life” light bulbs).

 

Restaurants – $37:

We’re stuck in our boring ways. Just one family visit to our regular haunt – the neighborhood Chinese restaurant.

 

Cable/Satellite – $14:

$14.99 per month for 30 mbit/second download speeds and 4 mbit/second upload speeds with no data caps.

 

I’m passing my love of Starcraft 2 to my son. Guess what we did during the entire winter vacation from school? Hint: there might have been more than a few Zerg, Protoss, and Terrans harmed in the process.

 

Telephone – $4:

I’ve been using Google Voice hooked up through an Obihai Telephone Adapter to get free VOIP home phone service for several years.  Something technological happened such that the older Obi100 adapter stopped receiving firmware updates. Google updated their Google Voice security interface and boom – my old Obi100 no longer played nicely with Google Voice. I found a $4 workaround through some telephony forums and paid that small fee to keep things running for free (at least on a recurring basis) in the home phone department.  I briefly considered tossing out the home phone completely but it is handy to have the whole house set up with phone service without relying on our cells.  And the price is right.

 

Total Spending in 2017

All told, we spent only $31,708 in 2017. That’s about 80% of our annual $40,000 early retirement budget.  We had a great time in 2017 and didn’t lack for anything.  We enjoyed nine weeks traveling across Europe and a week cruising the Caribbean.  We had a new roof put on the house.  Lots of fun was had by all!

I don’t see any huge expenses coming up on the horizon in the short term.  Our big 2018 summer vacation is mostly paid for.  The annual property tax bill is paid.  I don’t foresee any big housing expenses in 2018 although our water heater and furnace are both getting older and there’s a small chance that we would have to spend a lot on repair or replacement of either one of those systems during 2018.  Don’t worry; it’s in the budget along with other capital expenditures for all major systems in our house.

Life is good.  I’ve expressed this opinion before, but I really feel like we’re living a $100,000 lifestyle on $40,000 per year or less.  After four years of early retirement, our spending has averaged $32,000 per year (see summary below).

 

Monthly Expense Summary for 2017:

 

Summary of annual spending from all years of early retirement:

 

Net Worth: $2,037,000 (+$26,000)

Another month is over. Another YEAR is over! Our net worth increased yet again in December, making 2017 a year with 12 out of 12 months with positive net worth gains.  I’ll be surprised if we ever experience another year with such smoothly positive net worth growth.

In December, our stash of investments grew by $26,000 to bring our total net worth to $2,037,000.  Year over year, we’re $357,000 richer than we were at the end of 2016.  That astronomical amount of growth is more than five times what I earned on a yearly basis while working full time as a transportation engineer.

Here’s my market forecast for 2018: The market will go up, and the market will go down. I have zero clue where we will end up on December 31, 2018.  However I expect that on December 31, 2038 we will look back longingly at how cheap stocks were way back in 2018.

As far as investments, my biggest change in 2017 was switching to a slightly more conservative asset allocation.  I sold stock mutual funds and ETFs throughout 2017 and bought VBTLX, the Vanguard Total Bond Market Index Fund, with the proceeds.  I’m now the proud owner of $127,000 worth of bond funds.  In addition to the bonds, I hold $15,000 in 2% CDs at my local credit union and another $35,000 in money market accounts yielding 1%.

In total, I’m holding just over $175,000 in fixed income investments (including cash) which represents just under 10% of my total portfolio. The other 90% remains invested in a broad asset allocation covering the entire globe.  At an average annual spending level of $35,000 per year, the fixed income allocation will cover five full years of living expenses. Add to that five years of $8,000 per year in dividends from the taxable brokerage account and that would result in another year of living expenses.  If we enter a multi year bear market we’ll have plenty of cash and bonds on hand to get us through the tough spots without selling our equities for quite a while.  This worst case back of the envelope contingency planning excludes any blog or consulting income (which covers our monthly spending in most months).

I wanted to close this blog post with a hearty “Thank You!” to all the Root of Good readers and I’d like to extend best wishes for a prosperous 2018 from my family to you and yours!

 

 

How much progress did you make toward your early retirement goals in 2017? Any big New Year’s Resolutions for 2018? 

 

 

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Castles, Skyscrapers, and Prosciutto in Milan, Italy

Welcome to stop number five on our nine week trip across Europe! This post covers the four days we spent in Milan, Italy at the end of June. We flew to Milan from Seville, Spain on a super cheap two hour Ryanair flight.  Earlier in our trip, we visited Lisbon, Portugal, then flew to Malaga in southern Spain before taking a bus to Granada.

This was our first time in Italy and I didn’t have a clue where to visit. I considered Rome but I figured it would be too ambitious to tackle in just four days so we decided to save Rome for later.  Milan, though still a sizable city, proved a good choice to fit in a four day slot in our schedule before we headed onward to Venice.

Milan offers a great mix of the new and the historic.  In a single day of sightseeing, one can take a hundred year old trolley line to go from centuries old castles and cathedrals to cutting edge ultramodern skyscrapers.  Both the old and new proved interesting to me!

The Old – Milan Duomo

The new – Unicredit Tower

 

Sforzesco Castle and Sempione Park

The main highlight of our trip was the Sforzesco Castle and the Sempione Park. These two attractions sit side by side in the central core of downtown Milan and are easily accessed by a subway, bus, and trolley.

In the castle courtyard

 

The castle itself offers free admission all the time. If you want to enter any of the several museums on site, there is a small admission fee.  We skipped the museums and explored the castle grounds extensively instead.

Inside the lower levels of the castle.

 

Walking out of the castle’s northwest entrance brought us to Sempione Park. It’s a big tree-filled leafy green nature preserve right in the middle of downtown Milan. Kind of like New York City’s Central Park on a smaller scale.

Green fields, trees, and a monument in the distance.

 

Walk all the way across the park and you arrive at the Arco della Pace.

 

Galleria Vittorio Emanuele II and the Milan Duomo

The Duomo (or “Cathedral”) marks the Catholic Church’s historically monolithic presence in Milan given it’s prime placement in the very center of the city.  Though started in the 14th century, the final touches on the cathedral weren’t finished until the last half of the 20th century.  This was one of the more impressive churches we visited in Europe.

The Duomo provided a stunning backdrop for some amazingly talented street musicians. They were rocking out Michael Jackson and Pachelbel’s Canon on their violins!

Right next to the Duomo is another mainstay of Milan tourist stops. The Galleria Vittorio Emanuele II is a high end shopping mall built in the late 19th century.  It’s the perfect place to pick up all your must-haves from Versace, Louis Vuitton, Prada, and Swarovski.  If you need to use the restroom, there’s a free one in the McDonald’s next door to the Galleria (and you can make a pit stop at the Ferrari dealer on the way to McD’s).

 

 

 

Getting Around Town

To get from the airport to the Centrale train station near our apartment, we reserved bus tickets for the five of us for €28 total (about USD$31). It was roughly a 50 minute ride from the airport to the train station. Once at the train station we tried (but failed) to catch a city bus to our Airbnb.  After waiting for more than 30 minutes we gave up and decided to walk the mile to our apartment.  We travel light (nothing but bookbags) so the walk wasn’t bad and the weather was surprisingly nice.  We also got an in-depth preview of our neighborhood.

Subsequent attempts to use local transit were much more successful (with one caveat – read on).  Transit tickets were surprisingly cheap considering Milan’s reputation as a high priced city.  The €1.50 (USD$1.70) single transit ticket is good for 90 minutes with free transfers between tram/trolley, bus, and subway. Kids 10 and under rode free, so we only had to use three tickets at a time.  One time on the way home from downtown we used the flexibility of the 90 minute ticket to make a quick stopover to revisit a cool plaza we were impressed with earlier during our stay.

The kids LOVED playing in the fountains at Plaza Gae Aulenti near the Unicredit Tower. I don’t know if this is the kind of public fountain you’re allowed to play in, but we assumed it was.

 

It was so nice we had to revisit on a second day.

 

I got trapped inside the subway once when my transit ticket wouldn’t scan properly. Their subway operates on the scan-in, scan-out method such that you can’t leave the underground without swiping your ticket a second time upon exiting.  I tried to explain in horribly broken Italian to the transit police that I really did pay for the fare and I’d really really like to be reunited with my wife and three children on the other side of the turnstile. With a smile and a wave, this nice officer let me through without further investigation or interrogation.

 

One of the wood-paneled historic streetcars. For €1.50 you can hop on one of these beauties for a tour around the historic center of Milan.

 

Lodging for four nights with Airbnb

We reserved a two bedroom apartment near the Milan Centrale train station.  The historic core of the city was roughly 2.5 miles from our apartment.  At $86 per night, this place was a steal!  We were on the fourth floor of a seven story residential apartment building and it even came with a rickety old elevator that must have been from the Mussolini era.

Full kitchen in our sweet Milan Airbnb apartment. Perfect for making some coffee for breakfast and ravioli for dinner!

Overall the apartment was great. Easy to hop on a bus to downtown. Two minutes from a discount grocery store. Comfy beds. Comfy couch. Nice but small balcony. However this was the one place we stayed out of fourteen apartment rentals across Europe where I took a star off during the review process.

Why did the apartment lose a star? The shower curtain was covered in pink mold (though the bathtub was super clean). And the internet stopped working for a couple days before returning to normal on the last day of our stay.  My theory is that we exceeded the usage limit for the month – though we didn’t know there was a usage limit.  On July 1st the internet miraculously began working once again.  Minor quibbles for an otherwise great apartment.  Let’s just say it was 1,000 times nicer than our Airbnb from Hell in Quebec City, Canada several years ago.

I’m still a huge fan of Airbnb due to the value proposition and comfort. USD$86 per night in Milan wouldn’t even get me a crappy hotel for five people, and this apartment came with a living room, dining room, and full kitchen plus nice tasteful decor throughout.  If you want to try Airbnb for your next vacation, make sure to take $40 off your stay through this link.

 

Food in Milan

On our first full day in Milan we set out in search of a local pizzeria. We found one within a five minute walk from our apartment.  It was right next to a Domino’s Pizza, the ubiquitous US-based pizza chain (that has really improved their pizza game in the past several years).  This was my first chance to muddle through ordering food in Italian (it’s kinda like Spanish, right??).  Pointing and nodding my head seemed to work since they had all the pizzas on display behind the counter.  We didn’t go hungry in spite of my lack of Italian language skills.

Our slightly racist Airbnb host (maybe he was simply honest?) told us all about the tiers of pizza parlors in Milan.  Don’t eat pizza at the pizzerias run by the Chinese – it’s not fit to eat. The Egyptians can make acceptable pizza – that’s where we ended up finding some good slices.  But if you can find one – and mind you they are rare – eat at a pizzeria run by real Italians.

USD$12 for all of this from a local pizzeria!

 

While in Milan, we mostly cooked at home.  There was a very convenient and inexpensive grocery store close to our apartment where I picked up the staples like milk, cereal, yogurt, fruits, fresh ravioli, meatballs, and gelato.  They had raw horse meat carpaccio on the shelf but I decided not to try the horse meat this time around (it looked old and withered – not that I object to eating horse meat in general).

We hit pay dirt with several local treats like prosciutto, smoked salmon, spicy salami, dried dates, local cheeses, and olives.  These items were 50-75% less than the prices we usually pay at home.

Wonderful grocery options = good eats at “home” in our apartment!

 

While at the Milan Malpensa airport, we were treated to fine wines and spirits and plenty of food at the VIP Lounge.  For free!  During our time in Europe, we definitely put to work our Priority Pass Select benefits from our Chase Sapphire Reserve card (check out that card and more in the credit card offers).

Top shelf liquor on the top shelf at the VIP Lounge at Milan Airport. Sandwiches on the bottom shelf became dinner.  Courtesy of the Priority Pass Select!

