Category Archives: Lifestyle

When is Enough Enough?

sunset-cape-lookout

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.

 

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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.

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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

 

 

Summer Vacation for 5 in Europe: 9 Weeks, 8 Countries, 14 Cities, $10,000

world-maps-europe-featured

The Root of Good family is ramping up for an epic adventure across Europe during the summer of 2017.  The five of us will spend nine weeks traversing an all new (to us) continent by train, plane, bus, car, and foot.

We really struggled to narrow down the itinerary to something feasible for a family with three young children.  As a result this trip will NOT include London nor Paris nor a dozen other cities we would have loved to visit.  What we will see are museums, parks, castles, palaces, cathedrals, caves, mountains, seas, rivers, lakes, and canyons scattered about the rest of western and central Europe.

Many will view this as a “trip of a lifetime” or a “dream trip” but I choose to view this as just another cool vacation in a series of vacations we have already taken and will continue to take.

However, this Europe trip is in some ways the realization of a dream.  As a wistful traveler / college student yearning for adventure before embarking on my 10 year corporate grind, I ordered a stack of maps from AAA back in the dark days before the invention of Google Maps.  What better way to think, plan, and dream about where you want to explore than a pile of maps for all the countries in Europe?  For 15 years I kept these maps in a shoe box in the closet.  Now I’m figuratively dusting them off and planning on hitting the road soon (I’ll leave the maps at home since I’m going all digital with Google Maps on my computer and phone!).

Dreams fulfilled. Finally getting to bust out these maps of Europe.

Dreams fulfilled. Finally getting to bust out these maps of Europe.

This Europe trip is unique compared to our typical budget travel two months in Mexico and road trips through the US and Canada.  We’ll spend two or three times as much as we usually do on our grand summer vacations. And it’s Europe – a place we have never visited before, and in a cliché way, a must-have on every legitimate traveler’s resume.

 

Where are we going?

In mid-June we depart Raleigh for a flight across the Atlantic to Lisbon, Portugal where the adventure begins.  From Portugal we fly to the Andalusia region of southern Spain for a bit over a week before flying onward to Italy for a week.  After landing in Italy we travel overland through Slovenia, Austria, Germany, and the Czech Republic before arriving in Amsterdam where our vacation ends with a flight back to Raleigh.

The itinerary for nine weeks:

  1. Lisbon, Portugal 5 nights
  2. Malaga, Spain 2 nights
  3. Granada, Spain 3 nights
  4. Seville, Spain 4 nights
  5. Milan, Italy 4 nights
  6. Venice, Italy 2 nights
  7. Ljubljana, Slovenia 7 nights
  8. Bovec/Bled, Slovenia 4 nights
  9. Salzburg, Austria 2 nights
  10. Munich, Germany 7 nights
  11. Prague, Czech 7 nights
  12. Berlin, Germany 7 nights
  13. Koblenz (Mariaroth), Germany 7 nights
  14. Amsterdam, Netherlands 3 nights
  15. Back to Raleigh!

 

 

Transportation: Getting around town. And country. And continent.

To get around Europe, we’re relying primarily on buses and trains.  We are also taking a pair of flights for those travel segments that are difficult, expensive or take a long time on ground-based transit.  Overall, transportation in Europe is quite a steal IF you can snag the advance purchase cut rate fares.  Budget airlines aplenty such as Ryanair and EasyJet offer tickets for USD$10-20 in some cases.

Buses and trains can be even better deals for families with kids since children’s tickets are often heavily discounted or free altogether.  I looked into rail passes and quickly decided purchasing tickets a la carte would be much cheaper and easier than understanding the rules for different regional rail passes and days of validity versus days of travel.

All together, we spent 300,000 United Airline miles plus USD$544 cash for plane tickets.  More than half that was taxes on our transatlantic flights from Raleigh to Lisbon and Amsterdam to Raleigh.  The other bit is a roughly 1,000 mile flight from Seville, Spain to Milan, Italy on Ryanair at just under USD$40 per person (and a meager 2.5 hour flight time).

The flight from Lisbon, Portugal to Malaga, Spain was free since we booked an award flight to Europe.  You get a one way flight within the region you’re visiting with United Miles redemptions.  The award flights that we booked for 300,000 miles plus $350 in taxes would have cost $6,000 to $7,000 had we paid cash.  In the end we obtained between 2 to 2.2 cents per mile of value out of these points, which is pretty good for United miles.  All thanks to travel hacking some credit card sign up bonuses over the past few years.

To add to the value, we picked up the Chase Sapphire Reserve card earlier this year which gives us free Priority Pass Select membership.  Priority Pass admits us to certain business/first class lounges in the airports we’re traveling through so we can stop in and grab drinks (alcoholic or non) and some basic grub before and after our flight in lieu of paying for the same at an overpriced airport restaurant or rushing to get to a food establishment before the kids starve OMG literally to death (or so they would claim, literally).

Plane Tickets: Points Cost
United: Raleigh, North Carolina to Lisbon, Portugal x5 150,000 $175
United: Lisbon to Malaga, Spain x5 0 (free 1 way tix with United miles award booking) $0
Ryanair: Seville, Spain to Milan, Italy x5 0 $194
United: Amsterdam, Netherlands to Raleigh x5 150,000 $175
TOTAL 300,000 $544

 

For buses and trains, we spent between USD$40 and $69 for all segments with travel times between roughly two to four hours.  One exception is the Berlin to Koblenz train trip which is closer to six hours.  Since it was a longer duration than other trips, we decided to indulge in a little luxury and spring for first class tickets on Deutsche Bahn for $32 more than second class tickets (that’s $32 total for the entire family!).

Though second class seats on German trains are more than adequate, we opted for the upgrade to get comfier more spacious seating (including a private compartment) and more importantly, first class lounge access for the day.  We’ll be feasting on the all-inclusiveness with pastries, fruit, coffee and hot chocolate for breakfast in Berlin.  After a four hour high speed train ride from Berlin, we’ll grab a quick bite and pop some champagne during the 35 minute layover in Frankfurt before transferring to another high speed train bound for Cologne, Germany.  We have a three hour layover in downtown Cologne to explore on foot and have lunch with some beer or wine (and maybe an early dinner if time permits) in the first class lounge before heading a few minutes down the tracks to the airport for our rental car pickup.  A day on the rails in first class, three snacks or meals in their lounges, plus a quick city tour for $84 for the five of us.  That’s how you travel in style on the cheap!

Bus/Train: Cost (total for 5 tickets)
Bus from Malaga to Granada, Spain $41
Bus from Granada to Seville, Spain $40
Train from Milan to Venice, Italy $49
Bus from Venice, Italy to Ljubljana, Slovenia $69
Train from Bled, Slovenia to Salzburg, Austria $41
Bus from Munich, Germany to Prague, Czech $40 (estimate; not yet purchased)
Bus/train from Prague to Berlin, Germany $53 (estimate; not yet purchased)
Train from Berlin to Koblenz/Cologne, Germany (higher cost due to 1st class tix) $84
Train from Koblenz/Cologne to Amsterdam $40
Total $457

 

We’ll be renting cars for three different periods during our trip.  I’m unable to drive a manual transmission vehicle so I’ll be paying the 20-30% markup for automatic transmission vehicles.  The extra $100 will be recouped dozens of times when I don’t stall the car or inadvertently roll into oncoming vehicles or back down the hill onto the hood of an about-to-be-angry driver.  The frugalist in me says “learn to drive a stick to save a few bucks”. Then the realist shouts “This is why we saved up all this money. To afford small luxuries and conveniences.”  Though learning to drive stick while destroying someone else’s clutch does have its merits.

I’m shocked at how cheap the rental rates are since we are doing one-way rentals for at least two of the rentals (and possibly the third rental in the Koblenz area if I can find a decent one-way rate).  Another lesson learned is the lack of rental office availability on Sundays (note: never plan on conducting business or shopping for groceries on Sunday in Germany).

I’m also shocked at the opaqueness of rental car pricing. It jumps all over from hour to hour and day to day. And there are quirks.  Sometimes the price to rent for seven days is the exact same as for five days. And sometimes the total price DROPS if you extend the rental period.  Our Ljubljana, Slovenia rental was $20+ cheaper for a 13 day rental compared to a 10-12 day rental.  Ummm, okay, I can store your car for you for a few days in exchange for $20.

Rental Car: # Days Cost Cost Per Night
Ljubljana, Slovenia to Bled, Slovenia 13 $161 $12
Salzburg, Austria to Munich Germany 4 $113 $28
Koblenz, Germany (Via Cologne) 7 $181 $26
Total/Average 24 $455 $19

We will be taking public transit during about two thirds of our trip.  Most cities have multi-day or weekly transit passes and discounts for children (or they ride free with an adult pass), so transit costs should be fairly moderate overall.  Except in Venice where it’s $8 per person for a boat-bus called a vaporetto!  I’m sticking $750 in the budget for all transit costs.  Other miscellaneous transportation costs include parking and tolls at $75 and gas for the rental car at $250.  The gas cost is based on 1,375 miles at 33 miles per gallon with gas at $6/gallon.

Gas for Rental Car $250
Parking, Tolls $75
Local Transit $750
Total $1,075

To sweeten these deals, I’m always checking online cash back shopping portals like Ebates.  In this case, I didn’t have much luck finding the European train and bus companies on Ebates (but there are some travel consolidators that sell train tickets and qualify for cash back).  However, most rental car companies qualify for 4-5% cash back (like Hertz and Sixt) and the big travel sites like Expedia and Travelocity offer a couple percent cash back on rental car reservations.  I booked two out of three rental cars through Ebates so I should get another $10-20 cash back once the car rental is complete this summer.

If you’re interested in getting cash back at hundreds of sites where you are already shopping online, check out Ebates.  And click through this link for $10 bonus cash back for new members!

 

Lodging

At first we planned on a combination of hotels for short stays of two or three days and apartment rentals for longer periods.  After digging in to available hotel and apartment offerings, we quickly discovered that apartment rentals offered a much better value even for short stays.  Most hotels in Europe offer standard rooms that sleep two or possibly two plus a kid.  And you pay extra for guests in the room beyond one or two people, including kids.  For our family of five this put us in large hotel suite territory (think $$$) or paying for two rooms, the second of which might come with extra person fees for the third kid.

We moved on to Airbnb, our choice for vacation apartment rentals.  I’ve used VRBO in the past when I couldn’t find anything on Airbnb.  But this time around, the inventory and options available in all the cities we are visiting was simply overwhelming so I didn’t need to expand my search beyond Airbnb.

I love their search tools because you can filter out properties that don’t meet your criteria and then save your favorite properties on a map so it’s easy to see where your most desired properties are located.  Once you know exactly what you’re looking for, the thousands of properties in a city drop to several dozen or several hundred.

My typical search criteria was:

  • Whole house rental (not “shared room” or “private room”)
  • 2+ bedrooms (unless there aren’t many properties or they are super expensive or we’ll only be there for a couple nights, then 1+ bedroom)
  • 4+ guests (many times there’s an extra bed or couch where a small kid can sleep or a huge bed where multiple kids can sleep; 5+ guest weeds out too many perfectly acceptable rentals)
  • Air conditioning if it’s hot (summertime anywhere in Spain, Portugal, Italy)
  • limit price to a max of 60-80% of the average for the city (and increase price limit to show more properties if nothing cheaper looks appealing)

Though not included in our search criteria, we highly desire:

  • washer, and preferably dryer
  • internet
  • non-smoking
  • pet free

I find that limiting a search based on these latter four factors will eliminate nice properties that will work for us with some flexibility.  Sometimes there’s a washer available on site for free or a small charge that isn’t included in the listing.  One place we booked charges €3 per washer load, for example, but costs $40/night less than other comparable apartments!  If the cost savings are huge (as in $100+), or the property is really luxurious or in a sweet location, it might be worth making a trip to a laundromat a couple times to make the apartment work for us.

airbnb-montreal-2

Pretty decent bedroom (with a VERY firm bed) in our airbnb rental in Montreal a few years ago. We booked nicer places during our 2017 trip to Europe.

Internet is another weird one. Almost all rentals that aren’t absolute bare-bones have internet these days, but some don’t list it or only list “wireless internet” or “internet” (they are two separate check boxes on Airbnb’s search).  However, virtually all that have “internet” have a wireless router.  The key is reading the description or asking the owner if it’s in doubt.  Again, if the cost savings are huge or the property is otherwise wonderful we could forego internet.  However, I can’t recall seeing a really nice property that didn’t have internet, which is why I ignore this as a search term but double check that internet is available before booking.

We also looked for places that had ratings of 4+ stars with at least a few written reviews.  There’s no way to limit this with the search terms, but I would often skip over properties with poor ratings or no ratings.  Too many other polished gems out there to research!  However, if you’re on a very tight budget or not able to find much availability, there are certainly hidden gems waiting for you to find them.  We’ve had to stay at a few places with zero or one review due to reservations falling through at the last minute and suddenly needing to book a new apartment on short notice.  They all worked out fine after discussing the properties with the owner.

Amazing last minute booking in Mexico City with only one review. It was around USD$45 per night and beautiful inside and one block from the subway.

Amazing last minute booking in Mexico City with only one review. It was around USD$45 per night and beautiful inside and one block from the subway.

If you haven’t tried Airbnb yet, you should do so on your next vacation.  It’s an incredible way to save money, stay in a much larger, nicer accommodation than a hotel room (especially relevant to families!), and end up in a cool non-touristy neighborhood surrounded by locals (part of the reason you’re traveling, right?).  Right now you can take $40 off your first Airbnb stay through this link.

Here are all the apartments and houses we booked for our nine week trip:

Destination Nights Cost Cost Per Night
Lisbon, Portugal 5 $389 $78
Malaga, Spain 2 $124 $62
Granada, Spain 3 $201 $67
Seville, Spain 4 $252 $63
Milan, Italy 4 $343 $86
Venice, Italy 2 $332 $166
Ljubljana, Slovenia 7 $600 $86
Bovec/Bled, Slovenia 4 $180 $45
Salzburg, Austria 2 $260 $130
Munich, Germany 7 $618 $88
Prague, Czech 7 $351 $50
Berlin, Germany 7 $697 $100
Koblenz (Mariaroth), Germany 7 $383 $55
Amsterdam, Netherlands 3 $517 $172
Total/Average: 64 $5,247 $82
20% savings w/ gift cards   $4,198 $66

We booked 14 different properties for a total of 64 nights at a cost of USD$5,247, or $82 per night.  Most are apartments with two bedrooms, a full kitchen, a living room, and one bathroom.  A few places are three bedrooms with multiple bathrooms.  All but one place booked for three or more nights have a washing machine.

Our goal isn’t to stay in the cheapest lodging possible, but rather to balance cost with comfort, luxury, convenience, cleanliness, and location.  We could have saved 20-40% in most cities if we were traveling on a bare-bones budget and didn’t mind making sacrifices.

We have enjoyed a half dozen very positive Airbnb rentals and only one “rental from hell”.  Feel free to read more about the latter experience.  We learned to be wary of the lowest price properties and go with our guts when it comes to Airbnb places.  If there’s a hint that a place is unclean, it doesn’t make it on our list.

I amplified the cost savings on apartment rentals through Airbnb by buying Airbnb gift cards at a 20% discount through Giftcardmall.com.  Lots of them.  Roughly $5,800.  I clicked through Ebates to make the purchases at Giftcardmall, thereby adding ANOTHER 1% discount to the deal in the form of cash back.  Sadly the Giftcardmall promotion ran for just a few days in December. However, keep your eyes open at discount sites like Slickdeals and you’ll occasionally see Airbnb gift cards on sale for 10-20% off face value (usually in limited quantities).

And don’t forget Ebates for cash back on hotels if you don’t go 100% Airbnb.  Most hotels qualify for 3-6% when booked directly at the hotels’ website (12% for Hilton!!) and about the same if booked through Travelocity or Expedia.  If you go the Hotels.com route (possibly with discounted gift cards from somewhere like Raise.com), you currently earn 6% cash back through Ebates on hotels.com purchases.  Sign up for Ebates through this link for $10 bonus cash back for new members.

To summarize, you should be able to take at least a few percent off the cost of lodging using Ebates, and possibly 10-20% by combining discounted gift cards and shopping through Ebates.

In my case, I paid $4,198 cash for the gift cards used to purchase $5,247 worth of Airbnb rentals, a 20% cost savings (plus I got 1% cash back through Ebates).

 

Eating all the food

Most of the other areas of our trip are pretty well planned out, booked, and paid for.  Food is the one area where we’re going to make it up as we go along.  Belly rumbling means it’s time to eat.

Since we’ll have a full kitchen in all the Airbnb rentals, we have the option to cook essentially all meals.  We (and specifically the kids) enjoy basic breakfasts including cold stuff like fruit and yogurt or cereal and milk.  Sometimes we might get fancy and make some meat or eggs.  Or get pastries from a nearby bakery or grocery store.

