Journey to FI - November Update

Continuing on with my theme of monthly FI updates, here is November.

Income:  Income maintains steady from our day jobs this month, but we get a nice bump due to getting our newest rental filled.  We got a tenant in and they are paying $975/month.  Being that the house is paid off, I consider about $800 of it profit.  The $175/month is enough to cover taxes and insurance for the year.  I will save the $800 for a couple months for the emergency fund.

Expenses:  Again, spending for the month was high due to our rental renovation project.  Our total for the month was almost $9,400.

Remaining Money:  Still putting all remaining income toward our debt pay down.  I have gotten rid of all the outstanding credit card debt.  Now only my wife's care payment remains.

Debt:  Another month of good progress reducing our outstanding debt down another $5,000 this month.  As I mentioned above, all outstanding credit card debt has been eliminated so now only the car payment and our monthly expenses remain.  I actually added to our cash savings this month.

Savings:  Since I contributed to our savings for this month I will add this category.  For the month we accumulated a modest $2,000 or so in cash savings.  Our retirement investments are separate and are contributed every pay period.

Summary:  Another successful month in the march toward eliminating our non mortgage debt.  I will work hard to keep it this way.  I think I may just keep the minimum payment schedule on the car as it is on a 1.49% loan and I can get more return on my money if I do other things with it.  We will see.

Goals for the Coming Months:  My next goal will be to relax and accumulate some cash for a while.  It has been a stressful year working on 2 rentals so I need a break.  I also need to save up and decide what I want to do next.  I would like to move to our dream home in the next year or so.  I think I will push to set us up to do that.

I hope you enjoyed this update.  

Journey to FI - October Update

It has been another long stretch between posts for me.  I guess that's what happens when we are busy around the holidays.

I did continue to update my monthly tracker so I do have all the data.

I will be posting a few quick updates for the missing months over the next few days.

Here is October's update.

Income:  Still maintain our consistent income from month to month for budgetary purposes.  Our income does fluctuate based on my wife's sales.  She is very successful so we always make more than I budget.

Expenses:  Spending for the month was high due to our rental renovation project.  Our total for the month was a tad over $12,000.  At some point I should dive in and separate our personal vs. business spending, but I am not at that point yet.

Remaining Money:  From my original post stating that we have $5,425 in remaining money, that is strictly from a budgetary standpoint.    That money is all spent at this point because of our rental renovation and debt pay down efforts.  Don't worry, we have our rainy day savings in case of any emergency need for cash, but for the time being, all extra cash is paying for property renovation costs.

Debt:  Our debt was reduced drastically due to the fact that one of my 0% interest offers was expiring so I pushed hard to pay it all down.  That was about $11,000 alone.  Between that and our monthly mortgage and car payments, we reduced our debt by about $13,000 from September to October.  This is a huge impact.

Summary:  After my first month of tracking these metrics outside of Mint.com, I find it exciting to see our net worth grow.  The debt pay down is the big reason for the swing.  Another factor that drove our net worth to increase was the increase in home values.  I am simply using the Zillow value which I believe can be 10-15% off, but it is still a reasonable indicator, to some extent.

Goals for the Coming Months:  Continuing on from last month's goals, I am still working to eliminate the non mortgage debt.  It has decreased significantly from last month, but there are still some expenses from the rental renovation to pay off.  I believe we will be done quickly.

I hope you enjoyed this update.  

Journey to FI - September Status

Building on my last post regarding my personal/Family journey to Financial Independence, I will jump back a couple of months to give a snapshot of our monthly progress.

This first status will be from September when I created a chart that I update monthly.  I will soon post the October and November updates as well.  After that, it will likely be updated around mid month as I try to do my update after I am paid on the 15th of each month.

Income:  We have a pretty consistent income from both myself and my wife.  Our income does fluctuate due to my wife being in sales.  For budgeting purposes I use a conservative amount for her income.  Within our budget, we generally try to use my income for bills and living, and my wife's for saving/investing.  In addition to our personal income, we had $4,100 of income from our 5 rental homes.

Expenses:  Expenses are an area that we really need to work on.  We have some pretty set expenses in terms of our mortgage and child care.  However, we do overspend in other areas, which we are trying to focus more on sticking to our budget.  Our rental expenses for the month were $2,531 for 4 mortgages and our monthly repair reserves that we set aside.

Remaining Money:  We had a remaining "profit" for the month of $5,425.  This money was already allotted as payment for the money we were incurring on renovating the rental property we were working on throughout the summer.

