Budgeting for Early Retirement

I’ll be honest. The idea of “retiring” has always been something that I’ve almost completely ignored, mainly because it’s felt so far away. Through my work, I get 14% of my salary stashed into a 401k each month, and so I’ve felt like that’s enough so that when I’m 65 or 70 or whatever the retirement age is, I’ll be able to retire and be fine. End of story.

Except now I’ve been thinking it from a different angle. To retire, I need to have saved enough money so that Denisa and I can live on the earnings. In other words, there’s an amount I could save that would make it so I could retire, and once I reach that amount, I don’t (theoretically) have to work anymore. And that doesn’t have to be when I’m 65 or 70. In fact, it would be dandy if it were earlier.

Because I’ve largely been ignoring retirement as a concept, my approach to budgeting has been much looser than it was in days past. I’ve gotten raises, Denisa’s gotten work, and my book sales have picked up to the point that when we need money, it’s always just kind of there. And I’d justify pretty much anything I wanted (within reason) to “celebrate” when a book sold or royalties came in. I’m not saying I was just spending like a madman, but I haven’t been paying that much attention to it. We’ve spent less than we earned. That’s all I needed to worry about, right?

Well, not when I’m suddenly thinking about retiring early. Because there’s a few dials you can turn in your calculations for that. You can take how much you spend each year and then figure out how much you’ll need to make to be able to afford that same lifestyle perpetually. At my rate right now, that’s around $2,750,000, assuming I’m spending the interest very frugally.

I don’t know about you, but I definitely don’t have that kind of money kicking around. Not half. Not a quarter. And the odds I’ll ever have that saved up with my 14%/year retirement approach are non-existent. So is it a lost cause?

Not hardly. Because what if I started to actually, you know, budget? What if I tried to cut costs, so that my yearly spending goes down? It’s a novel idea, I know. But if I actually made a list of everything I’m spending right now, then I could get a better handle on things. I think I’ve been avoiding doing that, mainly because I haven’t wanted to look at just how much I’ve been spending. It’s like not going to the dentist because you know you’ve got a seriously big root canal in your future. Not going doesn’t make it disappear.

So I’m doing it. I’m looking at what I spend each month. Once I’ve got all of that in front of me, I can look at it from a perspective of “would I still have this expense when I’m retired?” I can also find ways to reduce what I’m spending each month. From that, I can figure out how much money I’d actually need to have to retire. The lower I can get that monthly budget, the sooner I can retire.

Mind you, my goal isn’t to turn into a church mouse for the next decade or two. I still plan to go on vacations. I still plan to get my kids fun Christmas presents. (Though I’ll likely be spending much less money on Magic the Gathering . . .) I know from experience that my kids are only here for a certain amount of time. I want to have great memories with them during that time.

However, MC is going to be graduated from high school 8 years from now. 8 years used to feel like a lot of time. It doesn’t, anymore. What if I were to somehow get myself into a position where I might retire 8 years from now? It’s something to shoot for, at least. Or make it a decade, and retire when I’m 55?

Some things could affect that as well. Would Denisa still want to teach? Would I want to work part time? Would my books still be bringing in money? The more I look at it, the more feasible it all seems.

I definitely don’t live to work. I work to be able to live and enjoy life. Yes, it helps that I have a job that I feel helps other people, and contributes to society, but society will be just fine when I step away from it. So why not step away sooner, rather than later? Will I reach this goal? No clue. But I know I won’t reach it if I don’t even try, and if by trying, I make it so I can retire five years earlier, I’d say that was time well spent.

Wish me luck.

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Like what you’ve read? Please consider supporting me on Patreon. Thanks to all my Patrons who support me! It only takes a minute or two, and then it’s automatic from there on out. I’ve posted the entirety of my book ICHABOD in installments, as well as PAWN OF THE DEAD, another of my unreleased books. Where else are you going to get the undead and muppets all in the same YA package? Check it out.

If you’d rather not sign up for Patreon, you can also support the site by clicking this DON’T GO TO SLEEP Amazon link. It will take you to Amazon, where you can buy my books or anything else. During that visit, a portion of your purchase will go to me. It won’t cost you anything extra.

Robinhood: Fun with Stocks?

