The title of this post is misleading and I should probably change it, but I think “Thriftygal’s 2016 Budget” is more click-baity than “Thriftygal’s 2016 Financial Philosophy” or “Thriftygal’s 2016 Experiment with Financial Independence in an Annoying Bear Market.” I haven’t settled on a name for this operation yet. Maybe I’ll just call it Operation Earl and confuse everyone.
Regardless, it definitely will not be Operation 2016 Budget. I hate budgeting. I hate tracking my expenses and putting them into buckets. I can’t account for how I spend cash to save my life and rely on my credit cards to monitor my spending. I have no idea how much I throw away on restaurants or airplanes or socks. I buy whatever I want and just add everything up at the end of the month.
Theoretically, I then verify that my monthly projected passive income for that month is larger than my monthly expenses.
I say theoretically because I’m hesitant to admit to you that I’m a coward. I believe in my philosophy and my investment advice 100%, but I’m not immune to anxiety. On the contrary, anxiety and I are tight. Before I started writing this post, I hadn’t played with my charts for more than two months. Two months! I know I’ve been shoddy when it comes to charting each and every month on this blog publicly, but personally, this was my longest stretch in more than five years. I’m retired now and not receiving any income, so I’m bearing the full brutal fall of the market. I’m itching to buy more VTSAX because stocks are on sale.
If you want to get “rich,” you have to resist the urge to PANIC! and sell when your portfolio falls. Remember, the saying is “buy low and sell high” and not “buy as it’s rising and panic-sell as it’s dropping.” If you want to get really rich, you have to not panic and you have to buy more when it’s down. Double down and play the long game.
But I can’t buy more because I don’t have a job because I refused to try to time the market and based on that refusal, I gave up my paycheck nearly five months ago to live and travel and write and generally be a bum. Alternate-Universe Thriftygal, who decided to go back to Chicago and work a bit longer, likes to taunt me over her steady net worth. I kick her in the shins when she starts her yapping and gleefully point out that I wake up whenever I want every single day. That often shuts her up. I don’t regret my decision, but it still kills me to roll my empty shopping cart past the orange stickers advertising a fire sale.
So that’s my dilemma. How do I manage my expenses now? I have zero desire to look at my dwindling assets regularly when the market throws a temper tantrum and I have less than zero desire to track my spending even in the best of times. I would feel like a hypocrite if I didn’t practice what I preached — namely, you manage what you measure. And how will I know if I’m okay financially if I ignore it?
Here’s what I’ve come up with so far. I may tweak this approach if it doesn’t work for me or if one of you out there gives me a better idea. For now, I’m going to check in on my financial avatar three times a year when I’m checking my credit and I’ll update my chart with my trimester averages. Here is where I stood at the end of November 2015 – the last time I updated my charts for you to gawk at.
February 2014’s massive spike was when I paid my security deposit for my apartment. I received that entire amount back, so I subtracted it from 2/14 to make the chart a bit prettier. I thought I had done that months ago, but apparently I was wrong.
Here’s where I stood at the end of December 2015.
My expenses, represented by the red line, were reasonable, hanging out in the Caribbean and the east coast of the U.S. of A. My net worth, as represented by the green line, dropped almost $14k to end 2015. Yes, it sucks. I’m just as annoyed as you are and, in reality, considerably more annoyed than you are because it’s my money. But they’re just numbers on a screen right now. I don’t consider it a loss because I have no intention of selling anytime soon. I own shares in civilization and I have to have faith that civilization will continue to improve and this correction is merely another bump in the road like so many we’ve seen before.
Besides, if civilization does end up collapsing, I doubt having crumpled hundreds in an apocalypse bunker will save me.
I’ll update this chart again at the beginning of May 2016 for January through April 2016 trimester’s average. Perhaps the market will have recovered a bit by then. This way too, I’ll get the average of four months of expenses, so that I have some flexibility with my spending. The times when I’m hanging out in one place are way cheaper than the times I’m traipsing around the globe and poking other cultures.