Monthly Money Check: Penny Punched By Back To School Expenses — August 2017

Dear Rich,

Looks like this summer has been keeping both of us pretty busy, huh? Neither of us has written very much. You, because you’re busy vacationing and getting settled back in the states. Me, because life is just busy, man, and I’ve been avoiding technology. But, now that September is here, I’m back to using technology a bit more again, and have been busy catching up on Norm MacDonald video podcasts on YouTube.

Also, I’m pregnant. Surprise! We’re expecting child number five sometime in the spring.

Now, let’s talk about my monthly spending.

This month was a bit of a doozy for us. A bunch of school-related expenses to deal with: tuition, a city bus pass, school supplies, all that fun stuff.

Here’s what it looks like:

And, here this is coming off a month where we set a record low in spending for the year. Oh, well. Our donations are a bit down just because we forgot to donate. We’ll probably make up for that later. Our mortgage payment went down from $843 to $747 because our insurance changed on that a bit.

I guess that’s about it.

Later,

Penny

Monthly Happiness Report: Penny Is Generally Happy. Is That Boring? — August 2017

Dear Rich,

Well, between me being on my technology-free(ish) summer and you being on vacation, we’re not getting much blog writing done. But we’re both happy, so that’s a good thing!

Speaking of which, I was wondering about our happiness ratings. Seems to me that you’re always rating things high, even though certain areas might have their challenges. Like you gave your health a perfect 5 last month, even though: “Mentally / spiritually, not a perfect month but I think I’m developing better tools to deal with my flaws.” And the month before you gave your family relationships a perfect 5, even though, as you said about you’re high energy boys and summer camp: “So, we’ve been anxious. And you know what? They’ve been absolutely normal — their normal, high energy, difficult selves. For a few days, it impacted my happiness.”

Now, that is perfectly fine and everything, given your wider view of what happiness is and all, but don’t you think that makes this rating system a little bit meaningless? And my ratings aren’t much better. After a rough start to the year, I’ve settled into my normal setting of happiness. Again, this month, it is a 4.5 out of 5 smiley faces.

Our rating system is getting a bit boring and routine, don’t you think?

I’ve still been enjoying my limited technology summer. But don’t worry, I’ll be back on technology more and posting more in September. Plus, I do have programs that I’ll want to stream (Brooklyn Nine-Nine, Supernatural).

Continue reading “Monthly Happiness Report: Penny Is Generally Happy. Is That Boring? — August 2017”

Monthly Happiness Report: Rich Is Not Crabby, He’s Back In The USA At The Beach. And There’s A Beef Jerky Outlet. — August 2017

This guy is crabby. Unlike me.

Dear Penny,

We just got back to the US a few days ago and it was a loooonngg journey, but I’m not crabby. Happiness levels steady. Elevated, even. And here’s why.

We are currently in the Outer Banks (OBX) of North Carolina, one of our favorite places on the East Coast. We rented a house by the beach to make our transition back to the States as easy as possible. It’s a big change for our family. And what better way to recover from jet lag than a couple weeks at the beach?

And jet lag there was. We had an 11 hour flight followed by a 1 hour flight followed by a 3 hour drive followed by 7 hours of waiting for the beach house to be ready. 5 suitcases, 5 carry-ons, 2 car seats, and 2 little jet lagged kids.

Totally worth it. Check out this view.

Worth the journey.

Oh yeah, about that crab in the picture. At OBX, there are ghost crabs that come out of the sand at night, near the water. So we wait until it gets dark, take some flashlights, and search for them. More accurately, we chase them around and taunt them as only a family with twin boys can. Last night there were hundreds of crabs, including the unlucky fella at the top of this post.

EXPAT CULTURE SHOCK AND GRATITUDE

A few observations on setting foot in the US for the first time in 2 years, and then I’ll get to my happiness numbers.

The people are nice. Maybe it’s a matter of being down South, but US Americans have been nice and friendly, lots of smiles and waves.

The food is plentiful … and often unhealthy. Compared to where we were living, the US has billions of food choices, whether at the grocery store or restaurants. I’m all for the ability to make individual choices, but there’s no denying that the ability to choose wisely is impacted by availability. On the way to the salad aisle, there are hundreds of quicker, easier, tastier, unhealthier options. That said, I’m proud of my kids — 5 year old boys, mind you — for actually requesting salad for dinner tonight. (We kinda brainwashed them by telling them about Super Size Me. They’re extremely frightened of fast food.)

