Financial Tune Up

After Jeff’s ‘quick and dirty‘ post became an intriguing set of discussions around his business / investing aspirations, I hope that you are finding these exercises worthwhile following along with?

Even better, if you find an issue raised – or financial situation disclosed – that has some parallel with your life, you should feel free to weigh in with a comment, opinion and/or question … the more the merrier!

Josh is also master of brevity, but it appears that he has made a major – and, uncomfortable – change to his ‘retirement savings’ strategy: basically eliminating it entirely, in favor of a more direct / hands-on investing/saving strategy. Is he wise to forgo the tax advantages and potential employer match?

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The latest improvements made to increase my net worth faster (while maintaining the ability to access the capital before I’m 59) is to drop the 401(k) bi-weekly contribution to 0% while adding the after tax cash to my bi-weekly saving and investing/trading. It has been difficult to accept this route because I know I will be forfeiting the free employer contribution, but it’s clearly best since I plan to withdraw the funds within 7 years.  I will continue to actively trade the SDRA account, from the research I’ve done, it seems once I leave my current job, I can withdraw the vested funds with 40% going to taxes and  penalties…at least I get the bigger piece of the pie.

The current exercise of recording all monetary expenditures for the month of April has been enlightening. I clearly need to spend less money and will continue to work toward minimizing unnecessary purchases.

It is also clear I need to increase my income as soon as possible. Over the next 3 years (approximately) I’ll be studying and taking tests’ to earn membership within the CFA Institute. I hope within the next year to land a position in finance, leading to an analytical position and finally portfolio management. Or maybe I’ll just open my own private equity group, we’ll see what happens.

Quick and Dirty…

I couldn’t resist adding the photo …

But, a short post can be a sweet post, if it tells you what you need to know.

So, did it? What else can Jeff tell us and what can you tell (well, suggest to) him?

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I feel bad even calling this a “post.”  It’s so short that it hardly qualifies as a response.

The only changes I think I need to make at this point relate to my approach to long term investing.  As a reminder, I’m primarily using index based mutual funds in a variety of tax advantaged accounts (401K, Roth and Traditional IRAs, 529s).

The change I’m going to begin implementing is a move away from mutual funds and into a more concentrated portfolio of individual stocks based upon value investing principles.  To help me accomplish this move, I’m re-reading Rule #1 by Phil Town and am reading Buffetology by Mary Buffett and David Clark.

This will be a measured process of moving money.  I plan to move a portion of my money…test the results and then move greater amounts over as I see results and become more confident in the stock selection methods.  Future investments will be prioritized to non-tax deferred accounts so that I can access the funds when I deem necessary (hopefully by age 50) rather then when Uncle Sam says I can can.

By doing this I hope to do accomplish two things….

1. Grow richer quicker 

2. Access my money whenever I desire

As far as my debts are concerned, I do not intend to do anything about my mortgages other than continue to pay them monthly per the amortization schedule.  I intend to pay off my $17,500 bridge loan in May.

My other activities are in the realm of MM201 where I continue to fiddle around with increasing my income via a variety of online methods and look for opportunities to buy a business and more residential or possibly commericial real estate.

Flying on Auto Pilot…

It’s interesting, as Jeff points out, the different views that each of the 7MITs have towards so-called ‘tax-advantaged retirement accounts’ … for example, Jeff views them as ‘investing’ and almost sees his investments in real-estate as ‘distractions’ from his investing strategy … I’m not here to pass judgement on any of this: rather, I want to throw it to you for your ideas?

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I find it very interesting how different and at times how similar our approaches to personal finance are.  Sometimes, almost everyone is singing the same tune…European luxury vehicles for all my friends (well almost all us), while at other times we are on completely different pages.

Take our discussion about retirement accounts.  Some have chosen different savings methods while others have signed up for the full meal deal and drank the tax-deferred retirement account kool-aid.  I’m a kool-aid drinker.

I’ve been drinking the kool-aid since I was 23.

I can still hear my father telling me right after I graduated from Aviation Officer Candidate School, “You better start saving for retirement.”

