Author Topic: Track expenses and reduce annual spending to 2% of liquid assets in 2016  (Read 11815 times)

Herbert Derp

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I finally became FI (annual expenses <= 3% of liquid assets) in December 2015. At least, I should be, based on 2014's spending. I was lazy and didn't track my expenses in 2015, though I estimate I spent around $8,500 due to a $3,300 special assessment on my condo. Thankfully, there shouldn't be any more of those this year. So for 2016 my goal is to track my expenses again and hopefully match the baseline of under $6,000 that I established in 2014.

Incidentally, if I can reach my goal of expenses of less than $6,000 for 2016, those expenses will probably reach 2% of my liquid assets based on how much I hope to save for the year. If I can achieve this, there is no doubt that I am FI! Let's do this!

Date:
01/01/2016

Liquid assets:
$212,857.16

Annual spending target for FI at 3%:
$6,385.71

2015 expenses:
~$8,500.00 (~3.99%)

2014 expenses:
$5,692.92 (2.67%)

On a side note, I am not sure how to include the special assessment in my FI calculations. Obviously my spending for 2015 was higher than my FI number of 6.4k, but I believe that the special assessment can be amortized over the years that I own the condo so that my average spending year to year is within the FI amount. There is a gap of about $700 between my fixed expenses and FI expenses, and that 3.3k special assessment can fit into the gap if you spread it out over five years. I do not expect to have such a significant special assessment more than once every five years, so it seems to work out. Anyway, once 2016 is up I aim to dispel any doubts about the status of my FI and be able to keep my spending below 3% of assets in any given year even in the event of a 3k special assessment.
« Last Edit: January 01, 2016, 10:30:55 PM by Herbert Derp »

arebelspy

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #1 on: January 02, 2016, 01:21:37 AM »
Congrats HD! 

Thanks the update.  A lot of us enjoy hearing about your frugal exploits.  :)
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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #2 on: January 02, 2016, 11:34:31 AM »
Impressive.  I like the expenses/liquid net worth metric.  Just ran the numbers for 2015 and the ratio came in at 2.7%, so I'm right on track for planned retirement later this year. 

Herbert Derp

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Three months have passed! Looks like a pretty good year so far for me. I'm curious to see whether I can come in under $5,000 for the year, although this seems unlikely because my food expenses have gone up slightly due to changes in the food available at work.

Date: 04/02/2016

2016 expenses
Code: [Select]
January:   $261.40
February:  $264.04
March:     $281.74

Average spend per month: $269.06
Estimated remaining one-off expenses: $1,475.36
Estimated annual spending: $4,704.08

FI numbers

Liquid assets:
$237,728.44

Annual spending target for FI at 3%:
$7,131.85

Projected 2016 expenses:
~$4,704.08 (~1.98%)

2015 expenses:
~$8,500.00 (~3.58%)

2014 expenses:
$5,692.92 (2.39%)
« Last Edit: October 01, 2016, 06:23:13 PM by Herbert Derp »

forummm

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Wow! That's ERE-level spending. Do you plan to continue at that level for the rest of your life? What does your spending breakdown look like?

Herbert Derp

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Most of my spending this year was HOA dues ($215/month) and utilities (~$30/month). My food spending is lower than normal because I am using a gift card I got as a Christmas present to purchase most of my food.

In retirement I plan to spend more, otherwise I would be retiring before I turn 30.

bigalsmith101

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Do you plan to continue at that level for the rest of your life? What does your spending breakdown look like?

You didn't answer the question. Though it seems that your not including the expenses that you are making as they were gifted to you. Can we have a bit more insight? It might be a good learning opportunity for those frugal enough to attempt your higher level of badassity.

stoaX

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Regardless of whether your spending is any of these numbers, $7,131.85, 4,704.08, $8,500.00 or $5,692.92, I am in awe and inspired to up my game!

Herbert Derp

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You didn't answer the question. Though it seems that your not including the expenses that you are making as they were gifted to you. Can we have a bit more insight? It might be a good learning opportunity for those frugal enough to attempt your higher level of badassity.

The only thing that is "missing" from my expenses for these first three months is food. I estimate that I would have spent about $100/month on food if I was completely on my own, didn't have my gift card, and didn't get some free food at work.

