Hiya.
2020 is over and I’m updating my chart because that’s what I do when December 31st rolls around. I’ve kept my head buried in the sand, so I was pleasantly surprised that the pandemic hadn’t cratered the stock market. Surprised and suspicious.
First the numbers. I spent $22,023.60 in 2020. That doesn’t sound like a lot, I know, but I bought everything I wanted. I just don’t want that much. On average, I spent $1,835 per month. Seems reasonable to me.
Here’s the chart from last year:
Red – average monthly expenses
Green – (Net worth)(Withdrawal rate)/months in the year
Here’s the chart through 2020 using a 4% withdrawal rate.
Here’s the chart with every single data point I have, not just the yearly average, also using a 4% withdrawal rate. There’s only one month in the last ten years, I wouldn’t be able to cover using my current 4% projected passive income. Damn you, January 2015!
I have a friend that used to map his chart out using 4% and 3% withdrawal rates to make himself feel better. Here’s my chart using a 3% withdrawal rate.
Huh. If 3% were a safe withdrawal rate, but not 4%, I would have been worried in 2018.
So what’s a comfortable withdrawal rate? Impossible to say. I use four percent for my chart because that’s what a lot of people told me to use. I’m a sheep following the wisdom of others.
This might all be a ponzi scheme. I don’t know. I don’t think it is, but I don’t know.
My net worth increased a lot from last year. Of course the gains are illusive and fragile, so I don’t interact with them very often, only two to three times a year when I need to transfer money. The “gains” are not real until they’re realized.
Comparison is the thief of joy
My net worth is a pretty number compared to most people.
But I’m falling behind the people that I actually know. Comparison is the thief of joy, but it’s human to be relative.
Back when I started investing, I told a friend from law school my strategy. He also started investing into VTSAX. He continued to lawyer though and told me he recently hit $2.5 million.
Every single person in my family owns property and has more scrilla than me. They’ve all eclipsed me. So many of my friends have bought second houses.
I love my life when I’m not comparing it to anyone. But it’s hard not to compare.
Some questions from the comments
How do you stay not-bored these days?
I’m working on the third draft of my novel! I’m about two-thirds of the way through. Now I have no idea which draft will be good enough, but I think I may let people read it. Eventually. That’s taking up most of my time.
What’s dating life like now?
Terrible. I blame covid.
Are you going to resume your globetrotting once it’s safe to?
Yes. Depending on the weather when it’s safe to travel, I have a list of destinations I would like to visit. Israel, Jordan, Belize. I could go on and on.
Why did ya settle down in once place, and is it everything you expected it to be?
I missed having a closet full of pretty dresses and a pantry full of healthy food and weights to use and friends who were a part of my daily life.
It’s everything I expected and more. I liked nesting more than I thought I would.
Do you like big cities? (What about New York?)
I love big cities and I love New York. “Live in NYC once, but leave before it makes you hard” is on my life bucket list. But yeah, I don’t know when that will happen.
If you could do it again, would you rather have worked a few more years before you retired instead of going back to work now?
Yes. I wish I had done more reading about real estate and realized I’d want a house one day and factored that in more and also realized I might not find a partner. I wish I had worked one to three more years. It’s lifestyle creep, I know.
Are you still mostly nonalcoholic and vegetarian?
I quit drinking completely for a year and drank perhaps 5-6 times per year after that. I’ll always be vegetarian. I’ve eaten fish a few times. They seem like they have fine lives.
Do you get dressed if you don’t have Zoom meetings?
I don’t get dressed even if I do have Zoom meetings. I live in yoga pants and sweatshirts these days. My Zoom “meetings” are with family and friends and I don’t think they care.
If you do buy a home, blog posts about that would be nice. And if you do get a job so you can get a mortgage, I think most banks want 2 years of employment history — do you think you’ll want to work for that long?
I think you can get asset-based mortgages and I know people who have gotten a mortgage if they’re salaried even if they haven’t been working for two years.
I need to do a ton more research on real estate before I do anything, but I’m lacking the motivation to do so because I’m still not sure where I want to live.
Maybe you should put in a line that shows a target for you wanting to buy a place??
That’s actually a superb idea. The amount would depend on the location though and I feel like I need to nail down location before I do anything else.
Very interested to hear more about your property plans! I can understand the pull of wanting a home of one’s own. Being nomadic for so long has made me yearn for some permanence – like composting and veggie patches. I know you’ve not been so interested In property before as part of your investment strategy, but this sounds like a shift in your retirement plans / life plans. A general financial/ life plans post would be really useful.