Note: This page has affiliate links to products we endorse. Full disclaimer.

The first store I shopped at. If this isn’t America at its most American, I don’t know what is. Beef Jerky has an outlet store??? Oh yes. C’mon, nobody pays retail for jerky anymore.

Consumerism is omnipresent. Along with food, I’ve noticed the sheer availability of consumer products, services, and activities. Again, not bad from the perspective of free choice, but with consequences. We were living overseas in a place that put a premium on public playgrounds. Here, the ratio of playgrounds to stores is much more sparse. Of course, the beach is a huge playground I guess.

The familiar feels new and exciting. We love to travel, and we will continue to explore new areas even back here in the US. This is our first time staying in the southern OBX, and we visited Ocracoke Island, accessible only via ferry boat or small airplane. We took the ferry. Fun trip, beautiful scenery. Very grateful for these opportunities and experiences.

HAPPINESS, BY THE NUMBERS

As is my custom, it’s time for the happiness numbers and some highlights from each category. For new readers, here’s my methodology, explained in more detail in the following posts:

Continue reading “Monthly Happiness Report: Rich Is Not Crabby, He’s Back In The USA At The Beach. And There’s A Beef Jerky Outlet. — August 2017”

MOVING DAY! Quick Thoughts About Living Overseas And Money And Happiness.

Dear Penny,

I have a lot I’d like to write but very little time, because tomorrow we head back to the US after living overseas for 2 years! More complicated topics will need to wait. But, I wanted to share some quick money and happiness lessons I’ve learned from our time here. In no particular order.

Perspective Is Valuable

Living in a foreign country has helped me appreciate the US, and it’s also given me some perspective on how to think about … anything and everything. What I mean is this: take any given question about life or money or happiness or whatever. And then imagine you grew up in a completely different socioeconomic culture.

Question: “What should I think about work and investing and retirement?”

Answer, from the perspective of …

… a personal finance blogger: “Invest only in Vanguard index funds. The market always goes up. Retire early.”

… a poor person in an urban slum: “I would give anything to have a good job.”

… a rice farmer in China: “Watch out for that water buffalo.”

… a French ski instructor: “Work to live, don’t live to work.”

… Penny: “Get off your computer and stop thinking about retirement so much.” 🙂

… a father of twin boys: “Hey — how’d you get on top of the house?”

It’s easy to get caught up in the particular circumstances of life. I like to remember that by sheer chance I was born into my culture and my family, and life would look a lot different otherwise. I try to make smart choices but I also know that for most decisions, there’s more than one right answer. If a certain answer sounds silly from several other perspectives, well then that certain answer might be silly. Or not as important as we think.

I Don’t Regret Any Spending On Travel Or Experiences. Life Is For Living.

We visited 7 or 8 countries while living overseas, ate a bunch of crazy food, saw some incredible sites, and enjoyed temper tantrums and ill-timed bathroom visits with kids in several European capitals.

(European in the bathroom. Get it?)

As you know, we’ve paid big money for these experiences. I wouldn’t want a dollar (or a Euro) back. Life is short. Life is mostly for living, isn’t it? I guess I’m like the French ski instructor sometimes.

Continue reading “MOVING DAY! Quick Thoughts About Living Overseas And Money And Happiness.”

Monthly Money Check: A Sunny Summer Update Of Rich’s Net Worth, Full Of Money Porn And Eye Candy … But BUDGETARY WINTER IS COMING — July 2017

Dear Penny,

This post will be full of detailed numbers (money porn) and cool graphics (eye candy) — because it’s summer, and summer is fun and bright and cheery. July was a sunny month for you and for us as well. Clear skies, no turbulence. As you can see, my net worth jumped by a happy $10,559.

Click on image to enlarge.

BUT … BUDGETARY WINTER IS COMING.

(SHUDDER. OMINOUS MUSIC. CLOSE UP OF NIGHT KING’S EYE.)

We’re moving back to the US in August, and our expenses will be going up faster than you can say “Littlefinger is a creepy douchebag.”

I’m not sure if you get these references to Game of Thrones, Penny. If you don’t watch it, you might consider it after your tech hiatus. You could binge during a free trial of HBO on Amazon Prime!

Readers, start your free trial of HBO by clicking above — no cost to you, a few pennies for the blog.  Full disclaimer on affiliate links here. 

