FIRE October Update

Status: Updated October 2018

Progress to Early Retirement: 45%
Progress to Financial Independence: 90%
Progress to Great Start: 100% {Feb 2015}
Percent Home Ownership: 42.14% (home value rose noticeably)
Net Worth Breakdown: Home Equity 14% Non Retirement: 25% Retirement: 61%

Previous Stats:

September 2018 – ER: 42% FI: 90% HO: 41%
August 2018 – ER: 44% FI: 89% HO: 41.9%

This Month’s Story:

There were a few interesting things that happened financially this month.  Nothing bad to report here, just some interesting stuff and some moving of things around.

For starters, our house’s value bounced back up.  Don’t ask me why.  I have no idea. Last month I said that our house’s value dropped $24,000.  Guess what, it’s back up this month.  The data is from Personal Capitol, so go figure? My home is near the border of a town who’s schools are not nearly as good as my town, and that generally is why housing values are higher in my town than the other.  Anyway, I think the algorithms forget which town I live in.

You might notice the new line, the net worth breakdown.  In my studies over the last month, particularly with the idea of early retirement or scaling back to a more personally rewarding, but perhaps less financially rewarding one, the idea of early withdrawal penalty is a big point.

Over my years of savings, I have followed the rule of first fill the emergency fund, then fully fund retirement.  Lastly, save extra for whatever.  The whatever is the non retirement category.  That fund has paid for the wedding, the down payment on the house, and more as needed.  Over the last few years, we have been able to do more with the emergency fund, so I think we are in a good place.

Still, if we want to retire early, then we need enough in the non-retirement accounts to support us until we can take the retirement money.  The alternative is to take the penalty of pulling the money out of our retirement accounts early.  Over the years we contributed to IRAs and to 401ks, and we maintain both types accounts, and I know there are more options in IRAs than 401ks.  Sadly, more of our savings are in the 401ks.  Our 401ks are about 58% of our networth.  It makes sense considering that we were not sure we could, nor will retire early, but it does limit our options somewhat.  That alone could have us working a bit longer than we want which is 55, or working in the higher paying job a bit longer. Time will tell.

Another thing is that we put a bunch more money in to I bonds and T bills.  My wife and I decided some years ago that our comfort level was to have 12 months of expenses in our emergency fund in cash or near cash.  Cash or near cash means savings accounts or US government bonds.  In truth, we have cash in 3 places.  We have cash in our local savings accounts.  That’s about 1/3 of our savings, and it is for normal expenses.  We deplete and refill this account.  The next third is in a high yield savings account like HSBC’s, Ally’s, or Morgan Stanley’s.  Any one of them are good, and periodically, I move us from one to another when the dividend is great enough to merit it.  This money is almost never touched. The last third is in I bonds.  My wife and I love these bonds.  Right now, they are at 2.52%.  Granted you lose the last 6 months yield if you cash them in, so this is our break glass kind of savings.

I will say that some of the middle third is in T bills.  This is something that comes and goes with the T-Bill rates.  We use 4 week T bills in a 25% per week, so that each week 1/4 of our savings is available. I got this idea a long time ago from My Money Blog, and I have used it when the rates were good.  As they are coming up again, I am using them again.

As  I review the numbers, I see we have about 17.4 months of savings cash.  We are going to have to shift some dollars.  Now we have a bill coming due for our windows that will eat most of one month, so really it’s say 16.6 months.  Still, that’s a solid 4 months of savings that should be in the market in some fashion.  I am thinking some high dividend stocks to balance some of our other riskier investments.  I am also considering some placement in a real estate crowdfunding site. I haven’t yet, but 4 months expenses would be a good chunk of cash to put there.

I mentioned the windows, so I think that warrants another comment. Our home is 35 years old, and 4 of the windows in one room had severe dry rot.  They had to be replaced.  Due to the size and shape of the windows, they are unusually expensive.  I checked multiple manufacturers websites and found that to be true.  Then there is the NYC suburb tax as we call it where things too close to the City,  where everything costs about 50% more than what it costs outside of reasonable commuting range to the City.  Anyway, we were offered 0% interest  for 12 months.  We took the deal, and the cash we would pay for the windows with has been earning us about 2% interest for the year.  Sure that’s only about $150, but hey every little bit helps.  That’s one month free electricity for an expensive month. Those twelve months end in December, and I will pay off that bill this month or next.

Now as it’s getting cold again here in the New York area, our air source heat pumps are plugging away supplying heat on the nights now, and our oil furnace is happily asleep.  That reminds me, I need to call my oil supplier to get my furnace it’s annual checkup.  I don’t think I did that this year, yet.  That will be about two hundred.  I usually do it around this month, September – October.  It’s less urgent as we have the heat pumps which will supply heat as long as the air temperature is above 5F, and that is nearly always true.  Most years, it never gets that cold here.  Admittedly, it’s optimally supplying heat at about 40F or warmer.  Anyway, our electric bill goes up in the fall, or does not drop depending on how warm it is in the summer, and our oil bill has gone down considerably.

If the National Weather Service is to be trusted, then December to February should be warmer than normal.  Sadly, their forecast for January to March is for a normal range of temperatures.  Both predictions are for normal precipitation for both forecasts, so I think we will get decent use of our heat pumps this winter.  The two almanacs have opposite predictions for my region, one being cold and snowy, and the other being warmer and drier.  What’s interesting is that the NOAA forecast, the two links above, for those months, have been slowly migrating from the warmer and drier to the colder and wetter.  I generally check each month, and in August and September they were predicting more solidly warmer and drier, as opposed to equal chance of either outcome (warmer vs cooler and wetter vs drier.)

We will see what happens.  My experience is that the predictions are vague and not very accurate even within that.  I am commenting specifically for the North East US, where I have been watching this specific forecast year round for years.  I use it to help me predict how much oil to buy.  It’s not been good to me.

One last point is referring to an article I am working on, and will post this week.  The coming crash.  I have read a few good bad and center articles, and I will be contrasting one of each.  My take is that we are due for a market crash, but who knows how bad it will be.  It could be a minor one, or a big one.  Mathematically, we are due, but who knows when.  The economy seems to be doing well, and the Fed continues to raise rates.  Obviously the economy is not tanking yet.  Time will tell, and we will see what we do to handle it.

 

 

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4 Comments

  1. Sounds like you are making great and consistent progress.
    There is a lot of talk about a crash – which probably proves that there will not be one. 🙂
    Of course, it may be caused by a bursting bubble in China – which has some stories coming out of it that make you wonder what’s going on there – massive massive property debt (and wealth) and if all that collapses, then there would be carnage!

    Like

    1. My guess is that a recession will come because it’s due. We have one on average every 4 years, and its been like 10. P/E ratios are high, not not in the stratosphere. I am making a post on this.

      In general, I, and perhaps others, need to be reminded of the fact whether it’s tomorrow, or 2020, the market will contract again. It always does, and then it rebounds again.

      China is so bad that there is no data you can trust from there. I don’t believe anyone has good data on China, so they use proxy indicators like energy use or freight traffic to tease out real data.

      Liked by 1 person

      1. Fair point. I am glad I avoided them. I tried to mine them, but never got far with it.

        I still expect the Dow Jones, etc to contract for 2 or 3 quarters within the next 3 years.

        Like

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