May Day! May Day!

So, this is May Day! as written in the, “help I’m in distress” version, and not the “I’m going to give my neighbor a flower” version.  After a few months of tracking a bit more, I’ve come to the conclusion that the best way to really see how much better we can be doing on spending and saving is to NOT spend and therefore save more…ie, a no-spend month!

Backstory…I’ve been trying to calculate our FI date, but there are a few calculators out there.  One calculator told me 20 years. Another told me 5.  What the hell?  I realize one easy way to calculate is simply take annual spending x 25 and that’s the total we’ll need at a 4% withdrawal rate.  But our spending can be so volatile…..and I stand by the fact that knowing eventually we’ll have no debt (student loan paid off and no mortgage) and far fewer kid expenses (like activities) make a difference.  I’m sure other things will change as well….for example, our insurance costs, which are nearly nil currently, will go up.  But it all still makes me confused as to how to compute. I finally decided that Brandon over at Mad Fientist has a spreadsheet that I understand, that I agree with and will calculate it for me, without sugar coating a darn thing.  So I did our net worth calc for April (to come…) and worked on that a bit.

15.15 years.  Womp womp…

Seriously.  But here’s what I love. Changes are already being made.  I’m working from home this summer and already made the choice to keep my daughter out of daycare next year, simply do three mornings a week of preschool, and call it good.  We’ll save nearly $550 a month.  So, next month, for example, as that cost goes away, it will reduce our FI date.  But not greatly…it takes time for that reduced cost to annualize and for the calculation to realize that our costs really are going down and we’ll need less to survive on.  Motivation nonetheless.

One way to put it all in perspective.  Our mortgage, which does still exist and we’d need to have enough money to cover if we retired tomorrow, is costing us 3.3 more years until FI.  There’s not a lot we can do about our mortgage. We can move to a cheaper house, but considering what we paid initially, how much we love it and what we’d have to pay to move, it’s not worth it to us.  But on the flip side, groceries cost us $1035 monthly (which includes all personal items and cleaning supplies as well), and therefore adds 2.18 to our FI date.  But groceries can be reduced.  What if we could get that down to $800 on a monthly basis? Then we’d see real progress!  So things like this are the goal.

We’ve also spent a lot on house projects lately. I should simply feature them so what we’ve done is clear, but we made the decision to finish the laundry room project and therefore I went to IKEA late April and purchased the $1100 in cabinets we needed to do so (plus a little more in additional purchases).  But large purchases like that add up and can really skew the calculation.

Our top 4 things contribution to our FI date being 15.15 years away are as follows:

  1. Mortgage – 3.30 years
  2. Groceries – 2.18 years
  3. House projects – 1.64 projects
  4. Tuition – 1.31 years

The house projects should really slow down soon and the tuition is going mostly away (can NOT wait!), but we’ve found some data points to really motivate us to make some every day changes.

A long explanation as to why a no-spend month for May, but I really want to see how much we can sock away and how much smaller our spending is when we focus specifically on keeping it to a minimum.

Can’t wait to see how this ends up!

March 2016 Net Worth

March was a GREAT month for our net worth game.  I’ll hit on spending in my next post, but for now let’s focus on net worth.  First, where we ended up:

NET WORTH: MARCH 2016
ASSETS THIS MONTH MONTHLY CHANGE % CHANGE
Cash Accounts $8,108.41 $2,005.81 -19.83%
Retirement Accounts $405,270.00 $16,307.39 4.19%
Investing Accounts $75.14 $46.93 166.36%
Non-Liquid Assets $305,513.00 $2,099.00 0.69%
LIABILITIES THIS MONTH MONTHLY CHANGE % CHANGE
Credit Cards $11,953.63 $2,781.29 -30.32%
Student Loan $48,225.00 $175.79 0.36%
Mortgage $154,823.00 $931.37 0.60%
NET WORTH $503,964.92 $19,355.86 3.99%
KIDS 529 ACCOUNTS
#1 #2 #3 TOTAL
24479.59 $8,160.60 $3,482.64 $36,122.83

A GREAT month, in my opinion.  So, how did we do it?  Let’s discuss each item…

Cash is cash for us.  It might be high depending on when the end of the month hits, or it might be low. April should be high, as a 3 paycheck month with the last Friday of the month being the 3rd paycheck of the month.  As a result, that also means in March it meant the 2nd paycheck of the month smack in the middle of the month, so when it ended, our balance was drawn down a bit.  Simply timing.