Anyway, before I dump the cold reality on you, here’s a recap of July.

JULY

Cash: We’re building cash to buy a car in August. We’ve been living on one car overseas but we’ll need two in the US. My philosophy on cars is to pay cash. I look for cars that are 3 years old (or so) with under 50,000 miles. The “new” car will be for Mrs. R, and I’ll keep driving my 2006 Rav4 with 120,000 miles on it and deep stains from kid snacks.

Debt: This is 0% debt. I’d like to pay it, but I want to wait until we get settled back in the US. We always pay our debts.

Investments: I didn’t add new money to taxable investments, but I adjusted the value of my LLC holdings upward by $1,730 after doing a detailed breakdown on the blog.

Related Post: How Rich’s LLC Turned $30,000 into $200,000 — A Story About Brothers, Bubbles, and Prairie Dogs.

Retirement: Maxing out 401k and IRA accounts is really the key to our low risk ride to $1MM. This alone will probably ensure a decent sized nest egg in 15 years or so. We won’t need to rely on BINGO.

Related Post: Rich’s Retirement Plan: Playing BINGO Will Not Be A Source Of Income. (Part of the #DrawdownStrategy chain)

What I like about July’s report: A 5 figure net worth gain is nothing to sneeze at, even if you have allergies.

What I don’t like: If I were paying $4k in rent, my gain would only be $6,500, which is not quite enough to stay on pace for my goal.

THE COLD REALITY

When we move back to the US, we will start paying out the nose for rent and parking. As in $4,000 per month. I’m not complaining, we’re happy to spend more so we can live in a walkable city neighborhood rather than commuting from the burbs.

Related Post: Rich Is Preparing To Move. He Enjoys Moving. Wait … He’s Paying HOW MUCH On Rent???

Additionally, we’re going to need some odds and ends like beds for our boys, a couple other pieces of furniture, work clothes, and that car.  

Here’s my list of upcoming expenses; I might be estimating low. 

Click on image to enlarge.

By the end of August, I’ll have enough cash to cover most of this. Besides, we won’t buy everything at once. That said, I expect the budget to be tighter the rest of the year. I don’t follow a strict budget, but with such drastic changes coming up, I wanted a rough idea of what our spending should look like. This is what I came up with.

Get ready for a bunch of graphical eye candy:

Click on image to enlarge.

Some of the items, like the HSA, won’t kick in until the new year. What do you think of this budget? I rather like it. So colorful and symmetrical. No idea yet if it’s realistic.

Here’s what it will look like for a complete year.

Click on image to enlarge.

So what does this mean for my savings and my net worth goal? 

Continue reading “Monthly Money Check: A Sunny Summer Update Of Rich’s Net Worth, Full Of Money Porn And Eye Candy … But BUDGETARY WINTER IS COMING — July 2017”

Monthly Money Check: Penny Had Her Lowest Monthly Spending Of The Year! — July 2017

Dear Rich,

Hey, guess what? I wasn’t even thinking about it, but when I totaled up my numbers for this month, I FINALLY made it under the $2,000 bar that I had set (kind of lukewarmly) set for ourselves. I guess that’s what happens when no major expenses come up. It won’t be that way for long though… big school bills coming up next month.

Before I get into all that, let’s talk about where the rest of our money is at. The last time I explored this was in April. In April, our student loans were at $147,037. We haven’t been able to put any extra money toward this since our tax refund, so it hasn’t moved much. It is now at $145,421, because we do pay a little bit more than the interest rate acquires every month in our automatic withdrawals.

Related: Penny’s 13 Year Plan to Repay $173,000 in Student Loans

One thing we are going to start doing, in response to advice from a reader, is instead of taking $1,000 out one time a month, we are going to have $500 withdrawn two times a month. This will help save since the interest is compounded daily on student loans. (My husband just has to make a phone call, which I keep reminding him to do…)

We have also built up more equity in our house since April. Back then, it was valued at $214,000. Now, it is valued at $229,460. (I come up with this figure by taking an average of the Zillow estimated value, $252,421, and the property tax estimated value, $206,500.) So, take that amount and subtract the amount we owe on the house ($88,670), and it looks like $140,790 is the current equity we have in the house.

Here’s a snapshot of our current net worth:

That’s up $25,318 from our net worth in April, but that’s basically because our home is valued $25,000 more than it was in April. If we took that out of the equation, our net worth would be basically the same.