For lunch we’ll grab lunch on the go while we’re out sightseeing during the day.  Some days we might pack a picnic lunch if we happen to have good ingredients on hand.  Otherwise, it’ll be a mix of street food and sit down or casual restaurants and cafes.

Dinner will be a mix of cooking at the apartment and getting take out, with some dining out mixed in.  You can’t go to Spain and NOT enjoy some tapas with wine or beer, right?

I know lunch is usually less expensive than dinner at restaurants, and we’ll naturally be consuming a higher proportion of lunches at restaurants given our schedule as tourists.

I found an app called “Too Good To Go” that I’m excited to try. The concept is simple – for a heavily discounted price, you purchase unsold food from a restaurant at the end of their meal service for pickup at a pre-determined time (usually around 3 pm or 8-9 pm).  The price is generally USD$3-4 for a take out plate.  I gather that sometimes it’s a mystery what they give you, and other times they give you a takeout tray to pick from their selection behind the counter or from their buffet.  Definitely an interesting concept, but it leaves me wondering how fresh the offerings will be by the time you pick them up.  So far the app is confined to a handful of countries in Europe plus 10 or so restaurants in New York City.  Of the places we are visiting, the only city with a major Too Good To Go presence is Berlin with 50+ restaurants offering dirt cheap surplus food.

As far as groceries, I always enjoy visiting new grocery stores to see what’s new and different versus our experience at home.  I’ve scoped out a few sales circulars for grocery stores near our rental apartments and confirmed that (1) Europeans do indeed buy food at grocery stores just like us Americans and (2) the prices are roughly the same on average, with some things a little more expensive and many things the same or cheaper.

A grocery run from our last Canada trip

A grocery run from our first trip to Canada. Pastries, fruit, bagels, and yogurt for breakfast or snacks. Broccoli, fries, salmon, tuna, and beef steaks for lunches and dinners.  And jello.

For budgeting purposes I’m making an educated guess that we’ll spend an average of $20 per day on dining out and $20 per day on groceries (with the understanding that we can greatly exceed this budget if we find awesome places to eat!).  That works out to roughly $1,250 each for restaurants and groceries, or $2,500 total for food.

We won’t dine out every day but we might end up dining out twice per day for several days in a row while we’re on the fast paced segments of the trip that find us staying in each city just two or three days at a time.  We’ll have access to free food and drinks on some of the travel days at the airport lounges and the first class train lounges, so we might spend next to nothing on food for a few days of the trip.

 

Having fun

We’ll be on vacation for nine weeks and don’t plan on packing in the museums, castles, and tourist attractions every day we are overseas.  But when we do venture out for the day, we’ll inevitably buy numerous tickets for those museums, castles, and tourist attractions.  I am pleased with just how cheap admission fees are in general.  Many cities have castles, museums, and churches open for free visits all the time or on certain days of the week.  We also enjoy walking around the historic districts, taking the kids to the park, and exploring natural parks and waterfronts (most of which are free or have nominal admission fees).

I’m budgeting $750 total for the various attractions that cost money.  There are a few “must sees” on our trip that cost $40-100 for family admission:

  • El Alhambra in Granada, Spain
  • Postojna Cave and Skocjan Cave, outside Ljubljana, Slovenia
  • Dachstein Ice Cave near Hallstatt, Austria
  • Neuschwanstein Castle (admission is part of Bavaria pass)

We haven’t nailed down every single place we want to visit, but these locations stood out in our preliminary research as places we have to go.  We’re brainstorming fun stuff to do and see in each city and we keep track of all that info in a spreadsheet. Then once we arrive in a new city we’ll dig through our list of local attractions to see what we’re up for at the moment.

 

Packing

Our goal is to pack light.  By light, I mean everything should fit into regular size bookbags.  The idea is we’ll be agile and mobile. We can hop on trains, toss the gear in lockers for a couple hours if necessary, stick the bags in overhead compartments (and carry them on board planes for free), and walk a mile or so with the bags on our backs (remember, we have kids including a soon to be five year old) to get from intercity train/bus station to public transit to our apartment.

The family with all our gear on our backs. Pack light and a mile or two is nothing!

The family with all our gear on our backs. Pack light and a mile or two is nothing!

We’ll probably take three changes of clothes since we’ll have a washing machine in every apartment and can do laundry frequently.

We will keep electronics gear to a minimum.  Phones for the adults, Amazon FIRE tablets for the kids.  We have a pair of ultralight laptops for the adults (the 13″ HP Probook 430 G3 at 3 pounds).  All travel guides, leisure reading books, and entertainment will come from our tablets, phones, and computers.  For photography, we have a basic DSLR, the Canon EOS Rebel T5i with a few lenses including a 75-300mm zoom lens.

Beyond clothes and electronics, we’ll have the regular assortment of toiletries and travel meds, snacks, water, and travel documents.  That plus a spirit of adventure is all we’re taking, folks.

I admit it feels weird to walk out your front door for a two month journey with nothing more than a bookbag slung over your shoulder, but we did exactly that in 2015 when we spent nearly the whole summer living out of our bookbags while traveling around Mexico.  It worked out just fine before with only 52 pounds of gear between the five of us.

This is all we packed for seven weeks in Mexico.

This is all we packed for seven weeks in Mexico.

The only tricky part about this trip is cold weather gear. It’ll be mild to warm in most destinations but the ice cave in Austria is supposed to be around freezing even in summer.  I hate to bring a heavy coat and winter gear for this one cave visit, so I need to figure out a solution.  So far I’m considering wearing socks on my hands, a long sleeve shirt, and accepting that it’ll be cold temporarily.  Or find a thrift shop somewhere in Slovenia or Austria then ditch the clothes after the ice cave visit.

 

Challenges

We are traveling with our three kids who will be five, ten, and twelve during our trip.  The pace of the whole trip takes that into consideration which explains why we’re going pretty slow.  We’re big fans of slow travel and loathe the idea of “popping off to another country for a quick weekend away”.  Slow travel and kids go hand in hand.

The whole idea is to spend a relatively small proportion of the trip on a bus, train, or plane and most of the time relaxing or enjoying the places you are visiting.  Initially we laid out a bold plan to visit 12-15 countries including 25 cities in the same nine week period.  After realizing this was idiotic, we started amputating amazing destinations from our itinerary.  Places like Paris – nope. The French Riviera – nope. Switzerland – nope. London – nope. Rome – nope.  Belgium – nope.  Budapest – nope.  We eventually settled on eight countries with stays in 14 cities.

We designed our itinerary with plenty of time in most cities so we can take a day off every second or third day.  This means we won’t see everything in every place we visit and that is okay, as long as we have a generally good time and all get along.  Nine weeks on the road with exhausted children and frazzled adults is not a good time.

These “do nothing days” are golden.  What a luxury to travel half way across the globe and NOT have to spend every waking moment sightseeing.  It’s like a rainy Saturday back home when you don’t go out and spend the day reading, relaxing, catching some Netflix, and maybe an afternoon nap.  Great way to battle travel fatigue.

Homesickness is a related issue we’ll face.  We crave the familiar and the routine as much as we crave uniqueness.  Sometimes you get tired of arguing with the guy behind the car rental counter or stressing out that you’ll miss your train.  I find the “do nothing” days help it feel a little more like home as much as they provide relaxation and a day of respite.  A nice juicy burger or a familiar home cooked meal helps too.

Along with homesickness is the yearning for people who just speak plain ole “regular” English.  Conversing in a foreign language is tricky and mentally exhausting.

Foreign languages are challenging too.  We are proficient in Spanish which will help for the nine days in Spain.  I’ve completed a few dozen modules of German on Duolingo but I’m nowhere near being able to carry on a conversation.  Otherwise, I’m hoping Italian and Portuguese are close enough to Spanish to let me catch a few words here and there.  We’re totally screwed in Slovenia, the Czech Republic, and Amsterdam since languages spoken there aren’t familiar to us at all.

I hope what they say is true – that everyone speaks English in Europe.  For those that don’t, we have Google Translate on our phones along with mad charade skillz to mime what we need.  I’d like to spend some more time on Duolingo learning the basics of Portuguese and Italian and refreshing my very rusty and basic German.

 

How we planned the trip

We started planning this trip in September of 2016 so that we could book plane tickets as early as possible in order to get the best flight schedules with convenient layovers.  Our transatlantic flights are only 7.5 hours to Lisbon and 8.5 hours returning from Amsterdam (plus a one hour hop from the Washington DC airport to Raleigh here in the States).  Seven or eight hours in coach isn’t ideal but overall our transatlantic flight itinerary is hard to beat.  It’s only two hours longer than flying to the west coast from here and people do that without hesitation.  And they still give out those tasty bags of peanuts, right?  We might even get two bags on the transatlantic flights.

Once the flights were booked we had our trip bookends. We are flying into Lisbon, Portugal in mid-June and flying out of Amsterdam a bit over two months later.  Then we had to figure out where exactly we wanted to visit in Europe and how we were going to travel between cities.  Portugal and southern Spain made it on the list as did northern Italy, Slovenia, Austria, Germany, Czech Republic, and the Netherlands.  The biggest jump of the trip is between southern Spain and northern Italy, so we decided on flights between these two points.

Other cities were close enough together that buses and trains offer reasonable transit times.  As a form of due diligence I checked the prices between cities along our route to ensure that a bus or train link was available at a reasonable price (it was).  Then we started booking Airbnb apartments in all our destination cities before all the cheap and good places were reserved.

Once the lodging was finalized, the train and bus schedules for our specific travel dates opened up and I booked most of the intercity bus/train tickets.  All intercity travel is booked at this time except the segments into and out of Prague which go on sale at the end of April.

The only remaining bookings are a few of the most popular tourist attractions like El Alhambra that can sell out a month or more ahead of time.

In general, we booked the big ticket items first to lock in good prices and options, then drilled down to smaller details on the itinerary once we knew for certain we were staying in a particular city and traveling by a certain method.

This method has worked out well so far except for the rental car pick up in Germany.  We are doing four one week stays across Germany and the Czech Republic and switching apartments on Sundays.  The apartments are already booked and paid for, and come with cancellation fees to change the dates.  We are stuck with Sunday travel days.  Many rental car offices aren’t open on Sundays or open for just a few hours so we’ll end up driving an hour longer to pick up the car at the rental company’s airport location instead of their downtown city locations.  A lesser inconvenience is the German grocery store. It’s closed on Sunday so we’ll have to make do for our Sunday evening meal and get some groceries on Mondays.

To economize on the trip, we used a few tricks:

 

Conclusion

There you have it.  That’s how you do a nine week vacation in Europe for a family of five for around $10,000.

Trip Budget Cost
Planes $544
Buses/Trains $457
Rental Car – 24 days $455
Misc. Transportation $1,075
Lodging – 64 nights $4,198
Restaurants $1,250
Groceries $1,250
Admission Fees $750
TOTAL $9,979

Most of the trip is already booked and paid for, so the hardest part is done.  Now we get to enjoy the fun part of reading about each destination and figuring out what we want to do while we are bumming around Europe.

In some regards, this will be a budget trip because we’re not staying in fancy five star luxury hotels nor dining in three star Michelin restaurants (well, probably not).  In other regards, this really IS a luxury vacation because it won’t be rushed and the itinerary is customized to our interests and tastes.

As this post goes live, we have just under three months till we leave for Europe.  Soon we’ll be packing our meager possessions in our bookbags and bidding farewell to home so we can spend the summer exploring the world.

 

 

Are we crazy?  Can this be done?  Any suggestions on the cities we are visiting? General tips on travel in Europe?  If you’ve been to any of these places, what is number one must see on your list?

 

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Living a $100,000 lifestyle on $40,000 per year – 2016 Expenses in Review

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“Oh you live on $40,000 per year? Guess you like camping in the van underneath the highway bridge huh?  Still enjoying those rice and beans?  Three kids cost $40,000 per year right off the bat so it’s clearly impossible!”.  That complainer clearly doesn’t know how we spend money.

Living well on $40,000 per year is possible and I’m here to explain exactly how by going over all of our expenses during 2016.  Later in the article I’ll explain why our spending affords us a lifestyle that costs most other people $100,000 per year.  And I don’t think many would argue that a $100,000 per year lifestyle is a tough way to live.

2016 was the first time that Mrs. Root of Good and I didn’t have a full time job all year (other than that one month of full time employment in January 2016 for Mrs. RoG).  Now we have essentially a full year of early retired living expenses recorded.  At a high level I can summarize our 2016 spending by saying “We nailed it!”.  Our 2016 budget totaled $40,000 while our expenses came in just a few bucks under $39,000.  On that low budget we managed to take several international vacations and purchase a 2009 minivan for cash.

 

Where did the money go?

At the beginning of 2016 I laid out our $40,000 spending plan for the year.  We increased the 2016 budget to $40,000 after acknowledging that we could be spending a lot more than the $32,000 or $32,400 that we budgeted for 2014 and 2015, respectively.

Our spending tracked closely to our budgeted amounts in almost all categories with the only really notable deviation coming from the $8,300 we spent on the new (used) minivan.  That expense plus other regular auto-related expenses reached 369% of our budgeted amount for autos.

Education and taxes were between 100% and 120% of budgeted amounts.  All other expense categories were 100% or less than the budgeted amounts.

 

 

Housing

$8,200 budgeted vs. $6,031 actual spending

First off allow me to celebrate our complete lack of a mortgage payment.  We paid off the last small chunk of mortgage in 2015.  No more mortgage!

Our housing expenses are fairly predictable year to year.  The repairs and maintenance budget of $2,500 covers big ticket items plus smaller repairs.  It also covers lawn maintenance supplies and equipment like gas for the lawnmower, fire ant bait, and paint for the house.  We spent $866 in this category which is only 35% of the $2,500 budgeted.  I intentionally budgeted plenty for this category because I wanted the flexibility to call a repairman for tasks I don’t want to do (like plumbing).

During the year we had a few plumbing issues, some preventative like replacing all the toilet shut off vales, and some repairs (I broke a sink drain P-trap while trying to clean it; the shower faucet sprung a leak and had to be replaced).  I also did a small amount of DIY plumbing repair and saved a few hundred bucks that way.  I needed to replace the pressure regulator valve.  It was an “unscrew the old one, screw back on the new one” repair fortunately.  That is about the limit of my plumbing expertise.

Had to get a little dirty in the crawl space to replace this beauty.

Had to get a little dirty in the crawl space to replace this beauty.

For house insurance and taxes we spent $2,203 against a budget of $2,200.  If only I could get all our expense categories within $3 of budgeted amounts!

Utilities are also fairly predictable since the rates are regulated for the most part.  We spent $2,809 out of the $3,000 budget.  The almost $200 cost savings versus the budget was due to savings on the water bill thanks to that pressure regulator valve replacement and the fact that we are on vacation five to ten weeks during any given year.

Our Home Furnishings / Furniture budget of $500 was way more than enough to cover our $153 actual spending.  We’ve owned our house for over 13 years so we don’t really need to replace a lot of household items.  We picked up a new couch from the thrift shop and a few other odds and ends.  I probably make enough from random craigslist sales to cover our actual spending on furniture but I don’t keep track of craigslist sales that closely.

 

Auto

$2,900 budgeted vs. $9,428 actual spending

This is the one area where we blew up the budget with our new (used) minivan purchase.  But it’s okay because we intentionally budget for these “one time” expenses by allocating $1,000 per year to our car replacement fund to account for the depreciation over time.

Here’s an excerpt from my “$50 car payment for life” car replacement strategy:

Here’s the math behind my $50 car payment.  Buy a gently used six to eight year old car with low to moderate mileage for around $8,000-10,000.  Run the car almost into the ground and then sell it after nine or ten years when it’s 15-16 years old for $3,000.  The net depreciation (cost of new(er) car minus sale proceeds from older car) for those nine to ten years is $5,000 to $7,000 or about $50 per month ($6000 divided by 120 months = $50/month).

$50 per month is less than $1,000 per year but I wanted to keep plenty in the budget in case we need to replace the vehicle more often (and odds are we’ll be in an accident or sustain damage to the van at some point).  We are our own insurance company since we carry no comprehensive or collision coverage on our minivan.  We’re saving hundreds per year and can easily afford a sudden $8,000 to $10,000 loss.

Great for hauling lots of people and loads of stuff. And 2000+ mile road trips.

Great for hauling lots of people and loads of stuff. And 2000+ mile road trips.

I’ll probably put out a full article on it later, but so far we are eight months into owning just one car.  And there have been exactly two situations where it would have been nice to have two cars (but we managed to get by just fine with one).  No uber or public transit required so far (though I did take the bus downtown once for a day of museums with our four year old).

It’s worth mentioning that we didn’t come close to spending our $400 gas budget.  We only spent $191 during 2016.  I planned the gas budget assuming 4,000 miles of driving around town at 30 miles per gallon while paying $3 per gallon for gas.  It turns out all three assumptions were wrong.

