Does anyone actually understand my chart? Is it pointless to keep posting it? It’s losing some of its thrill for me if I’m being honest.
What matters when you’re trying to retire? Your income and your expenses. What matters when you’re already retired? Your net worth and your expenses.
I am really good at keeping my expenses low. That’s in my control and makes me feel better about my retirement life. I’m a simple person with simple needs living a simple life. It’s not for everyone.
I spent about $23,441.03 last year. Approximately. That’s the red data point on my chart. Or rather, the red data point is my average monthly expense — what I spent last year divided by twelve.
Here’s my chart.
I only look at my net worth once a year officially. Watching the day to day fluctuations would, I think, drive a person mad. Last year, my net worth dropped and I felt sad for a second. That wasn’t a pleasant feeling.
My projected passive income, which might be a bullshit number, is calculated by this formula:
(Net worth at arbitrary day) * (educated guess on safe withdrawal rate) / 12 = Green data point in chart
My arbitrary date to look at my net worth is December 31st of each year. I know, it’s a little cliche.
On December 31, 2019, my net worth was approximately $988,719.11. That’s a fun number.
$988,719.11 * 0.04/12 = $3,295.73
So, theoretically, I could spend almost $3300/month, but in reality, I only spend about $1,953.42/month.
This exercise makes me feel like I’m fine being retired, ya know?
As long as civilization continues, we should theoretically all be fine.
I meant to make some money last year through my brain, but I didn’t. Whoops. I sold another book or two and made about $370. That’s not nothing, but my net worth increased almost $200,000 in the last year from the ridiculous market. It’s all just numbers on paper and not super meaningful to my life, but it’s still, like, wow.
People are still buying my book!
I understand your charts :).
I also understand that it’s just an estimation of your current financial position. It’s not an exact number, but it’s important enough to give you an sense of whether you’re still doing well financially. If you’re spending way too much, you would want to know, right?
Precisely!
Can you remind us of the book and where we can get it?
Also – do you think you’ll ever re-enter the workforce even on a part-time basis. Obviously you could be fussy about what you do.
Envious of your net worth! Mine is just barely in the six figure range 😂.
My book? It’s called Operation Enough and you can get it on amazon.com. Thanks for asking!
Well the green keeps separating from the red so you’re doing something right – kudos!
Let’s get the green farther from the red. That’s my motto that nobody understands outside of this blog.
Hello Anitha, you should start vlog and post education al videos on youtube which will add up some dollars totoy cash flow.
Oh, I don’t like being in front of the camera!
I bought your book in 2019. I loved it. Fellow readers-you should buy it too if you haven’t it’s a good read.
Oh you!
How in the world does a person get down to only $23k in expenses…..rent (or mortgage) alone would eat up most of that and then, there’s travel….
Love your posts!
I live in Denver and my rent is $1100/month. I still managed to travel, taking a month plus in Europe and a couple of weeks in the Caribbean! I also eat out quite a bit. I don’t buy stuff.
Yes, please continue posting your chart. What’s helpful for me is seeing your chart updates along with what you are thinking and how you are feeling about it. The combination of those things makes it valuable.
I appreciate your input! Thanks and I’ll keep posting my chart.
I definitely want you to keep doing your chart! It’s what drew me to your blog in the first place, and while I certainly like the other posts you put up, I really look forward to the financial ones in particular.
Okay, enough said!
Ditto to FIREAbroad! Keep showing us your chart 🙂
Okay!
I like the chart, and I love that you provide real numbers because it shows me what’s realistic and possible. I am curious about your budget, though. I live in a pretty low COL area, have a cheap mortgage, no other debt. But now I’m looking at my monthly expenses compared to yours and wondering where the heck I’m wasting so much money!
I don’t buy a lot of stuff! I don’t break down my expenses by category anymore, but most of my expenses are from rent and food.
For someone that is new to your blog, the chart is helpful. When I looked at the chart, I wonder what happened in 2016 to make your expenses drop. I am curious enough to go to the beginning of your blog to find out.
I stopped living in Sydney, Australia and started living a nomadic lifestyle!
Big ERN links P/E to withdrawal % = real tasty chart.
I’m getting a kick out of trendlines these days, keep it QoQ, so one doesn’t go full rainman.
Roger that, 10-40
Thanks for posting what you spent last year! I always enjoy seeing how people break down their expenses. But if you don’t mind me asking, you still live in Denver, right? Are you renting? If so, how are you able to keep your expenses so low with how high rent in Denver is?
Yes! That’s part of the reason I picked Denver. It’s much more reasonable than New York or San Francisco. My rent is $1100 per month.
I’m curious, do you plan to live in Denver long term? Have you thought about the ability to cut expenses even lower? I’m 23 & just returned from living in SE Asia where my expenses rarely topped 700/month total-travel, apartment, gym, food and all. Now it’s that struggle of getting my first real job and paying 900+ in rent, just to know that i could be in SE Asia, working less and saving more. The struggle!
I hear ya! I don’t know if Denver is my forever home, but I do plan on staying in the states, I think. The struggle! LOL.
Your explanations of income vs expenses, and simple life strategies are what I look forward to reading. The graphs are helpful in that regard and are an inspiration to work towards the goal of living a simple life without the consumerism stress. Keep up the good work and thanks for sharing it with us. I am living that life now and need the reminders in order to stay on track.
Reminder poke!
