Gyroscopic Investing

High income single earner, extremely frugal--as much as I can be in the SF bay area. Wife takes care of the baby. The huge tax break from being married with a stay-at-home spouse is awesome. As far as I can tell from my co-workers, my high savings rate is basically enabled by not living in San Francisco, not going to multiple out-of-state concerts, music festivals, or sporting events every month, not participating in the bar and restaurant scene, and turning all of my expensive hobbies into income-producing side businesses or putting them on hold. My consumption patterns are otherwise pretty normal, I think.

However, as I'm quitting my job for full-time self-employment, I expect the percentage to fall to about 10% for a while and then shoot up to 90%. Hey, a man can dream!

What was the problem with the condo, out of curiosity? Moved and couldn't get rid of it or something? I have a co-worker in that situation.

Pointedstick wrote: What was the problem with the condo, out of curiosity? Moved and couldn't get rid of it or something? I have a co-worker in that situation.

Bought after the first big slip in Real Estate prices and thought I was getting a steal.  The condo was also the perfect place for an easy commute, only a girlfriend at the time, etc.  Also, I qualified (by $400 under a limit) for a low income, low rate, no PMI, and no credit mortgage that was 41% of my income at the time...  I did my research and asked the bank why they were giving me this loan, as it seemed crazy even though I knew I would pay it.  They said they had to by law.  All I had to do was take a 2 hour class about home ownership.  Looking back on it, I see why all these mortgages failed.

Well ~6 years later, changed jobs, got engaged, then married, prices/rents plummeted.  Luckily, I bought my house at the very bottom of prices and rates, so my 1 bedroom luxury condo's rent completely pays for my 4 bedroom house.  In the end, my budget was cash flow neutral in the move from the condo to the house, but I am so upside down on that condo that I cannot sell it.

SF eh?  So you graduate from starfleet academy?

TennPaGa wrote:

Pointedstick wrote: High income single earner, extremely frugal--as much as I can be in the SF bay area. Wife takes care of the baby. The huge tax break from being married with a stay-at-home spouse is awesome.

Californians get a tax break with a stay-at-home spouse?  Seriously?

I think he's talking about how a high-earner going from a single filer to filing jointly with a non-earner observes a tremendous drop in his effective tax rate.

Xan wrote: I think he's talking about how a high-earner going from a single filer to filing jointly with a non-earner observes a tremendous drop in his effective tax rate.

Yup. Higher income limits for each tax bracket, twice the standard deduction, and I can also contribute to her Roth IRA. It would be a wash if she was working, but without that, it's a huge bonus.

Bean wrote: Also, I qualified (by $400 under a limit) for a low income, low rate, no PMI, and no credit mortgage that was 41% of my income at the time...  I did my research and asked the bank why they were giving me this loan, as it seemed crazy even though I knew I would pay it.  They said they had to by law.  All I had to do was take a 2 hour class about home ownership.  Looking back on it, I see why all these mortgages failed.

       

That's just insane.

The implications of saving 60%, in California, with a family are astounding. I save about 75%, and I live in one of the cheapest areas of the country, with NO state income tax, and I hardly spend any money at all. Maybe we're using different base figures, or your salary is just incredibly high. I tend to judge how "frugal" I'm being by taking the absolute $ spent each money, instead of a % of my salary. The % of salary figure just indicates how much longer you have to work at your current spending levels. Messing with the $ spent each month is more important, I think.

OH, but what I wanted to say was, PS, that I'm thinking about doing the same thing: quitting my high paying job and doing entrepreneurial stuff. Not really, I just want to get into real estate, along the lines of what Mike did, from Lacking Ambition.

Kriegsspiel wrote: OH, but what I wanted to say was, PS, that I'm thinking about doing the same thing: quitting my high paying job and doing entrepreneurial stuff. Not really, I just want to get into real estate, along the lines of what Mike did, from Lacking Ambition.

Fill me in: What's Mike at Lacking Ambition doing?

Well thank you! I just figured if Jacob could do it in the bay area, so could I. My salary is high from the perspective of the rest of the country but average to low for my peers in the area. I've never really cared for the savings percentage figure, either, since I always knew that after I "retired" I'd have a house in a place with a far lower cost of living than the SF bay area, so my goal was always to minimize non-housing expenditures. There have been a few months where our monthly costs minus rent have been about $850! $350 groceries + $250 health insurance + $100 utilities +$50 car stuff + $100 misc & entertainment.

That's the exception rather than the rule but it's definitely possible and we didn't feel particularly deprived during those months. Once we have a paid-off house, we'll be very easily capable of living on $1,100/mo, as that's about what we live on right now in CA if you exclude rent.

