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TJ

Money Travel

Have You Considered #VanLife? Info From Actual Van Lifers

by on November 30, 2016
How Much Does Van Life Cost?

How Much Does #VanLife Cost?

if you’re pursuing any sort of extensive road trip, you’ll notice that there’s sort of a shortage of financial particulars.  I did the logical thing. I asked my friends. I even asked one of my mother’s friends. True story, my mother sings in a choir with a woman my age who pursued van life. Since I know I’m not the only one who has considered the possibility of van life, i’m going to share the wealth of knowledge that was shared with me with people who are actually doing van life. Most of these people do not have a van life blog, so they aren’t trying to convince you to consider van life and click their affiliate links and fund their lifestyle. They’re just living the dream. Do I sell my car and go full out for #vanlife ? Do I go for a test run with a 3 month van rental in “low season” to go up and down the Pacific Coast ? (The cost would be about $1k per month for a 3 to 6 month rental – in case you were curious.)

Discounts Money Saving

My Black Friday Treasure Finds

by on November 28, 2016
Black Friday Treasure Hunt

Hello friends! I had a super relaxing weekend. Spent the weekend out in the desert and only took my mini laptop. I did not remember my WP Admin or wordpress.com passwords, so I was conveniently forced to step away from the blog. It was a welcome break from all of this, but it is not so much fun trying to cram a past in under the wire before Monday morning. You know what place was NOT crowded on Black Friday? The local grocery store! Not a soul in sight.

It was a productive weekend in terms of finding good deals as well as actual free cash.

Travel

Awesome Posts I Read

by on November 23, 2016
Awesome Posts I Read Recently

One of my favorite things that I’ve seen some bloggers do is give shout outs to other articles that they’ve read recently. A lot of people don’t do this anymore because it effects their SEO rankings. There are so many writers out there and it’s impossible to keep track of everybody.  I decided that I’m writing for humans and not for robots, so below are a few of the articles that I noticed throughout this past month.

Blog Stats

October 2016 Blog Traffic & Social Media Report

by on November 21, 2016
October 2016 Blog Stats

Happy Monday friends!

I’m not sure how interesting these posts are to read, but I write them for the purposes of archiving my progress. One of my problems over the years has been laziness in the form of outsourcing various data collection, so when I switched my expense monitoring from LearnVest to Mint, I lost all of that historical data. By writing down this information on my blog, it is saved indefinitely and seeing the progression validates my decision to keep writing.

I briefly touched on my September Stats in a different format. For this post and all subsequent traffic updates, I’m following in Graham’s footsteps, as his format for tracking these analytics is effective and very easy to read.

Life Retirement

Why Isn’t Productivity Personal?

by on November 18, 2016

There’s a lot of talk in the financial independence community about feeling the need to be productive. Productivity in life. In retirement. In employment. Also in *unemployment*. If you’re Mustachian, then consuming is the anti-good and producing is good. I’m sure you’re all shocked to hear that I think this is yet another false dichotomy perpetuated on the internet. Production and consumption are on two sides of the spectrum. I have no interest in being on either extreme.

Investing Money Retirement Saving

EE Bonds For a Basic Early Retirement Income Stream

by on November 16, 2016

EE Savings Bonds are an interesting investment vehicle that often gets overlooked for someone who is looking to retire early. The reality is that a lot of us are planning to retire a lot sooner than the Social Security eligibility age. Social Security being an income stream that we cannot start until age 62 at the earliest. It’s rather important to bridge the gap in between the day you declare early retirement and the day you begin that social security income stream. Can EE Bonds be a plausible strategy to bridge the Gap?

Money Saving

October 2016 Financials

by on November 14, 2016
October 2016 Financial Recap

Another month of spending shenanigans is in the books. October certainly looks to be better than September, but it’s not where I’d like it to be. The good news is that there are definitely some road trip expenses in here and I guess it’s good to know that anything I pay now while I’m gainfully employed, I don’t need to worry about paying for while i’m on the road. Read on to get inside the nitty gritty of my October expenditures.

