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August 2015 Budget Update and More!

Where to begin with the budget this month? Some surprising things we noticed. Greyhounds eat a LOT, haha! Our new grocery norm has jumped to ~$600, so the kids must be eating more… Oh yeah, daycare trumps the mortgage again this month, as it was a 5 Monday month. Yep, those little ones eat more, cost more, and our oldest is now in uniforms, so there was that extra cost. Upside, we found some uniform shirts at Goodwill of all places, so woohoo! Of course this was after ordering the bare minimum he would need. Mrs. SSC tried and failed getting uniforms on ebay, especially when the bids ended higher than buying brand new, wtf people?!

Daycare - you cruel expensive mistress!
Daycare – you cruel expensive mistress!

Everything else pretty much stayed on par, so that’s always a good thing.

Money, money, money! Going to someone else...
Money, money, money! Going to someone else…

In the winning column, we realized we’re at 70% of our savings goal this year ($150k) and we just may be able to pull it off if we stay focused. Our FIRE costs would have been ~$4,050 this month, and our current running total of our annual FIRE spending would be ~$55,700. As Mrs. SSC pointed out, this is with a 5% slush built in, and allowances. Take those out, and we are at a solid $40k, which is pretty good considering that we have a solid $15k buffer if things get wonky after we leave the workforce.

Speaking of leaving the workforce, Mrs. SSC is one week away from applying for her job again! She gets to also apply for 3 others, and hope she lands in one of them. More on that in upcoming posts though, when we have more to share. This has led to a LOT of re-evaluation of our life plans though. Mrs. SSC always wanted to teach and has recently begun looking for teaching jobs. We realize it’s the off season, and I have another 22 months until I get vested in my current 401k, so we’re not planning on leaving before then. However…. We’ve come to realize that we can probably pull the trigger as early as 2017 if some things happen. Mainly, if Mrs. SSC gets a teaching job somewhere that could buffer dipping into our savings for a year or two, we could begin our Fully Funded Lifestyle Change (FFLC) early. It would be more of a Mostly Funded Lifestyle Change, but one we think would be for the better. I really like my job, but I love lots of other things WAY more. 🙂

We both think that we are about done with our current lifestyle. Mrs. SSC wakes up at 5 am, short commute ~30 min, work, gets home by 4pm to get the kids and get them dinner. I get up at 5:30am, get the kids dropped off at 6:30am (poor kids), traffic ~40 min, work, more traffic ~50-60 min, then home by 6pm. I get to see the kids for an hour or so, then they get put to bed, and I have time to exercise/make dinner/relax/catch up with Mrs. SSC, my choice! Hahaha…. Then repeat 4-5 days a week. I’m appreciative to have my job, and very grateful of what it has afforded us, but man, this schedule sucks! So, we’re doing what we can to try and shorten our FFLC date. Even if it means (call the retirement police) working after beginning our FFLC.

While we will get more clarity on what path we may travel in the upcoming weeks, we have decided our current path is not sustainable. What that actually means in terms of our going forward plan, who knows. We’ll be sure to keep you informed however this whole thing shakes out though.

Have you had any workplace or lifestyle epiphanies lately?
Do your kids cost more than your house? 
Are these budget updates a helpful prophylactic for those currently without children?

Is this your car and family?
Is this your car and “family”?

Rising Insurance rates saved us $1800/year!

I drive the one on the right!
I drive the one on the right!

This past month we got hit pretty hard with insurance raises across the board. It’s around this time every year our flood insurance, home insurance, and car insurance comes up for renewal, since we moved to Houston around May 2013. Mrs. SSC nearly split her gourd when she opened the envelope with the new rates for our home insurance. They had jumped almost $700 for the exact same coverage! $700!! WTF, man?! A few days later we get the renewal for our car insurance.  Again, I see Mrs. SSC open the envelope and her jaw hits the floor and steam shot from her ears. It had gone up as well, almost $250 for my car and $140 for Mrs. SSC. Immediately, we ask ourselves, “What the hell is going on? We didn’t get into an accident (I did in August, but I was rear-ended and no claim on my part). We haven’t made any home owner claims? Why would they both raise dramatically at the same time? Have we gotten into some new age bracket we didn’t know about?” We couldn’t come up with anything, so we decided to start shopping around and that reminded me of the last time we changed insurance.

