Retire By 35 – December 2011 Results

Each month I calculate my family’s cash flow and balance sheet to track my path to extreme early retirement.  I do this to ensure we are spending our money on things we need and activities we enjoy.  My intention with sharing it here with such transparency is not to show off my income or savings, but rather to show what can be done if you stay focused and deliberate.  I strongly encourage everyone to create a similar report, even if you don’t share it with others.  It takes me 2 hours (including this fancy report), and it’s the only time I look at my portfolio or expenses each month.


For those of you who follow this site closely, you know that I didn’t write up my standard report in November.  During my monthly analysis at the end of November, I found that some credit card transactions were missing from my Quicken report.  Worse, it appeared that the previous month and a half were also missing some transactions – which meant we were actually spending more than I realized.  Considering my recent spending improvements from $3000/month down to nearly $2500/month, this was a disheartening realization.

On the other hand, I’m still right around my original goal of $3000/month even during the month of December where we had heavier expenses for Christmas gifts and hosting family at our house for over a week.

Here are December’s numbers:

Expenses: $3055

  • Mortgage: $871
  • Education: $130
  • Utilities: $210
  • Groceries: $522
  • Diapers: $0
  • Restauraunts: $77
  • Fuel: $32
  • Gym:$81
  • Clothes: $22
  • Auto Sevice and Parts: $0
  • Auto Insurance: $311
  • Auto Registration: $0
  • Bike Stuff: $32
  • Shopping: $89
  • Gifts: $324
  • Medical: $124
  • Cash: $0
  • Entertainment: $86
  • Home Improvement: $144
  • Books: $15

Groceries were extremely high.  I’m not sure what to make of this, since we had been making some progress.  Much of it could be due to having guests during Christmas, although they bought quite a bit of food also.  It’s probably time to start tracking our groceries at a more detailed level so we can understand where it’s going.  I also want to start getting more of our groceries at Costco.

Entertainment was also higher than usual.  This is totally my fault.  3 trips to the sports bar to watch the Steelers’ games, and 2 more for some big UFC events.  But this beats buying the NFL Sunday ticket and UFC on pay-per-view, so I’ll take it.

My bike expenses make me laugh.  I had a coworker that recently had to replace the brakes on his truck, a cost of $450!  On the other hand, I replaced my front and rear brake pads on my bike and a tire tube for a grand total of $32. And it only cost me that much because I decided to buy at the local bike shop rather than order online.  And in case you’re wondering… Yes, I happily pointed out the difference to my coworker.  :)

Income: $12066

  • Salary: $10157
  • Dividends: $1305
  • Premier Equity Fund: $0
  • Online Store: $181
  • Android Apps: $229
  • Lending Club: $97
  • Amazon: $72
  • Bonus: $0
  • Commission Junction: $25
  • Real Estate: $0

I had another good month of income in December, mainly due to the fact that I had three paychecks in December rather than the usual 2.  Dividends are up about $30/month, which is always fun to see.

On the real estate front, we unfortunately still haven’t sold our property flip, but we got surprisingly good traffic for a December, so I’m hopeful that withing the next 3 months we’ll sell the house for a good profit.  It’s only been on the market for a little more than a month, so I’m not concerned.

You may also notice that I added an income source called Premier Equity Fund.  This is the fund I bought into with my SDIRA.  I bought in at $40,000 and will receive a base return of 8% APR paid out monthly ($267/month) starting in January.  At the end of each year, outstanding profits will be shared to all private investors, including me.  I’m hoping for an overall return between 10% and 12% annually.

Assets: $978,000

  • Taxable Portfolio: $525K
  • Tax-Deferred Portfolio: $362K
  • Lending Club: $10.6K
  • First Investment House: $7K
  • Second Investment House: $75K

Overall Outlook:

Savings rate: 75%
Months to retirement at current expenses (3% SWR): 27
Months to retirement at current expenses (4% SWR): 0

With my expenses back up to $3000/month, I am up to 27 months of work until retirement assuming a 3% safe withdrawal rate and assuming I never make another penny of income from anything other than my investments (which, of course, is silly).  Realistically, I’m still confident that I could retire at any time and be financially free.