Life Money Retirement

Reader Mailbag: Can I FIRE as a Single?

by on November 11, 2016

READER MAILBAG

Can I FIRE As a Single ?

A few weeks ago, I received an unexpected e-mail from a woman who was seeking FIRE, but wasn’t sure if it’s doable on her own as this community is dominated by high income couples. That e-mail is as follows:

Hi, I have been interested in early retirement and financial freedom topics for the last year or so. I have been reading lots of stories of couples retiring early and traveling the world … because it’s easier to save when you are sharing living expenses and common goals with somebody else , right?  So I started to wonder if it is even a feasible goal to retire early as a single person.  I started my research for single FIRE  success stories … so far I haven’t found any.  After FinCon was over I decided to ask Mrs. Our next life if she knows anybody and she suggested to check out your site. Here I am:) tell me how you do it ?

I wasn’t sure how to respond to this e-mail. As I’ve mentioned before, I consider a lot of what I do in the FIRE world to deviate from the usual narrative we see, with more than a little cheating. I utilize actively managed dividend-focused stock and investment grade bond funds to juice my income. My plan even includes going back to work. The horror!  I’m also not doing the stereotypical American abroad backpacker thing.

If you’ve read my blog posts, you shouldn’t be surprised that my response was absolutely long-winded:

Thanks so much for reaching out! An ONL recommendation is a pretty high honor. Hopefully I won’t let her and you down. 🙂
I can’t think of any single FIRE folk off the top of my head either, but I did learn that there are a lot of people doing cool things as a single which have provided me with the inspiration that I don’t need to wait until I’m partnered off to take some financial risks in my life.
Jay Zantos is somebody you should check out. He did a year long road trip going to all the national parks all by himself. He’s not financially independent, but he took a life risk and experienced something that many people would say is impossible. I think it’s a pretty cool story.
 
Lula is another…after she paid off her student loan debt, she went abroad and never came back. She supports herself via internet marketing and such and lives out of a single backpack. She doesn’t write about money much anymore, but that’s because money has basically been eliminated from her thought process. She was going to travel “until the money runs out”, but  she makes more than enough to sustain her lifestyle. So, I’d say there’s a form of financial independence where you’re still working, it just depends on what you want to do. She admittedly has a rock bottom daily budget that most people would not want to try to adhere to.
I also highly suggest that you read my favorite personal financial book as it’s been a big influence on my own life philosophy of early retirement and financial independence: How to Retire Happy, Wild & Free: Retirement Wisdom That You Won’t Get From Your Financial Advisor.
The most important question to ask yourself:
Why are you wanting to achieve FIRE ? Consider that you might not need to achieve total financial independence for whatever it is you are wanting to do with your life. For me, waiting until financial independence defined by conservative measures would have meant waiting until around age 40 (or longer) to live the life that I want to live. That’s a long time to wait.
I think, for you, it might help to re-frame what you are perceiving as the social norm from extraordinary stories you read about on the internet. You are observing the people who are in these happy financially compatible relationships as the social norm and you’re looking at that and you’re thinking “I can’t duplicate what they are doing. it’s just not possible. They have this huge advantage over me.”
 
The issue with that is that you’re comparing yourself to the wrong group of people. I totally get where you’re coming from, I’ve been there, and because I’m assuming your life’s dream isn’t to become the Financially Independent Crazy Cat Lady (if it is, I don’t think anyone has yet created that blog!), the “Who is my partner going to be?” is a major unknown variable in the FIRE journey.  My fear is that by pursuing FIRE as a single, I might subconsciously place too much emphasis on money status in a romantic match. That makes me feel icky inside, but when something like FIRE is a dream, you either need to have that in common with a partner or you need to be willing to give up that FIRE dream or at least potentially delay it.
What you haven’t considered is that as an independent single person, you have an advantage over the many people who are stuck in incompatible relationships but who are too afraid to try something different.  Since it’s just you, you don’t have to compromise with anybody, you don’t have to consider a partner’s priorities/circumstances and you don’t have to answer to anyone but yourself. That is the PERFECT circumstances to choose to save more money for FIRE. Want to live in a tiny shack? Nobody to tell you no. Want to live close enough to work so that you can bicycle to work and sell your car? Nobody to tell you no.  It probably sounds selfish, but I know that for me, every money-saving decision I make not only benefits myself, but it also benefits my future wife. So when I remind myself of that, It starts to feel a little less selfish.
 