 

Thoughts on Milan

Milan is a big, wonderful, modern city in Italy. I thought it was a great introduction to Italy since it is more manageable than a larger city like Rome, especially if you only have a few days.  Transit is easy. The city is compact.  Prices weren’t bad at all.  People were nice.  There are plenty of old buildings mixed in with newer architectural marvels.

The crowds weren’t too bad in general, though the heart of the historic center was pretty packed.  We had a good time and managed to see tons of cool stuff during our brief stay in Milan.

Next stop: Venice!

 

 

Have you visited other big cities in Italy? How do they compare to Milan?

 

 

Check out the whole series (so far) of our nine week European family vacation:

 

Cruising through Fall – October 2017 Financial Update

October was another great month for us!  We had a blast, blew some money on a quick jaunt on the high seas, and enjoyed the outdoors. And grew $42,000 wealthier while having all that fun.  No complaints here.

In financial terms, our net worth climbed to $1,978,000.  Income remained steady at $4,573 while total spending for the month of October remained modest at $1,748.  Given that we don’t even spend our current income, I’m starting to unravel the mystery of why our cash balance continues to grow month after month.  Spending less than we make – an old habit we can’t kick.

Fall is slowly descending on North Carolina. The leaves are finally changing colors and falling off the trees. Mornings are chilly while afternoons are mild.  We haven’t turned on the heat much this year, but that will change soon with forecasted highs in the 50’s and 60’s over the next week.  Thanksgiving is just around the corner which means lots of turkey and family time (and some family members that are turkeys).

Income

Investment income totaled $1,096 for the month of October.  This is the last dribble of quarterly dividends from funds that pay at the end of the third quarter.  Our equity mutual funds and ETFs pay dividends quarterly in March, June, September, and December.  During other months investment income tends to be much smaller.  We are well on our way to earning roughly $30,000 in dividends for 2017, as we have in the past.

About half of October’s investment income came from our taxable brokerage account investments which means we can spend the money without withdrawing it from IRAs or 401ks.

Blog income, shown as “other income” in the chart, remained steady at $2,568.  Not a bad figure given how infrequently I’ve been posting lately!

My early retirement lifestyle consulting income climbed to $845 in October after a big fat $0 for September. I can’t explain why this little side hustle ebbs and flows like it does.  If it remains this busy I’ll look closer at raising rates to reduce demand.

Nephew’s birthday party at the city park

 

Deposit income of $62 was cash back from the Ebates.com and Mrrebates.com online shopping portals.  If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did.  When shopping online, I always check to see if I can score some extra cash back by using one of those online shopping portals (and it usually pays off!).  I paid for a cruise in October (more details later in this article) which will lead to $40 cash back in the next month or two.

If you’re interested in tracking your income and expenses like I do, then check out Personal Capital (it’s free!). All of our savings and spending accounts (including checking, money market, and five credit cards) are all linked and updated in real time through Personal Capital. We have accounts all over the place, and Personal Capital makes it really easy to check on everything at one time.

Personal Capital is also a solid tool for investment management. Keeping track of our entire investment portfolio takes two clicks. If you haven’t signed up for the free Personal Capital service, check it out today (review here).

Beautiful lakeside hiking this fall!

 

More stunning hike views

Expenses

Now let’s take a look at October expenses:


For the fourth consecutive month, our spending remained below $2,000 per month.  In October we spent $1,748.  That’s slightly more than half of our budgeted spending of $3,333 per month (or $40,000 per year).  Travel and groceries made up almost all our spending for the month.  Gotta eat and go to fun places, right?

 

Travel – $928:

We found a last minute cruise deal out of Miami on the MSC Divina.  So we booked it six days before the date of sailing.  Here’s the price breakout:

  • Cruise fare – $744 (we’ll end up with ~$64 refunded due to Ebates and the MSC Voyager club discount/refund)
  • Mandatory gratuities – $175
  • Miami light rail tickets – $9 (MIA airport to downtown, then free trolley to Port of Miami)
  • Flights RDU-MIA $0 ($330 each but we used 22,000 (x2) Chase Ultimate Reward points to get free last minute flights).

 

Sailing away from Miami!

 

Beautiful Bahamas

As a family, we sailed on the MSC Divina in December of 2016.  We loved it so much that we jumped on this deal when we saw it.  This time around it was just me and Mrs. Root of Good.  We call it a 13.5 year wedding anniversary present to ourselves because we’re awesome.  It’s the first time cruising without kids since our honeymoon 13.5 years ago.

Hot tub time in the adults only area. Stars. Wind. Waves. Solitude.

The airfare was expensive in points terms for a 2 hour flight, but it made sense to fly instead of drive and pay for gas and parking. Timewise, it’s about six hours door to door to fly versus 12-13 hours driving (which means overnight hotel at least in one direction).  We also used our Priority Pass Select card (a benefit that comes free with the Chase Sapphire Reserve card) to get a free meal and frosty beverage in the Miami airport plus $180 worth of to-go candy and beef jerky at the Corona Beach House restaurant/market.

In selecting expensive flights, we thought to ourselves:

We have money so let’s spend it to gain convenience and comfort because what are we saving it for after all?

I could have booked less convenient flights for a significant points savings that would have us leaving home at 5 am instead of 7 am the day of the cruise (and be dead tired by 3 pm!).  Or book flights with very little slack in the schedule to get to/from the airport and cruise ship (and freak out if the plane or the ship isn’t on schedule).  Or we could have waited six extra hours in the airport to save $80 worth of points (and arrive home at midnight).  In the end, we decided to go first class (well, still in coach but you know what I mean) with a flight schedule that got us to Miami at a reasonable time and got us back home without excessive hurrying or waiting.  Not driving twelve hours home was worth every point expended!

A relatively undiscovered spot of natural beauty an easy one mile walk from the port city of Ocho Rios, Jamaica. Here we are at Little Dunn River Falls/Beach. Climbing up the falls was fun!

 

Mmmm… Good eats! Best pizza in the world, which isn’t surprising since MSC is an Italian cruise line.  Pizza is straight out of Naples, Italy.  Paella, fried fish, asparagus, and veggie lasagna also good.

 

Interested in cruising? Check out all the posts in my “Going on a Cruise” series:

Going on a Cruise Part 1: Overview

Going on a Cruise Part 2: Getting the Best Deal

Going on a Cruise Part 3: Save on Board and on Transportation

Going on a Cruise Part 4: The Food!

Cruising the Caribbean Aboard the MSC Divina

 

We enjoyed several opportunities for free drinks while on board. This was the complimentary beverage assortment at the Cruise Critic meet and mingle where we got to meet a handful of fellow American cruisers and we got to meet all the ship’s senior officers.  Gin martini, pink lady, or champagne anyone?

 

Good times were had by all.

 

Groceries – $609:

Groceries were a little higher than average but nothing to be concerned about.  We spent around $150 at Walmart which gets lumped into “groceries” but routinely includes non-grocery items like clothing and random household or automotive stuff.  The same happens at Aldi occasionally. We bought a $12 ceramic frying pan that’s included here in “groceries”.  That’s the price we pay for automated, simple categorization at Personal Capital.

Prepping for beef/chicken/veggie stir fry. I cut up two batches of meat and veggies and put the second batch in the fridge so I could have freshly cooked stir fry in 5-10 minutes later on.  Mrs. Root of Good assisted with the wine selection in the lower right corner.

 

End result plus jasmine white rice and lo mein.  A healthy dose of chili oil paste and sriracha to keep the intestines purified from disease.

 

We made Banh Cuon wraps. Rice flour wrapping stuffed with beef and mushrooms.

 

Charitable Giving – $50:

We bought a $50 Walmart gift card and gave it to our kindergartener’s teacher so she can buy supplies and technology gear for the class.  The neighborhood school our kiddo attends was one of the worst schools in the district several years ago, but it’s been improving steadily over the years.  The gentrification of our neighborhood certainly helps.

Lazy day in the back yard with friends.

 

Education – $48:

$38 for a year’s worth of field trips for our kindergartener plus $10 for both of us to join the elementary school’s PTA.

 

Healthcare/Dental – $39:

$23 for lab tests for a routine physical. Theoretically this lab work would be covered for free with our insurance since it’s preventative medicine.  In practice, as everyone knows, healthcare billing doesn’t always work out like we think it should.  In order to avoid hour upon hour of phone calls, emails, scanning and sending forms, appeals, and other ugly nonsense to appeal this $23 charge (and possibly end up paying it anyway), I simply whipped out a credit card and resolved this issue in a couple of minutes.  Mental health has its price and it’s somewhere around $23 in this case.  Having plenty of money is nice.

The other $16 of healthcare spending was monthly premiums for our health insurance plan that’s mostly paid for with ACA premium subsidies.  ACA looks to be mostly intact going into the end of the year.  Other than the routine minor billing squabbles, the ACA is working out pretty well for us to provide good insurance at nearly no out of pocket cost.

FYI, open enrollment just started and runs through December 15 so head over to Healthcare.gov if you need to sign up for 2018.  I took a peek at our premiums for 2018 and they will be just over $1,000 per month however we’ll still pay less than $100 per month for the premium after the generous income based subsidy tax credit.

 

Gas – $36:

Our monthly visit to the gas station.

 

Restaurants – $15:

A box of fried chicken and biscuits for the family from Bojangle’s.  This is the In-N-Out Burger/Whataburger for fried chicken (and only available south of the Mason-Dixon line other than a sole location in Pennsylvania).

 

Cable/Satellite – $14:

$14.99 per month for 30 mbit/second download speeds and 4 mbit/second upload speeds with no data caps.

Bird watching in the backyard. Three white egrets floating over the lake.

 

Automotive – $6:

We spent $6 on a replacement key for our minivan.  The minivan only came with one key when we bought it used last year, so I figured a spare key would be a good idea.  Otherwise if we lose it, then we’ll be paying $150-200+ between locksmith fees and/or a new key from the Toyota dealership.  The key has an RF chip in the base of it for security, but I found a nifty Youtube video that allowed me to program it for free in a few minutes (something locksmiths charge $60-80 for) by cloning the existing key I have.  I’ll still have to drop a buck or two at Walmart or the hardware store to get the key custom cut to match the master key.  

Halloween scare house with our little pirate.

 

Year to Date Living Expenses for 2017

Ten months into 2017 and we have only spent $20,896.  That’s more than $12,000 below the $33,333 budgeted for the first ten months of the year.

The highest expense category is travel which is no surprise since we’ve spent 10.5 weeks on the road this year.

We’re taking baby steps to spend more (like that last minute cruise) but still not spending all that we could.  However there will be years with large unexpected expenses (or large expected, but lumpy, spending), so I’m okay under spending our budget potential in these early years of early retirement.

 

Monthly Expense Summary for 2017:

 

The North Carolina State Fair comes to Raleigh every year.

 

We went on “Can Day” where you donate 5 cans and get free admission. I picked up a ton of tomato sauce for $0.03 per can so the net cost of family admission was $0.60 (plus the food bank gets 20 cans of tomato sauce).

 

As we were walking to the exit gate, we found a free light show!

 

Net Worth: $1,978,000 (+$42,000)

October marks the twelfth consecutive month of net worth gains.  The last time we lost money during a single month was October 2016 when our net worth dropped to $1,618,000.  Since then we’ve been on a tear with five digit gains almost every month.  We’re up more than a third of a million dollars in the past year.

I’m hoping we avoid the fate of Icarus. For those not familiar with Greek mythology, I’ll save you the trip to wikipedia.  Icarus was a young man with wings crafted of wax and feathers.  “Don’t fly too close to the sun, son” said Icarus’ father Daedalus.  As kids are wont to do, young Icarus didn’t listen and soared too close to the sun with his “amazing” wax and feather wings.  Long story short, the wax melted, the wings fell apart and Icarus died.  As we glide onward and upward toward the mythical $2 million mark, I hope we can maintain altitude and stay at these levels for a while.  I hope our wings don’t melt this close to the sun.

