I travel several times a year with my family, but very rarely do I travel on an airplane alone. When I go with the family, I usually spend the majority of the time paranoid about making sure my kids are the best-behaved on the plane so we don’t get dirty looks.* I traveled by myself for work last week. As I was packing my bag, I tried to decide which book to throw in. This was a big decision. The book you pick is the equivalent of a Choose Your Own Airplane Adventure. The book starts the path. I thought about the choices and my response to the question I would inevitably get: “What are you reading? Anything good?”
Month: March 2016 Page 1 of 2
With all the numbers we ran last week in the formulations of our new plans, I was reminded just how long is really left in our journey. I’m impatient by nature and would like to retire yesterday! As I made a batch of peanut butter balls, I realized the journey is worth it. The recipe for peanut butter balls comes from my great aunt, Joanie, who always knew that delicious candy could make the world a better place. These tiny bits of heaven are simple to make, but take quite a bit of time. After the peanut butter center is mixed, it has to be rolled into balls and chilled before dipping each one in chocolate. As I carefully rolled and dipped a batch recently, I started thinking about all the parallels to personal finance (geek alert!):
Welcome to the culmination of a week of numbers! On Monday, we took a look at the historic spending of the Banks family and emerged with an ideal early retirement budget of $51,300 with an after-kids budget of $47,000. Remember that these numbers are all based on maintaining our current lifestyle in our current home in Alaska. Moving will most likely decrease those needs, but since we have data about what we currently spend, we’ll build projections based on the life we currently live.
Today we’re going to take a good look at the three numbers most retirement calculators make you just guess. All three are very arbitrary and are based on future market and economic performance.
Inflation and Market Return
For ease of use, I like to combine inflation and market return. Often, when the market is high, so is inflation. But that’s not always true. So, luckily, some very nice people have combined the two metrics for us in an overview of historic market performance. All charts we discuss below are adjusted for inflation.
This week, we’re doing an in-depth look at numbers and we’re kicking it off by taking a good, hard look at how much we spend. Annual expenditures are really the magical number needed to retire. We’re getting real (with charts!) and taking a look at 2013, 2014, and 2015. First up, 2013:
I am absolutely loving this guest series! Today, I introduce you to another blogger-friend of mine, Penny from She Picks Up Pennies. Penny and her husband took the Roth IRA Challenge together and successfully funded two Roth IRAs with side hustle income! Check out how they did it:
I had an interesting conversation with Penny last week. It went something like this:
- Penny: McKinley is a saver. I’m a spender.
- Me: What makes McKinley a saver and you a spender?
- Penny: McKinley just saves all of his money. I buy things. Like my waterproof camera. Well, I guess I’m more of a saver, then a spender.
- Me: What’s the point of McKinley saving his money? What is he going to do with it?
- Penny: I don’t know. He just keeps it.
- Me: Dad and I are savers. But do you know why we save money?
- Penny: So we can go on vacations and dad doesn’t have to work until he’s old.
- Me: Right. Money isn’t worth anything if it doesn’t have a purpose.
I wanted to write a post highlighting the financial benefits of living in Alaska. With oil prices low, the state of Alaska isn’t in a great financial position. The state’s operating budget has counted on major income from oil and that income is now severely lacking. Because of that, many of these things may change this next year. But as things stand now, despite our high cost of living, there are several major perks for living in the state.
We live on a cul-de-sac with a shared picnic/BBQ area. In the summertime, my kids are constantly riding bikes and playing in the cul-de-sac. There are currently no other kids, but we know most of our neighbors and they are great about letting the kids play. (One neighbor even bought them tiny rakes because she thought they’d like them. They do!) Our neighbors have been awesome. One helped with our windows, two of them insulated their attics the same day we did so we could all help each other out, and we used the tools of one of our neighbors to do all the window and door trim work. Two of our neighbors came over for Christmas Eve two years ago. We really like the dynamic of our cul-de-sac. We often end up having communal dinners in the picnic area during the summer and stay up late chatting with the neighbors when the sun is out until midnight.
The book, Your Money or Your Life is said to have introduced the term “Financial Independence” and offers a very specific road map for achieving it. I strongly advocate every person read this book. A large part of the program involves creating a chart. Let’s start with how to create your own chart and then talk about why it’s the greatest thing since sliced bread. In Excel,* or on graph paper on the wall (I will argue for doing both momentarily), start tracking in a point-to-point or line graph form the following numbers: