RV-Dreams Journal

Two-Year Financial Recap Follow-Up

Every time I post a financial entry, my finger hovers over the mouse.  "Do I really want to do this?"  :)

It was really hard this time since the stock market has fallen significantly since the end of July, and our situation is not as rosy as it was a few weeks ago.  But we are in it for the long term and the numbers will hopefull still play out.  As of today, the DOW is down 1200 points from its all-time high last month, but it is still up 1600 points from its lowest point in the last year.  The glass is half full.  :)

Each time I post financials, I eventually get over the fear of posting such personal details in favor of providing information for future full-timers.  I keep going back to the time when we were researching.  I had so much trouble finding really solid financial information.

Even when I could find budgets on expenses, I still had to wonder "Okay, but how do they pay for the lifestyle?  Do they have pensions, social security, military retirement, investments?  Are they working on the road?  If they are working on the road, what are they doing and how much are they bringing in?  What level of income do these people have?  What kind of assets do they have to fall back on?"

Well, we decided from the beginning, as a team, that we would put everything out there.  Would that make us a target of the unscrupulous?  Maybe.  Would we look like we are bragging to those with less in assets?  Probably.  Would we look like idiots to those with more assets?  Almost certainly.

But we made the call to be as open as possible and just hoped that the positives would outweigh the negatives.  So far, so good.  :)

Now, whenever we put out the financial info and our loose plan for the future, we get lots of emails.  "What about inflation?  What about depreciation?  How are you going to pay for a new rig down the road?  How are you going to pay for a new truck?  What happens when you are older and your insurance goes up?  What happens if there is an illness or an accident?  What happens if the stock market tanks?"

Our answer:  We don't know, but we'll deal with it.  :)

Everyone has their own comfort level with their own situation.  We are very comfortable with ours.  We have no idea what's going to happen in the future.  None of us can predict what will happen in the next twenty years.

We have planned as much as we want.  Everything else will happen in the flow of life.  It might be bad, it might be good, but we are not going to fret about it now.  Planning for an unknown future is what kept us in our prior robotic lives.  :)

What I will say is if you are the type that wants to have every possible contingency covered, and you worry yourself sick about things you can't control, full-timing is probably not for you.  Think long and hard before you make the decision.  I know that will offend some folks, so I'll go ahead and apologize now.  Sorry if I stepped on your toes.  :)

There is an old saying that goes something like this: "If you want to run with the big dogs, you have to get off the porch."

Well, if you want to run with the full-timers, you have to get out of the driveway.  So many people dream of full-time RVing (or changing their lives in some drastic way), but fear and trying to control the future keeps them from setting out.

Full-timing requires some risk-taking and being comfortable with uncertainty.

I wish I could tell everyone "Just go for it!  Everything will be okay."  But I can't.  Things go wrong.  Mistakes are made.  The lifestyle is not for everyone.

You know, there are three country songs (off the top of my head) that were very popular that considered life as a dance.  The attractiveness of those songs to most people is the premise that it is better, no matter the outcome, to have danced than to have safely sat in the bleachers and watched.

John Michael Montgomery's "Life's A Dance":

Life's a dance you learn as you go
Sometimes you lead, sometimes you follow
Don't worry about what you don't know
Life's a dance you learn as you go

Had sure things blow up in my face
Seen the longshot, win the race
Been knocked down by the slammin' door
Picked myself up and came back for more

Lee Ann Womack's "I Hope You Dance":

I hope you still feel small
When you stand by the ocean
Whenever one door closes, I hope one more opens
Promise me you'll give fate a fighting chance

And when you get the choice to sit it out or dance
Dance
I hope you dance

Garth Brooks' "The Dance":  

For a moment wasn't I the king
But if I'd only known how the king would fall
Hey who's to say, you know I might have changed it all
And now I'm glad I didn't know
The way it all would end, the way it all would go

Our lives are better left to chance I could have missed the pain
But I'd've had to miss the dance
Yes my life is better left to chance
I could have missed the pain but I'd've had to miss the dance

Millions upon millions of people love those songs because that's the way they wish they could be.  Fewer people love those songs because that's the way they really live their lives.  We were right there with the millions, and now, even though we have no idea what the future holds, at least we are dancing.  :)

So I have two points my friends.

First, really consider if your comfort level with uncertainty and risk taking is such that you can enjoy full-timing before you take the leap.