In financial moves, I’m planning several things for year end 2017:

  • harvest capital gains – about $4,000 gains from selling a $14,000 mutual fund position
  • continue my Roth IRA Conversion Ladder – planning to convert ~$5,000
  • fund my solo 401k to create a tax shelter for income from Root of Good – $18,000 into Roth solo 401k; $6,000 into traditional solo 401k (for the RoG employer portion).
  • fund a his and hers Roth IRA – $5,500 x2 = $11,000

By the end of this financial fancy footwork I’ll accomplish the following:

  • reduce taxable holdings by $14,000
  • reduce cash on hand/money market balance by $21,000 (currently at $48,000)
  • increase traditional IRA/401k space by a net of $1,000
  • increase Roth IRA/401k space by $34,000

My initial Early Retirement financial plans were destroyed by this whole “Blog Makes Money” phenomenon.  As I mentioned in my article on the Roth IRA Conversion Ladder, I initially planned on converting $25,000 to $30,000 per year from my traditional IRA to my Roth IRA and use the proceeds from sales of equities in my taxable brokerage account to fund my annual living expenses.

As it turns out, this blog makes money.  That threw off the Roth IRA Conversion Ladder completely. Now I’m spending income that comes from the early retirement consulting and Root of Good, plus the dividends from my taxable account. Then, I use any excess funds plus some modest sales from the brokerage account to fund the Roth IRA/401k totalling $29,000.  On top of that I’ll still convert several thousand dollars from traditional IRA to Roth IRA each year.

I’m still achieving the same end goal as the Roth IRA Conversion Ladder which is to increase funds in the Roth space to allow tax free and penalty free withdrawals before age 59.5.

As part of this year end tax planning and shifting money around I might move more funds out of equities into bonds.  Throughout 2017 I have shifted $110,000 from equities into the Vanguard Total Bond Market Index. If the market keeps going up, I’ll take some more profits and continue this shift. I also moved $15,000 from a money market account earning 1% to five year certificates of deposit earning 2%.  That’s an extra $150 per year interest income.

 

Want to finish the year on a strong note? Here’s 11 tips to get you there.

 

 

How awesome has 2017 been for you?  Excited about the holidays coming up soon?

 

 

Want to get the latest posts from Root of Good? Make sure to subscribe on Facebook, Twitter, or by email (in the column to the right) or RSS feed reader.

Exploring La Alhambra and the Narrow Alleyways of Granada, Spain

This week we’re visiting the third stop on our nine week family vacation in Europe.  After spending two nights in Malaga, Spain, the five of us set out on a two hour bus ride to Granada, Spain.

Upon arriving in Granada, we immediately noticed it was very hot but very dry.  We caught a city bus to the center of town, hopped off, and walked the last five minutes to our Airbnb.  This Airbnb was small and spartanly furnished but clean and modern – Ikea Chic style.  The apartment had all the basics – air conditioning, clothes washer, dishwasher, sleek bathroom, and full size refrigerator.  I was concerned the air conditioning wouldn’t be able to keep up with the 95-100 degree heat, but fortunately for us it had a setting that probably translates to “super jet fan turbo blast” in English.  Not a bad place to stay for three nights.

 

Getting Around Town

Our $67 per night Airbnb was pleasantly situated on a quiet alleyway within five minutes of just about everything in town including the main town square, the Cathedral, restaurants, grocery stores, and the bus stop.  It’s entirely possible to walk to most places in town and a car would be more trouble than what it’s worth unless you were planning to visit the surrounding countryside.  

The main reason we visited Granada was to tour the expansive Moorish fortification and palaces known collectively as La Alhambra. It was a 20 minute walk uphill from our Airbnb or a quick 8 minute bus ride.  We have three kids so the choice was obvious – bus it was!

A quick note: most buses in Granada are different than regular city buses ubiquitous throughout Europe and the US. These were shaped more like fancy bread delivery vans hollowed out and filled with benches and handholds.  The narrow streets and alleyways of old town Granada couldn’t handle full size buses (except on a few routes that don’t stray from the major thoroughfares).

Granada buses are cheap. If you buy a bus card for €2 (about USD$2.40) you can then add funds to it in any amount €5 or greater.  With the bus card, you save about 33% on each trip, making trips using the bus card only €0.79 each (USD$0.92).

Though we didn’t take any taxis, I saw the rate cards and they were surprisingly cheap.  From what I recall it was USD$4-6 for a short to medium length ride (from the bus station into the center of town, for example).  Once you see how steep some of the streets are, the taxis look like an even better deal.

Taxis won’t haul your lazy butt up this steep alleyway unfortunately.

One day we visited the Albaicin neighborhood – a thousand year old series of narrow alleyways lined with houses sitting on a hill overlooking La Alhambra.  From our Airbnb to Albaicin was an easy five minute walk.

I’d hate to be driving on these streets. Good thing those mirrors are retractable.

 

La Alhambra – The Main Attraction

We planned the whole nine day segment in Spain around visiting La Alhambra in Granada.  It didn’t disappoint.  I think the kids liked it too as they managed to trudge through the almost 100 degree weather for six hours (!!).  There are water fountains all over the complex which helped immensely in our battle against dehydration.

Good spirits in spite of the heat.  This shot was taken in the Generalife Palace with La Alhambra in the background.

 

Looking at La Alhambra from the Albaicin neighborhood.

 

La Alhambra’s roots are over 1,100 years old and date back to the days of Moorish conquest by the Muslims from North Africa (who controlled most of Spain for around 700 years).

The site itself is huge with one half of it extending a distance of a half mile from the main entrance gate. The other half of the site, the Generalife palace, measures roughly a quarter of a mile including buildings and gardens.

Planning tip: Tickets must be bought a month or two ahead of time during peak summer season, so don’t forget to book your tickets as soon as you can. Their website is cumbersome so allow a few extra days to deal with that. My experience involved a scratchy phone call to Ticketmaster Espana because the online site wouldn’t take any of my US-based credit or debit cards.

One of many gardens in the foreground with the Nasrid Palace and Carlos V Palace in the background.

 

Part palace, part fort. Great views of Granada abound.

 

Amazing pools. How did they build these 700 years ago on top of this mountain in the middle of the desert?

 

More pools in the gardens.

 

Nasrid Palace courtyard.

 

Intricately carved pillars and ceiling.

 

Courtyard in the Generalife Palace.

 

Good Eats

We mostly dined on food from the grocery store while in Granada. They had an amazing selection of cured meats and cheeses, olives, pastries, wine, and beer.  Plenty of ingredients for homemade tapas!  I also picked up some eggs and potatoes to try cooking the Spanish version of a tortilla after tasting it at a restaurant in Malaga a few days earlier.

Exploring the grocery stores in Spain was an experience in itself. Great way to better understand the culinary traditions of a place.  I also learned you DON’T TOUCH THE FRUITS AND VEGETABLES. There’s a lady in charge of handling the produce for you. After some begging and pleading from me, she did let me sneak a quick squeeze on the nectarines to see how ripe they were.

Restaurants and bars line the slender streets of Granada. We tried a variety of Mediterranean food from a local restaurant. We got doner kebabs, kefta meat wraps, and “hamburgers” (the latter of which were really chicken burgers on a unique yeasty flatbread roll).

 

Thoughts on Granada

It’s a phenomenal place to visit for at least a few days.  The town itself is interesting with its winding alleyways and narrow streets.  La Alhambra is a very full day-long visit and a must-see if you make it to Granada.  Though we didn’t make it outside of Granada proper on this trip, we were tempted to try out some great hiking trails criss-crossing the mountains and foothills around Granada (but the scorching temperatures kept us away).

Main shopping street in Granada. It’s covered so the intense summer sun won’t burn you up!

 

La Alhambra is superb.  The largest and best specimen of Moorish architecture in Spain.  If you can’t make it to Granada, the Alcazaba in Malaga and the Alcazar in Seville are similar in nature to La Alhambra though not as grand in scale.

I’m glad we had a chance to visit Granada and other parts of Andalusia in southern Spain because these areas had a totally different look and feel compared to the rest of Europe.  I’ve wanted to visit this region since studying Andalusia in Spanish class two decades ago.  It took a while but my patience paid off!

 

Check out the whole series (so far) of our nine week European family vacation:

 

 

Interested in visiting La Alhambra?  Have you already navigated the twisting alleyways of Granada?

 

 

September 2017 Financial Update

Life is going well for the Root of Good family.  The kids are all back in school and we are settling into our new school-time routine.  Most weekday mornings start with the walk to school to drop off our kindergartner. Then we play tennis, take a walk, go hiking, or go swimming.  As the days grow cooler we’ll adjust our routine to take advantage of warmer afternoons on days that we plan on being outside for a while.  I always look forward to fall and this year is no different.  For us it means more time outside, campfires, Halloween, Thanksgiving, and time with family.

We just closed the books on September and along with it, marked the end of the third quarter of 2017.  Our income spiked up to $7,433 for the month while our expenses remained low at $1,824.  Net worth grew by a massive $46,000, thereby boosting our net worth to $1,936,000 by the end of September.

Income

Investment income totaled $3,221 for the month of September.  Dividends were higher than most months because our equity mutual funds and ETFs pay dividends quarterly in March, June, September, and December.  During other months investment income tends to be much smaller.  We are well on our way to earning roughly $30,000 in dividends for 2017, as we have in the past.

Blog income, shown as “other income” in the chart, remained steady at $4,202.  2017 is going to be a good year for Root of Good income.

My early retirement lifestyle consulting dropped to $0 for the month because I didn’t transfer the fees from a September client consultation session until the beginning of October. October is already looking better for this little side hustle, and I’m totally happy with just a few consulting clients per month (and in fact prefer this pace 🙂 ).

Deposit income of $9 was cash back from the Ebates.com and Mrrebates.com online shopping portals.  If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did.  When shopping online, I always check to see if I can score some extra cash back by using one of those online shopping portals (and it usually pays off!).

If you’re interested in tracking your income and expenses like I do, then check out Personal Capital (it’s free!). All of our savings and spending accounts (including checking, money market, and five credit cards) are all linked and updated in real time through Personal Capital. We have accounts all over the place, and Personal Capital makes it really easy to check on everything at one time.

Personal Capital is also a solid tool for investment management. Keeping track of our entire investment portfolio takes two clicks. If you haven’t signed up for the free Personal Capital service, check it out today (review here).

What we’re up to these days. As little as possible.

 

And watching this guy on the back fence. Great Blue Heron – stands over 2 feet tall with a 7 foot wingspan.

Expenses

Now let’s take a look at September expenses:


Like August, spending in September remained low at $1,824.  That’s just over half of our budgeted spending of $3,333 per month (or $40,000 per year).  Taxes were our largest category of spending closely followed by groceries.

 

Taxes – $600:

Third quarter estimated federal taxes of $600. I paid this with a credit card (and paid a fee just under 2% for that privilege) to meet the minimum spending requirements for a credit card that will give me $500 cash back (or the same amount of travel reimbursement) after spending $4,000 (Capital One Spark Business card, for the curious).  The $11 credit card usage fee is filed under the “travel” category.

I paid third quarter estimated North Carolina state taxes in August so it doesn’t show up on this month’s expense summary.

 

Groceries – $551:

A pretty average month of grocery purchases for us. We spent about half of the total at Aldi and Food Lion (a regional grocer in the Mid-Atlantic states).  Aldi is where we routinely shop for most things.  Food Lion is very convenient since it’s an easy walk from home.  They had a crazy sale in September where all store brand items were $0.25 off (sale runs through October 10, FYI). Many canned goods were $0.03 to $.25 each, and yogurt cups were $0.15 after the discount.  When this sale runs every 4-6 months I tend to stock up on things that last a while.  I don’t do extreme couponing but I’m okay paying attention to the grocery store sales paper to take advantage of big savings like this opportunity.

