Pick Your Path and Don’t Stray

I read an amazing post by Kitty at BitchesGetRiches last night.  She walked through her reasoning behind buying $25 wedding rings.  She compared them to the $1,900 rings she and her partner really wanted and explained why they decided on the $25 rings.

They decided on the $25 rings because she and her partner had, years earlier, talked about their dreams.  She wanted the pony her parents never got her and she wanted to live in a house with secret passages.

Buying $1,900 rings didn’t help her get the pony. . . or the house.

She gives us permission to get the fancy rings if “you’ve dreamed your whole life of having a great big diamond on your finger”.  That wasn’t her dream or her path so she didn’t do it.

Before I read Kitty’s post, I was trying to come up with a way to use this amazing picture of a slot canyon I hiked last weekend.  I wanted to talk about how we each have to decide what is important to us and spend our limited resources–our time and money–to pursue our own path.

But she expressed it better than I could.

If you want the pony, then do everything you need to do to get the pony.

If you want the rings, then do everything you need to do to get the rings.  But please, please, please don’t settle on the partner portion of this scenario–you can buy your own damn rings.

If you want to get out of debt, then do everything you need to do to get out of debt.

If you want some flexibility or freedom, then do everything you need to do save some money.

But don’t jump on someone else’s path, figure out what matters to you and stay on your own path.

Do you know what your pony/hidden passage house is?  Figure out your path to get you there.

If you don’t know what your pony/hidden passage house is, read this and take an hour to do J.D. Roth’s exercise to figure it out.

Sometimes other people’s paths look like more fun–whether it’s fancy rings, huge ass houses or amazing trips.

But here’s the thing.  You don’t know their whole story.  You only know your own whole story.  Don’t compare your real story to their Facebook/Instagram/Twitter story.

Figure out your path and stay on it.  Your path is the only path that is right for you.

I’d hate to get to the end of this one beautiful life and realize I’d been walking on the wrong path . . . for me.

Save To Retire Early Even If You Won’t

I listened to a good bit of the James Comey hearing last week.  I don’t follow politics closely but Mr. Ms. Liz does so it was on the TV while I was working.

I kept wondering–does he have F U money?

We haven’t talked about F U money before because I find it to be a bit vulgar and I know some of my readers are sensitive to such things.  But I haven’t found a better way to express this concept.

Jim Collins, one of my personal finance heroes, coined the term.  If you haven’t read his stock series yet, do it right after you finish this insightful post :).

Does James Comey have enough money to move on to something else without worrying about how he will keep his family afloat during the interim?  He’s 56, could he retire?

Fortunately, few people see their jobs implode like James did.  But layoffs are common, companies sell, bosses move on, economies falter etc.

In my last job, we had two major downturns that affected people’s ability to pay an obscene amount of money for ski vacations.  A few of my colleagues lost their jobs–at a time when good jobs were not plentiful.

Most were not prepared.

My approach was to save as if I would retire early, even if I didn’t. 

I wanted to have F U money before I even knew what F U money was.

I’m a worrier, a planner and a control freak.

There are many worries that I have little control over–car accidents, health crises etc.

I have a lot of control over my dependence on a job. 

I reduced my need to worry by reducing my spending and increasing my savings . 

About 15 years ago, my boss’s boss asked me how I could get by with one less accountant.  I think I had a team of seven at the time so the loss of one would have been significant. I immediately replied, “well it better be me because I couldn’t do it”.

I wonder what my response would have been if I didn’t have F U money–maybe I would have worked 80 hours a week rather than the 60 I was already working.  I’ll never know.  Fortunately, I never heard another word about this suggestion.

The value of having F U money isn’t just that you have the ability to leave.

F U money allows you to shape your job throughout your career.

It allows you to ask for more flexibility because there’s less risk if they say no.  It allows you to stand your ground if you’re asked to do something unethical or not aligned with your values.  It gives you more control–now we’re talking my language!

I was a world class saver–saving over half of my take home pay for the last decade I worked.

When I turned 30, my net worth was about 1 times my gross earnings; at 40, it was 7 times; at 50 it was 13 times.