So start I did.  And I’ve been at it ever since.

I’m not sure how to react to those who say they don’t need/want to use Uncle Sam’s tax deferred retirement accounts.  I appreciate the “damn the torpedoes, full speed ahead” approach, but I think there is a place for these types of accounts in preparing for the later stages of life.

I do not intend to imply that I have this thing squared away.  I’m part of this experiment not because I have the answers, but because I know I can do better.  My pendulum is probably too far to one side in that I may be relying too much upon my retirement account savings and the promise of a government pension.  As you’ll see below, my non-tax-deferred savings strategy is a bit…oh, let’s call it lacking.

I haven’t always saved a ton, but I’ve saved.  I am a classic buy and hold long-term investor.  I squirrel a way a little at a time, each and every pay check.  Yes, I’m one of those dollar-cost-averagers.  And lately I’ve been averaging down, which is a good thing.  My program is on auto pilot, managing my money and investments automatically, whether I remember to or not.

Let’s hit the details of how I’ve been investing and saving.

My investment and savings vehicles include two traditional and two Roth IRAs, a 401K, two 529 college savings accounts, one brokerage account for individual stocks and a money market account for my cash savings.

On a monthly basis, my wife and I set aside the following:

• 401K – $675 (no employer matching)
• Roth IRAs – $833
• 529s – $800
• Money market savings – $1350

That totals $3658 set aside each month.

The annual numbers look like:

• 401K – $8100
• Roth IRAs – $10000
• 529s – $9600
• Money market savings – $16200

That totals $43,896 set aside annually which is approximately 38% of my gross income.

It’s enlightening putting all the numbers down on a single sheet of paper (or electrons since we’re on the Internet).  Now I know why I haven’t been able to afford my own airplane.  I’ve been saving too much. 

My money is invested predominately in mutual funds in these tax deferred accounts.  I have experimented a little with individual stocks but I typically tend to lose there.  Heck, lately I’ve lost in my mutual funds as well, but who hasn’t.

For many years I went about investing completely on my own and had mediocre performance.   As much as I want to believe investing is a pastime for me, I have to admit that I’m no expert.  In 2004 I started subscribing to an investment newsletter and now follow an aggressive growth model portfolio they have put together.  My overall performance has improved dramatically but I’ve been hit pretty hard just like everyone else lately.

My portfolio is made up primarily of low cost index funds (a total stock market index, a NASDAQ 100 index, and an EAFE international index fund).  I also have a couple aggressive growth oriented funds that are actively managed (read higher fees).  These funds are the Baron Partners fund and the Meridian Growth fund.  Additionally, I have a few shares of Garmin.

The high water mark was in the fall of 2007 when my investment accounts topped $220K.  However, it’s now back down to around $125K as of Feb 09.  While that downturn of $95K is disappointing, my Net Worth has increased more than $100K since the Fall of 2007 because of my recent real estate purchase.

While real estate has kept my Net Worth moving forward.  It kicked my financial airplane off auto-pilot.  I stopped all the investing activity listed above in early January and redirected it to the money market account so I could “pad” my cash to get through the financial and life upheaval that comes with a move.  I’m antsy to get my investing back on track and will slowly start re-engaging the auto pilot as my life and finances settle into their new groove.

I have some ideas on changes I need to consider moving forward, but want to hear what you think first.

201K

Photo credit: krodinjw

Mark’s experience (50% losses in his 401k; 75% losses in his Roth IRA) prove that it’s not the 401k or the Roth IRA that is the problem, it’s what you put IN them that counts … in Mark’s case, he’s prepared to wait 20 to 30 years to cash them out … presumably, these are ‘backstops’ for him in case his plans to reach his Number don’t pan out?

As Mark asks: what can we learn from all this?

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As an employee, the 401K program is definitely one of the easiest “savings” vehicle.  It is automatic, you don’t see the money when you get the paycheck and the employer matches too.  However, it is tightly tied to the stock market;  it goes up and down over the years; depending on your investment choices.

