Monday, February 25, 2019

Hitting a Moving Target

Hitting a Moving Target
It is weird to think that this blog is over six years old now. Back when I was starting out in 2012, I was only 32, had only recently started getting interested in financial independence and early retirement, and with the fervor of the newly converted, thought I should be able to knock out that goal in eight years.

Mrs. Done by Forty and I were newly married and still didn't know whether we wanted kids in the near future, or at all. We were living in our first house, a true fixer that was originally a two bedroom, one bath with odd additions for the third bedroom and second bath. We were renting out a room to help pay the tiny, $104,000 mortgage. Looking back at our old budgets, we were frugal. Our annual spending barely tipped over $30k, after we had the mortgage paid off.

I figured retiring by forty would be pretty achievable.

But a lot's changed over the past six years. 

Baby AF is now in our life and is amazing, if a little costly. We are also talking about having a second baby, with all the joy and stress that entails. Suffice it to say that thirty two year old Brian did not seriously consider whether a child or two might have an impact on that sub-$40k a year budget he was rocking back in 2013.

Turns out, kids cost money. Take health insurance: even the kind with a high deductible, ends up costing us a couple extra thousand a year, when you add a human that the company isn't subsidizing, as they do with an employee. 

And maybe I'm just not as frugal as I thought I was, but our budget seems to be swelling a lot from things like, oh, I don't know, meeting our out of pocket maximum for medical costs. And we're about to spend a couple thousand putting a fence around the pool, just in case Baby AF decides crawling in there would be a good idea.

There's the regular stuff, too: diapers, random doctors visits, toys and helpful-baby-raising doodads that we buy from time to time. Oh, and that whole saving-for-college thing: turns out, not free.

Maybe we're doing this all wrong. I hear from bloggers that kids cost little to nothing: are they all lying to me?

Why are they lying to me?

But in the Done by Forty household, this extra person now living in our house is not "only as expensive as we make him". And I have a sneaking suspicion that this next baby might also decide to cost money to raise and insure and feed, and he probably wants to go to college, too, the selfish little prick.

We also moved into a home that's almost three times the cost of the little house we bought in 2010. I'm a little ashamed to admit that this was a pretty emotional decision, not one based on maths. We were planning to start a family and just knew, based on our history of living in a fixer-upper for seven years and fixing literally nothing, that we weren't going to get our old house renovated while pregnant, or when there was a little human crawling around.

So we did the costly thing and bought a flipped house: one (we thought) we wouldn't have to do anything to. Good schools, good neighborhood, reasonable taxes, all that jazz. The rub is that it's a good example of how not to buy a house: one that someone else flipped and made a profit on, and it just happened to be the most expensive house on the block. 

I mean, we love the house, it's just what we were looking for; and the dogs love the yard and the pool, and I'm sure Baby AF will, too. But changing your mortgage payment from $600 a month to nearly $1,500 sure does have an impact on your FI plans, especially when you don't really think it through enough ahead of time.

Who knew impulse buys could be in the six figure range?

The third big thing changing our FI plan is Mrs. Done by Forty's work plan. The PhD program being what it is, our initial timeline for when she'd graduate proved to be optimistic by a couple years. And now that Baby AF is here, some other options are on the table. She might want to work full time (ideally at home at least some of the time), she might want to work part time (again, would love to be at home), or she might just not work at all for a while, choosing to just spend this time with Baby AF.

I'm trying to be a good partner and not weigh in on this, because these are her career decisions. We talk about this stuff together and, sure, whatever work decision she makes would impact our FI plans. But I'm cool with any of the options: they all could be great in their own way. Baby AF is adorable and apparently is made entirely of skin rolls, so I get the appeal of chilling with this rolly polly instead of commuting to an office.

But career satisfaction and, you know, money, are good, too. 

Hitting a Moving Target

There are a lot of different career paths she could go down, and I think all would come with the satisfaction of doing good work and helping the world a bit. And, you know, there's the money and the sweet, sweet tax deductions that come from a 401k. With two full time incomes, we'd reach financial independence a lot earlier, to boot.