More importantly, when I turned 30, my net worth was 2 times my annual spending; at 40, it was 22 times; at 50, it was 53 times.

I saved this money even though I didn’t have a burning desire to retire. 

I loved my job 95% of the time.  I didn’t have a lot of hobbies and I didn’t have anything to retire to . . . until I found something to retire to.

Once we bought our retirement home in the desert, I wanted to spend my winters there.  BAM – I suddenly had something to retire to.

Fortunately my husband and I were on the same page though he still isn’t fully retired.

We researched what we needed financially, did a bunch of long-term projections and decided we had enough.

I mentored my staff so my work transition could be as smooth as possible.

Then I took the leap–on leap day no less!

Don’t put off saving until you have something to retire to.  It may sneak up on you like it did me or, like James Comey, it may not be your choice.  Start preparing yourself–gather your F U money, invest it, and watch it grow. And, in the meantime, shape your career into something that works well for you–you’re in control.

Reflections On My First Year of Retirement

I’ve been retired a year–it’s crazy how fast it has gone!  It makes me better understand a line Gretchen Rubin often quotes “The days are long but the years are short”.

I hope you’re not disappointed but I’m not issuing a report card like I did for my first four months of retirement.

Mainly because my grade would go down and I’m a gold star junkie.

Not because I’m not loving this retirement thing but because retirement has turned into more of a vacation than something I can grade myself on.

I feel like this first year has been a detox.

I’ve allowed myself to be far less productive than I expected I would.

I got my first job when I was 12–yes, 8th grade.  I bussed tables at a Mexican restaurant for five weeks–just enough time for the owner to realize the head bus girl was hiring 12 year olds.

Not sure what my parents were thinking but I learned a lot about how to handle come ons from gross kitchen workers in just five weeks.

I got my first legitimate job at 13 making models of teeth for an orthodontist.  I kept that job all through high school and typically had one or two jobs on top of it.

I wasn’t allowed to work my freshman year of college and couldn’t have worked my first year of law school.  But other than those years, I always had at least one job.

So retiring at 51 may seem early but I had worked almost 40 years.

I thought my job was my life.  I think that tends to happen when you don’t have kids.

I learned my job was not my life.

It’s a long story more appropriately discussed on a therapist’s couch than on this blog but suffice it to say some loyalties were stretched or broken.  I was able to rebuild the relationships but I better understood the difference between colleagues and friends.  I do have a few treasured friends who have bridged this gap but not many.

So it feels like I’ve been on vacation for a year.  Yippee!

I retired for a lot of reasons but the overarching reason was so I could spend the winter in the desert.  21 winters in ski country is enough.  And I’ll tell you, the saving and the sacrifice was worth it.

Sorry mountain friends, but it was especially fun when I received weather and road alerts from our home county.  This winter was a doozie–early season snowfall was record setting.  We enjoyed watching much of this snowfall on our driveway cam, from the desert.  The gal who replaced me at work texted that I picked a great year to retire because my old 25 mile commute sucked.

People who are working often ask me what a typical day is like.  There’s rarely anything super exciting in my days but here goes.

I wake up when my body tells me it’s time to wake up.  I stretch while my latte brews.  I then spend a bit of time working on this blog and reading posts from my favorite bloggers.  After breakfast, we play pickleball, hike, mountain bike or take our cruisers out for a ride.  We get cleaned up, do household chores or shopping.  Then on the best days we get together with friends for cocktails or dinner and cards.  On the other days, Mr. Ms. Liz and I play cards and watch TV or a movie.

I  spend a bit of time on homeowner association matters.  I’m on the Board of my mountain association and help with financial matters for my desert association.  Association management is the business I retired from and this is a way I can give back to the communities I love.

I’ve worked a bit – about a weeks worth in total.  It’s been fun and hasn’t interfered with my important leisure activities too much.  I also received my first gold star in a year . . . literally:  “and a gold star to Liz for” blaah blaah blaah. . .

I’ve informally coached a few people and hopefully helped them make better financial decisions.

I also read and listen a lot–books and podcasts about money and life that teach me and give me ideas for this blog and shit-lit that entertains me.