My gift card balance was originally $300 at the start of the year, now it is $188.85. So that's $111.15 of food spending over four months which was gifted to me.

Anyway, my monthly budget breakdown is like this:

$215 HOA dues
$122 property taxes (paid bi-annually)
$100 food
$30 utilities

That's about $470 per month or $5,600 per year. As I mentioned, I can usually get by without paying as much for food since I can get plenty of food for free, which brings my total spending down to what you see here.
« Last Edit: May 01, 2016, 05:08:16 AM by Herbert Derp »

arebelspy

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Herb Der is the extremiest of all the badasses.
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bigalsmith101

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Herb Der is the extremiest of all the badasses.

It would appear so!

For the sake of reasoning, I just did a bit of math myself. Were my wife and I to fully own a small house in our current area (30 miles north of Seattle) we'd have all necessary monthly expenses below $1000, including property taxes, food, utilities, etc. At first I though Herbert Derp was off his rocker, but I realized that were nearly in the same bracket! As for now, we tack $850/mo on for rent.

Do you employ social services for medical insurance?

The question remains: "Do you plan to continue at that level for the rest of your life?"

« Last Edit: May 05, 2016, 03:49:48 PM by bigalsmith101 »

ardrum

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Great stuff, Herbert Derp!  Great name too, hah!

I'm curious if you would mind sharing the general location where you live or otherwise how much you paid for your condo.  I'm currently living on $17-18k, but in the long run I'd like to cut this down further.  I'm currently renting, and even with a cheaper rent than my former place, rent consumes about 50% of my annual expenses (otherwise I'd be comfortably living on four figures/year).


soupcxan

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You have no insurance for either health or your residence? You never pay for transportation, not even a taxi/subway/bus fare? You never go to the dentist? You never buy clothes, even at a thrift store? You never travel? You never go to the movies? You cut your own hair? You never buy gifts for family members? You have no hobbies that involve spending a single dime? You don't eat out, even once a year?
« Last Edit: May 05, 2016, 06:53:39 PM by soupcxan »

Herbert Derp

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The question remains: "Do you plan to continue at that level for the rest of your life?"

As I mentioned before, no I don't plan to live like this for the rest of my life. I'd like to retire on a budget that allows me to freely move around the world, support a family of four, and live at at least the median standard of living in whatever country I want for as long as I want (yes, this includes all of the first-world countries). I'm pretty sure I can accomplish this for about $50-60K per year.

Great stuff, Herbert Derp!  Great name too, hah!

I'm curious if you would mind sharing the general location where you live or otherwise how much you paid for your condo.  I'm currently living on $17-18k, but in the long run I'd like to cut this down further.  I'm currently renting, and even with a cheaper rent than my former place, rent consumes about 50% of my annual expenses (otherwise I'd be comfortably living on four figures/year).

For privacy reasons, I'd rather not share where I live. But I will tell you that I live downtown in a HCOL city in the United States. I paid about $150K for my condo.

You have no insurance for either health or your residence?
My healthcare is paid for by my employer. Condo insurance is included in my HOA dues.

You never pay for transportation, not even a taxi/subway/bus fare?
Nope.

You never go to the dentist?
Covered by my health insurance.

You never buy clothes, even at a thrift store?
The last time I bought clothes was over three years ago. I spent maybe around $1,000. They are still going strong and I expect them to last for many more years. I get tons of free t-shirts from various activities. I occasionally get one or two articles of clothing as a gift.

You never travel?
For the last two years I spent roughly $200-$300 per year on travel. This year I'm traveling free due to credit card churning.

You never go to the movies?
I go once every month or two, but it's only for free advance screenings. I don't watch much movies or TV.

You cut your own hair?
No. I pay, but I only cut my hair about three times a year. It's $10 per haircut so that makes $30 per year.

You never buy gifts for family members?
I only give free gifts.

You have no hobbies that involve spending a single dime?
Nope, I don't spend money on hobbies, unless you count food for my pet which comes to about $100 per year.

You don't eat out, even once a year?
In the past 12 months I'm pretty sure I've spent less than $100 eating out, and about half of that was because I was stranded for a few days without access to a grocery store. This year, I've not paid for any food at restaurants. In fact, the only two items I've paid for at restaurants this year were one glass of cider and one cup of coffee, totaling about $10. I do get to eat out at least once a month, but it's mostly work related and I never have to pay for it.
« Last Edit: May 05, 2016, 11:44:01 PM by Herbert Derp »

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Commenting to follow.