Retirement accounts had a boon in two ways…the first was that Mr. Fool received his bonus, and I immediately took that and stuck the max into a traditional IRA with Vanguard.  This was huge for us.  We have been stuck in a rut the past few years where spending caught up with us and then, come bonus time, we were paying down a credit card or something else.  NEVER ideal.  So this year as soon as we received the money I made it happen. Money is gone – no muss, no fuss.  That plus nice market returns means we saw a nice increase here.  Personally, now that we’re getting really serious about FI, I sort of hope the market doesn’t recover very well just yet.

Investing accounts – Nothing but Acorns for us.  I turned on a minimum weekly amount of $10 and the round-ups are the rest.

Non-liquid assets – this is our house and our boat.  No vehicles, as they are old, and will be more of a net worth drain once they die, anyhow.  House value increased per Zillow, and since a house down the street sold for about $45K higher than our estimate, I know it’s conservative and I’m comfortable here.

Credit cards – also timing.  We put almost every expense on one card and the balance at the end of the month was up.  Plus I’m a moron and missed the payment this month.  I have an auto-payment to cover the minimum, but I normally pay it in full each month.  So in April I get to take an $85 interest bath.  Let me tell you – not awesome.  They actually suck.

Student loan – fixed loan at 3%.  Reduction just principal pay down.

Mortgage – also fixed loan at 3% over 15 years (we have about 12 left).  Reduction just principal pay down.

We had a huge boost from the IRA contribution, but I’m hoping to get some things paid down soon and continue the momentum.  There’s some talk at my job about some possible ways to increase my salary, so I’m hoping that pans out.  Increased flexibility at work + increased pay = the stuff that FI dreams are made of!  I also was able to pay down my side-hustle credit card further than expected last month and may be able to pay it off entirely in April. The momentum continues!

February 2016 Net Worth

I have wavered on how much detail to go into with our finances, but after finding people like Paula Pant of Afford Anything and J. Money of Budgets are Sexy, I am in agreement that the info I give out can be helpful…not only to ourselves but also to other readers.  After all, I’ve been fully upfront that we have made some huge mistakes in the past (hello money fools???) and are trying to rectify that all now.  Now I personally can’t wait to watch that net worth climb. 🙂

I think I mentioned before that I started using Personal Capital and still seriously have mixed feelings on it.  We have more than one account (401k’s) with Wells Fargo, and it’s pulling in my husband’s no problem, while my doozy of a balance is an error message every single time I try.  Grrrrr.  I’ve sent them a message and so far…no response (other than the advisor feature which I have zero intention of using at this point).  So, I had to compile a bit of a spreadsheet that I’ll have to track each month unless PC gets their act together.  I love the idea of it…it’s just not working for me.

Anyway, here goes:

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I’ve created the chart above but will obviously start tracking changes beginning with the end of March.  The cash accounts include our checking and our currently pathetic excuse for an emergency fund – a problem I hope to remedy very quickly.  Our retirement accounts are a bunch of things currently….Mr. Fool’s current 401k, his rolled over previous 401k’s, and his Roth IRA, which is actually missing from the balance.  It also includes my previous employer’s 401k, as well as a rolled over SEP IRA from one year that I worked part-time.  I’m not eligible for my current employer’s retirement plan until July of this year, but I plan to contribute the maximum once I can.  This balance should also see a hefty increase once I max out a traditional IRA later this month – something I’ve never done before.

The investment accounts currently only contain a paltry Acorns balance, but planning to start beefing that up a bit to increase investments without thinking much about it.  I also plan on starting a Vanguard account soon to add savings to whenever our income is greater than our savings.  Our spending is an area I really plan to dive into in the coming weeks/months, because without getting that down, our years of working are many.

Our non-liquid (thus, not easily cashed out) assets consist of two things:  1) our home (around $270K – possibly more based on recent listings in our neighborhood, but I’d rather be conservative) and 2) our boat.  And the cat comes out of the bag!  Yes, we are those types of people that Mr. Money Mustache would love to punch in the face.  We also have a rather large SUV to pull said boat, and that is my primary driving vehicle (ducking now).  Regardless, this is one of those non-negotiables for us that isn’t going anywhere.  We use it often in the warm weather, my husband wanted one for years before buying one (used, that he’s invested time and yes, more money into to make it his own), and we have spent countless hours with friends and family on it that we wouldn’t trade for anything.  We trailer it (no lake house for us, thanks) and take it to a reservoir a mere 15 minutes from our house.  Regardless of all that, I’ve estimated the value at $32K. Likely more, but again – being conservative. I’m not including our vehicles in here because I don’t really consider them assets.  They are a 13 year old Honda Accord and a 2007 Toyota Sequoia.  If anything I consider them looming liabilities, not only for the expenses they’ll cost in the coming years keeping them running, but also in the sense that at some point we will need to replace a vehicle.  They’ve also been a wrench in our spending lately, so hopefully we don’t see any more of that for a while.  We replaced the tires on both vehicles, brakes on the Sequoia and a new battery.  Fingers crossed we’re good for awhile….

