Does Cash Make You Happier Than Income or Paying Down Debt?

happyfaceThe growing appreciation of behavioral psychology in investing is basically us admitting that we aren’t perfectly rational. When you make people automatically opt-in to 401(k) plans and make their contributions increase automatically, they save more. We value stocks more simply because we own them (“endowment effect”). We hate losing money more than we enjoy winning (“loss aversion”).

A recent research paper tells us (in my own words) that having liquid cash has a stronger correlation effect to happiness than having a bigger retirement portfolio, a higher income, or paying down your debt. This is coming from the NYT article Yes, Numbers Matter in Money Decisions, but So Do Emotions linking to the Kitces post Buying Happiness And Life Satisfaction With Greater Cash-On-Hand Reserves linking to academic paper How Your Bank Balance Buys Happiness: The Importance of “Cash on Hand” to Life Satisfaction. Here’s the abstract:

Our results suggest that having a buffer of money available in checking and savings accounts confers a sense of financial security, which in turn is associated with greater life satisfaction. The strength of this association was comparable to the effect of investments—which may themselves be liquid assets (e.g., money market accounts)—and slightly greater than the effect of debt status. By contrast, higher income and spending—the amounts going into or out of a person’s bank account—were not associated with increased financial well-being after liquid wealth was included in the model. This finding suggests that people with low liquid account balances may feel more economically distressed—and thus less satisfied with their lives—than their peers with higher balances, even if their incomes and spending, considered separately from their account balances, would predict high financial security.

Michael Kitces took the numbers from the paper and created this useful graphic:

cashlife

I dug up some more specific numbers from the paper:

To put our results into context, we found that going from having £1 to having £1,000 (a 3-log increase) in one’s bank accounts each month—not rags-to-riches, but merely rags-to-sufficiency—is associated with an average gain of 2 points (10% of a 20-point scale) in life satisfaction by virtue of feeling more secure about one’s finances. However, because liquid wealth was log transformed, further increasing liquid assets from £1,000 to £10,000 (a 1-log increase) was associated with an expected increase of just 0.7 further points on the same scale.

There are diminishing returns with accumulating cash reserves past a certain size. Going from $1 to ~$1,500 in your bank account improves your life satisfaction more than twice as much as going from ~$1,500 to ~$15,000.

This is similar to the findings that happiness increases with higher income until $60,000 to $75,000 per year. Above that level, happiness still increases but at a much lower rate.

On a certain level, this is common sense. Having a hunk of cash available for emergencies should make you feel more secure. However, in purely mathematical terms you should feel the same if you put $1,500 into your retirement account or if you paid down $1,500 of debt. Money is fungible. But your mind doesn’t necessarily agree, and perhaps it is better to work within that bias rather than fight it.

Bottom line. It may not be rational, but putting money towards a modest cash cushion can make you happier than putting every last penny towards paying down debt or your 401(k) retirement account. After a certain point this “cash is king” effect diminishes. (I might carve out an exception for 401(k) matches that effectively double your money at no risk.)

Extremes in Minimalism, Frugality, and Early Retirement

masonjaraceI enjoyed reading this NYT article When the Gospel of Minimalism Collides With Daily Life. The “Minimalist Mom” was profiled who vowed to not buy their kids anything for an entire year (2013). How does she live now?

These days, she warned, their two-story London house is far from minimalist. “Lego bricks strewn across the floor, poster paints cluttering the breakfast table, children’s drawings covering the fridge,” she said. In hindsight, she said, some of the trade-offs she made as the Minimalist Mom, like spending days looking for free toilet-training underpants for her toddler, “may not have been the best investment of my time.”

Ms. Garlick cautions those flirting with such a lifestyle change, “Chasing any ideal, whether it’s minimalism or anything else, isn’t the way forward.”

“Family life,” she added, “and actually any life probably, is at its best when it’s a bit scruffy and messy.” Being the Minimalist Mom entailed some daily mental gymnastics, she said, and required her to say no to her son about buying certain things, purely “in pursuit of a principle.” Today, she said, she feels more relaxed and happier, without the added worry of so much minimalism.

I’m sure she felt a lot of pressure to keep up with her commitment. It can be hard to keep projecting the perfect life (credit: Fowl Language)…

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Perfection is exhausting. I figure if two people cut their consumer waste by 50%, that’s the same effect on the environment as one person living as before and another person fitting all their waste into a tiny jar.