We drove much less than 4,000 miles during the year (I count road trip related expenditures such as gas in the “Vacations/Travel” category).  We replaced the 30 mpg Honda sedans we owned at the beginning of 2016 with the minivan that probably gets 19-20 mpg in the city.  And gas prices were closer to $2 than $3 throughout 2016.

 

Food

$8,000 budgeted vs. $6,330 actual spending

We budgeted $7,000 for groceries and $1,000 for dining out.  By year end, we spent a total of $5,753 on groceries (82% of budget) and $577 on dining out (58% of budget).

We manage to save on groceries without Extreme Couponing (hint: Aldi and grocery store loss leaders are your friends).  We eat pretty well with a variety of fresh fruits and vegetables (and meat of course) plus purchase a ton of Asian and Latino ingredients throughout the year to make some tasty ethnic dishes (here’s what a month of grocery shopping looked like for us a couple of years ago).  We love cooking and enjoy the challenge of making awesome meals out of whatever random stuff is in our fridge.

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Pho, from scratch. Maybe a buck per bowl.

 

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(Mostly) fresh fruits and veggies mostly from Aldi. And all of that was probably under $40 (about what you would spend for a small basket of produce at a fancy pants grocery store).

 

When dining out, we tend to frequent the same few restaurants.  For those restaurants that take them, we buy discounted gift cards from Raise.com (and you can get $5 off your first gift card purchase at Raise by clicking here).  But we really don’t go out to eat very often.

 

Other Core Living Expenses

$6,300 budgeted vs. $5,378 actual spending

We spent about $1,000 less than budgeted in this catch all category that includes phone, internet, medical and dental, clothing, education, and taxes.

For phone, cell phone, and internet, we go the extremely cheap route.  The $422 per year that we pay for phone, cell, and internet is less than some households pay in one month!

Our phone is hooked up through a $50 Obihai VOIP adapter using Google Voice for free monthly service.  My smartphone service is free through Freedompop.  Each month I get 200 voice minutes, 500 texts and around a gigabyte of 3G/4G data for free.  I never come close to any of those limits.

Our internet is 50 mbit/5 mbit service through Time Warner Cable at $35 per month (and we bought our own cable modem for $30 to avoid the $10 per month cable modem rental fee).  The regular rate for internet is $40/month but I call or go online each year and snag an extra $5-10 discount by asking politely.

We have a prepaid T-mobile dumb phone on a legacy plan that costs $10 per year. We rarely use it, but keep it activated for convenience and for emergencies.  It has saved us several times while overseas since it works worldwide (for higher per-minute rates).

Our medical and dental expenses were $2,162 for the year which is 72% of the $3,000 budgeted.  Our health insurance premiums (with heavy subsidies from the Affordable Care Act) were about what we expected at $125 per month.  We planned on $440 in healthcare expenses and didn’t spend all of that.  Dental expenses were budgeted for $1,000 since Mrs. Root of Good and I don’t have dental insurance.  We were lucky and didn’t have any expensive dental procedures in 2016 (just routine cleaning and exams).

What will you do when the Affordable Care Act / Obamacare goes away?” someone will ask.  Check out my discussion and the comments in my December 2016 Financial Update post to learn more about my thoughts and our plans.

Clothing purchases totaled $452 for the year.  How do we do it with a family of five? Some hand me downs, some thrift shopping, and some retail store purchases.  Since the adults in the house are no longer working, our wardrobes are pretty basic.  Swimming attire and shoes are probably the largest clothing subcategories these days.

Marathon thrift shopping

Marathon thrift shopping

Education expenses of $267 were 107% of the $250 budgeted for 2016.  Now that our oldest child is in middle school, the field trips are getting more expensive. As are the required graphing calculators.

We paid a total of $2,075 in taxes during 2016 versus a budgeted $1,750.  This primarily comes from rounding up when paying quarterly estimated state taxes to spend in even $100 increments.  North Carolina charges $2 per $100 when paying with a credit card so I try to get as many points or miles as possible.  Paying taxes with a credit card is a great way to meet minimum spending requirements from new credit card bonus offers.  And who doesn’t love free travel?  (Check out Jeremy at Go Curry Cracker – he graciously allowed Uncle Sam to buy him a free family trip to Hawaii!).

For those curious about our tax liability in 2016, we’ll owe a couple of thousand dollars in federal tax due to the self employment tax I pay on blog income (partially offset by $3000 in child tax credits).  We are in the strange situation of paying higher taxes during early retirement than we were when working full time and earning $150,000 per year while paying only $150 in taxes.  I still think our overall 2016 tax burden is very reasonable considering I took some capital gains and converted $4,000+ from a traditional IRA to a Roth to start my Roth IRA Conversion Ladder.

 

Purely Discretionary Expenses

$14,600 budgeted vs. $11,812 actual spending

This is where the fun is.  Vacations, entertainment expenses, and electronics primarily.

I bumped our entertainment and toys budget up to $2,500 from the $1,000 in 2015 and previous years.  At $522 total entertainment spending for the year we still didn’t spend the $1,000 let alone the $2,500 “new and improved” budget.  What can I say? So many free or cheap entertainment options mean we don’t spend a lot in this category.  Most of the $522 is outdoors/sports related expenses like bike tires/tubes, rollerskating admission, and city swimming pool passes.  Liquor ($176) is included in this category.  There’s a miscellany of computer/video games, supplies to build crazy things, and half of a netflix subscription.

Boat rental - not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And we saw a bald eagle.

Boat rental – not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And we saw a bald eagle.

 

Vacations represent the bulk of our discretionary spending.  We somehow managed to come in just $43 under our $10,000 budget with $9,957 total vacation spending in 2016.

In 2016 we did some serious traveling:

We stretch a buck till it hurts.  Travel hacking helps a lot. Check out credit card sign up bonuses and get you some free travel too.  The European lodging is all through Airbnb (save $35 on your first trip!).  For cruises we usually book through Expedia but click through Ebates to get a 10% cash rebate (and you get an extra $10 when you sign up for Ebates through this link).

View of both falls from the Canadian side.

We took a quick 2 night pit stop in Niagara Falls on our drive home this past summer.

 

Our electronics budget of $1,000 was big enough to accommodate our $885 in tech gadget purchases.  The majority of the electronics spending was a pair of brand new HP ProBook 430 g3 ultralight computers for $350 each (Black Friday special pricing).  They have similar specs to macbook pros that cost 3-4 times as much (except ours came with no Apple logos).  We mainly bought them for our 9 week summer trip since we’ll be carrying nothing more than regular size bookbags for our trek across Europe.  These new toys are faster, smaller, and almost half the weight of our old 15″ laptops.

Our $1,000 gift budget went mostly unused.  We spent just $381 throughout the year on various gifts for Christmas and birthdays.  Our families aren’t huge gift givers fortunately so we get by without much financial outlay.  We’re also opportunistic gift acquirers, so if we see a nice deal on a gift for someone then we’ll purchase it months ahead of time.

A "free" gift. An art kit pulled together from random unused school supplies. Our kids love these and use them all the time.

A “free” Christmas gift. Random unused school supplies found around our house repurposed into an art kit. Our kids both loved receiving these for Christmas gifts and use them all the time.

I’m going to get some nasty comments for this, but here it goes.  We gave almost nothing away to charity in 2016 and I’m totally okay with it.  We only spent $67 out of our already scrooge-like $100 budget.  Maybe we’ll give hundreds, thousands, or millions to charity some day.  We still have three young kids to take care of and several other financial unknowns.  Health care costs in the future are uncertain.  In the meantime we are active in the community and volunteer our time in various ways.

2016 was a huge year in the Personal Finance blogging community. It was pretty awesome when Mr. Money Mustache gave away $100,000 of his loot to charity.  Then Physician on Fire did the same thing.  Newcomer to the FIRE blogging world TJ Pridonoff gave away $17,000.  I believe all of them received some decent tax breaks from making these sizable donations (in some cases to their own donor advised funds), and I hope to one day turbocharge the value of my giving by finding some tax breaks too.  That time is not today.

I’m a big fan of letting each person choose how they spend their money and not shaming others into giving it away.  I know at least one other major FIRE blogger feels the same way but I’ll never tell who!

A quick note on discretionary expenses: over one third of our annual budget falls in the discretionary category.  And that’s a great situation to be in since we can very easily slash discretionary spending if we enter a prolonged period of poor stock market returns.  Cheap vacations or skipping them altogether combined with deferred toy purchases would lower our total annual expenses to roughly $30,000.

 

Living well on less than $40,000 per year

So that’s the story of our $40,000 per year budget and how it played out in practice over the past year.  Sometimes I’ll hear from high spending folks that there is no way anyone could live on $40,000 per year, and certainly not with three kids.

However if we gross up our $40,000 per year budget to account for things we don’t pay for, it’s easy to see how we’re living a $100,000 per year lifestyle only minor sacrifices:

  • +$20,000 mortgage payment
  • +$5,000 new car payments
  • +$10,000 extra tax bill
  • +$5,000 dumb financial moves (credit card interest, extended warranties, investment management fees)
  • +$10,000 rough annual value of travel hacking free hotel rooms and free flights
  • +$10,000 work related costs (lunches out; fancier wardrobe)

So if you’re like me and spend around $40,000 per year, realize that you might be living a luxurious six figure lifestyle without even knowing it!  And welcome to the club.

 

How to track spending like a pro

When I was working I kept track of spending but never budgeted. We always had a surplus of funds and spent like we wanted to.  I used a simple spreadsheet to keep track of our expenses.

Total 2016 Spending (courtesy of Personal Capital)

Total 2016 Spending (screen cap from Personal Capital)

 

Then a few years ago I switched to Personal Capital to track all of our expenses (full review).  Personal Capital also tracks all our income (including dividends and interest), and summarizes a couple dozen investment accounts into one screen.  It is completely free to use Personal Capital whether you have $10,000 or $1,000,000 or more.  If you don’t already track expenses, try Personal Capital, since it only takes 10 minutes to sign up and link all your accounts.

 

 

How was your 2016 spending?  Who’s going to win the biggest spender award?  And the tiniest spender award?  Impress me with your numbers!

 

 

Cruising the Caribbean aboard the MSC Divina

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What’s the best way to fight off winter’s chill?  Spend a week cruising the Caribbean of course!  Right before Christmas the Root of Good family did exactly that. I wanted to share a few pictures from our eight day, seven night cruise aboard the MSC Divina sailing out of Miami, Florida.

After two lazy days at sea, we reached the island of St. Maarten where we watched airplanes zip by just feet off the beach.  The next day we docked in San Juan, Puerto Rico where we explored the city and toured the Castillo San Cristobal fort.  Then we enjoyed another relaxing day at sea before we reached Nassau, Bahamas.  We didn’t get off the boat in Nassau since we seem to visit the island on every cruise we take.  Relaxing on the ship while everyone was on shore proved to be the perfect way to spend the last full day of our vacation.

Since this is a finance blog, I’m compelled to share the numbers for our trip.  We spent about $2,100 total on this cruise.

  • Cruise tickets for five: $1,600
  • Gas to/from Miami from Raleigh: $150
  • Hotel on the drive down: free with Marriott points (travel hacking)
  • Parking at South Miami Park and Ride lot: $40
  • Local bus in St. Maarten: $14 round trip
  • Mandatory gratuities for housekeeping/dining staff: $294

MSC offers a “kids sail free” promotion on many of their Caribbean cruises for kids up to age 10 or 11, and a steep discount for older kids up to age 17.  Their mandatory gratuities are also halved for kids ($6 per day compared to $12 for adults).  MSC served up an incredible experience along with great value for our family.

It’s also worth mentioning that we’ll get around 10% cash back from buying the cruise at Expedia after clicking through the Ebates online shopping portal. After factoring in the cash back, the final cost will be closer to $2,000.

 

The Beautiful MSC Divina

The MSC Divina is your typical monstrosity of an oceangoing cruise liner.  At almost 1,100 feet long and a displacement of 140,000 tons, it’s big. The crew of 1,388 works hard to make things happy for the more than 4,300 guests on board.  Built in 2012, it’s the newest cruise ship we have sailed on.

Our ship, the MSC Divina, sits to the right while docked in St. Maarten.

Our ship, the MSC Divina, sits to the right while docked in St. Maarten.

The kids' balcony room, sleeps four.

The kids’ balcony room.  Sleeps four.

The Atrium connects all the interior common areas of the ship.

The multi-story Atrium connects all the interior common areas of the ship.

Main pool deck

Main outdoor pool deck

Indoor pools if you like a bit of shade

Indoor pools if you like a bit of shade

Formal dining room. Fancy eating!

Formal dining room. Fancy eating!

Enjoying the view!

Enjoying the view!

 

Entertainment options – How to never get bored

Every night we saw a wonderful show in the theater. Mostly singing, dancing, and acrobatics.

Almost every night we saw a wonderful show in the theater. Mostly singing, dancing, and acrobatics.

The hula hoop guy performing in mid-air while dangling from a rope strapped to his head. Seems safe.

The hula hoop guy performing in mid-air while dangling from a rope strapped to his head. Seems safe.

The guys on stage enjoyed throwing this lady 20 feet into the air.

During the “Pirates” show, the guys on stage enjoyed throwing this wench 20 feet into the air (look for the upside down lady hovering above the skull if you missed her at first glance).

The Italian opera night reminded me that opera isn't my thing.

The Italian opera night reminded me that opera isn’t my thing.  They were pretty good though.  It’s also the first time I have seen a cruise ship performance troupe with a pair of dedicated opera singers.

Other musical options: piano music in the Atrium (occasionally accompanied by a violinist)

Other musical options: piano music in the Atrium (occasionally accompanied by a violinist)

Or you could listen to Greg jamming out classic hits

Or you could listen to Greg jamming out classic hits.

Or check out the Black and White lounge for more live music and dancing

Or check out the Black and White lounge for more live music and dancing.  Not shown are several other live music venues on board.  My only complaint is they mostly performed in the evenings.

Or you could order up most major newspapers in a variety of languages.

Or you could order up most major newspapers in a variety of languages.  This selection caters to the wide range of international guests on board.  I never did figure out how they delivered newspapers while we were in the middle of the ocean.

Not a bad view sitting on deck watching the ocean

Not a bad view sitting on deck watching the ocean

For the kids, there's constant fun in the kids' club. Ours didn't participate as much since they are getting older (and the little guy wanted to do everything his sisters did!).

For the kids, there’s constant fun in the kids’ club (and it’s free!). Our children didn’t participate much since they are getting older (and the little guy wanted to do everything his sisters did!).

 

Time to eat!

Overall, the food on the MSC Divina was great.  Possibly the best we have enjoyed at sea.  Compared to the past few Carnival cruises, the buffet restaurant was amazing.  The formal dining room wasn’t as impressive this time around.  Since most of the formal dining room’s appetizer and entree choices appeared in the buffet restaurant, we tended to dine in the self-serve buffet restaurant for most meals during this cruise.

Many of the dishes reflected MSC's Italian heritage.

Many of the dishes reflected MSC Cruises’s Italian heritage.  And then there was the seafood fried rice.

For display only, but technically food. The Caribbean's warm, balmy weather made us forget it was almost Christmas.

For display only, but technically food. The Caribbean’s warm, balmy weather made us forget it was almost Christmas.

Fancy some caviar?

Fancy some caviar?

It pairs well with the free champagne at the "Welcome Back" cocktail party.

It pairs well with the free champagne at the “Welcome Back” cocktail party.

Pool-side ice cream for dessert.

Pool-side soft serve ice cream for dessert.

 

Port of Call: St. Maarten

This was our second time visiting the island of St. Maarten.  We hopped off the ship and walked about a mile into the center of town where we picked up a local “bus” (minivan).  Then we made our way to the nearby Maho Beach.  The beach itself is pretty but not great for swimming.  The airplanes landing a few feet away made up for it.

The St. Maarten city "bus"

The St. Maarten city “bus”

The "not great" Maho Beach

The “not great” Maho Beach

maho-beach-plane

The airport runway is immediately adjacent to the beach. Most inbound planes were smaller than this Delta jet.

View from the bus

Mountain view from the bus

Just another day in paradise!

Just another day in paradise.

All the customers' yachts

Nice boats!

 

Port of Call: San Juan, Puerto Rico

The last time I visited San Juan twelve years ago I didn’t have time to visit the massive fort watching over the harbor entrance.  During San Juan round #2 I finally got to tour the fort!

Castillo San Cristobal fort. Since Puerto Rico is a territory of the United States, the US National Park Service maintains the fort.

Castillo San Cristobal fort. Since Puerto Rico is a territory of the United States, the US National Park Service maintains the fort. My mom was on the cruise with us and she bought the $10 lifetime admission Senior Pass for all US Parks which admits her and three other guests.  Score!  The rest of us avoided the $5 park admission.

Our view from the cruise dock.

The fort from the cruise dock.

Man the cannons!

I bet the soldiers loved defending the island while enjoying that view!