Theoretically a $260k PP could sustain this indefinitely at a 5% withdrawal rate, but since I have a family I'd like to double that figure to account for future child-related costs, more luxury, and more unexpected expenses.

Even with a paid off house, there are ongoing expenses.  I assume you'll mow your own lawn, for example?  Have you priced fertilizer lately?  What about when your mower needs to be replaced?  What about when weeds take root?  And that's just a lawn.

Now figure your AC or your roof needs to be replaced?

Don't get me wrong... I'm rooting for you.  I just think there's more to retirement than being frugal because there are so many unexpected expenses. 

Big expenses.  Especially as you get older, too.

I'd think a paid-off condo would be cheaper, despite the monthly HOA?

Coffee wrote: Even with a paid off house, there are ongoing expenses.  I assume you'll mow your own lawn, for example?  Have you priced fertilizer lately?  What about when your mower needs to be replaced?  What about when weeds take root?  And that's just a lawn.

Now figure your AC or your roof needs to be replaced?

Lawn? What's a lawn? Maintenance-free desert plants FTW.

Coffee wrote: Don't get me wrong... I'm rooting for you.  I just think there's more to retirement than being frugal because there are so many unexpected expenses. 

Big expenses.  Especially as you get older, too.

Yeah, I agree. That's a big part of the reason I'm shooting for twice as much as the bare-bones version. Additionally, to me "early retirement" is more like "financial independence". I don't anticipate ever not having a business and making money somehow, even after investments take care of all the bills.


I would actually be interested in hearing from you and other homeowners what are things that typically cost you money, besides the obvious utility charges. I can think of other obvious things like appliances breaking, roofs needing to be replaced, etc.

Pointedstick wrote:

Coffee wrote: Even with a paid off house, there are ongoing expenses.  I assume you'll mow your own lawn, for example?  Have you priced fertilizer lately?  What about when your mower needs to be replaced?  What about when weeds take root?  And that's just a lawn.

Now figure your AC or your roof needs to be replaced?

Lawn? What's a lawn? Maintenance-free desert plants FTW.

Coffee wrote: Don't get me wrong... I'm rooting for you.  I just think there's more to retirement than being frugal because there are so many unexpected expenses. 

Big expenses.  Especially as you get older, too.

Yeah, I agree. That's a big part of the reason I'm shooting for twice as much as the bare-bones version. Additionally, to me "early retirement" is more like "financial independence". I don't anticipate ever not having a business and making money somehow, even after investments take care of all the bills.


I would actually be interested in hearing from you and other homeowners what are things that typically cost you money, besides the obvious utility charges. I can think of other obvious things like appliances breaking, roofs needing to be replaced, etc.

Taxes, insurance, foundation repairs if you live in a place with crappy "soil" like Texas, plumbing, security systems, right off the bat.

Routine spraying for bugs and rodents.  Unexpected spraying (like when you discover the house you bought is in the migratory path of desert scorpions).

Plus: There are a lot of things that come up if you have a wife.  She will expect that you improve things.  Especially if the neighbors start improving their houses.  Or when she backs into your garage door, dents it, and then insists that you pay to replace (read: improve) the garage door.  [That didn't actually happen, I just made it up.]

There will also (likely) be many things you "discover" that you can "improve" in order to increase the efficiency and lower the long run cost of home ownership.  For example, adding siding so you don't have to paint the house every few years.  Or solar panels.  But those will cost you money out of pocket. 

Fences need to be repaired or replaced.  Windows suddenly start leaking when it rains.  Shit, I could go on and on. 

We downsized a few years ago from a McMansion to a much lower maintenance house.  It's paid off.  And despite my griping, I really like it.  Although the huge backyard lawn is a little much to mow, especially during the hot summer.

We just spent $800 to have five interior brown 1960's wood doors replaced with painted five panel doors.  Totally transforms that part of the house.

Pointedstick wrote:

Coffee wrote: Even with a paid off house, there are ongoing expenses.  I assume you'll mow your own lawn, for example?  Have you priced fertilizer lately?  What about when your mower needs to be replaced?  What about when weeds take root?  And that's just a lawn.

Now figure your AC or your roof needs to be replaced?

Lawn? What's a lawn? Maintenance-free desert plants FTW.

Coffee wrote: Don't get me wrong... I'm rooting for you.  I just think there's more to retirement than being frugal because there are so many unexpected expenses. 

Big expenses.  Especially as you get older, too.