Second, we appreciate the concern for the "holes" in our "plan", but we know they are there and still we choose to dance.  When we find we have danced right into one of those holes, we'll crawl out and wait for the next tune with a wry smile and a wink at each other as those in the bleachers are laughing their "I told you sos."  :) 

Two Year Financial Recap

We went on the road as full-time RVers August 3, 2005.  Since we just had our two-year anniversary, I'm doing a two-year recap.

However, I decided to break out the financial portion of our two-year recap and do a separate entry.  So here it is.

This quote still applies from the year-one recap:

"We have learned that, if you are new to RVing, no matter how much you plan, you still won't know what you want to have with you until you have experienced the lifestyle.

As much as we wanted to buy everything up front while we still had regular paying jobs, we just did not know what else we would need or want.  So, build a cushion into your budget for the first year, or maybe two, for unanticipated expenses and additions to your set-up."

I would only modify that to say build in that cushion for at least the first two years if you have never RVed before or RVed casually in the past.  :)

Okay, where do we stand financially after two years on the road?

We started out August 1, 2005 with $336,000 ($101,000 in IRAs we can't touch without penalties and $235,000 in other investments, checking, and Health Savings that we can get to if need be).

After 1 year, as of July 31, 2006, we had $423,000 ($110,000 in IRAs and $313,000 in everything else).  That was a $93,000 increase.

We knew when we went on the road in 2005 we would have about $75,000 coming in from the sale of my company, so that was most of the increase.  Having that income cushion in our first year was one of the big reasons we went on the road when we did.

In year one, we ended up spending $40,000 (including $8,000 on additions to our set-up and $4,000 getting our five little businesses going) in the first year.  But, only $28,000 of that was on actual living expenses.  Fortunately, our investments earned $32,000. 

As of July 31, 2007, we had $433,500 ($127,890 in IRAs and $305,610 in everything else).

Here is what it looks like in table format:

                                July 31, 2005     July 31, 2006     July 31, 2007

Total Cash/Invest.       $336,000            $423,000           $433,500         

IRAs                             $101,000            $110,000           $127,890

Liquid Invest./Cash     $235,000            $313,000           $305,610

After July 31, 2006 we had no more stable sources of income.  Our only income since then comes from our business ventures and investment earnings.

But our values increased $10,500 in year two.  Yahoo!

Let's look at year two a little closer.  We haven't touched the IRAs - no withdrawals or deposits - since we started.  In year two they grew $17,890 or 16.2%.  We're very happy with that.

Our more liquid investments decreased $7,390.  But we are not getting overly concerned about that.  Let's see how things broke down.

Here was our spending in year two.

We spent $56,366 in our second year on the road.  Yikes!

Here we go - $27,500 in basic living expenses, $3,679 for our electrical upgrade, $1,400 for our upcoming cruise, $14,700 for Jeep and accessories, $2,609 for taxes on 2006 income from sale of my company, and $6,478 on business expenses (of course we made up the business expenses with business income).

Let's look at our liquid (non-IRA) funds balance.  We started the year on August 1, 2006 with $313,000.  We spent the $56,366 taking us down to $256,634.  Then we added revenue from our businesses of $9,370 to get back to $266,004.  Investment income of $39,606 got us back to the ending balance of $305,610.

So, with spending $56,366, we are thrilled that our liquid balances only decreased by $7,390.  It's impossible to tell what rate of return we had on the liquid funds, but my analysis has it in the 12 - 13% range.

Suffice it to say that we would not have done the electrical upgrade, the cruise, or the Jeep purchase if we hadn't known our investments were doing that well.

In each of our first two years, our basic living expenses, including all insurance has been $28,000 and $27,500 respectively.  That's $2,333 and $2,292 a month in each of the first two years.  Once again we confirmed $2,500 a month is a comfortable, moderate monthly budget for living expenses plus a little cushion.

The "unexpected" part of the expenses in the first two years has been the surprise we were not expecting when we started.  We have spent $25,000 on bikes, inflatable boats, Jeep, electrical upgrade, PressurePro tire monitoring, wheel chocks, new recliners, air compressor, kingpin stabilizer, blue boy and extra sewer components, and various other supplies to make our set-up and our lifestyle more efficient, safer, and more enjoyable.