The view from the fort's bathroom.

The view from the fort’s bathroom.

This cruise ship was slightly cheaper but we opted for the more luxurious and modern ocean liner for this cruise.

This cruise ship was slightly cheaper but we opted for the more luxurious and modern ocean liner for this cruise.

A friendly San Juan caterpillar.

A friendly San Juan caterpillar.

The streets of Old San Juan.

The streets of Old San Juan.

 

Port of Call: Nassau, Bahamas

Our cruise stopped in Nassau on the last full day.  Being lazy, we decided to enjoy a day on board the ship (which is basically a floating luxury resort) instead of muscling our way through the throngs of tourists and touts in the port terminal.  We have probably visited and explored Nassau a half dozen times in the past, so we’ve seen most of the noteworthy destinations on the island.

Our home for the day

Our home for the day next to the world’s second largest cruise ship, the Oasis of the Seas.

Junkanoo beach, minutes away from the cruise terminal (taken during a previous visit)

Junkanoo beach, minutes away from the cruise terminal (taken during a previous cruise in January 2016)

The mighty vessels of the Bahamian Navy

The mighty vessels of the Bahamian Navy

The sun setting on our neighbor

The sun setting on our neighbor

City lights of Nassau as we sailed out of port

City lights of Nassau as we sailed out of port

 

Miami and the drive to Raleigh

The sobering reality of dawn: we're back in Miami and it's time to get off the ship.

The sobering reality of dawn: we’re back in Miami and it’s time to get off the ship.

The Raleigh-Miami drive is about 800 miles. At least we enjoyed distractions like this!

The Raleigh-Miami drive is about 800 miles each way along I-95.  At least we enjoyed nice distractions like this sunset.  Our minivan once again proved its worth as a great “road trip” vehicle after rocking it on this summer’s Great American Canadian Road Trip.

 

Land ‘Ho!

We had a great time as a family and really enjoyed the MSC Divina and the warm weather. Cruises are our time to relax and enjoy some modest luxuries.  That’s why we saved all this money, right?

Although $2,100 is more than we typically spend for a week of vacation, it would be hard to beat that price for the five of us at a land-based all-inclusive resort.

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!

 

 

Ever been on a cruise?  How did it compare to a land-based resort or other kind of vacation?  

 

 

The Role of Luck in Early Retirement

luck-girl-cards1

We’re celebrating Thanksgiving here in America in a few days, and that means two things: eating massive quantities of turkey and reflecting on all the beautifully awesome parts of life!  Last year I mentioned how thankful I was for cool affordable tech gadgets, the ease of growing wealth, and lastly, economic and political stability.

I’m still a big fan of all of those! But in this post, I want to express my gratitude for all the good luck experienced throughout my life.

First up, I’m glad I was born in the United States of America.  It’s one of the richest countries in the world as measured by per capita gross domestic product, consistently ranking in the top 10 or 15 countries of the world.  In the good ole US of A, we speak English which is the lingua franca of business and culture worldwide.  Speaking English as a first language boosts one’s career prospects and allows conversation with around a quarter of the world’s population.  That also translates to a huge marketplace if you’re in the idea biz (such as writing a blog).

Even the poorest Americans are almost guaranteed:

  • clean drinking water (the embarrassment of Flint notwithstanding)
  • some modicum of a safe environment (disregarding the worst pockets of gang warfare in some inner cities)
  • twelve or more years of free public education (we can quibble over the quality in some places)
  • and a basic social safety net (Social Security old age pension, survivors and disability benefits, Earned Income Tax Credit, Affordable Care Act/Medicaid at least through 2017 or 2018, TANF, Food Stamps/WIC, Unemployment Insurance, just to name a few)

This isn’t to say the US is without problems but I’ll posit that it’s still the land of opportunity for the vast majority of Americans.

 

My Lucky Start

In my case, I discerningly selected a good set of parents to be born to.  When I was born, my parents lived in a house trailer in rural Appalachia but several years and one valuable college degree later, we upgraded our standard of living and joined the ranks of the comfortable middle class (loosely defined as a house, a car, and plenty of food).

Coming from a somewhat humble background exposed me to others working hard at blue collar jobs.  It made me realize 40 hours per week in an air conditioned office wasn’t such a bad life after all.  At varying times in my childhood I enjoyed the pleasure of hanging out at my grandfather’s auto shop, collecting eggs in the chicken house with my other grandfather (he even let me drive the shit truck after we scraped the manure pits!).  Growing up with rural, working class roots has its advantages.  Not many other kids can say they helped dig up and move an outhouse while growing up (those things are HEAVY).

The one downside was having to learn to speak “city” once we moved to Raleigh.  You may know this “city” dialect as plain old, regular American English that doesn’t require subtitles in the way that Appalachian English does.

Being born a white male certainly helped me statistically since racism and sexism generally weren’t issues, and us white dudes tend to earn some of the highest salaries, playing second fiddle only to Asians.  But there’s at least one confounding variable at work – family wealth.  Those with family money do much better on average compared to those born in more austere circumstances.  The cultural inheritance of social networks and connections plus access to better educational opportunities give the children of the wealthy a big step up (regardless of race, I might add).

I’ll offer as an example my own experience in deciding on a college to attend.  Although I grew up a dozen miles away from Duke University, I had no clue it was a top ranked university and that I might want to consider dangling my near-perfect SAT scores in front of the admissions staff to see if any financial aid might be forthcoming.  My lackluster high school GPA (yeah, I was a slacker, but a smart slacker) probably would have precluded any meaningful merit based scholarships, but I didn’t even think about attending an elite university instead of a “good enough” state university regardless of financial considerations.  It just didn’t cross my mind to apply.  Things still turned out okay (guess I got lucky).

Though I didn’t grow up rich, I did observe first hand how to manage money responsibly.  We never had any houses foreclosed on nor cars repossessed.  We never suffered eviction for non-payment of rent.  No one blew all the grocery money on drugs or alcohol, nor did they fail to pay the utility bill due to an unlucky night at the poker table.  When I started college I knew it would be paid for somehow (and I was fortunate to actually make money during college).

Education was important.  Good grades meant good things.

My father was into computers back in the early 1980’s back when they were cumbersome and expensive.  I grew up in a household awash in the monochromatic green glow of those early computers (this was WAY before internet, kiddos).  This translated to familiarity and success using computers during high school, college, and in my career.  It also led to a lifelong love of computer and video games!

I noticed my parents invested routinely while growing up.  They contributed to 401k’s.  My dad watched the Nightly Business Report on PBS.  Though I didn’t fully grasp exactly what a stock or mutual fund was, I understood they were valuable and usually grew in value over time.  And wealthy people liked to buy them.  Sounds like something I might like to own, too.

In our household, frugality got the job done.  Don’t waste stuff.  Fix it instead of tossing and buying new.  You can’t always have the nicest stuff, and “good enough” is usually okay.  In a perverse way, modest living growing up benefited me as an adult.  Since I never experienced an upper middle class or upper class lifestyle, I never had inflated expectations of what I “deserved” when I graduated college.  “You can have it when you earn it” was the way things had always worked in my experience.

Contrast that with the expectations of some college graduates who expect to make a fat salary with cushy benefits right out of school just because they stumbled through four years of higher education and miraculously picked up a bachelor’s degree somehow.

All of these cultural inheritances proved to be a lucky acquisition on my part.

Another stroke of luck is being born able bodied.  My arms, legs, heart, and brain all work (on most days).  I’ve never experienced hospitalization or suffered from mental health issues (other than undiagnosed kid-induced temporary insanity).  I was able to go to school while young, get a good job right out of school, save, and invest to achieve financial independence and early retirement.

We were even more lucky that all three of our children were born perfectly able-bodied so that our child-related expenses have remained modest so far.

 

Separating Luck From Effort

It’s easy to start on third base and think you hit a triple (to borrow a baseball analogy).  Then when you score that home run, you take credit for your success without acknowledging how fortunate you were to start on third, or recognize the fact that you’re playing on a team that is also responsible for part of your success.  Your effort is still required because you still have to make the run from third to home plate, possibly making a hard slide home.

For those that don’t start on base and have to, you know, actually pick up a bat and hit the ball, there’s some help available.  Enter the social safety nets for food, housing, medical care, disability, and social security I mentioned earlier.  Not everyone can start on third base, but at least most of us get bats and balls and a flat field to take a shot at getting on base.  Some do well, others founder.  Those that start on base tend to get a lot farther in the game.

Mrs. Root of Good didn’t have the sagacity and good fortune to be born in the US.  In contrast, her family barely escaped from the genocidal dictatorship in one of the world’s least developed nations at the time, Cambodia.  After spending the first six years of her life in refugee camps in Asia, she arrived in the US with not much more than the shirt on her back and the flip flops on her feet.  Once settled in America, her family was able to take advantage of all the social goodies on offer to vastly improve their lot in life.

Instead of farming rice in Cambodia or hustling her way into a good “high paying” sweatshop job, here in the US she finished high school, then college, then graduate school and landed a reasonably high paying job that made us millionaires after ten years of working.  We had to do the heavy lifting of saving and investing, but on a scale unimaginable for the daughter of your average Cambodian laborer and rice farmer.

Mrs. Root of Good’s greatest stroke of luck manifested itself in a one way plane ticket to a developed nation with plenty of opportunity coupled with proper immigration status to make her official in the system.  There was a lot of luck involved in landing in Raleigh where the cost of living is relatively low, the economy is strong, and even the worst elementary, middle, and high schools are still pretty good.

Then came the hard part.  Catching up with her classmates by learning English.  Learning new social customs and traditions.  Making friends in a foreign land.  Knowing you didn’t have as much as many of your wealthier classmates, but succeeding in spite of that (because of that?).

Kristy, the blogger behind Millennial Revolution, shared a similar path when she immigrated from China to Canada as a kid.  She started with very little, made the most of her new life and created a lot of wealth and success which led to early retirement.

 

Keeping my Luck Making Machine in Perspective

In a piece I wrote several years ago, I poked fun at our Luck Making Machine that got us to where we are today.  The idea is that we have some magical device that catapulted us to the top of the socioeconomic ladder.  In reality, our relative success of retiring in our 30’s came from a combination of lucky starts in life, smart choices along the way, and persistent effort throughout.

I’m very thankful for all the luck I’ve had in the past and hope to keep that Luck Making Machine running for several more decades.

 

 

How much of your success today came from luck, and how much came from skill, hard work, and effort?  Does your starting point in life determine how you view luck and success?  

 

 

October 2016 Financial Update

two-cents-photo

Now that the trick or treating is over and October is gone, I’m ready to share the good and bad financial data from last month.  Our income, mostly derived from this blog, remained very strong at $8,365 while our expenses ended the month at $1,460 which left us with a large cash surplus.  If I make much more money, I’m afraid I might be “unretired”!

I can’t say I paid any attention to the stock market in October but apparently it declined.  In spite of income exceeding expenses by about $7,000, our net worth still dropped by $29,000 to $1,618,000.  Since this is significantly more money than we had a year or two ago, I continue to feel safe and secure at our current net worth levels.

Here’s the straight dope on our October financials:

 

Income

October investment income dropped to $31 after a much stouter September with $4,160.  That’s the nature of the beast since most of our funds pay at the end of each quarter which means March, June, September, and December always bring us high investment income while the other months are near zero.  We are still on pace for matching or exceeding the total of $28,527 in dividend income received in 2015.  Although I’m no dividend-focused investor, dividends still figure significantly into our annual cash flow by helping provide the funds we need for living expenses.

No October post would be valid without the obligatory pumpkin pic. Neighborhood event in the park.

No October post would be valid without the obligatory pumpkin pic. Neighborhood event in the park.

Blog income, shown as “other income” in the chart, ballooned to $7,253 while my early retirement lifestyle consulting also increased healthily to $1,076.  Blog income was higher than normal because I received both September and October payments from one advertiser during the month of October.  The consulting income remained very strong even though I raised rates last month.  As one client mentioned, it’s hard to find good, competent professionals that understand taxes and investments with a focus on very early retirement at any price point, and particularly at the relative pittance I’m charging (though I don’t claim to be a professional or anything more than “a guy that writes stuff on the internet and retired at 33”).

The $4 in Deposits includes the cash back rebates from the Ebates.com and Mrrebates.com online shopping portals. If you sign up through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did.  I try to do all of my online shopping through one of these portals and the cash back adds up fast. I recently booked an $857 cruise for next month through Expedia by clicking through Ebates to get to Expedia.  I’ll be getting $85.70 in cash back once we return home from the cruise in December.  Ebates is a nice way to get a 10% discount on every cruise from a booking site we already use.  I’ll also be using one of those shopping portals later in the month if I see any good deals on Black Friday / Cyber Monday.

On a slightly different note, our ten year old just landed her first job!  Someone asked us if one of our kids would be interested in making some cash as a tutor for their kid.  Now our little gal makes $10 per hour as a tutor.  She will be working one hour after school Monday through Thursday.  If this gig continues, she might make enough to fund a Roth IRA like Go Curry Cracker’s kid!  This also supports my notion that mom and dad won’t be on the hook for very much during the kids’ college years.

october-2016-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 look at October expenses:

october-2016-expenses

While some consider $1,460 to be a mind blowing monthly expense total for a family of five, I consider it just another routine month where we didn’t have any huge lumpy annual expenses (like property taxes or insurance).  We spent almost $2,000 less than our budget of $3,333 per month (or $40,000 per year).  For the second month in a row, travel spending topped the expense report (and I like it that way!).

Travel – $579:  In September it was cruises. In October it was plane tickets for the five of us to, from, and around Europe.  We booked tickets from Raleigh to Lisbon, Portugal for June, 2017 with the return from Amsterdam to Raleigh in August, 2017.  Even though we used United Airline miles to score “free” tickets, we still had to pay tax on the tickets which was almost $400 for the five of us.

For those in the points/miles game, we spent 60,000 miles per ticket, or 300,000 total to fly economy between Raleigh and Europe.  By booking so far ahead of time we scored some great flights that are only 10 hours to Europe and 13 hours back home including connection times.

With United’s new redemption rules, you get a free one way flight anywhere within the region you’re flying to (in this case, Europe).  We used the free flight for a short hop from Lisbon to Malaga, Spain.  We could have flown all the way across Europe to some distant corner (Estonia?) but instead chose to take a relatively short flight to coastal Spain since we wanted to visit that area and it’s cooler in June than it is later in the summer.  We’re slowly making our way north across the continent as the temperature rises throughout the summer.

All of those 300,000 United miles came from sign up bonuses for credit cards, so if you’re interested in free flights to Europe don’t forget to check out my credit card page.

We also jumped on a luke warm Ryanair deal from Seville, Spain to Milan, Italy for $194 total for the five of us.  There might be some extra checked bag fees later on if we can’t pack extremely light like we did for our 7 weeks in Mexico last summer.

All of our gear for seven weeks in Mexico.

All of our gear for seven weeks in Mexico.

So far, we spent $579 for our 9 week trip to Europe and managed to buy all the flights for our trip (20 one way tickets in all).  Hopefully this is prelude to a nice low cost, high value summer in Europe!

After visiting Portugal, Spain, and Italy, we will continue through Slovenia, Austria, Hungary, Czech Republic, and Germany before flying back home from Amsterdam.  It won’t be cheap even with my travel hacking skillz.  I’ll feel really proud if we can pull it off for less than $10,000, and content with a total under $15,000.  In rough terms, we’ll probably spend around $6,000-7,000 on lodging ($100/day), $3,500 ($50/day) on food, $2,000 ($30/day) on ground transportation between and within cities, and $1,000 on various admission fees, attractions, and entertainment.

Sound off in the comments if I’m being completely ridiculous about prices but keep in mind we have hotel points for free nights and will rely heavily on airbnb (click for $35 off your first rental), and will probably dine out once per day and buy groceries for the other meals.  Trains and buses are stupid cheap in most places (goeuro.com is amazing for cost comparisons) and often come with kids ride cheap or free promotions.

I’ll probably ramp up the hotel/airbnb reservations in the early spring and book those advance purchase train tickets that come with discounts for booking early as the reservation windows open up.  Anyone have experience booking airbnb apartments six or eight months before their stay?

I’ll publish a more in depth article on the trip at some point.

Groceries – $366: Another modest month buying groceries.  Some of the savings came from “shopping in our freezer and pantry” instead of buying stuff at the store.  Here’s a typical month of groceries for us.

We enjoy good food cooked from scratch.  Somehow we find these incredible deals on groceries including some high end, “fancy” ingredients.  At Kroger, we scored about $80 worth of imported Italian goodies like cheeses, pasta sauce, prosciutto, and olives at 75-95% off retail prices.