When we relocated from Denver and Chicago, respectively, to Bum-squattle, LA we figured we’d both save a lot of coin on car insurance. I was coming from a policy written for an outside parking only, decent vehicle crime area, and commute of 25 miles. I figured my new policy would be cheaper because I had a garage, 5 mile commute, and did I mention car theft/break-ins in Bum-squattle were really low? Yet, my policy was going to double. DOUBLE! For the same coverage on an 8 year old vehicle. WTF man?!

Mrs. SSC was in the same boat. Her Chicago policy covered her for on-street parking, high vehicle theft/break-in rates in her area and her policy would also more than double. What we didn’t take into account was that Geico (our provider at the time) had just lost their ass with claims from hurricanes Katrina and Rita pummeling the Gulf Coast a few years earlier… However, we ended up saving a lot of coin from our previous policies just by switching to a provider that hadn’t gotten hit so badly with the hurricane claims. Big win there just by shopping around.

We ran into the same thing with home insurance. Most big providers wouldn’t even issue any new policies and it took Mrs. SSC days to find a local company that would issue a policy. (See above with insurance companies losing their ass on those two hurricanes.) We got laughed at from some companies once they looked up our new address. Literal laughing followed by, “My computer says we don’t issue policies for that area anymore…” Evidently this was a thing and even long-time residents would get dropped because the insurance companies would reach a maximum number of policies they’d gamble on for that area and just drop those unlucky enough to not make the cut. It was literally a year to year scramble to have home insurance for some people I worked with.

But, I digress…

After spending 1.5 hours online (15 minutes doesn’t quite cut it anymore, the commercials lie! lol) Mrs. SSC decided we should go back to Geico. Actually, she found they had a slightly better coverage policy offered for the same rate as our insurance prior to the price jump. So, effectively, $390/6 months saved. That’s almost $800/year! Way to go Mrs. SSC!

Ironically, for our biggest liability the house, the amount of time spent shopping for home insurance was only 15 minutes. There were ~10 emails back and forth to our home insurance agent, the first few were along the “Are you sure this is correct? WTF?! What caused the jump?”. So, maybe 5-6 productive emails, and ~5 minutes perusing the latest flood maps, since the links haven’t changed from when we bought the house. Our agent found us a policy with the exact same coverage but would save us $523/year and $430/year with flood insurance. That’s a savings of almost $1000/year! This is partly because we are not renewing flood insurance. Gasp!!! I know, I know, Gulf Coast, pseudo swamp land, what are we thinking? Well, our biggest risk is the tall pine tree getting blown into our house and letting rain/hail/creepy crawlies in during a storm. That’s covered on our new policy since water is coming from above and not upward into our home. These type of clarifications account for most of the other emails. Unless our neighbors pools catastrophically flood and beeline to our house and not out to the street, we should be good. Famous last words, right?

By getting our hand forced to review our insurances and coverage, we ended up saving about $1800/year. That’s pretty sweet, but if they hadn’t raised our rates, we wouldn’t have had a reason to shop around. It’s the complacency and comfort of not changing things I guess. In Denver, and even before then, I’d usually check for better car insurance rates once a year, but never got a better rate from anyone. That’s why I had been with Geico for 16 years before the last time I switched companies. 16 years! Whew, that’s a long time… I guess it just drives home the fact that if you pay attention even when you think you’re doing everything right “frugal-wise” you can still try and find some better deals just by investing a little bit of time. If you find you’re already getting the best deal, that’s an awesome feeling as well!

 

When was the last time you shopped around for different rates on insurance?

Have you found better deals by shopping around for other utilities?

Have you ever moved from a big city to Bum-squattle, USA?

Our allowances cover what?!

Whatever you call it, it’s nice to have a little extra!

