April 2015 – Frugal Living

Planning for (Early) Retirement

April 30, 2015 by Andrew Leave a Comment

You may have noticed an addition to the sidebar. It is this little chart graphic that I try to update once a month.

May 2015

It is our yard stick for two major financial goals in life. The first is to pay off our mortgage and be completely debt free. The second is to have enough interest earning assets socked away to be able to live indefinitely without having to work (aka retirement).

We currently have 62% of our mortgage paid off. Our extra payments help to chip away about 3% every month.

The retirement bar rises more slowly and could even decrease if the stock market goes down. We are currently at 12.3% of our retirement goal, but what is the goal number? More importantly, how do you find out your own goal number?

Planning for Retirement

There are only a couple of numbers that you need to know in order to plan for retirement. The most important number is your annual expenses. Ya, ya, I know what you are thinking. All of those retirement calculators and financial gurus on the internet talk about retirement in terms of income. “You need to be able to replace 80% of your working income in order to retire.” Let me tell you, that’s a load of crap.

What you really need, is to be able to cover 100% of your expenses. You track those, right? If not, now’s a great time to get started with Mint.

The great thing about basing your retirement goal off your expenses is that if you want to retire sooner, you just have to lower your expenses! Man, I knew this frugal thing was going to pay off. 🙂

Before you rush off to figure out your annual expenses keep in mind that they should be adjusted for retirement. If you are going to be mortgage free before you retire, you can drop those mortgage payments from your total. The same goes for items such as daycare, estimated income tax (you’ll be retired), and any debts that you have paid off (student loans, credit card, car, etc…).

Okay, so do you have your annual expenses number? Let’s use $30,000 as an example.

4% Rule

Here comes the second number. If you guessed 4 you’re wrong. The second number is 25. Multiple your annual expenses by 25.

$30,000 x 25 = $750,000

There you go, that is how much money you need to save in interest earning assets (like stocks and bonds) in order to retire. Do you see what I did there. I said “retire”, I didn’t say “retire at 67”. That’s right, once you have your nest egg you should be able to retire at any age and live indefinitely off your nest egg.

Suuuurre… say the skeptics.

Don’t believe me? Let’s start with exhibit A, the Trinity Study. The study, done by a group of professors in the 90s, and later updated with recent historical data, looked at rolling 30 year periods to see how stock portfolios (50/50 stocks to bonds) would have fared since as early as 1926. The authors concluded that given a withdrawal rate of 4% per year, the likelihood of a portfolio surviving for 30 years was 96%.

It’s at this point that you look over to your SO, if you’re single you can skip this step, and you find out who among you is the more cautious. The cautious partner will probably say that number is too small, and want to use a 3% withdrawal rate just to be safe. So we really have two retirement numbers, the 4% and the ‘rock solid’.

If you’d like to read more about the Trinity Study and the 4% rule, Go Curry Cracker has a great write up on the topic.

Going back to our example, 4% of $750,000 is $30,000. Yay, the math works!

But $750,000 is SOO much money. Who could ever save up that amount of dough.

If you are close to the ‘normal’ retirement age, you may not have to. Social Security and any pensions may be able to subsidize your annual expenses. Instead of needing 30,000 from your portfolio a year, you may only need $10,000. That shaves off a cool half million right there. If you are still young and want to pursue early retirement then Social Security and pensions are too far away to be much of a serious help. Instead you’ll have to focus on two things, cutting expenses and raising income.

Early Retirement

Mr Money Moustache (MMM), an avid early retirement blogger, has put together a simple table to correlate savings rate to years till retirement.

Saving 10-15% of your income for retirement will put you on track for retiring in your 60s or 70s, assuming you start in your early 20s. We are currently putting aside 25% of our income, and even that amount of savings only puts us on track for late 50s. Our goal is to increase our savings percent to 40 or 50 so we can retire early. Preferably before we turn 40. That may be possible if we are disciplined enough to pay off our mortgage early and save that freed up cash flow instead of spending it on lifestyle creep.