Our credit card debt consists of two cards….our main personal card that nearly all of our purchases goes on and is paid in full every month, and a second card that was a card I used for a part-time job that I’m no longer pursuing.  Unfortunately I racked up some debt that now has to be paid down.  I currently have two side-hustles that are paying that down, and once gone, all of that money will go toward either further debt payment or investing.

The student loan is mine, and consists of my undergrad and graduate debt. Maybe some day I’ll talk about that mistake as well, but for now I guess the most important thing to note is that it’s locked in at 3%.  I was paying extra to it each month, but have since decided that bigger debt (like the credit card) would be smarter to get rid of and also investing while the market is down.

Lastly our mortgage.  It’s a rather large expense each month ($1551) but is a 15 year loan locked in at 3% as well. We have roughly 12 years left on it.  Same as the loan above, I was paying extra on it each month, but am currently forgoing that option to invest the money and pay down that extra card.

So there you have it.  The amount doesn’t match what I previously reported, but I know Mr. Fool’s IRA is about $5K as well, so thus the $488K balance, and the boat is now included.  It’s a rather large asset that we could sell for sizable cash if the need arose.  Hoping for some positive changes at the end of this month!

Monthly Spending – Feb 2016 Edition

So, after my last post, I read the Frugalwoods Feb 2016 spending post, and I have to admit it made me feel embarrassed.  Like, WTF are we spending all our money on???  So, the hubs and I took advantage of a morning where we both worked from home (with a sick kiddo – boo!) to review the spending and get a better idea what was going on.

First off, I’m not 100% sold on the Personal Capital spending amounts….maybe I just need to get used to it or I’m just so used to my YNAB that I’m a little attached to that, but I looked at our YNAB number to see what might be different.  For one, I do love that Personal Capital lets me designate certain transactions as reimbursements.  We have medical expenses reimbursed in this manner, and Mr. Fool uses our credit card when traveling for work which gets reimbursed (but yay miles!). So, in YNAB this shows up as “spending” and has to get backed out, where as in Personal Capital it gets designated as a reimbursement and therefore not included in spending.  So, PC 1, YNAB 0….not that I’m keeping track or anything.

Regardless, the YNAB number was $10,387….quite a bit different than PC.  But included in that number was $223 of medical and $1169 of travel reimbursements, bringing us down to $8995.  Then, we also had to put $800 of our hard-earned cash toward one of our rentals (which is totally a topic for another post) for reasons I can’t bring myself to even discuss right now, but obviously not a normal recurring expense for us.  So, if we deduct that just to get a better idea of more average spending, we’re down to $8195 – closer to the PC number.

Included in that number was also $434 for the outdoor project, $332 for the laundry room project (obviously true expenses but NOT normal monthly costs for us), $1199 in auto expenses (also a topic for another post ugh) and our semi-annual $271 car insurance payment.  I budget $50 for that a month and therefore have a little surplus left over each time which at this point I’m just letting build up a bit.

After all that we’re down to $5959 which included $1665 of a mortgage payment ($4294 net).  Still abysmal compared to others, and especially the Frugalwoods when you consider they spent $1K more than usual!  And, lest you think I am calling the $5959 our spending vs the larger number, I am totally not.  But I’m hoping it represents more accurate spending that once the projects are completed  and we don’t have auto expenses  either we can be spending that VS the larger number and therefore saving a lot more.  I also realize I haven’t even gotten into that whole “WTF are we spending our money on?” question, because technically I only talked about the things we don’t normally spend our money on.  But, I’ll save that for another post.

This summer I am SO lucky to have a job where they are going to let me work from home and be home with my kids, which is going to save us $160 a week in childcare expenses.  That money will most certainly be stashed away into savings!

Later this month we will also be getting Mr. Fool’s annual bonus check, and we have already determined that my traditional IRA will be fully funded for 2015, and we’ll see what we do with the rest.  Then in April we have a 3-paycheck month which will mean more income vs spending, and that will get saved as well.  Ideally we’ll start putting money into my IRA for 2016 right away so it’s not last minute.