Continue reading “Monthly Money Check: Penny Had Her Lowest Monthly Spending Of The Year! — July 2017”

Penny On Fame And Shame — A Response To Critics Of Her Notorious Guest Post

So easy to comment, so difficult to be civil.

Dear Rich (and our readers),

As you know, I had a guest post on the Making Sense of Cents blog and it was met with quite a few mean-spirited comments.

Now I know how it feels to be publicly shamed, I guess.

I can’t say I wasn’t anticipating a bit of pushback from the article, that was to be expected. But the amount of vitriol behind some of the comments was kind of hurtful and surprising. A got a personal note from Michelle from the blog and she said: Thank you for responding to comments on the article. Some of them are not the kindest – which is not the norm for Making Sense of Cents readers. Sorry that you are experiencing that.

But alas, what can you do? Such is the nature of the internet.

The comments bothered me at first, but then the next day, I continued on with my technology fast, and got over it pretty quickly. When I checked back in on the comments several days later, there were several more hurtful comments, but by that time, it didn’t bother me that much. It was like, once I’d read one, I’d read them all, because they were all saying pretty much the same thing.

Thank you for all your help with the comments, by the way. You do a good job of addressing people fairly and kindly. I liked what you had to write.

Related Post: Monthly Happiness Report: Rich Makes Sense Of Internet Commentary, His Cousin’s Controversy, And The Good Life –July 2017

So, anyway, because of all this, I want to break protocol for a moment and instead of addressing this post just to you, Rich, I would like to break through the fourth wall and directly address our readers and comment some of the issues that the Making Sense commenters had with me and the choices I’ve made. Because, if I’m making these choices, I might as well be able to stand behind them and defend them, right?

That’s kind of the point of this whole blog, isn’t it?

Let’s start here.

Here is are two actual comments that pretty much sum up what a dozen other commenters were saying:

WOW! JUST WOW! It’s one thing to do all of this but totally another to BRAG ABOUT STEALING FROM THE GOVT. I guess there is a first for everything and this is the first time I have seen someone with balls big enough to brag about ripping the govt. off in writing. THIS is why people do without because people like Penny “steal” and there isn’t enough for others who NEED IT.

and

I am very liberal and support the existence of social programs for people in need. But this is disgraceful – you don’t have “need.” Read what I am writing: you don’t have need, you have “want” and are gaming the system so that other people are paying for it. Other people’s tax dollars are funding your food stamps and earned income credit, while you deliberately under-earn and use the earnings of others to pay loans you voluntarily incurred, rightfully owe, and will reap the rewards of as your husband’s practice grows. Shame on you.

First of all, I think a lot of the commenters were mistaking my unbridled honesty for pride. Nobody is proud to be on food support. If anything, it is the opposite. It takes a bit of humility to accept that is offered.

I don’t think I’m stealing from anybody or lying about anything. As you’ve seen here, I’m honest almost to a fault. I mean, I’m laying out my monthly expenditures for everyone to see and critique, line by line.

Note: This page has affiliate links to products we endorse. Full disclaimer. 

As far as taking money from other people who really need it… here’s the thing: If my family, at our income level, is getting this kind of support, this means that other families are getting support too! Isn’t that a good thing? Just because we’re getting support doesn’t mean that we’re taking it from others who need it. We’re ALL getting help! Yeah!

Secondly, I don’t find anything ethically wrong with accepting benefits that I legally qualify for. As Rich pointed out in his response to one of the comments:

This idea that Penny should voluntarily give up assistance that she qualifies for, because some people think it’s unfair, is misleading. How many people out there qualify for tax breaks, refunds, mortgage interest deductions? Is anyone sending that money back to the Treasury because they don’t really need it? Should we all reject our standard deduction, because, well, we can afford a computer, so it would be immoral to accept the tax system the way it is? I don’t think so. The tax benefits that one qualifies for and how one spends their money are two quite different matters.

Continue reading “Penny On Fame And Shame — A Response To Critics Of Her Notorious Guest Post”

How Rich’s LLC Turned $30,000 into $200,000 — A Story About Brothers, Bubbles, and Prairie Dogs.

Dear Penny (and Mr. Othalafehu and Mr. Retirement Manifesto),

After my Retirement Plan post, Mr. O, specifically, asked about my LLC holdings. Happy to oblige. Here’s the story of how a $30,000 investment in farmland turned into more than $200,000. There are bunch of graphics and some stories from my neck of the woods.

