Current net worth: 49 years worth of expenses. Annual withdrawal rate: 2.1%
As promised in the last update something significant happened. We decided to sell our car (why pay for something that’s parked most of the time?) but more about that later. First some service announcements:
Once again, we need to remember that in terms of retirement, there’s a difference between having the financial independence to “not have to work” and the more nitpickery “having to not work” which seems to be popular on certain internet discussion boards. I suppose diligently avoiding work serves to prove a point—maybe much like some cultures grow their fingernails long enough to render their hands practically useless—but I also think that self-imposed definition is way to restrictive for someone with enough money to do what they want. The point with ERE is to increase opportunities (as pointed out in chapter 1 of the ERE book). I’m not sure what their point is. Anyway …
Next, the health insurance issue keeps coming up. The system in the US is confusing at best (I’m lucky to be married to someone who used to work in a doctor’s office). Many, therefore, take a reactive approach and pick whatever insurance policy is offered to them instead of searching out what is most cost effective for them. They in turn advice their friends and so on. Consequently many believe that the only way to affordable health insurance is through either tax-subsidized corporations (which until today was true for those with serious preexisting conditions) or extremely expensive plans (even for healthy persons) at over $1000 per month. This belief even leads to structural unemployment in the sense that people are afraid to engage in entrepreneurial activities because they don’t know how to get affordable health insurance on the free market. It also keeps people in jobs they’d rather not be in just to collect “bennies”. This, in turn, keeps other people unemployed.
I’ve already detailed how to go about it several times before (see links in Frequently Asked Questions). It’s very easy so I just repeated the exercise.
For a 36 year old non-smoking male in Chicago (that is me), the cost is $85/month.
Repeating the exercise for a 62 year old non-smoking male in Chicago (future me), it’s possible to get a plan with 0% co-insurance and a $7500 deductible for $341/month or $4092/year.
This is quite a bit less than the rather frightening $15000/year number that people usually throw around. I highly recommend spending some time understanding how things like coinsurance, maximum deductibles, copay, and premiums work.
I often (and still) get asked for investment advice. The problem with investing, like with exercising, that individual skills and desires vary widely from person to person. It is therefore very hard to say anything at all about investing to a general audience. For example, while everybody here is onboard with the simple living, DIY, survival, permaculture, bohemian, capitalist mixture generally espoused here, people span the whole spectrum when it comes to investing. From couch potato-equivalent to Usain Bolt.
Consequentially, whenever I’ve said something on this blog about investing, which I didn’t do very often, there was always someone who disagreed, some who were confused, and a few who acted as if their personal religion was just insulted. There’s simply no one size fits all when it comes to investing. If you have questions about investing, I suggest reading the relevant books, blogs, or forums for the particular kind of investing that interests you. If you want to hear what people who are deeply concerned about making their money last for 50+ years think about it, it’s better to answer questions on an individual basis in the forums. Also, in the forum, it’s much more likely to get an answer from someone on the same page/skill/temperament.
As I pointed out in the ERE book, there’s no particular condition on your investment style other than the requirement of a 3% real return (or less if you’re willing to save substantially more, for example, I only require 2.1% on my savings) — something that has been possible to achieve with a fairly conservative allocation for thousands of years throughout human history (see A History of Interest Rates by Sidney Homer). How you structure that investment is up to you.
End of service announcements.
Yeah, so we finally got rid of the car. I figured that would be sufficiently significant to warrant an update. Living in Chicago there’s simply very little reason to own a car (it’s mostly just a hassle to park the damn thing if you go anywhere anyway) and thus it made no sense to keep it. Aside from saving the insurance money, the health benefits down the line from more walking will probably be worth a lot more in the long run. We sold it privately through craigslist which is actually pretty easy. The ad ran for two weeks. We had five interested people and the first one who showed up bought it.
In terms of home production, I’ve started making wines. Consumers might only be familiar with a couple of different wines: red and white because that’s all that’s available for buying. However, it’s possible to ferment practically anything with sugar in it. I’ve made apple, potato, chai (yes, you read that right), and orange wine. I also have some pyment (mead with grapes) bubbling. It’s amazingly easy (easier than beer). Only soda is easier. Oh yeah, we also make that. It’s possible to make one gallon of wine for about $4 (less than a buck a bottle) adjusted to whatever level of dryness/sweetness, strength, body, etc. one desires much like it’s possible to bake your own bread to whatever consistency you prefer (lots of interesting experimenting here).
In fact I think this household is turning into a Borsodi style household. DW has figured out how to sew dress shirts (MIL is impressed). I have built a book shelf ($8 worth of pine joined with 24 hidden tenons) and currently I’m making bird houses (beveled angles with frame and panel construction) for presents (using license plates—guess where they came from—for the roof). I’ll see if I can get some pictures of my contraptions on the ERE facebook page.
Ultimately we might get self-sufficient to a level where all we pay is RE taxes(*) and health insurance. With a proper setup it is almost always easier and faster to either be able to quickly build something on the spot (e.g. a window screen) for practically nothing instead of racing down to Home Depot and paying for it—alternatively spending time to build something that’s so good (e.g. bookshelf) that it doesn’t have to be replaced. (See Captain Vimes’ boots theory.) In that regard, it’s sad that we lost our container garden moving into an apartment (that gets no sun). It was so damn convenient picking up lettuce outside the front door. Now we have to walk for 20 minutes and PAY for it. Terrible indeed.
(*) Given that housing is so cheap in Chicago, it’s seriously tempting to buy a house. If anyone local is willing to guide/mentor us in the home buying process, let us know.