We also shop at the ethnic grocery stores in our neighborhood.  After walking to the kid’s school for morning drop off, we continued walking to the neighborhood Latino supermarket and picked up three pounds of poblano peppers (on clearance but still perfectly good), a bunch of cilantro, two and a half pounds of fresh tortillas, and two bottles of imported Guatemalan hot sauce for $6.  These goodies combined with some large hunks of meat led to incredible fajitas for under $1 per meal.  “Reminds me of those street tacos in Mexico” one of our kids remarked.  ¡Que rico!

Some of that prosciutto and mascarpone gracing the tops of some day old ciabatta bread. Mmm... discount good eats.

Some of that prosciutto and mascarpone gracing the tops of some day old ciabatta bread. Mmm… discount good eats.

Clothing – $134: Fall and winter clothes for the kids.  One pair of shoes.  A combo of Walmart and the thrift store.  The thrift store offered all girls/women’s apparel at 40% off.  How incredible is that?  A steep discount on top of already low prices.  As usual, the thrift store haul included some articles of clothing with price tags still attached.

Healthcare/Medical – $129: Health insurance premiums of $125 for our very impressive gold plated silver plan obtained through Healthcare.gov with some very sizable ACA subsidies. $4 for some random lab tests at the doctor.

For those looking for insurance in early retirement, on November 1st the Healthcare.gov marketplace started open enrollment for 2017.  You can price out plans based on your income and household size.  Even though North Carolina was one of those states that lost a few insurers, we picked up one new insurer (Cigna) bringing the total number of companies offering insurance in Raleigh to two, with Blue Cross Blue Shield being the other one.

The two cheapest silver plans look like reasonably good options for our family.  I’m debating between the $50 per month plan with $200 deductible, no kid dental coverage and limited network and the $125 per month plan with $800 deductible, kid dental, and nationwide network plus out of network coverage.  Those costs are after the very generous premium tax credit/subsidy and include large cost sharing subsidies since our MAGI is less than 150% of the federal poverty level.

Utilities – $103: Water, sewer, trash.  In a previous month I prepaid the electric bill by applying an extra $250 toward my account balance – more credit card travel hacking.

October is a cheap time of year for utilities since we don’t need to use the heat or the air conditioning.  Winter is coming (like the Game of Thrones reference?).  A few minutes before pressing “publish”, I had to turn on the heat.  It was 62 inside the house and the forecast for the week calls for brisk mornings in the 40’s and cool afternoons topping out in the upper 60’s.  I appreciate thriftiness, but don’t mind dropping a few bucks to keep it 68 degrees during the day and 63 at night.

Hurricane Matthew blew through in October. Culvert underneath our property almost topped out. That plus 4-5 more feet of water equals a flooded crawlspace.

Hurricane Matthew blew through in October. Culvert underneath our property almost topped out. That plus 4-5 more feet of water equals a flooded crawlspace.

On the bright side, the kids got to play in a hurricane!

On the bright side, the kids got to play in a hurricane!

Education – $66: Field trips for the year for the elementary school kid.

Free education: troubleshooting a freebie TV given to us by some family. Looks like a $4 fuse will fix it.

Free education: troubleshooting a freebie TV given to us by some family. Looks like a $4 fuse will fix it.

Restaurants – $38: Dinner at a pizza place for the whole family and a clandestine lunch at the Chinese restaurant for Mrs. Root of Good and I (we brought home some fortune cookies and mints for the kids).

Internet (“Cable”) – $34: 50/5 mbit service.

Entertainment – $4: One hour boat rental on the city lake.  Small price to pay for a beautiful morning paddling on the water.  My first bald eagle sighting was included at no additional charge.

Most of our entertainment is free.  Tennis or other sports/recreation at neighborhood parks.  Walking/hiking on the trails.  Hanging out with friends at the park or at our house.  Campfires in the back yard.  A seemingly endless string of birthday parties.  Visits to the art museum, science museum, and children’s museum.  After all that, it’s time to kick back and relax with some video games, Netflix (which actually costs us a tiny bit), and library books (like European travel guides).

Free visit to the children's museum. I'm strapped in with the little dude at the flight stick. HELP!!

Free visit to the children’s museum. I’m strapped in with the little dude at the flight stick. HELP!!

Special huge inflatable bunny week at the Art Museum. Free, of course.

Special huge inflatable bunny week at the Art Museum. Free, of course.

Boat rental - not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And bald eagles.

Boat rental – not free but worth every penny of the $4. Also cheaper and more fun than a gym membership. And bald eagles. And look at that grin.

Home Maintenance – $2: A gallon of gas for the lawn mower. Colder weather = no more mowing (soon).

Gas – $0: Nope, not for the car. But I did get a full tank in early November which you can read all about next month.

 

Year to Date Living Expenses

october-2016-ytd-expenses

That should read “through 10/31/2016”

At $30,780 year to date spending, we remain below our annual spending target of $33,333 budgeted for the first ten months of the year by a few thousand dollars.

Other than paying for gas, parking, and tips on our two cruises in December, we won’t have a lot of expenses out of the ordinary.  I’m planning on replacing the roof sometime in the next year but I don’t think I have time to get bids, research those bids, schedule an installation time, and deal with any unexpected delays before we leave for our first cruise in less than three weeks.  And there’s a huge Thanksgiving feast we’ll be throwing somewhere in that schedule.  Otherwise, I would go ahead and tackle this project in November.

The budget for the roof replacement is somewhere around $4,000 to $8,000.  I could probably fit it in the $40,000 annual budget this year, or underspend 2016’s budget by a bit, then go over slightly in 2017 if we do the roof replacement in the spring.

 

Monthly Expense Summary:

 

Net Worth: $1,618,000 (-$29,000)

After several good months we experienced a slight reversal of fortune in October as $29,000 disappeared from our net worth statement.  It’s to be expected.  The market goes up, it goes down.  October happened to be a down month.  So far November is following in October’s footsteps.

october-2016-net-worth

From last month’s financial update:

We’re still sitting on over $50,000 in cash in our credit union money market account right now.  I’ll be moving some of that cash around for year end tax planning, like a large solo 401k contribution, but I will also hang on to part of that cash in order to provide a buffer against severe market downturns.

My procrastination paid off since we’re sitting on even more cash right now and I still haven’t pulled the trigger on the IRA or solo 401k contributions and the market is lower now than it was a month ago.  I’m either the wisest or laziest investor ever.

This pretty much sums it up right here. Didn't cost a penny but worth a million bucks.

This pretty much sums it up right here. Didn’t cost a penny but worth a million bucks.

 

Looking for year end tips to get your finances in order? Check out these 11 tips to finish the year strong.

 

 

How was your October?  Any big year end financial moves?  Ready to end the year on a high note?

 

 

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My first person view of gentrification

gentrification-frogs-featured

Earlier this week I walked out the kitchen door and down the sidewalk destined for the neighborhood Food Lion grocery store.  It’s a quick five minute walk to the shopping center and proves uneventful on most trips.

This day was a little different for a number of reasons.  Half a block away from home, I bumped into a new neighbor.  We started chatting about the neighborhood, the fancy downtown magnet school both of our children attend, and his most recent acquisition: oboe reeds.  This guy had a different vibe than many other neighbors that moved here over the past several years.  He’s completely white and fluent in English for starters.  Solidly middle class.  After doing some cybersleuthing later in the day, I realized he paid about 50% more for his house than what his neighbors did a few years earlier.

We shake hands and part ways after exchanging contact info to stay in touch (we’re neighborly like that down here in the South). I proceed to the grocery store in no particular rush (I’m retired after all).  I enter the shopping center through the short cut by the dumpsters.  And lo and behold there’s a homeless looking gentleman laid out on the sidewalk in the sun chugging a half gallon jug of whole milk.  Not my first choice of mid-day beverage, but it was warm that day so I guess 64 fluid ounces of ice cold milk hit the spot, right?

Upon entering the store, the weird continued.  The first customer I encountered was a lady cruising around in the store’s mobility-aid cart.  She was yelling to her friend about WIC cheese.  If you know who Fat Albert is, then read the following in that voice.  Otherwise, read it in a very deep, throaty voice.

“Where da WIC cheese at? Hey, where da WIC cheese at?  Ain’t nobody got no WIC cheese up in here.  Where it at?”

“It ova heah” her friend suggests.

BEEP – BEEP – BEEP – BEEP – BEEP, she backs up the motorized cart.

“Where it at? Oh dat ain’t what I want.  What else dey got? Where da WIC cheese at?”

A few more moments perusing the shelves.

“Dey ain’t got no WIC chedduh?”

At that point, I had to leave or else I might have lost it.  Laughter, tears, anger; I wasn’t sure what emotion would come next.  Look, I just wanted some string cheese for my kids (and I’m not gonna lie, for me too, because that stuff is deceptively good).  It was on sale for a buck fifty for a 12 ounce package which is darn cheap for mozzarella, let alone mozzarella shaped and individually wrapped in portable one ounce snack sticks.  But I couldn’t get to it because of the circus going on in the dairy aisle.

Lest I appear overly classist here, I genuinely feel for people that have to jump through those hoops to get a free block of cheese, and I have to assume there’s a better way to administer a governmental program to get nutrition (“nutrition”??) to people that need it.  Our household has the option to apply for WIC, even though we clearly don’t need it.  But there is no way I’d waste time on that given the hassles involved (at least in our state).

I don’t know if the lady in the go-cart got her WIC qualified cheddar cheese, but I did see her later.  She was holding up the extremely long check out aisle, presumably with WIC related issues.  I smartly chose to head to a different check out aisle, since I knew it would take quite a while to unravel her shopping basket mysteries at the cash register.  Disaster averted.

In the meantime, I had the fortune to stand behind someone who appeared to be suffering from heroin or meth withdrawal.  Either that or she was a really bad erratic dancer, twitching and swaying about to some unmusic heard only in her own head.  At least it didn’t take long to ring up her hot dogs ($0.99), bologna ($0.99), white loaf bread ($0.78), Ho Ho’s ($0.89), bar-be-que sauce ($1.29), and sliced American cheese food product ($1.68).  I’ve never had BBQ sauce on bologna or hot dogs, but it does sound like an interesting combo.

Fun times in the grocery store.

You’d think it was time to move given how sketchy the neighborhood grocery store is.  But you would be wrong.  It’s time for the “good” people to move near me.  It’s time for GENTRIFICATION!

What's that? Oh, just a couple of Celtic fiddlers at our community Halloween festival that don't fit the typical mold.  Stereotypes are pretty worthless so many times.  This is what I like about our neighborhood.

What’s that? Oh, just a couple of Celtic fiddlers at our community Halloween festival that don’t fit the typical mold. Stereotypes are pretty worthless so many times. This is what I like about our neighborhood.

 

Very Humble Beginnings

Gentrification is already well underway in my neighborhood today.  But that’s a recent development from the past couple of years.

We moved in 13 years ago when things didn’t look so rosy.  It wasn’t the worst area of Raleigh by any stretch.  But it wasn’t the best either.  And there are plenty of sketchy communities scattered outside the perimeter of the neighborhood which don’t help our zip code’s demographics at all.

The neighborhood elementary school was in steady decline year after year, at one point becoming the worst school in the district based on poverty level of students at the school and test scores.  We sent our kids there anyway.  We took a gamble and it paid off (or perhaps our active involvement and promotion helped the school turn around?).  The county school system decided to reboot the school, fire 80% of the faculty and staff, and start from scratch while dumping tons of financial resources into the school.  Mission accomplished – there’s a waitlist now and plenty of applicants get turned away.

We encounter one of the enigmas of gentrification here.  One of chicken and egg proportions.  Did the vast improvement of the school (in spite of difficult socioeconomics still present today) fuel the gentrification, or at least remove one impediment to solid young middle class households relocating here?  Or did the improving socioeconomics of households moving to our neighborhood lead to a higher quality of student at the elementary school?

After moving into our house, we realized one neighbor was going to be a problem.  Three loud, angry pit bulls roamed his yard and stalked our fence line whenever we were in the backyard.  The owners rarely paid them any attention, so their only option was to bark.  And bark.  And bark.  Day and night.  Incessantly.

That was a relatively peaceful time before the drive by shooting.  To make a long story short, a 14 year old shot a 17 year old after their respective gangs were beefing at school.  One of the gangs just so happened to attend a birthday party thrown by the family next door.  The other gang decided it was time to retaliate.  We got to see people running and jumping through our yard as the bullets flew and a huge puddle of blood in the street once the ambulance hauled the injured boy away.

Fortunately things have a way of working themselves out.  The lady of the house apparently left.  The man of the house remained, but appeared not to be working much (and I don’t think he was early retired, if you know what I’m saying).  Not long after the shooting, the Rent-A-Center trucks showed up to repossess all their weekly rental items (TVs, stereos, computers, who knows?).  Then the mortgage company foreclosed on the property and these bad neighbors became someone else’s bad neighbors.  The guy that bought the house (and repaired all the damage and neglect) still lives next door and has two very quiet tiny indoor dogs.  All quiet on the eastern front.

edit: I wanted to point out that 4,697 of the roughly 4,700 days that we have lived in this neighborhood have been rather boring and uneventful from a crime standpoint.  And we have never been the victims of any kind of crime while we’ve lived here.  We live on a lake, there’s tons of wildlife, and we frequently walk to the park, school, and library and don’t worry about crime given its inherently random nature.  Life has treated us pretty well here, but there have been a couple of bumpy moments.  

 

The wealthy are coming! The wealthy are coming!

The latest crop of new residents in our neighborhood all seem to be youngish, hip looking folks holding down solid middle or upper middle class jobs.  That’s who used to live here a couple of decades ago.  Former owners of my house include a local politician/lawyer/lobbyist and a successful small business owner.

However, over the last couple of decades the property prices lagged and this opened the doors to the great unwashed masses who couldn’t afford the pricier new homes going up elsewhere in town (or didn’t want to add an extra 20-30 minutes to their commute!).

Good or bad, I don’t know.  It brought a lot of diversity to the neighborhood and most of the residents are totally awesome.  But it also let in people like my former next door neighbor, Mr. Drive By Gang Shooting.  Those kind of people seem to take care of themselves, and now there’s a whole new crop of buyers looking to escape the ridiculously priced, sometimes crappy accommodations in the really exclusive part of town and move a couple miles north or east to scoop up large yards, old trees and extra square footage at a fraction of the price.

Thanks to their money, our neighborhood real estate market is on fire.  It’s common to see sales at asking price within a day of listing assuming the price isn’t crazy.

From Zillow:

raleigh-housing-appreciation-2016

Jan 2015 Oct 2016 % Change
Root of Good House $163,000 $185,000 13.5%
Northeast Raleigh $149,000 $166,000 11.4%
Raleigh $190,000 $210,000 10.5%

In numerical terms, our house, and our neighborhood overall has slightly outperformed the rest of the zip code and Raleigh as a whole by a few percent.  I don’t think this fully reflects the limited supply and speed of sales in our neighborhood, but maybe it’s a larger phenomenon than I think.

A few years ago there were plenty of fixer uppers in the $100,000 price range with renovated houses selling for $150,000.  In what seems like an overnight shift, it’s hard to find any houses asking less than $150,000 while most houses are asking in the $180,000 to $220,000 range (and selling at those levels quickly).

Anyone want to drop $220,000 on my buddy's 2,400 square foot 5 bedroom, 2.5 bath with two car detached garage?

Anyone want to drop $220,000 on my buddy’s 2,400 square foot 5 bedroom, 2.5 bath with two car detached garage?

These kind of upward price movements probably don’t seem like a big deal to folks in high priced and fast appreciating cities like New York or San Francisco/Silicon Valley.  But for a place like Raleigh where house prices barely kept up with inflation for the past decade or two, this is a big deal.

I’m obviously the worst real estate investor ever for not buying up all the $100,000-120,000 houses I could get my hands on, renting them for several years at a nicely positive cash flow, then flipping them for $200,000 a few years later.  Maybe next real estate cycle I’ll have more time on my hands and a clearer crystal ball.

What I don’t know is how long this trend will continue.  I’m still carrying my house at a value of $140,000 in Personal Capital because I’m not sure it’s actually worth the $185,000 projected by Zillow  – they don’t know we have a partially “vintage” 1972 kitchen – and I would only get around 94% of the sales price if I sold through a realtor.  Eventually I’ll bump up the carrying value if these higher prices stick around.  I have no plans to sell even if the value went up another $50,000, so for now it’s just a somewhat arbitrary number on a screen.  And in terms of our $1.6 million-ish net worth, what’s an extra $50,000 in an illiquid asset that I can’t live in if I sell it?  Though at some point we would be foolish not to evaluate a scenario where we sell our house and move somewhere less expensive in this city or elsewhere in the nation or world.  Since we aren’t hurting for money, the payoff would have to be rather great to make it a worthwhile move (<– see what I did there?).

Thanks to this gentrification, I’ve grown a little wealthier (even if I haven’t fully recognized it on my balance sheet).  Our streets might get a little safer.  And our neighborhood will have just a bit more clout in City Council when it comes to doling out government funny money for pet projects (like that multimillion dollar park upgrade coming our way).

