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February 21, 2014


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My husband graduated as a Computer Science and he is working now as a developer/tester now in a prestigious company. Right now we are still building our emergency fund and still planning about a small business.

are you planning to ever marry/have a family? I don't see you mention this in you planning calculations.

Instead of VTSAX, I would take a look at VASVX, unless you are set on only investing in index funds. It has a 10 yr average of 10.11 vs 7.77 for VTSAX. The expenses are higher at .43 vs .05, but the higher return more than makes up for it.

At 30, you are also fairly young. Is there a reason why you want 20% in bonds?

I think the 4% safe withdrawal rate breaks down as you expand the time horizon. If you will need the money for 50 years, I'd run some Monte Carlo type scenarios to see if that is right. Also, is the 4% based on the initial value of the portfolio? Does it go up each year for inflation? Even if the US inflation stays at a long term average of 2-3 percent, it still means that costs will double in 25-30 years. Inflation really hits hard the longer the horizon for drawing out funds.

I disagree with some of your risk assessments, but then again it is a little hazy from what you've written what your expectations are. Are you expecting to fully retire? Are you expecting to live single forever or only choose a mate who only matches your risk taking and degree of frugality? If you are like MMM, then you'd also keep several job skills sharpened like carpentry, successful blog sites, networking...things that keep you "in" in case the unforeseen should happen. MMM could go back to work without a sweat if he had a "life event". I'm not so sure he could go back to software engineering right away.

The disagreements I had with your assessment was mainly about avoiding most types of insurance. As a single person trying to make it on your own I'd highly suggest very good short and long term disability. Also singles should expect to have long term care insurance. You need good health insurance, car insurance, renter's insurance. You can try to scrimp on insurance, but if you do then you must be mentally and physicially prepared with a back-to-work plan.

Be careful about the risks of living off of economic growth. The US is spoiled to think that the past history is a good predictor of the future. When politicians already play "chicken" to the point of waiting until the very last day of defaulting then I wouldn't underestimate their spite to take us over the edge one day. Look unto other countries where default risks are a reality.

Be careful about avoiding love for a financial dream, your future self may regret that decision. You're young but one day you'll realize both the terribleness and awesomeness that life inevitably brings us.

OP here -- I really appreciate all the feedback.

@jason, @Luis - I'd never planned on having kids, but I realize that changing one's mind on such things isn't unheard of. :) Obviously I would need to rethink the financial plan (and many others) if that became a goal. I am definitely not "avoiding love for a financial dream," and would be quite sad if that were ever to happen. I didn't want to get into too much detail on my personal life, but I'm lucky to be able to say I'm quite happily in love. To your point about financial plans limiting one's choice in a mate, I agree but would argue that the reverse can also be true in that financial robustness can pre-empt some of the conflict that arises out of money stresses. I've never turned down dating someone due to having judged them insufficiently frugal; hopefully I have not put anyone off by seeming excessively cheap either. :)

@Noah - I've thought about various active strategies/funds but have avoided them so far. My reasoning is that I don't know that I'm currently qualified to confidently pick funds that I think will beat the market, nor do I feel like I want to take the time necessary to learn to do that. As for the 20% bond allocation that stems mostly from the relatively short timeline since I may start drawing down within a decade or so, so reduced volatility seems appropriate. Given the current outlook for bonds this might be unwise.

@Erik - yes, 4% is a ballpark number that may be a bit risky for an indefinite drawdown especially if, as Luis mentions, economic growth stagnates (risk 3 on my list). To be honest I'm a little stumped as to how to estimate the world's future economic growth for the next few decades, but at the same time I don't want to become too paranoid, take a very low guess and end up spending way more time focusing on making money than I end up having needed to.

