Sunday, February 23, 2020

A Little Past Financial Independence

Before we dive in to this week's post, I wanted to mention that I was a guest on one of my favorite podcasts last week: Jamila Souffrant's Journey to Launch.

I've been listening to Jamila's podcast for while and it was such a cool, surreal experience to get to chat with her. (Though like everyone else, I hate the sound of my voice, so I had to listen to the episode in five minute chunks before hitting pause and berating myself for sounding the way I do, and for letting inane thoughts fall out of my piehole.)

Jamila and I talk about financial independence (what else?), specifically digging in to whether financial independence is possible for everyone and anyone, education, debt, and a lot more.

Here is the link to the episode. And if you're not listening to Jamila's show yet, go ahead and add it to your podcast rotation. You won't be sorry.

And now back to our regularly scheduled program.

I like taking stock. I'm a planner, and Mrs. Done by Forty is, too. We like going over our plans together, and seeing how we're tracking towards the goal.

As we're approaching our financial independence number (or perhaps we've technically passed it if we use the 4% rule) I keep stumbling on things that cost money, but aren't ever part of our annual budgets or our savings figures.

Like the yet-to-be-named MC Baby. We'd like to set up a savings account for this yet-to-exist little human. But how do we account for that with the 4% rule? It's not in this year of spending or savings, or any year, for that matter. It's just a one-off expense, and a big one: we set aside $40k for Baby AF's college fund (expected to grow to over six figures by the time eighteen years of compounding works its magic). So our plan is to set aside another forty thousand for MC baby, too.

And there's that 13' Scamp fiberglass camper we keep talking about: the thing we'd like to take out on long weekends and summer vacations with the kiddos, heading to state parks and camp grounds, maybe even boondocking on BLM land a bit. But even used, they're not particularly cheap: we're looking at anywhere between $10k used and nearing $20k if we wanted to buy new.

And while we're fine making one car work for now, our still-to-be-formed plan for perhaps both of us working in financial independence might mean that two cars makes more sense. If I substitute teach, there are likely schools I can't bike to easily (and for part of the school year, that ride home in the afternoon would be pretty miserable). I'd also like to take Baby AF and MC Baby to daycare, or to pick them up, too: splitting up the extra labor & commuting that is currently falling only on Mrs. Done by Forty.

(For those who care about this sort of thing, we're eyeing a downright luxurious vehicle: a used Lexus RX350, with a tow prep package to pull that Scamp around. We're debating all wheel drive, as we aren't sure how likely it is that we actually head out on dirt roads to BLM land. Still, even in the years we're looking at, between 2012 and 2015 with low miles, we're probably looking at $15k or $20k for this second vehicle.)

Anyway, that's a whole lot of extra spending that isn't technically in our "FI" number, which is based on past spending.

When we consider the future spending that isn't technically in any of our past years either, things like a new roof, new appliances, and hitting our out-of-pocket maximum for medical expenses once in a while, it gets easy to see that pining down a specific financial independence number is tricky. All I know is that it's probably higher than we originally were planning for.

We've all had our caffeine by now, yes? Let's do a little math.

Our spending is projected to be around $35,000 now that we don't have a mortgage payment (it was around $50k before, with the mortgage)

If we round up to $40,000 for safety, and use the 3.5% safe withdrawal rate instead of 4%, that means our FI number would be....$1,142,847.

Phew. Deep breaths.

But that just covers our average annual spending. What if we want to add in all the one-off expenses that we're aware of:

$14,000: Remaining amount for Baby AF College Fund
$40,000: Remaining amount for MC Baby College Fund
$20,000: Second vehicle (want to account for additional insurance, maintenance, etc.)
$15,000: Scamp (TBD whether we actually want this thing)
$15,000: Miscellaneous extra cash for medical, appliances, etc.

That's $104,000 in 'extra' money we'd have to pile up, in addition to our FI number. Mother fucking yikes. Even at our fairly ridiculous savings rate, that's going to take some extra time to save up.