Currently, I’ve 2 retirement accounts, 401K and Roth IRA.  I’ve been contributing to the 401K account for the last 8 years at 10% of my salary. It was bad during the first couple of years where we experience the dot com bust, good to very good the next 5 years and an almost disaster the past 1 year. It is amazing that in 1 year, you go loose so much on paper.

As of writing, the 401K is valued at $64, 600. It is down probably around 50%, just like the Dow Jones Industrial. It has a good mix of large cap, mid cap, small cap, and international mutual funds. Am I concerned about the return? Yes definitely. Am I underwater? Yes, on paper. But am I breaking sweat about it? Not really.  I don’t need the money now and it still got 20-30 years to recover before I can start withdrawing. Will it recover or produce decent returns by then? Probably. I’ll just continue what I’m doing right now since it is automatic and it is getting an employer’s match at 6% up to $750 per quarter. That is a maximum of $3,000 that I get every year.

The Roth IRA was a pet project of mine. I enrolled in an advisory service to auto trade calendar options. It was doing well for 2-3 years until the sharp reversal the past year. It is valued only at $4,200 right now, mostly in cash. There are huge losing positions in there. The losses in this account is about 75%.   Lesson learned for sure and I did learn a few things; a rather expensive education for me

What can we learn from all this?

From what I can gather, Diane has made some good decisions (e.g. pay cash for a car instead of a loan); get an MBA … but, hasn’t really been able to financially ‘cash in’ on it, and is now either looking for work – or, ‘semi retired’ – and currently drawing down from her retirement accounts. Have I got that right? If so, what could/should Diane do?

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Quick post to answer Adrian’s questions about our retirement accounts.

What I got ain’t much. My first retirement was a real retirement and when I resigned my position to become a SAHM, I withdrew its cash value and put it in an IRA, as well as withdrawing a thrift savings plan (more akin to a 401k I guess) and putting that in the IRA as well.

Since the cash value of what I withdrew was about $22k, plus $3k from the TSP, it wasn’t worth as much in cash as it is as a retirement plan. This is important because it was a federal government retirement. Leaving meant I could not get the exact same retirement plan if I went back to the government, but if I did get reinstated later (going back), I could “buy back the years” into a retirement plan by returning the cash. This would add the years I’d worked back into the years towards my retirement and it would be a retirement plan, not a 401k. Tho I know that’s changed a lot for the US Govt in the past decade.

This money later got used to buy my current vehicle because when my prior vehicle finally ran itself into the ground, we did not have headroom between income and expenses at that time (two young boys) for a car payment. It was a choice of paying off the house (mortgage) or buying the vehicle.

My last post should have revealed that the vehicle cost $28,100. We chose to leave the mortgage alone and pay cash for the vehicle because the rates between the two would be quite different (our mortgage was at a good rate, plus was tax-deductible.) That action probably saved my financial skin during the later divorce, actually, so let’s not try to second-guess it now. That did not wipe out the IRA either.

However, that was in the years 1999-2000, so we luckily ended up pulling out the money at a time when the market had run up quite a bit (remember the New Year’s toasts to QualComm?) and right before it semi-crashed in March/April 2000. I believe at one point the value of $13k went down to $9k, but because it was a divisible property, I didn’t really mind that it was less than it was (I figured it would go back up later, and it did.) I was investing in stocks at this time I think; perhaps some mutual funds.

Off to get the MBA and acquire a lot of debt – credit card and student loans. Received some cash from division of the house, paid off the living expenses (credit card debt) then went to work and started rebuilding a retirement, this time a 401k.

I worked some OT and because of the great support staff in our home office, was able to set up to have all my OT money put into the 401k and keep building it.

I invested in stocks of companies I was familiar with and was watching, then delved into some international funds – again where I knew something about the infrastructure and planning in those countries (international consulting in Supply Chain Management was the major focus of my MBA) as well as something about most of the companies/industries where the funds were placing their money.