Even though we have found our FIRE number and our FFLC date worked out, and we track our spending fairly closely, we still allow ourselves some freedom with money. Some call it “mad money”, “rainy day fund”, “allowance”, or whatever the term; it’s essentially money we can spend and don’t have to be accountable to the other person for.

In the SSC household, we use the allowance system. Each month we each get a set amount and can use it however we want. This was originally meant to be for purchases that would only benefit one of us, or for extravagant things that the other may not agree with. Using our allowance funds circumvents those “why did you buy this?” arguments, and makes it easier to stay on budget for FIRE, since the allowances are a category that is already built into our FIRE budget. It also allows us a buffer with our FIRE calculations, since it is a cost we can immediately cut out if needed. It wasn’t always like this though, as our allowances and what they cover have evolved quite dramatically over the past 7 years.

In the beginning our allowances were less, and were intended to cover things that would only benefit one of us. For instance, beer brewing supplies, video games, and fishing stuff for Mr. SSC. And then for Mrs. SSC, well, she would let hers grow and then invest it… Seriously. Then Mrs. SSC started shopping for work clothes, and shoes, and purses more often, and more often. It got to the point that she started feeling bad about the amount that was coming out of the household budget that she decided we should put clothes into the “allowance” category. I rarely bought new clothes, but if it was a little more $$ to spend each month, then sure, I’ll vote for that! Add one more thing to the allowance list.

After a year or so, Mrs. SSC decided we were going out to eat for lunch too often. Specifically, I was going out to eat too often. Usually, we would bring our lunches and eat out at the pavilion at our work campus, but with my new team and assignment, I had started going out once a week, sometimes twice a week! Gah!!! We were also eating out at restaurants at night a bit more during this time period, so after some back and forth discussion, restaurants were put into the “allowance” category. I of course argued for more money, because, well I always argued for more money if another item was put onto the allowance list.
Although looking back I realized I could have had double the allowance and would have still spent it all because my spending habits were pretty poor. Another item that got put into the “allowance” category was gifts. Birthday presents, and Christmas especially. I resisted this one pretty hard, but lost. Mostly, it’s because Mrs. SSC has a birthday close to Christmas so for most years initially, I was in debt to the SSC bank come January, and sometimes thru February. I told you, my spending habits suck.

I kept arguing that the allowances were getting out of hand because we were having to buy “everything” from our allowances. Not really, but it felt like that to me. Plus, just using the term “allowance” made me feel like a little kid whose Mommy watches over his money for him and doles out what she thinks is “appropriate”. That attitude didn’t help my thoughts that our allowances were a good idea. When I would mention them to people, the reactions were one of two: 1. That’s a great idea, we should do that in our relationship! 2. You get what?! An allowance?! What are you, 12?

Yeah, that did wonders to reinforce my negative attitude towards allowances. However, I’ve come to realize though that they are great on many levels.

First: Even though we track everything, I don’t feel hamstrung by our “frugality” and I feel like I have the freedom to buy frivolous things if I want. I can also go out to eat if I want, or take Mrs. SSC out to lunch/dinner. It works great, and avoids those arguments where one party tries to justify buying something ridiculous. Imagine yourself trying to justifying to your significant other, why a $2000 banjo is a good purchase for “the household”. That took a LOT of saving, but zero arguing.

 

Second: It now makes me question a lot of purchases prior to buying them. Instead of buying something just because I’m “bored”, I want some kind of return on my money. For instance, I just replaced my bike. Prior to doing that, I researched bikes online, went to a couple of stores for test rides and thought about it for a few weeks before I decided on which bike to get. I love my new bike and since we go on bike rides 3-5 times a week, it’s worth it to me to have a comfy, nice bike. I haven’t even looked at banjo’s lately or other music instruments because I just don’t feel the return on investment will be there, and I won’t get a new banjo before selling one.

 

Third: We have an extra buffer in our FIRE budget calculations. Sure, maybe this is a stretch, but when we quit working if things go south and our dividends aren’t doing well, or stocks have dropped, this is a “bill” that we can immediately eliminate. I mean, it’s more of a book-keeping thing, but it’s money accounted in our budget that is available for us to use, so it would be easy to cut out if it needed to go to something else for a bit.