Last week I was talking with Tomas, and he was telling me all about the stocks he’d bought. I did a bit of a mental double take, because I hadn’t realized he’d been buying stocks. I asked him how he was doing it, and he told me all about Robinhood, the stock buying app that’s all the rage with the younger crowd. I had some downtime, and they offered $5 of free stock if I signed up with them, so I decided to give it a whirl.

My initial impressions were very favorable. It was super easy to open the account and connect it to my bank. Then I got to pick which free stock to get, and just like that, I’d gone from $0 to $5 of value. Can’t beat it! I added about $20 of other stocks, which shows that when I have too much time on my hands, I’m up for doing just about anything.

Over the next few days, I enjoyed opening the app and checking to see how my investments were doing. To make things interesting, I’d bought about 10 shares of a penny stock worth 40 cents or so. A few days later, it shot up to 60 cents. I happily cashed out, having increased my investments by 50% in a matter of days. Score.

Robinhood kept encouraging me to diversify my investments, so I put down another $40 into an ETF, because that seemed like the thing to do.

And then I stopped.

I realized I had done almost no research into the app as a platform. Sure, it was easy to use, but I have an honest to goodness account with Schwab. If I’m going to be dumping money somewhere, wouldn’t it make sense to use the real deal? Did it make a difference?

After nosing around some, I discovered that yes, it did. Schwab has an app that’s much more robust than Robinhood. You can buy more things, and there’s a ton of research in there to tell you all about the things you’re buying. Yes, it means you have to read more stuff, which I suppose might seem difficult to some, but “read more stuff” was never something to cause me to turn away. Plus, the overall fees for Schwab are lower.

Naturally, I didn’t stop there. I called up my brother, who’s a financial planner, to ask him about everything. And as usual when I talk to an actual expert in something, I discovered he knew way more about this than my half hour of research had taught me. Some things I learned:

• Yes, Robinhood is nice because it’s simple to use. But also yes, Schwab is a better platform.
• Buying stocks and watching them day by day can be entertaining, but it’s also very high risk, comparatively. You’re taking your money and essentially betting that a certain company will do well. If it does, huzzah! You feel like a pro. If it doesn’t? You’re kind of hosed, stuck into a pattern where you feel like you need to wait around to see if you can get your money back.
• Related to that, buying stocks involves keeping track of stocks. It’s One More Thing to Worry About. If it’s entertaining to you, great. Just don’t get carried away. Personally, I make more money being a librarian than I’m likely to as a Full Time Stock Checker. And I’m busy enough that adding Full Time Stock Checker to my responsibilities probably isn’t something I want to be doing.
• When you’re dealing with investing, the best thing to do is to think longterm. That means not randomly dumping money into a penny stock you read about ten minutes ago. There are several avenues to put money in first to make sure you’re getting the most bang for your buck.
• Roth IRAs are the bee’s knees. You can put up to $6,000 into one each year, and the money you take out when you retire is tax free. Compare that to the money you make selling stocks normally, where you have to pay capital gains taxes. If it’s stock you’ve held less than a year, it’s taxed just like any other earning. For me, that means I’d have to pay around 25% of whatever I earned. If I invested $100 and sold it for $140, it looks like I made $40. But then I have to pay 25% of that $50, so I really just made $30. If I’d put the money in a Roth IRA instead, I wouldn’t have to pay any taxes on it. (Though I’d have to wait to use it until I retire. No biggie. That’s the goal, anyway.)
• If you’ve already maxed out your Roth IRA, then you should look into putting as much money into your work’s retirement fund that you can (if they have one). Why? Because that money comes out before you get your paycheck, which means that the government pretends you never actually made it. (I’m oversimplifying here.) In other words, when it’s take to pay your taxes for the year, if your salary was $100,000, but you had $25,000 put into your retirement fund directly on your paycheck, then the government only sees you having made $75,000. The downside is you’ll have to pay taxes on that money when you take it out eventually (unlike a Roth IRA), but by then, you’re also probably making less money, because you’re retired. This means you’ll pay less taxes on it.
• In either of these accounts, you get to decide where your money goes. You can put it into stocks, if you like to live dangerously, I suppose, but you can also put it into ETFs, which are professional run accounts that invest in a wide range of stocks, making them more resistant to high fluctuations. You aren’t likely to double your money in a year or anything, but you’re not likely to lose it all, either. And there are different flavors of ETFs, each with their own speciality.