Some complain about higher property taxes after their area undergoes gentrification, but that won’t be an issue for us for at least seven more years since the county reassesses all home values every eight years and 2016 was the most recent reassessment (our home value inexplicably went down by seven thousand dollars).  Since our property taxes are already low at $1,500 per year for a fairly average house in the neighborhood, a doubling of property taxes wouldn’t be a huge hardship for most.

As the gentrification proceeds, I expect it will be a virtuous feedback loop of increasing values making home renovations and improvements more sensible investments, which makes the neighborhood look nicer, leading to more price appreciation.

If things keep improving, eventually we’ll have the tear down phenomenon seen elsewhere in Raleigh.  Someone might purchase my house for $200,000 or $250,000 with the intent to bulldoze the house and building a McMansion from the ground up.  In essence, they are paying a large sum of money for the land underneath my house.  Some folks REALLY hate this phenomenon because “it destroys the aesthetic quality of the neighborhood”.  In our case, it’s predominantly 1960’s and 1970’s split levels and ranches, so I’ll be interested to hear the objections I am sure many neighbors will lodge against tear downs with rebuilds.

In the meantime, the new folks moving in are classing up the block with their chicken coops.  Why go to Whole Foods for your free range eggs when you can raise them yourself in your backyard?  I’ve already spotted several Subarus sprouting up in driveways.  Next I expect they will request bike lanes painted on our neighborhood streets.

A little charcuterie setting so we'll fit in. Don't worry, all the Spanish chorizo, pine nut hummus, ciabatta bread, marinated artichokes, olives, and imported piave cheese were purchased from the clearance section. The olive oil sadly was not.

A little charcuterie setting so we’ll fit in. Don’t worry, the Spanish chorizo, pine nut hummus, ciabatta bread, marinated artichokes, olives, and imported piave cheese were purchased from the clearance section. The olive oil sadly was not.  Just need a snotty microbrew to complete the experience.

 

The downside of gentrification

All this new money flowing into the neighborhood isn’t all positive.  Over time, lower income residents will move on to other neighborhoods and be replaced by more homogeneous middle and upper middle income residents.  No longer will the smell of the tamales and garlic rich dishes wafting out of the open kitchen windows tickle my nose as I stroll down the block.  Kale smoothies don’t really have much of an odor.  Hearing only one language at the neighborhood park will leave me wondering “where did all my former neighbors go?”.

I used to recommend my neighborhood to everyone that would listen.  Cheap, large houses on large lots just a few miles from the city center in an up and coming neighborhood.  As the prices keep rising, I’m afraid I can’t make such a strong recommendation any longer.  If this trend continues, it will be hard for friends relocating to this city to move to my neighborhood.  In another ten or fifteen years when my kids are in the market for their first house, they might have to look elsewhere instead of buying in this area like we did for our first permanent house.

This past weekend we met up with some friends at the neighborhood park to play some tennis (a notably middle class or wealthy sport).  We are usually the only ones using the two courts.  Very rarely will another party use the second court.  This time, we had to squeeze our whole party onto one court to make room for another pair.  Then another family approached to play.  And another.  Gentrification means crowded tennis courts for us.  Now I know how the folks competing for the basketball courts and the fútbol fields feel since that’s what is usually jam packed on nights and weekends.

We are contributing to the tennis court overcrowding problem.

We are contributing to the tennis court overcrowding problem.

Perhaps the worst part of gentrification, should it continue, will be the loss of all the ethnic grocery stores and restaurants.  What will life be like without the panaderías, tortillerías, Latino, Asian and African groceries, and restaurants from all over the world?  Who would want to give all that up for organic coffee bars, hot yoga studios, a skinny jeans shop, a cronut shop, and a boutique oil dispensary?  Maybe some of those ethnic places will survive the cultural shift and stick around.  I wouldn’t mind most of the tattoo parlors, hair salons, nail salons, and pawn shops disappearing though.  And please don’t convert my Walmart to a Target.

Or maybe this whole home price increase is a flash in the pan and gentrification won’t actually stick to my neighborhood.

 

Lessons Learned

Gentrification can take a looooong time.  Get ready to be patient and make sure you can live in a less than perfect setting long term.

Embrace the good and the bad of your situation and make the most of it because it might be a while before it changes.  Enjoy the cultural differences to the extent possible.  People that are different from you rarely bite, and those that do often get the boot as Mr. Drive By Gang Shooting did.  Instead of flying half way around the world to experience a different culture, you might encounter it next door instead.  From that point of view, moving into an “up and coming” neighborhood can be a great experience if you’re open to it.

Don’t count on gentrification to make you rich.  The timing of gentrification is uncertain, and it may not happen at all.  Investments in your property might not pay off if gentrification never comes to pass.

Overall, I have mixed feelings about gentrification.  I don’t mind sharing my neighborhood with the poor (even the homeless), minorities, those of a lower social class, recent immigrants that might not speak English (yet), those of low educational attainment, or other societal outcasts that didn’t quite make it all the way out to the suburbs.  Mrs. Root of Good and I both have some of those groupings in our recent family history.  Those people are probably more fun than a lot of upper middle class people anyway.  We count many of them as friends.  Many times these people value education, wealth, success, and achievement as much as the upper classes, but come from disadvantaged backgrounds and never had the resources or motivation to climb the socioeconomic ladder.

On the other hand, with gentrification comes changing social expectations and peer groups.  I think we fit in better with the low to moderate income households in terms of visible spending, and feel more peer pressure to keep up with the Joneses when mingling with the comfortably middle class or upper class like those that seem to be moving in to our neighborhood.  I doubt we’ll actually spend more money as a result, but it’s a tricky spot to be in.  For example, do we prevent our kids from participating in expensive activities that all the other kids are into just because the activity is a horrible value (but one we could easily afford?).  Do we still bring $3-5 bottles of wine to neighborhood parties when everyone else brings $20 bottles?  Will neighbors still attend our house parties if we’re the last house on the block sporting an original 1972 kitchen?  It’s probably much ado about nothing, as most of these newly minted neighbors appear to be of the live and let live variety, but one never knows what it’ll be like in another five or ten years.

We’re very fortunate to have the luxury of wealth such that we don’t really care if our house price drops by $50,000 or goes up by $50,000 because it won’t materially impact our daily lives and spending decisions.  We lose more than that in a day sometimes so it’s no biggie.  Instead, we enjoy living in a convenient location that’s close to things we value like a variety of budget shopping and dining choices, parks, schools, libraries, and entertainment options.  When we bought our house, the low price combined with these other features made it the right choice for us.  We liked the neighborhood well enough, warts and all.  Over time it looks like it’s improving from a price appreciation standpoint, and with that comes a change in demographics and socioeconomics.

 

 

Have you ever experienced gentrification first hand?  Are you trying to find the next “up and coming” neighborhood before it gets discovered?  How do you do that?

 

 

How to Pay for College while Early Retired

yale-university-doorway

One of the top questions I’m asked when people see “retired at 33 with 3 kids” is “yeah, but what about college?”.  The truth is I never really gave it a lot of thought because the total cost is well into the future (though closing in fast for our oldest kid) and not huge relative to our total net worth.  I had a very vague goal of being able to cover the tuition and fees for four years of in-state tuition for all three kids.

We funneled some cash into 529 accounts when North Carolina offered a tax credit for doing so.  We earned a $350 tax credit for contributing $5,000 per year to the 529.  When that tax credit was eliminated, I stopped contributing to the 529s and stopped thinking about college funding.  Paying tens of thousands of dollars for college is no biggie when you have a million or two, right?

It turns out my lazy attitude toward college funding won’t spell disaster for my children’s higher education future.  Between what we have saved in 529s, our large investment portfolio, and a plethora of other funding sources, the kids will be perfectly fine when the college tuition bills start piling up.  You’ll have to read on to find out why I’m so confident (or is it cocky?).

 

How much does college really cost?

“It works out to just pennies per inspiring moment” reports the University of North Carolina at Chapel Hill’s Cost of Attendance page.  While technically true (it’s about six cents per minute assuming all the minutes are “inspiring”), a better way to look at the cost is dollars per year.  For the 2016-2017 school year, the cost of attendance at UNC is just under $25,000.

Univ. of NC Tuition & Fees $8,834
Room $6,292
Board $4,926
Books & Supplies $1,442
Travel $810
Health Insurance $1,088
Loan Fees $58
Personal $1,448
Total $24,898

Here in Raleigh at North Carolina State University, the total Cost of Attendance is closer to $23,000.  NCSU doesn’t include health insurance (something we would likely provide at near zero cost after subsidy through the Affordable Care Act) which explains $1,000 of the difference in cost (the other $1,000 being meals; Raleigh is cheaper than Chapel Hill I guess).

UNC Chapel Hill and NC State University are two great local options for school where the sticker price is under $100,000 for four years.  We pay for these institutions through our tax dollars and we’re hoping to get a nice return on our tax dollars when our kids attend one of these two flagship research universities (Mrs. RoG and I are alumni of one or both schools.  Go Heels/Pack!).

Breaking down the approximately $24,000 cost of attendance further, we see the actual academics cost around $10,000 between tuition, fees, and books.  The remaining $14,000 covers personal expenses like rent, food, transportation, and beer.  For those living on campus, that’s probably a good number to use since the dorms and meal plans cost what they cost and that’s the bulk of the living expenses.  Off campus living costs vary greatly based on whether you own a car, whether you split a house or apartment, and whether your college crash pad is luxury, slummy, or somewhere in between.

For those students living at home, the cost of college is the $10,000 cost of tuition, fees, and books plus whatever the parents have been spending for the past 18 years.

I don’t know whether my kids will live at home, attend NC State University and commute the 12-15 minutes to school by car or live on/off campus at whatever state school they attend.  With either choice, the total cost for college will be between $10,000 per year plus whatever we already spend on them as part of our $40,000 early retirement budget and $24,000 per year.  

A quick note on college cost inflation.  Yes, tuition increases at a faster rate than overall CPI inflation.  But tuition is less than half of the total cost of attendance at the two schools I’ve mentioned.  The room and board, while subject to inflation, isn’t increasing at such a rapid rate.  For example, when I started college in 1998, tuition at NCSU was $2,364 while it’s $8,880 in 2016.  That’s an average annual 7.6% increase.  Holy smokes!  All other costs of attendance totaled $6,672 in 1998 while it’s $14,159 today, a more modest 4.3% average annual increase.  The total cost of attendance increased 5.3% overall during the past 18 years.  CPI inflation averaged 2.2% during that period of time.  Tuition outpaced inflation by 5.4% per year whereas room and board outpaced inflation by only 2.1% per year, with the overall cost of attendance outpacing inflation by 3.1% per year.

Keep that in mind when you see the headlines that read “college tuition increases at 8% per year on average for the past X years”.  Room and board aren’t going up at nearly the same rate, and if you live and eat off campus, your room and board will probably track CPI very closely (because you’re paying the same prices baked into the CPI that all of us are paying outside the university).  It’s also worth noting that the quality of room and board has increased greatly in the 18 years since I started full time higher education.  We didn’t have tikka masala or sushi in the dining hall for example, and many of the dorms didn’t even have air conditioning back in 1998!  You pay more, you get more.  Or you can eat 6/$1 ramen noodles off campus like all the broke college students did in 1998 (back when it was 8/$1).

Life often throws curve balls, so it’s quite possible our kids will attend some other in state public university (which all cost less than NCSU and UNC), a private U, or an out of state school.  It really depends on what will work best for the kids, and what kind of financial aid a particular university offers.  We are still seven years out from the oldest kid starting college, so for planning purposes I’m focusing on the costs for the two best in-state universities that routinely rank well for great values in public universities.

 

Nobody pays sticker price for college

Like the MSRP on a new car, the college sticker price is the starting point for negotiations.  If you’re early retired and don’t have a high Adjusted Gross Income or huge assets in taxable brokerage accounts, you’re in luck.  You’ll probably get a nice financial aid award.

The University of North Carolina offers a Net Price Calculator to estimate what kind of financial aid package you’ll receive.

After roughly estimating our numbers and filling out the calculator, the results say we’ll get $4,250 in grant money when one kid is in college.  One year later when our second kid enters college we’ll get $10,250 PER KID.  That’s almost half of the total cost of attendance right there, before we even start talking about other sources of financial assistance offered such as work study or student loans.

Is this an equitable result?  Probably not.  But that is how the system works.  We look poor on paper because they don’t ask about retirement account values and that is where 75% of our net worth resides.  Therefore we get a lot of free money for college.  And this is with us making zero effort to game our assets and income to maximize free grant money!

If those grants work out, we’ll be paying a maximum of $14,000 per kid half the time and $20,000 per kid the other half of the time.

 

What do we have saved for college?

We invested in 529 accounts for several years to snag some state income tax credits.  The older two kids have $18,000 each in 529s while the youngest kid has $7,000 in his 529.

The older two kids have UTMA accounts at Vanguard with about $2,500 per account.  This is their money but could be used for college, or something like a new (used) car to commute to college if living at home.

The remainder of college expenses will come from our main investment portfolio.  As of mid-September 2016 we have about $1.45 million in the investment portfolio (including the 529 accounts) and another $50,000 cash in a money market account.  I’ve mentally set aside $200,000 (including the 529 account values) to cover college, car purchases, higher teenage expenses, and some adult gifts like house down payments and weddings.

That will leave about $1,250,000 to fund the remainder of our early retirement expenses (which, if we spend $40,000 per year according to our budget, will equate to a 3.2% withdrawal rate).  If our portfolio does well, we will feel more free to spend the $200,000 and then some.  If things don’t go well, we might not part with all of that $200,000 if we need it to cover core living expenses. In a way we’re taking a wait and see approach to deciding exactly how much we’ll pay for college.

Money is fungible and we can move it around all we want.  We’ll likely spend enough on college expenses to deplete the $43,000 in the 529 accounts, so I’m not concerned about paying a 10% penalty to withdraw any balance remaining after they finish college.  But I don’t want to save a significantly higher sum in the 529s because I expect they will obtain college funding from numerous other sources (to be discussed later in this article).

 

Will the kids help with college expenses?

Yes. And we have talked with them about this starting around age 9 or 10.  Exactly how much they will have to pay is uncertain, although we plan on paying (at a minimum) the tuition and fees (and maybe a lump sum for books) which will total around $40,000 per kid.  That leaves them responsible for room, board, transportation and miscellaneous personal expenses, though some of that would be covered by us if they drive one of our cars and/or live with us.

There’s a strong incentive to save when it’s your money you’re spending and not someone else’s.  There is plenty of moderately priced off campus college housing around NCSU.  With roommates, monthly rent is $250-400 per month plus a share of utilities ($50-75/month per person).  A private bedroom in a shared apartment (with kitchen) rents for 12 months for around $4,000.  In contrast, shared dorm rooms cost around $6,500 per person for the fall and spring semesters (summer session costs extra).

A full year of off campus housing is much less than the price of a shared dorm room on campus for nine months, and would allow the option of a full semester of summer studies for only $3,500 tuition and fees.  Two or three summers of that would lead to graduating college in three years (or less!).  Paying for three years of college is a lot cheaper than paying for four.

The same logic applies to the food budget.  Pay the rack rates for on campus dining plans and it costs $8.61 per meal IF every single meal in the plan is consumed during the school year.  I’m pretty sure my kids can figure out a way to pay less than $8.61 for some fruit, cereal and milk, oatmeal, and yogurt for breakfast.  Rules vary by university, but it appears that NC State University requires first year students living on campus to purchase an overpriced meal plan (“looking out for their best interests” and all that), but beyond the first year students have the choice to skip the meal plan and pay a la carte (or dine off campus as often as possible like everyone did when I went to NCSU).

Having the kids pay part of their own way through college isn’t just a devious way to remove some of those costs from my cash flow statement and lower the overall costs for all parties involved.  There’s also a real benefit to the kids.  They will learn crucial money management skills in a sort-of real world environment with a parental safety net stretched underneath them in case they take a tumble.  It’s better to fail when the stakes are small (calling mom and dad to make up their share of the month’s rent) instead of when they are enormous (calling to say they are $50,000 underwater on their mortgage and will lose their house without help).

 

Sources of college funding

But it’s cruel, you say, to make kids pay for any of their college when they should be studying hard.  That would be true if they didn’t have nights, weekends, breaks, and a huge 3+ month summer vacation to figure out a way to make a little money.

15 possible sources of funds for the kids:

  1. loans
  2. grants
  3. scholarships
  4. research assistanceships
  5. teaching assistanceships
  6. work study
  7. formal co-op program
  8. internships
  9. ROTC
  10. resident advisor (free housing + meals + living stipend)
  11. on campus jobs during school year
  12. summer jobs between college semesters
  13. jobs during the school year in high school or during HS summer breaks
  14. entrepreneurship
  15. UTMA investment accounts

Parental source of college funds:

  1. 529s (currently have $43,000 total for all 3 kids)
  2. our main early retirement portfolio
  3. doing something productive that pays money (part time job, freelancing, more blogging or consulting, entrepreneurship)

As you can see, the kids have more options for funding college than us parents do.