 

For us, they work well and have for about 6 years now. It’s also something that we plan on keeping into our “post-work” life. Even though the “allowance” seems to have become a nebulous “everything comes from allowances” budgeting category, it is still easy to build up a surplus. That being said, due to some unforeseen purchases that came up, I admit, I think I’m currently at $0 or maybe even negative. Ooops…

In general though, I’m a fan of some sort of system like this. I’ve seen other bloggers that have this system, The Maroon’s for instance, use a similar allowance type of fund. I think it’s a nice way to not feel so tied down to always being frugal or feeling like you can’t spend money. I can spend it, I just have to save. That makes me buy less, scrutinize my purchases more, and ultimately be more frugal than if we didn’t have this system in place.

 

What about your family? Do you have a similar discretionary funds system?

Would referring to it as “allowance” make you feel like a kid again too?

We’re headed to the track!

Best new investment strategy around!
Best new investment strategy around!

A while back I noticed a lot of bloggers talking about what you should do with your tax return, as opposed to what most people would actually do with their tax returns. As a kid, this was always a nice time of year because we generally got a fairly healthy tax refund. It was like a financial Christmas, and presents would be bought, we’d get treated to some dinners out, and usually within a month or less, it would all be gone. Nothing invested, maybe some immediately pressing bills caught up, but generally, it was frittered away here and there. As an adult, I’ve tried to be more fiscally responsible, which is why we invest our tax refund. This year instead of putting it into our usual investment hidey holes, I convinced Mrs. SSC to go a different route and diversify our investments. Being from Kentucky, where we’re most famous for horses and bourbon, I decided investing in bourbon wasn’t up my alley, but how could you go wrong with horses?! It’s like they say, “How do you make a small pile of cash off horse racing? Start with a big pile of cash.” So that’s what I plan to do!

 

That’s right, I’m putting it all into horses. I’m sure you’re thinking, “Wait a second, most horses are privately owned and you can’t really buy shares of them, can you? Are you planning on investing in a horse training facility, or farm?” You’re right, I can’t diversify our portfolio with “shares of a horse” so I’m heading to the tracks baby! I usually do pretty well on Kentucky Derby day investments, and over the last few years I’ve managed to clean up. I did some calculations and my investments at the track have yielded over 200% return year to year. I did have a down year here and there, but modeling the amount invested against the returns, makes the stock market look paltry in comparison. I mean really 7% is supposed to be a “good” number? I’m talking averaging 200% returns. If you put that into my other modeling spreadsheets, I can have us to our FI/FFLC goal 2 years earlier!! 2 years!

 

Now that I’ve piqued your curiosity, you’re probably wondering, “How can you do this though, because The Kentucky Derby is a month away, PLUS it is only once a year. You won’t be able to make that much on one race, right?” You’re right again, I knew we had some smart readers! Plus, like I’ve found on all the FI blogs I read, you don’t want all your eggs in one basket, so I’ll be diversifying and spreading my investments over MANY races. I have taken our tax refund and parlayed it into a side hustle of betting on horses! We’re midway through the racing season, so I only have a half a season left, but I’m confident that I can more than double our refund. Already, I’ve been able to get a 30% return on my “investment choices”. 30%!! Our portfolio hasn’t done that yet! It makes me want to show our portfolio my winning stubs investments and say, “Get with the program, portfolio! What have you done for me lately?! Slow and steady, more like, Slow and Slower… sheesh!” I digress…

 

This weekend, I plan to get the investment action in full swing though. I’ve been researching the upcoming races around the country, track conditions, racing surfaces, horses, and put them all into a spreadsheet. Then I run a few Monte Carlo scenarios and pick the new members of the SSC Investment Portfolio. It has worked well so far with predicting which “investments” I should be making, so I will continue to follow it. I diverged from this method last weekend and I found that picking a horse with a funny name isn’t the best investment strategy, so I’ll keep science-ing it up. Not sure why I thought “Pajama Pancake” and “Tweedling Peanut” would pull out a win, when my spreadsheet said otherwise, but I know better now. Seriously though, I don’t know why people haven’t thought about this before, it’s pretty dang easy once you get all the variables accounted for.