We’ve done a bit of local traveling–but stay pretty close to home because of our geriatric cat (who knew a cat could live 21 years?!).  Once he’s gone, I suspect we’ll buy a sprinter van RV and travel more extensively.

It may sound like a snore, but I’m doing what I want to be doing.  The mix of physical, social and sedentary activities suits me.

This coming year, I need to work on the technical side of this blog so I can reach more readers.  I really (read: really, really, really) hate messing with the technical side–I tend to screw it up and can’t figure out how to unscrew it.  But, fortunately, I have a friend who is expert in this area and has offered to help.  It sounds like a good winter project to me.  I’m also working on formalizing my coaching process and even have a friend who is willing to work with me while I develop the program.

But this is a blog about money so let’s talk about money.

I thought it would be really hard to spend money when I’m not making any.  I’m shocked, but it isn’t hard at all.  Each month, I get a transfer from my investment account–it feels like I’m getting a paycheck even though it’s just my own money.  If I had to think about where my money was coming from each month, it would be unnerving–automated transfers reduce my stress.

I’m spending more money in retirement because I have more time to fill.  It’s mainly groceries and dining out that have gone up.  But we saved on utilities by avoiding winter and save on vehicle expenses by driving less.  I’m still staying well within my budget–I should probably be spending more but I have and do everything I want.

And I’m making a bit of money too which was not in my plan!  I’ll use the money to maintain my CPA license and fund an IRA.  It’s been fun to contribute to these projects and I’ve kept in touch with my former colleagues.

I thought it would be hard to see my net worth go down.  But it hasn’t gone down, it’s up over $100,000 since I retired thanks to the 16% run up in the S&P 500.  And I’m not even including increases in our real estate values–our mountain community’s real estate market is making a comeback (finally!).

My investments increased more in the first two months of this year than I will spend all year.  I’m incredibly grateful for this–if the market had tanked as I retired, retirement would be way scarier.

So speaking of scary.  What scares me?  Healthcare.

If there is anything that could make one of us go back to work, it is the cost of healthcare.

We are on an HSA eligible Obamacare plan.  We pay $171 a month for coverage for both of us.  It’s absurd but it’s the law.  Because we are (voluntarily) low income, we receive a subsidy for most of our insurance premium.  You don’t want to hear me rant about how foolish this is–the government paying insurance premiums for high net worth individuals–so I won’t start.

If the subsidies go away and premiums stay at the current levels, we’ll feel it.  Fortunately, Mr. Ms. Liz has only five years until he’s eligible for Medicare (one time when it’s good to be old!) but I’m 13 years out and a lot can happen in 13 years.  If you’re in a similar situation, and wanting to read a great write up on the current situation (aka scare yourself!) check out ournextlife.com.

It’s a worry, but it won’t keep me from enjoying this early retirement I worked (and saved!) hard for.

The Easy Way To Fund Your Dreams

What do you dream of?

Traveling? Buying a home? Staying home with your kids? Taking time off? Sending your kid to college? Retiring someday or even early? Buying a camper and heading for the open road?

Don’t know what your dream is?  Read this and figure it out!

Unfortunately, few dreams are free.  If you want to pursue your dream, you’ll probably need to save some money.

It may seem really hard to eek out savings from each paycheck.

But I promise it will only get easier!

As long as you’re not spending more than you make, you don’t even have to reduce your spending.  IF you’re spending more than you make, sorry, but you have to get yourself on track.  Cut, cut, cut and earn, earn, earn until you’re not living beyond your means.

You just need to commit to keep your spending where it is.

Earned a raise?  Put it in your dream fund.
Earned a bonus?  Put it in your dream fund.
Received a cost of living adjustment?  Put half of it in your dream fund.
Earned extra money from a side hustle?  Put it in your dream fund.

You don’t HAVE to increase your spending just because you’re making more money.

You don’t HAVE to increase your spending just because inflation has gone up.

Sure, some of your bills will go up as inflation rises, but not all costs need to rise.

Think this is impossible?  I’m here to show you how possible it is.

I compared my spending in 1996 to my spending in 2015–the last full year I worked.  From age 30 to age 50, my annual spending went down over $3,000.

Even when I take out 1995’s house and car payments*, my spending went up only $6,400 in 20 years.

