Retire by 35: August Results

August was another successful month on my road to extremely early retirement.  We have once again achieved our goal of keeping our family expenses below $3000 (well, close anyways). This, despite several large purchases.  In fact, although  I was a few dollars over, I’m encouraged because it included nearly $600 of one-time expenses that we could have done without.  I’m not happy about those expenses, but it was a compromise with my wife who has been very open to our drastic life changes.  I’m continuing to stick with my stretch goal of $2500/month as my next target.  To do that, we need to step up on getting our grocery expenses down.

Here are August’s numbers:

Expenses: $3011

Mortgage: $871
Auto Sevice and Parts: $21
Fuel: $80
Auto Insurance: $0
Auto Registration: $0
Groceries: $479
Restauraunts: $88
General Shopping: $0
Haircut: $16
School Supplies: $38
Utilities: $321
Student Loan: $0
Cash: $143
Medical: $144
Entertainment: $54
Books: $18
Bike Stuff: $40
Diapers: $89
Home Improvement: $609

The highs:

  1. My wife’s student loan is paid off, saving $140 per month.
  2. I finally broke out the general “Shopping” category which was mostly unknown payments to Amazon and Walmart.  Turns out it’s a combination of groceries, diapers, and bike gear this month.

The lows:

  1. My in-laws came to town and spent a bunch of our money painting and doing other home improvements that I considered unnecessary.   We also bought a new bed, which was slightly more necessary.  This all resulted in $609 of home improvement.  I’d like to keep this under $100/month. Remove this expense and we hit our stretch goal of $2500/month
  2. I continued to take too much out at the ATM.
  3. Grocery expenses began creeping back up.  There were a few good reasons for this, but I want to get it back under $400.  Originally I wanted to hit $300, but I’m easing off that.  $300 is a better goal when I actually retire and can spend the time preparing less expensive food.  Targeting $300 now puts too much burden on my wife.

Income: $12235

Salary: $10402
Dividends: $1382
Online Store: $362
Amazon Affiliates: $1.48
Commission Junction: $25
Lending Club: $57.1
Adsense: $5.55
Admob: $0

My salary was nice this month because I got three paychecks instead of the typical 2.  For dividends, I’ve decided to start reporting the annualized expected payout divided by 12, rather than see some months extremely high and others extremely low.  I’m trying to reduce the volatility in the tracking of my progress.

For my online store, I had not previously been paying myself any income.  Now, I’ve decided to pay out 10% of sales.  Profit margin is close to 50%, so that still allows us to reinvest quite a bit.  Reinvesting all goes into buying more inventory, although I’m also thinking about hiring out some designers to improve the look of the store.  I did it all myself, and while I’m proud of the work, it’s not up to par with the high-end competitors we have, who spent thousands on their design.  I often wonder how much that hurts sales.

I was happy to see a sale on Commission Junction.  It’s actually from this blog, when someone signed up for Lending Club.  I don’t write on this blog to make money, but if I make a few bucks while also helping someone else get involved in a product I believe in, all the better.

You’ll also notice that I set up a placeholder for Admob.  This is an advertising platform for mobile devices.  I’ve recently started re-learning java and plan to try writing some Android apps.  For now I’m writing custom games for my kids.  I figure if they like them, then other kids will too.  It might be an utter failure, or it could be another fun way to get some income diversification.  I’m enjoying the challenge, so even if it fails financially I’ve had some fun.

One of my other outlets for investing is real estate. I don’t do any work, I just fund a partner who does all the work and take in 50% of profits.  This week, we found a renter for our first house together, so we’ll start to see mild cash flow from that.  It was rented out as “rent-to-own”, and once she qualifies for the purchase I should see about a $10,000 payout.  That should happen in 1-2 years.  Not bad on the $7000 investment.  We are also looking at doing a flip together which will cost me about $109,000 for 3-4 months time, with an expectation of about $11,000 payout.  That would be a 30% annualized return.  I’m still analyzing that purchase, however.

Investable Assets: $948,000 – does not include house equity

I re-positioned my investments quite a bit this past month.  After the volatility we experienced in the stock market, I’ve decided to re-allocate to a more conservative (smarter) portfolio.  Predictability is key when approaching an extremely early retirement.  The allocation is similar to Harry Browne’s Permanent Portfolio, and I’ll be writing about it in my next post – so stay tuned!

Other Stats

Savings rate: 75%
Months to retirement at current expenses (3% SWR): 28
Months to retirement at current expenses (4% SWR): 7

This is the first month where my “Months to retirement” at a 3% safe withdrawal rate will actually get me to my goal of retiring at 35.  In 28 months I will be exactly one month shy of my 36th birthday – still 35!  That’s cutting it a little close, but I will build some buffer as I continue to drive expenses lower.