Note: This page has affiliate links to good products we endorse. Full disclaimer. 

BROTHERS LLC

I’m going to start this story at the end, and then talk about the beginning, and then return full circle to the very end, like one of those annoying historical fiction novels that jumps between the past and the present. I’ll try to do this without being annoying. Go read or watch Julie and Julia for a barometer of this approach. If you can stomach it.

Careful readers of my Retirement Plan, like Mr. Manifesto, noticed that around 30% of my Net Worth is currently tied up in what we will call Brothers LLC (Limited Liability Company). Here’s my net worth pie chart, updated:

Rich’s Net Worth Pie. Click on image to enlarge.

Brothers LLC is like an investment club I’m in with my 2 brothers. More accurately, it’s me and Mrs. Rich and my brothers and their spouses. We all own our shares through our respective family living trusts (which I highly recommend for estate planning — more on this in a future post).

My brothers and I each bring unique contributions to our company.

  1. Brother 1 is a former doc and a visionary. He can afford to be a visionary because he made huge money as a doc. He owns 55%. The LLC was his idea, and most of our holdings have come through his connections.
  2. Brother 2 is a banker, he’s our numbers guy. He also makes big money, but he’s fairly conservative, as bankers can be. If he doesn’t like a deal, we usually pass. He owns 20%.
  3. Brother 3 is me. I’m the youngest. I bring creativity and comic relief and the occasional flash of insight. I own 25%.

The foundation of Brothers LLC is farmland. None of us are farmers anymore, but we farmed growing up and we come from a long line of wheat farmers. My ancestors worked the land in France before immigrating to Canada and the northern Midwest, USA. It’s here that I must introduce a seedy character named Grandpa Jack. Get it? Seedy?

That’s not his real name, but people called him that. And now, we go back.

Related: Rich’s Financial Origin Story: From Farm Boy To Theology Student To High Income Professional

GRANDPA JACK, NORTHERN MINNESOTA HILLBILLY

Grandpa Jack was a farmer who didn’t graduate from the 8th grade because, as he told the story, he was afraid of my grandmother. I didn’t get it, but I nodded when he told the story.

His whole life, he worked on the farm. Even in his 70s he would be fiddling around, fixing up old trucks, cussing about broken parts. His favorite was “Damnitalltohell” — properly said as one extended compound word. Honestly, I was afraid of the guy. Later on in high school, I told him I was going to start traveling to help people in other countries. His only question was, “When will you be back to the farm to work?” My grandma slipped me a card with $50 inside, and she wrote: “For your trip. Don’t tell Grandpa.”

Grandpa Jack had a falling out with my Dad, for various reasons, including the fact that when he retired he didn’t give Dad the land as he had promised. He made my Dad buy it in sections, full price.

In 2005, Grandpa Jack died, and true to form, he did not leave any land to my Dad, even though Dad had worked it for 40 years. Grandpa left land to his daughters (my aunts) and to a grandson (Brother 1). Other grandchildren received silver bars that Grandpa Jack had hidden in a woodpile in his backyard. I’m not kidding.

This is real farmland.

AUNTIE JUNE, NORTHERN MINNESOTA HILLBILLY

In 2008, my Auntie June, a chip off Jack’s block who had inherited 80 acres of land, was looking to sell. I have no idea why. Auntie June is a total mystery to me and I can’t believe we are related.

I just finished reading the excellent book Hillbilly Elegy (that you recommended, Penny). Grandpa Jack and Auntie June remind me of characters from that book. I’m not sure we have a good name for these people in Minnesota, rural folk who drink terrible beer and tell dirty jokes, and also shovel the sidewalk and wave to everyone they see. Imagine crossing a hillbilly with a character in the movie Fargo and stick them in Little House On The Prairie, and there you go.

Could we call them Prairie Dogs? I mean that with all respect.

Auntie June smokes like a chimney and carries dice in her purse, just in case anyone wants to gamble for quarters. And if you see Auntie June, you’re going to gamble for quarters. I’m guessing this habit has something to do with why she wanted to sell the land.

BROTHERLY VISION AND A DECISION

Like I said, Brother 1 is a visionary. After he inherited the farmland (151.5 acres), he immediately began pestering us to form a company and use the land as the basis for more investments. He could’ve done this himself, but he wanted the land to be a family asset and he also wanted to decrease his own risk. We ignored him at first.