The net result was that I decided to stop worrying about Robinhood so much, and to pay more attention to the retirement accounts I’ve already got going for me. I’ve done some more research into ETFs today, and there’s plenty there to keep me busy.

True, this is all something you could have just googled on your own, but it’s something I hadn’t looked into, and with as much buzz as Robinhood had been getting, I thought perhaps some of you would be interested in hearing what I’d found out. I’d say I’d be happy to answer any questions if you have them, but I’m clearly not qualified to. I’d send you to my brother, but I think he’s full up on clients right now, and he’s a fancy pants, so his clients all have to have like a zillion dollars (or rather, way more money than I have), so I just fly under the radar with occasional naive questions like, “Is Robinhood a good thing to use for investing?” (Though they do keep a blog that writes on interesting topics.) So if you do have questions, I definitely recommend either getting a financial planner, or convincing one of your friends or family members to become one. They could also marry one. That could work too . . .

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Like what you’ve read? Please consider supporting me on Patreon. Thanks to all my Patrons who support me! It only takes a minute or two, and then it’s automatic from there on out. I’ve posted the entirety of my book ICHABOD in installments, and I’m now putting up chapters from PAWN OF THE DEAD, another of my unreleased books. Where else are you going to get the undead and muppets all in the same YA package? Check it out.

If you’d rather not sign up for Patreon, you can also support the site by clicking this DON’T GO TO SLEEP Amazon link. It will take you to Amazon, where you can buy my books or anything else. During that visit, a portion of your purchase will go to me. It won’t cost you anything extra.

Tax Time!

Oh joy. Time for us to submit our taxes again. I got mine finished over the weekend, after starting them about a month ago. I typically do that to get a rough estimate on how much I’m going to owe (or get back), so that I can be sure to be prepared when the time comes. But then my inherent laziness steps in, and I wait until much closer to the deadline.

And as my friend Dan always points out, the Simpsons say it best:

Then again, the yearly ritual of doing my taxes is also a great time to take a look back and see how things are going on the whole, financially speaking. For a good long while during COVID, I was worried about the stability of my job and the future in general. (I’m still worried about my university, mind you. There are plenty of signs about just how much trouble we’re in. That’s not unique to my institution by any means. I think higher education in America has a whole slew of problems coming up, but that’s a topic for a different post.)

So when I took the time to actually run the numbers, I was surprised and more than a little grateful to discover 2021 actually turned out to be the best year for Denisa and me ever, from a financial standpoint, this despite the uncertainty at times over whether she’d have classes to teach. In the end, she taught 5 classes and took on several additional responsibilities at the university that compensated her more. I taught a class myself, and I had the best year I’ve ever had as an author.

Mind you, this doesn’t mean I’m just sitting over here in Maine, swimming in my Scrooge McDuck money pool. My grand total of authorly earnings this year, once you take out taxes, paid for . . . about 1/4 of my kitchen renovation. True, the renovation ended up being more expensive than I thought it would be, but I made more money as an author than I thought I would have, so that kind of balances out.

However, I also think it’s important to look at the good things that are happening, and making an honest-to-goodness profit off my writing is definitely a very good thing. There was a long time when I wondered if writing would ever do anything for me. It was a hobby with aspirations. Now it’s a trumped up side hustle with big dreams. 🙂

So while this all means that I had to pay a fair bit more in taxes than I’ve paid in previous years (say goodbye to any hope of a refund), I’m much more focused on the cause of that, rather than the effect. All my problems are not magically solved, but I’m grateful they aren’t worse than they could have been. If that’s not the most 2020’s-ish thing to say, I don’t know what is.

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Like what you’ve read? Please consider supporting me on Patreon. Thanks to all my Patrons who support me! It only takes a minute or two, and then it’s automatic from there on out. I’ve posted the entirety of my book ICHABOD in installments, and I’m now putting up chapters from PAWN OF THE DEAD, another of my unreleased books. Where else are you going to get the undead and muppets all in the same YA package? Check it out.

If you’d rather not sign up for Patreon, you can also support the site by clicking this PERFECT PLACE TO DIE Amazon link. It will take you to Amazon, where you can buy my books or anything else. During that visit, a portion of your purchase will go to me. It won’t cost you anything extra.

