There’s no good way to describe the first four months of the year. I’ve used “trimester” in the past, but oops, that only means three months. Quadrimester would be more technically accurate, but I find that word a bit pretentious. Google suggests “tertile,” which I would like if it were more widely-used or I had a good turtle joke. I’ll have a think about it some more. Or maybe not. It’s a pretty inconsequential factoid in life and probably not worth the amount of time I’ve already spent on it.
Anywho, I’m updating my charts for the first third of 2016. Here is where I stood at the end of December 2015.
My sister reads most of my rantings before I publish them, editing and making suggestions. I consider her an intelligent gal who gives some great feedback, but she has never really “gotten” my charts. My wonderful charts. My cat that doesn’t interact with anyone except me. I love my charts with the fire of a burning sun, but I can understand your ambivalence.
Personal finance is personal. I love my charts because I see so much of my life looking at it – the year paying off my loans, the spikes for specific trips, the exciting low-expenses months where everything came together, the years in Australia and now, my post-retirement life.
I love my charts because looking at it gives me confidence. I can physically see my expenses line – the red data points – from the last five years and how much I spent to live a life that I liked and now, a life that I love. I also know that I could have reduced those expenses if I needed to. I could have eaten out less. I could have quit drinking. I could have stayed home and traveled less. I could have found a roommate again.
That’s all theoretical, of course, my brain’s safety net and shrug when I notice the market has dropped. In actuality, I don’t think about money at all. Everyone’s enough is different, but my chart reinforces my belief that I have my enough.
The green line, calculated using my net worth and some educated guesses is my monthly projected passive income. I use a lot of assumptions that may turn out to be horribly wrong. In fact, I’m willing to bet that at least one of my assumptions will end up being wrong.
Here’s the equation:
[(Net Worth)*0.04]/12 = Projected Monthly Passive Income
I assume that my investments will return 7% each year and inflation will be 3% each year. Thus, I can take out 4% and never touch the principal. Divide that number by 12 and I get my monthly projected passive income.
But I must admit that these are all just guesses – educated guesses, but still guesses. If you’ve ever read a prospectus, you know the warnings splattered around the language touting the investment, “past performance is not indicative of future success.” My VTSAX has that sentiment in there at least six times.
“Keep in mind that the Fund’s past performance (before and after taxes) does not indicate how the Fund will perform in the future.”
I love the jovial nature of that warning. I’ve drafted these types of documents at my old job. I’m well aware that the past is not a guarantee for the future, but the past is all we have to go on, so my hypothetical scenarios are based on what has happened in the past. Maybe inflation will go to 2,000% (but I doubt it). Maybe the economy will enter into a decade-long stagnation (but I doubt it). Maybe I’ll need a great deal of money for a physical ailment in the future. I can’t control those outcomes and it makes little sense for me to worry about it now.
My version of the serenity prayer rattles around in my brain quite a bit.
Please grant me the serenity to accept the things I can’t change
the courage to change the things I can
and the wisdom to know the difference
I spend a shocking amount of time sorting the difference between things I can control and things I can’t. Here is my list of things that could potentially cause civilization to collapse and which could imperil my retirement plans. When I picture these events though, I’m not sure how much better off I would be if I were actually working.
List of possible future scenarios that could wipe out civilization
- An unfortunate and concurrent series of elections around the world
- Accidental nuclear war
- Climate change devastation unfolding as fast as the movie, “The Day After Tomorrow” predicted
- Alien invasion
Sometimes I have the serenity to accept that I can’t change those possibilities, so I try not wasting too much time getting into a snip about them. I like to remind myself that, perhaps right now my net worth is tied to the market, but if circumstances change (which, of course they will; I just don’t know how yet), I have the power to change the green line too. I can make money again using my brain. I have more control than I sometimes remember.
The market is bullish, I think. I don’t really pay attention to its movement on a day-to-day basis anymore and that has improved my sanity level a noticeable percent. I just checked to update my charts and it’s not in an unhappy place. This might be a moderately okay data point to plot.
So, folks, I’m a third of the way through the year and seven months post any type of paycheck. Since officially retiring, I’ve spent time in Cayman, Jamaica, Brazil, Chile, Argentina, Uruguay, New York, Washington DC and Chicago. I’ve rented out apartments for myself, pet-sat, house-sat, hung out with family, visited friends and bought anything my stupid heart desired. I spent a lot of money eating out, on drinks, on gifts and less than you would think on air travel (miles, baby).
I have not earned a penny from anything I have done and my net worth is almost $7,000 higher than it was the last time I updated my charts in December. I know that’s not incredibly impressive, but you have to admit that it’s not unimpressive either. My money works hard for me while I sleep in. Here is my chart with the latest data point.
Does my projected passive income cover my average monthly expenses? Yes. By a lot. I’ll think about this again in four months. Life is truly amazing.