Regardless of which path she takes, it's tricky to plan for FIRE without knowing what our income or our costs will look like.

I finally added up the costs for all the months at the end of 2018 that I was too busy and stressed to document earlier, and our budget apparently swelled to a mind-boggling fifty three thousand dollars last year, by far the highest annual spend on record.

Should I plan for this figure to be our new reality, with the new, bigger mortgage and the baby that probably will continue to need health insurance and food and whatnot?

Or should we plan for an even higher figure, since there might be another person in the mix sooner rather than later? Because it might be hard to be done by forty if we need to plan for an annual spend that starts with a five or a six, instead of a four. 

And without knowing whether our income is going to go up or down, how should we make projections? 

Here's what the Mad Fientist's laboratory predicts for our financial independence plans, based on the last twelve months of our ridiculous spending, which includes a very scientific trend line, that I definitely did not just draw on there haphazardly in Microsoft Paint.

Hitting a Moving Target

Despite the undeniable increase in spending, the maths say we can still reach financial independence by the time I'm forty. I have some doubt about the projection, but apparently we are still on track. (Though the lab is currently assuming a 4% safe withdrawal rate that we may never feel is safe again, thanks to Big ERN.)

More to the point, being about two years out from the goal, I'm starting to get some feels about the impending deadline. Thanks to thirty two year old Brian thinking it was a great idea to put a hard deadline in the name of his blog, I sure feel a lot of pressure to actually be done by the last day I'm still forty.

But that dumbass didn't know he'd be having a kid or two. Or a new house. Or that Mrs. Done by Forty might take a bit longer to leave the PhD program, and might want to stay home with those kids he didn't know would exist. Why didn't that jag leave me more wiggle room?

There are going to be some serious feelings of failure if we don't hit the goal, and it will be a pretty public failure, too.

The rational side of me says that it's not a big deal. Pulling the plug at forty one or forty two will be just fine. Great, even. Life is going to have changes and that means plans have to change, too.

Still, I want the feeling of hitting the goal. I want that feeling of accomplishment and maybe even fame, my precious quasi fame, that comes with retiring early. The bad parts of my psyche, the parts that want to impress others and want to seem like a winner to people on the internets, is scared of what it will look like if I don't make the goal.

What will people think then?


*Photo is from JeepersMedia at Flickr Creative Commons.

45 comments:

  1. I completely understand your position. I discovered the FI world at 22. I'm now almost 29, and I do feel like it's been a moving target...
    I get why some people get discouraged and give up. We, also, don't know if we will be having kids. And if we do we will be in our mid 30s.

    But I remind myself that being FI at 40 or 41 or 42 or 43 is so impressive. Even if I don't exactly hit the goal at 40.

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  2. On the house, we, also, moved to a new build....it was expensive ($300K) for an 1800 sq. ft house. Love the house.

    But I think I may not have made the best choice on location....I would love to live closer to the city, but an 1800 sq. foot house would be $100K more....

    I don't want a big house, but I do want a great location.

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    1. Hey there, SFL. We obviously changed our minds on our house at least once. We decided not to compromise on the house or the location, and so we ended up paying a lot more. :/

      Like you, our plans changed a lot and we ended up having our first kid when I was 37 and Mrs. Done by Forty was 31: way different than the plan was six years ago...

      With all the changing plans, I wonder sometimes if a whole lot of wiggle room is needed just to allow for the big changes we'll institute in our 40's 50's and 60s...

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    2. I think eventually we will ending up changing our minds about the house. But for now, we are staying put.

      I am on the side of more wiggle room. If you look at my FI net worth target, it's a very conservative number. But there are so many changes (kids, elderly parents, etc)....that I rather build buffer.

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    3. Agreed -- that's our approach as well. I'd rather have a bit too much and have the 'problem' of having to spend a bit more than having too little and be forced to spend less.

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  3. All my empathies. I try not to think of the ohhh roughly $60-70,000 we've spent on childcare plus the other $50,000+ on saving for college.