I think your chart and its annual review are useful and important. I think your best guess/bs estimate of portfolio returns is good and important. I would urge you to consider another variable however, that is whether civilization continues to exist , at least in the form it does now. Recency bias and endowment effect lead us to assume things will continue in the future as we remember them happening in the past and of course we have a vested interest in them doing so. But a longer view of history combined with a realistic appreciation of what science is telling us would lead to a more nuanced estimation of how the future may unfold. Understanding the difference between what assumptions evolution has pre-wired us to have and how events are likely to play out was my job before I retired and if you are interested we can discuss 😊
Oh my gosh I think about this a lot. I have a post entitled “civilization might collapse” that I’ve been working on for a long time. Climate change, an epidemic, anything might kill us all.
I love your charts! Your charts were what inspired me to do my own charts. And when I did my charts I came to the unsettling and surprising realisation that I was much closer to early retirement than I thought I was. And so my charts helped motivate me to cut out all the extraneous spending and get the expenses down even more dramatically.
My last job wasn’t bad. They even bought me a standing desk. But your chart made me realise I didn’t need an employer to get me a standing desk. Fact is, I didn’t need an employer to be able to just go stand anywhere I wanted to, whenever I wanted to!
This possibly wouldn’t have happened so quickly for me if it wasn’t for your charts. And I was directed to your site from MMM.
Actually, more chart love, I think the thing I like about your charts the most is the way they capture the big picture. Scant regard for obsessive optimisation, dissection of 4% rule etc etc. Just two nice lines and confidence in the ability to adapt one’s life circumstances to stay on the right side of those lines.
Here’s my chart for reference as well:
https://imgur.com/NDqkIr0
I think I discovered MMM in mid 2015, so the chart goes back to early 2015 as far as I could as I didn’t keep good records before then. Prior to 2015 is a murky world of too many guitars bought off ebay, a property purchase that underperformed, bad superannuation, too many take away coffees etc etc etc.
Also I check mine a lot more than once a year, at least once a month – but mainly because I can’t quite believe that this early retirement experiment is actually working.
I believe it. But I also know that the whole thing could come crashing down.
Oh man, I want a standing desk.
Love your chart!
I sincerely appreciate this update to your chart. It might not be thrilling for you to write but it’s very motivating to watch you crush it year after year. Like you, my rent is $1100 but my total monthly spending is closer to $3k rather than your $1.9k. This post inspired me scrutinize my spending carefully and cancel some streaming plans and optimize other subscription services including my internet+phone plan. With just a few painless changes I’ll be saving over $130 a month going forward, all thanks to you!!
Awesome, you’re killing it!
It is cool to see the experimental results fit the theoretical scenario folks write about! Maybe you can publish an update to your book, I think there is at least one other FI book where they did that after a few years.
Unfortunately, my exorbinate spending would not fit on your y-axis… and not because it is negative… something to work on I guess :/
Wow, it wouldn’t fit on the y-axis? That’s impressive. What do you spend it on?
Good question. I only track fixed expenses like mortgage & utilities closely ($35K) and entertainment ($20K), the rest I lump together in a bucket of one-time costs (of apparently $55K). My main focus is on reducing the entertainment budget and weekly spending but I don’t break out one-time expenses in any detail (vacations, commute, etc.). I might start doing that this year.. 🙂 Not the blueprint for early retirement, but still manage to save 15-20% of income per year.
Yeah, tracking sucks. 20% of your income saved isn’t terrible and if you like your job, who cares about early retirement, right?
Oh ya, I agree, the trick is avoiding FOMO and replacing it with JOMO… XD
Interesting. I’m from Europe (high taxes!) and was wondering how much do you pay in taxes for capital gains in USA if you withdraw money every month or rebalance mutual fund? I read that it can be as low as 0% (single filer, 0% tax bracket: $0-$39,375). Does this mean you can withdraw tax free?
You can keep the federal taxes to zero if you don’t take out much. I’m not sure the line though. I’ve always had to pay some state taxes too.
Thrifty gal, you and Root of Good are both amazing how you can live such a superb life on a small amount of money. Keep up the excellent work! Very inspiring! And you both travel a lot too!
It’s not for everyone, but it works for me!
Also with the new tax law if you make less than $39375 in taxable income you do not pay taxes on qualified dividends. So with your annual spending around $23,000, you probably don’t owe any federal tax on dividends from your Vanguard index fund so you keep more of your money as opposed to earning $23,000 thru wages.
I was just talking to my friend about this number and long term capital gains. There are, apparently, a lot of hacks you can do to minimize your tax bill that I’m not doing.
I love the chart. It tells a lot about your journey and current state in a single glance. It’s worth a thousand words.
Noted. Thanks for the feedback!
Dudette, I kicked your a** in spending last year. Evidently, looking at the MMM website, him too. I really need to look at these blogs more often now that my spending lets me sit at the cool table. Under 18K, BAM!
I cheated though, I moved in with my GF and rent halved. Still, let me know if you want any tips 🙂
Nice! I’m jealous. I want an SO to split rent with.
I’m always looking for tips. 🙂
I can see how it can lose it’s thrill posting the chart every year. A good year it’s basically the same as last year with the same two lines.
Looking at the current development 2020 will be an interesting year. As one of your biggest* fans I would like to request the fan-service of posting at least the 2020 and perhaps even the 2021 chart, even if they’re not very thrilling to you.
*Measured by beard length multiplied by latitude
I aim to please. 🙂