I’ve never understood the pull of home ownership until recently for exactly the reasons you listed. Composting and vegetable and flower gardens. Outdoor space and a foot on the property ladder. A home that’s completely yours.
It’s free money if you do it right. I’ve always erred on the side of laziness. I don’t want to be a landlord. Do I? I don’t want to be in the Airbnb business. Right? I don’t know where I want to live for long enough for it to be worth it. I possess zero know how to fix the inevitable. Houses are expensive where I would want to live.
But I’m craving. I don’t know. Something.
I live my life in groups of three years. Three years at undergrad, three years working in insurance, three years at law school, three years working at a law firm in Chicago, nearly three years traveling.
Right on schedule, I’m nearly three years into living in Denver and I’m antsy.
I’m a little vague on the life plans at the moment. Let me get this book published and then I’ll focus on the next thing.
I’m interested in whether your expenses are still at only $23.5k approx, and how you spend your time, whether you miss the social aspect of work, blah blah blah
Approximately $22k. I went down from last year. 🙂
How I spend my time: Sleep 9 hours, workout for thirty minutes to an hour, meditate for 24-45 minutes, write for 2-4 hours, read for an hour or more, chores, socializing (but not as much of that lately.) I’ll cook occasionally or take long walks if the sun is out. Book clubs and online zoom board games happen fairly regularly. I actually talk on the phone a lot. Today I went cross country skiing.
I miss the social aspect of work during the pandemic, but maybe I was just craving social interaction in general.
Most people want more & more.
Bigger house, luxurious vehicles, large bank accounts.
What made you opt of that life style ?
I didn’t like alarm clocks and I wanted to tackle other life bucket list items. I wanted freedom and time. When I was making those decisions in my twenties and early thirties, the cars and the houses didn’t really appeal to me in the slightest.
But I do kind of get the appeal of that lifestyle. New cars are nice. They’re safer and more reliable. Fun probably. I think everyone I know has a big house and they’re nice. An increasing net worth is nice.
I feel like I’m not saying anything. I don’t know. It just felt right at the time. It feels okay now. When it stops feeling okay, maybe I’ll make a change.
Duplex? Rental income and house all in one, lots of reliable trades people on Angie’s list when the need occurs. So fun to read about your journey, good luck!
I go back and forth between thinking a duplex is the best of both worlds and the worst of both worlds. 🙂
Q&A was a great idea Anita!!!
From the cheap and retired seats–think weather when you finally find that property to buy.
Sunshine = happiness for sure
Great post, Anita! So much food for thought here. I wasn’t too surprised when you added a car to your lifestyle because it makes sense based on where you live. I’m a little shocked though by how much your views on home ownership have evolved.
I agree the Q&A was a fantastic idea. A couple more questions come to mind. What are your thoughts on carrying a mortgage without W2 income? Buying property generally involves a commitment longer than your 3 year cycle, so how will that work for you in the long term? When deciding whether or not to relocate to another city how do you factor in the cost of leaving behind the relationships you’ve built in your current city? I know you went through the agonizing process of choosing where to live a few years ago and came up with Denver as the answer. How have your thoughts on this changed? When you say “It’s free money if you do it right” are you referring to house-hacking?
So many questions I have to think more about to give a thoughtful answer.
Thank you for being so candid in the Q&A – super helpful to hear your reflections! I’ve reached FI but I plan to stay at my job for at least another 3-5 more years, partly because i love my job and partly because I want more cushion and flexibility in case anything evolves in my life. A lot of FIRE blogs tend to be critical of One-More-Year but I see it as giving Future Me more options. I also get such a sense of social connection from my work and as a single person who lives alone, that is the biggest wild card for me about leaving my job. You are one of the only bloggers I’ve found who I can relate to on this so it’s very valuable to hear your perspective. Look forward to future posts. Congrats on the progress on your novel!
Thanks! I appreciate the comment. 🙂 If you love your job, you’ll never work a day in your life.
Have you read The Soul of Money? It’s about the need for more and lots of other things. Just started it. Would love to hear your take on it.
Just put it on my to-read list. Thanks!
Nice update. With about $3800 in passive income per month based on a 4% withdraw rate, but an average spend of just under $1900 per month in expenses, perhaps a strategy is to realize some of those gains and put those toward a house down payment fund (rather than holding in equities). Assuming they are not locked up in retirement accounts, this might help you get started on the property side of investing. It’s a good inflation hedge if nothing else.