 

Groceries mean good eats. Like this pad thai!

 

And thai curry with noodles.

 

And spring rolls with hoisin peanut dipping sauce. We don’t skimp on good ingredients.

 

Healthcare/Dental – $226:

Mrs. Root of Good and I both visited the dentist in September.  We paid cash for our visits that were $99 and $111 each.

The other $16 of healthcare spending was monthly premiums for our health insurance plan that’s mostly paid for with ACA premium subsidies.  The ACA came under attack once again in September though it remained unscathed once again.

 

Business/Misc – $219:

This cost represents my annual domain registration and privacy protection fees for RootofGood.com ($27) plus hosting fees for three years ($192) at my new hosting provider, Rockaway Hosting.  I just switched away from Hostgator because I was up for renewal and their renewal rates were rather expensive given some upcoming upgrades I hope to do (including converting Root of Good to HTTPS).

So far Rockaway works flawlessly.  Things are running smoothly and their tech support is amazing.  I’ve received email responses on tech support issues from the owner at 4 am and 8 pm on weekends (when does he sleep?).  Other hosting companies might be slightly cheaper and they might work just fine until you have a technical problem you need help with.

If you have a blog and need to migrate to new hosting soon, or want to start a blog at a reliable host where real people provide tech support, check out Rockaway Hosting (that’s my referral link – if you sign up and I might make a commission on services you buy). And use coupon code ROCK10 if you want to save an extra 10% off their low rates.  The code generally stacks with their promotions on multi-year packages, too.

 

Clothing/shoes – $123:

We finished our back to school and post-Europe trip shopping during September by spending a total of $123 on clothes and shoes.

I spend more on shoes now that I’m retired than I did while working. Way more time to explore the woods these days!

 

Lake Durant, Raleigh North Carolina

 

Travel – $63:

We took a three day trip to Atlantic Beach, North Carolina in September.  The hotel itself was free using Chase Ultimate Reward points.  Our only expenses were $34 for a tank of gas to get to the beach (about 300 miles round-trip from Raleigh) and $17 for dining out while on vacation.  The hotel provided a free hot breakfast each day along with free snacks, fruits, coffee, and hot chocolate throughout the day. Those freebies plus a small assortment of vittles we brought with us kept our vacation food expenses to a minimum.

I took a gamble on the hotel booking. I could have spent 17% more points to book a refundable room and cancel if there was bad weather.  I opted to take a chance and save the 17% surcharge and hope for no hurricanes.  It worked out in our favor since we dodged both hurricanes that skirted the North Carolina coast in September.  I like being my own insurance company since we save tons of money over the long haul.

The last $11 of travel spending for the month was the 1.87% surcharge to pay my $600 estimated taxes. I stick that expense here in the travel category since I’m usually paying taxes on credit cards to snag some free travel.

If you want to save on travel, check out all the credit card offers and find a good sign up bonus that will take you where you want to go.  And don’t forget about Airbnb – $40 off your first stay.  Our family of five saved thousands of dollars on lodging this past summer in Europe by booking two and three bedroom apartments through Airbnb instead of two hotel rooms (and enjoyed much more spacious accommodations too!).

Exploring the tidal areas of Atlantic Beach.

 

Brother/sister time at the beach.

 

We had the whole beach to ourselves. No one within a quarter of a mile or more. Shoulder season in North Carolina is great (and cheap)!

 

Just up the road from the hotel is Fort Macon, a North Carolina State Park.

 

We stayed at the Hampton Inn and Suites in Atlantic Beach, North Carolina.  It’s a quick three minute walk to the beach and many of the rooms (including ours) come with a great oceanview. For some bizarre reason they charge a premium for rooms with views of the golf course so we luckily got one of the “regular” oceanview rooms on an upper floor.  Using Chase Ultimate Reward points, I paid about 7,000 points per night for a suite that accommodates six and comes with a kitchen and living room (and free breakfast for all).  This was a nice practical hotel for family trips to the beach.

 

Couch folds out into a bed

 

Kitchen with microwave, sink, and mini fridge.

 

One of the better free hotel buffet breakfasts that I’ve come across. Especially if you like bacon with a side of bacon.

 

Poolside in the shade was perfect since it was still rather hot in the afternoons.

 

Restaurants – $21:

Back home in Raleigh, Mrs. Root of Good and I enjoyed a kid-free mid-day post-swimming treat of thin crust NY style pizza (2 smalls for $11 at a local pizzeria).  I thought this pizza was better than the thin crust pies we ate in Venice, Italy this summer, but Mrs. Root of Good disagrees with me.

Later in the month we used part of a Papa John’s gift card someone gave us as a thank you for dog sitting.  I supplemented the gift card with cash ($10) to get some Papa’s pizza a couple times in September.

 

Cable/Satellite – $14:

$14.99 per month for 30 mbit/second download speeds and 4 mbit/second upload speeds with no data caps.

 

Home Improvement – $3:

Bathtub drain washer replacement from Lowe’s. Who knew these things dry rot and leak after 45 years?  It’s apparently been leaking off and on since we bought the house 13 years ago and I have just now isolated the leak after many rounds of troubleshooting over the years including breaking stuff, sawing a hole in the wall, poking a hole in the ceiling, a plumber visit, and replacing some plumbing and fixtures.  And the whole time it was a $3 faulty rubber washer.  This is a situation where it probably would have been cheaper to call the plumber first before trying to DIY.  I still need to patch the hole in the ceiling and do some touch up ceiling painting but at least we no longer get the occasional indoor rain shower coming from the second story bathroom.

 

Year to Date Living Expenses for 2017

Three quarters of the way through 2017 and we have only spent $19,148.  That’s more than $10,000 below the $30,000 budgeted for the first nine months of the year.

2017 is shaping up to be a rather unspendy year.  We have been fortunate to not have any unexpected emergencies, health scares, or other assaults on our budget.  Our planned roof replacement was mostly covered by insurance and our Europe trip came in about $1,500 under our $10,000 budget (and half of the trip was paid for in 2016).

Remaining big expenses for 2017 include summer 2018 travel we book this year plus a more expensive than expected preventative maintenance procedure for our minivan.  When we bought the used van last year, I knew it would need some routine maintenance.  What I didn’t know was that the recommended spark plug replacement at 120,000 miles costs almost $500!  Apparently the layout inside the cramped engine compartment means there are a lot of parts that have to come out to swap out the spark plugs.  The shop quoted three hours of labor which translates to at least double that for a guy like me (assuming I only break a few things).  The van is a six cylinder and we’re used to paying for maintenance on four cylinder engines.  Altogether, this means we’ll be shelling out some big bucks to keep the van running in optimal condition for as long as possible.

I’m tempted to skip or delay this particular routine maintenance but I would hate to lose a cylinder half way through a 1,000+ mile road trip and suffer the consequences which might include missing the departure of our next cruise ($1,000’s of wasted travel dollars).  I’m going to follow the frugal but not cheap route on this issue.  Our minivan has run flawlessly for the past 1.5 years and I’m hoping it remains reliable another 10 years if we keep it that long. This $500 maintenance should be one of the most expensive routine repairs we experience while we own this vehicle.

 

Monthly Expense Summary for 2017:

 

My sister in law wanted to throw a campfire themed birthday party for Mrs. Root of Good’s brother at our house. Sure!

 

Net Worth: $1,936,000 (+$46,000)

Another mind-blowing +$46,000 explosion of net worth in September.  We’re rapidly closing in on the $2 million mark.  Two years ago in September of 2015, I never thought we would be this close to the magic 2 million.  Since then we have enjoyed a half million dollars of net worth creation thanks (primarily) to a booming stock market.  Times are good if you’re a capitalist.

Throughout 2017 I have shifted $110,000 from equities into the Vanguard Total Bond Market Index.  If the market keeps going up, I’ll probably take some more profits and shift more equities to bonds.  Our portfolio is still over 90% equities so we’ll continue to enjoy huge gains if the market continues its upward march for several more years.

Other than thinking about moving money to bonds and transferring dividends to my checking account every quarter, I spend very little time managing my portfolio since it’s all in passive index funds.  Later in the year I’ll be analyzing my tax situation and will probably do one or more of the following:

  • harvest some capital gains (yes, gains)
  • continue my Roth IRA Conversion Ladder
  • fund my solo 401k to create a tax shelter for income from Root of Good

Over the next few months, I’m planning on releasing more Europe Trip Report posts with tons of pictures along with a few other finance-related posts.  I’ve been working on a lot of back end technical stuff with the blog and have some more tinkering to do in the next few months.  This is exactly the kind of “internet-y” nerding out I hoped to do in early retirement. I just didn’t know exactly what it would look like four years ago when I first made the shift away from working for the man.

 

Another great month!

 

Camp FI in Virginia

In other exciting news, I volunteered to speak at a four day retreat in April 2018.  At “Camp FI” in Virginia, 50 FIRE-seekers will camp in the woods, recreate, and mingle while listening to and hanging out with their favorite FIRE bloggers and podcasters.  Or something like that.  There are still several tickets available starting at $225 including lodging, food, and activities for four days if you are interested (click here) (update: as of Nov 1, 2017 these tickets are all sold out but they have a waiting list if you are interested in signing up).  Past guests LOVED it – rave reviews.  Other camps sold out within days or weeks of tickets going on sale so please be aware tickets won’t be available forever if you’re thinking about it.

I don’t make money if you sign up, but figured I’d throw the opportunity out there for those within driving distance of Petersburg or Richmond, Virginia with $225+ burning a hole in their pockets and an overwhelming desire to saturate themselves in FIRE-knowledge for a few days.

 

 

With just under three months left in 2017, how are you going to make the most of it?  Ready for fall?  Looking forward to the holiday season?  

 

 

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Our Early Retirement Didn’t Go As Planned… Our Net Worth Went UP Half a Million Dollars!

In contrast to early retirement modeling that looks for all the worst cases and failure modes, our actual life the past almost four years illustrates that good things can offset the bad events in life.

Financial planning for early retirement is pretty straightforward.  Figure out how much you plan on spending in early retirement then save up till you have between 25 and 33 times your annual expenses in your investment portfolio.  We initially planned on spending $32,000 per year plus a large lump sum for the three kids’ college tuition.  Using the 33x multiplier (which represents a 3% withdrawal rate), that means we needed $1,056,000 plus another $100,000 to cover tuition, or roughly $1,150,000 in total investments.  That’s about what we started with four years ago but now we have a lot more.

 

The Good:

We plan for the worst and hope for the best.  Fortunately, the past four year have been very positive.  Maybe we used our luck making machine.  Or maybe we aren’t as lucky as we think.  We’re earning more than we thought and spending about what we expected, and future expenses don’t look too bad.

More Work, More Money

When I quit working in 2013, we expected Mrs. Root of Good to join me in early retirement within six months.  Then her employer decided to be really really nice to her so she kept working longer than expected.  Her employer met her requests to take a paid five week summer sabbatical in 2014, and again agreed to a paid sabbatical of twelve weeks in 2015.  The sabbaticals were on top of a 40 hour work week with negligible overtime, four weeks paid vacation, two weeks of holidays, and unlimited sick leave.  After returning from the second sabbatical in 2015, Mrs. Root of Good submitted her resignation and tried to retire.

Unsuccessfully as it turned out.  Her employer offered a flexible work from home arrangement where she officially works from home for four 10 hour days per week.  The boss gave her a **wink wink, nod nod** and said she just needed to work enough each week to make sure nothing fell through the cracks as they worked toward replacing her.  She generally worked Monday-Wednesday for six to eight hours per day and some Thursdays, probably averaging 30 hours per week.  While still collecting full time pay!  This part-time-for-full-time lasted about six months before Mrs. Root of Good finally called it quits and promoted herself from part time work to full time retirement.

