Before I get to this month’s numbers, I have a bit of budgeting heresy that I’d like to slide by you: don’t bother micro-managing your spending.
FIRE aspirants too often consider the 4% rule to be Holy Writ…graven in stone, as it were, and humped down from the mountaintop by William Bengen.1 Well, dash those tablets against a rock. After you retire you’ll often make withdrawals that on a vAalue-per-dollar basis are impossible to quantify, so you should consider reframing your thinking.
Case in point came late last month when we were already $300 over our monthly budget. My wife, an avid gardener, spent $250 on plants and supplies: blueberries and heirloom tomato seedlings and mulch and a lot of other stuff.
Marital politics aside, there are at least three ways to look at this overage:
- Gardening expenses helped push us over our $4,200 withdrawal budget. Bad, bad, bad.
- Gardening reduces our grocery budget in the long run, especially since she focuses on “bang-for-the-buck” produce that’s expensive in the grocery store. Blueberries, for instance, are something like $2.99 a pint at our nearby Publix. Good, good, good.
- My wife finds gardening to be pleasant work. Spending a couple of afternoons a week with her hands in the dirt across the course of a summer amortizes the costs of doing so to practically nothing. Awesome awesome awesome.
So I tell you all that to tell you this: I don’t budget by category. As long as we hit or come close to our monthly target of $4,200, I couldn’t care less what we spend it on. And even if we go over I don’t much care as long as the spending offset future costs. Bear this idea in mind as you consider to what degree you should micro-manage your finances.
(Note that we use Personal Capital as our financial management and retirement modeling system. It’s free, and we’ll each get a $20 Amazon gift card if you try it.)
Here’s what’s gone down since the last update.
In net worth terms we’re down roughly $114,000 since the beginning of February…which, if you’ve followed this blog for a while, you’ll know that I don’t lose a moment of sleep over. Situation = normal.
The most notable thing we did in April was this: after a bunch of due diligence I made a $10K handshake loan to a very old and highly trustworthy friend so he can hang out his own shingle in a business he’s highly competent in. The terms2 are ridiculously basic: 10% simple interest paid on each anniversary of the loan, with a quarter of the loan repayable annually after the first year. No collateral.
Which might sound like craziness at first pass, yes? But while I hate to mix business with friendship, there aren’t that many people in this world I’d write a $10K check to…and he’s definitely one of them. And the amount in question…
…is where the craziness really sets in. Frankly I don’t consider $10K to be that much money, especially not when compared to the millions I’ve given over to strangers like Warren Buffet and Jeff Bezos and so on.3 I mean, I just said that losing $114K of paper gains on stocks hasn’t cost me a single drop of sweat, so if I only recover, say, $5K of this $10K loan, I’m not terribly worried about that either. My friend’s a housing contractor and if his new business goes belly up I’ll take the balance out in trade.
But everybody gets into these things with good intentions, I guess. We’ll see how it plays out, and as always, I’ll keep up with the transparency so you’ll know exactly which parts of myself I’ve stepped on, and especially how hard.
That’s it, folks…and since it’s the first week of May already, I bid you to get away from your computer and go play outside.
- Maybe Charlton Heston should’ve played him in a biopic. I oughtta pitch that to Bill’s agent; despite Heston’s unavailability I’m sure there’s a screenplay in it somewhere, and there’s always bad CGI.
- Which of course we’re formalizing in a contract.
- Granted that stocks are equity, but when I get in bed with Bezos I’m still putting my fate in the hands of strangers.