The perfect frugal early retiree. I observe this dynamic at work in the “frugal” and “early retirement” communities as well. Very quickly, an ideal forms. Small home. 15-year-old used econobox car. Better yet, bike 30 miles a day or use public transportation exclusively. At least two side hustles and your hobbies must consist of couponing, dumpster-diving, and visiting garage sales to resell on Amazon and eBay.

My goals is to not teach my children any specific ideal, but instead that the world is full of options. You don’t need to spend like everyone around you, and you don’t need to live like everyone around you.

I have to admit, I enjoy reading about extremes. You can learn a lot from people living at the extreme and it can help inspire a change within your life. The key is to not treat it like a religion (“gospel”). Pick and choose what works for you. It shouldn’t feel like you’re in a cult. Otherwise, it’s conformity all over again.

Our family does not fit into any ideal. We have not optimized our life solely based on savings rates and early retirement. We chose to have three kids (higher expenses). We chose to work half-time instead of paying for daycare (lower net income). We intentionally spend more so that we can travel (supplemented by points and miles) and are also putting some funds aside some money for future education to take advantage of time and tax-exempt 529 growth (hopefully the kids will see this and appreciate compounding returns and long-term investing).

Switch to Sprint, Get One Year of Free Cell Service (Unlimited Talk, Text, Data Plan)

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Offer appears to still be live, but may end at any time. I decided to jump on this deal. We will save several hundred dollars and we get unlimited data which we didn’t have before. Some quick notes:

  • Offer now expires 7/30. The original offer was extended by a month. If you order by 2pm EST, they will send the SIM cards that same day by UPS Next Day Air.
  • Activation was quick and easy. The activation process was done 100% online, and it took under 20 minutes to swap SIM cards and port the existing numbers over.
  • Some people have been successful switching from prepaid service, especially Verizon, AT&T, and T-Mobile Prepaid. Use the checker tool at sprint.com/1yearfree. Another tactic is to first move to T-Mobile’s cheapest prepaid $3/month plan ($10 minimum load) and then immediately port over to Sprint.
  • The total cost for two SIMs was $2.99 each + $10 flat shipping = $15.98 + sales tax.
  • To complete activation after you get the SIM cards, you will need your SIM card #, phone IMEI/MEID #, and current carrier’s account number and PIN.
  • I created a Sprint account but no bill has been generated, so I don’t know the exact monthly bill amount yet. Various online reports I’ve seen are $3 to $4 total monthly bill per line including taxes.
  • A big promo like this was smart as this was the only way I would switch to Sprint. In my area, they have the worst relative coverage and the slowest data speeds. I don’t stream a lot of 1080p video or download huge files on my phone, so the ~3 Mbps that I am getting is fine.
  • This plan also comes with Sprint Global Roaming, which includes “data up to 2G speeds and text messaging in any of our 165+ Global Roaming countries at no charge, plus calling for just $0.20 a minute.”

Original post:

Sprint has a limited-time promotion aimed at existing postpaid customers of Verizon, AT&T, and T-Mobile. Sprint will give a free year of service to new customers who switch to Sprint and sign up on sprint.com/1yearfree by 7/30/17. Your free unlimited talk, text, and data service will run until 7/31/18. There is no requirement to continue service past that. Offer is valid for 1-5 lines. For example, if you currently pay $100 a month, this promotion is worth $1,200. If you pay $150 a month now, that’s $1,800 value.

The current promotion for Sprint Unlimited is $50 1st line, $40 2nd line, and $0 for lines 3-5. That’s $90 a year for 5 lines until 6/30/18. This new offer is for a free year of service, so even at that number it’s worth $1,080.

Important requirements and fine print:

  • You must bring over a phone that is already unlocked and compatible with Sprint (so that you just need to switch SIM cards). If you have AT&T or T-Mobile you may need to call them up and ask to unlock your phone. See list below, but enter your MEID and phone number to check eligibility.
  • You must own the phone(s) you’re bringing to Sprint. (Not on a lease plan.)
  • You must still pay a small monthly fee: “standard $1.99 admin fee, $0.40 regulatory fee and other taxes and fees apply.”
  • The $30 activation fee is waived as part of this promotion. The fee will appear on your first bill and a credit will appear within 2 bills.
  • Requires a Sprint SIM card ($2.99 each + $10 shipping), paperless statements and Sprint AutoPay ($5/mo./line discount applied within two invoices). If AutoPay and eBill are removed, a $7.99/mo. charge will apply.
  • This deal is not available in any stores, you must sign up online through the special website above.
  • According to the terms, you must port-in from another postpaid carrier. Sprint requires a hard credit check on all new postpaid customers, including this offer.
  • If you keep the service past 7/31/18, you will then start to pay $60/mo. for line 1, $40/mo. for line 2 & $30/mo./line for lines 3-5.