When Two Wrongs Make a Right

It’s been a tough couple of years for everyone, right? Right. And I’ve mentioned multiple times how I’ve been off my game for the past while. This has resulted in some lapses that I normally just don’t make. The last little bit, I realized I had made two fairly large goofs that were going to cost me some significant money.

Through my job, I put aside $2,750 each year to spend on medical bills through a Flex Spending Account. This is good for tax reasons, but it comes with a couple of stipulations. First, you have to voluntarily re-enroll each year. If you forget to sign up, you don’t get to do it. That’s normally not a problem. I get a reminder each November, and I’ve re-enrolled every year like clockwork.

Until 2021, when I somehow completely spaced it and didn’t re-enroll. (I blame my kitchen.) This meant I wouldn’t have the chance to get the tax benefits, but I wasn’t too terribly upset about it, because I didn’t think those benefits would be too much. (Actually, we can calculate what they would have been. It basically knocks that money off the top of what you earned, so the IRS treats it as if you didn’t earn it, which means it’s not taxed. At my tax bracket, it would have been taxed 22%, which means that by forgetting to do it, I lost $605. It’s not insignificant, and I definitely wasn’t happy about it, but I tried not to beat myself up over it too much.

However.

As I tried to remember through the mists of 2020 and 2021, I couldn’t for the life of me remember submitting a claim for my 2020 flex spending account money. Each year, we just put in a claim in April to get reimbursed for everything we spent the year before, which is always enough to get all our money back. But FSAs are a “use it or lose it” tool. If you don’t get reimbursed for something, then you don’t get the money back from that year. A small amount can typically rollover, but other than that, you’re out of luck.

If I hadn’t submitted a claim, then I would be out $2,750 for that who year, bringing the grand total of my blunders around FSAs to $3,355. That, my friends, is a number that I just can’t let slide. That’s a really boneheaded amount of money to just pour down the drain. And yet yesterday, it looked like that’s just what I had done. I got a letter from my FSA account company that confirmed I hadn’t put in a reimbursement for 2020.

I was, needless to say, not very happy for myself. I read the letter, and then decided to just not think about it until today, because I was too depressed about the loss to face it right away.

Today, however, I cowboyed up and looked into the matter some more. Was there any way I could get some of that money back? It never hurts to ask, right?

Well, after some googling and a few phone calls, I discovered the truth. Because of the pandemic, Congress had altered the rollover rules around FSAs to make it so that your 2020 amount rolled over into 2021, and it could also rollover into 2022. What does this mean for me? It means that while I can’t be reimbursed for any of my 2020 expenses, I can be reimbursed for 2022 expenses, even though I didn’t sign up for the FSA plan for this year. Actually, if I’d signed up like I should have, then I would have had to spend $5,500 this year to get all my money back.

So in the end, by forgetting to sign up for my FSA in 2022, I countered the mistake I made in 2020 of not getting reimbursed.

Mind you, it still means that I’ll lose about $600 in taxes for 2022. The best thing to do would have been to do it right in 2020, 2021, and 2022. But at this point, I’m just grateful to be able to get the money back that I put in. I’ll take my wins where I can get them.

Thanks, Congress! I give you a hard time a lot of the time (deservedly), but you really bailed me out this time, and I appreciate it.

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Like what you’ve read? Please consider supporting me on Patreon. Thanks to all my Patrons who support me! It only takes a minute or two, and then it’s automatic from there on out. I’ve posted the entirety of my book ICHABOD in installments, and I’m now putting up chapters from PAWN OF THE DEAD, another of my unreleased books. Where else are you going to get the undead and muppets all in the same YA package? Check it out.

If you’d rather not sign up for Patreon, you can also support the site by clicking this PERFECT PLACE TO DIE Amazon link. It will take you to Amazon, where you can buy my books or anything else. During that visit, a portion of your purchase will go to me. It won’t cost you anything extra.

Credit Card Churning: 1.5 Years In

I posted back when I began to dip my toes into the vast world of credit card churning in October of 2017. (For those of you who don’t know, it’s the practice of signing up for credit cards that have attractive incentive offers (tens of thousands of points for spending $3,000 in the first three months, typically), and then chaining those offers together to gets tons of free points for, well, free.) I posted another update about four months later, saying that so far, it had been going well.

How are things looking now?