The 3 year rule applies to many people — I can say after a 3 decade career that the first 2 decades were blocks of 3 years but the third decade seemed to stretch out… perhaps because i now know what I like and don’t like.
I FIREd at 45 but have been doing a fun job for the past 6 years since hitting FIRE… (which provides health insurance) and is very low stress but fun. You might consider that approach. If you’re not back to full time work, you might consider some gig jobs for a few months at a time to dip your toes back into working and all proceeds go toward that house fund…
Good ideas, I think.
Interesting post and thoughts… I am not in your shoes but I would be willing to bet some of those folks with second houses etc are steeped in debt. You probably know more what is really going in with your family but I would be skeptical with the old friends, etc.
In any case, I think you have the right answer – don’t compare! 🙂
Hard to say for sure, you’re right!
Hi Anita,
Happy New Year! It was great reading your post! 🙂
Thanks, Liz!
Oh wow, I wasn’t expecting you to answer all the questions — you’re awesome <3 <3 But I’m falling behind the people that I actually know. Comparison is the thief of joy, but it’s human to be relative. Back when I started investing, I told a friend from law school my strategy. He also started investing into VTSAX. He continued to lawyer though and told me he recently hit $2.5 million.
Yeah. I thought I had reached my number, but then I heard a coworker mention a much bigger number before he’d consider himself FIRE’d. So now I’m thinking I should keep working one more year?
That’s forever the question. One more year??
ahh yes, the thief of joy.
We too crave that additional income that will let us grow our net worth, the stuff (well, some stuff like cars and houses) and the feeling of working hard. It seems, especially because of the pandemic, that day-to-day FIRE is somewhat, how to put it, “floaty?”
I liked working hard, earning the bucks, and hitting that FIRE target. Then quit. Except, a few years later I’m realising that income is wonderful. And it’s great to have a little bit of prestige/ego.
It’s probably Covid’s fault. Maybe it’s time for me to build a high-income business to get that rewarded feeling. I don’t want the work stress and bosses from a job – I didn’t save all this money just to give it no value.
Yes, I blame the pandemic, but I’ve had these thoughts before, so maybe the blame isn’t fair.
Comparison is truly a curse. Assuming I dont lose my job and the market doesnt tank I will be on track to hit a similar 4% FIRE target as you did around age 33 in a few years. When I first heard about your story on money mustache that a fellow alum just 5 years older than me was able to retire, I was so inspired and thought it was so far away. I should be overjoyed that I’m close yet the close
I get the less motivation I have to actually stop working.
I highly suspect I will never fully take a long break solely because all my other peers will be aiming for the 10x that amount and I’ll be peer pressured to buy houses in the same neighborhoods, go on fancy ski trips, sent kids to those crazy competitive manhattan pre schools etc… Just last week one of my best friends and I had a difference of opinion for booking a economy flight with credit card points as opposed to flying first class to reduce chance of getting coughed on by someone else.
That said I do plan to be much more picky about my jobs and try to use FI as leverage to get 20 day of vacation a year.
I still have friends that are still in law and I feel that! You just got to do what makes you happy. I’m happy with my life 85% of the time. Comparison is the thief of that last 15% joy. But when I was working, I was still comparing and I was a lot unhappier.
20 vacation days isn’t enough, in my opinion!
I always like your updates! I’m running into the house-buying problem right now. I still work, but for very little money, and when I FIREd I never thought I’d want to buy a place. Now I do. The people I’ve talked to have said asset-based mortgages don’t exist, maybe if you have a very friendly local banker or something. They don’t care how much you have in the bank, only about income. No more than a 50% DTI ratio. Right now I qualify for about 150K in mortgage and I’d like to buy with more like a 200K mortgage. 1099 income counts so I’m planning on trying to up that temporarily. Good luck with your property dreams!
I’ve actually never looked into asset-based mortgages, so I’m not surprised they might not exist! Bummer.
Really appreciate your candid responses! Looking forward to hearing more about the job/house development, and sending warm New Year wishes.
No developments on any front so far. Maybe none for a while. Idk.
Happy 2021 to you, too!
Can’t wait to read the novel!
Shelter, food, tribe can provide a sense of grounding. Perhaps more novels will born out of that safety. Or not. Maybe it is not a problem to solve right now, given the circumstances.