I made about 33% in 2007, then watched one (a US cable company’s) stock tank as a result of a Jim Cramer episode (it was a good pick, but now it had the attention of those who are fad shoppers and he – not understanding their market position – downgraded it with telecommunications stocks, so speculators started selling out….or something.) I had dabbled a bit with REITs overseas, but wasn’t seeing a good return on that, and eventually limited it to a couple of stocks and Intl Mkt funds, then last summer when they dropped 17% in a week, and in preparation for my move to NC, moved everything into cash – about $66k? – and left it there. I didn’t have time to work the investments (keep up-to-date) and could not risk losing value at that time in my life.  All told, this was only for about 4 years.

Now, I am using the IRA (all is now in IRAs again) to pay off Credit Card debt, child support payments, etc. (see prior posts on what I am covering), so it is dropping rapidly and I will make a huge withdrawal soon to pay off any remaining 2008 taxes as well as prepare for 2009 taxes. Then, who knows?

All I know is that I realized last year (2007-2008) that at age 47, saving 10% of my income with a 50% match up to 8% by my company, fully-vested from day one, I was not going to be able to save enough money – even with 33% growth each year, assuming I could assume that (which we all know I can’t) – to be able to afford to retire one day.

I still have the option of returning to work for the govt, if they hire, but where I am in NC, there is not the kind of work I used to do (cost analysis/operations research) for the government, and so I would have to move again to regain that retirement.

Needless to say, I am in a state of transition…let’s not think about the names that has been called in mythology…change is always such.

Oh, there’s also some stuff in a State Teacher’s Retirement Fund – which I should transfer somewhere else – for a year’s substitute teaching I did.  Very small. — And some years (working) which took money for social security, so there may be something there for my old age.  Being at the tail end of the baby boomers, I try not to think of that as a back-up plan, you know?  Same goes for my xh’s retirement, which I may have already traded for less aggravation from those quarters, but it might exist;  just not something I am counting on.

The Fund

Josh explores 401k v Roth IRA’s …. I’m not sure of the specifics around these things, but I presume one taxes money out but not going in and the other is the opposite. I wonder if Josh can tell us which one is better?

Also, by switching to a self-directed retirement account, Josh can indulge his itchy trigger finger and trade with his retirement money. Is this a good thing? Common wisdom would shout “NO!!!!!!’ …. but, where do you stand!?

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Like many people employed privately in the United States, I have a employer supplemented 401(k). The match used to be 100% up to 8% of your salary but was recently cut to 50% match up to 8% of your salary.

When I first started at my current position I was contributing 20% pre-tax money to the retirement account, but have since  decreased the contributions to 9% and soon plan to remove it completely once the fund is fully vested in about another year. At that time I will begin contributing post tax money to a Roth IRA.  I haven’t worked through the calculations but I’m estimating a large savings once I retire and begin withdrawing the funds from the Roth tax free, instead of the 401(k).

The factors involved include large growth in fund equity, approximately a 10% early withdrawal fee,  high future taxes and a long period of withdrawal (70 years +).

The current equity in the account is around $12,000, I invested about $11,000 into one particular company this past week and expect it to increase over the next few months. Once I take profits from this trade, I’m going to explore withdrawing the funds from the 401(k) account and depositing the funds into an account which can be withdrawn tax free (due to the recent government stimulus spending, I’m anticipating high taxes in the future).

The performance of the 401(k) fund was terribly poor until I switched from mutual funds into a SDRA (self-directed retirement account), with around 50% loss at the time I switched.  I’ve made one trade since then, realizing a 10% gain. I’m expecting the company I’m in right now to do well, getting me closer to the point where I started, minus the gains I should have incurred since then. Either way,  I’ll let you know how it goes.

401K? No way!

First cab off the rank – Scott – weighs in with a barrage of reasons why he does NOT have a 401k, or the ‘doctor equivalent’ thereof …

… I can’t judge Scott badly because:

a) He has a strong saving ethic and a positive and – apparently – rapidly improving net worth, and

b) I have no 401k, either, to show for 5 years of living and working in the USA

Perhaps some of you can steer Scott down the ‘path of the retirement righteous’ better than I?