    On top of that, THE HOUSE. We more than tripled our mortgage. I'd just refinanced to under $1000 a month at the old place and went to well over $3000. O_O

    Needless to say, I couldn't even commit to any FI number/target age in the past few years because things were just too wonky. I still don't know what our number is going to be and I have more thoughts on that bubbling up.

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    1. Hey Revanche,

      I didn't even factor in daycare. That's five more figures a year, easy.

      My wife is from the Bay Area so I have a little appreciation for what mortgages are like there. Helps put my little mortgage in perspective.

      Thanks for sharing that I'm not the only one who's not entirely sure of the FI number or target date. As always, I'm not alone...

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    2. This is part of why I hesitate to project an FI date. I don't know that there will be any time where are expenses are higher than they were the last couple years (infant daycare) but who knows? Our date is far enough away that there wouldn't be any precision in the projection anyway.

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    3. We're in the same boat it seems, JP. These early days of parenthood might be outliers, or they might be our new reality. Like you say...who knows?

      I think this may just be an extreme version of a tricky problem for any FIRE adherent: the fact that there's some uncertainty that the future will cost as much as the present.

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  4. If you need to take the pressure off, GoDaddy says that donebyfortysomething.com is currently available. Just sayin'. =P

    With kids and health insurance though, at least with our plans - the first kid adds to the premiums, but not the family deductible or out of pocket max - those are same as EE + spouse. The second kid adds nothing to premiums, and nothing to the family deductible or OOP max. There'd be additional copay costs, but if you're already hitting deductibles/OOP max, the max costs would stay the same.

    Not that we're planning on a #2 at the moment... =P

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    1. Mrs. PoP! Donebyfortysomething might be one for me to scoop up preemptively...

      That's a great point about the second kiddo not adding to the premiums.

      I'm hoping we'll only hit the out of pocket maximums on the year the kiddo is born, but I suppose it might not be true every year. Fingers crossed.

      And congratulations, just in case. ;)

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  5. Kids. Ahhh. Yep, we're in the same boat. It's the house thing for us, too. Because you gotta be in a good school district. We could have moved to a nearby town and paid a lot less for our house, but by living in Davidson, we're in the best school district for the kids. So there's that, on top of daycare and college savings. Then come sports and lessons and toys and birthday parties. I love having two, though, and I feel like it doesn't add that much to our total costs (although I'm sure it does). My boys are best friends and man, that is great to watch. They're also best enemies, not so fun to watch. :) Retire when you retire, or not. I don't think people care about the hard and fast deadlines as much as you do. In the end, it's your life that you're living, not reading about, so you have to make the decisions that make the most sense for real-life Brian. Good luck! I love reading about it, whatever you decide.

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    1. Hey there, Laurie. It's nice to hear that other PF bloggers are making similar choices re: schools & the housing costs associated with that.

      Mrs. Done by Forty and I both had siblings growing up and we're leaning towards trying to have the same family set up for Baby AF.

      And it's good to know others might not care about the date as much as I do. I need a healthier perspective on that.

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  6. At least your blog entry on your 40th birthday will be easy:

    "And I would have gotten away with it too, if it weren't for you meddling kids"

    This topic is a part of each FI journey. Take those original projections and add X% because life happens. It would be interesting to hear how others have handled the moving target (e.g., work more years, coast with part-time work until FI, buckle down and move the target back, etc.).

    The other part of the equation is that 32-year old Brian had no idea what your current life/spending would be like. How confident can you be that 40-year old Brian has good projections? Enter the OMY syndrome...

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    1. LOL at the Scooby-Do reference, Adam.

      And I have absolutely no idea that my 40 year old projections will be any better than my 32 year old ones. Maybe they'll be worse.

      I think that's where the one more year syndrome comes from: an acknowledgment that you can't accurately predict spending over a multi-decade run. Wiggle room and extra savings can mitigate those risks a bit.

      I think cutting it too fine and retiring with just enough to cover the 4% rule is perhaps asking for trouble (or at least requiring some extra income along the way).