When I look at the goal we'd initially set up, to hit financial independence by forty, I often feel a lot of pressure to finish on time. In one way, we will have, I guess. When I set up the goal, it was under the assumption we'd use the 4% rule, not 3.5%. And under that original assumption, yeah, we've hit the goal. And that's cool.

But we also moved the goal posts...a lot with that stupid half a percent. It means we'll need an extra $143,000 invested for the safety that half a percent allows for. (Cue the PF bro critiques telling us that 3.5% is somehow both too risky and too conservative.)

Add in an extra $104,000 for the things we'd like to save up for while we still have our high household income, and, you know, I don't think we'll necessarily have that all wrapped up by the last day I'm forty. I might need to stay at the stressful job a bit longer to ensure we have the college funds topped off and the second vehicle we want. So there I'll be, working past forty.

And cue the feelings of failure. Public failure.

I know I shouldn't really care that much about hitting arbitrary goals, especially when they originated on the back of a napkin by some thirty two year old who didn't know a whole lot about the subject.

Still, if given the choice, I'd rather succeed than fail. Who likes failing?

There are some neat alternative paths to get to these goals, though, if we get creative.

If Mrs. Done by Forty gets hired on permanently, and I end up wanting to earn a bit of side income in some second act career, I suppose we could just embrace that we did hit financial independence, that we really are FI and met our goals, and then we can say we're using our income to save up for the little luxuries we'd like to enjoy in this second act of ours. Fancy college funds. Fancy cars. And a decidedly not-fancy fiberglass camper that we squeeze four humans and one adorable farting golden retriever into for camping trips.

I like that idea. We can claim a little victory, feeling like we did what we set out to do, and then deciding we're working at things just because. Just because we want to.

Internet retirement police will probably not like it, for sure. There will be finger wagging and pointing to jobs (jobs!) as proof that we did not really retire. They'll say we're failures and frauds and be out to deliver their righteous internet justice.

But let's see if they can catch us in our fancy car. It has two hundred and seventy horses, and I bet it goes pretty fast, even with a little scamp in tow.

Thanks for reading, as always.

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  1. If you still have income after retirement, I wouldn't worry about the one time expenses too much. You can pay them off as you go along. It should work out especially if your wife gets hired on permanently. Don't worry about the IRP. It's your life and you can do whatever you want, right? ;)

    1. That's kind of what we're thinking, too, Joe. If Mrs. Done by Forty is hired on permanently it will provide some unique challenges & opportunities: the steady income & benefits will certainly allow us to tackle these one-offs as we need to.

      I know I shouldn't care about the IRP, but I still dread them.

  2. I think this is one of the things when you stop working early. Truly stop without continuing to blog, do the side hustles.
    Eventually you need to replace a car, do major maintenance on the house (like a roof replacement or something like that) and other stuff.

    These all need to be taken into account. It is very unexpected to realise at 70s that you need to rebuilt a house and there are no money for it. Or help kids with downpayment on their house, weddings, etc..

    1. Hi there, Financial Independence.

      I'll probably continue to blog but there's no income from it, so there's that. As you said, we know we'll eventually need to get a new roof, new car, etc. Got to plan for all that. And better now than later.

  3. I decided to take the leap of faith and retire early. I'm in a different position to you in that I'm in the UK, in my early 50's so things like Personal Pensions are much closer to being available than they would be if I jumped at 40.

    The thing for me though is that side hustles are always going to be of interest to me. I can't ever see me just stopping everything. I just don't need to depend on a main income any longer.

    1. Hi there, Baldrick. I can see how a pension being on the near horizon would make the leap easier, for sure. That system is rare in the US, and even when it's around you have to wonder if it's being properly funded: there are some sad stories of pensions going bankrupt here.

      Agree that things that earn income are potentially (maybe likely) in our future. The tricky bit is deciding when to pull the cord when those things are hard to know in advance. When is 'enough' enough?

      Also, congratulations on your early retirement! That's rad. How are you liking it so far?