For me personally…how do I do it? A lot of good fortune and a lot of staying humble. Good fortune? I never had student loans debt. My working career so far has been during an incredible stock market run. My parents instructed me to buy a condo when I moved out and they gifted me a portion of the down payment. I sold it five years later and made a noteworthy profit.  For the humble part, I drive a six year old Honda Civic whereas many of my peers would opt for an Audi or a Volkswagen or something even more luxurious than that. Probably on a new lease every few years. I’ve also lived with  a roommate for almost the entire time after I moved out of my parents house. A lot of people choose to live alone while they are single. 3 of my 4 roommates over the years were random people from Craigslist. That being said, I’ve still lived a great life full of fun and adventure. Over the past 7 years, I did a 10 day trip to Canada, a 2 week trip to Europe and a 6 week trip to Australia/New Zealand and have eaten way too many meals at restaurants..
As you may have noticed in a recent blog post, my personal life definitely hasn’t been an easy one. I’ve spent a lot of money trying to be someone I’m not, and I’ve found it difficult to look for the types of women who will accept me for my unusual approach to spending money, but if you read the comment section on that post, there’s a lot of inspiration from people who found their person at an unexpected time in their lives.
So, to sum it up, I totally agree with you that it probably is a lot easier to heavily save when you are sharing living expenses and have common financial goals with a partner – but that doesn’t make it impossible to do on your own, and just because you’re single now doesn’t mean you always will be.
Please let me know if anything in this ramble was remotely helpful (….or not…)
The following week, I received a reply that made my day. THIS is exactly why I share my thoughts and financial stories. It’s nice to see someone else recognizing that there is in fact more to life than money:
Hi, TJ,
I have been listening to “Retire happy, wild and free” as you recommended. I love it. I think it’s time to pursue more hobbies while I have health and desire:-) So rock climbing, backpacking, library, golf, skiing and new things to try … here I come 🙂
Yes, your rambling was helpful… I saw a different perspective and also your email had impact on my decision to stay away from social media and focus on people and community in front of me. And yes I am loving no social media … my friends and family are happy to hear from me again, I sleep better and I am already calmer and happier. 
🙂
Would you response be different? Let me know in the comments! Have a question of your own? E-mail me!
11/13 update: I completely forgot about the most obvious Financially Independent as a Single Success Story. Anita  at Power of Thrift was a lawyer in Chicago for a few years. She just doesn’t really blog that much or promote herself, because she’s too busy living here life, that I completely forgot about her.
Investing Money

TJ’s Investment Portfolio Revealed

by on November 10, 2016
TJ's Investment Portfolio Revealed

TJ’s Current Portfolio Allocation

TJ's Investment Allocation

I don’t have PersonalCapital monitoring my bank accounts which is where most of my cash is. If i did, it would be way too easy for people to guess my net worth since I plan on sharing my cash savings balance at some point. The cash in this screenshot would be the cash that is embedded inside of my various stock and bond mutual funds.

TJ’s Current Mutual Funds

Core Equity Positions:

Vanguard Equity Income

41% of portfolio – A High Quality Dividend-focused fund. 40% of an investment portfolio in a single fund might seem like a lot, but this fund actually has two similar-but-different strategies. 2/3 of the fund is managed by Wellington Management in Boston and the other 1/3 is run by an equity team at Vanguard.