Mrs. Root of Good’s extra two years of work netted us around $120,000 after taxes and work-related costs in my estimate (she was earning $70,000 gross per year and we paid nearly zero federal income tax but we stilled owed payroll tax plus state income tax).  Toss that $120,000 on the pile and watch it grow!

Mrs. RoG enjoying her first day of sabbatical.

Mrs. RoG enjoying her first day of the flexible work from home arrangement that doesn’t include working on Fridays.

 

Who knew you could make money blogging?

I always wanted to do something “internet-y” and finance related while working but never found myself in a professional role that fit that desire.  About two weeks after retiring, I started looking into this whole blogging thing.  Mr. Money Mustache had a pretty sweet site so I figured maybe it would be fun to do something similar.  I spent the weekend reading and googling and youtubing all about how to start a blog.  How great is it to be able to jump into a new exciting project head first when you don’t have to deal with work all day?!

Two days after I started the intense blog research I figured out enough to register the Rootofgood.com domain name, set up my hosting service, and then I sat staring at that blinking cursor waiting for me to start typing.  The first couple of words I typed were “HELLO WORLD” (of course).  My little homage to all things programming/internet-y. Then I deleted it and got down to business (first ever real blog post and ALL THE BLOG POSTS EVER).

Almost four years and three million pageviews later, this blog is a little dynamo.  Root of Good currently receives an average of 50,000 to 60,000 visits per month.  In late 2015 I started offering Early Retirement Lifestyle Consulting.  Since conception, the net profit from the blog and related activities was:

  • 2013 – near zero
  • 2014 – $12,000
  • 2015 – $29,000
  • 2016 – $31,000
  • 2017 – roughly the same as 2016

Toss another $72,000 on the pile plus whatever we earn this year.

Though not all early retirees start a blog, many early retirees have a side hustle.  Some early retirees turn a hobby into something profitable.  Others retire from full time work while keeping the door open to very part time, flexible work arrangements by only accepting those projects or clients that fit into their early retired lifestyles.  I did both when I started a blog for fun that turned profitable within the first year and I started consulting an hour or two per week (less when the weather is nice outside).

When planning for early retirement many years ago, I occasionally used a “part time income in retirement” line item for forecasting purposes.  At the time I used a tiny annual income for this part time work.  In one model, I assumed I might earn $6,000 per year doing something one day per week for $15 per hour.  This was based on a little side hustle related to engineering data collection that I had some success with during college.  But more generally, $15 per hour represents a pretty broad swath of potential jobs and hustles, and eight hours per week isn’t a huge impediment to otherwise enjoying one’s leisure time throughout the week.  I could mow lawns, start a handyman business, repair appliances, run errands for the elderly and disabled, or drive for Uber (which wasn’t a thing when I was completing my early retirement models and forecasts).

The very part time work for $15/hr was more of a Plan B “what if” scenario.  Adding $6,000 income per year to supplement withdrawals from an investment portfolio means you can get by on a smaller portfolio using the four percent rule.

As fate would have it, I’m blowing that $15/hr threshold out of the water (ER Lifestyle Consulting rates are currently $125/hr and I’m considering raising those given the demand).  Total earnings from my side hustles are running in the $30,000 per year range right now.  And I don’t think I’m putting in eight hours of effort per week.  Life is good as is the financial solvency of my early retirement plans.

 

Spending is in line with budgeted amounts

We started out budgeting $32,000 per year for 2014 and increased it to $32,400 in 2015 to account for inflation.  In 2016 we bumped the budget to $40,000 in light of all the extra side hustle income and better than expected investment results.

Actual spending since 2014 remained pretty close to our annual budget:

We were over budget in 2014 by a few thousand dollars but under budget all other years so far.  That underspending comes in the face of an almost $9,000 major renovation in 2014, an $8,000 minivan purchase in 2016, and paying for the bulk of a $10,000 nine week trip to Europe in 2016 and 2017 (along with several other multi-week or multi-month trips in previous years).  In other words, we have a rather robust spending plan to fund a whole lotta living and the budget seems to be working out perfectly fine.

Four months of spending at just under $10,000 (Personal Capital screenshot).

Four months of spending in 2017 at just under $10,000 (Personal Capital screenshot).

And this is with three kids!  They are now age 5, 10, and 12 years old.  I’ll admit that we’re still a year away from the oldest starting the typically more spendy teen years, but so far we haven’t noticed a significant spike in spending as the kids get older.

Since we’ve already replaced the exterior siding and the windows, and we’re in the middle of replacing the roof right now, we don’t have a lot of major home improvement projects planned for the near future, so spending on the home should remain modest.  We just replaced the car last year, so that should last us quite a while too.  Those big house-related capital replacement costs are amortized and included in our annual budget.

Another area that can bust a budget is healthcare and dental expenses.  We’ve been fortunate to spend very little in this category other than a few doctor’s visits and routine dental checkups (plus a few minor procedures at the doc and dentist).  We haven’t used up our whole healthcare/dental budget in any year of retirement.

We track all our monthly spending in Personal Capital.  It’s a free, easy to use, and automatically pulls transaction data from credit cards and bank accounts so you don’t have to spend any time inputting transactions manually (or maintain another spreadsheet!).  Review of Personal Capital.  It’s also a great tool to consolidate and track your brokerage accounts, IRA’s, and 401k’s so you can track your asset allocation and keep an eye on mutual fund expenses automatically.  Tracking spending is in my opinion the best way to stay cognizant of where your hard earned money goes and what expense categories are dominating your budget.

 

College won’t cost as much as we initially budgeted

By most objective metrics, we are wealthy.  I assumed we wouldn’t qualify for any need-based financial aid for the kids’ college.  I was wrong.  I found out the FAFSA financial aid form doesn’t include the home value nor does it include retirement account values in determining financial aid.  As a result we look relatively poor on paper due to having over 75% of our financial assets in retirement accounts and a modest adjusted gross income around $40,000 per year.

Upon entering early retirement in 2013, I expected to pay around $100,000 in total just for tuition for 3 kids and almost triple that amount if we cover room and board, books, transportation, and other living expenses.

After crunching some numbers on college costs using a few different assumptions, it looks like the worst case scenario will have us paying around $162,000 total while the best case scenario (which isn’t that far-fetched) has us paying just $31,500.  Those are totals for all three kids.  The updated forecasts come from better assumptions about scholarships and grants our children might qualify for given their academic achievements to date, along with a better understanding of how financial aid formulas work.  When I first retired, our oldest two kids were in second and third grade, and we really didn’t know how well they would do in school once the academics grew more challenging.  Several years later and they are doing great!

yale-university-doorway

 

Great stock market returns

Since I retired early, the stock market has been on fire!  As measured by the Vanguard Total Stock Market Index Fund (VTSMX), returns including reinvestment of dividends are:

  • 2013 – 33.4%
  • 2014 – 12.4%
  • 2015 – 0.3%
  • 2016 – 12.5%
  • 2017 (year to date through May 12) – 7.0%

International investments haven’t performed quite as well over the same period.  Our portfolio still managed to swell from around $1.1 million right after I retired up to $1.65 million today.  That’s a $550,000 increase in value.  About $100,000 of that increase can be attributed to Mrs. Root of Good’s extra two years of paychecks and my blog earnings (after subtracting the roughly $100,000 spent on living expenses during early retirement).  That still leaves us with roughly $450,000 of investment gains in the past four years.  Thanks Mr. Stock Market!

The returns have been so great that since the start of 2017 I have moved $90,000 from equities into the Vanguard Total Bond Market Index Fund (VBTLX).  Those bonds plus the $30,000 we have sitting in money market accounts will provide a multi-year safety blanket should the market decide that the party is over.  A six figure low-risk fixed income portfolio will help me sleep at night regardless of market volatility.

 

Successful travel hacking continues

I’ve been scoring huge credit card sign up bonuses and collecting points and miles from credit cards for over a decade.  Upon entering retirement in 2013, I fretted over the eventual end of all these easy bonuses that translate to free trips all over the world, even for our family of five.

It turns out I had nothing to worry about after earning 1,265,000 points and miles from sign up bonus offers in the almost four years of early retirement.  This gravy train keeps rolling down the tracks and shows no signs of stopping!  Some of the rules of the game have changed (Chase’s 5/24 rule is a key example) but there are still plenty of fish in the sea. So cast your net wide and don’t let all these delicious morsels slip past you.  Our credit scores remain a killer 800-something (out of 850 points) and card issuers generally don’t bat an eye at extending us even more credit.

All these free points and miles explain how we’re able to travel the world for weeks or months each year on a modest $5,000 to $10,000 annual budget.  Without free points and miles we would be incurring an extra $5,000-$10,000 expense per trip based on the past few trips.

two-years-early-retirement-mexico

 

No more work = no more work related costs

I’m sure we save a small amount on lunches out and simpler wardrobes (shorts and polos just don’t cost that much, guys).  But the biggest work-related cost that disappeared was our second car.  We questioned whether we could cut back to one car and it turns out it’s not a problem at all with our current lifestyle.  It’s been almost a year since we dropped to one car and there have been just a few times where it would have been nice to have a second car.  But we made it work with just one car.

This one car does it all for us.

This one car does it all for us.

We walk, we can take transit, Uber is always a few clicks away (though we’ve never used it so far).  Postponing or combining trips and smartly scheduling appointments help.  We also enjoy spending time at home or within walking distance in the neighborhood, so there are multi-day stretches were our car doesn’t leave the driveway (but our feet still do!).

The money savings are unquestionable – maintaining one car costs half of what it does to maintain two cars. One set of tires, one set of oil changes, one set of routine maintenance, one set of inspections, registration/licensing, insurance, and taxes.  The time savings are even more important – fewer trips to the auto shop for repairs and maintenance.  It takes less time to check the tire pressure and fluid levels in one car versus two cars.

For us, simplifying saves time and money without being a detriment to our lifestyle.  Of course others’ experiences might differ.  We only drive about 300 miles per month (unless we’re on the road completing a multi-thousand mile road trip).  Many destinations are walking distance in the neighborhood. Our kids aren’t overloaded with after school and weekend activities (though we stay busy!).

 

The Bad:

I feel like we need a counterpoint to “The Good” so I’m sticking “The Bad” in here.

 

Health Insurance in a Post-ACA World

The future of health insurance is our biggest unknown going forward.  There’s a new sheriff in town and he’s adamant that the Affordable Care Act is horrible and must be repealed and replaced.  The replacement bill, the AHCA, recently passed the House and now sits with the Senate for further sausage-making.  What will we end up with?  Your guess is as good as mine.  The following is an excerpt from my April 2017 Financial Update article where I opine about the current health insurance situation in the US:

“Let’s look at the details of the AHCA as passed by the House.  Here’s the best summary I’ve seen of the current version of the AHCA compared to the ACA (courtesy of the non-partisan Kaiser Family Foundation).

Main takeaways:

  • ACA premium subsidies continue through 2017, 2018, and 2019 (so it’s not an immediate “repeal”). Your subsidy declines as your income increases up to 400% of the federal poverty level.
  • Starting in 2020 those buying individual coverage get a $2,000 to $4,000 tax credit per person for qualifying insurance (and policies don’t have to be purchased through the official Healthcare.gov Marketplace to qualify for the tax credit). Tax credits vary with age (older = larger credit) but not with income, however there are income limits where the tax credit phases out
  • Cost sharing reduction subsidies disappear in 2020 (currently available to those earning under 250% of the federal poverty level – it’s what makes my deductible $100, max out of pocket $1,200, and my copays $5-20)
  • In 2018, HSA contribution limits double to $13,100 for family coverage.
  • If a state chooses to allow it, insurers can charge more for pre-existing conditions for those that have a lapse in coverage. Possibly much, much more. Maintaining continuous coverage seems to be the way to go to avoid paying a lot more for pre-existing conditions.
  • Increase the age banding of premiums so that the premiums paid by older people aren’t capped at three times the premiums charged to the youngest people (under AHCA older people will pay five times what younger people pay – while only getting an extra $2,000 in tax credits)
  • No more individual mandate to have health insurance retroactive to 2016

Those are the basics but trust me, I’m leaving a lot out.  Medicaid and Medicare are tinkered with too.