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Well the next area for each of the 7 MIT to look at when analyzing our financial health and how well we are on track to generate our required compound growth rates (and hence, reach our Number by our Date) is in the area of retirement accounts. In this exercise, we are taking a strong look at how well we’ve put money away to date in traditional retirement accounts, such as 401k’s, Roth IRA’s, etc… as well as approximately what percentage of our income do we invest in these vehicles, do we get an employer match, how has this investment performed for us thus far and whether or not we have lost money recently due to the current economy.

I must first start by saying that very gladly I have absolutely NO retirement account, never opened one, never participated one bit and don’t really plan on participating in an actual retirement account at all during this lifetime, unless I get to the point where an adviser shows me that I might get a slight tax advantage from using one, instead of ponying up a little extra of my hard earned money for Uncle Sam, instead of for my life’s purpose. I know to many of you, this probably sounds like about the most foolish statement concerning finance that you have ever heard and probably think of me as a fool. Well, a fool I am!

Back a few years ago, when the end of school was near for me and I was beginning to face a different set of challenges and ways of thinking.  Basically switching gears from thinking scientifically, clinically, drowning my mind in research and cutting through how I was going to properly assess patients and get the desired clinical results to help them with their health challenges, to thinking about things like; finance, my debt, what it was going to cost to get into practice, how to run a small business practice, etc..  Needless to say, when you’ve been thinking about nothing but anatomy, physiology, biochemistry, injuries and the like for the past bazzillion years, it’s tough to make the switch in your mind and do it right so that you can indeed be financial successful.

I think this is one of the major pitfalls that young doctors coming out of school make. Not only is it hard to switch those gears in your mind from the science of the human body, to the science of money, but you’ve been raked through the coals for so long mentally and you’ve been so financially drained and broke for so many years that I believe this is the cause for most doctors to get into the typical doctor finance situation. The situations where as they start to earn money (not to mention serious income), they go bananas, break the 20% and 25% housing rules, live waaaay above or at least the maximum of their financial means, purchase expensive toys, cars, etc…and get nowhere in the process financially speaking.

In other words, they’ve had to live on absolutely nothing for so many years, while the same age friends and peers have already joined the work force, began to make some decent money, purchased some decent houses, cars and toys and taken a vacation or 3. I believe this is the cause for the new doctor spending bonanza. I found myself starting down this road right out of school and immediately put the brakes on!!

I began talking to as many financially successful doctors as I could, read just about anything on finance I could get my hands on, subscribed to several blogs on money, take seminars and just about anything else I could do to start creating the transition in my mind. It worked. It was a hard switch to turn, but it did indeed work and the rest is history. Since that time, we’ve gone from a whopping net worth of negative 225k to a positive 152k in just a few short years, but more importantly, I can already see the wealth snowball building faster and faster for the next few years to come. I believe we’ve paved a very nice, clear Money Making 101 runway and have begun a very smooth takeoff and ascent to begin Money Making 201.

So concerning a retirement account, well, we’ve spent so much time and energy the past few years paying off debt that of course we didn’t bother to open one up. It also helped that I never had a traditional ‘corporate’ job, that was supplied with a 401k option. So it never really came up in my mind. However, as I read my way through several books, blogs, popular finance magazines and websites, the topic kept coming up over and over about how smart it was to invest the 10-15% of your paycheck into a tax-deferred retirement account, possibly get an employer match and finish like a winner with a mil or so in that account at age 65!

Somehow the thought of this didn’t sit well in my brain….I kept getting images of me at 65, in really scary looking  plaid golf pants (and I don’t even play golf. Don’t ask how I got this image in my head) a strangely unstylish looking white hat, heading over to the ATM machine to check the limited funds I had available to rent the car that we would need to drive across Yellowstone National Park for the 30th time, because we couldn’t afford to do the Fiji trip I always wanted to do. Nope, there were not enough funds in that intelligent 401k that every author told me I had to invest in, to withdraw safely without worrying about the remaining years of my retirement, anyway.