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  7. Brian!

    Don't give a fudge about what people think on the internet!

    Any sane person will understand that your goal of 40 was an arbitrary one and that life happens and things change. Any long term readers will be aware of the changes and you've kept us all in the loop so will not be surprised or disappointed or angry (quite the opposite and we're all rooting for you of course!).

    I get it though. I often have people chime in who've literally just read the first post on my blog and are like "why aren't you retired yet" - dude, read 5 years worth of posts and come back to me. It's all there! Haha.

    What is quite spooky is I think our spending has matched very very closely each year but mine in £ of course. I'm pretty sure we spent £53k last year! Wonder if the trend continues?!

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    1. Hi there FireStarter!

      There's a rational side of me that knows I shouldn't care what people think. But then there's the pesky reality that I do, and I think that's just part of who I am.

      And I want to say thanks for being such a long and consistent supporter of the blog, friend. I really do appreciate it.

      It is kind of neat that we're in lockstep in our spending. Maybe if you cut your spending way down, then I'll reap the benefits?

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  8. Lol, I think retiring anywhere in your 40's still counts. I've moved my finish line so many times. Hopefully by 50 otherwise it's not really early anymore.

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    1. Hi there, Daizy.

      I think it's early any time before 62, honestly. Heck, even Social Security calls 62 early, so maybe they're on to something.

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  9. Of course you are going to care what people think, even people who you never met, that's totally natural. The bigger question is did you actually fail at anything at all?

    There is a maxim in business that goes something like, if you have never failed you weren't trying hard enough. There is nothing wrong with setting a hard but achievable goal and then doing everything you can to make it happen. But ultimately if you don't make it, you can't beat yourself up over it, just learn what you did right and what went wrong and improve next time.

    There are two people in this world, the first are the people who have tried to be FI early, some failed and some succeeded, but either way they realize how hard it is and will appreciate the effort you put in and the decisions you've made.

    The second type are those aspirational people who look up to you as a proxy for what they wished they were doing but never tried. Those people will be upset, perhaps, but don't have much skin in the game so who cares really.

    Lastly, aiming high and missing is better than not aiming at all. Regardless of whether or not you hit this arbitrary number by an arbitrary day is irrelevant. What is important is that you have focused on your finances, that you have not spent frivolously, and that as a result you and your family don't have to worry that you will starve if you miss a paycheck. There are unfortunately few people in the world that can say that, and you should be proud to bring kids into this world with parents who have the toolkit to help them also achieve a financial safety net.

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    1. What a great comment, Nelson.

      I like the concept of a stretch goal but, at least when I've encountered them in a business setting, I've found them to be more annoying than typical goals. I guess I'm finding that to be the case in my personal finance experience as well.

      Though like you said, maybe I'm getting better results with this sort of goal than I otherwise would...opportunity benefits?

      I really am blown away by all the kind sentiments and you're correct that I should be thinking of the millions of little ways that I should feel grateful, just constantly grateful, instead of nitpicking about the one way I might not be doing as well as I thought I should. Thanks, Nelson.

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  10. Should I start referring to you as Done By Forty...ish? ��

    The comments about kids not being expensive absolutely drive me nuts. Besides daycare, college, feeding him (and his friends that come over), needing more tickets and space when we travel, etc etc etc.... there’s also the fact that I cut my hours and with it my pay by 20% to have more time with him. Turns out it was a good plan regardless of the kid thing, but it sure means I’m giving up a LOT of money to do it (full time would also mean larger raises etc so it’s really more than a 20% swing). We’re only having one, but no, a second one still costs a heck of a lot more, no matter what people say about economies of scale.

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    1. Hi Angela. I really might go buy a few donebyforty-ish sounding urls, just in case.

      A 20% cut in income (plus any other hypothetical opportunity costs) surely has an impact on any FI plans. Like you said, cutting back on hours can be a great thing for life, with or without kids. But we don't need to pretend these decisions aren't costly. I, too, get peeved with the "nothing I do has any costs or repercussions" type of attitude that's rife in frugality blogs.

