Author Topic: 1 Year Update  (Read 1743 times)

h2ogal

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1 Year Update
« on: October 14, 2015, 12:25:01 PM »
Hi All - Here is a 1-year update on my 1000 day FIRE plan.  Am posting in hopes of helping those also on the Journey.   Please share your own progress notes!  I would be very interested to hear details!

Background: In September 2014 I discovered MMM and had my mind blown.  I had been somewhat financially responsible over the years, so I quickly put a plan together that would allow me to retire in 1000 days (June 2017) with about $750K in savings.  I posted an update about halfway thru this year, and I decided to post another update to mark the 1-year milestone.   

Starting Place - Oct 2014:
$478K in various savings and retirement accounts.   
A paid-off house that we live in.
My average Monthly Spending: $4.6K
Plan was to SAVE/Invest about $40K and also realize about 8% ROI on my investments.

Today - Oct 2015:
Goal:  By Oct, my goal was to have $575K in various savings and retirement accounts.
Actual:  $542K in various savings and retirement accounts.
My average Monthly spending: $3.9K
I have Saved/Invested: Well over $40K  ($24K in 401K plan, $5K in HSA, $40K in various taxable accounts)   
Negative ROI from Oct 2014-Oct 2015 on most of my low cost index fund investments.

TLDR Part:
Some planning lessons learned from the past year:
1. Don't count on unvested stock options!!!  - In my early net worth calculations and in setting my goals I counted in the market value of unvested options.  Although the stock did perform well, I didn't account for the tax implications of vesting, and moving the vested stock from individual stock into mutual funds in accordance with my personal investment strategy.  As of now, I no longer count the value of unvested options in my net worth so it skewed the plan a bit (If I was still counting the unvested options my balance would be about $36K higher).

2.   Automatic Saving and Investing helps a lot - Part way through the year I set up my direct deposit so that less was deposited to my checking accounts and more was deposited to my investing and brokerage accounts and I make periodic investments.  I find that I'm more willing to hold off on purchases when it means dipping into these accounts.

3. Big Spending Cuts can mean having to make real changes in your values.  We had (and still have) quite a bit of 'FAT' in our budget.  Early on the path we found a few 'easy' cuts.   For example, shopping for cheaper car insurance.   At some point, we ran out of the type of cost reductions that can be made with a change in vendor or a quick negotiation.  Further cuts required the sacrifice of Time or a change of habits.  If there was a TRUE NEED to cut another $1K per month, we could do it.   We had a few months where my half of the spending was actually that less than $2K.   But, making the cuts meant we had to give up time, or make a mindset change on what we value.   We're not there yet.   For example, we have a 20 acre property and large house.  It requires a LOT of time to keep the 4 acres of grass cut, the orchard trimmed, the many flowerbeds weeded and watered, the pool water crystal clear, and the house perfectly neat and clean.   We pay other people to help us.   I tried cutting down on the help and did NOT enjoy the results.   I like my weekends free, I have a really busy social life and when I give up fun time and work 7 days a week it makes me cranky.  A messy house and weedy yard makes me irritated.  I would rather work longer, and retire later than give up time now.   Of course, we could certainly downsize and live in a condo and we have discussed that, but at this point neither of us wants to.  However once I am retired I have NO problem with doing the housework and outdoor maintenance ourselves.  I will have 50 extra hours per week once I retire!

4. Past performance does not = Future performance!  When planning, I built in an assumption of 8% ROI based on some long term historical performance research.  Didn't get it.   At this point I have no plan for how i will retire before 65 if the market does not grow in value in the next 15 years.

(Clarification: Although I am part of a couple, I don't include DH's finances in this plan, because as a business owner, his retirement is tied up with the business value.  He may or may not actually 'retire'.  He may just fade away slowly as the next generation takes over...and take ongoing dividends/stipend as retirement income.  So my FIRE plan is targeted to cover roughly 1/2 of our household expenses.)

 

Wow, a phone plan for fifteen bucks!