My personal inflation rate over 20 years was 34% or 1.5% a year.

The government says inflation in my state was up 57% or 2.3% a year though I believe in my resort locale, it was even higher.

My earnings went up 122% or about 4% a year.

Keeping my personal inflation rate below the real inflation rate and far less than my earnings were growing allowed me to retire early.

And I promise, I was not suffering!

During these 20 years, I bought a new car and a new boat, we built our dream home and bought a vacation home . . . all for cash.

You’ll be amazed at what you can accomplish just by keeping your personal inflation rate low.

So right now, commit to doing this for me (and for you!):

Immediately increase your retirement contributions by at least half of any cost of living increase–before you even get that first paycheck.  Out of sight, out of mind–done.

Put most of your bonuses, raises and side hustle income in your dream fund.  If retirement is your dream, put it into your tax deferred account like a 401k or IRA.

Put the money you’re saving for the long-term (over 10 years) into a low fee, broadly diversified index fund like Vanguard’s VTSAX (my favorite fund).  Learn a bit about investing–this education will serve you well.

Then just sit back and watch your dream fund grow!  You CAN do this!


Investing is risky, this reflects my opinion and is for informational purposes only.  Proceed with caution, do your research and seek professional advice if necessary.

* In 1996, I had a mortgage and Mr. Ms. Liz loaned me money for my car (interest free baby!).  In 2015, I had no debt.

Social Security Is My Bond Portfolio

My Dad is an Investor.  I say Investor with a capital I because I remember him studying investments in his home office (aka my brother’s former bedroom) for hours when I was a teenager.

He’s the first early retiree I knew.  So when he shared a bit of his investment philosophy with me, I listened.

In spite of being in his late 60’s at the time and retired with no significant pension, he continued to be invested very aggressively and held very little of his investments in bonds.

He said Social Security was his bond portfolio.

This approach worked well for him.  He’s now in his late 70’s and running out of money is not even possible (he was also the first frugal person I knew!).  Though he recognizes he would have been better off investing in index funds and saving the hours he pored over investment reports.

I’ve followed in his footsteps on many things and I’m following him on this one too.

I’m also invested very aggressively.  I’m 80% invested in the stock market.  More than half of my investments are in a single fund–Vanguard’s total stock market index fund (VTSAX) or an exchange traded fund that is very comparable to VTSAX.  I have about five years’ living expenses in banks and money funds and a tiny bit of bonds.  This cash helps me feel comfortable with my large exposure to the stock market–I shouldn’t have to sell stocks in a major downturn.

There are two primary reasons I’m not invested in bonds.  One is the stabilizing force my future social security payments have on my portfolio.  The other is the inherent risk long-term bonds have in the current, low interest rate environment.

The Social Security Administration tells me I should receive about $2,500 a month plus future cost of living adjustments when I reach my full retirement age of 67 (login to SSA.gov to check yours).  The actuarial tables tell me I should live to about 86 so I should receive 19 years of payments before I’m done.  The present value of those payments is over $400,000.  So I can say I have $400,000 invested in bond equivalents.  Only Social Security is even better than a bond because it escalates with inflation.

Some of you would say I shouldn’t count on receiving Social Security–the fund is running out, future contributions won’t support payments etc.  Our elected representatives will need to pull their heads out of the sand and make changes so the fund is sustainable.  Though I’m confident these changes won’t affect me significantly, I include only a reduced payment in my long-term plan.  Here’s one time when being older is a good thing–our elected rep’s aren’t likely to muck with a (voluntarily) low income baby boomer’s retirement.  We vote and being a baby boomer makes me sound even older than I am.  It won’t hurt that Mr. Ms. Liz is 8 years my senior–there’s no way they’ll be mucking with his Social Security.

Traditionally, bonds have been a low risk/low reward investment.  They act as a stabilizing force on a diversified portfolio.  Their value doesn’t tend to swing much and their value often goes up when stocks go down.