Needless to say, when I snapped out of that dream, I began to question retirements accounts and other investment tools of the poor. I would be found regularly scoffing at retirement accounts in front of friends, on blogs, to family members, etc… and be looked at like a fool. But I’m sticking to my guns here and saying that I’m passing up the retirement account.

I believe that life is short, too darn short to stick away 10% into a retirement account, earning 7-8% if you’re lucky and don’t get picked apart by fees and the myth of diversification. Not to mention the fact that you can’t touch that money for the next 100 years without being penalized, or whatever the cutoff age is now.

No thanks, I’ll make my own decision concerning my own money Uncle Sam! And even more importantly,  I’ll have a few swings for the fence and all the glory it can provide you if you connect right!

So there you have it! No retirement account in the past, present or future for Scott. My retirement account comes to the tune of about 40-50% of my net household income per month going into appreciating assets that include a mixture of real estate, small businesses and stocks, with a higher percentage of that income going to all of the above as my income increases.

Now, I guess I need to plan on thoughts for a better wardrobe for my mind in my dream retirement…..hmmm, lets see here…

Start Here

Photo credit: massdistraction

Mark is income ‘rich’ compared to what he needs to spend; now, imagine adding: wife, children, dog, college fund, bigger house (hence, bigger mortgage, bigger land tax), more food, clothes, it’s enough to make you want to stay single …. is that a dream or a financial nightmare?

Looks like we’ll have plenty of RE and finance=type issues to chew over in the coming weeks and months …

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In my last post, I discussed about creating 3 year programs in lieu of a formal MBA program. I’m now ready to venture more into real estate investing, be it in tax lien or investment properties. I did acquire a tax lien a while ago on a small condo and it is now due for redemption. It is time for me to investigate more into this particular property. I will definitely need seek legal advice on this.

I have been thinking about buying another house and convert my current townhouse into a rental. I was looking last year and did put up a few offers but none of them came through. It is a good thing since the real estate market has been declining. Looks like I might be able find better deals in the next few months. However, the area I’m in did not decline as much. It’s time to go hunting!

As you can see, I’m going to start with real estate investing first. How am I able to fund these investments?

Let’s take a look at my current financial health at NetworthIQ.

I’m fortunate enough not to have any consumer debt. I did have a car loan earlier this year but I paid it off using a HELOC which is at a lower rate. The interest is tax deductible too. HELOCs are great now since I did get a very good deal at prime minus 1. This is a very low 3.0% at the moment. Looks like I’m not likely to pay this off very soon. There is still some equity to be tapped to invest but for now, it is better not to incur more debt.

Given my current income, I do live below my means. However, all my income is tied to my current occupation. I would like to add some passive income through rentals or other ventures.

My living expenses are low relative to my income. This does not mean that I live frugally. I spend quite a lot on traveling, going out, parties and on toys. I’m looking forward for a trip to Asia next month! There is definitely a lot of cost cutting opportunities. But I should think about generating more income instead. Right now, I’m thinking about selling a lot of unused toys and items around the house on ebay.

Currently, I’m saving quite a bit. I see only less than 50% of my paycheck after taxes, deductions and retirement contribution. I think this made me spend less than what I earn since I don’t see the money to begin with. I put in 10% into my 401K, ermm 201K and 15% into the ESPP program. The 401K is not very healthy due to the current market conditions. The proceeds from the ESPP program are usually reinvested in stock investments and Roth IRA. Sometimes, I send money home (overseas) and build up my travel allowance.

What’s Going On

Diane told us all about her revised Number in this comment to my recent post:

I worked my number up again last night.

If I am getting this part of the exercise, it is to make us take a hard look at our “wanta” haves and look at see what we will say mid-stream when we get offered alternatives. Do we take Door Nr 3, or do we keep the $3M we’ve already got?

I skinnied down the list to pretty much “today” plus what I really really really REALLY want to do before I die. It shaved $3M off my number and left me with between $5.3M and $5.5M, in 5-6 years.