Picture of progress (click to expand):

 


19 Responses to Retire by 35: August Results

  1. Looking good BNL!
    Your housing expense is very low, I’m jealous.
    No Auto insurance?
    Everything looks really good and you’re on track to ERE. Great job!
    I’m doing my August cash flow tonight. Our expense is closer to 5k though. :(

    • Thanks. My housing expenses were $2400/month back in April, but then I downsized to half the size and moved to a city with far lower taxes. Back in my old oversized house, I also paid about $600 in monthly utilities, and averages $200/month on pool maintenance. Just owning that home was more expensive than my entire family’s budget today.

      We do have auto insurance on my wife’s car, but it’s paid annually. I also have insurance on my motorcycle but it’s less than $90 per year and also paid annually.

      Regarding your expenses, $5K/month is pretty high if you’re aiming for retiring by 30. Are you targeting $2M in savings, using more than a 3% safe withdrawal rate, or planning to reduce the expenses?

      • Eventually the expense will be reduced to 3.5k – 4k after the rental is paid off (around 6-7 years.) I’m planning to increase income with more rentals and side income. Mrs. RB40 is going to keep working also. If she quits, then we can move to a cheaper location and lower the housing expense.

      • Gotcha. I’ve considered buying a rental property or two, but just don’t have the time right now. After I retire, it might be fun to buy a fix-up house on the cheap, do all the manual labor myself as a project with my son, and then rent it out.

      • We’re thinking about doing that too, but I think I want to start small. There are some cheap homes around the local college, which I think would be a good place to start renting. I don’t want to start with anything too expensive until we get the hang of it…

      • @kyle – I want to start small also. Here’s my inspiration.

  2. I am jealous on your savings rate and dividend income, those are well above average, good job!

  3. Andy Hough says:

    You’re making good progress. Keep it up.

  4. Dana says:

    Your overview looks very thorough – love how you analyze yourself and make a plan for the changes you need to make in the future to accomplish your goals. Good luck!

  5. Iowa says:

    Doing great! Say, want to get your take on health/dental insurance. Will this be a purchase after your retirement or something your wife has?

  6. I like the way you think. It’s great that you’re really showing people how to obtain financial wealth. And I feel fortunate to be able to witness it.

    You’re going for real asset diversification (by including real estate in your portfolio). You focus on income diversification, and you don’t include your home equity as a factor in whether you’ll be able to retire by 35.

  7. Wow! Looks nice! And how old are you again? $10k a month in salary?

  8. rj says:

    How much is your home equity..i notice you don’t count that towards your assets….

  9. @rj:just $40K – 20% of total cost. I debated paying it off cash, but at 3% 5yr ARM I decided to keepit open and see if I could beat the market.

    @Tony: 33

    @Iowa: Regarding insurance, I had a plan until my daughter got sick. Since then, I’ve been reconsidering. When I figure it out, I will let you all know. Expect an answer in the next few days.

  10. m741 says:

    Glad to see you making progress. Wish you’d continue to post updates on the ERE forum as well!

  11. Yabusame says:

    Hi BNL, Just surfed in from Mr Money Mustache. Nice to see that you’re making massive progress on your plan. You mentioned the Harry Browne’s Permanent Portfolio in this post and you said that you’d be writing about it in your next post. I’m at the early stages of preparing for ERE, but I’m interested in learning more about investing. Can you tell us more about the Harry Browne’s Permanent Portfolio and your own Portfolio?

    Thanks!

    • Thanks for stopping by.

      I’ve written an extensive post on the PP,and my adaptation. I’ve been sitting on it for awhile because I want to reread it and add a few more details. I’ll see if I can get it completed today, so keep an eye out.

  12. Dave M says:

    Awesome blog! I just found it tonight while reading some comments over at Mr Money Mustache. :) Great stuff so far, and you are really inspiring me to kick my early retirement plan into high gear.

    I’m curious… Do you use any particular software to track your finances? I’m talking about Mint, Yodlee, YNAB, Excel, etc. I need to get better at this aspect since I firmly believe if you can’t measure it, you can’t manage it!

    Thanks! I look forward to doing a LOT more reading on your blog.

  13. Hi Dave,

    “if you can’t measure it, you can’t manage it”

    Totally agree. I’m not married to the idea of a budget, but instead I think just tracking and measuring your expenses is sufficient. This is the same philosophy you’ll see in “Your Money Or You Life”

    For tracking, I use Quicken for expenses and Excel for tracking dividend income. I’ve also played with MS Money and Mint.com, but neither met my needs.

    Welcome to BNL, hope you’ll stick around.

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