We consider all of that part of our new home.  It's just like buying a stick house and then modifying it and furnishing it to suit needs, tastes, and function.  We've just decided to squeeze it all in during the first two years while we knew we had the cash cushion from the sale of my company and nicely performing investments.

Of course we had no idea that we would want or need all those additions until we experienced the lifestyle.  That is the thing I want to make sure all our readers understand.  It takes time living the lifestyle to understand your needs - prepare for that in your budgeting the first couple of years.      

Okay, let's look at the future and our financial thoughts.  Some of this is taken from last year's entry as it hasn't changed much.

So we will start our third year on the road with $433,500 ($127,890 in IRAs and $305,610 in everything else).  We remove our IRAs from consideration because of early withdrawal penalites.

Note:  Under Internal Revenue Code Section 72(t), there is a way to withdraw IRA funds early without penalties.  But check with a tax professional to see if using this Code section is for you.

So we are working with the $305,610.  Of that, Linda and I have established that we are going to try to never dip below a $200,000 balance (our "just in case" threshhold).

So that leaves us $105,610 in cushion to live on for as long as possible. 

Now, let's assume we can keep our expenses at $30,000 a year ($2,500 per month) which is a very reasonable, moderate full-timing lifestyle.  At an average return of 9% a year, which is what we are shooting for on our $305,610, that will be about $27,500 a year.

That would mean we would have a $2,500 per year deficit between our budgeted expenses ($30,000) and income ($27,500).  Our $105,610 cushion would last 42 years without us earning a penny by working.  And we would still have our $200,000 threshhold plus our increasing IRA funds.  That oughta do us.  :) 

Note: Yes, I know that these examples are little oversimplified for the accountant and investor types out there, but they're somewhat illustrative.

Of course, we know for a fact that we can make up the $2,500 a year deficit with our businesses.  So, if our investments average what they should over the long term, we can full-time as long as we are able and not reduce our current financial holdings.

Not going for the 9% annual return?  Okay, how about 5%?  At 5% annually our $305,610 would make a little over $15,000 per year.  So now we are at a $15,000 per year deficit and our $105,610 cushion would only last 7 years if we didn't earn a penny working.  But we would still have our $200,000 threshhold plus our IRAs.

Seven years doesn't get us very far.  But we know we can earn $15,000 a year between the two of us if we need to.  So we are pretty comfortable with our financial options.  We can work or cut expenses or a combination of working and cutting expenses and running our little businesses.

"But Howard, what if your investments tank and never recover?"  Oh well, guess we'll get j-o-bs while we live in our rig at an RV park.  "Yeah, but everything you built up would be gone."  That would be a little rough, but that's the way it goes - we'd deal with it and move on.  We aren't scared, and oh what a feeling that is. :)

Now that you have the big picture, lets dissect this sucker a little more for those of you that I didn't lose ten paragraphs ago - financial stuff is a great cure for insomnia.  :)

The following averages are two-year averages.

We averaged $408 a month in campground fees for the first two years.  Note: That included 4 months of a free site while workamping.  If we don't include those 4 months, our average was $489 a month.

We averaged $260 a month in diesel fuel for the first two years at 1,182 miles per month.

We averaged $433 a month on groceries and dining out.

We averaged $223 a month on entertainment - golf, park admissions, movies, etc.

We averaged $62 a month on laundry, clothing, and hair care - about half of that is laundry.

Cell phones are $85 a month, DirecTV is $71 a month, and satellite internet is $68 a month.

So those 8 categories total $1,610 a month - $19,320 a year.

Add $2,870 for truck and RV taxes, insurance, and registation and $1,081 for life, health, and umbrella insurance and we have $23,271.  That leaves a little over $4,200 for miscellaneous, propane, RV clubs, RV maintenance, and truck maintenance.  And there you have our $27,500 in actual living expenses for the year ended July 31, 2007.

I'm looking forward to seeing how things go in year three.  Hopefully, we are close to being done with RV upgrades and set-up additions.  But I am encouraged to see consistency in living expenses for both years.

I'll sign off by once again saying that $2,500 is a very reasonable, moderate monthly budget.  But if you have $3,000 a month from pensions, social security, or other stable income sources, you can live comfortably and have room for unexpected expenses and/or special treats.

I hope this detailed information about our situation is helpful.  It ain't easy to put all that out there, but if it assists folks in their research, it's worth it.  :)