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I’ve recently discovered Mr Money Mustache and have consumed all of his posts and delved headlong into the Forums. What a treasure trove!

One of the themes of his blog is The 4% Rule, which is essentially a rough guide to how much you need to retire. This little figure is based on The Trinity Study, a study to determine “safe withdrawal rates” from retirement portfolios that contain stocks and thus grow (or shrink) irregularly over time. This study defined ‘success’ as not going broke during a 30-year test period.

So if I accept that a 4% withdrawal rate won’t leave me broke in my old age, then the assumption is that I would need a portfolio of $1 Million to give me $40,000 per annum.

The interesting thing for me, is that (as MMM points out) the trinity study assumes a retiree will:

  • never earn any more money through part-time work or self-employment projects
  • never collect a single dollar from social security or any other pension plan
  • never adjust spending to account for economic reality like a huge recession
  • never substitute goods to compensate for inflation or price fluctuation
  • never collect any inheritance from the passing of parents or other family members
  • and never spend less as they age

I fully expect that we will do a bit in our retirement to keep some money trickling in; we expect to get a bit from superannuation in our old age (but when or how much is yet to be seen); and we know that we can downscale our life if circumstances require it. So, in short, the 4% rule is theoretically quite conservative.

After reading all of this, I started to feel like maybe it was possible to retire easily at 40. However being the careful person that I am, I wanted to test some assumptions by running a few scenarios. This is where some Early Retirement calculators came in very handy. You can check them out here:

I decided to base my simulations on the following set assumptions:

  • Starting portfolio $600,000
  • Property portfolio providing an income of $20,000 per annum
  • Superannuation or pension of $30,000 per annum starting when I turn 60.
  • Additional savings of $50,000 per annum until 40 (retirement age).

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Scenario 1. In the first simulation, I assumed that we continued to spend like we currently do (minus things like childcare that we would no longer use), that we would continue to rent a house in our retirement and that we make no additional income. This scenario has a 63-71% chance of success (i.e. that we don’t go broke).

Scenario 2. On the second run, I cut our living expenses by 25%. This time, we have a 95-100% chance of success. Okay, that sounds better, but we don’t really want to rent forever. We want to buy ‘The Farm’ when we retire! Let’s see what happens.

Scenario 3. Ok, so this time we bought ‘The Farm’ for $500,000 upon retirement. I reduced our expenses by the equivalent of the rent we wouldn’t pay. This scenario has a 73-81% chance of success, which is not good enough for conservative old me.

Scenario 4. What if we bring in a small income of $10,000 per annum in retirement? Well, it looks like we have 97-99% chance of success! That will do!

So what does all of this mean? Essentially I can retire easily at 40 IF we reduce our current living expenses by 25% before then. If we want to buy ‘The Farm’ then we have to be prepared to find an additional $10,000 per annum from some side hustles, which I think is more than achievable.

That was a very worthwhile exercise and I feel like we now have something concrete to work towards:

  1. Develop a budget such that we can live comfortably on 25% less than what we currently spend (not including childcare and other work-related expenses that would disappear in retirement).
  2. Identify some opportunities for side hustles that could bring in $10,000 per year.

 Photo by: Matt Shalvatis 

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 1876711558_74d4c6bd29Photo by: random letters

It had been many years since I last went camping, but in the last few months I have been aching for more time in the mountains surrounded by trees. Living on the coast in Southern California makes it difficult to get my dose of green, so I’ve been pestering hubby for weeks to take me camping. Finally we made the time to go the other weekend. We packed up all our stuff, put the dog in the back and headed off to the mountains for a couple of days hiking. Even though I knew I wanted to love camping, I wasn’t really sure how I was going to like it. Thankfully I loved every minute of it and I think there were a couple of important lessons that could be integrated back into my everyday life:

  • Making do with what we we have. While camping, we only have limited amounts of food and water. Being happy eating from our limited stores is a good mental skill to have.
  • Enjoying the simple things. Building a fire, practicing on the slackline or making a coffee over the camp stove can all be lessons in living in the moment and enjoying the simple things.
  • Remaining flexible. On our first day of hiking, our dog was not well. After one and a half hour hours of hiking the Pacific Crest Trail she simply stopped and would not get up again. Hubby had to put her over his shoulders (all 62 pounds or 28kg) and carried her out. Thankfully we weren’t too far from a road, so I sat with her in the shade while hubby went back for the car. Our day of hiking was somewhat ruined, but conducting a medical evacuation for our dog was a good lesson in remaining flexible to changing conditions.