Yeah, I agree. That's a big part of the reason I'm shooting for twice as much as the bare-bones version. Additionally, to me "early retirement" is more like "financial independence". I don't anticipate ever not having a business and making money somehow, even after investments take care of all the bills.


I would actually be interested in hearing from you and other homeowners what are things that typically cost you money, besides the obvious utility charges. I can think of other obvious things like appliances breaking, roofs needing to be replaced, etc.

One of the other benefits of walking into retirement / financial independence as opposed to backing into it old and on social security is you generally do it on your own terms because you have skills and aren't a moron.  If something unfortunate should happen, these kinds of people aren't usually the kind that wind up on the bread line. 

Don't forget medical care,caring for your parents,extended family,three years where the portfolio just matches inflation.

PS is right to think he'll still want to do some work.

[quote="Coffee"]
Even with a paid off house, there are ongoing expenses.  I assume you'll mow your own lawn, for example?  Have you priced fertilizer lately?  What about when your mower needs to be replaced?  What about when weeds take root?  And that's just a lawn.

Now figure your AC or your roof needs to be replaced?

Don't get me wrong... I'm rooting for you.  I just think there's more to retirement than being frugal because there are so many unexpected expenses. 

Big expenses.  Especially as you get older, too.

I'd think a paid-off condo would be cheaper, despite the monthly HOA?

My father-in-law and his wife have a very nice condo in Lakewood, Washington.  Very nice, well-kept complex.  Yes, he has the $200 a month HOA, plus $200 a month property tax, utilites, etc , etc, ad naseum, ad infinitum....  Living there is less expensive than living in a paid off house but it isn't "cheap."  When out son finishes college, my wife and are are looking at "going the condo route." 

dualstow wrote: PS, did you end up selling that Wonder Wash?

I tried that once and gave up on it too.  I found a portable twin-tub washer that works quite nicely:

http://www.amazon.com/Panda-Compact-Por ... B00AW04ZMM

About as made-in-China as it gets but the thing works really well.  And I kind of like old semi-manual approach.  You can also get this portable automatic washer:

http://www.amazon.com/Haier-HLP21N-Puls ... ble+washer

I probably would have gone for this except I had no place to put it.  Also, I could imagine wrestling endlessly with the faucet attachment, given that it has to operate at high pressure.

For big jobs like sheets and towels I still use the building's basement laundry, but a) it's kinda yucky, and b) laundromats are probably one of the best places to get a bed-bug infestation.  I only wash in hot water and turn the dryer on the highest setting.

For those of you with houses wondering what the fuss is all about...us apartment dwellers would KILL for a washer/dryer hookup!!!

Coffee wrote:

Kriegsspiel wrote: OH, but what I wanted to say was, PS, that I'm thinking about doing the same thing: quitting my high paying job and doing entrepreneurial stuff. Not really, I just want to get into real estate, along the lines of what Mike did, from Lacking Ambition.

Fill me in: What's Mike at Lacking Ambition doing?

If you check out his blog, he started buying real estate at the end of 2010 I think. Just buy cheap houses in need of repairs, do them yourself, then rent it out.

My total plan, if my current work/life situation doesn't improve, is to find a part time job in a city where I want to live (at a university, if I can swing it), and buy and renovate up to 4 buildings and rent them out.

what is the mathematical expression that allows one to ERE ?

frugal wrote: what is the mathematical expression that allows one to ERE ?

Portfolio size > yearly expenses * (1/safe withdrawal rate for your portfolio)

Pointedstick wrote:

frugal wrote: what is the mathematical expression that allows one to ERE ?

Portfolio size > yearly expenses * (1/safe withdrawal rate for your portfolio)

frugal wrote:

Pointedstick wrote:

frugal wrote: what is the mathematical expression that allows one to ERE ?

Portfolio size > yearly expenses * (1/safe withdrawal rate for your portfolio)

So all you have to do is save 100% of your income and you can retire whenever you want? Now you tell me!

Libertarian666 wrote: So all you have to do is save 100% of your income and you can retire whenever you want? Now you tell me!

Assuming you never need to spend a penny more, sure! 

The problem with this simplistic calculation is that often you can only roughly estimate your future expenses. If you earn your money in a high cost of living area and then move, they may be lower. If family members develop unexpected medical problems, they could be higher. And so on and so forth.

I just saw the Morgan Spurlock show on CNN where he covers a different issue each week.  This last week he chronicled his grandmother going into a retirement home/growing old.  They put the price at about $8,000 a month. 

And to have somebody stay in the house with her 24 hours, they put the cost at $250 a day. 

If you retire early and live on a lean budget... what will you do with your parents if for some reason they can't afford to take care of themselves?