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  11. Personally, I think you can still call yourself "Done by Forty" if you hang up your hat the day before you turn 50. Forty is an entire decade, not just a single year.

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    1. I like that idea, Emily. I get a whole nother decade!

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  12. Babies are sooooo selfish. Wanting to be fed and clothed and insured all the time. Like you don't have better things to do with your money! Well, given the love you feel for a kid, you probably don't have better things to do with your money. But abstractly...

    Sorry that you're having to rethink your target. It's gotta be disheartening, but just know that no one is really going to care if you're not done by 40. Your readers will be cheering you on the same. Or you could just pull a stereotypical female move and lie about your age...

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    1. You might be on with that whole lying about my age business, Abigail. Suddenly being 35 again has a whole lot of benefits, and not just for the blog. Hmmm.

      I appreciate the kind words and the perspective. As always, I am probably more anxious than I need to be, and it's a good reminder that people are generally kind & forgiving, even if they don't seem that way in my head sometimes.

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  13. Awesome read, I love following the thought process. I totally get the internal pressure, made worse by the name. But as you said, life does change and throws curve balls at you. We will forgive you if it takes an extra year or two, you're still WAY better off than the average bear.

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    1. Thanks, Budget Epicurean! Back in 2012 there were so many good names (and Joe already had the moniker of retired by forty). I could have gone in another direction.

      As you said, better to focus on the big picture: even if we miss the goal, we'll still be just fine and way, way better than the average person, who is probably rolling her eyes at my whining. ;)

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  14. I completely understand this. My wife and I just adopted a little baby boy. And we love it, but the costs have now got me thinking otherwise (I should probably blog about this). For example, the house that we have we can pay off in 5 years and we could get close, but the school district is not good. So we want to move to the next town over where houses cost about 30-40% more for just the square footage we have now (and it is a fairly small house by American standards...1300 square feet).

    Additionally, because I am older I am wondering if we should sock money in a Roth IRA and then cash flow his college out of that. I will be in my 60s by the time he graduates from high school. But I also dream of stopping work in my early 50s to spend more time with him. But because of extra housing costs, potential college, and more stuff that will cost him I am actually just thinking I may work until I am 60.

    The good thing is I love my job (I also have a Ph.D.). I am not sure if your wife is considering the college professor thing, but the work life balance is pretty darn good.

    We are not in a bad position, but I am not sure my FI number will be enough when we hit it (hopefully) in 5-7 years. I might have to up it a bit.

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    1. Hi there, Jason.

      Congratulations on your adoption! That's amazing and is something I've long thought about. I imagine the costs are much higher with adoption, yes? And yes, I think that could make for a very cool blog post that would help a lot of people.

      Schools played a large role in where we selected a home and, as in the situation you're planning on, the neighborhood is pricier than our last one, too.

      We went the route of a tiny amount in a 529 and the rest in a taxable account, but could see how a well thought out Roth plan could also be very good, and indeed much better than a taxable account.

      The professor route is on the table but I'm not sure she wants to go that route, as getting tenure is such a competitive thing and would probably necessitate a move. It's definitely an option but I'm not sure it's the favorite. That work life balance sounds good though

      We've upped our FI number, too: that seems to be the trend over the past few years. The more I read about this stuff, the more cautious I get with our figures...

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  15. Kids always change things no matter how hard you try for them not to. They change your priorities, your focus, your future plans, your spending requirements etc! But they are worth it as you are already finding out.
    Whoever said kids aren't expensive obviously didn't have to work (and pay childcare) or pay for healthcare. You can of course make them less expensive by adjusting your lifestyle to one where costs are reduced but you'll need to discuss with Mrs DB40 first :-)

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    1. Ha! Yes, we'd definitely need to discuss with Mrs. Done by Forty first, Tuppenny. :)

      I agree that kids definitely impact spending and those who say it didn't usually have some very unique circumstances (i.e. - no daycare because they have family who work for free, or perhaps they retired early before kids). Even then though, the healthcare costs (insurance, sure, but also the fact that medical care for 4 people is more than the cost for 2) is always going to be there, I don't care what your plan is.