I also looked at the number from a passive income perspective – if it paid out 10% or 5% and then at 7%, how much would go to taxes (assuming I’m no better at avoiding those than I am now) and how much to covering those minimal things on my list.

This was to give me the picture of HOW MUCH would it take to sustain me later, given that I may be tempted at some point to throw in the towel in the face of aggravation, frustrations, and resistance by others in my life? The answer was a scary $5.3-5.5M.

Now, read on as Diane tells us what’s going on  since then …

It’s a quiet week on-line for me.  I took the plunge and after finally meeting with two of my bosses – who didn’t seem to think they wanted an employee who telecommuted – I resigned from my job as a necessary step to moving to NC.

The typical 2-week notice was (gratefully by me) allowed to shorten to give me time to get things together for the move.

The house is planned for renting to a friend, but I need to meet with a lawyer who specializes in residential real estate so that I can put a lease together that addresses not only standard terms, but also the special considerations that my friend is giving me in return for my reducing his rent – and it has to be something that we can both agree to in writing.

I am also looking at the tax and legal implications of converting the property from a personal piece of property to one that is owned by an LLC, and have talked with a property manager in the expectation that at some point I will need to have a property manager running the property for me (outside of my friend doing some of those functions for reduced rent at this point).  This is new to me – both selling and renting would be – so I am looking for legal advice.  That meeting (with the lawyer) is scheduled for next week.

Health insurance will end at the end of the month, so I have finally gotten to the doctor about my sore shoulder to see what is going on.  It’s more than advil/motrin type products can handle, and I am not sure that a massage will take care of whatever is going on.  He scheduled me for some tests/exams this week (all done now, awaiting results).

Concurrent with the move, I am relocating stuff into the garage for a EVERYTHING MUST SALE garage sale this week, and things that still need to get packed for the move to NC into the living room.  Most of the big items were moved to NC a couple of weeks ago, but I still have some large things to sell (or plan on another rental truck).

Then, the bathroom needs painting, a screen needs fixing, I need to hire carpet cleaners, pick out carpeting for the hall and a room, bring in the carpet layers to measure and install, and then the  whole place needs to be cleaned top-to-bottom!  I’m running out of time already, and most of this is scheduling, not doing it myself, but I am not quite nutso – not yet!

Lots to do, and my casual reading is two books Adrian had recommended, reviewing them while trying to locate a sample lease.  I spoke with a couple of others who deal with leases – another rental investor as well as the property manager at the last apartment complex in which I lived.  Both gave me some pointers on what kinds of terms are standard for different kinds of clientele.  I’m glad I’m not having to learn everything on this one deal, but I am getting my feet a little wet.

I did a lot of working on my numbers last week, and that revealed that I can live off my 401k and IRA AND pay off my credit card debt – up to July of next year without getting a job or other source of income.  (Note that a 10% penalty is less than a 30% drop in the 401k’s value, and that I won’t pay more income tax on the dollars from the IRA than what I would pay on any dollars I earn this or next year.  I will try to defer more withdrawals to next year as I know that this year is probably going to be higher than next year, but I do not think my rate will change that much anyway.  Perhaps now the interest on my student loan will be tax-deductible (as it was supposed to be).

By July 09, I hope to be doing other things that will push that date of being self-supporting (at least for my next investments) out, but I have lived off credit cards before and know that if push comes to shove, I can do it again.  (Note, I am not planning to do it again, I just know that I have paid them off, and I can do it again if necessary.)

I may find other temporary employment to help with cash flow as long as it allows me to have time to work on the really big things, which is the $8.5M in 6 years (first number for what I thought I minimally needed) or $5.5M in 6 years (for my number adjusted down to the true minimum needed).

I hope that momentum will pull me thru and I’ll sail on from the 5.5 to the 8.5, but I expect the first few years will be steep, hard learning curves, and it will grow more exponentially once I get more dollars to invest in me.

So, Mark, I am well on my way to NC now . . . soon, soon.  Where are you off to next?