There is a bit more turnover in the Vanguard managed portion and a big reason why I didn’t want to have too much of this fund in a taxable account. That being said, I can’t imagine why being all in on Vanguard Equity Income would be a terrible long term buy and hold investment for an average joe. It isn’t lacking in diversification. This fund should perform very similar to the Vanguard High Dividend Yield Index, which is the index that it attempts to out-perform. In the past couple years, the high dividend index has been the better performer. It all goes in cycles. So I tell myself I’m buying low. 😀 It’s not like I have 40% of my portfolio in a collection of random penny stocks. Ironically enough, the admiral share version of Equity Income is less expensive than the mutual fund version of High Dividend Index.

 Mairs and Power Growth Fund

18% of portfolio. This one was selected for  two reasons. The first: EXTREMELY Low Turnover. This is a large cap U.S Stock fund with an Upper Midwestern Concentration. They’re located in Minnesota and they definitely like their Minnesota companies. They’ve been a good steward of their client’s capital for over half a century. I like having part of my U.S. equity portfolio intentionally avoiding what I perceive as crazy tech valuations in California, New York, etc. Midwest focus is definitely a convenient way to stay out of that scene.

I definitely do pay a bit of a premium in management fees on this fund vs. a typical Vanguard fund expense. If you’re curious about the overlap between Vanguard Equity Income and Mairs and Power Growth, I’ve created a Google Sheet with all the holdings of each fund by weight as of 9/30/16. Other than both funds having Johnson N Johnson as a top holding (which I have no complaints about, JNJ is a great company.), there’s really not a lot of significant individual holding overlap, and I feel pretty good about the mix of companies that both firms have chosen to invest in.

 Backtested Fun

Below is a backtested table and graph which compares a lazy 50/50 split between Mairs and Power Growth and Vanguard Equity Income starting on January 1, 1989. No rebalancing. Dividends reinvested. 1989 being the first full year that Vanguard Equity Income Fund existed.  If you just skim and look at the ending balances, it looks like you absolutely crushed the 500 index with the active approach. That’s not the point though, and it would be a terrible reason to pick those two funds. If you take a closer look at the graph, you can see what really happened is your fund managers avoided that late 1990’s dot com bubble rise and the subsequent steep crash. Because they are conservatively managed funds  that don’t chase growthy tech stocks with frothy valuations.

When you’re in a cap-weighted index fund, you’re more exposed to bubbles like this and that is just the nature of the game. Index fund investor solution: Work longer! Save more! Lower your Safe Withdrawal Rate! It’s not the only way though. If you have competent active management, you at least have the possibility of a fighting chance. This active mix offered more protection than the index during the more recent financial crisis, but it was still smacked around pretty hard. Still, avoiding 1 crash is better than avoiding none of the crashes, right? Avoiding the dot com bubble is the best explanation I have for why there is such a drastic variation in the two final balances after nearly 17 full years of being invested in primarily large American companies in both strategies. Highly unlikely that the next 27 years turn out exactly the same as the previous 27.

Backtested Portfolio - MPGFX/VEIPX vs VFINX

Image Source: Portfolio Visualizer

Note that the performance was almost identical before the dot com bubble, and very very similar coming out of both crashes. Don’t overlook downside protection in your equity funds, particularly after you shut off your primary income stream. ESPECIALLY if you are 100% equities as many early retirees have chosen to be. I was 100% in index funds in my taxable accounts during nearly all of my working career thus far. That was a time where I could handle more volatility and take advantage of investing regularly where the price of the security may be less important. A mini-retirement or early-retirement is a very different financial circumstance in that you might not be adding to your portfolio.  I’ve scaled back and added roughly 20% bonds for the same reason.

Time in the market with compounded reinvestment is why it’s so important to start investing as early as possible; regardless of which fund you choose. I’ve heard others equate mutual fund investing to gambling. Long term investing is not the same as rolling the dice at a Las Vegas casino.

Income Comparison

I think the following chart does a good job of  showing the potential difference in current income if you go with a dividend strategy. In a high tax bracket, this is the probably last thing you want, but in a low bracket, it’s okay.. This is using the same data as mentioned earlier. Both portfolios have all dividends reinvested and no additional investments. No rebalancing.