Some Final Thoughts

I use the word retirement, but what we are actually pursuing is early partial retirement. The flexibility of working when, where, and on what we want is incredibly appealing. It may not be necessary to reach 100% of our retirement number if we offset our annual expenses with partial working income.

The second thought, is that no where in here have I mentioned financial windfalls. That could include winning a lottery, or receiving an inheritance. The reason for their omission is simple, you shouldn’t count on them or rely on them.

Finally, the 4% rule has been getting a lot of flak in the past few years saying it is obsolete and no longer valid. The arguments generally go that bond rates have plummeted in recent history and yield close to zero. The 2008 crash and subsequent depression hit close to home and rattled a lot of 401k holders. The 4% rule works if you remain flexible. Should you buy a new car the year that the stock market drops 50%? Probably not, maybe you can make do with what you have until your portfolio recovers in a year or two. Is the market up 15% this year? Maybe you should withdraw more than 4% to build up cash reserves for down years.

Freebie Extravaganza

April 19, 2015 by Andrew 1 Comment

It has been a jam packed weekend for us with lots of freebies!

A Free Chair

Here is a free chair that I found on Friday. The upholstering is a bit rough but it is a solid chair. The label on the bottom says Fairfield, so someone probably paid a few hundred bucks once upon a time.

Free Movie Rentals

Redbox is running a deal right now (PLKMP982) where you can get five free DVD rentals for each account that you have with them. The deal runs until 4/30 and you must reserve your DVD online (the code won’t work at the kiosk).

So far we have watched Interstellar and The Imitation Game. Both excellent movies that you should watch if you haven’t already!

Free Laundry Detergent +

On Saturday, there was a cloth diaper expo in town. The first twenty people got goodie bags. We happened to be walking nearby so we stopped in and got a large bag filled with detergent, an insert, various balms, and literature.

Free Charcoal Grill!

Also on Saturday we won a free charcoal grill as part of a city wide scavenger hunt.

Our local library has been promoting National Library Week and the rollout of their brand new bookmobile by posting a scavenger hunt on Facebook every day for the past week. It has been really fun to try and figure out the clues and race across town to get to the destination before other treasure seekers. The prizes were usually claimed within 10-20 minutes of the first clue being posted and twice we were in sight of the goal line just to see someone else get their first. The last prizes clue started with:

Subtract the number of dwarves from a baker’s dozen
Add the number of blind mice to the loneliest number
Subtract the number of calling birds from the number of gold rings

My gut told me that it was a call number so we went to the library. We had books to return and they were having cake to celebrate the new bookmobile so even if I was wrong we would still score some free cake!

After getting to the library the second part of the clue was posted

.LVII
Add the value of two quarters to Walter Payton’s number
“Bam!” You got it!

I’ll leave the answer at the end of the post so you can see if you figured it out.

Here was Shae with the prize envelope. We were so thrilled to have found one and win a prize!

Then we took a group selfie to commemorate the occasion. Frugal Boy was obviously not as excited as his parents, but he’ll come around after he gets to eat some meat seared over red hot coals.

After eating some free cake and checking out the snazzy new bookmobile we headed home.

Free Garage Door Fix

Arriving home I pressed the button to open our garage door and the door shook a lot on the way up and then stopped 3/4 of the way. In the words of Frugal Boy, “Uh Oooh!”

The culprit was easy to spot. One of the rollers had dragged and bent its hinge completely out of alignment.

I grabbed some tools and pulled the broken hardware off the door.

My first attempt to fix the door was to go to Lowes and buy a new hinge and ten new rollers. Our garage door dates back to the 70s and as this little incident proved, it is on its last legs. Returning home, I lined up the new hinge where the old one was and discovered that it was incompatible. The replacement hinge was far too tall and if I screwed it into place then the roller wouldn’t line up with the track. I would have to move the entire track back at least 1/2″ to accommodate the replacement parts. To add insult to injury, the new rollers are too thick to fit into the old hinges.