Details about the Sprint Unlimited Plan:

  • Unlimited talk, text, and 4G LTE data subject to the following limits below. Data deprioritization applies during congestion after 23 GB.
  • Stream video at up to HD 1080p, music at up to 1.5mbps, gaming at up to 8mbps.
  • 10GB of high-speed mobile hotspot data per line. Once your 10GB is used up, continue at up to 2G speeds (32 Kbps) for no additional cost, or purchase more on-network high-speed data for $15/1GB until the monthly billing cycle resets.

The following phones are eligible:

  • Apple iPhone 5C (Verizon only)
  • Apple iPhone 5S (Verizon only)
  • Apple iPhone 6
  • Apple iPhone 6 Plus
  • Apple iPhone 6S
  • Apple iPhone 6S Plus
  • Apple iPhone 7 (Verizon only)
  • Apple iPhone 7 Plus (Verizon only)
  • Apple iPhone SE
  • Google Nexus 5 (Verizon only)
  • Google Nexus 5X
  • Google Nexus 6
  • Google Nexus 6P
  • Google Pixel
  • Google Pixel XL
  • Motorola E4
  • Motorola Z2 Play
  • Motorola G4
  • Motorola G4 Play
  • Motorola G4 Plus
  • Motorola G5 Plus
  • Motorola X Pure Edition
  • Samsung Galaxy S7 edge Special Edition
  • Samsung Galaxy S7 Special Edition
  • Samsung Galaxy S8 Special Edition
  • Samsung Galaxy S8+ Special Edition

I’m definitely tempted by free (or at least somewhat close to it). Too bad they don’t allow switching in from a prepaid carrier. I would try their online website to check eligibility, even if you are on a prepaid carrier some people are getting approval.

Jack Bogle Full Interviews with CNN and Business Insider

boglecnn2If you haven’t gotten a dose of Jack Bogle wisdom recently, check out this full Business Insider interview transcript and this 16-minute CNN video interview. There is a lot of ground covered between them. Here are my selected notes:

S&P 500 dividend income reliability. Bogle seems to support the idea of relying on S&P 500 stock dividends to supplement Social Security:

The basic idea of retirement income is, to me, to get a check, two checks every month, one from your fixed income and one from equity account. And you want them to grow over time. Social Security is a cost-of-living hedge, and in the equity account dividends grow over time.

The record of the S&P 500 dividends is almost a complete up trend with only two big declines going back into the ’20s. One would be in 1930s — ’33 or ’34 — and the other is when the banks stocks eliminated their dividends, back in 2009. Those are really the only significant declines in the dividends.

Investors make a big mistake by thinking too much of the value of the account and not enough about the monthly income they want to get. We could have a significant decline in the market with dividends unchanged.

Here’s a chart of the S&P 500 dividend history via Multpl.com:

sp500divmult

Helping investors improve their behavior. For example, 401(k) plans were not designed to be your primary retirement vehicle, and thus have a lot of flexibility built into them. However, this flexibility means a lot of people take money out of their 401(k) when they switch jobs or for loans that never get paid back. A similar thing when people chase performance:

With actively managed funds, people have big behavior problems. With funds that have done well, they put their money in, and when it has done bad, they want to take it out. The index fund always gives you the market return. It may be bad sometimes — it will be bad sometimes — but there’s just no evidence that active managers can win [long term].

Why you don’t see performance-based incentive fees for fund managers. I didn’t know about the SEC symmetrical rule:

The active managers have their work cut out for them. One thing they could do is put in an incentive fee. Get 10 basis points or five [0.10% or 0.05%], unless they beat the market. We’re paying people to beat the market when they aren’t doing it, and when you think about it, that doesn’t make sense.

They can put their expense ratio at 5 [basis points, 0.05%] and get another 1% if they beat the market by X. But they have to, under the SEC rules, be symmetrical. So if they lost to the market by 1%, they would be out of pocket. Managers, at least in this context, are not stupid. They know perfectly well they are going to lose that bet.

