Author Topic: Latest Case Study (2/23/14)  (Read 5633 times)

ToughMother

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Latest Case Study (2/23/14)
« on: March 01, 2014, 08:38:12 AM »
http://www.mrmoneymustache.com/2014/02/23/reader-case-study-going-west-for-early-retirement/#comment-615626

We're trying to create a realistic budget that will work in early retirement and allows us to compute the total savings/FU $ we need to have.  In the course of this, we've reviewed many MMM case studies as well as MMM's own budget and are struck by the categories that seem to be "missing."

In the most recent case study, here were some categories that seemed to be missing:
It allows for a house, but no house maint. $
house, but no water/sewer
It allows for 2 paid off cars (!!!), but no car maint $
no clothing $ (even if for thrifted clothes)
no entertainment $ (a lot is free, but not everything; i know this is a personal pref)
no travel $ (even if camping, still a little bit...)
no charity $

even if many of these categories are small $ sums, they would still add up to something and then would definitely impact the total $ needed to be saved (multiple any small sum by 25 and it gets big, right?).

Anyway, just wondering if others have had this reaction to budgets? And more importantly, how have you made sure your budget is appropriately encompassing so that when you compute your FU $/FIRE budget, you're in good shape?  The lack of these categories in many case studies makes me wonder if $2500 is truly realistic...

thx staches!

MarciaB

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Re: Latest Case Study (2/23/14)
« Reply #1 on: March 01, 2014, 10:33:27 AM »
You are right that charity is a category that is often missing, and that's a shame. I'm working towards FI (not there yet) but wouldn't consider putting charitable contributions on hold until I get there. Sharing my financial resources is a part of a good and decent life, and contributes greatly to happiness. I also contribute time/expertise as a board member to some of the charities I support (which is another kind of contribution...which leads to greater happiness).

I'd support an all-out call to require charitable contributions as a "must have" category in the reader case studies from now on!

gimp

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Re: Latest Case Study (2/23/14)
« Reply #2 on: March 01, 2014, 03:53:35 PM »
In regards to this blog post:

Financial independence means being allowed to work at the job you love.

I see myself in a similar situation, in the next 10-ish years, where I've saved enough money to stop working but I won't ever stop because I love work.

Exflyboy

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Re: Latest Case Study (2/23/14)
« Reply #3 on: March 03, 2014, 06:51:31 PM »
I have a couple of thoughts about this..

1) Pete has been doing this for a number of years and I have no reason to doubt he does live on $25k a year.
2) Pete has been doing this a long time and I suspect he's got very good at it..:)
3) yes there are one or two categories I don't see, As you say even if you live on a well and septic then you have to pump out the septic tank every say 3 to 10 years (depending on people/size of tank).

For out particular situation we decided to plan conservatively and are aiming for a spending budget of $35k ($23k essentials, including charitable giving) plus $12k fun money. This number does not include healthcare.

The reason we set it up this way is that we currently make about $44k in Wife's salary plus rent. In Oregon this will make about $35k roughly (although I since discovered I can make that come down a little more by contributing to a Traditional  IRA.. then pulling the same amount out of after tax savings).

So right now with me retired we don't touch any of our stash and are now measuring our spending each month (this was the first month).

I am making the assumption that when my Wife retires the taxable income will become zero (as we will be living off of $15k rent which will be tax free for Federal and make up the balance with after tax savings.. the gains for which are tax free up to $75k approx).. But the lack of tax will then leave close to $10k for healthcare which she currently has through her job... HC will probably cost less then $5k in reality.

So you can see already there is a lot of conservatism built into the above scenario.

Now 4% of our current stash is roughly $52k.. and if we don't touch that for 3 to 5 years it should grow some more.


and we will probably still be renting out one or both of our rentals on  top of that.

Bottom line I don't think you want to be planning to retire with just 25 * $25k.

The good news is.. When you get to the likes of $600k plus, your rate of growth becomes quite impressive.. 8% of 600 = $48k per year.

Frank



MDM

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Re: Latest Case Study (2/23/14)
« Reply #4 on: March 03, 2014, 09:09:14 PM »
http://www.mrmoneymustache.com/2014/02/23/reader-case-study-going-west-for-early-retirement/#comment-615626

We're trying to create a realistic budget that will work in early retirement and allows us to compute the total savings/FU $ we need to have.  In the course of this, we've reviewed many MMM case studies as well as MMM's own budget and are struck by the categories that seem to be "missing."

...

And more importantly, how have you made sure your budget is appropriately encompassing so that when you compute your FU $/FIRE budget, you're in good shape?  The lack of these categories in many case studies makes me wonder if $2500 is truly realistic...

thx staches!

Particularly if you aren't planning to move, one way is to use what you are spending now for a basis and adjust as appropriate.  Your question seems generally applicable, and I posted some thoughts based on it in a different thread: https://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-'case-study'-topic/msg232916/#msg232916.

As arebelspy rightly mentioned there, most people won't need that many categories so no problem if you use zero (or delete lines) a lot.  Your point (as I understand it, and if so I concur) is to avoid "missing something". 

Anyway, what I described above (used Quicken to dump "categorized previous 12 month spending", then used Excel for "expected future") is what we did - and so far so good....

ToughMother

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Re: Latest Case Study (2/23/14)
« Reply #5 on: March 05, 2014, 06:38:05 PM »
Thanks very much frankh and mdm.  I appreciate the attention to the intent of the question about proper computation of "enough" both from a perspective of (a) not missing categories and (b) having enough of a cushion that you're not underestimating...]

mdm, i also checked out your list in the other thread and although the moderator missed the intent of your question (completeness not "proper categorizing"), maybe some other folks will pick it up.  while i appreciate that some folks are quite minimalist in their categories (really, "rent" and "not rent"??), my own look quite like yours! 

thanks again to you both.

(nod to marcia b too!  yup, charity!)

LAL

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Re: Latest Case Study (2/23/14)
« Reply #6 on: June 11, 2014, 09:12:42 PM »
I'm the case study and while i didn't put out all the details we have a pretty tight budget that we've run for years.  We've been LBYM for years now and have tracked expenses. In the budget there is $300 car payment to ourselves, then autosave for home repairs outside of $2500. It's all taken out before our expenses hit. 

I'm not sure what to do about the move.  Still working on what we need.