Two year FIRE-Anniversary, unexpected expenses, withdrawal agonies, gratitude, regrets and other observations!
A few days ago, I realized my two year FIRE anniversary was coming up. We were renting a parking spot near Seattle for the RV from a couple we met through the FIRE community. I had just come back from another trip to Germany, where I went to help my parents out, because my mum had to have one more surgery. TDA stayed back to look after the cats, while I was gone, which is why we decided to rent a spot near a larger city for me to fly out of, instead of having him wait it out somewhere remote.
Two Year FIRE-Anniversary
The day after my return, we were chatting with our hosts about their FIRE plans, when I realized that my two year anniversary was going to be the next day. I actually even got the days wrong, because you don’t pay so much attention which day it is anymore, once you are FIREd, unless you have to catch a flight of course. We celebrated my anniversary cooking Kaesespaetzle (the German version of Mac and Cheese) from scratch with our hosts and their kiddos, while discussing FIREd life and FIRE dreams. Fun times. So much fun, that I totally forgot to take a picture of our food for the blog. Kaesespaetzle are amazing! They are gooey good soul food and they taste heavenly when they are made from scratch with the right cheese (Emmental and Gruyere, none of that yucky processed stuff that comes in an orange block) and topped with caramelized onions. The Mac and Cheese reference really doesn’t do that dish any justice at all.
It’s hard to believe that year two is over already! That milestone totally snuck up on me this time. We spent big parts of it involuntarily stationary due to two larger repairs on the RV, which got us stuck 17 days in California in May and another 17 days in Oregon in June. Those two repairs (transmission and emergency brake with speed sensor) plus a few minor repairs and a couple of new tires in the earlier months of this year, set us back a good $7000 YTD and that’s not counting the $1000 we spent on towing, ouch! Luckily we managed to save a pretty penny by getting refurbished parts. We even bought the ebrake on Ebay and used Ebay gift cards at Fred Meyer paying with our Amex Blue Cash preferred card to hack extra fuel points.
When we decided to buy an older RV we were fully aware that we’d have some repair cost further down the line. We did hire a local RV mechanic to do a thorough inspection of the RV before purchasing, in hopes to avoid anything major, like said transmission, but obviously shit still can happen despite all the best efforts. We have an emergency fund, so the small repairs that added up in the course of this year, like the new water pump, toilet, faucet, tires etc. usually don’t faze us, especially as we could repair all of those ourselves. However adding in that transmission plus shortly after also the ebrake and speed sensor and the labor to get these fixed, sure did sting a bit.
In the grand scheme of things, everything is still fine though. Unexpected expenses are what emergency funds are for, right?
Once all those items were taken care of, I looked into replenishing the efund. It was time to look at rebalancing the portfolio anyways. I hadn’t touched my investments since getting into my target asset allocation, right before I quit my job. I had a healthy cash cushion to cover the first couple of years and thankfully things did not look too far out of my target allocation after year one.
When I started out I had a full year of living expenses plus a small efund in my bank account and the rest of the cash in Vanguard VMMXX in my investment account.
My plan was to always have 3 years worth of expenses in easily accessible cash equivalents, mostly in VMMXX and CDs, between those two accounts. My planned SWR is 3-3.5%. That sounds like a lot of cash, but remember, we designed our lifestyle to be pretty affordable, by not having a fixed residence, so three years worth of expenses in our case is not all that much after all.
Unlike most FIRE bloggers out there. I don’t have any side hustle or other money coming in, so I fully rely on the portfolio to live off of. The peanuts I make from my two blogs get donated right away and the amounts are so small, they would not make any difference either way.
So there really is no incoming cash flow other than dividends from my Vanguard Index funds and two individual stocks that I still hold. Those dividends hit the VMMXX and will be used first to cover living expenses.
Once these funds are used up, the idea was to sell a little at a time to maintain the 3x expenses plus efund buffer, while rebalancing the portfolio.
Great plan, right?!
I mean with a planned withdrawal rate of 3-3.5% and a slightly above 2 % return between dividend and interest, all you have to do is sell 1-1.5% of the portfolio to make up the missing amount.
After the first year of FIRE, I was right at my planned WR of slightly over 3% but still below 3.5%, using the money in the bank account. I did not feel the need to rebalance, as I was still very close to the target allocation.
But now, a couple of months shy of my two year FIRE anniversary and with the efund completely depleted, for the first time I actually had to replenish my cash buffer from the investment account over to the regular checking account AND
at the same time I had to rebalance from stocks to replenish the cash equivalents in the investment accounts.
It’s really straight forward, that’s what planning, asset allocation,withdrawal strategies etc. are for. The funds are there, it’s REALLY NO BIG DEAL! Two clicks, done deal, right?
But boy was it a tough mental hurdle to get over.
