Motivated by a thread here on Cutting the Cord I posted an update regarding 'life after Cable'. I have been without it for 18 months now. For some reason most people call it Cutting the Cord, and in my post I referenced that it may be because you are severing a dependency on a monthly outflow.
Reflecting further, I see the cord we called Cable as a string, and we are snipping away at them. Sure, cords, strings, whatever these semantic terms mean, but the point is that it is that there are many, and it is possible to unravel them and once isolated make educated decisions on them. Each one that we can remove from our budget puts us one step closer to F.I.R.E.
The goal is always to remove or reduce the costs that can be removed (without negatively impacting your lifestyle) and saving enough to offset those costs that cannot be removed.
The ones that spring to mind that I have removed or reduced to date are:
A Full Lion Doesn't Hunt
An argument I make in the Pay Off your Mortgage Early thread is that a problem that can arise from cutting the strings is that it can make you complacent. If you don't have to make a mortgage payment each month, you don't have the same pressure to produce.
To avoid that, I think it is important to keep a firm eye on the overall strategy. You will get to a place where you have removed or reduced as much as you feel comfortable from your budget, but you will still need income to offset expenses, even the for the most frugal person. There are many ways to figure out how much is needed a common one is the Safe Withdrawal Rate (SWR) which recently has been set as 4%. The reason for that is the vogue with many personal finance 'boffs' to follow one another and appear like an expert.
The 4% rule came about from The Trinity Study which ran monte carlo simulations back in 1998 on retirement plans. Simplified, it is that if you withdraw 4% of your total savings per year it should last you throughout your retirement. The notion being that inflation adjusted investment income would top up your funds. I'm not sure that I agree with this notion of 4%, but I haven't pressure tested the numbers enough to know for sure, however I certainly would aim for a SWR of at least 4%.
How much more do I need?
Let's say I can survive on $40,000 in retirement, according to the 4% rule that would mean a nest egg of $1M. I have to say I would feel more comfortable about this $1M if I retired at 65 rather than 40..
The vastness of the amount required to retire early in relation to expenses is why I constantly talk about earning more, and why I tend to encourage people to find ways to reduce expenses only within their own parameters. I certainly enjoy some luxuries, but I make some decisions to not follow the pack either.
What strings have you cut to get you to retirement sooner?
Reflecting further, I see the cord we called Cable as a string, and we are snipping away at them. Sure, cords, strings, whatever these semantic terms mean, but the point is that it is that there are many, and it is possible to unravel them and once isolated make educated decisions on them. Each one that we can remove from our budget puts us one step closer to F.I.R.E.
The goal is always to remove or reduce the costs that can be removed (without negatively impacting your lifestyle) and saving enough to offset those costs that cannot be removed.
The ones that spring to mind that I have removed or reduced to date are:
- Travel (zero)
- Mortgage (zero)
- Cable (zero)
- CellPhone (in process)
A Full Lion Doesn't Hunt
An argument I make in the Pay Off your Mortgage Early thread is that a problem that can arise from cutting the strings is that it can make you complacent. If you don't have to make a mortgage payment each month, you don't have the same pressure to produce.
To avoid that, I think it is important to keep a firm eye on the overall strategy. You will get to a place where you have removed or reduced as much as you feel comfortable from your budget, but you will still need income to offset expenses, even the for the most frugal person. There are many ways to figure out how much is needed a common one is the Safe Withdrawal Rate (SWR) which recently has been set as 4%. The reason for that is the vogue with many personal finance 'boffs' to follow one another and appear like an expert.
The 4% rule came about from The Trinity Study which ran monte carlo simulations back in 1998 on retirement plans. Simplified, it is that if you withdraw 4% of your total savings per year it should last you throughout your retirement. The notion being that inflation adjusted investment income would top up your funds. I'm not sure that I agree with this notion of 4%, but I haven't pressure tested the numbers enough to know for sure, however I certainly would aim for a SWR of at least 4%.
How much more do I need?
Let's say I can survive on $40,000 in retirement, according to the 4% rule that would mean a nest egg of $1M. I have to say I would feel more comfortable about this $1M if I retired at 65 rather than 40..
The vastness of the amount required to retire early in relation to expenses is why I constantly talk about earning more, and why I tend to encourage people to find ways to reduce expenses only within their own parameters. I certainly enjoy some luxuries, but I make some decisions to not follow the pack either.
What strings have you cut to get you to retirement sooner?
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