Note To Self: Distract Yourself From Making Dumb Moves In A Bumpy Market!

The Time Has Come

We have a golden opportunity to practice what we have been preaching: “don’t worry about losing thousands of dollars in a second, this is totally normal, markets go up and down (you just don’t remember young one), don’t make stupid moves out of fear, keep your eyes on the long term horizon, this too shall pass, you still have time, this time is no different”, etc. etc…

Rationally, I get it.  Emotionally, a little anxiety started creeping in. Not to worry though as I am determined to not let feelings win this round! Take that heart, said the brain!

Dealing With Sneaky Feelings

I am trying to focus on things I can control and creating positive distractions for myself.  For example, I am still going strong with my two personal challenges of the month: vegetarian diet and no technology Sundays (affectionately dubbed Tech-No Sundays by my sweet son). In addition, I am still enjoying the “no (stuff) purchase challenge” for a year with no issues.

I am feeling pretty good about these challenges, and hope to continue with some of the habits learned so far as they do make a difference (though in full honestly mode, while still limiting meat substantially, I will probably still have the very occasional Chicken Burrito Bowl from my beloved Chipotle upon finishing this challenge…. sigh, I miss you!).

In addition, we are tracking against expenses, despite a few unplanned medical bills (the scariest part of the expense side of the house, if you ask me!). Oh and I am kicking butt at work (according to my very unbiased opinion) – go me!

With that said, on the assets sides things are a little less rosy. For a brief second, we saw our liquid assets hit $650k this month, only to be back down to $620k a few weeks later even after adding a few thousand dollars in contributions during that time. Ouch. I had forgotten what that felt like!

After some reflection, my husband and I agreed that we are comfortable(ish) leaving our already invested money where it is and we will, but not necessarily adding ALL our new money into the market right now. With that, we compromised and will do the following:

We will continue to add pre-tax 401k and HSA funds in the market but use post tax extra funds to up our emergency cash stash (to 3-4 months vs 2) and increase our mortgage payments significantly. As a reminder, we are hoping to add in about $140k per year in new inflows, of which about $80k is post-tax.

Is this the best financial decision? I don’t know, but it does not seem the worse decision either, especially as it brings some peace of mind.  At least we did not decide to go spend it because well, YOLO! (midlife crisis under control folks….for now).

We will revisit as circumstances change of course, but, if this is the path we take the rest of the year, we will likely not meet our EOY asset goals, however, we would crush our debt repayment goal.  We are ok with that. Now, should the market take a steep dive soon,  we will get back in the market full swing and revert to min mortgage payments until we get cold feet again.

Now tell me, how are you coping with this natural but by now not so familiar volatility? Are you ready to stay the course? Let’s do this!

 

 

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A Year Later ….

This blog was born about a year ago and man, have things changed since! I have been thinking about how much harder it was to get to the first $100- $200k compared to how much faster things seem to be moving after we crossed the $300-400k line. Granted, our journey is a little strange as we kept taking random time off work and spending a lot of what we saved but, the end result in terms of asset accumulation is still is pretty interesting.

Obviously our strong focus on FIRE for about 1.5 years now, much larger dual incomes after a period of unemployment and work breaks have helped as much as the incredible market ride as of late which has propelled this forward. It does make it super fun to see that even small gains amount to a lot more $ these days compared to even last year. I have to remember to breath when it does the same when market decides to explore negative territory :).

Let’s revisit what I wrote a year ago, when the FIRE dream was just starting:

As of August 2016, our investable assets stand at $335k. I guesstimate that about $200k of this came from our savings from 2001 until 2009. We did not save anything from then until about 2012 really, the rest was saved from late 2013 to today. Our 529s ended 2015 with about $5k. Today (August 2016) we have a combined $26k balance for both kids, much of which was added this year as we started a super funding strategy.

A Year Later…

Assets: Liquid assets stand $525.2k. It is strange to see the market still going up and I keep reminding myself to stay the course when/if the correction comes. Our home has about $135k in equity assuming about 10% expense costs between real estate fees and random taxes, so total net worth is about: $660,000. Woot!

It is crazy to look back and see that exactly a year ago – August 2016, our assets stood at $335k – that is $190k dollars difference in one year! Check out this progression, feels almost surreal (liquid assets only, excludes 529s – those we count separate as money we won’t have available):

  • 2001 – 2009: $200k (8 years!)
  • 2009 – 2016: $335k (7 years to add an extra $100k+)
  • 2016 – 2017: $525K (1 year, $190 added! yikes!)

Debt: $125.1k, still on track to end at $118k without issues.