Still peachy keen. Really, my only regret is that I didn’t start this a long time ago. Though, as always, that comes with a huge disclaimer. To make this work, you need to be hyper-organized. You need to keep track of what cards need to be used when and for what. You *need* to pay off each card in full every month. You also need to have a steady stream of purchases you put on a credit card anyway. If you start making purchases just to meet a minimum spending goal, then you’re spending money you wouldn’t have spent otherwise. And that means you’re likely losing money . . .

Denisa and I have some purchases we know will go on a card every month: groceries, phone, utilities, gas. We know how much we spend on those each month, and so we’ve gotten a new card about every 2-3 months. Since I started this, I have gotten 10 new credit cards. With those credit cards, I have gotten 260,000 Chase Ultimate Rewards Points, 325,000 Marriott Points, and I’m coming up on 275,000 Hilton Points. All earned on purchases we were going to make anyway. In addition, I have Gold status with Marriott and Diamond status with Hilton.

Of course, some of the nicer card offers come on cards that have annual fees. If you don’t watch yourself, you’re going to lose some of your “profits” by paying those, but if you swing it right, it actually works out very well. Some examples:

• My Marriott cards typically cost about $95/year. However, they each come with a free night each year. If I’m planning on staying at a Marriott one night/year anyway (per card), then as long as the Marriott I was planning on staying at would cost more than $95, I’m ahead of the game on this one. With my family, when we stay at Marriotts, the cheapest we can find them is usually around $120, so this is just fine. And we travel often.
• My Hilton card costs $450/year(!) When I was starting out, this would have been a deal breaker for me. However, I realize there are ways to make this work as well. For example, it comes with $250 of Southwest gift cards, which knocks that annual price down to $200. It comes with a free weekend night at almost any Hilton. (This year, I’m hoping to take Denisa to stay at a Hilton right off Central Park. It would usually cost $450 for the room. I’ll stay there for “free.”) In addition, I get automatic Diamond status at Hilton, which comes with free upgrades to rooms when I say there, free breakfasts, and other perks. If you don’t travel and stay at hotels enough, it’s hard for these perks to counterbalance the $450 you’re paying for them, but if you *do* travel anyway, they’re an excellent bonus.
• My Chase Sapphire Reserve card is also $450/year. But again, there are benefits. If I spend Chase points to travel, I get a 50% bonus. The first $300 I spend on travel with that card each year is refunded. I get extra buyers protection on purchases, automatic trip insurance, and more. It all depends on whether these bonuses work for what you’re already doing or what you want to do anyway.

I’m to the point now where I’m being more selective on what cards I get, and where I use which card, as some of them give you bonus points for spending in a particular category. For example, my Chase Freedom card gives me 5% points at grocery stores and home improvement stores this quarter. That means I get back about 8-10% of what I spend there if I use those points in travel. If I was going to buy groceries anyway (spoiler alert: I was), then which would be better: buying them for $100 and getting nothing back, or buying them for $100 and getting $8 in travel credits?

My biggest concern going into all of this had been for my credit score. I needn’t have worried. It’s still at the highest level possible, even with all these cards.

Would I do it again? Of course. But only within the constraints I’ve outlined. This morning I just bought round trip tickets to San Antonio for my family, all with points. They would have been over $1,500 for cash. I spent 96,000 Chase points, transferring them over to Southwest. It really felt like a cheat code for travel.

Honestly, my biggest “problem” at this point is that I’m so used to saving money, my natural inclination is to save points as well. They’re no good to me if I don’t use them, so I’m having to look for ways to spend the points to have fun, which is why I got into all of this in the first place. Next up? I’m hoping to stay in Orlando for a week with the fam for free, and there’s another trip to Boston I’d like to take.

Life’s rough.

If any of this sounds like it’s something that’s up your alley (with the disclaimers I gave), then let me know. I can give you some referral links to good cards . . .

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Like what you’ve read? Please consider supporting me on Patreon. Thanks to all my Patrons who support me! It only takes a minute or two, and then it’s automatic from there on out. I’ve posted the entirety of my book ICHABOD in installments, and I’m now putting up chapters from PAWN OF THE DEAD, another of my unreleased books. Where else are you going to get the undead and muppets all in the same YA package? Check it out.

If you’d rather not sign up for Patreon, you can also support the site by clicking the MEMORY THIEF Amazon link on the right of the page. That will take you to Amazon, where you can buy my books or anything else. During that visit, a portion of your purchase will go to me. It won’t cost you anything extra.