Herbert Derp

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The year is half over! It seems I've already reached my goal for the year, I guess I wasn't ambitious enough...

Date: 07/18/2016

2016 expenses
Code: [Select]
January:   $261.40
February:  $264.04
March:     $281.74
April:     $997.10
May:       $307.39
June:      $276.93

Average spend per month: $398.10
Estimated remaining one-off expenses: $737.68
Estimated annual spending: $4,777.20

FI numbers

Liquid assets:
$310,073.56

Annual spending target for FI at 3%:
$9,302.21

Projected 2016 expenses:
~$4,777.20 (~1.54%)

2015 expenses:
~$8,500.00 (~2.74%)

2014 expenses:
$5,692.92 (1.836%)
« Last Edit: October 01, 2016, 06:23:36 PM by Herbert Derp »

Zamboni

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Looks like you've made it. Congrats, and you are my ultra-frugal idol!

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The year is half over! It seems I've already reached my goal for the year, I guess I wasn't ambitious enough...

Huh?  How could you have reached your goal (spend <2% of liquid assets)?  We're only halfway through the year.  You're on track to reach it (at a projected 1.54%), but how could you have already reached it (except in a negative way, i.e. already spent over that, which you haven't)?  Or was there another goal I missed?
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Herbert Derp

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Good point. Although I'm pretty confident about my projections, I guess I'm counting my chickens before they hatch. We'll see where the rest of the year takes me, although at this point I'd say it's pretty much a foregone conclusion that I'll hit my 2% spending target.
« Last Edit: July 19, 2016, 03:46:03 PM by Herbert Derp »

arebelspy

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Cool.

Well I'm crossing my fingers no major expenses come up then.  Either way, your spending is incredible, as always!
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soupcxan

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Maybe I am too skeptical but I don't see how you can be FI when your budget can't cover health/dental insurance and out of pocket healthcare costs without your job.

Also, I'm not sure how someone can plan to live another few decades with literally $0 budgeted for all of the following categories: eating out, transportation, travel, clothes, books/movies/music/entertainment, hobbies, home or cell phone, internet, cable or netflix, gifts, hair cuts, donations, large item maintenance/replacement (e.g. household appliances, furniture, mattress, laptop, bicycle, etc.)

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Soupcxan, HB did note that he has 310k in liquid assets, which gives him 12,500/year at 4%. He's got some room for lifestyle inflation. He also said he's saving for a 50-60k/year budget later in life.

I have no desire to emulate your spending HB, but it's cool to see it all laid out.

Herbert Derp

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #22 on: October 01, 2016, 06:15:53 PM »
Another quarter down. Looks like I'm zeroing in on annual spending of $4,800 for the year, which is only about $100 off from the $4,700 that I predicted at the beginning of April. Note that the higher spending in April and September is due to bi-annual property tax payments. Hooray for predictable expenses!

Date: 10/01/2016

2016 expenses
Code: [Select]
January:   $261.40
February:  $264.04
March:     $281.74
April:     $997.10
May:       $307.39
June:      $276.93
July:      $292.76
August:    $285.62
September: $1,021.66

Average spend per month: $443.18
Estimated remaining one-off expenses: $0.00
Estimated annual spending: $4,808.40

FI numbers

Liquid assets:
$354,759.57

Annual spending target for FI at 3%:
$10,642.78

Projected 2016 expenses:
~$4,808.40 (~1.36%)

2015 expenses:
~$8,500.00 (~2.40%)

2014 expenses:
$5,692.92 (1.60%)
« Last Edit: October 01, 2016, 06:23:43 PM by Herbert Derp »

arebelspy

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #23 on: October 01, 2016, 08:08:21 PM »
What's your end game?
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Herbert Derp

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #24 on: October 02, 2016, 01:15:22 AM »
My end game is still to retire at 35 with about $2MM net worth. After that, who knows. But I should be able to do pretty much anything I want.

arebelspy

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #25 on: October 02, 2016, 02:48:26 AM »
My end game is still to retire at 35 with about $2MM net worth.