529 combined: $54.7k combined. A year ago our combined balance here was $26k! Huge accomplishment especially given how much we also saved for our retirement.

Expenses YTD: $42.9k. It is going to be a nail-biter ending within the $75k or under goal as we have a few unaccounted for car related expenses and a few other things to consider. I remain cautiously optimistic.

Lastly, I poked around the Social Security Website to figure out what my expected benefit would be if I worked for 8 – 10 more years, assuming the thing can still pay 100% of benefits. I figured it would be something like $1,800 per month or slightly more, which is not bad, especially considering that I am assuming best case scenario we get 60% of that or really (and what I actually base my FIRE plan on), nothing at all. Still fun to poke around with the numbers. 🙂

Hope your year is going well but most importantly that you are out there LIVING!

How are things going with you? At what point in your savings did you start feeling like things were really snowballing? How long did it take you to make each $100k?

September 2016, Progress Report

September 2016‘s market got a little scary but then bounced back. I am bracing myself for more crazy in the coming months. A huge highlight this month –  we maxed out our other 401k, woot!

All in all, another solid month, we are right on track so far. Here is the summary YTD:

Income* Expenses Assets 529s Debt
September $127.7k $57.9k $355.4k $34.2k $140.2k

Our assets grew by $9.4k while expenses came in at $5.8k (very good considering our trip that took about $1.5k of that! Creating habits is REALLY working!).We now have about 5k of these assets in cash, which we really did not have before. People are right – it gets addictive almost and I feel strange leaving things ‘out of the market’ but a little buffer is good, plus we are considering an alternative investment at this point (just considering) so this helps with options.

Our kids’ college funds grew a bit less than normal as we contributed only $2,650 (vs other months that I was putting about 5k to super fund and be done by the end of the year with a $25k balance for each), and the earnings stayed pretty flat otherwise.

Debt is getting there, we contributed a few extra hundred bucks, but is still not making as much progress as other areas, and that is ok as it is by design.

All in all – three months to go to end the year (wha?! how did that happen!?), almost at goal, very exciting to see progress!

How did you go this month? Did you panic when the market tanked?

Expenses Goal – from $100k+ to $60k

You spend how much?

When I first started reading about financial independence, I came across this post from Mr Money Mustache from 2011 entitled: Exposed! The MMM Family’s Actual Spending. 

This was the bottom line:

Total of Everything: $30,500
Total excluding Mortgage: $26,885

How does my family compare, I wonder? (family of 4 vs 3). Holy crap, I nearly fell off my chair when I discovered that from 2012 – 2015 we spent over $100k per year. WHAT!? Why?! I mean sure we moved, we got 2 cars for the first time ever ($16k total, cash), got kids on private school (no more as of next year as they are older and can attend public school), furniture for our new house, and some fancy pants vacations without caring for miles or points usage for the most part, etc. Still what the heck were we doing?!

Our incomes (here) at that point were not even CLOSE to sustaining this lifestyle. Thank goodness I found that blog and re-focused myself (to be fair, I was having some serious post partum depression and was getting my act together, so I had other things on my mind. Now I am totally ready, no excuses!).

After picking my jaw from the floor, I started reading every possible financial independence blog (these ones my favorites) and sat down with my husband to make a plan. We immediately cut out things that were not essential (cable, for example), starting making most of our meals at home vs eating or ordering out and called our insurance company to negotiate a better rate, which we got.

We created a path that would allow us to live more frugally. Much like when running, we did not want to go from 5 miles to a marathon in a day, so we set out to do a plan that would allow us to cut expenses gradually so that we could adjust to our new (hopefully sustainable) habits without that much pain.

The Goal

We have a pretty solid plan for saving and investments, but now we needed a goal for ourselves for the next 5 years in terms of spending. Here is where we landed (as of Summer 2016). We pledge to spend (ignoring inflation):

  1. $80k in 2016We beat this! We came in a little under $75k!
  2. $75k in 2017 – Barely, but achieved!
  3. $70k in 2018 –  Failed! $75,575. $75k seems our ideal expense range!
  4. $65k in 2019
  5. $60k in 2020

I will update our progress as we go, where we cut, what hurt and what was easy. I am fairly confident we can hit $80k and $75k this year and next  – but I am seriously questioning our ability to go lower than that. I know this is very doable when reading other blogs out there, but you know, I like my traveling and first world privileges.

Will we make it? Will we totally fail or quit? Let’s see how far we can go! Check our our progress reports here.

For further inspiration, I keep checking Justin’s Root of Good amazing posts like these  which put my expenses to shame….

How about you, what is your goal?!

Resources

Summer 2016.