Since getting back to our everyday life, I’ve been dreaming of heading back to the mountains. Unfortunately we don’t have any weekends free at the moment, but later this month we plan to spend a week in Colorado, South Dakota and Wyoming…camping all the way. I can’t wait.

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Since Hubby and I are home for the entire month and not traveling anywhere, I’ve decided to get involved with a monthly challenge over at Crunchy Chicken. The challenge this month is to reduce the amount of food waste in our household. 

We don’t deliberately waste food and we always make an effort to turn food which is on its way out into something edible. Inevitably though, we forget some feta cheese in the back of the fridge or find some old rubbery celery in the crisper weeks after it resembled anything edible. Thankfully we have a dog who eats almost anything so most of our waste isn’t going into landfill and once we have our compost system up and running, we’ll eliminate any food going to landfill at all. That’s not really the point though, wasted food is still a waste of money and a waste of energy. A lot of energy has gone into the growing and transporting of our food and throwing it out just means our environmental impact is higher than it needs to be.  

Ok, so what will we be doing this month? It’s pretty simple. Our goal is to try to reduce the amount of food we throw out, feed to the dog or put into the compost. We’ll keep track of the food that we have and make sure that it gets eaten or preserved before it goes bad and needs to be disposed. It will take a little planning, some organization and the willingness to be creative, but I’m sure we are up for it. 

Our first job yesterday was to go through the fridge and cupboards to see what’s getting close to its expiry date or is starting to go off. Here’s what I threw out:

  • Two bottles of salad dressing
  • A tube of sundried tomato paste
  • Two packets of Starbucks coffee (Didn’t even know I had them)
  • Half a bottle of very old Coca-Cola (from a party last June)
  • Quarter of a bottle of Powerade (from our trip back from Central America a month ago!)
  • Half a bunch of baby spinach 
  • Baby potatoes gone to seed
  • Dried apricots
  • A whole collection of interesting things given to us by friends as they left (pickled onions, jello, gravy mix, food collouring etc)

Here’s what’s close to expiring and which we’ll need to eat up soon:

  • Two boxes of cereal and oats
  • Gravox
  • Bread crumbs
  • Custard powder
  • Feta cheese
  • Tinned fruit
  • Long-life milk
  • Green Apples

I’m amazed at how much stuff I had to throw away. It was really quite painful, but I think it was a very necessary step to start the month with a clean slate. Now we just need to come up with some recipes to use up what’s soon to go off and then be more mindful of what we buy and eat for the rest of the month.

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In yesterday’s post I listed Sustainability Changes That Save Money which we have managed to successfully include in our life. Today I need to admit that there are many, mnay things that we need to improve upon.

  • Barter and trade with neighbors and friends.

[D] I’ve thought about it…does that count? Yesterday, Hubby and I were actually brainstorming some ways we could do some of this inthe near future.

  • Utilize Freecycle, Craigs List, and other local free exchanges.

[C] We use these where possible. It’s only been a recent pledge to buy pre-loved instead of new, so the habits are not yet ingrained.

  • Shop at thrift stores and garage sales, and arrange clothing swaps with friends and family.

[C] I swap clothes with family and have shopped at thrifts stores in the past, but it isn’t a big part of my life now. I think I’m 90% ready to say no to new clothes for the remainder of this year. I’ll get there soon, I’m sure.

  • Buy in bulk: buy from bulk bins at your local market, buy large quantities of staples via special order from your local market or online, buy a whole case which generally comes with a case discount, and buy large packages of food you use regularly. If buying in bulk leaves you with too much food, go in on the purchase with a friend or set up a community buying club.

[C] We buy bulk sugar, flour, beans and oats from Costco as well as canned goods. Honesly I think there is more that we could be doing in this area, and we plan to explore it further this year.

  • Buy fruit and vegetable seconds and day old bakery items.  

[D] We don’t go out of our way to do this.

  • Pick your own produce at a local farm.

[C] Where possible we buy at the local Farmer’s Market, however we need to embrace this more

  • Grow your own food.

[D] We have straw bales to start our own Straw Bale vegetable garden, but at the moment they are just growing grass.

  • Learn to preserve food by canning, drying, root cellaring, freezing, and pickling.  

[C] So far I’ve tried tomato relish and orange marmalade. I intend to experiment more when we have extra food in our own garden.

  • Make your own cleaning and body products from simple and cheap ingredients like vinegar, baking soda/bicarb, hydrogen peroxide, corn starch, cooking oil, lemon juice, and water.  

[D] We’ve used vinegar for cleaning, but haven’t tried any of these other remedies yet.

  • Unplug or turn off power switches to appliances when not in use, to save electricity.