In a last ditch effort, I resorted to Great Depression tactics and laid the old hinge on the garage floor and beat the snot out of it with a four pound hammer until it was straightened out again. I also tightened up and replaced any missing nuts that had shaken loose from 40 years of operation. So far so good and the fix was free!

Free Car (Blocks Sold Separately)

Saturday night, Shae asked me if I wanted to come with her to walk around the neighborhood to find any curbside deals. A couple of blocks away we found a Little Tikes Cozy Coupe. I asked the man outside of the house if we could have it and he was more than happy to let us drag it away. He said that they had inherited it with the house and his kids had ridden it pretty hard. The front wheels were bent and one of the columns had been ‘repaired’ long ago.

This morning we went back to Lowes to return the incompatible garage hardware and to pick up some new wheels for Frugal Boy’s pimpin ride.

A couple of casters, long carriage bolts, some scrap wood, and a little ingenuity had Frugal Boy’s ride back on the street, err alley, err garage (it was raining today).

So there you have it, our freebie filled weekend! I still have to assemble the grill and break it in sometime, we have three more redbox movies to rent, leave a recommendation down in the comments, and our garage door is running on borrowed time.

Scavenger Hunt Answer

641.5784 which refers to a section of grilling cookbooks in the Adult Services Department. The reference to “Bam!” was intended to narrow down the options to Emeril Lagasse’s cookbook “Emeril at the Grill: A Cookbook for all Seasons.”

Spring Mishmash

April 12, 2015 by Andrew Leave a Comment

In the interest of not falling too far behind on blog posts here is a new one. Unfortunately, I don’t have enough quality material for an on focus post, so let the ramblings begin! Please do try to keep up, we’ll be switching topics rapidly.

A New Hat

The last bit of winter weather was the straw that broke Shae’s back. She brought out the sewing machine and made a custom fleece hat for herself with ear flaps (a must have feature according to her) and a special cutout for hair.

We Visited Family

Easter weekend we visited with family. Frugal Boy got some one on one time with Grandma.

Vegetable Korma

Shae planned out April’s dinner menu. A surprise favorite so far for me was vegetable korma. This vegetarian dish is big on flavor and texture (depending on how long you cook the veggies). Next time I think I want to add some chicken or a white fish for that little extra bit of extra flavor.

Walking Becomes The New Thing

Frugal Boy can now be seen wandering aimlessly through the house on two limbs instead of four.

Blueberry Bushes Get a New Home

We ordered two dwarf blueberry plants for our backyard. The two varieties are suitable for container gardening and in a few years we will hopefully be collecting 5-10 pounds of fresh berries each summer! In preparation for the new arrivals we got their large pots ready with nice acidic soil.

Is the Carnival in Town?

The weather has been fantastic and we have been booting Frugal Boy outside as much as possible. Our neighbors seem to have the same idea, so when a bounce house got set up and they invited Frugal Boy over to jump in it I couldn’t say no!

Slides are FUN!

We’ve found that playgrounds offer a better place for Frugal Boy to express his climbing desires than our living room furniture. He seems to be taking after his oldest cousin and is completely fearless about going down any slide by himself.

Hanging Out and Eating Crackers with Mom

We are working on getting Frugal Boy used to the idea of spending all day outside when it is warm out. I have fond memories of childhood and playing outside until it got dark out. Hopefully with the proper nurturing and boundaries Frugal Boy will be able to experience some of the carefreeness of our youth.

Nothing is Safe

April 3, 2015 by Andrew 1 Comment

It’s official, we have a climber!

Building a Self Watering Raised Garden Bed

April 2, 2015 by Andrew 23 Comments

I am 99% finished with a weekend home improvement project and it is only Thursday! Just don’t ask what weekend I started on. 😉

Shae and I have been talking for a while about building some kind of raised garden/flower bed in our backyard. I wanted something tall but affordable. Shae wanted low maintenance. Here is the almost finished product that has been erected in our backyard.

A view from the inside of the ‘L’

and a view from the alley.