Why?  Why 2MM?  Why 35?  Why not 30, with 1MM?  Or 26, with 350k?  Or 50, with 5 MM?

If you're going to be working another 9 years, what's the motivation?  ("I don't mind work" is not a reason to continue to do it.)  If you're going to be working another 9 years anyways, why keep spending so little?  If you like spending so little, why save so much?

Quote
But I should be able to do pretty much anything I want.

What is there you want to do that you can't now?

I'd challenge you to think more thoroughly through your life, and plan.  Seems like you're drifting along, with real potential to have wasted time you may regret.  You're clearly pretty badass, but are you putting it to the highest and best use?  :)
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Herbert Derp

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #26 on: October 02, 2016, 04:01:24 AM »
I guess the way I think about this is that I've made a sharp delineation between the "accumulation" and "retirement" stages of my life. In the accumulation stage that I'm currently in, I'm able to accumulate money much faster than any other method known to me. However, I am not able to live the life that I ultimately want to live in retirement because of being stuck in one city and a lack of free time due to working. But if I quit my job now, I won't be able to afford the retirement that I desire. And if I can't live that life, then I might as well continue working and spend nothing.

I haven't figured out any way to compromise and start living my retirement life sooner, since most of the things I want to do in retirement require the time commitment of a full-time job but would drain my nest egg rather than build it. With the assets I currently have, I do not feel financially secure diving into a radically different lifestyle where I lack a stable income. In any case, I'm still very young and have only been working for four years, I don't see any need to change up my life when I can continue working for a few more years, make a ton of money, and still retire extremely early in my 30's. And honestly, I need some more time to sit back and ponder what I actually want to do with my life because I still haven't made up my mind. Right now, my retirement ideas are very heavily focused on experimentation, but maybe they will crystallize more over time.

arebelspy

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #27 on: October 02, 2016, 04:13:10 AM »
And honestly, I need some more time to sit back and ponder what I actually want to do with my life because I still haven't made up my mind.

And when do you plan to do this?  The years will pass quicker than you think. And suddenly you'll have choices to make, without having done the proper thought or analysis.

Not to mention even if you do make a decision, often the transition takes time (in which the stache piles up even more), so making ti earlier rather than later can be beneficial, to plan in this transition time.

I mean, you still have time.  But there's no time like the present.  Thinking about when to think about this stuff may be important.

Quote
Right now, my retirement ideas are very heavily focused on experimentation, but maybe they will crystallize more over time.

And all of this experimentation, ideas, or activities are reliant on being full time, i.e. having no job?  None can be done on weekends, evenings, vacations, etc. etc.?

In other words, your spending is great.  But to shift from 0 to 80k spending (or whatever) seems odd to me.  If there's some things you might like to spend on later, not doing it now can make sense on some of them (something that would require you being in another country, for example), or not spending on things you don't care about (say, eating out) always makes sense.  But not spending on something you want just to live ascetically when you'll be spending more later?

Spend based on your values, and if your values change, sure.  And acquiring more to not HAVE to live like this is smart.  But don't hold back now, necessarily, or deprive yourself.  Looking back and feeling like you.. not exactly wasted your 20s and early 30s, because you did make great financial progress..but maybe that you didn't take full advantage of them due to solely focusing on financials would be a bummer.  You're only young once, so to spend age 25-35 spending 0, doing no other hobby spending, very limited travel, etc. just to amass 2MM and spend a lot more... well, you may find yourself wishing you did it a bit different in that 25-35 decade.  You could still hit 1MM by 35, or 1.5MM, or whatever, even loosening a bit.

So if you're 100% happy with your spending and activities, great.  More power to you.  And I'd think for many ERE people, this would be the case.  But in your case, with the future plans to ramp it up, my question becomes...why not do a little of that now?  Living as you are is awesome.. if that's what you want to do (especially indefinitely).  If you have dreams of something else, it may be worth trying to have some of those dreams now, rather than waiting.

