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Corona Virus Course Correction – Go Curry Cracker! RETIREMENT

Well, the time has finally come: the inevitable recession that occurs after every expansion and the corresponding downturn on the stock markets. And oh man, is it a fool?

Is this the end of early retirement?

The important things first

First and foremost, I would like to thank all of the world’s first responders and frontliners – those who are working to stop the spread of this pandemic and minimize the damage to the doctors and nurses, as well as the hospital staff, the heroes who keep the grocery stores running Entrepreneurs rebuild factories to manufacture medical equipment and supplies, search for vaccines and medicines, and everyone who stays at home if they would rather be elsewhere. Thank you very much. And stay safe.

The stock exchange and the economy

At the time of writing (before the exchange opens on Monday March 23, futures are limited (-5%), putting the SP500 at ~ 2200, a decrease of 35% from a high of ~ 3386 corresponds to one month.

That said, it needs to rise ~ 50% to return to previous highs. It was the fastest decline in history.

And if much of the country is closed, it could get worse. Much worse.

20% of the US work in the hospitality and tourism industries.

Dining in restaurants in the U.S. has dropped 98%. Many will not survive and unemployment is expected to skyrocket – Goldman Sachs estimates 2 million people have to apply for unemployment this week (The highest ever.) We saw unemployment rates up 30% (versus 24% during the Great Depression).

Who knows how long it will take before things are “normal” again.

Early retirement at risk

We are in the middle of our 8th full year of early retirement.

In general, our retirement should be extremely robust and largely immune to volatility in the equity markets given years of strong investment returns.

But that’s not the case. We have inflated our lifestyle, expanded our family from 2 to (soon) 4, eliminated flexibility options (we have a long-term lease), and the coronavirus has reduced other options (can’t just move to a cheaper place).

If you add it all up, we have the same risk as anyone else who withdraws into this economic environment. I wouldn’t want anyone to retreat to an economic breakdown, and yet Here we are.

Where is The I agree?

Knowing that the stock market has dropped 35% is pretty scary. What else do we know

S & P500 Total Return Index (SPXTR)

Including reinvested dividends, the SP500 is currently valued at a similar level to 3 years ago, February 2017.

Corona virus course correction

Was our retirement 3 years ago shortly before the crash and the cremation? I didn’t seem to believe that at the time, because at that point we really started to increase our expenses – bigger house, more Wagyu, etc.

The difference, of course, is that the economic forecasts for 2017 were positive and optimistic.

With the change in prevailing winds We correct our course.

We are currently sitting on 4-5 years of cash and another 2-3 years of bonds. This money came from a combination of:

  • a share sale in March 2019 where I bought bonds – a majority of which I have now sold (some in late February, the rest early in mid-March).
  • a share sale in January 2019 where I increased our cash position on the planned expenses for childbirth and aftercare (as we did in 2014/2015).

Our 6-8 years runway assumes:

  • no change in expenditure,
  • Dividends halved (similar to the Great Depression)
  • Blog earnings go to zero
    • Zero travel means that nobody is interested in hacking
    • Zero capital gains mean that nobody is interested in a tax reduction

If one of these assumptions turns out to be inaccurate, our runway is shorter / longer.

If the stock market and the economy continue to deteriorate, we will continue to correct the price.

Some things will happen automatically:

  • Jr starts in the 1st class with the attendance of the public school (saving of approx. USD 1,000 / month) – time frame 1.5 years

Other options are:

  • Moving to less expensive homes – a few years ago we spent $ 1,000 a month compared to our current $ 2,700
  • Delay planned purchases
    • This was the year I would get a new laptop. I will probably wait. (I typed it quite well on the old laptop)
  • Tighten the strap
    • We have a lot of fluff in our budget, especially in the food department. An example:
      – Two weeks ago, the date night was ~ $ 100 for steak and Paris pastries
      – Last week the date night was an experiment as a great Korean restaurant for ~ $ 15 (yummy!)
  • earn some income
    • Every little bit helps – no shame in getting a short or long-term job

For clarity:

I only sold bonds Hold cash. I bought stocks. I will buy more stocks when prices go down.

Our course correction summed up: have some money, be mentally prepared to reduce expenses, wash your hands.

What I’m doing financially through the crisis

Cash from the US to Taiwan, from USD to TWD – The US dollar will behave erratically when different governments turn on the presses and the economy fights. One year of rent payment in local currency helps sleep at night. (I do this through the ATM.)

Buy stocks – I bought stocks on the way down

  • sold some bonds to buy stocks
  • invested the money in my Roth IRA (contribution 2018 from April 2019) and our HSA (transferred in cash in spring 2019)
  • I have just transferred cash to Winnies Roth IRA (2019 income) and Jrs Roth IRA (2019 income).

Capital Loss Harvest – Thanks to years of harvesting capital gains, we have inventories that are even higher than when I originally bought them (around 2009), but for tax reasons AB. I’m harvesting “losses”.

Massive Roth conversion – If I think the time is right (*) I will do a massive Roth conversion and fill in the tax classes 0% and 10% and possibly more. That will Postpone the recovery to tax-free accounts.

* I am sure that I will clearly miss the floor.

Get ready to secure the money cart

There may be a point when (reduced) S & P500 dividends bring more than our (reduced) expenses. When / when that happens (or something like that) I go all-in.

Continue to spend less than 4%

Even if the 2020 spending matches the 2019 spending planned two months ago, we will still spend less than 4% of the current value of our portfolio.

What I do for physical and mental health

This is an emotionally challenging time – my mother, sister and brother are all nurses. My grandmother probably still thinks it’s a joke. I hope you stay safe.

The exponential growth of this virus in many parts of the world shows that the worst is yet to come. I fear for this short-term future.

To deal with this fear, I did what I can to control what I can.

  • I created a cash flow table and plotted it over the next few years (fear turns into trust).
  • We bought a 100 liter chest freezer and equipped it with a Costco barrel in case there is a resurgence in Taiwan.
  • I switch off the television and computer and ignore the everyday behavior of the stock exchange.
  • Regular cycling (150 km this week)
  • Writing – analyzing and writing brings me inner peace
  • Regular hand washing

I measure my own level of fear against my cravings. If I want to eat a pint of Ben-n-Jerry before going to bed, I’m stressed out. If I don’t want to eat, I’m overwhelmed.

I currently want to eat the numerous full pints of Ben-n-Jerry’s ice cream in the freezer, but I only do it in moderation.

Now that our own house is in order, it’s time to turn my attention to helping others. (Suggestions welcome.)

If my Ben-n-Jerry’s situation changes at any time, I’ll let everyone know on twitter. (super critical)

Summary

Things are bad out there. As such, we naturally correct the course.

I have sold some bonds and we are now holding cash and bonds for ~ 7 years. We have the option to expand this by reducing expenses and reducing and / or increasing income.

What measures do you take if necessary?

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