Made another principal payment yesterday in the amount of $1,668.98. Balance is down to $35,183.28.
I also had a dental visit yesterday. The dentist I had been seeing left the practice some months ago. The new dentist has a new treatment plan. This new plan includes two crowns and prep to do implants, which I will need to have done elsewhere. My share of cost is $5,400 plus whatever the periodontist charges for the implants. So, we are talking about a large dental bill.
Background: I have ruined my teeth with vitamin C drops and cough drops by having one in my mouth constantly. I have used this method to cope with my constant persistent cough. (I switched to only sugarless cough drops with no citric acid, but the damage was already done.) In the past year, I have had 3 extractions and 8 fillings. I still need more fillings and a deep cleaning, below the gum line. Previous dentist recommended doing a little at a time, which I had been doing.
The dentist wants to begin right away. I made an appointment 2 weeks out, but may cancel. I am not certain I wish to proceed. I think I may try to find where the previous dentist went. SB said I should also consider Mexico.
Also, the extractions were all in the back of my mouth. Two on the lower left and one on the lower right. So I don't APPEAR to be missing any teeth.
I think I am going to stop my extra principal payments for now and save the money instead, until I have a plan of action for my teeth.
Archive for January, 2020
Made another principal payment yesterday in the amount of $1,668.98. Balance is down to $35,183.28.
or payment #3 since the refinance.
My automatic payment of $407.58 has posted. Additionally, I made an extra principal payment today of $4,999.42.
The new principal balance is $36,806.23. I have now paid off more than 20% of the original balance.
The last payment date has moved up to 4/3/29; that is 9 years and 3 months to go.
Ten years ago on 1/1/10, I was already happily divorced and had been living in the only house I ever bought all by myself for just over 1 year (purchased 11/30/08). My adult nephew was living with me. My son was just 14 and I shared custody of him with my ex-husband; my daughter was 19 and was already married and living in Indiana. I had been dating SB for a few months (we met in September of 2009).
Financially, I had not yet started budgeting. Oh, I kept track of my bills, paid everything on time, did not overdraft, etc. but had never had an actual written budget. I had no debt but my mortgage (it was during 2010 that I accumulated about 4k of consumer debt and realized that I needed a written budget). I had a savings account, a traditional IRA, a Simple IRA, and had contributed a total of 4k to my Roth IRA. I don't know exactly how much my retirement savings totaled, but I do know that I broke 100k for the first time in 2007, just before that big correction. It took about a year and a half to get back there, so my best guesstimate for portfolio value on 1/1/10 is 100k-125k.
I was worried about my home value as prices had fallen and I was underwater quite a bit. It felt like a huge weight on my shoulders.
I was happy at my job and was thinking I would work full-time until age 65. I had relinquished my dream of world travel when I signed away my claim to ex-husband's pension. I was not yet thinking that I could still have a nomadic retirement but in a different (more modest) way.
I was happy with my life, but I am happier now.
I have been wanting to share this spreadsheet so you can see how I am calculating my "Retire Now" numbers. I would be happy to email this spreadsheet to anyone who would like to modify it for themselves.
So at the very top, I update the current value of my various accounts ear-marked for retirement. The pension value is included because if I were to retire now, I would not be able to receive a monthly pension as I do not have at least 5 service credits. Instead, I would roll the balance to my 457 plan. Once I reach the point that I do have 5 service credits, I will no longer include this value but will instead alter my monthly portfolio withdrawal at age 62; the age at which I can begin to draw a monthly pension check.
Please note that months which have actually happened are highlighted in green; months which are not yet highlighted are in the future and thus are purely estimates.
So let's look more closely at the December 2019 line. The beginning balance is the ending balance from the month before. In this case, $359,847.64.
The additions column is the amount of new money added during the month. For December 2019, the amount of new money is $701.52.
The subtractions column is the base amount withdrawn, or starting withdrawal amount. As I am not yet retired, the amount withdrawn for December 2019 is $0.00.
The COLA column is for the annual 2% cost of living adjustment. The first COLA will happen in January of the year after I retire. As I am not retired yet, the COLA for December 2019 is $0.00.
The growth column is for the amount the portfolio has changed during the month, excluding both new money and withdrawals. Looking forward, this amount is an estimate. But as each month actually happens, the estimate is replaced with the actual. For December 2019, my portfolio grew by $7,441.16.