I want to say I have full confidence that you will find a great partner and build a house of your own in the future. I want to believe that life is generous to the one who consistently ventures out. But only God knows?
Alas, novel first. Can’t wait to read:)
Thanks! That’s really nice of you to say. 😁
Thanks for the thought-provoking comments about housing. We’ve thought about it too. One issue is that houses are really quite unaffordable in many places that we might like to be in, like New Zealand or Vancouver BC. (Also they can only be bought by citizens). The US has some houses that are cheaper, though.
We do have a townhouse condo in Waterloo ON. It wasn’t unaffordable, though it’s getting there. It does have outdoor space, though a bunch of it is not-so-useful grass. A bit more space than an apartment for growing things in the back. Would we want to hang on to it for the long haul? We don’t know. Renting it out for 6 months of the year is a lot of work. For now we like having it.
I’m afraid of how much work renting it out would be. Interesting food for thought.
We’ve done it twice when going on sabbatical, in 2016 and 2020. It got much harder to find good tenants the second time for some reason.
Here’s the answer to your4% rule question
https://www.barrons.com/articles/the-originator-of-the-4-retirement-rule-thinks-its-off-the-mark-he-says-it-now-could-be-up-to-4-5-51611410402
That’s interesting! Thanks for sharing. That’s good news! He thinks a safe rate is 4.5%.
For a 30 year retirement, though.
I’ll be 68. Plausible or disastrous.
Thanks for sharing your FI progress, nice to see your plan is holding up well. I am 51 now and trying to make the transition to retirement. I started investing aggressively at 26 and my approach to the 4% rule was to try not to worry about it by building a portfolio of dividend paying stocks and index funds over time to pay for my living expenses. The strategy I had was to have enough dividend income generated to pay for my living expenses so I would not have sell any of my principle. I wanted to eliminate the guesswork out of deciding which investments to sell or selling my equities in a bear market. If the dividend stocks I picked were good, they would pay the same income whether the market was up or down. Right now I get about $19,000 annually in dividends. I also combine this with the “yield shield” concept described in the Millenial-Revolution blog. My goal is to keep my living expenses under $40000 since federal tax on qualified dividends is zero if total income is $0 to $40000. I kept track of all my spending in 2020 and spent a total of $23,256 for the year. So if my dividends grow $5-6% every year, the dividend income should overtake my expenses in a few years. I like how you choose to live beneath your means, life is so much less stressful that way. I value freedom with controlling my schedule and time more than owning a overly expensive house or car that I can’t afford with lots of maintenance costs. Renting still provides lots of optionality. If rent increases to much you can always move to a cheaper area, smaller place, or get a roommate, etc. Not so easy when you own a house with lots of fixed costs.
Your last few sentences are exactly why I haven’t bought a house yet. The majority of my arguments are emotional ones to buy a house.
Thanks so much for sharing. It’s always inspiration to read about people on the other side of FIRE.
Regarding comparison, it’s important to remember that despite the second houses, etc., it doesn’t mean that their bottom line is any better than yours. Just because they make good money and spend good money, it’s possible that they won’t be in a better position come (traditional) retirement age than you. By being so far below 4%, with such a long time horizon ahead of you, in addition to the small chance you have of running out of money, you also stand a very good chance of having too much money. 😉
I never thought about having too much money! That’s actually a possibility, isn’t it?
I recommend a listen to Michael Kitces on biggerpockets money podcast. He’s one of the key researchers of the
4% rule and very fun to listen to. With you being so far under the 4% rule with such a long time horizon it’ll give you all the warm fuzzies. It’s overwhelmingly likely your net worth with continue to balloon and you’ll have to figure out what to do with the surplus.
That’s a fun thought!
If you haven’t read “The Life You Can Save” by Peter Singer, this will give you probably a whole new outlook on what to do if you end up with too much money. Even if you don’t, it might instigate a whole new purpose to your retirement. It’s free to download on the website. A quick and fascinating read, and the ethical questions are great acrobatics for your brain.
Thanks for the recommendation! It’s on my list.
Hi Anita, is there no room for a discussion on getting a tiny house? i don’t know what the return is when you sell a used tiny house, but the initial cost can be minimal, depending on your desires. if you don’t like your location, you can always move it somewhere else. particularly the converted shipping container homes.
Tiny house appeals to me not in the least. I want separate rooms and space. I’ve lived in a studio apartment before and didn’t like it as much as living in a one bedroom.