The Senate will most likely make significant modifications to the AHCA, so it’s pure speculation as to what we’ll actually end up with once all the sausage is made.

My main takeaway as a 30-something early retiree that will be 40 by the time the ACA premium subsidies go away in 2020 is that I’ll be paying more for health insurance that will come with higher deductibles and copays.  Mrs. Root of Good and I will each get a $3,000 tax credit to use toward insurance that will probably cost $4,000-$5,000 per year per person for a basic plan, and possibly much more if healthy people choose to go uninsured (since the individual mandate will be gone and many people will pay more for health insurance, making it less affordable).  I don’t know what the kids’ policy pricing will look like or if they’ll end up on Medicaid (if that’s still an option given the possibility of AHCA-related changes to Medicaid), but I understand they’ll be eligible for $2,000 tax credits too (based on their age) if we purchase individual policies for them.

In conclusion, I’m mentally penciling in an extra $4,000 or so for health insurance and healthcare costs starting in 2020, but also accepting that a lot can change with the AHCA before passage (or it might fail altogether).  There might be a subsequent health care bill passed later on in 2018 or 2020 as the political winds change that could put our costs back in line with where they are currently under the ACA.” (end excerpt)

If this bill passes then the near-term damage of this law won’t be horrible.  But it’s still a lot of uncertainty in our early retirement financial plan.

A silver lining of the Republican controlled White House and both houses of Congress: tax cuts.  I’ve heard mutterings about higher child tax credits and larger standard deductions, which could save us some money on taxes to partially offset higher health insurance costs (or, rather, lower health insurance tax credits versus what we get under the Affordable Care Act).  Tax cuts can potentially benefit the economy depending on how they are structured, so it’s possible we’ll see investment gains too.

Stop and smell the roses

Stop and smell the roses

 

Have we reached the top in the stock market?

I’ll be the first to admit I have no clue but I know it’s been on a winning streak the past four years.  That’s not to say it can’t keep going up for several more years.  However, there’s a lower chance of strong continued gains year after year simply because there’s less room to grow when the market is already at high valuations compared to long term historical averages.  It’s the exact reason you would have expected big stock market gains in the long term back about 2009 when the market was valued at a third of what it is today.  From deep valleys rise tall mountains.

Our portfolio might experience several years of sideways movement or suffer a double digit percentage decline.  Either of those scenarios are fairly common in the recent history of investing and it’s most certainly not different this time around.  That’s not pessimism speaking but rather realism.  It won’t mean the end of everyone’s early retirements but it will certainly mean we will keep a closer eye on expenses and income.  However our $120,000 of bond funds plus money market funds will provide a lot of stability for several years in the event of a market downturn.

 

Spending more on travel

I roughly doubled our travel budget from $5,400 when I first retired to $10,000 today.  We didn’t really know how much we would travel since our working lives were filled with work work work and just a few weeks of vacation time each year.  Travel is our safety relief valve – when our portfolio fills up to the top, this is where we let out the monetary steam.  We spend more on travel.  If we have to tighten our belts we can cut back in this area.

We’re also taking advantage of geographic arbitrage by traveling to places where the foreign exchange rate makes everything cheaper.  In 2015 that was Mexico (though we would have saved even more by waiting till 2017!).  In 2016 that was Canada.  2017 is a perfect time to visit Europe with the euro trading at the cheapest levels of the past decade.  If foreign currencies grow significantly stronger (= overseas travel becomes more expensive) then we might knock a few US destinations off our bucket list.

And if our portfolio drops by a half million dollars, we can cut out a huge chunk of spending simply by traveling less or choosing less expensive destinations.  I’m sort of looking forward to spending a lazy summer at home at some point in the near future, and a financial reason to skip a summer filled with travel wouldn’t be entirely unwelcome.

Spending more on travel is a good thing because it’s so easy to trim this spending versus other areas of the budget that are more rigid like housing costs or transportation costs.

Wouldn't mind a summer hanging around our house at all. :)

Wouldn’t mind a summer hanging around our house at all. 🙂

 

Almost four years into retirement, where are we now?

In a few months I’ll celebrate four years of early retirement.  From a financial perspective we are doing great.  We earned close to $200,000 extra that wasn’t anticipated due to starting this blog and Mrs. Root of Good working a couple years longer than expected.  Our investments have grown by an even larger sum.  And we’re keeping our spending generally at or below budget.

Our living expenses in retirement are funded from roughly $10,000 dividends and interest per year plus $30,000 income from Root of Good.  That means we don’t really have to sell any investments on a routine basis for living expenses.  Nor do we have to worry about withdrawing investments from IRA’s, 401k’s or my 457 account.

It also means the Roth IRA Conversion Ladder I planned to set up is partially on hold for now.  I still managed to convert around $4,000 from traditional to Roth IRA in 2016, whereas my Roth IRA Conversion Ladder plan called for conversions of $24,000 per year.  However, I was able to contribute $18,000 to my solo Roth 401k and $11,000 to his and hers Roth IRAs during 2016.  Yes, I have a Root of Good 401k plan and I play a shell game by living off the income from Root of Good while shuttling taxable funds into the Roth accounts.  You could say I’m “living off my portfolio like a real early retiree” and saving the $30,000 Root of Good income, which is also a legitimate way of describing my early retirement finances if one wanted to downplay the significance of the side hustle income (I don’t).  It’s a game of semantics.

The net result is $33,000 of additional Roth assets from conversions and contributions during 2016.  In other words, I didn’t follow my original plan but I accomplished a similar goal – increase the amount of funds in the Roth space so I can withdraw the contributions/conversions penalty free and tax free well before age 59.5 should that be necessary.

The unexpected income from Root of Good also means my decision to choose the Roth IRA Conversion Ladder over the competing 72(t) Substantially Equal Periodic Payments method of withdrawal was a sound one.  The 72(t) method is extremely rigid in the amounts you must withdraw each year once you start your initial withdrawals.  However, I knew going into early retirement that my income needs would vary year to year and there was always the chance I would have earned income (or get bored and go back to some form of work).  As a result, I rejected the 72(t) withdrawal method mainly because of the lack of flexibility in withdrawals.  I would really hate to be taking $30,000 of 72(t) taxable IRA withdrawals while earning another $40,000 between this blog and dividends and interest.

 

Now where are we headed?

Things look pretty rosy.  I took my financials and dumped them into the wonderful early retirement calculator at cFIREsim.com and determined that we could spend somewhere around $65,000 per year with almost zero chance of running out of money before age 90 even when we make conservative assumptions about income from the blog and other side hustle income.  Helping shore up the forecast is roughly $25,000 of expected Social Security income that we’ll start drawing in a little less than 30 years.

I don’t know that we’ll spend $65,000 per year but it’s reassuring to know that money isn’t a real constraint to our lifestyle.  We could increase our budget by 50% to cover a lot of unknowns such as higher health care/insurance costs and higher kid-related costs during the teen years.

Four years into retirement and our potential standard of living is approximately double what it was when I quit working.  It’s not entirely surprising given the conservatism of the worst case analysis performed under the “four percent rule”.  Most of the scenarios modeled in the four percent rule (which is closer to a three percent rule for very early retirees) leave the retiree with several times their initial portfolio value.  End result: a growing net worth in real terms for most very early retirees.

However I keep in mind that we might be at the top of a stock market bubble that’s about to burst and that we might see hundreds of thousands of dollars of our net worth disappear in a short period of time.  In that case, I’ll have to revisit what we are able to spend.  Until then, I’m not gonna worry about money and I’ll keep an optimistic but flexible attitude toward the future.

 

 

Any early retirees in the audience that ended up with substantially more than they started with?  Or did early retirement lead to new ventures or interests that turned profitable?  For those planning on retiring soon, do you have any plans to hustle on the side?  Let me know!

 

 

April 2017 Financial Update

This year is flying by so far! Now that we are one third of the way through 2017, our financial picture for the year is becoming clearer.  And it’s a good picture so far.  Our spending for April remained below budget at $2,981 while our income of $3,321 slightly exceeded our expenses.  Our portfolio and other assets continue their upward trajectory with a $34,000 gain bringing our total net worth to $1,805,000.

This time of year is one of the prettiest in North Carolina, with moderate temperatures perfect for exploring the outdoors. Or lounging in the hammock on the back porch.  The past month has been incredibly busy for us with school events, time with family and friends, tackling some issues around the house, and entering the final stages of planning and preparation for our nine week summer vacation in Europe (we leave in about a month).

Income

Our investment income was $241 in April.  The majority of our mutual funds and ETFs pay dividends quarterly in March, June, September, and December.  During other months investment income tends to be much smaller.  The $241 is mostly interest from our roughly $100,000 investment in our money market account and bond fund.  Also included in that total is a small dividend payment from a mutual fund.  I have no clue why they paid out in the middle of the quarter.

Blog income, shown as “other income” in the chart, returned to a more normal $2,193 in April after dropping to $508 in March. My early retirement lifestyle consulting took off during April with a half dozen clients seeking advice during the month.  Total consulting income climbed to $836 for the month.  This is busier than I would like to be long term, so if this level of interest continues I’ll probably raise rates from $125 per hour to $150 per hour in order to trim back my hours per month devoted to consulting.  It’s really cutting into my video gaming / Netflix / hammock time and I’m afraid of losing my official “Early Retired” status if I work so much.  Though the consulting continues to be a personally rewarding and intellectually stimulating pastime.

The $49 in Deposits includes cash back rebates from the Ebates.com and Mrrebates.com online shopping portals. If you sign up for Ebates through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did.  When shopping online, I always check to see if I can score some extra cash back by using one of those online shopping portals (and it usually pays off!).

april-2017-income

If you’re interested in tracking your income and expenses like I do, then check out Personal Capital (it’s free!). All of our savings and spending accounts (including checking, money market, and five credit cards) are all linked and updated in real time through Personal Capital. We have accounts all over the place, and Personal Capital makes it really easy to check on everything at one time.

Personal Capital is also a solid tool for investment management. Keeping track of our entire investment portfolio takes two clicks. If you haven’t signed up for the free Personal Capital service, check it out today (review here).

 

Expenses

Now let’s take a look at April expenses:

april-2017-expenses

We came in just under our budgeted $3,333 per month (or $40,000 per year) during April with total spending of $2,981.  Where did the money go?

 

Utilities – $662:

In addition to paying the monthly water bill and natural gas bill, I also prepaid about $500 extra in order to meet the spending requirements on our pair of Chase Sapphire Reserve Cards.  I just received one set of 100,000 bonus Ultimate Reward points for one of the Sapphire Reserve cards and I should get the other 100,000 bonus points in a few days.  I had to spend $4,000 per card within three months, which is a stretch for us given our low spending of $1,000 to $3,000 during most months.

The 200,000 Chase Ultimate Rewards points can be redeemed for $3,000 of travel if booked through the Ultimate Rewards portal, or transferred to a ton of different airline and hotel partners, which in turn can be redeemed for a dozen or more hotel nights or several international round trip plane tickets or up to eight domestic plane tickets.  Even if you don’t travel, 200,000 UR points can be cashed in for $2,000 instant cash back.  Credit card sign up bonuses are great, aren’t they?  FYI, the 100,000 Chase Sapphire Reserve offer is gone, but there is an 80,000 point bonus for a Chase Ink business card.  Sell stuff on ebay? That’s a business!

