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Cushion

April 2nd, 2008 at 09:43 am

It was very cold last night so walked at WalMart. They had 1 lb wild caught salmon on sale for $3.98. Unfortunately when I got to the register it was ringing up as $6.34. I caught it and made them change it. My mom went thru before me and paid full price and had to go to customer service to get her money back. Yesterday was Tuesday and the sale was Sunday, which means they charged people full price at least 2 days and are probably still doing so. This is a very good price for salmon around here. My usual buy price is $5.99. I got 3 lbs. Each package contains 4 pieces. At 1 a week this is 3 months worth for me.

Before being ready to retire I created a cushion account. This account is cash in a MMA and it's purpose is to handle emergencies and known big-ticket items that might occur prior to me turning 59 1/2. One of the biggest things to consider for early retirement is the phases of retirement and how to best maximize your income to pay the least amount of taxes.

My budget of $1500 - 1750 is only for basic monthly/yearly expenses and is not meant to cover emergencies or big ticket items. The reason the cushion is designed to last only till I am 59 1/2 is because after that I have unlimited access to my Roth IRA. I expect to use the money in that fund for any big ticket items after I turn 59 1/2 because there will be no tax consequences when I withdraw that money. Since it will be growing tax free for the next 12 years it should be pretty big by then.

So the following are the categories in my cushion account.

Health - meant to cover large deductibles.

Maintenance/Repair/Replace - $5000 - meant for applicace replacement/repair, car repairs, big ticket items. I own a townhome so don't have to worry about roofs or exterior paint.

Vacations - I usually take a nice vacation about every 3 years

New Carpet - My carpet is getting old and I know it will need to be replaced sometime before I am 59 1/2

New Car - I bought my car new in 2007 and I have had no problems with it. I drive it around $6000 miles a year and may want to replace it sometime in the next 12 years. So I've put the money aside to do that

College - I originally saved $10,000 for each of my nieces college, (total $20,000) but my sister recieved an inheritance that will let her pay for them now. So I'm only putting $3,000 away for each of them now. I may supplement living expenses or something. If I don't use the money before they graduate I will absorb it back in to my retirement.

I have the following amounts saved for each area

Health - $5,000
Maintenance/Repair/Replace - $5,000
Vacations - $8,000
New Carpet - $3,000
New Car - $18,000
College - $6,000

Total - $45,000

I finished reading the library book Wealth on Minimal Wage by James Steamer. Finance. Pretty good. The philosophy is good, most of the ideas are known to me. Overall worth reading.

I finished reading my book Choosers of the Slain by John Ringo. Adventure. Good. This is a man's book though, lots of sex and violence, but the storyline is good.

4 Responses to “Cushion”

  1. Sunshine Suz Says:

    Hi Retire at 50,

    May we know what part of the country you live in?
    I'm very interested in following your journey as I hope to retire in a few years also. Carolina Bound inspired me. I hope to learn LOTS from ya'll before I take the plunge myself.
    Thanks!

  2. tiki Says:

    Me too, it's incredible that you've determined to save a large percentage of your income from an early age and have stuck with it. VERY inspiring ^_^

  3. retire@50 Says:

    I live in Colorado

  4. Lisa Says:

    I was reading all of your past posts and you have inspired me to try to get shampoo/conditioner, soap/body wash, razors, toothpaste, razors, etc. for free or next to nothing. I am looking forward to the challenge of using sales/coupons/rebates/samples to make this happen. Thanks for the inspiration. It will be a part of my plan for retirement in the next 1.5 to 2 years (at age 49).

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