The ending balance column is the total portfolio value at the end of the month. The future numbers are estimates, but the past and present numbers are actual. For December 2019, the actual ending number is $367,990.32.
Now let's take a closer look at January 2020. This is the first non-actual month and thus the assumption is that I retire in January and begin taking portfolio withdrawals.
The beginning balance is the ending balance from the month before.
The additions column for January 2020 is $0.00. This is because the assumption is I have retired with no new money ever being added again.
The subtractions column shows a base withdrawal of $1,535 per month. I find this number by trial and error. I plug in a number and the spreadsheet re-calculates. I am looking for the number which gives me the lowest positive balance at age 100. I do not bother with cents. So if I were to change this base withdrawal number to $1,536, I would have a negative balance the month I turn 100. I do not want a negative number until the month after I turn 100, so I go with $1,535.
COLA column. This begins at $0 as the first increase will happen the January after I retire. So if I were to retire right now, the first COLA would occur in January 2021.
Growth column. For January 2020 and all following months, this number is calculated at 5% APR (so divided by 12 to get a monthly increase) of previous month's ending balance. While 5% is not unrealistic, it is of course not guaranteed. More importantly, even if the average annual return is exactly 5%, there will almost certainly be many months with a much higher return as well as many months with a much lower return. This is referred to as "sequence of returns" and greatly impacts what actually happens to your portfolio especially in the withdrawal phase. Unfortunately, the actual sequence of returns cannot be known ahead of time.
The ending balance is the beginning balance minus withdrawals plus estimated growth. Notice that at this point, withdrawal and growth are almost equal. However, as COLAs begin and increase, monthly withdrawals begin to outpace estimated growth and the portfolio balance decreases.
Now let's skip ahead to the time when I will turn 67, which is my Social Security full-retirement age (FRA). Currently, I am planning that I will begin to draw SS benefits the month after I reach my FRA. I will look at this decision more closely as I approach age 62 to determine what will make the most sense for me. I am estimating only $700 per month, because the assumption is I quit working at age 52. As I work longer, I will have to re-visit what is a reasonable estimate of my future SS benefits.
Notice that the month I turn 67, my total portfolio withdrawal is $1535 + $472 = $2,007 which is outpacing estimated portfolio growth by a good bit and the portfolio is decreasing. However, the month I begin receiving SS benefits I reduce my withdrawal by $700 and the monthly withdrawal is once again close to estimated monthly growth.
And finally, the month I turn 100. After that, I will have only SS benefits to live on.
I do not expect I will reach age 100, and this provides some cushion against the unknown actual portfolio performance and the all important sequence of returns.
Also, I am thinking that I will do tax preparation post retirement, full-time for 2.5 months or so each year. Working for a CPA firm would be best, but I would be OK with working for H&R Block. This also provides some cushion as I will not be entirely dependent on portfolio withdrawals.
I am thinking this would be money for travel, but if portfolio returns are low in the first several years of my retirement, it would give me the flexibility to reduce portfolio withdrawals, which would help get it back on track and extend it's life.
So, there you have it.
Let's take a look at how I did in December.
This is the money I had available for the month.
Wages - my take home pay was $0.50 more than expected.
Transfers In - higher than expected. This will happen any time there is a sinking fund expense I did not know about at the time I did my monthly budget.
Buffer - starting balance in checking on 12/1/19.
Other - I have a $200 loan out to a friend which I had expected to be paid in full in December. With my approval, only $60 was repaid; the remaining $140 is to be repaid in January. I received $37 in secret shop fees, and $0.01 of interest on checking.
This is the cash I withdraw each payday to cover groceries, gas, personal (hair cuts, meals out, anything I decide I want) and miscellaneous needs (shampoo, hygiene products, vitamins, etc.). If I have at least $20 left in a category, I reduce the next withdrawal by $20. As you can see, I was able to spend less than budgeted in both personal and miscellaneous.
These are my regular monthly bills. Very few surprises here. The phone category is both my monthly Verizon prepaid bill which is fixed at $52.75 and my mom's monthly Ting bill which is variable. Mom's bill was $17.35 this month.
Sinking funds. Deposits mostly went as planned, with the exception of a $1 deposit to open Bella's sinking fund. The bi-weekly transfers happen every other Tuesday. Because of the way the days fell in December, there were 3 transfers this month.