 

Home Maintenance – $609:

This was the worst month of homeownership ever.

After noticing the electricity bill unexpectedly doubling last September, I assumed an inefficient air conditioner was the culprit.  So I planned on having the HVAC system checked out this spring.  $220 later and we have a clean set of coils on the outside compressor unit and an extra pound of R-22 refrigerant added to our system (and picked up a $17 discount for paying in cash).  I haven’t needed to run the AC much given how cool it’s been this April and May, so I’ll probably have to wait till June to see if it helped with the electricity bill.   I’ve done a bit of DIY air conditioner maintenance before but didn’t want to illegally recharge my own AC system (or blow it up accidentally).

Right around the time of the AC repair, our main sewer line completely clogged up.  Not knowing where to start with the repair, I called my trusted neighborhood plumber.  The proposed fix was a $750 installation of a cleanout near the foundation of my house (as long as I dug the two tons of dirt out of the hole myself; $100 extra if they dig it).  So I got out the shovel and started digging. I eventually struck gold – a buried cleanout cap a couple feet down!  They were able to use that cleanout to snake the main drain and remove what might have been roots from the sewer line about 50-60 feet from our house.  It’s a mystery because there aren’t any large trees anywhere near that part of the yard.  It might be that 45 year old sewer pipes clog up due to slow accumulations of gunk.  By the end of it, I was still out of pocket $389, but at least now I know I have a cleanout available if it happens again, and I might try renting an industrial drain snake to DIY the cleaning since it looks pretty straight forward (though dirty).

Dig 2 tons of dirt for $100? Sounds like a good idea to me!

Dig 2 tons of dirt for $100? Sounds like a good idea to me!

Then the lights started flickering.  I called the power company and they came out to determine the problem.  Our meter base housing was busted and their power line from the transformer also had issues, so they shut off our power for the whole day while they installed a new meter base.  They still haven’t returned to replace their line to our house, so in the meantime we have a mystery device – a “service saver” – sitting next to our electric meter that provides the neutral necessary for proper electrical service (the electrician said it was “some kind of transformer but he’s not really sure how it works”). We have power so that’s good enough for me.

I found out I could power our refrigerator and our router using a 100 foot extension cord plugged in at the neighbor’s house.  While the refrigerator was pulled away from the wall, I decided to clean the coils in the refrigerator.  So. Much. Dust.  I’m not really sure how it was able to operate, and I assume this is why many refrigerators fail prematurely.  Hopefully I’ll get around to vacuuming out the coils while brushing them clean with a toothbrush more than once a decade.

I tackled a leaking sink drain line. Unsuccessfully. So I’ll be heading to a home improvement store in May to get the parts to replace the drain line (or at least the one leaky connection).

All of this was a huge distraction in my efforts to get quotes to replace our roof.  As this post goes live I’ve received over a half dozen quotes and should be selecting a roofing contractor soon.  The costs came in exactly as expected – just over $4,000 on the lower end and just over $8,000 on the high end.  We’ll definitely end up using one of the guys that quoted under $6,000 (which includes a few upgrades like chimney repair/replacement, additional/new gutters, and redoing the roofs on the porch and shed).  Insurance already paid $3,300 and should pay another $1,100 once all the work is complete, so out of pocket costs will be limited to roughly $1,500 or less.

Although we tackled a ton of home repairs in April, and the costs are slowly mounting, it’s okay.  We explicitly budgeted for all of these major and minor home repairs with a long term capital replacement plan of roughly $1,500 per year.  The roof is listed in the plan at $4,000 on a 20 year replacement cycle.  Major plumbing repairs listed at $1,000 every 10 years.  The one big shocker will be the hot water heater since I’m planning on converting to a tankless wall-mounted installation to bring things up to code once the current 40 gallon tank water heater dies.  The plumber estimated $2,300 to do that, and I’m only carrying the water heater replacement expense at $700.  Oh well – can’t get it right every time.

This isn’t the first time everything decided to conspire against us at once.  Over three years ago I wrote about the other time all the things broke at one time.

Homeownership certainly has its share of ups and downs.

 

Taxes – $600:

State and Federal estimated income taxes (minus the 2016 tax refunds received).  Since we no longer have paychecks that withhold taxes for us, we have to make small quarterly estimated tax payments to avoid an underpayment penalty at tax filing time each year.  We owe very little tax in early retirement, but it’s still higher than the $150 per year we paid while working full time earning $150,000 per year!

 

Groceries – $476:

Another slightly below average month for grocery spending.  We’re trying not to buy more food than we’ll consume before we leave for Europe in mid-June, so our “stocking up” efforts are near zero these days.  I would like to leave the fridge and freezer as empty as practicable in case we lose power or the refrigerator dies while we are away.

We threw a birthday party for our five year old and our nephew who turned one.  We had around 30-35 guests and provided a Mexican buffet.  All those groceries plus a case of beer are included in our $476 monthly grocery budget.  The other family that joined us brought papaya salad, pad thai, and chicken wings.

Mexican taco buffet - mi favorito!

Mexican taco buffet – mi favorito! Roasted pork carnitas, beans, fajita veggies, and all the fixings.

The Asian delicacies at the birthday party.

The Asian delicacies at the birthday party.

Obligatory monthly pho-to.

Obligatory monthly pho-to.

My first attempt at making Tikka Masala from scratch. Winner!

My first attempt at making Tikka Masala from scratch. Winner!

Homemade lasagna. We invited a few FIRE friends over for a meal.

Homemade lasagna. We invited a few FIRE friends over for a meal and they didn’t leave hungry.

 

Clothing/Shoes – $226:

A new pair of shoes for all of us so our feet will be happy while vacationing in Europe.  A miscellany of shorts, shirts, and socks.  Mostly in preparation for our Europe trip but things we’ll wear day to day at home too.

After I wore my new shoes for a while and completed a five mile walk/hike, I realized the new shoe has a tiny spot that causes friction on one toe. So I went crazy and dropped another $40 (after requesting a $5 discount for a tiny imperfection in the stitching on one shoe) on a SECOND pair of new shoes that are even more comfortable.  I’ll be taking the more comfortable shoes to Europe.  We’ll be doing five miles of walking or more on some days, and I really don’t want to suffer through uncomfortable footwear.

I’m working on loosening up the purse strings (since we can afford it) and spending where it makes sense and brings value.

 

Travel – $181:

We’re slowly completing the final bookings and reservations for our big summer trip to Europe.  We finished booking the last two bus/train tickets from Munich to Prague and Prague to Berlin at the end of April but the charges posted to the credit card in May (so I’ll report on them next month).  Here’s a preview: who knew you could buy five double decker bus tickets for the 4.5 hour ride across Germany from Munich to Prague, Czech Republic for €38 (USD$41)?

I paid our quarterly estimated taxes using credit cards in order to meet minimum spending requirements and to snag some big sign up bonuses on our pair of Chase Sapphire Reserve cards, so I’m including the $34 transaction fee for credit card usage here in the “travel” expense category.

In cruise news, we booked another cruise!  As I mentioned in last month’s financial update, a very helpful Root of Good reader emailed me about an incredible deal over the 2018 Christmas holidays (yes, over a year away).  It was a price mistake but before the cruise line corrected the error, we managed to book the family on a seven night cruise out of Miami bound for the Caribbean on MSC Cruises’ new ship, the MSC Seaside.  Our total cost will be around $1,400 for two rooms to accommodate five of us.  We only had to make a $147 refundable deposit to hold our two rooms, with final payment not due until October 2018.  With two kids in middle school, the cruise over Christmas break is very helpful to avoid excessive absences from school.

 

Restaurants – $48:

$35 for a family meal at the Chinese restaurant to celebrate the kids’ excellent grades. $13 for a box of Bojangles fried chicken and biscuits for the whole family.  We also redeemed a few free pizza codes acquired during March (with no additional costs in April).

The kids' favorite Chinese restaurant. Celebrating great grades on Q3 report cards.

The kids’ favorite Chinese restaurant. Celebrating great grades on Q3 report cards.

 

Gasoline – $42:

One tank of gas for the minivan.  We don’t drive a lot.

 

Cable/Satellite (Internet) – $40:

Now that Spectrum’s done gobbling up Time Warner Cable, we’ve been given a “courtesy upgrade” to a faster, more expensive internet plan.  It’s currently $45 per month for the next 12 months at which point it reverts to the regular $65 (or some other crazy figure – but I’ll be at a different provider if that happens).  I only paid $40 in April because I paid a bit extra in March during the transition to the new plan.

 

Gifts – $28:

$15 for some action figures at Walmart for our son’s fifth birthday.  $13 at a local discount store for some small birthday gifts for our other daughter and a friend (and some glue for the birthday piñatas).

Action figure battle time!

Action figure battle time!

We welcome 30-35 people to celebrate a joint birthday with our five year old son and his one year old cousin. Another homemade piñata to smash!

We welcomed 30-35 people to celebrate a joint birthday with our five year old son and his one year old cousin. Another homemade piñata to smash!

 

Healthcare/Medical – $23:

Another dirt cheap healthcare month.  I paid a $5 copay to visit my new doctor for a routine physical and to get a prescription renewed (usually an extra charge at my old doc).  It turns out he only charged me for a routine physical so the $5 copay will be credited toward a future office visit (or refunded at my request). I had to switch doctors since my new insurance plan for 2017 doesn’t have my previous doctor in the network (but they do have several hundred other doctors within 10 miles of me).  I was pleasantly surprised with the new medical practice and might just stay with them!

I also paid $2 for a 90 day supply at the pharmacy.  This new insurance is saving us more than the old insurance so far.

The balance of the healthcare/medical spending is one month’s health insurance premiums of $16. For us, the Affordable Care Act works phenomenally well in making our health insurance premiums tiny.

Since the ACA and it’s impending demise is a popular topic right now, it’s worth addressing here.  The US House of Representatives passed the AHCA which is the promised “repeal and replace” bill that’s supposed to gut the ACA and Make America Great Again.  The US Senate will get a go at making all the changes they want and then they have to vote on the AHCA (as modified) and pass it, then it goes to the House for further sausage making.  There’s a good chance the final version of the AHCA won’t look a whole lot like the version of the AHCA just passed.

But if it does, here’s the best summary I’ve seen of the current version of the AHCA compared to the ACA (courtesy of the non-partisan Kaiser Family Foundation).  Main takeaways:

  • ACA premium subsidies continue through 2017, 2018, and 2019 (so it’s not an immediate “repeal”). Your subsidy declines as your income increases up to 400% of the federal poverty level.
  • Starting in 2020 those buying individual coverage get a $2,000 to $4,000 tax credit per person for qualifying insurance (and policies don’t have to be purchased through the official Healthcare.gov Marketplace to qualify for the tax credit). Tax credits vary with age (older = larger credit) but not with income, however there are income limits where the tax credit phases out
  • Cost sharing reduction subsidies disappear in 2020 (currently available to those earning under 250% of the federal poverty level – it’s what makes my deductible $100, max out of pocket $1,200, and my copays $5-20)
  • In 2018, HSA contribution limits double to $13,100 for family coverage.
  • If a state chooses to allow it, insurers can charge more for pre-existing conditions for those that have a lapse in coverage. Possibly much, much more. Maintaining continuous coverage seems to be the way to go to avoid paying a lot more for pre-existing conditions.
  • Increase the age banding of premiums so that the premiums paid by older people aren’t capped at three times the premiums charged to the youngest people (under AHCA older people will pay five times what younger people pay – while only getting an extra $2,000 in tax credits)
  • No more individual mandate to have health insurance retroactive to 2016

Those are the basics but trust me, I’m leaving a lot out.  Medicaid and Medicare are tinkered with too.