Travel Resources:

Here are a great list of travel blogs and sites that you may enjoy in regards to traveling, specifically with a family.

Want to learn about points and miles? Check out Million Mile Secrets and The Points Guy.

Overwhelmed with credit card/miles and don’t know where to start? I started with Marriott Card (best benefit is 7 nights + x amount of miles to most major airlines), Chase Sapphire Card and Starwood American Express (not sure how much longer this one will be around). These seemed the most flexible for me until I learned more.

Hotels.com and Rocketmiles.com for hotel reservation if you are not using a specific travel rewards card or hotel chain.

Car rental? Try  Autoslash.

Different ways the world talks about Continents. The 5 to 7 Continent models.

College Planning:

If you are just getting started investigating 529s and general cost of college, I encourage you to start here. Probably the best site I found so far. It helped me a lot with my initial planning.

Financial Independence:

Getting started on your own path to financial independence? I encourage you to watch this eye opening PBS documentary called The Retirement Gamble. Then, take a read through these articles, which I re-read often for encouragement. Why “Earn More” vs “Save More” Is The Wrong Debate, The Shockingly Simple Math Behind Retirement, Zero to Millionaire in Ten Years, How We Reached Financial Independence in Our 30s, and A Millionaire Is Made 10 Bucks at A Time.

The blogs that I mention here are the ones I most often read regarding early financial independence.

For a very simple how to guide for saving and investments, I really love this The Simple Path to Wealth. I particularly love that he is writing this to leave as a manifesto for his daughter. He also writes about rent vs own issue very eloquently. Another excellent article on rent vs buy by Afford Anything blog here.

The Mad Fientist is also filled with all sorts of great information and tools. And this blog post on The Road to financial independence is a great read.

Financial Management:

I use mint.com to track my day to day spending and Personalcapital.com to track my investments and assess my 401k plan fees.

As for investing, I am partial to Vanguard index funds.

Simple yet effective interest calculator.

Inflation calculator.

Teaching kids about money resources

The Goal

Alright, so I gave you context as to where I fall in the financial independence range. Now, I present you the goal (Summer 2016):

The Goal

  • Years to financial independence: 12
  • Investable Assets: $3.1 million (today’s $2.2m equivalent, with 3% yearly inflation)
  • Debt: Zero (inclusive of mortgage and car)
  • Annual Spending: $75k for retirement ($107k equivalent then with 3% inflation). See accumulation year expense goals here.
  • College Savings:  $100k each 529 account $75k in 529s plus $100k in post tax accounts by the time they reach college (total, not per child).
  • Travel After Reaching Goal: Sell everything we have and go live anywhere in the world as a way of living, currycracker style!

Here is my starting point (past yearly incomes and current assets), and here is what we need to do to achieve our goals and how we plan to do it, including all our assumptions.

Lastly, we do have will and life insurance plans here, which will change as we grow. Below is the graphical representation of the plan – you can follow actual progress here.

The purple numbers represent where I was October 2016 when I started tracking this way and what I consider a ‘prep’ year for the plan. From 2017 onward it will be tracked from day 1 hopefully.

fire-plan-vs-actuals

debt-repayment

Let’s get to work!

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Progress Report

Where is the money, Lebowski?!

Alright, the moment of truth. How are we doing against our plan?

Starting point – 2001 – 2015. I did not track in this detail but at least I have records of income for every single year.

End of 2015

Progress Report:

  • Assets: Guesstimate $250k (ish)
  • 529 balance(s): Around $5k
  • Expenses: Over $100k per year
  • Income (Pre tax): $188k (Year by year income info for last 15+ years, here).
  • Debt: $185k (mortgage, solar panels and gasp ‘new’ car!).

2015 dumbest financial mistake: Buying a new car. Yes, I know…At least it is zero percent for 7 years and we enjoy the great mileage for our long travel trips by car.

2015 best financial move: Maxing 401k for the first time (one of us) and paying off student loans. Yay!


June – Dec 2016 (cumulative):

Income* Expenses Assets 529s Debt
June $84.6k  $41.3k  $317.5k  $18k  $144k
July $98.9k $46.8k $333.5k  $26.5k  $142.8k
August $113.8k  $52.2k  $346k  $31.6k  $141.9K
September $127.7k $57.9k  $355.4k  $34.2k  $140.2k
October $141.8k  $63.8k  $354.2k $38.7k $138.6k
November $157k  $68.6k  $371.8k $44.3k  $135.4k
December $175.1k  $73.7k  $388k  $50.4k  $134.9k
Goal $165k $80k $360k $50k $135.3k

*Income is post-tax and post 401k, HSA and medical deductions. Expenses include mortgage and car payment. Assets are liquid only, they exclude home value (about $275k),  529 accounts are combined (we have one for each child), and debt includes mortgage (15 year, 11 to go, 3.75%) and car (zero % interest, 6 years to go).