What happens if index funds continue to grow in popularity:

Right now I believe indexing to be about 22% to 25% of the marketplace. It’s not disturbing anything. Could it go to 50% and not disturb anything? I believe it could. All you’re doing is immobilizing X percentage of the shares in the market. The remaining 50% can trade away to their hearts’ content.

Could it handle 90%? I think it could, but we’re so far away from that, I don’t spend a lot of time thinking about it. The reality here, however, is that even if the market would reach a level of inefficiency, which everyone says then the active managers can win because then they can find underpriced stocks. [Laughs] It’s such a ridiculous argument it hardly bears refuting. The fact is, if the market is more inefficient, it would be easier for half of the managers to win and by definition easier for half of the managers to lose. Because every purchase is a sale and every sale is a purchase.

This is not a problem that I worry about very much. Markets stay relatively efficient because there continues to be big rewards for those that can figure out any small inefficiency, even for a short period of time. Those rewards aren’t going aways, so markets will stay efficient, and low costs will continue to matter.

Southwest Companion Pass: 3 Chase Credit Cards with 60k Bonus Points Each

swa_logoUpdated. Southwest Airlines offers a unique feature called the Companion Pass, which lets you pick one person to fly free with you on both paid and award flights. If you either fly 100 qualifying one-way flights or earn 110,000 Qualifying Points in a calendar year, and you’ll earn the Companion Pass for the remainder of that year plus the following full calendar year. For example, if you earned it in March 2017, you would have the benefit for the rest of 2017 and all of 2018. You can change your designated companion up to three times each calendar year.

As of March 31st, 2017, Southwest ended the ability to transfer hotel points to qualify for the Companion Pass. Therefore, I have removed a big chunk of this original post.

However, points earned from credit cards still count, including sign-up bonuses. As such, it is notable that all three Chase credit cards currently have a limited-time offer of 60,000 bonus points. Picking any two cards and qualifying for the bonus will get you there with no flying at all with an upfront cost as low as 69 + 99 = $168 in annual fees.

  • Chase Southwest Plus consumer card is offering 60,000 points after you spend $2,000 on purchases in the first 3 months. $69 annual fee applies. 3,000 points at card anniversary (and you pay another annual fee).
  • Chase Southwest Premier consumer card is offering 60,000 points after you spend $2,000 on purchases in the first 3 months. $99 annual fee applies. 6,000 points at card anniversary (and you pay another annual fee). No foreign transaction fees.
  • Chase Southwest Premier Business card offers 60,000 points after spending $3,000 on purchases in the first 3 months. $99 annual fee applies. 6,000 points at card anniversary (and you pay another annual fee). No foreign transaction fees.

Restrictions. All of these Southwest credit cards are subject to “5/24” restrictions, which means that your application will be automatically denied if you have opened 5 or more credit cards in the last 24 months (check your credit reports). Our household strategy is to have one person only apply for Chase 5/24 cards, and the other person applies for everything else. There is also this language:

This product is available if you do not have this card and have not received a new cardmember bonus for this card in the past 24 months.

Because the companion pass counts for the calendar year of qualification and the next full calendar year, you can still time things so that you have Companion Pass most of the time (assuming these credit card bonuses stay this high).

In addition, you can use all those points for free flights alongside your new Companion Pass. 110,000 Rapid Rewards points transfers roughly to $1,700 in Wanna Get Away airfare (you are still liable for taxes and fees from $5.60 one-way). If $1,700 would have theoretically covered 16 free one-way flights, then with the Companion Pass you’d be getting 16 free one-way flights for two people.

Bottom line. Right now, you can earn 120,000 Southwest points from signing up for just two credit cards with required total annual fees as low as $168. That’s enough points to automatically qualify for the Southwest Companion pass. With the 120k bonus points and Companion Pass, you’d have roughly 16 free one-way flights for two people. Not bad for $170. Explore the country!

Hyatt Credit Card – Two Free Nights Offer Changing to 40,000 Points on 6/29

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The Hyatt Credit Card is changing their sign-up bonus on 6/29/17. For now, you can get two free night awards after spending $2,000 in the first 3 months from account opening. The free nights are valid for a standard room at any Hyatt hotel worldwide with no blackout dates, no resort fees, but expire within one year of issuance. You can also get 5,000 Hyatt points after adding an authorized user and having them make a first purchase in the first 3 months from account opening. This alternate link adds a $50 statement credit but says nothing about an authorized user bonus. Take your pick.