Portfolio Income

Image Source: Portfolio Visualizer

The massive income in 2015 is because of the Covidien/Medtronic merger last year. Mairs and Power had owned a lot of shares of the Medtronic stock for a long ass time.  That’s obviously not a typical income year for Mairs and Power Growth Fund. Though I’m sure Medtronic won’t be the last acquisition that forces a steep taxable gain distribution, it’s not a reason to avoid the fund in my opinion. Is the potential downside protection worth the potentially higher taxes? That’s an individual decision of course.

What about International?

It’s definitely a big hole in my portfolio. But plenty of people permanently stick to American equities. And, since I’m more focused on income than growth in the near-term, I’m mostly okay with it.  I also don’t anticipate doing much (any?) spending in other currencies any time soon.

Equity Exploration/Diversifiers:

Mairs and Power Small Cap Fund

10% of portfolio. My most expensive fund for sure.  They’ve had to close it to new investors because it has done so well. I guess they ran out of good small cap investing ideas in the Midwest. Sounds like responsible fund managers to me. I do not plan on adding any additional funds to this position.

Vanguard REIT Index Fund

10% of portfolio. I assume that these are the alternatives in the PersonalCapital graphic. I guess it’s slightly less than 10% now.

Bond Portfolio

Baird Core Plus Bond Fund

21% of portfolio. One of the lowest cost Actively Managed Bond funds (30bps) that I’ve ever seen. Mostly investment grade corporate bonds with some mortgages, car loans, credit cards, high yield bonds, and treasuries mixed in. Looking at the PersonalCapital allocation graphic, it appears there is a tiny sliver of foreign bonds too. I don’t have any issues with that.

Baird is in Wisconsin. They are no more expensive than what Vanguard charges for an actively managed bond fund. I could try to duplicate what Baird Core Plus is doing with a handful of Vanguard bond index funds. But that seems like a lot of extra work. Especially when there is a perfectly good mutual fund that already exists.  I also like that Baird doesn’t “make guesses” on duration, as I learned here. I know Dodge & Cox intentionally has a shorter duration than the index.

Originally, I was going to use Dodge and Cox Income for my bond exposure. But then I figured I might as well save the 13 basis points on the management fee. The two funds are incredibly similar.

This is a pretty boring vanilla bond fund. You’re probably not going to lose your shirt in any diversified bond fund. If interest rates go up, your portfolio value will go down. But, you’ll recover that much faster if you reinvest the higher interest payments. I struggle with people who worry about losing value in their bond funds, but have no concerns about stock funds which are so much more volatile.

Also a completely random and useless fun fact, but during yesterday’s surprising stock market rise, my REITs and Bonds got comparatively shellacked.  But The Baird fund didn’t go down as much as the intermediate treasury and corporate bond index ETF’s that are inside of my Wellington Motif.

Bonds

 My Weighted Expense Ratio

Just under 37 bps. Or basically right about what you’d pay in total for a robo-advised portfolio when you add in the cost of the robot to the cost of the underlying ETF’s. I’ll take my portfolio over the Robo’s any day.

Unfortunately, I don’t have any secret sauce investing advice to offer. My best advice is to do your own due diligence.  I’ve made a lot of mistakes over the years. I’m just not a fan of the “one size fits all” approach we hear a lot about in this corner of the internet. Good luck to all.

Investing Money Retirement Taxes

Demystifying the Tax Brackets

by on November 7, 2016
How the 2017 Tax Brackets Affect Mini Retirement

I recently saw a claim by a fellow blogger that he expects the Wealthfront Direct 100 indexing option to juice investment returns by 0.5% -1% per year for anyone with a $100,000 taxable portfolio. He also claimed that “almost anyone” with that size portfolio would be in the 25% tax bracket. I don’t believe either of these claims to be true for a second and I’m definitely NOT pursuing that strategy. This post got so long that I’m splitting into two. On Thursday, I will reveal my current investment portfolio.

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