 

I’m excited about keeping this train to FI rolling and get us retired a few years earlier than we’ve planned using traditional methods, and now I get why more people aren’t doing this whole FIRE thing. They’re sticking to slow methods with even slower investment return times. No wonder everyone works until they’re 60 or older, it takes that long for the stock market to work! Ain’t nobody got time for that! Certainly not this household. While the stock market keeps trying to make me some coin, I’ll be laughing all the way to the bank with my new diversification strategy!

 

Do you have a unique side hustle that outperforms the market?

Do you want a copy of my Horse Racing spreadsheet, so you too can be more diversified?

Have you realized today’s April 1st yet?

 
image from hdwallpapersnew.net

TGISB! (Thank God It’s Spring Break)

SUCK-ville! Don't worry, we were stopped. For a while...
SUCK-ville! Don’t worry, we were stopped. For a while…

These last 2 weeks have been awesome! First, Harris county was on Spring Break, and then the outlying counties have been on Spring Break! Hopefully next week some other set of schools is out on Spring Break also. Why do I care about Spring Break since neither me nor my kids are even in school? I’ll tell you, because “Traffic has been great!” (a phrase rarely uttered anywhere near Houston freeways) I’ve been getting to work in 30 minutes, traffic is flowing well, and even when it is storming outside (which normally causes HUGE delays everywhere) traffic is still moving fine.

I remember last summer when I started my new job. (Initiate dream sequence music and sparkly fade out) It was mid-June, the birds were singing and the commute was nice. Traffic flowed well, there were no major headaches to deal with twice a day. Better yet, it was almost the exact same as my last commute. Then one day, everything changed and it went from “nice” to “SUCK-ville” overnight! Clogged highways no matter which one I took. Worse, the surface streets were just as clogged and slow too! I started looking at different commute routes but it didn’t make a difference overall. Somehow my commute had increased a consistent 10-20 minutes each way. I just couldn’t figure out what changed and then someone mentioned school. Oh… school… Riiiight… Man, that makes such a big difference. I guess people take vacation time off centered around Spring Breaks, Christmas Breaks, Summer Breaks, and other school closures.

You wouldn’t think that a few schools out would make that much difference, but based on how empty my office building and parking garage has been the last few weeks, it seems everyone with kids takes off this time to do something with family. It could be that there isn‘t a vacation, but rather a forced stay at home to babysit the kid. Most people I talk to though turn that into a vacation of some sort instead of just sitting around the house. I never ran into this too much growing up because my mom was home for most of our school age. For us, it was just another week to not have to go to school, which is still awesome in and of itself!

Note the string of cars on the bridge. FYI, they're stopped too.
Note the string of cars on the bridge. FYI, they’re stopped too.

Does this do anything for me financially? No, not really? Does it help me get to FIRE quicker? Even more so, nope. However, if traffic was like this every day, I wouldn’t be in such a rush to pull the trigger as soon as financially possible. I’d be a little more content putting it off for another 6 months, or maybe even a year and build up that comfort factor and savings. Then think, “Well, if I give it a few more months I can stick it out until bonuses get here, and it’d be crazy to give up that much money only a few months away.” This situation still may happen though even with the blech commute. We might have Mrs. SSC going to part-time at her job, and since I don’t think my company offers that, I’ll probably stay full time until things get really serious. Although, I don’t have anything to lose asking for part-time, so I will definitely ask when the time gets here.

From everything I’ve read though, once people pull the trigger and retire their biggest regret is not doing it sooner. Granted, these are mostly older people, but even some of the FIRE blogs I read echo that same sentiment. I’d love to make it sooner, but there are certain thresholds that need to be crossed financially before that can happen. Until then, I enjoy working where I do, with the people I work with and am happy plugging away at our goal until we get there. In the short term though, I’m counting down the days until school is out, and I get this traffic reprieve for a few months!