The new offer is supposed to be 40,000 Hyatt points after spending $2,000 within your first 3 months of cardmembership. The question is then:

What is better: Two free nights at any Hyatt hotel or 40,000 Hyatt points?

The overall answer is you should apply for the current offer if you have an aspirational hotel you want to stay at within the next year or so. Here is a screenshot of their award chart:

hyattchart

As you can see, the best Hyatt hotels cost more than 20,000 Hyatt points per night, with a cash cost of $500+ per night. Some examples of these Category 6 and 7 properties:

There are about 50 hotels worldwide that at Cat 6 and Cat 7. If you don’t want to stay at one of those, then you should take the flexibility of the 40,000 Hyatt points. You don’t need to use them within a year, and you can also use Points + Cash redemptions if you want.

If you have any problems booking your award nights, I would first try using the phone and calling. If that doesn’t work, use the power of social media and contact their Gold Passport “Concierges” @hyattconcierge on Twitter.

Card highlights.

  • $75 annual fee. Not waived the first year.
  • Free Category 1-4 award night upon renewal. Upon annual fee renewal, you will also receive a free night certificate valid for Category 1-4 hotels. Category 3-4 hotels can easily run $200 to $300 per night.
  • Free Discoverist member status. Automatic as long as your card is open. This gets you minor room upgrades when available, premium internet access, and late 2pm checkout.
  • Explorist status after you spend $50,000 or more on purchases in a calendar year. Perks include guaranteed room availability up to 72 hours in advance, 4 Club lounge access awards and more.
  • 3 Bonus Points per $1 spent at all Hyatt hotels and resorts. 2 Bonus Points per $1 spent at restaurants, on airline tickets purchased directly from the airline and at car rental agencies. 1 Bonus Point per $1 spent on all other purchases made with your card.
  • No foreign transaction fees.

Restrictions. This Chase Hyatt card is not subject to “5/24” restrictions, although it will count as an opened card for other 5/24 cards. Our strategy is to have one person apply for Chase 5/24 cards, and the other person applies for everything else like these. However, there is this language:

This product is available if you do not have this card and have not received a new cardmember bonus for this card in the past 24 months.

Bottom line. I enjoy using hotel awards to stay at luxurious places where I would balk at paying the full cash cost. Nights-based awards are nice for such aspirational stays. You can get $1,000+ value out of two free unrestricted night awards. The award certificates do expire after a year though, so you might prefer to wait for a points award with additional flexibility. I might even wait for an improved limited-time offer or something. But if you’ve been waiting on this bonus, you need to make a decision soon.

Standard eBooks: High-Quality, Free, Public Domain eBooks

sebooksThe Standard eBooks Project is a new volunteer-driven, not-for-profit project that produces carefully-formatted, open-source, and free public domain ebooks. They improve upon the work of sites like Project Gutenberg and HathiTrust in the following ways:

  • Modern & consistent typography
  • Proofreading with careful corrections
  • Light modernization of language (spelling, hyphenation)
  • Additional metadata
  • Ready to download in .epub (iBooks), Kobo, and Kindle native formats.

Basically, it makes these public domain books easier to download and more pleasurable to read. The only drawback so far is that the library is somewhat limited. You can also contribute in a variety of ways, from reporting errors to proofing entire books. Found via Daring Fireball.

The .epub format works with iBooks and most other readers, so you can download directly from iPad or iPhone. If you prefer to read on an Amazon Kindle, visit the website using your built-in web browser and download the .azw3 file directly. This saves you the step of having to transfer files from your computer.

Another source of free eBooks with improved formatting is Feedbooks.

Starbucks for Outlook: Send $5 Gift Card, Get $5 Gift Card Free

sbux_cupMmm… caffeine. Here’s a new promotion with Starbucks and Microsoft Outlook that is basically a Give 1 Get 1 Free $5 Starbucks eGfit Card. Here is the promo page and the terms and conditions page.

For a limited time, when you send a $5 Starbucks eGift Card using Outlook, you’ll be eligible to get a $5 Starbucks eGift Card. Just follow the steps below to send a Starbucks eGift Card to a friend or co-worker, and we’ll send you a $5 Starbucks eGift Card within 72 hours.

Follow the directions at the bottom of the promo page for Outlook.com. If you have a Microsoft Live (remember Hotmail?) and Starbucks Rewards account, this promo is actually pretty quick. Otherwise, you’d have to sign up for those two free accounts. You don’t need a Outlook.com e-mail, just use your existing e-mail. The free gift card came instantly and I was done in under 5 minutes.