@Luis - on job skills - getting out of the job market and losing marketable skills is an interesting risk that I haven't yet thought about. My gut response is that whenever I stop focusing on money I imagine I will continue to be interested in serving others in a productive and challenging way, thus maintaining skills that could produce earnings if needed, and would therefore run less risk of this happening than if I immediately quit my job and found out I loved being a couch potato. I also do have some other skills that I've made money with in the past (e.g. translation) that may come in handy if I forget how to program. The proof is in the pudding on this one. :)

@Luis - on insurance - I think I phrased this poorly, I do have great health, long-term disability, and car insurance. I must admit I'm not clear on how long-term care insurance differs from long-term disability and will read up on that. I don't have short-term disability insurance and I'm not entirely clear on why I should, given an appropriate emergency fund. I also don't have renter's insurance, and was about to argue that I don't need it, but after reading up a bit more on the liability protection benefits I agree that I probably should. What I should have said is that insurance against non-catastrophic expenses can suck a lot of money out with odds that are inherently against you because the providers of the insurance need to pay their bills. What is catastrophic obviously varies by personal situation but stuff like collision, dental, or low-deductible health insurance can often be a losing bet. I also seem to see more and more consumer products offer warranties billed as insurance that frequently appear to be simple upsell efforts without much value (on stuff like electronics, event tickets, etc).

Thanks again for everyone's input!

Hot tubs are ok but ofuros are easier to maintain without all those bubbly jets.
MMM feedback would tell you to decrease the food costs. That it's high for 1 person. Any chance you can open a sep ira and save more in that since you dont have access to 401k?

You should definitely have renter's insurance. If you lose all your belongings in a fire, that will be a catastrophic loss, believe me.

I am a bit surprised no one else mentioned your inclusion of "drugs" as an entertainment expense. At your age I guess it's quite common.
You may be better off saving that drug money.

In my experience, budgeting $25k for expenses for the rest
Of your life is unrealistic.

You may buy a home. You may get married. You may want to
travel. You may have kids. You may go back to school. You may
need to pay for health emergencies for yourself or loved ones. Life
happens whether you want it to or not, and sometimes it can be very, very expensive
And like you said, paying more for food then for housing costs is very much upside down

All of these things cost a lot of money.

It is possible to live on a very small amount of money similar to what you see on Mr. Money Mustache or similar sites but it takes an exceptional and committed type of personality to pull that off.

Maybe You are that type of person – I don't know.

What I can tell you is that I make a respectable salary and I save a significant portion of that and have for years. This put me in the fortunate position of being considered well-off or even wealthy today. The way to get there is to save like a maniac, grow your income and save
more. Investing is a great tool as well but if you don't save - there is
nothing to invest.

And once you stop working – you should consider exploring guaranteed sources of income. Things like annuities, pensions and Social Security. These guaranteed sources of income usually provide $ for your entire life time or the joint lives of you and your spouse. Relying solely on the stock market for your income is a risky bet. This is especially true if you not a millionaire or a multimillionaire.

Kudos for thinking long term. Kudos for
reading FMF. But you have a ways to go yet.
You'll get there. But be cautious. It's a rocky road.

@FMF Millionaire
On the whole I agree with your comments.

My wife and I both saved hard between 1956 and 1992 when we retired and as a result are in a far better position than we had ever hoped for, but that period was a very good one for us in terms of employment, real estate, and the financial markets with the result that in retrospect we overdid the saving in spite of living very comfortably and being able to travel all over the world once the children had moved out.

Prescription Drugs would definitely be listed if we itemized our expenses but since we are both on medicare, depending upon whether a drug is generic or still under patent our cost for a 3 month supply is either $20 or $50 so it doesn't amount to a lot of money.

For many years now we have owned only fixed income investments in the form of CDs, Corporate and Municipal bonds and a couple of mutual funds that own only income investments.

We are also still pretty healthy, my wife less so than myself, but we enjoy a very quiet, unexciting, and happy life, live in a very safe location in Silicon Valley, enjoy the moderate climate, and the primary thing we have given up since 2010 is vacationing and air travel.

I received a newsletter today from the attorney that handled our living trust and was pleased to read that for a married couple the estate tax exemption has been raised to $10.68M.

Seems like cutting drugs out of your entertainment expenses could save money as well as reduce the chances of needing expensive healthcare due to some mishap. Or unexpected legal fees due to a brush with the law if anything illegal is going on.

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