Retired in 2013 at age 33. Life is Good.
In April, we spent quite a bit of money. We are ramping up for our seven week summer trip to Mexico which led to many expenses in excess of our routine monthly spending. As a result, our income of $2,125 didn’t quite keep up with our $4,549 of expenditures in April. In spite of that shortfall, our net worth climbed another $30,000 primarily due to investment returns.
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I want to tell you a story about accessing tax-deferred funds in an IRA or 401k before age 59.5 without paying a penalty. But first I’m going full out White Fang on you.
A trapped animal will do just about anything to get free. When you get caught, normal rules of comportment and demeanor are sloughed off to make room for the demands of the primordial will to live. It’s all about survival. Adrenaline rushing, pumping through arteries and veins, clouding the judgment and dulling the pain, the wild animal will chew it’s own leg off to disengage itself from a trap. It’s all about survival.
You’ll have to keep reading to figure out what this has to do with accessing tax deferred accounts without paying a 10% penalty.
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March has come and gone and left our net worth largely unchanged from it’s lofty heights of a month ago. We brought in a bunch of income yet spent a relatively modest amount in spite of focusing a lot of time and effort on spending more money.
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What does a seven week trip through Mexico cost? For us, it’s just over $1,000 per week. The budget comes to $7,668 for all lodging, food, transportation, entertainment, and miscellaneous expenses.
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Half a lifetime ago I developed a financial independence plan before I knew anything about financial independence and early retirement. My 17 year old self scribbled out a poorly refined plan to never work again and live off of savings from a minimum wage job. The bottom line: I thought I needed $120,000 to fund a perfectly adequate lifestyle forever by living on $600 per month in interest.
The year was 1997, the place was North Carolina in the wonderful United States of America. The federal poverty level back in 1997 was $657 per month, which meant that I was planning on living below the poverty line (before I even knew what a poverty line was).
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February’s headline: “Massive net worth growth and tiny expenses”. Our net worth shot up $74,000 thanks to robust returns in our investment portfolio. We managed to spend less than $1,000 because two winter storms kept us partially housebound for two weeks. And we simply don’t spend a lot of money in general because we already own just about everything we need or want.
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Imagine early retirement as a well cooked meal. The recipe calls for healthy doses of earned income and a liberal application of spending less than you make. Place those savings into a good asset allocation. Mix ingredients well and let simmer for a decade or two. Voila! Early retirement on a platter. If only you could find that dish in the frozen section of the grocery store or at a drive thru window near you!
You can’t retire early without a decent working history. Throughout the last two decades, I’ve had almost twenty different jobs. The earliest ones didn’t pay particularly well, but my compensation generally increased as I gained more experience. Join me on this autobiographical odyssey through my working years.
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Out of curiosity, I took a look at our ten largest purchases of 2014. I knew what the the top few expenses would be (vacations and a major home renovation), but the rest of the expenses escaped my memory after the money left my hand.
Looking at the top ten expenses is a good exercise to conduct each year. Our top ten add up to about half of our annual spending. I’m a big believer in making sure our expenditures bring a lot of value, and by looking at these top ten expenses, we can see whether we got good value in 2014.
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How did we kick off 2015? With a month of average spending of course! January’s expenses of $2,548 were very average in spite of some lumpy expenses like the annual property tax bill. When it comes to spending money, average is good. Our income of $2,068 was on the smaller side and much lower than last month’s income.
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We closed out the year with a financially busy month. With income exceeding $17,000 in December, we way more than covered our abnormally large expenses of about $10,000. We finished the year on a strong financial note and wrapped up a major home renovation project during the month. And booked another Caribbean cruise.
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