2016 highlights – Got a promotion in Q2 (yay!), maxed one 401k already (but sadly match will then come via true-up next year).


July 2016 gave us a jump of $16k in assets and $8.5k on 529s, with a combination of market appreciation and savings. Woot! This month was particularly good because I got 3 paychecks, so we contributed $6,225 towards assets (pre and post tax), and $9,775 came from market gains. As for 529s we added $8k towards our accounts, with about $500 dollars market gains. Reminder, for the 529s we are super funding until the end of the year then easing up significantly and focusing on post-tax accounts instead.

Our expenses were pretty controlled as well for us ($5.5k), which is nice, but we are doing some traveling in September so I am bracing for that month’s final numbers.


August 2016 was pretty solid. The income side of the equation helped a lot ($14.9), as one of us received an extra paycheck and a significantly larger amount of over time than usual. We don’t expect any more of that through the rest of the year, rather the opposite as November and December usually bring in some unpaid time.

Our assets grew by $12.5k ($9.4 were adds, $3.1 market gains) and 0ur 529 accounts grew by $5.1, where $100 of that amount was gains vs $5k of additions.

Expenses were pretty decent ($5.4) considering we had to pay car taxes and inspection and extra activities for kids before starting school. We kept groceries under $500, and restaurants about our usual $240, not bad for us. This expense level should keep us on track for the under $80k goal by end of year even though September will come in high due to travel plans. Most importantly, this is helping us slowly adapt to spending levels that are more aligned with our lower, future goals without feeling like we are making any drastic life changes.


September 2016 was a little scary for a bit in the market but then bounced back (so far!). I am bracing myself for more crazy in the coming months. A huge highlight this month is that we maxed out our other 401k, woot!

Our assets grew by $9.4k while expenses came in at $5.8k (very good considering our trip that took about $1.5k of that! creating habits is REALLY working!). Our college funds grew a bit less than normal as I contributed only $2,650, and the earnings stayed pretty flat otherwise.

Debt is getting there, I contributed a few extra hundred bucks, but is still not making as much progress as other areas, and that is ok as it is by design.

All in all – three months to go, almost at goal in some areas, very exciting!

On track for EOY goal. Final goal details, here.


October 2016 Our income is going as expected, also, we are actually getting in better spending habits and feel very comfortable and confident that we will be able to go under $80k by the end of the year. Also, we remain on track for putting $50k on our kids 529s (combined) though we may end with a little lower balance as who knows what the market will bring to close the year, and, since we have over a decade to go, we have it in pretty aggressive investments. Regardless, we are done putting money there by end of year. Similarly, our debt repayment is on track, what we like to see!

For the not so good news, for the first time since starting this blog our assets are lower than the previous month despite adding quite a bit of money in there. That is ok though – it was expected AND we did increase our cash holdings to about $7.5k of that money (we had virtually zero before that) and we are still on track to hit that $360k by year end unless something dramatic happens.


November 2016 Incredible month. We are OVER our asset goals for the year with one month to go.

I am most excited about our expenses. Even though we bought a bunch of Christmas stuff, we still spent about $4.8, which is quite good for us. Our income was $15.2 this month, and we added a healthy amount to our 529. I made a small extra payment to debt so we will likely end up the year a couple hundred dollars under (positive for us) our original goal for debt balance. Woot.


December 2016 We did it! We met and even surpassed every single one of our financial goals. It has been a remarkable journey already and the realization that with a little focus things can really change dramatically. While I am impressed with all our metrics, the one that stands out for me is the expenses. Sure $74k is a lot of money to spend for a lot of people, but we were at the 100k+ when we started this journey in yearly spending, so that is a pretty big deal for us. For 2017, we aim to keep a similar spending limit, and hope that it feels extremely comfortable now that we have gotten a few months of practice at this spending level.

It is also relieving to have met out 529 goals for our kids. Since we were heavily front-loading there, we will now be able to turn our focus on maximizing our savings for our post tax and retirement accounts, towards our FIRE goal. It is so encouraging to start seeing fast progress, despite knowing that a lot of this was due to a crazy market which may correct at any point. That said, we are in for the long term and have created habits that we think will get us to our goals, as long as we don’t have any major set backs in our income category or unexpected expenses.

Hope you all had a successful 2016 also and that 2017 brings more growth on all fronts!

2016 Lessons Learned and Plan Forward.

 

 

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