But, with interest rates currently at historic lows, I believe there are significant risks in the bond market.  A general rule of thumb is that for every 1% increase in interest rate, the value of the bond decreases 1% for every year of maturity.  If I paid $1,000 for a bond that matures in 10 years, my bond is worth only $900 if interest rates go up 1%.  With bonds paying about 2% today, the potential decrease in bond value seems to me like significant risk without adequate reward.

I prefer to invest almost fully in the stock market.  I expect sometimes scary volatility but I expect to be rewarded for the risk I am taking.

What do you think–is my Social Security as bond approach crazy?  How do you factor Social Security into your financial plan?


Investing is risky, this reflects my opinion and is for informational purposes only.  Proceed with caution, do your research and seek professional advice if necessary.

The Power Of One Word

I just got back from a mountain bike ride.  It’s one I do regularly because it is a good lung buster that helps me get in shape.  But I haven’t ridden this trail in six months.  Our desert trails are much flatter and I’ve only been back at altitude for a week.  So it felt really hard.  I got to the top without taking any breaks–though I felt like I might puke.

I know exercise is good for my body and my brain.  But getting out and exercising regularly doesn’t come easy for me.  And I’m especially bad at making myself do the hard stuff like I did today.

I was tempted to put my foot down, take a break and get my breathing under control. Continue reading “The Power Of One Word”

My Visit With Warren Buffett

The typical investor has no business investing in individual stocks.  Most of my investments are in Vanguard index funds–VTSAX is my favorite.  Until recently, I owned only two individual stocks.  I also own some managed funds (which carry higher fees) but I would move all of my investments to VTSAX if I could do it without paying taxes on my gains.  You can learn more about my investment philosophy here.

A few months ago I broke one of my cardinal rules. I bought another individual stock–BRK–Berkshire Hathaway.  I bought it only because I wanted to go to the annual meeting and see Warren Buffett (world’s 2nd richest person) and his partner, Charlie Munger talk about investing and life.  A trip to Omaha doesn’t sound all that exciting but this annual meeting is a real spectacle–more about that later. Continue reading “My Visit With Warren Buffett”

How Can Money Buy Your Happiness?

I’m reading the book Happy Money. It is helping me understand how we can use money to create happiness in our lives.  It’s an easy read–follow the link above to buy it on Amazon (and I’ll receive a small commission) or look for it in your library.

The research on how money makes us happy is super interesting and not always intuitive.

I always thought the more money I made, the happier I would be.  It seems like life would just get easier.  But the research shows that once you make $75,000 a year, you don’t get happier with more income.  I’m sure this number varies based on the cost of living in your area but once you reach that amount, your happiness doesn’t rise. Continue reading “How Can Money Buy Your Happiness?”

Little Decisions Help You Reach Your Dreams

It is hard to set money aside for your future.  Damn hard.

Especially when you are surrounded by people who spend money like it never runs out.

I hated being the one saying I couldn’t do something because I didn’t have the money.  Really I had the money but I didn’t have the budget.  So then I started saying those things weren’t in my budget.

But it got easier–people got used to us being more frugal and adjusted to it or they sort of slipped out of our lives. Continue reading “Little Decisions Help You Reach Your Dreams”

What Could You Do With A Million Dollars?

On the Stacking Benjamins Podcast I was listening to today, Joe was talking about the responses he received when he asked his Twitter followers what they would do with a million dollars.

He got some interesting responses.  Some were altruistic–donating the money or helping family members.  Some were realistic–like paying off debt.  And some were funny–like calculating the time it would take to count the money at the bank–in twenties.

It got me thinking.  What could each of us do with a million dollars?

I’m overly rational so I got out the calculator.  $1,000,000 invested should provide $40,000 of retirement income forever.  With Social Security providing 40% of our needs (as it does for the average recipient), we should have a stream of income of about $67,000 in retirement.  I could live a pretty nice life on $67,000.

That $1,000,000 invested in rental real estate should provide even more income.  According to Paula at affordanything.com, we shouldn’t invest in a property unless it will rent for 12% of the purchase costs per year, 6% of that goes to costs and that leaves 6% return for us.  Our retiree now has an annual stream of income of $100,000 including Social Security.

Now we’re talkin’!  With that income, we could do some really cool altruistic stuff too! Continue reading “What Could You Do With A Million Dollars?”