Limited to the first 45,000 eligible customers between 6/20/17 and 6/30/17. Usually if they run out of free codes, they will take down the offer page. However, if you’re interested I’d take advantage of this offer as soon as possible.

Research Affiliates Custom Portfolio Expected Returns Tool

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Investment advisory firm Research Affiliates has updated their interactive Asset Allocation tool, which now provides estimates of expected returns for more than 130 asset classes and model portfolios. There are two expected return models, “valuation-dependent” and “yield-plus-growth”. In addition, you can input your own custom asset allocation.

My initial reaction is that while the tool got new bells and whistles, it also became more confusing to navigate and harder on the eyes. Here’s a screenshot of their scatter plot showing the expected risk and return for several asset classes under their valuation-dependent model.

raf_aa1

I created a custom portfolio “CustomMMB” using my current portfolio asset allocation and it is charted below on their risk/return map. In a separate window (not shown) you can see how each individual asset class contributes to the total expected return.

raf_aa2

As you can see, my portfolio did not offer the maximum expected return for its risk level. The RA efficient model portfolio that did includes an exotic mix of asset classes, including Emerging Markets bonds (non-local currency), Bank Loans, US Private Equity, European Private Equity, and direct investments into US Commercial Real Estate (not through REITs). Unfortunately, I’m not even sure how to access many of those asset classes.

I appreciate that they freely share their research methodology and results, specifically covering the valuation perspective. US Equities have historically high valuations, but interest rates are also at historically lows. The next 10 years should be interesting…

Another portfolio analysis tool that lets you input your specific asset allocation is PortfolioCharts.com Safe Withdrawal Rate calculator. This Research Affiliates tool says my expected 10-year real return is only 2.4% (equates to a nominal expected return of 4.6%). The PortfolioCharts.com tool says the same personal asset allocation has a historical perpetual withdrawal rate of over 4% over a 40-year timeframe.

PortfolioCharts.com Safe Withdrawal Rate Tool (Updated)

eggosI just noticed that PortfolioCharts.com has updated their Withdrawal Rate Calculator. It has improved visualizations and as a personal finance geek I even found it fun. You can enter your specific asset allocation slices down to 1% and see customized results.

The Withdrawal Rates calculator shows the safe withdrawal rate for any asset allocation over a variety of retirement durations based on real-life sequence of returns. Those looking to retire early or leave money to heirs can also see the perpetual withdrawal rate that protected the original inflation-adjusted principal.

You can read about the specifics behind these improvements here. You should also read all the assumptions here. For example:

The withdrawal rate is the percentage of the original portfolio value used for one year of retirement expenses. Each year, expenses are adjusted for inflation (not for portfolio size) to maintain constant purchasing power.

Briefly, a “safe” withdrawal rate (orange) allowed a portfolio to go as low as $1 but never hit zero at the end of the timeframe. In other words, the ride could have still gotten quite hairy for a while. A “perpetual” withdrawal rate (green) never ended up less than the initial principal, even adjusted for inflation. The author Tyler recommends the perpetual WR for early retirees or for people who desire to leave an inheritance for heirs.

Here is the specific chart for my current portfolio asset allocation:

pcharts_me

I would be quite happy with being able to confidently withdraw over 4% (+ inflation adjustments) of my portfolio for the next 40 years. The short-term drawdown paths can still be scary though. The usual caveats with using backtested data also apply.

Playing around, I noticed that the simplest way to change things up was by adding a healthy chunk (~20%) of gold instead of stocks. This seemed to significantly improve the perpetual withdrawal rates in the short-term (0 to 15 years). It’s too bad I still don’t have a firm fundamental understanding of gold. If you can’t maintain faith in it when things are scary, then you shouldn’t own it in your portfolio.

A Semi-Retirement Update, Father’s Day 2017

okaydadI’ve been told that my blog isn’t personal enough. Father’s Day seemed like an appropriate time to share how our efforts towards financial freedom have altered our day-to-day lives.

Guiding principle. When I first started chasing the idea of “early retirement”, it was mostly about escaping the chains of a 9-5 corporate job for the next 40 years. These days, I am driven primarily to avoid the most common deathbed regret:

I wish I’d had the courage to live a life true to myself, not the life others expected of me.