The Senate will most likely make significant modifications to the AHCA, so it’s pure speculation as to what we’ll actually end up with once all the sausage is made.

My main takeaway as a 30-something early retiree that will be 40 by the time the ACA premium subsidies goes away in 2020 is that I’ll be paying more for health insurance that will come with higher deductibles and copays.  Mrs. Root of Good and I will each get a $3,000 tax credit to use toward insurance that will probably cost $4,000-$5,000 per year per person for a basic plan, and possibly much more if healthy people choose to go uninsured (since the individual mandate will be gone and many people will pay more for health insurance, making it less affordable).  I don’t know what the kids’ policy pricing will look like or if they’ll end up on Medicaid (if that’s still an option given the possibility of AHCA-related changes to Medicaid), but I understand they’ll be eligible for $2,000 tax credits too (based on their age) if we purchase individual policies for them.

In conclusion, I’m mentally penciling in an extra $4,000 or so for health insurance and healthcare costs starting in 2020, but also accepting that a lot can change with the AHCA before passage (or it might fail to pass altogether).  There might be a subsequent health care bill passed later on in 2018 or 2020 as the political winds change that could put our costs back in line with where they are currently under the ACA.

 

We spend almost nothing on entertainment because there's always something free going on in the neighborhood or within a few miles in the city. Like this Big Truck and Heavy Equipment expo at the neighborhood library and community center.

We spend almost nothing on entertainment because there’s always something free going on in the neighborhood or within a few miles in the city. Like this Big Truck and Heavy Equipment expo at the neighborhood library / community center.

 

Entertainment – $22:

Is it weird that I categorize hard liquor as an entertainment expense? We bought a half gallon of vodka and a fifth of tequila (1.75 L and 750 mL, respectively, for those using the far superior metric system). All bottom shelf stuff for making cocktails, although the tequila bottle did come with a red sombrero attached to the lid, so I’m pretty sure it’s high quality stuff.  Or at least high octane.

Our favorite spot in the woods. Free entertainment (if you don't count the dollar's worth of gas to get to the city's nature park).

Our favorite spot in the woods. Free entertainment (if you don’t count the dollar’s worth of gas to get to the city’s nature park).

This snake enjoyed our favorite spot, too. Non-venomous so I let it swim underneath my feet.

This snake enjoyed our favorite spot, too. Non-venomous so I let it swim underneath my feet.  Probably 3-4 feet long.

One of the kids' favorite things to do. LAN party! Roblox and Minecraft are favorites. Fortunately we have 6 PCs so everyone gets to play.

One of the kids’ favorite things to do. LAN party with friends! Roblox and Minecraft are favorite games. Fortunately we have 6 PCs so everyone gets to play.

Education – $13:

The middle kid’s elementary school Spring Fling Carnival.  Admission included unlimited games and we bought a few raffle tickets.  This could just as easily be categorized as “charity” since it’s a huge fundraiser for the PTA.  So far our K-12 educational expenses have been very modest compared to those reported by some blog readers.  No organized sports fees nor band fees certainly helps keep education costs to a minimum.

 

Electronics – $6:

3 replacement USB cables for charging the kids’ tablets. Put this in the “getting ready for our Europe trip” category of expenses.

The tablets require heavy duty USB cables with higher amp ratings to charge the tablets quickly.  Monoprice.com offers good quality cables at a ridiculously low price, even though you do have to pay a couple bucks for shipping.  Still cheaper than Amazon (which might sell lower quality cables).

 

Year to Date Living Expenses for 2017

april-2017-ytd-expenses

Through the end of April we’ve only spent $9,857.  That’s roughly $3,500 below our annual spending target of $13,333 budgeted for the first four months of the year.  So far so good!

The two remaining big cost items for 2017 are the roof replacement and our trip to Europe.  The roofing quotes are coming in low enough that it shouldn’t cost more than $1,500 out of pocket beyond the amounts paid by the insurance company.

We’ve already booked and paid for roughly $6,000 out of our $10,000 total budget for our nine week Europe trip this summer.  The remaining $4,000 of vacation spending will be concentrated in June through August while we are overseas.  The good news is we won’t be spending much to maintain our home or car here in Raleigh while we’re traveling.

Coming up in May, I’ll pay just under $1,000 for our annual homeowner’s insurance and umbrella policy plus our six month auto insurance policy.  Even though the insurance and the roof expense will hit in May, there’s a chance we won’t exceed our $3,333 monthly budget by too much.

 

Monthly Expense Summary for 2017:

Got a mild case of geese on the roof.

Got a mild case of geese on the roof.

 

Net Worth: $1,805,000 (+$34,000)

Another $34,000 added to the pile.  This stock market thingy always goes up, right?  It’s starting to feel that way.  We broke through another $100,000 milestone now that we crossed into the $1.8 million territory.  How long will these gains last?

april-2017-net-worth

I’ll be checking our asset allocation soon to see if I need to rebalance any asset classes since the international markets have done well lately.  I’m also planning on moving another $25,000 to $50,000 from equities into bonds very soon.  That will bring our total cash/bonds position from roughly $100,000 up to $125,000-150,000.

If we get to $150,000 in cash and bonds, that will represent about four years of living expenses without any efforts to curtail spending, without collecting any dividends from the equities side of the portfolio, and without any side income earned from this blog, the early retirement lifestyle consulting, or other ventures I might stumble upon in the future.

In reality, we’ll keep collecting $8,000 or more in dividends and the blog plus consulting will probably bring in $20,000 or more without too much effort.  If we can cut spending by 25% then we won’t need to pull more than $3,000 to $5,000 from our fixed income reserves, which means the cash and bonds could get us to Social Security age (contrary to popular belief, retiring in your 30’s doesn’t mean you won’t collect a fat Social Security check at age 67).  That’s why the next stock market correction doesn’t worry me at all – we’ll be just fine for many years without needing to sell any equities at sharply reduced prices.  In other words, I don’t think we’ll ever run out of money.

 

 

Still enjoying this rising market?  Are you taking any defensive measures to protect against losses, or staying the course (as you probably should!)?  Now that tax season is over, any new tax strategies you’re implementing in 2017?  

 

 

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When is Enough Enough?

How do you know when you have enough to retire early?  When is enough enough?  In a rare guest post, the Early Retirement Dude pays a visit to Root of Good to share his thoughts.  

Relatively new to the FIRE blog scene, the Early Retirement Dude is no stranger to the refined art of Early Retirement.  Now 47, he retired over a decade ago at the ripe young age of 36 (ha ha I beat him by 3 years but it’s not really a contest, is it?!).  I had the pleasure of hosting ER Dude at my house several weeks back, and can confirm he’s a legitimate ER Dude, scraggly two week beard and all.

 

=========================

 

It’s May of 2005 and I’m officially quitting my job this morning—or, technically, I’m being laid off because I’ve turned down a directed transfer—and part of the process is an exit interview with our divisional president.

I’ve just turned thirty-six.

Cliff is a good guy, and for a couple more hours I’m two tiers down from him on the org chart. I report directly to a woman who reports directly to him, so he and I have gotten to know one another and become friends. He’s also helped me out career-wise; involved me in higher-level meetings, invited me to the right cocktail parties, and been solicitous of my opinion.

So at the appointed time I show up in his office, him in his charcoal Brooks Brothers and me in my Grateful Dead t-shirt and cargo shorts and running shoes. I mean, what the hell, right? Truckin’…got my chips cashed in, etc.

Cliff checks out my outfit and grins. “I guess you’re serious.”

I chuckle. “Yeah.”

“OK. Can’t say I didn’t try. Have a seat.”

On the far side of his office he’s got two couches and two easy chairs arranged into a conversation pit. I take a couch and he comes over and sinks into a chair.

“Right,” he sighs. “Uh, Rachael filled me in somewhat. Said you were leaving the industry.”

Rachel’s an HR rep. “Sort of,” I say. “I’m getting completely out of corporate America. I’m done.”

“Done?”

“Retiring.”

“Oh.”

He shifts his gaze to the big plate-glass windows. He’s got the blinds open; it’s a bright spring day. “You know,” he muses, “I’ve heard a lot of people talk about doing what you’re doing, but nobody ever does.”

Now: Cliff is a a guy whose net worth is easily ten million dollars. I’m guesstimating, but I’d once seen the standard executive-level contract, blank, and between the perks and the stock options and the bonus floor and the wide wide empty salary line with plenty of room for zeroes; and of course his slice of the phantom equity the company originally distributed when it was a startup, I know he’s done and is still doing well for himself.

So I call him on it. “Man, I don’t get it. I mean, you. You’re worth, what, ten million bucks? And I know you’re burned out, so why are you still here?”

He replies a little too quickly, as if he often asks himself this question. “Because,” he tells me, “you get the big house and the nice cars and the toys, and your kids are in private schools and your wife gets used to the lifestyle, and that’s it.”

I nod. “OK.”

And that’s pretty much it for the personal side of the discussion. The rest of the interview is the usual formulaic bullshit about my satisfaction with career development, how I feel the company can improve employee retention, whether I have any concerns about discrimination or sexual harassment, and so forth, and within twenty minutes we’ve got the whole thing wrapped up. We stand up and shake hands, he directs me to the HR VP’s office, I sign off on my severance contract, and I’m on the train home before noon.

I never see Cliff again.

A few years later I hear through the grapevine that the company axed him after a regulatory agency found his division guilty of violating the agency’s operational standards. Not anything criminal, but sketchy enough nonetheless. The agency’s finding cost the company an eight-figure settlement, which of course resulted in several public and bloody decapitations, including Cliff’s.

Which triggered his severance agreement. And that meant he’d just thrown however many million dollars his package was worth onto his already Kilimanjaro-sized pile of money—not to mention however much that mountain had grown in the years since I’d left.

~

These days I don’t think about Cliff much, but I wonder if that layoff was the point at which he left the industry. I hope so, because how much is enough?

Maybe he started consulting, or maybe he moved on to a different field. He’s not on Facebook, or at least not the last time I checked, and I guess I could google him or search LinkedIn, but I haven’t bothered.

campfire-on-beach

That exit interview was eleven years ago. I’m forty-seven, now, and as I write this I’m sitting alone on the beach on Cape Lookout, a barrier island off the North Carolina coast. This is an undeveloped beach, a national seashore that stretches on and on for fifty miles, and at this time of year it’s deserted. I’d be surprised if there are twenty other people sharing the island with me.

When I drove off the ferry eight days ago I hit the beach and drove south through the sand for I don’t know how many miles until I got seized by The Thirst…so I pulled over onto a nice flat spot in the shelter of the dunes, cracked a beer, and set up camp.

truck-on-beach

I’ve been sun-basking and surf-fishing and beer-cracking ever since. I’ve gone running along the tideline, picked up a million seashells, watched the lighthouse’s beam endlessly circle around and around, counted shooting stars, and of course I’ve been doing some heavy thinking. You can’t help but think in places like this.

And so I thought of Cliff. I don’t know where he is; what he’s doing; how his life is going…but he’s certainly not sun-basking or surf-fishing or beer-cracking or even soul-searching on Cape Lookout.

puffer-fish-beach

This must be an allegory for Cliff – stuck on the hook and unsure how to free himself.

That thing he said about the house and cars and private schools and such. I think taking a job you hate and getting addicted to the paycheck is one of the worst ways you can screw up your life. Money can’t buy you happiness, but I guess it makes misery more enjoyable…as the old saying goes, or ought to.

So wherever Cliff is, I hope it’s someplace he wants to be. He’d be in his early fifties now, so maybe he DID get out.
Whatever the case, I wish him well.

=======================

Don’t forget to visit Early Retirement Dude!

 

 

Any Cliffs out there willing to admit it?  If so, when will you call it quits?  How do you persuade yourself that enough is in fact enough when there’s always the fear of running out of money in early retirement

 

 

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