[C]We turn off lights and appliances if they aren’t in use, but we really need to get power boards so that our appliances aren’t inadvertently sucking electricity.

  • Reduce shower times, bathe less often, and use bath water to water outdoor plants and flush toilets.

[C] We are concious of reducing the water we use, but haven’t yet started to monitor our actual usage.

  • Use coupons.  I recently bought a book of coupons for local shopping.  

[D] Not something we’ve even looked at yet.

I guess this is now a good opportunity to start working on bringing more of these elements into our lives.

Photo by: bitzcelt

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I recently came across this great list of 25 Sustainability Changes That Save Money over at Simple | Green | Frugal Co-op. Here are the changes I seem to have done well at implementing into my life.

  • Take advantage of your local library for books, music, and videos.

[A] I get about 90% of my books from the library.

  • Walk or bike, use public transportation, carpool with neighbors and co-workers, and consolidate any car errands to one or two days per week.

[A] We ride to work and to most places in our local community, walk to the grocery store and usually take the car out a maximum of twice during the week.

  • Think about getting rid of your car to save money on insurance, maintenance, and gas.

[B] We’ve downshifted from two cars to one.

  • Use a clothesline instead of the dryer.

[A] We’ve rigged up a line in our back courtyard and line-dry all our washing.

  • Replace paper towels & napkins with cloth.  

[B] Mostly we use cloth for wiping spills and drying dishes, but I admit we still use paper towel on occasion.

  • Make your own lunches for school and work.

[A] I always take lunch from home. I even said no to lunch with work colleagues yesterday.

  • Stop buying snacks and take-out food, and instead cook at home.  

[A]I can’t even remember the last time we had take-out. We eat at home nearly every night now and Hubby is even baking our own snacks. Mmmm…carrot cake.

  • Plan your menus.  If you plan your menus for the week, you will use all of the food you’ve purchased, you’ll be able to shop just once a week, you can make sure to utilize seasonal items, and you can save time and stress by not having to worry about “what’s for dinner.”

[B] We plan a weekly menu, shop once per week and use all of our food. However, at the moment we don’t consider what is seasonal. We need to become more mindful.

  • Recycle and compost as much as possible to reduce trash collection fees.

[B] We recycle everything we can, however I’d really like to start composting as well.

  • Mend and repair.  

[B] Hubby is a genius when it comes to fixing things. When he puts his mind to it, there’s almost nothing he can’t bring back to life.

  • As they burn out, replace incandescent bulbs with CFLs.  They cost more initially, but they will save significant amounts of electricity and will last many times longer than an incandescent bulb.

[A] All of the lights that are used with regularity now have CFLs.

  • Turn off the television, get rid of your cable bill, and take up reading, knitting, and walking more regularly.

[B] We don’t have cable, we limit out TV viewing to a few shows per week and have been reading more in the evenings. We are a little addicted to Netflix, although we do watch a lot of documentaries.

I’m quite happy that we are doing well on much of the list.  I can honestly say that we’re doing much better that we would have been two years ago, but tomorrow I’ll look at those items we really need to improve upon.

Photo by: Erica Marshall

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The future of radio

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I love listening to music. When I’m in a particular mood, finding just the right song makes me feel like I have my very own soundtrack to my life. Unfortunately, I have great difficulty finding music I love. I have very different tastes to the rest of my friends so just coming across a song I love is not common. 
Imagine my delight when I discovered Pandora Radio. Pandora lets you type in a song or artist you like and instantly find other music that might fit your taste. Usually it is spot on and once you’ve customised it a little, you’ll probably find you love every song it suggests. And now for the best part…it’s FREE! 

When you create a radio station on Pandora, it uses a pretty radical approach to delivering your personalized selections: Having analyzed the musical structures present in the songs you like, it plays other songs that possess similar musical traits. Pandora relies on a Music Genome that consists of 400 musical attributes covering the qualities of melody, harmony, rhythm, form, composition and lyrics.  ~ How Stuff Works

Last night I entered Fragma into Pandora and happily danced away to some funky beats for a few hours. Yes, I’m one of those people who loves turning up the music and dancing like no-one is watching. My husband just shakes his head.

Photo by: bricolage

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In September I am flying home to Australia for my sisters wedding. I had planned to book my flights in about April, but this morning I found out about a sale on Qantas flights from the US to Australia. I managed to get two return flights from LA to Brisbane for $799 each! That’s less than half the price they usually are. I love getting a bargain in the morning.

If anyone else is interested in cheap flights to Australia, this sale ends tomorrow 13 Jan 09.

[UPDATE: Good news. The sale has been extended to 26 Jan 09. That’s Australia Day!]

Photo by: pbo31

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