This is beautifully phrased, as it will mean something different to everyone. You have to push away the expectations and noise coming from society, your co-workers, even your friends and family. Some people call it mindfulness or meditation, I just call it that quiet voice inside you. Another good take on this from Anthony Bourdain:

It’s a quality-of-life issue with me. Am I having fun? Am I surrounded by people I like? Are we proud of what we’re doing? Do we have anything to regret when we look in the mirror tomorrow? Those things are huge to me.

Choosing semi-retirement over daycare. Up until 2012, my wife and I were dual, full-time earners with a healthy savings rate used to steadily accumulate assets. We spent our free time eating at new restaurants, traveling, hiking, skiing, and playing with our two dogs.

When our first child arrived, we weren’t quite ready to live off our investments but we still wanted to spend a lot of time raising our kids. We decided that we would both work roughly 20 hours a week (“half-time”) and share the stay-at-home parenting duties between us. Technically, we both semi-retired at age 33. At the same time, it was nothing to brag about because many families have a single income parent and a stay-at-home parent. We just happen to split it up. Today, we continue as 50/50 parents and somehow accumulated three kids: a 6-month old, a 2-year-old, and a 4-year-old.

For a many couples, it is simply financially efficient to keep working full-time and pay for daycare. For others, both individuals want to maintain their career trajectory. Both are a valid options and we don’t pass judgment. For us, giving up essentially one full income was also a big decision. We were concerned that we would be giving up current income now and likely stall our future career growth.

Ever since growing up as kid with a dad working long hours, I made a promise to be different when I had children of my own. I never want to utter the words “I wish I spent more time with my kids”. As a direct result of our aggressive savings rate in our 20s and early 30s, we felt comfortable taking an unconventional path. We are thankful every day that we don’t have to drop off our baby at 7am, work all day, come home, and only see them for an hour before bedtime.

Snapshot of our daily lives. We are not the most frugal family, but again we try to live aligned to our values. Our home is not overly big – two girls already share a bedroom and eventually all three will share one bathroom. We cook dinner at home more often than not. We rarely eat out. Our frequent flyer points are mostly idle nowadays, but we did take our 1-year-old and 3-year-old to visit the UK and France last summer. One of the highlights was feeding free-ranging reindeer in Scotland.

reindeer

Is semi-retirement all sunshine and rainbows? Yes, we’ve never had to deal with daycare or hire a nanny. Either my wife or I have been there for every single bathtime and bedtime. One of us has been present for all the first laughs, first words, first crawls, and first steps. But we also feel physically exhausted at the end of every day. I’m definitely more worn out now than our time as DINKs (dual income, no kids).

You really start to appreciate working with adults again after wrestling with three little tyrants children under the age of 5. Yesterday, my oldest child decided to stick her finger down the youngest’s throat. Guess who got to clean up projectile vomit off a shockingly-high blast radius? I’m pretty sure the comic Fowl Language installed a hidden camera inside my house (check out the book as well):

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There is a huge difference between doing something difficult and aligned with your personal values, and doing something difficult and not aligned with your personal values. Sure, we could spend our free time doing a million other easier things. But perhaps happiness is being able to choose your hard thing and then spend your time working on it. For now, parenting young children is my hard thing. I’m not terribly good at it, but I try… This is a precious time and I want to savor it before it ends.

You may think I’m crazy. That’s okay. Remember, the point is to live a life true to yourself and ignore what other people think. Now excuse me while I clean the vomit stain off my shorts.

Amazon Dash Wand With Alexa: $20 + $20 in Amazon Credit w/ Prime

wandAmazon has another gadget, this time called the Amazon Dash Wand With Alexa. You talk to the Alexa voice assistant and do Alexa-type things like ask the weather or order stuff (though it doesn’t play music), or you can scan physical barcodes with it. If you have Amazon Prime, it costs $20 but you’ll get a $20 promotional credit when you register your Amazon Dash Wand with your Amazon Prime account. (Update: Got my $20 credit on next Amazon purchase without issue, no purchase required at all.)

You may not have (or necessarily want) an always-listening Amazon Echo, so it’s good to have a cheap alternative. In addition, this device will get you access to “Alexa-only” deals, so this would be a free and easy way to gain that capability. You also get an extended 90-day free trial of AmazonFresh (normally $14.99 per month). Imagine grocery shopping by just saying out loud what you are running low on.

Promotional credit only applies to products sold by Amazon.com or Amazon Digital Services. Here are the full promo details.