I wanted to elaborate on a few great ways to cover half or more of the total cost of attendance:

Resident advisor or RA – I strongly considered becoming a resident advisor but decided to move off campus and split a $700 per month apartment between four people for extremely cheap rent instead.  The Resident Advisor lives in a dorm room for free, gets a university meal plan, and receives a small annual cash stipend (currently $1,735 or more at NCSU).  The room, board, and stipend are worth about $12,400 per year at NC State (more at UNC), which is over half the total cost of attendance.  You aren’t supposed to work other jobs while working as an RA because they claim it’s a 20 hour per week work commitment, though in practice many of those hours have you chilling in your room in the evenings for “office hours” while you do your homework (or whatever kids do in college these days).  At 20 hours of “work” per week for a $12,400 benefit, that equates to somewhere between $17 and $20 per hour, almost all of which would be tax free. Becoming an RA is an option after your first year of living in the dorms.

My freshman year resident advisor, George, was an overseas engineering student from Ghana paying his way through undergrad primarily by being a resident advisor plus getting some small grants and scholarships.  I could totally see my oldest daughter being an RA and loving every minute of it!

ROTC – I didn’t have any personal experience with ROTC but it sounds like an incredible opportunity.  I reached out to Doug “Nords” Nordman, a retired nuclear submarine officer who blogs at The Military Guide and an occasional guest poster here at Root of Good.  Doug’s daughter Carol recently graduated from college after completing the Naval ROTC program.  Here’s what Doug had to say:

Every student who’s the least little bit curious about the military should join a ROTC unit just to try the first year for free. At the very minimum they’ll get priority registration (for ROTC classes), lots of new friends with peer tutors, and a summer tour of their career options. Parents will know that their freshmen are getting a good start with plenty of career options.

NROTC paid over $160K of Carol’s tuition, fees, and textbooks at Rice University. She also earned $2K-$5K/year in stipends and summer training pay.

Carol also landed a well paid position as a commissioned officer in the Navy straight out of school.  Doug reports her net worth is significantly higher than her peers even though she’s only a few years out of college.  Sounds like another early retiree in the making!

ROTC provides funding for everything but room and board.  Students can drop out of the program at any time during the first year without penalty and don’t have to repay the ROTC funds (that’s what Doug meant by “free”).  There’s very little risk for joining ROTC for one year.  Starting in the second year of ROTC, the grant recipients are on the hook for repayment of any additional moneys received if they drop out of ROTC.  Alternatively they can enlist in the military later to discharge that debt.

 

How I funded my college

If you’re a long time reader you won’t be surprised to learn that I managed to finish college on the cheap.  First up was entering the fall semester of my freshman year just a few hours short of being a junior upperclassman.  Through AP credits, taking several courses at the state university during high school, taking several more during the summer after graduating high school, and taking one course through credit by examination, I managed to enter the university as a full time student with 56 credit hours (FYI most bachelor degrees require around 120-132 credit hours to graduate).  With all that credit, I managed to graduate with two bachelors degrees in three years.  And I managed to bum around Mexico for six weeks one summer.

Considering I finished 120th in my high school class, my experience wasn’t atypical for the upper level students at my high school which is the exact same high school that our two daughters will attend in a few more years (one of the reasons I like our public schools here).  So far both kids are academically on track to follow the same general path that I did, therefore entering college as a sophomore with 30+ credit hours is very possible.  If that happens, that’s $48,000 saved (minus costs of AP exams and several thousand dollars for university courses during high school and summer sessions).

Once I was in college, I received some parental help with tuition, books, room and board, and other living expenses the first year (but I couldn’t tell you exactly what my parents paid for the first year).  I also took advantage of the subsidized college loans offered to me.

During my first year of college I landed a position as a DJ at the college radio station.  In addition to being as cool as it sounds, it also paid very well if you took the boring shifts that included running the control board during men’s baseball and women’s basketball games (read: 2-3 hours to do homework punctuated with 2 minutes of work each hour to run station identification reels plus a couple of advertisements).  I didn’t suck at DJ’ing so I got promoted to production manager and became a member of the board of directors where I made $200 per month producing commercials and other on air spots.  Overall, the college radio experience was mostly jamming out to music while doing some homework during my shifts.  And getting paid cash money for the privilege.

By my second year of college I won a number of scholarships that more than paid for all of my expenses (I guess doing all that homework while working at the college radio station helped my grades).  I also started teaching an intro to engineering class for incoming freshmen ($25/hour) and landed an internship in the university’s facilities engineering department ($10/hour).  I quit the facilities department internship when a professor hired me on a research assistanceship ($13/hr) that later morphed into a grant ($3000 for a semester).  These progressively more challenging jobs qualified me for an $18/hr research engineer position during the summer between undergrad and law school.  All these dollar amounts are in the 1998-2001 time frame, so you can inflate them by 40% to arrive at values in 2016 dollars.

During law school I founded my own business that initially didn’t make more than $400-500 for an occasional small job.  Then I made $30,000 profit in five weeks (mostly working 12-16 hours per day).  I wish I had a $99 course explaining the secret to making that much, but it’s really common sense.  I did a great job on the smaller projects which led to my selection for a massive job that included some add on work because my quality was better and my prices were lower than the other team in competition with me.  Skip the $99 course fee, just do good work and profit.  And then there were the summer jobs during law school that paid between $0 and $23/hr.

Overall, I made a ridiculous amount of money by the time I graduated from undergrad and even more by the time I graduated from law school.  For the curious, here’s all 20 jobs I held between being a paper boy at age 12 and retiring as an engineering director at age 33.

In addition to making money and learning how to hustle, all those jobs provided invaluable experience that helped me land a professional job right out of school.

Will my kids find as much employment success as I did during college?  Even if they don’t, they can still make quite a bit of money to help pay for living expenses during college.

 

Hacking college

A four year degree doesn’t have to take four years, nor does it have to cost $100,000 to $300,000.

For those students that excel academically, they can start college as a sophomore or junior.  Focus on AP classes, credit by examination, summer school before college, and university/community college courses during high school.  If you can’t find resources online, then starting around 8th or 9th grade ask your kid’s guidance counselor what programs are available to earn college credit while still in high school.  I recall getting bored on summer during high school so I grabbed a course catalog from NC State University (pre-internet days, folks), and that’s when I realized they have very specific guidelines on what AP test scores get you, and what basic educational courses I should take to apply toward an engineering degree.

Another classic college hack is to attend community college for two years in a college transfer program.  Then, apply to a four year college and transfer in those two years of community college credits.  This way you only pay for two years of the more expensive university tuition.

I’m a little skeptical of this one after running the numbers.  In our situation, tuition runs $2,768 per year for full time at Wake Technical Community College, a $6,112 cost savings versus NC State University’s $8,880 per year for tuition and fees.  Not too bad but it might be a money losing proposition for students that miss out on financial aid and merit based scholarships (the engineering college at NCSU was awash with scholarship money and often had a hard time finding applicants for all that free money in my experience).  Community college is probably a better bet for students in an academic field with little prospect for discipline specific scholarships or for “average” students that graduate high school without credit for many of the freshman level college courses.

I also worry about how well those two years of community college credit would transfer into some four year degree programs that require very specific coursework (NC State University College of Engineering, I’m looking at you).

Ed Mills of The Millionaire Educator fame has figured out a way to hack a college degree in 12 months from a real, accredited four year institution for just $7,500 in tuition and fees.  It’s a little circuitous and requires discipline to study on your own then pass third party exams to demonstrate competency.  But well worth the effort for someone that needs a bachelor’s degree and doesn’t have a lot of money nor four years to waste.  Mr. Mills hones in on a few universities in the US that allow the bulk of the required credit hours to be taken through various credit by exam options.  You might want to add a second year to your course of study to allow time to actually learn the material that will be on your exams (or what the heck, take the exam and maybe you’ll pass it without studying!).

 

Other thoughts on college

I still wonder whether college will be relevant in another 10 years.  And at what cost will it remain relevant?  Is it worth a quarter of a million dollars?  Half a million dollars?  If college costs continue their meteoric rise to the moon, at some point we can jump off that vertically asymptotic crazy train by simply skipping the whole college charade and handing our kids a huge portfolio full of investments and let them join us in FIRE at age 18.  Then they can read Chaucer and learn Laplace transformations at a more leisurely pace.

To put the absurdities of growing costs in more stark contrast, there are so many free or extremely cheap educational options available today that continue to grow in quantity and quality.  Harvard, Yale, MIT, and Stanford (among other top tier schools) offer tons of free undergraduate and graduate level courses in every academic field imaginable.  Education is mostly free already, it’s just that diploma – that piece of paper that says you’re educated – that you need to get a job.

There also educational consolidators like Coursera, Udacity, Codecademy, and Khan Academy offering courses from a variety of instructors.  If you have $300 for a laptop and access to an internet connection, it’s hard to stay ignorant if you’re motivated to learn.

Will all this easily accessible free education ever supplant the need for a traditional four year degree?  That’s the $64,000 (or $99,592 at University of North Carolina) question that remains to be answered.  It’ll take a paradigm shift in hiring practices and corporate mindsets away from a strict requirement for a four year degree toward a more fluid skills-based or portfolio based assessment of job applicants.  Or a willingness to accept credentials from a different kind of educational institution.

Perhaps one day smart kids will brag about a set of certificates from Coursera instead of a diploma from Harvard.  That day isn’t today and I don’t know if we’ll see it before oldest two kids graduate college in 10-12 years.  But it’s a valid question to ask as you’re planning on college costs for a newborn today.  18 years might be enough time for an educational revolution.

Jeremy at Go Curry Cracker put a lot of thought into college funding for his newborn.  The most interesting take away from his article was the fact that investing college savings into a stock index fund like the S&P 500 is a smart way to combat escalating college tuition if you start early.  He looked at a 34 year period from 1979 to 2013 and found that

[f]rom 1979, consumer prices increased 3.4x.  Tuition increased 10x.  The S&P500 increased 18x.  And with dividends reinvested, the S&P500 increased 45X!

The stock investment grew 4.5 times as much as the cost of tuition.  Even with a much more mediocre stock market, it’s still a good bet that stock returns will at least keep up with inflation.  That’s why I’m not too worried about the inflation we’ll see between now and 7-8 years from now when my oldest two kids enter college.  Their 529s are invested in an aggressive mix of equities, though I’ll be slowly dialing back on the risk as the looming tuition payments draw near.

image courtesy of Go Curry Cracker

 

The bottom line

My kids will be able to attend college and somehow we’ll pay for it.  And we can remain early retired.

I see the best case scenario playing out like this:

$24,000 cost of attendance for 3 years – BEST CASE SCENARIO:

  • $4,000 – cut costs on room and board, misc. expenses (live at home with us?)
  • $6,500 – average need based grant (probably free money but maybe some loans)
  • $4,000 – merit based scholarships and grants
  • $6,000 – various jobs and internships
  • $3,500 – spending from our 529 accounts

If this rosy tinted picture plays out, we’ll have three years of spending at $3,500 per year times three students.  Our total outlay will be $31,500 in today’s dollars, and our kids might leave college with a small dose of those dangerous student loans.  That’s about $10,000 less than we have in 529 accounts today, so we are well prepared if this scenario occurs.

But what if my kids end up being “average” and deviating from the path their old man followed?  And what if they can’t or won’t economize on housing and food?

$24,000 cost of attendance for 4 years – WORST CASE SCENARIO:

  • $6,500 – average need based grant (probably free money but maybe some loans)
  • $4,000 – various jobs and internships (they’re average; the earnings are lower than the optimistic scenario)
  • $13,500 – spending from our 529 accounts and investment portfolio

In this scenario, where our kids are very average, can’t economize on costs, get no merit based grants or scholarships and deliver pizzas or bus tables instead of engaging in paid activities related to their field of study, we are left with a $13,500 bill every year.  That means we’ll be paying a combined $162,000 for three kids for four years of study.  That figure exceeds our existing 529 balances by $119,000, so we’ll be digging deep into our investment portfolio to cover the shortfall.  I’ve mentally set aside $200,000 in my portfolio to cover some variation of this worst case college funding scenario plus other big, lumpy one time kid expenses, so we’ll be okay financially.

I suppose I should mention the beyond superlative worse than worst case scenario (though in purely financial terms, the least costly).  There’s a chance that one or more of our kids won’t attend a four year college at all, which means that $3,500 to $13,500 per year spending figure drops close to zero (spending tons of money on adult children is a topic best left for another article).

Whether our kids excel academically and need very little parental financial assistance, or whether we end up paying for the majority of their college costs, we’ve got it covered in our early retirement financial plan.

 

 

What is your plan for kids’ college funding?  How did you fund your own college experience?  Anything you would do differently?

 

 

One Thousand Days of Early Retirement

freeport-bahamas-oceanview

1,000 days ago I retired early without really knowing it.  When I walked in the office on the morning of August 26, 2013, I didn’t know it would be my last day of work forever (probably).  I suspected something might happen to me on that Monday because another coworker was suddenly and unexpectedly terminated the previous business day and housecleaning often happens in clusters.

I spent the first hour of that day catching up on emails from the previous week that I missed while I was on vacation in Chicago.  Then I jumped on a quick 9:00 am conference call to discuss the financial model for a new toll road proposed for the southern part of town. Then BOOM! The boss walked in the door with a fistful of bad tidings.

By 10:00 am I had my walking papers in hand along with a cardboard box containing the detritus collected over the course of a few years of office work.  Down the six flights of stairs I walked, the elevator being condemned at the moment by the Department of Labor for excessive safety violations.  Out the back door and to my car I strolled, wondering “what’s next?”.  I found the corporate Ipad in my trunk that HR forgot to ask for, briefly questioned whether they would ever miss it (probably not), then did the right thing and turned it over to my former employer.

Once out the door I messaged Mrs. Root of Good and broke the bad (at the time) news.  I got fired.  Looking back at that email chain, she didn’t seem particularly concerned. Her responses, in chronological order:

  1. “What? Are you kidding?” (getting fake fired would have been a superb prank!)
  2. “Oh well, guess you won’t be getting that interview after all huh?” (I was one of two short listed by the guy that fired me for an internal promotion)
  3. “Are you picking the kids up from school since you’re free?” (of course I had plenty of free time!)
  4. “Ok.  Well, time to collect unemployment and look for a new job.” (done with respect to unemployment and done but to no avail with respect to a new job)

That’s what the household discussions sound like when you’re FI, live on less than one income, and you get fired unexpectedly.

That afternoon I started checking The Plan – our two page outline of our early retirement financial plan.  After a summary review, I quickly realized we were FI enough that I didn’t have to go back to work (though I did make an effort to find a new job pursuant to our state’s rules on collecting unemployment benefits).

Before the sun set on that fateful Monday in August I decided I was early retired (unless a job offer I couldn’t refuse walked in the door).  Mrs. Root of Good began making plans to leave her job too.  In early September I started Root of Good since I had always wanted to “do something online and computer-y” for many years but never had time between a full time job, kids, computer games, and a hectic TV-watching schedule.

Stop and smell the roses

Stop and smell the roses

In the early days, there was still some nagging uncertainty about the whole early retirement thing.  Would it really work out okay financially?  Can a 33 year old really get by in this world without a job (hint: having a million bucks helps a lot!)?  That doubt and uncertainty is 99.9% gone today (the remaining 0.1% represents my Plan E or F – go back to full time work).

Mrs. Root of Good initially decided to stick around to take a three month paid sabbatical the following summer and pick up a raise and bonus in the meantime.  The three months paid time off didn’t happen in 2014 but she did receive five weeks paid time off and a promise that she could take the whole three month paid sabbatical the following summer in 2015.  And so began the limbo period of Mrs. Root of Good’s pre-retirement career.  Work a little longer, get a raise and bonus.  Work just a bit more than that and get a month or three paid time off.

After completing the three month’s paid time off in 2015, Mrs. Root of Good finally submitted her resignation.  She didn’t escape from limbo though.  Her employer cajoled her into staying by offering a flexible work schedule consisting of what turned out to be mostly 24-30 hours per week working from home for full time pay.  After milking that sweet set up for six months, Mrs. Root of Good finally quit for real (for really real this time!) in February of 2016.  As I celebrate my 1,000th day of early retirement, she celebrates her 107th day.  Yes, I quit working 893 days before her, but I think after all her paid maternity leave, sabbaticals, and flexible working schedule we are roughly even on the “lifetime total days worked” metric.

Mrs. Root of Good's new hobby - photography

Mrs. Root of Good’s new hobby – photography

 

 

What Early Retirement means to me

These first 1,000 days have been amazing.  Looking back at some of my old posts outlining what I was up to in the early days of early retirement, it’s clear how much fun I was having from day one.  It’s also been a very busy period of life, and not only because of our three kids.