But then he heard Auntie June was selling. So Brother 1 proposed that we pool our money to buy Auntie June’s land, and he would add it to his own land and give us a discount in the process. We would then have 231.5 acres to work with in an LLC.

The total cost to me would be $30,000 for a 20% share of the total. $30,000 was a lot of money to me in 2008. I was newly married, we were paying of Mrs. Rich’s student loans (totaling $30,000) and we were thinking of saving for a house.

We had to decide: house or LLC?

It was philosophical. Conventional wisdom says own a home. But we liked the idea of growing our investments and renting our residence. And I liked the idea of starting a family business with my brothers. So we scrapped together the money and BROTHERS LLC was born — from the ashes of Grandpa Jack’s grave and Auntie June’s cigarettes.

Chart reflects Iowa prices, but this is an example of farmland mania. Click on image to enlarge.

THE GREAT RECESSION AND THE FARMLAND BUBBLE

With my brother’s discount, our $30,000 was immediately worth $50,000. And much to our surprise, we had bought farmland just before land prices skyrocketed. In 2008, our land was worth around $1,150 per acre and rental prices were around $65 per acre, per year. A decent ROI of 5% or so. Then the Great Recession caused the Fed to lower interest rates, causing wheat and land prices to go nuts. Land prices tripled and rent prices doubled.

In 2010 and 2011, I started seeing articles about farmland in the NYT, WSJ, and USA Today. Not normal. By 2012, I was pounding the table with my brothers, telling them that we may never see prices like this again. Even my Dad, who loves to say, “God ain’t making more farmland,” was convinced to sell a section of land. That said, we didn’t want to sell ALL of it — it’s our family heritage and a unique asset. So Brothers LLC decided to sell the 80 acres we bought from Auntie June. And that’s how my $30,000 investment jumped to $186,000 in a flash.

As you can see on this chart, the value of our land went up 220% in 4 years and my investment went up right with it. In rural Minnesota, you just don’t see moves like this. It’s not New York, it’s the Prairie!

Rich’s share of the LLC from 2008-2012. Click on image to enlarge.

There was a bidding war and we got a great price. I think my profit after taxes and fees from the land sale was around $39,500. Instead of pocketing all the cash, I used $30k to purchase an additional 5% in the LLC from Brother 1. So, now I own 25%

DIVERSIFICATION AND LEVERAGE

The story of BROTHERS LLC after that is mostly a story about diversification and leverage.

Continue reading “How Rich’s LLC Turned $30,000 into $200,000 — A Story About Brothers, Bubbles, and Prairie Dogs.”

Rich’s Retirement Plan: Playing BINGO Will Not Be A Source Of Income

A common image for retirement is a sunset. Is that depressing?

Penny,

I just realized I have no idea what you think about retirement. You probably aren’t thinking about it very much, considering the student loans you still need to pay off. But when you hear the word “retirement,” what do you think of?

Growing up, I thought of retirement as for only the very old. You got old, you couldn’t work anymore, so you had to stop working. It wasn’t a choice so much as a stage of life. And in the northern Midwest, you had 2 options:

  1. Become a snowbird. This was the usually preferred option for those who could afford it. Move someplace hot (like Arizona or Mexico) for the winter, and return to the Midwest in the summer (to a lake house).
  2. Stay in the Midwest year round. This was the option for those who didn’t want to change their way of life. During the cold winters, they’d watch TV and play BINGO.

As you might guess, I’m not into these options. No gray haired communities in a brown desert. No BINGO. I want travel, adventure, and good food. Mostly, I want the freedom and flexibility to decide later. I can’t be sure what 65 year old Rich will want (or, more importantly, what 60 year old Mrs. Rich will want), but I want enough dough to do whatever our future selves want to do.

So how will I get there?

Recently, some personal finance bloggers started a series called the Retirement Drawdown, so I thought it’d be interesting to analyze my own retirement plan and join the series. Please refer to the end of this post for more information and links to all the bloggers who have contributed.

RICH’S RETIREMENT PLAN — WHAT WE’RE STARTING WITH

As you’ll see in the chart below, most of my net worth is in retirement accounts — 401k and IRAs. 63.4% of my net worth, to be exact.

Click on image to enlarge.

