2015 was quite a money ride. Some of the progress toward financial freedom made following my own frugal living tips (outlined in this post "Can I make it on $3k per month?" got tossed overboard.
Cushion the Body Blow with Frugal Living
I can recover because my frugal living ways helped me saved. That and the personal finance software addiction and fascination with minimalism and aggressive downsizing.
But my pride and confidence hit the surf and it felt like I slammed into concrete. Worse, it may have derailed complete financial freedom by a year or more.
And some of it I could have avoided by listening to those much wiser than myself.
Surfing Lessons From the Sages
1. Retirement really is a psychological journey and you might want to prepare for that.
The first time I retired was about 15 months ago.
As the retirement sages on www.earlyretirement.org said might happen, I experienced a sudden depression.
I wasn’t ready psychologically or emotionally, which affected how I dealt with the other surprises to come (i.e., not great).
Just like every one said -- a great deal of your self perception can be tied to your work identity and title.
In the past party talk - "So, what do you do?"
My answer - "Oh, I am a marketer and public relations professional."
Notice - I didn't say what I do. I said "this is who I am."
It took about a year to adjust. Therapy helped. So did part-time work and volunteering for professional associations.
There are plenty of resources on the web about transitioning to a new life phase, even AARP has a coaching service available.
2. Sound financial planning is not an exact science.
I asked all the wise ones on the early retirement forums for advice as to "don't I have enough to pull the plug on this job?"
The answer wasn't as positive as I expected. As much as I had saved, they still said, "you need more of a safety cushion, nobody gets this stuff right on the money. Hold on! Give yourself a 5-10% margin of error."
But I hated the idea of holding on another year.
- There was $350K in 401Ks plus $65K in cash,
- Two guaranteed pensions starting in two years that would provide $24K per year.
- That was before social security.
- Monthly spending was down to $3500 (plus or minus 5%).
- The corporate situation was brutal.
So I took the leap anyway.
Looking back? It was the right thing to do for my health. But the sages were right too, I needed a 20% cushion and only had 5% planned.
3. Don't Forget 20% Taxes on 401K withdrawals
401K withdrawals I made for that month almost triggered a big taxable event.
No matter what your tax bracket was last year or might be that year.
My rent was cheaper than owning a home, right? It was. Then it wasn't.
And the 1 year and 2 year renewal rates? They were still higher than I had ever paid and more than fit into the budget. (WTF?)
And mortgages are smart financial vehicles for building wealth right? They are if you qualify for one...
How can you pay something you didn't even know existed?
Would it trigger a 45% tax bill to pull out the $100K chunk all at once? Yes. Which would drown me financially.
If you plan on buying a home anytime soon, follow that advice about checking your credit scores with all three companies. If I had done that earlier, I might have had enough time to straighten out the hospital’s mistake before I was stuck in a situation that forced my interest rate up to 4.65% in a 3.35% market.
- Your US Congressman's office.
- Your state’s attorney general’s office consumer affairs department.
- Repeated calls to the hospital's billing department.
Even mortage lenders you would think are perfectly legit, like Capitol One 360.
Ask your title company if they've had any issues with local lenders.
Supposedly it protects local branches from making bad loans. That's the crap line that they spin. Really, it's corporate america's way to stay arms length distance from a customers they are going to screw over.
I went to the Fair Housing Authority to complain about this one and claimed sex discrimination. Capitol One had loaned money to a couple, but not to a single woman.
I get no commission for this, but readers please bless David Allello at Assurance Financial -- the mortgage broker who pulled me out of the water on this one.
So many people got screwed on this one that the federal Consumer Financial Protection Bureau stepped in and sued them. I had no idea. What a dumb bunny! The information is all over the internet.