Withdrawals from car ins & reg include $947.26 to pay my 6 month premium due 12/4/19, and $188.64 which I had determined was in excess of what is needed (went to debt repayment).
Withdrawals from gifts/xmas included 1 birthday gift and 3 Xmas gifts.
Withdrawals from travel/vacation to cover half of the gas cost for towing our travel trailer to my mom's at Thanksgiving and my niece's at Christmas. SB pays the other half.
This section is everything not included above; some items were budgeted some items were not.
Movies - over Thanksgiving weekend, my son and daughter-in-law and SB and I went to see a movie (Knives Out). When we decided to go, I bought the tickets online with my credit card (since I paid the charge in December, this item has ended up in December's budget). I entered the wrong amount ($41.80 instead of $47.80) but I just left it that way. My daughter-in-law Zelled me the money for their 2 tickets, and SB just gave me cash for his.
Bella flowers - These are large fabric flowers which attach to her collar and look so cute. I bought them on Amazon. There are a dozen in assorted colors and are washable. This is definitely just a want!
Bella vet - a visit to the vet regarding her re-occurring ear infection. We still had the eardrops left over from when they were prescribed 2 months prior so were charged only for the office visit.
McAfee - anti-virus software for 1 year for my laptop. I bought this on Black Friday and got a great deal. (with credit card, paid for in December).
ins-6 mo - 6 month insurance premium for my CR-V (daily driver) and 5th wheel. Sinking Fund transfer paid for this.
Gifts - Xmas and birthday gifts. Sinking Fund transfer paid for this.
Playing w FIRE - a documentary I have been waiting to see, purchased on Amazon.
fuel-trailer trips - My half of the fuel to haul our travel trailer over Thanksgiving and Christmas. Sinking Fund transfer paid for this.
medical - out-of-pocket medical expense. My HCRA was depleted for 2019. I am very conservative with funding it, as any amount over $500 is forfeit at the end of the calendar year.
meal out - An unbudgeted (and quite naughty) meal out which went on my credit card. The rule is any meals out should come from my personal cash, so this should not have happened.
extra principal - extra principal to my 5th wheel loan.
Grand Total - perhaps I should re-name this. It is a net total; what is actually left in checking at the end of the month.
This area is just for me to calculate what I want to have left in checking, so I know to the penny how much I can send off to debt. I like to keep a buffer of 1k in checking. Additionally, since my pay dates vary, I need to think about what will happen before my first paycheck of the new month. My first paycheck in January will be on the 10th, but I have an automatic loan payment coming out on the 3rd. I am expecting to be repaid $140 this coming Friday, so can reduce my required balance accordingly.
As you can see from above, my target is $1267.58 but I have only $1266.79. I am short by $0.79. This shortage won't cause a problem, but I will be a bit more careful next month. I do like to hit my target to the penny.
Twice over the last few months I have had a vet bill to pay for Bella. I budget $0 for Bella's expenses. Obviously, she costs more than $0, so this has to change. However, I am loathe to increase my total sinking fund transfer.
Looking over my sinking funds and account balances, I decided to trim bi-weekly transfers as follows:
clothing - from $23.07 to $20.00
eGadgets - from $11.55 to $10.00
gifts/Xmas - from $38.46 to $28.46
hobbies - from $3.85 to $3.00
thereby freeing up $15.47 bi-weekly to set aside for Bella's expenses (excluding her food), while leaving my total bi-weekly transfer amount unchanged at $230. So we will see how this works out.
Additionally, I have decided to use the money in car replacement towards debt. Between us, we do have 4 vehicles, 1.5 of which are mine. While my daily driver is now 12 (!) years old, it has 140k ~ish on the odometer, is a Honda, and receives regular maintenance. I expect to be driving it for a good long while yet. However, I do want to beef up my car r&m fund to handle any large repairs, just in case. After the 5th wheel loan is paid in full, I can focus on saving up for my next car.
So, my plan is to transfer $1500 from car replacement into car r&m, leave $1 in car replacement, and apply the balance of $6,342.42 towards the 5th wheel loan.
My goal with the 5th wheel loan is to have the balance down to 23k by the end of 2020; paid in full by the end of 2021. I expect this last will require dipping into my emergency fund, possibly even wiping it out. I am willing to do so only if it pays the loan in full.