Aside from retirement accounts, my biggest investment by far is in an LLC I own with my brothers. We started the business in 2010 and we invest in farmland, commercial real estate, and one small business. Every year it seems we find 1-2 new investment opportunities.

My share of the LLC is currently worth $198,370. I’ve contributed $69,000, so it has done well. We receive occasional distributions from the rental income and the sale of properties. I’ve pocketed $38,670 so far. In retirement, I’m hoping it will produce regular income — more on this later.

THE NEXT 15 YEARS — PREPARING FOR RETIREMENT

My working assumption is that Mrs. Rich and I will both be working 15 more years. She’s younger than me, so maybe she will work a few years longer. Our kids are 5 years old, so in 15 years they will be 20, and by then we’ll have a good idea if they are “launching” as they should. We’ll see.

There’s another reason 15 years is a good estimate for running our numbers. We are in the lucky position of having a company pension. In around 15 years, I’ll be able to receive the full pension benefit, more or less.

So, what’s the plan over the next 15 years? Get ready for an exciting, unprecedented, and innovative answer …

!!!

We’ll keep doing what we’re doing. Managing cash flow, investing opportunistically, and maxing out retirement accounts. It’s a low-risk ride.

FUTURE ASSETS

Here’s what I expect from my various net worth categories over the next 15 years, in 5 year blocks:

Click on image to enlarge.

Ok, so this will take some unpacking.

Cash: Easy, this is just a gradual build.

HSA: I’m going to start maxing out an HSA in 2018. Currently, one can contribute $6,750 per year. That number may go up over time, and there might be investment gains. Then again, I might spend some of it on health expenses. So, I’ll assume no increase in contributions and a 0% rate of return here. The calculation is just $6,750 x 15.

Investments:

Opportunity Fund– Opportunity Fund? Well, I don’t like the stock market very much right now, so I want a fund that will earn some interest and give me some dry powder for future investment opportunities. I’ll initially use my state’s Municipal Bonds for tax free 4% dividends. I plan investing $1,000 per month for 2018, and increasing this by $250 per month every year until I hit $3,000. At 4% compounding, it’ll add up fast. Finally, I’m assuming that I’ll use $200k of this on college for the kids, either by transferring it to a 529 or just withdrawing the money.

I should note that I’ll probably find other investments along the way, so this fund is a place holder.

Alternative Investments– I’m always looking for new and different investments. For example, I’ve earned a total of $30,000 investing over several years in marketplace lending via Prosper.com. I do this now primarily in a Roth IRA, for tax efficiency.  

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LLC– My assumption is that the LLC keeps growing at a decent pace. Even without appreciation, the land and properties are creating good cash flow. I assume $10k each year for the first 5 years, $12,500 each year for the next 5 years, and $15,000 each year for the final 5 years. These are actually fairly conservative numbers, around 5% return on investment.

There’s a bump in value to the LLC in the final year due to an expected farmland inheritance.

Retirement: These accounts are on autopilot, and my estimates are very conservative at 2-2.25% compounding, which is currently the rate on “risk free” treasuries.

Thus, at the end of 15 years, my pie chart will hopefully look something like this:

Click on image to enlarge.

All well and good. A $3MM nest egg! 

At first I thought my retirement plan was boring, but there’s nothing boring about a $3 Million nest egg. I try to remember this every month as I’m slowly but surely saving.

And now, my plan for income …

Continue reading “Rich’s Retirement Plan: Playing BINGO Will Not Be A Source Of Income”

Monthly Happiness Report: Rich Makes Sense Of Internet Commentary, His Cousin’s Controversy, And The Good Life –July 2017

Hey Penny,

Glad to see your technology hiatus is continuing to reward you with happiness. I’d like to hear more of your thoughts about the Amusing Ourselves To Death book, when you have time. 

I think modern technology is mostly AMAZING — after all, I just received a new iPhone from T-mobile that I can use to text for free internationally! But I also know technology can suck away your time and your life if you don’t follow the 4 Commandments.

MAKING SENSE OF INTERNET COMMENTARY

You wrote your happiness report before July 14th (also French independence day, as it were), and I’m wondering how that day impacted your happiness level. It was the day your guest post aired on the widely read Making Sense Of Cents blog. You detailed your journey, which you’ve done before on this blog: in your origin story as well as in your posts on giving to charity and receiving food support. The Making Sense article was an amalgamation.