I’m glad to be on this journey and realizing that we needed to get a handle on things.  We still feel foolish, but hope that 6 months from now and a year from now seeing the changes over time will make us start to feel a little less so.

feb2016

Jan/Feb 2016

So, obviously one of my goals I talked about in my intro post was to get a handle on our money situation.  We have a budget, but when we thought long and hard about exactly what we spend on a monthly basis, we really didn’t know the answer.  We can ballpark it, but ballpark doesn’t work for us when we’re on a mission.  So, that was job 1.

The other thing was to compile all of our accounts into one place to get a handle on our net worth.  This was an area that, honestly, we were far less certain of.  After compiling the number for March 1, I can honestly say that I would have been off.  WAY off.  Like possibly tens or a hundred thousand dollars off.  Luckily the result was better than I expected.  And in this market I consider that a huge win.

So, I’d like to get more detailed on this in the future, but for simplicity sake I’ll do this:  Personal Capital says our spending for Feb (I didn’t start using it until mid-January and not relying on it for that month) was $85% of our income.  YIKES.  Obviously that needs to come down if we’re going to make any sort of progress getting to financial independence more quickly.  Without our mortgage  it’s 66%.  I should also add that the spending amount also includes additional amounts paid toward some debts (mortgage and student loan – our only actual debts).  THIS is why you don’t want debt, people.  It literally eats up all the payments I could instead be saving.  “Same as cash” is NOT a good deal, I don’t care if it’s zero interest!  Because both are low interest (3%) we have decided to instead start saving the additional payments starting in March.

Net worth….this month our net worth totals in at $448K and some change.  Like I indicated, better than I expected, but we still have a ways to go.  $448K isn’t bad, but if your spending is 85% of income, it pretty much sucks.  The FI formula would tell us we have a LONG way to go before FI.

So…..spending.  We are in the midst of two projects that is causing spending to be higher than normal; a laundry room renovation and an outdoor project.  Once complete spending will come down, and then we really need to have a “no additional spending” month to get a good handle on what our minimum monthly expenses really are.  One win though was bringing food spending down $300 this month.  I’ll take it.

feb2016

In summary, we suck.  We really are two fools.  Gah!  Onward toward progress!

Italy, 2015

Two Fools

Two fools, huh? Yep, that’s exactly how we feel. Foolish. We are 40ish year old professionals that should be well into enjoying our years of financial independence, yet, we’re not. And the more (most?) scary part is we really have no clue how close we are.

There’s a quote out there….”you weren’t born to pay bills and die.”  People can think what they want of it, and while we enjoy our jobs, there are plenty of people out there who do not clock into an 8 to 5 job every day (or at least, past a certain point for some) or have non-traditional jobs that keep money coming in.  This is what we’re after….freedom.  Freedom to have more time with our children and more time to travel and spend time together as a family.  Last year I spent 10 days in Italy. It was the trip of a lifetime!  Thanks to the $75 airfare (cost for using our miles) I was able to swing it.  But what if we could do trips like that more often?

We found Mr. Money Mustache a few years back and had a fire lit to get things in order, but I’m honestly not sure what happened. We are busy (but that’s a lazy man’s excuse in the grand scheme of things). Back then I was a stay-at-home mom spending my days with my kids not-yet-in-school. Currently I’m working a mostly full-time job and two part-time jobs. But this new job also was a boon to our income (yes, a 33% increase to your income is substantial, you should treat it as such and not waste it). I’ll admit we haven’t done things the way we should have all these years, but we’re ready to get on track.

So, thus this blog is born…our place to document our plans and hold ourselves accountable. We have used YNAB for years. I have signed on to Personal Capital (though the two seem to be at odds and I need to figure out where I fall on that) and am using it to track our net worth and calculate our FI date. I’m trying to ensure that every single dollar of my part-time jobs goes to pay off debt and/or get reinvested.

Look, the fact that we have any debt at this point is somewhat embarrassing. And I’ll admit, I don’t expect our journey to be near as extreme as other financial independence bloggers, but more to come on that in future posts. We have to find our own path, but now we need to commit.

So, first steps. Establish our baseline spending which we have a decent handle on, but need to do some serious tweaking to. Our food spending is high, other spending needs to be examined….so time to get serious. I need to finish loading the last of our accounts into Personal Capital and have a better handle on our total net worth. Then it’s time for action….what are we going to tackle first (I also have a good idea what this is going to be) and why? What next?

So many questions!!! Stay tuned…..