From the Beginning

Every project of ours starts with a written plan. We often go through several iterations of a design before settling on ‘the one’. The first proposal was a simple rectangle and the site location for it was a completely different part of our backyard. It was only about a foot tall and made entirely from cedar.

Of course that didn’t really meet any of our specs. Cedar is an expensive wood, at least when compared to pine. The planter was only a foot tall and it wasn’t self watering. There had to be a design that would meet all of our requirements and eventually we started toying with an L shaped hybrid design that incorporated low cost treated, stained pine with galvanized sheet metal.

Several revisions later and we had our bill of materials.

Menards was running an 11% rebate sale, that we took advantage of. We also rented one of their trucks ($22.50) for 75 minutes from when you leave the outdoor yard.

We unloaded all of the material minus the dirt into our garage for the evening. I posted the below picture to Facebook and asked friends to guess what I was building. People were very creative in their guesses, although most were spot on that it had to do with gardening. That night I started building the frame in the garage.

Saturday morning, Shae helped me drag the frame out of the garage and put it next to its final resting place. It was a bit taller than either of us anticipated!

Due to its weight, we decided that I would build the rest of it in place, so we marked out where it would go on the grass.

Then dug out and leveled the ground so the planter would sit evenly.

After dragging the skeleton into place and leveling it, I started fitting the metal panels.

After fitting the first panel, I instantly knew there was a serious design flaw. My intention was to have the panel hold the dirt in, but with it only being secured at the top and bottom, it was far too ‘bendy’ and easily bowed in and out with the slightest amount of pressure. To resolve this, I bought three additional stained and treated 2x4s to brace the panels on the outside. I also had to buy an additional four regular treated 2x4s to replace the ones that had to be used for bracing.

Being able to screw the sides of each panel added much needed rigidity.

With the panels in place, I turned my attention to the inside of the planter. Instead of filling the entire planter with dirt, an expensive and back breaking proposition, we opted to instead build a raised internal floor. I secured treated 2×4 joists to the vertical 4x4s.

Treated 1x6s were cut to size and installed as planking. Frugal Boy enjoyed cruising along the inside.

Once all of the floorboards were installed, I grabbed some left over heavy duty plastic from when we lined one of our crawlspaces and carefully placed it into the planter to make a liner.

With the liner stapled to the top of the planter, I cut 3″ corrugated, perforated drainage tube to fit the bottom.

These tubes act as a water reservoir and form a critical part of the ‘self watering’ aspect of the planter. Of course, you need a way to add water to the reservoir and that is where this handy fill tube comes into play.

We also needed an overflow drainage pipe. I used a scrap piece of pvc and drilled a bunch of holes into it.

I cut a hole in the planter side just above the corrugated pipe

and inserted the overflow pipe.

The overflow is on the far side of the fill tube.

All of the piping gets wrapped in landscape fabric to prevent dirt from falling in and filling/clogging up the watering system.

Then it was time to add dirt! I started with some sand along the sides of the corrugated piping. I read somewhere that top dirt sitting in water will begin to stink as anaerobic bacteria goes to town.

With the dirt added, the only major thing left was to add the edge cap. I used treated and stained 2x6s and secured them with screws from the underside to leave an unmarred top surface.

What’s Left?

Besides sowing seeds, something that will have to wait until it gets a bit warmer, the only big item left to complete the project is to add gravel along the perimeter like so.

I am putting down landscape fabric to keep weeds from popping up next to the planter. Holding that in place is river rock because it is cheap and attractive. I have to go back to the store for a few more bags of rock. I also need a PVC cap for the supply tube so mosquitos cannot breed in the underground reservoir.

So there you have it! Hopefully the self watering system will work by wicking moisture from the reservoir to the root systems. We should only have to water once a week even during the hottest days of summer.

Shae has been deciding what she wants to plant and already has a few ideas.

Leave a comment with what you would plant! Who knows, maybe we’ll try it out ourselves.

Frugal Living

Indulging in life, financially responsible

Month: April 2015