Some of the comments were nice and some were … well … pas sympathique. Not nice.

Mon dieu. I enjoy interacting with comments most of the time, but I don’t think anyone would say that the internet comment sections are a shining example of technology benefiting humanity.

I was thinking about why some commenters were unhappy with your article. Here are the two main charges, simplified:

  1. They think it’s unfair that you receive government assistance, based on how you are spending your money.
  2. They don’t like the way that you think about it: Thoreau and the Art of Asking and all that. 

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MAKING SENSE OF MY DEFENSE OF MY COUSIN’S CONTROVERSIAL BLOG POST

We’re not hillbillies, but we are cousins! Click on image to view this awesome book on Amazon.

I find it funny that some commenters questioned me for defending you. Was I supposed to turn on my own cousin?? I felt like Mamaw in Hillbilly Elegy, ready to start kicking butt!

Here were my basic responses to their unhappiness.

Response to Charge #1: People get riled up about taxes. As you know, I pay LOADS of taxes. And the idea is that we want our tax money to go to exactly what we think are the highest priorities and best programs. When they see that you, Penny, receive government money, well then there’s anger. Unfair! You’re a regular ol’ blogger! You need to spend less and work harder!

Now I’m not an expert on taxes, but I can comfortably say that food assistance is not the big national tax scandal to be worried about. It’s peanuts (perhaps literally!) compared to the national debt and other such obligations that have little social benefit.

The fact is that you receive food support because you qualify for food support. We can argue about the system and how fair it is, but it makes no sense for you to turn down this support. It’s for food, and it’s completely separate from how you spend the rest of your money. It wouldn’t do an ounce of good to anyone for you to turn it down, which you’ve said you’re eager to do as your income grows.

People don’t normally consider the idea of rejecting government benefits when they do their own taxes. I’d venture that most people who receive the standard deduction are not refusing their refund checks for the good of the system, because they can afford to. I’d love to hear from someone who has done this.

As for how you spend your money …

This part is ironic for me to defend because, as you know, we don’t agree on how to spend money at all. You’re way TOO FRUGAL and TOO GENEROUS! One of your biggest line items every month is charity! Also, you are paying back your student loans at a ridiculously fast rate considering your income.

So, I wasn’t actually trying to defend every specific choice. Mostly I defended you because the attacks got personal, which leads me to the second complaint from commenters.

Response to Charge #2: People want you to think and feel differently about receiving food support.

You wrote that at first you felt embarrassed about receiving food support. And then you talked about how your outlook has changed, how you want people to understand this process, and how in the future you’d like to give more and take less.

This is just my observation, but I don’t think some people want you to come to terms with receiving support. They would like you to keep feeling embarrassed for as long as it takes to support yourself. They want you to feel a certain way.

This, I thought, was rather unfair. People’s feelings are complex, and as we’ve discussed a lot on this blog, there isn’t a straight line between money and feelings.

I’ve experienced this in reverse as a high income earner in an age of income inequality. A RICH GUY! HOARDING THE AMERICAN DREAM! Based on my income, some would say I should continually feel lucky, grateful, and humble, or else I’m just a greedy materialistic a-hole.

This is just not how people work. We don’t have static emotions based on our income levels. Some days I feel incredibly lucky — I love my job and I’m healthy. Some days I’m irritated about traffic or annoying errands. Other days I’m overjoyed because I’m going on vacation. And this week I’ve been anxious about my kids’ behavior at summer camp.

The fact is, I don’t walk around thinking, “Wow, I’m so grateful to be earning six figures, I guess I shouldn’t worry about my boys starting a fight with other kids at camp.” Life doesn’t work that way.

MAKING SENSE OF KIDS, HAPPINESS, AND THE GOOD LIFE

All of this made me consider my happiness level for the past month. Initially I thought I’d rate it low, like 3.5 smileys out of 5, which is not good for me. The main reason: It’s summer camp season.

My twin boys are high energy. That’s an understatement. They make other high energy kids seem mild mannered. As twins, they don’t take many breaks because they always have a willing partner to egg them on. They run around and talk and yell and laugh and fight and play from 6am to 8pm every single day. Their favorite game, besides Uno, is to be chased. That’s the game — we chase them. There’s my cardio regimen right there.

Continue reading “Monthly Happiness Report: Rich Makes Sense Of Internet Commentary, His Cousin’s Controversy, And The Good Life –July 2017”