Maybe that’s just me, but it took me logging in and staring at Vanguard three different times, before I finally moved some money out of VMMXX into the bank account for the next few months of expenses. I expected going from net saver to net spender being hard. But seriously, that was RIDICULOUS!
Then it took me another three to four times to see which part of the stock allocation to rebalance out of and replenish VMMXX then from there buy CD’s for some of that cash allocation.
Trigger capital gains, yes or no? Sell the individual stocks first, like Jim Collins suggests even if it means paying a fee. Ex dividend date, relevant or not!? I didn’t want to sell anything at all! But also, I don’t have any other income and this is what the portfolio is for!
I was telling myself, it’s really only such a “small” amount, because the dividends replenish some of the money already, so what you have to SELL on top of that is really not all that much. Also the market has been up since I FIREd in 2016, so really this is a non-issue.
But finally hitting that stupid SELL button is another story! It honestly took me like three or four attempts to actually do that.
Eventually I got there. I am now back up at 3 years in cash equivalents plus small efund between bank account and investment account, some of it in CD’s as they yield more than VMMXX now, but I really feel it has been more painful than it should have been. If it’s this hard in the good times, when the market has been up two years in a row, I really don’t want to know how it must feel after a strong correction or a crash. I hope I won’t get to experience that too soon either.
Either way, I am hopeful this will get better over the years. I remember reading a series of withdrawal strategy posts during my first year of FIRE and getting so frustrated, because everybody essentially said that their blog/side hustle/spouse’s income or other kind of source largely eliminated the need to withdraw anything at all or allowed them to withdraw very little. None of those posts was helpful to me one bit. Quite the opposite, they made me feel, inadequate, frustrated and sometimes even anxious. A big part of my first year was spent thinking about possible jobs, researching side hustles and looking for opportunities.
This is the reason, which I am sharing this withdrawal agony in such detail. I really hope it helps someone out there, who is also just relying on their stash to do the heavy lifting.
I don’t know of many people who just rely on the portfolio. It seems everyone nowadays has a side hustle or blog or real estate or other gig that provides some cash flow. I am sure this eases some anxiety for them and makes the transition into fired life easier.
It certainly has been an adjustment for me to not see anything at all coming in other than dividends and interest.
I do realize, I could just have the dividends deposited in the bank account, so it feels like a paycheck (TDA does this), but I feel, I get a bit more for keeping them in VMMXX or CD’s until I need them.
I know, those were a lot of words to describe what should be a non-issue. Laugh at me all you want, I agree this has been ridiculous, but I still thought sharing some of my FIRE SWR realities may be helpful to someone out there. It certainly would have been for me, one year ago.
To make a very long story short: things are still fine. The cats are the only ones eating cat food and a good quality one at that. TDA and I are not starving, quite the opposite, I still could afford to lose more than only a few pounds.
As I said in my one year anniversary post “Things don’t just happen in FIRE unless you make them happen”. Still very true, truer than ever. There are countless things I want to make more progress on and I keep adding to the list on a daily basis. I really don’t know why people think early retirees would be bored or would not know what to do with themselves. My life certainly is slower paced now, but I also have more things I want to do than I have time for, even without a job getting in the way.
Another observation I made in the past months is intense waves of gratitude moving through me on a regular basis. Things are not always easy. Several of my family members in Germany have some serious health challenges. Being in a position to just pack up and go there to help out, is still priceless, like I wrote in my first year anniversary post. Generally speaking being the master of my own time is definitely one of the biggest advantages of FIRE. Even if it means a leaner FIRE than originally planned, having this time NOW, truly truly fills me with gratitude on a daily basis. Nobody and nothing can take those two years away from me anymore. I look at my kitties and at TDA and could not be happier. As goofy as it sounds, I tell TDA and the kitties every day, how happy I am to have them in my life and how grateful I am, I get to spend this time with them.
I still do feel guilty once in a while about volunteering less than initially planned and donating less that I’d like to. I am also still looking for ways to make up for this some more. But I don’t stress over it as much as I used to anymore. I have researched many hustle ideas, including blogging in a more professional way, which would mean starting over with a new more targeted blog, with an editorial calendar, potentially pushing products I don’t believe in, just to get some affiliate income. I theoretically know what I’d need to do, but I really don’t want this to become a “job”. So yes, there are some regrets and I’d still like to find a way to make more money to donate to even more causes, but not at any cost. I figure eventually an opportunity will come along, that will fit into my lifestyle and that will allow me to do just that. Until then, I am not willing to compromise my values or sacrifice time for work I don’t feel like doing.
Beyond a certain point, FIRE is certainly not about money anymore, but about designing and leading the best possible life in your own definition of “best”. Getting there still takes adjustments in FIRE, but the process of figuring this out is a big part of the fun.