Image of progress (click to enlarge):

24 Responses to Retire By 35 – December 2011 Results

  1. Alice says:

    Where are your taxes? I don’t see them in expenses did you net them from your income? In retirement I find them to be one of my larger expenses

    • Taxes are taken out of my income. What I report for income is after taxes, health insurance, and 401K contributions.

      What is your income in retirement? For my family of 4, if we plan wisely and keep our expenses (and corresponding passive income) low, I think we should keep our taxes close to 0.

      • Jason says:

        Are 0 taxes really realistic? From what I’m seeing it seems like you’re a fan of dividend-paying stocks. Even though would be taxed at a 10 or 15% rate. I’d be curious to hear your strategy for keeping taxes below that level.

      • No, zero taxes are probably not realistic but I think I can get pretty close with good tax planning.

        I’ve spent some time recently studying good tax planning and methods to decrease reported income while increasing deductions. By keeping my reported income low and deducting many expenses to my LLC, it’s possible to get pretty low. It’s very hard to work the system with a typical 9-5 office job, but not that hard when you control your income.

        Consider this: My family expenses are $36K/year. I’ll pay off my mortgage when I retire, dropping my expenses to about $27K/year. I can deduct $11K for my wife and I, and $3750 for each of my two kids. So now I have $8K of income to pay taxes on at a rate of 10% ($70/month).

        It’s also worth noting, that under current law, the qualified dividend tax rate for this size of income is 0%. Starting in 2013, that will go up to 15% unless the Bush tax cuts are extended.

        I realize there is more to consider (state taxes, social security, etc) but my point is that when you are self-employed and have a good tax reduction strategy, you can drive your taxes pretty low.

      • Jason says:

        You know, you’re absolutely right. I hadn’t considered your side business and the ability to deduct some expenses using the LLC. I also wasn’t thinking about the deduction for your kids (as a single guy, I tend to forget about that deduction. :-))

        My expenses are around the same as yours, and in my personal planning I assume I’ll be taxed at around 10-15%. I do keep some money in Roths, so my hope is that there will be opportunities to play with the numbers. As I get closer to my goal maybe I’ll find more ways to reduce that rate. Good food for thought!

      • One more thought… In addition to tweaking my dividends to reduce my income to only what I need, I can also still contribute to my IRA.

  2. Shawn says:

    You no longer have to be concerned with that trip for the Steelers. (insert smirk to go along with the good natured sports ribbing)

  3. Another great month. I’m interested to find out more about the premier equity fund. 8% is pretty good in this low interest environment. What is the ticker symbol?

    • It’s a private LLC specializing in private money lending. They lend at high interest rates (~14%) to real estate investors, and the loan is backed by the deed of the home.

      I’m going to write a lot more about it in my next post, including the risks (which I deem pretty low given the details of the loans).

  4. jump says:

    Quick question, I’m not thinking clearly on this part:

    Months to retirement at current expenses (3% SWR): 27
    Months to retirement at current expenses (4% SWR): 0

    Can you explain how you calculate this?

    • It’s not the best way to do it, but here’s
      my math:

      (monthly expenses * 400) / (monthly income – monthly expenses)

      The monthly expenses and monthly income is based on the current month, so the resulting estimate varies widely. There are definitely better ways to do this, but I don’t want to spend a bunch of time on this.

      I multiply by 400 for a 3% safe withdrawal rate. This is based on:

      12 (months per year) / 3% = 400

      Make sense?

      • jump says:

        Did you also subtract your current assets from the equation? If not, I can’t reproduce your 27 months.

        (Current Assets??) – (monthly expenses * 400) / (monthly income – monthly expenses)

        I was a tad confused by this, but I think I get it now. Basically this number represents the time (at current pace) required to fulfill your FI requirement of 1,200,000 (3k/month @ 3%swr)

      • Good catch!