I feel like I rambled a bit, I was struggling to get my point across, but hopefully some of that made sense.  :)

Some stuff to think about at least, maybe.
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Herbert Derp

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #28 on: October 02, 2016, 08:09:19 PM »
I think about this stuff every day, believe me. Compared to a year ago, my ideas about the future have evolved significantly. Anyway, I do have a definite road map of the things I want to focus on over the next few years. Right now, my career still hasn't matured to its full income-bearing potential, and currently my main focus is to cultivate that. This involves regularly working late into the evenings and on weekends, which leaves me relatively little quality free time to invest in other pursuits. Besides working, the only other activity that I currently devote a significant amount of time to is exercise, because it's crucial that I do not sacrifice my health. I don't really see this as a sacrifice, I do enjoy the day-to-day activities of my work and derive a lot of satisfaction by advancing my career. Every bit of wealth that I accumulate during this stage will remain with me and pay dividends over the rest of my life.

Of course, given the limited length of my career, I do see it reaching a point within about three years where further advancement becomes unrealistic. Once I reach that point, I will shift some of my energy away from my career and focus on other areas of self-improvement. I might start dating or taking classes at one of the local colleges / universities. I am determined to live according to a constant cycle of self-improvement, and if I feel that I am stagnating then I will definitely try to change something. I guess what I've realized about myself is that I derive a lot of satisfaction from self-improvement but actually seem to regret time spent on "frivolous" activities that don't have any specific end goal. So I am perfectly fine with pouring 80+ hours a week into focused, objective-based tasks while devoting only a handful of hours towards leisure activities such as hanging out with friends, reading, or playing video games.

There was a period of years where I spent many hours a day on leisure activities, but I found that this actually led to increased boredom and dissatisfaction with my life. After having left that behind, I can honestly say that I feel much better about the direction I'm heading in. So, my prior post was actually a bit of a misrepresentation about how I am living my life. I realized over a year ago that it was untenable to pin all my hopes on a future retirement life ten years into the future, and put my present life into cruise control. Without a sense of forward progress, I will become bored and depressed--and what I realized was that forward progress is best felt as "acceleration," rather than "velocity." As we all know, sitting still in an airplane seat still feels like you're going nowhere, even if you're actually traveling at 500 MPH. My life will be empty without any sense of improvement, and the accumulation of money in my accounts does not seem to provide that, even if it's to the tune of 150K a year. I can however, derive this same feeling of "acceleration" from advancing my career, improving my health and fitness, or learning new skills.

Anyway, I hope this gives you a better sense of what I've been doing. And don't get the wrong impression, I really appreciate that you challenged me. Challenging myself or being challenged by others is the best way to force myself to rethink things and achieve the self-improvement that I desire. There is a famous quote: "Happiness is the feeling that power increases - that resistance is being overcome." I guess this is one of the mottoes by which I live my life.
« Last Edit: October 02, 2016, 08:14:17 PM by Herbert Derp »

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Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #29 on: October 02, 2016, 08:29:38 PM »
Sounds good.  I'm glad you're thinking about it, and realizing what does, and doesn't make you happy.  Continual personal progress is a great goal.

It'll be interesting to see your thoughts evolve over the next year, five years, ten years.  I'm glad you typed that out, I think it'll be interesting to look back on.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Herbert Derp

  • Bristles
  • ***
  • Posts: 495
  • Age: 29
  • Location: United States
Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #30 on: January 01, 2017, 11:30:18 AM »
The year is over! Looks like I blew through my goals and at this point I'm pretty sure I'm FI.

I've started a journal, go here to read about my progress over the next year:
http://forum.mrmoneymustache.com/journals/herbert-derp's-frugal-adventures/

Date: 01/01/2017

2016 expenses
Code: [Select]
January:   $261.40
February:  $264.04
March:     $281.74
April:     $997.10
May:       $307.39
June:      $276.93
July:      $292.76
August:    $285.62
September: $1,021.66
October:   $234.73
November:  $271.76
December:  $250.13

Average spend per month: $395.44
Total annual spending: $4,745.26

FI numbers

Liquid assets:
$390,341.71

Annual spending target for FI at 3%:
$11,710.25

2016 expenses:
$4,745.26 (1.22% of liquid assets)

2015 expenses:
~$8,500.00 (~2.18%)

2014 expenses:
$5,692.92 (1.46%)

Metric Mouse

  • Walrus Stache
  • *******
  • Posts: 5299
  • FU @ 22. F.I.R.E before 23
Re: Track expenses and reduce annual spending to 2% of liquid assets in 2016
« Reply #31 on: January 01, 2017, 02:06:18 PM »
good work! thanks for the update.