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  16. The baby is a blessing, you'll still hit the target, even if a year or two later.

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  17. Kids change everything don't they? No pressure on reaching FIRE at 40...it's a nice round number but does it really matter? That's the think with FIRE, so many variables when there is a spouse, kid, possibly more kids, etc. It's a flexible FIRE plan and I'd be proud of all that you've accomplished at this point.

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    1. I hear you, Andrew. That's a healthy mindset and one I should keep pushing to have when thinking about these goals.

      I've unfortunately been a person who's not great at dealing with not achieving goals...but maybe getting a new mindset should be a new goal of mine. ;)

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  18. I wouldn't worry about it too much. We all have to do the best we can. Our budget swelled from $30k/year to $60k/year since I retired in 2012. That's including housing. We were living too lean in 2012 in my big push to retire early. Now, we are at a comfortable level and should be able to hold the line here for many years. Life changes, though. Who knows what's going to happen next?
    Our expense didn't increase much due to our son. We still live in a small home and he doesn't eat much. 2 kids would make a big difference. You'd need a bigger home, for sure.
    Good luck!

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    1. I've found that our budget has swelled a bit, too, Joe. I sure hope our current house will work for two kids but I guess we'll find out!

      I think deciding whether to pay off the house or not will probably have some (specious) positive impacts on our budget. Our annual spend will reduce by a whole hell of a lot...but it's primarily because we took a pile of money and paid off our mortgage debt.

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  19. "Thanks to thirty two year old Brian thinking it was a great idea to put a hard deadline in the name of his blog, I sure feel a lot of pressure to actually be done by the last day I'm still forty."

    Haha, it ain't no thang. It's your life and your story to write. You'll know when it's time to pull the trigger. Nothing else matters.

    I stayed after my self-imposed deadline (gasp!) and then Mindy went back to work (gasp!!). No one cared. Well, some cared about the latter, but I didn't, so whatever.

    Putting deadlines on something that is largely controlled by Mr. Market is kind of silly anyway. I'm looking in the mirror right now. Hello Mr. 1500...

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    1. Thanks for that encouragement, Carl.

      It's interesting that people didn't mind your deadline (or staying later) but they had thoughts on Mindy going back to work. I have a feeling the internet might have thoughts about Mrs. Done by Forty going back to work, too.

      And like you said, it's mostly in the markets hands right now.

      Realizing that we both have time limits in our blog titles. I'd say great minds, but...:)

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  20. This is a powerful post with a lot of useful takeaways and great reflection. Even if you don't meet your goal, think of how much further ahead you are by even trying! As a 32 year old starting their blog this year, contemplating having a second child, and really into the idea of providing well for my children, the work you have put in as writers won't go overlooked (even if you don't retire at the perfect age you had in mind). Be kind to yourselves!

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    1. Thanks, Savvy History!

      I do need to remember to be kind to myself. I'm generally not. :/

      I highly recommend starting blogging at 32, though.

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  21. This is a great post. You had a goal of being FI at forty and you tried your best to achieve but circumstances get in the way like a baby and buying a new home. No shame in that because you made the effort and it sounds like you could achieve FI a bit later from forty. That's better than a lot of people.
    I want to acheive FI myself but with a three year old and another one on the way along with a looking to buy a home in the Bay Area, I will put FI on the back burner until we settle down with a home and see how our finances are. After that, hopefully I will have a target date for FI at that time.

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    1. Thanks for writing Kris and my apologies for not seeing it earlier! I often miss the updates for blog comments.

      Sounds like you have a lot of the same hurdles to FI that we did, but you have the extra hard hurdle of trying to do them in the Bay Area (where Mrs. Done by Forty is from). I think you have a good plan: once you get settled with those goals of home ownership and children, then you'll have the figures and trend line needed to plan out FI.

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