        [(Current Assets) – (monthly expenses * 400)] / (monthly income – monthly expenses)

        So yes, this time represents the required time to meet my current spending habits, based on my current savings rate. It does not account for interest on current assets, which would obviously accelerate the process as you get closer to your goal. For instance, if I had 10% return on investments then I would probably meet my goal in under 12 months.

        It also doesn’t assume any future income. But realistically I find it hard to believe I won’t make a few thousand bucks a year on hobbies that happen to be monetized.

      • jump says:

        Makes perfect sense, thanks!

  5. Kacie says:

    Go Steelers! I’m sad for them, but better luck next year. I used to live in Pittsburgh. Amazing city.

    Anyway, you are doing a fantastic job.

    We also had an extra paycheck in December, and used it to rebuild our savings. Got a little carried away on Christmas.

  6. lifeoverwork says:

    It’s really impressive that you were able to build up that kind of assets in your early 30s. I don’t see any reason why you won’t be able to hit your goal, even if your expenses see some upward pressure as your kid gets older.

  7. Robin says:

    I have recently found your blog so you may have answered this question in the past…forgive me if this is the case. How do you factor in that you will need to increase expenses for either COBRA or purchasing health insurance externally once you retire?

    • Hi Robin, and welcome to BNL. I’m not sure I’ve answered this directly, but let me give it a shot.

      My plan is to spend about $300/month on a high deductible insurance plan for our family, complemented with an HSA. So that’s $300/month more than I spend today.

      However, after a few more years I’ll be spending $200/month less on my kids school once they move into public school (or we may decide to home school). Also, I expect our grocery budget to drop once I have time to work our garden and help my wife cook from scratch. So I think this will cover health insurance.

      Besides all this, I’m a conservative guy, so that’s not enough on it’s own. I’m also planning for a 3% withdrawal rate, where as most people figure 4% is enough. So that gives me some buffer.

      Finally, I fully expect to make a little money here and there with various hobbies. For example, I’m still making $90/month on some silly Android apps I wrote for fun, and $80/month on this site – neither of which are intended to make money.

      From my experience, if I need to make a few bucks on the side it’s not that difficult.

  8. burntout says:

    75% savings rate is AWESOME! Good job!

  9. John says:

    Apparently the Government is Fully Against most achieving FI.
    1) 401ks are promoted so you continue to work until at least age 65 before touching those funds (that most likely gather a ROI of 1-3% after all those fund fees, that Billionaires are laughing to the bank about, as all those Ads about 401ks show the truth behind their money making intentions)
    2) Most people die before the Age of 65, so don’t invest to much untouchable money into your 401k unless it’s matched! (3% over 20 years is more then enough, $36k-$220, after compounding interest!)
    3) the longer you work that 9-5 Office job, the more taxes they can take out of you at higher Tax Brackets.
    4) The more you consume on luxuries, the more taxes the government collects! Vacations, Road Tolls, Sales Tax, Alcohol Tax, Vehicle tax let alone registration and stat tax emissions!

    Only reason USA has lower taxes compared to the rest of the World is because we Work Harder and Longer. The ultra Rich thus Feed off of the Hard Workers with a Compounding Effect with their very low Taxes on Billions of Dollars; and in return support the government by hiring more hard workers to pay taxes to the government.

  10. kl says:

    Doesn’t look like you do these postings any more — any reason why you stopped, or am I searching in the wrong place? I find it very interesting to see how/what others are doing hence my question.

  11. […] and loyal readers of this site, I’ve decided to bring back my monthly financial reports that I used to write. I quit writing them in January 2012 because, well, they were boring for me to write and they […]

  12. […] and loyal readers of this site, I’ve decided to bring back my monthly financial reports that I used to write.  I quit writing them in January 2012 because, well, they were boring for me to write and they […]

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