In The Early Retiree’s Weekly Schedule I outlined what I’m up to in a generic, average week:

early-retirement-daily-schedule

One year after publishing that article, I haven’t really deviated from the bones of the schedule other than I seem to be busier volunteering at the kids’ school and spending more time on our now-four year old and his busy schedule and less time blogging (sorry, readers; life happened 🙂 ).

Staying busy volunteering at the kids' school

Staying busy volunteering at the kids’ school

When I do the occasional media interview, I usually get asked “what’s it like to be retired early?”.  I stumble and pause and then start listing off the rather mundane things I have on my weekly schedule.  Then close the answer with something like “basically everything that working folks do on the weekends except my weekend lasts seven days”.  I don’t intend to gloat or brag, but rather to be as descriptive as possible because early retirement on a regular day is very similar to the weekend while working.

Not sure where to categorize this on my schedule. Work/chores? Kid time? Fun?

Not sure where to categorize this on my schedule. Work/chores? Kid time? Fun?

And then there are the multi-week vacations made possible by early retirement.

In 2014 we spent two and a half weeks on a road trip to Canada:

During the summer of 2015 we spent seven weeks in Mexico:

two-years-early-retirement-mexico

This summer we will pack up our new (to us) minivan and head out on a 3.5 week trip west to Kentucky and Tennessee, then north to Detroit and Toronto before returning home through Niagara Falls and Washington, D.C.

Watching the kids grow up and being at home the whole time is the biggest change since retirement.  When I retired the kids were 1, 7, and 8 years old.  Now they are 4, 9, and 11.  Each one of them has grown and matured significantly in the almost three years since I quit working.  The passing of time is particularly visible with our four year old.  When I quit working he was a baby turning into a toddler.  Now he’s running around, riding a bike, surfing the web to Netflix (he knows how to type “N-E-T-enter” in the browser bar), and being generally autonomous all day.

Oatmeal. Breakfast of champions

Oatmeal. Breakfast of champions

Hiking at the local city park

Hiking at the local city park

 

Finances

When I retired in August of 2013 our net worth was around $1,250,000.  Net worth continued to climb for the next 18 months before plateauing just above $1,500,000 for the past year.  Part of the early rise in NW came from Mrs. RoG’s income and part came from increases in the stock market.  My unexpected income from this blog also contributed a small share to the net worth growth.

We tracked spending very carefully and only spent $34,000 in 2014 and $24,000 in 2015.  Not bad considering we completed a major exterior renovation project in 2014 that included all new vinyl siding, new windows, and a major roof repair.  We also took multiple international vacations each year.

Crafting a spicy chipotle alfredo sauce. Great way to keep food costs low while still enjoying good grub.

Crafting a spicy chipotle alfredo sauce. Great way to keep food costs low while still enjoying good grub.

Since our net worth increased over the past few years, we decided to try to spend more money.  The long term goal is to spend around 4% of our portfolio value each year (the “4% rule”).  After reducing our $1.5 million net worth by our home value ($150,000) and another $200,000 to cover lumpy kid costs (braces, teenager auto insurance and other added car costs, college, miscellaneous kid launching costs) and other lump sums, we have slightly more than a million dollars left in our portfolio.  Four percent of a million dollars equals spending $40,000 per year if we follow the 4% rule.  That’s exactly what we budgeted for 2016.  The biggest budget additions for 2016 are entertainment and travel spending.  However, if the past few years’ expenses are any indication, we’ll probably spend closer to 3% of our portfolio.

Spending $0 while enjoying a campfire by the lake in the backyard

Spending $0 while enjoying a campfire by the lake in the backyard

Part of our low spending strategy (particularly on travel) centers around travel hacking and credit card rewards.  On our 2015 trip to Mexico, for example, we scored free round trip tickets to Mexico for our family of five simply by signing up for two credit cards (the British Airways card and the Southwest Airlines card, both from Chase).  This year we earned a free week of apartment rental in Toronto and half off a week long Caribbean cruise by signing up for his and hers Barclay Arrival Cards.

We recently sorted out our health insurance situation after Mrs. RoG quit her job a few months ago with the final piece of coverage falling into place in the past few weeks.  The Affordable Care Act played a huge role in keeping our monthly premiums extremely low.  $125 per month is low, right?

I’ve written before why I don’t think we’ll ever run out of money in early retirement and I’m more certain of that today than I was two and a half years ago when I first published that article.  Flexibility is a big key to our security since we have to rely on our investment portfolio for the next several decades before Social Security starts.

Since more than half of our financial assets are held in tax deferred savings accounts like 401k’s and traditional IRA’s, the Roth IRA Conversion Ladder is our magical tool to avoid penalties for withdrawals made before age 59.5.

 

Regrets?

Who has time for that nonsense?

We are having a blast.  Stress is minimal.  I can always go back to work if I want.  We are financially well off and want for nothing.

We are able to travel the world subject to the constraints that come from having two, and soon to be three, children in traditional public schools.

School rocks!

School rocks when you get to play with circuits!

Every day is busy, but not like it was when working.  We choose the activities we participate in and don’t have a problem saying “no thanks” to things we don’t enjoy.

With plenty of autonomy, freedom, and flexibility, what is there to regret?  I can imagine a far-fetched scenario in 20 or 30 years where we realize we don’t have quite enough money and have to go back to work part time or full time.  I doubt that I would regret enjoying the couple of decades between now and then.  It would be like working till a traditional retirement age with a multi-decade sabbatical tossed in the middle of my career.  I’ll take that!

One of the many moments when I don't regret retiring early at all!

One of the many moments when I don’t regret retiring early at all!

 

Looking forward

A more likely reason I would return to paid employment of some kind is boredom.  I can’t foresee it happening, but the future is hard to predict.  I know I’ll have a lot more free time on my hands in another 15 years once our youngest kid is out of high school.  If travel, TV, games, books, and the outdoors don’t keep us busy, maybe I’ll find something productive that also pays.

A friend and former coworker contacted me recently to offer as much work as I wanted with a flexible schedule and 50% more compensation than I used to earn when working full time.  I gave the opportunity a lot of consideration since it would involve working with someone I enjoyed working with in the past and the work itself was engineering consulting for design and construction of our county’s public schools (sort of like volunteering while getting paid six figures).

My answer was that I was having too much fun and wouldn’t be able to fit in the work, even ten or twenty hours per week.  The weather was too nice in the spring and we’re going on vacation for almost a month this summer.  Maybe in another year when our youngest is in kindergarten?  It’s nice to have options and not need to work.

When hanging out with friends, does anyone say "I wish I was working?"

When hanging out with friends, does anyone say “I wish I was working?”

We have thought of retiring abroad but aren’t committed to the lifestyle enough to live overseas full time.  The biggest impediment is the kids’ education because we have some really great free public schools not far from our house in Raleigh.  Perhaps someday the travel bug will bite us hard enough and the resulting infection will make us crazy enough to sell or rent out everything and hop on the next plane south (or east or west or north).

Once again we find ourselves at a crossroads where all directions lead to happiness.  It’s great to have options.

 

 

How close are you to early or traditional retirement (or are you already there)?  How do you see your life changing once you enter retirement?  

 

 

April 2016 Financial Update

two-cents-photo

Now that April is over, we are one third of the way through 2016.  How are we doing?  Where are we going from here?

Financially, April was a great month on all fronts.  Our net worth increased by $23,000 to $1,552,000.  Our income remained strong at $2,471 even though it’s been a few months since we received any pay checks from employers.  Our spending dropped significantly compared to last month to $1,829 (not buying a new minivan certainly helped keep expenses low).

On the personal side, April was an incredibly busy month.  The weather was nice so we spent a lot of time outdoors.  We were busy with kids’ school events and volunteering, hanging out with friends, and enjoying the wonderful life we have built through a decade of financial butt kicking.  We capped off the month with a day trip to the beach for a wedding.

On to the numbers!

 

Income

After receiving $4,476 in dividend income in March, our investment income dropped to just $130 during April. Since our portfolio is all funds and ETFs that pay dividends quarterly or annually, the months of March, June, September, and December are big for dividends.  As this post goes live, we’re about six weeks from the start of the next dividend season in June.  In 2015 we earned a total of $28,527 in dividend income.

Blog income, shown as “other income” in the chart, was fairly normal at $2,043.  My early retirement lifestyle consulting brought in $180 in April (same as March).  I’m still aiming to live off of four percent of our portfolio, and treating the blog and consulting income as purely discretionary money that we can spend if we want (or save if we want).  The next month or two should be very good months for blog income thanks to a lot of recent attention in the media (part of what kept me busy during April!).

TV talking head - my new career?

TV talking head – my new career?

Deposit income of $117 includes $87 of ebay and craigslist sales plus $30 of cash back rebates from the Ebates.com and Mrrebates.com online shopping portals. I’m all about sharing the wealth, so if you sign up through this link and make a qualifying $25 purchase through Ebates, you’ll get a $10 gift card like I did.  I try to do all of my online shopping through one of these portals and the cash back adds up fast.  I’m not sure when I’ll actually get the cash but my Ebates account was just credited with over $100 in cash back from our January 2016 cruise I booked through Expedia (via Ebates).  Very nice and worth the wait!

april-2016-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 look at April expenses:

april-2016-expenses

Monthly spending in April totaled much less than our budget of $3,333 per month (or $40,000 per year).  We didn’t buy a minivan and we didn’t have any large annual bills like property tax or insurance, so it was easy to come in well under budget for the month.

Grocery spending dropped back to a more normal $428 during April.  I thought this would be a lot higher given how well we ate and how much we shopped for groceries during the month.  I guess I’ll have to thank Aldi, Trader Joe’s, Kroger, Walmart, Food Lion, the Asian store, and the Mexican grocery store for keeping their prices low.

Spend little on groceries; make awesome food like homemade tamales? Yes, please.

Spend little on groceries; make awesome food like homemade tamales with fresh guacamole tomatillo salsa? Yes, please.

Healthcare spending increased significantly to $270.  Since we no longer have dental insurance, Mrs. Root of Good paid $105 for her routine dental visit (the cash rate for uninsured patients at our dentist).  We finally got to use our new health insurance when Mrs. RoG visited the doc to have a lump on her arm checked out.  It was diagnosed as likely being a lipoma (a lump of fat, and please note, NOT lymphoma or anything like it fortunately!).  The doc scheduled her for minor outpatient surgery the next day.  The biopsy revealed it was, in fact, just a lump of fatty tissue and totally benign.  Our insurance is working out well so far with two $20 copays paid at the time of service plus another $120 bill for the surgery (20% of the $700 price the insurance allowed for the surgery).

Health insurance premiums totaled $125 for our very impressive gold plated silver plan obtained through Healthcare.gov with some very sizable ACA subsidies.  Quick update on our health insurance situation: four of us obtained insurance through the healthcare.gov exchange very quickly.  We had to apply to the state’s medicaid/NC Health Choice program for our three year old (now four year old).  We’re currently on day 87 of waiting for our application to be approved so our four year old has been uninsured since May 1 (during March and April we had the possibility of retroactive COBRA coverage for the little dude but that option expired April 30).  He will have retroactive coverage if his NC Health Choice application is ultimately approved (which it should be).  The wheels of bureaucracy move.  Slowly.  Let’s hope they finish processing the application before he’s five.  And I think the State of North Carolina is distracted with other important issues these days, so I understand the delay.

Good thing we don’t pay state tax to fund the agency processing his paperwork.  Except we do!  Since we don’t have any tax withheld from a paycheck, we now have to make estimated tax payments.  I made the first estimated quarterly tax payment of $225 for state taxes.  We can pay online and we can even pay with a credit card for a 2% fee.  Good to know if I need to meet minimum spending requirements for my credit card travel hacking hustle!

Clothing and shoe purchases totaled $200 for the month.  Everyone but me got new shoes and the ladies got new swimsuits.  We also did a bit of thrift shopping.

Utility spending of $167 includes the water/sewer/trash and the natural gas bill.

Restaurant spending of $103 included some horribly unhealthy but delicious donuts, Chinese take out, and a fun lunch out with an old friend.  However, the bulk of the restaurant spending in April was for a meal at the restaurant where the beach wedding reception was held ($62 for okay but not great food).  We had to pay for our own meal but (1) we can afford it and (2) at least the bride and groom didn’t have to pay tens of thousands of dollars for their wedding.  Nicely done newly married couple!

donuts-bakers-dozen

Delicious. $17 for 13 of the most mouth-watering treats that aren’t Mexican food. Courtesy of Baker’s Dozen Donuts in Cary and now in Raleigh. And a Cambodian-owned business so we’re supporting Mrs. RoG’s people.

The $69 electronics purchase was an ASUS RT-N66W router.  We tried to go cheap on a router last month and it didn’t have the range that we needed to cover the whole house.  Lesson learned and $15 wasted (but we have a backup router just in case).

The uncategorized expense of $67 was mostly the purchase of our new couch at a thrift shop benefiting the homeless.  The curb sleepers of Raleigh get some of our cash to keep them off the street and we got a new couch.  Now to craigslist the old couch for more than we paid for the new(er) couch.  We also found some other ridiculous items like a brand new pair of shorts from Jos A Banks with tag still on for $3.  The only reason this expense was uncategorized is that Personal Capital couldn’t categorize the purchase correctly since it’s the first time we’ve shopped at this particular thrift store.  After I update it, it’ll be in the system correctly for good and subsequent purchases from this retailer will appear correctly too.

The minivan needed a few final touches before getting it road ready for our summer trip.  I spent $16 on some fancy windshield wiper blades at Walmart (they were on clearance) and $42 for tire rebalancing.  The tech said the wheels were way out of balance. The vibrations observed at mid to high speeds disappeared immediately after the rebalancing.  So far so good on the used car purchase.

The entertainment expense of $48 was a brand new camera lens for Mrs. RoG’s photography addiction.  I debated whether to put this in entertainment or electronics because it’s really both.

Not shown in the expense graphic because of their small dollar values were:

  • gifts – $45
  • gasoline – $40 (mostly the trip to the beach at 23 miles per gallon in our minivan with 7 passengers)
  • internet – $31
  • service charges/fees – $26 (Mrs. RoG’s 401k – I’ll have to follow these closely to see how much they total per year)

That’s a lot of consumption but we still spent at a level 30% below the poverty line.  Maybe we’ll throw in some cigarettes, alcohol, bail bonds, flashy rims, and lottery tickets to bootstrap our way up to the lofty heights of poverty level living next month (no offense to my distant kinfolk if you guys are reading this month’s edition of Lifestyles of the Rich and Boring).

Giving the little guy a taste of stardom.

Giving the little guy a taste of stardom.

 

Year to Date Living Expenses

april-2016-ytd-expenses

At $17,065 year to date spending, we have exceeded the $13,333 budgeted for the first four months of the year by a few thousand dollars.  This includes the minivan purchase in March, so if we keep under spending our monthly $3,333 budget (like we do many months) then we’ll be back on track in a few more months.

I just received the annual or semi-annual bills for about $1,000 for home, auto, and umbrella insurance policies.  July and August should be fairly low cost months too since we’ll be traveling for half of each month on a road trip through the US and Canada and have already paid for all of our vacation lodging expenses.

Our goal this year was to spend more than the $24,000 we spent last year, and so far we are on track spend a bit more than that paltry figure.  Regardless of whether we spend the whole $40,000 budgeted for 2016, we are having a good time, enjoying life, and doing the things we want to do in early retirement.  And that’s what matters the most, right?

Monthly Expense Summary:

Living like a pauper is tough but somebody's gotta do it. And do it well.

Living like a pauper is tough but somebody’s gotta do it. And do it well.

Net Worth: $1,552,000 (+$23,000)

Another month of net worth growth!  Yippee!  We are within $40,000 of our all time high net worth reached in 2015.

The net worth is just a number to me.  I don’t really get excited when I see a $23,000 increase in one month because I know the net worth figure will fluctuate by a five figure amount almost every month.  That’s just the nature of the stock market and there’s very little one can do when investing most of one’s portfolio in equities.

If volatility concerned me, I would shift into more stable asset classes like bonds and cash.  But it doesn’t so a high equities allocation is fine with me.

april-2016-net-worth

Every month we are growing more and more comfortable with our early retirement finances.  Toward the end of 2015 and beginning of 2016, we watched our investment portfolio drop almost $200,000 over a three month period.  A few months later, we have recovered all those losses and even gained a small amount.

What will the future hold?  If by future you mean the rest of 2016, I have no clue other than it will go up and it will go down.  In 2025 or 2030, I expect markets will be up.  Let’s check back in at that point and compare notes.

In the meantime, I’m ignoring the daily market vacillations.  I’m planning on enjoying a beautiful May in North Carolina (one of our best months weather-wise) and ease our way into summer when we depart for our road trip up north in mid-July.

 

 

 

And you? How was your April?  Enjoying the rising stock market?  Gearing up for summertime fun?  

 

 

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