Debt:  In September we had a total of $287,448 in overall debt which includes a mortgage for our personal home and 3 rentals, about $18k of credit card debt, and $3,900 on my wife's car.  As of the creation of my monthly status for September, my goal at that time was to eliminate all of the non mortgage debt by January 1, 2017.  An important point to note is that all of the credit card debt was either just the accrual of our monthly personal expenses or costs associated with rental renovation, all of which are paid in full each month. Any other credit card debt were previous costs of a rental remodel that were on a 0% credit card.  No interest was being paid.

Summary:  This was the first month that I put together this tracking document to give myself a 1 page summary of our financial snapshot.  I do include on my sheet our cash and other assets, but I do not plan to share that.  We are relatively low on cash due to the purchase and renovation of 2 properties since March 2016.

Goals for the Coming Months:  My top priority in the next couple monthly updates will be to eliminate all of our non mortgage debt.  As I alluded to in the debt section, we have a significant amount of credit card debt that is on 0% interest cards.  These 2 card offers expire in October and November so all extra income, and perhaps some savings will be thrown at that in order to avoid any interest.

All of these efforts are to build toward my long term goal of Early Retirement.  My absolute end date is my 40th birthday, but I believe we can achieve that much sooner.  I hope.  I will be 33 in 2 months from today.

I hope any readers enjoy this little snapshot into our lives.  I also hope this may inspire you to begin looking at your own finances and get you on track to achieve your goals.

Good luck.

My Personal Journey to Financial Independence - The Genesis

For much of my life I had the mentality of a person who's life journey outlook entailed the standard goal of getting a comfortable career, working my way up over time, then hopefully being able to retire in good enough health to enjoy it.  My plan included having a wife and kids, living in a comfortable home and enjoying vacations and spending time with loved ones.  I did not necessarily work overly hard in school, but did well enough to go to a good college.  While in college I began a co-op program, which later turned into a full time job.  Once I graduated, I swore that I was done with school forever as it had taken my 7+ years to get my bachelors due to doing school part time while working full time.  However, I soon realized that to get the high paying career I wanted, a Masters degree would be extremely helpful.  So, I was enrolled a short time after that.  I did actually work hard for the Masters and completed the degree in a year and a half.  This immediately paid dividends as I was promoted to a better position and given a roughly 15% raise as soon as I completed the degree.  Fast forward another year, and I was offered a job with another company for a 30% pay increase and better opportunity.  That was too much of an increase to pass up at that point in my career so I took it.  Jump ahead another 2+ years and here we are today.  In the last 3 years I have gotten married, moved to a different city not far from my hometown, have a daughter, and accumulated 5 rental properties.

The strange thing is that in the past few years I have become increasingly aware of the opportunities to not continue with the "standard" life journey of work till your sixties and retire.  I do not mean to just retire a couple years early in my mid fifties.  I am talking about drastically different lifestyles that lead you to being able to retire in your Thirties or younger.

I believe this came about when a friend referred me to a couple of sites where the blogger talks mainly about Financial Independence and Early Retirement.  My first exposure to such concepts came from reading Financial Samurai.  Initially I was just amazed by some of the stories and concepts that he discussed.  Eventually I began to look at my own situation in his posts.  He would look at things such as target net worth based on your age and alternative sources of income, normally referred to as your Side Hustle.  

Sam's articles inspired me to realize that there is MUCH more to life than grinding away in a cubicle to provide greater gains for someone beside myself.  I certainly was not in a place to quit my job to focus my efforts elsewhere, but I needed to figure out what my side hustle would be.  

If you have ever or decide to read Financial Samurai, you will see that Sam is a big fan of rental properties as a source of Passive Income.  The goal of Passive Income is just as it sounds.  Income that is generated by minimal effort.  Basically, making your financial investment work for you.

Being that I 1. Already owned a house and my then Fiance also owned one, and 2. Lived in one of the most depressed Real Estate markets in the country Metro Detroit, I thought this was an opportunity I should take advantage of.  On the other hand, I was also going to try it out of necessity as my house was severely underwater at the time due to a 2007 purchase and the real estate collapse that followed.  I would not have been able to sell and was considering speaking to an attorney about my short sale or foreclosure options.  But I decided to go for it.  I am reasonably handy and can fix just about anything, so I did some renovations and rented my house for about a $200/month profit.

And that was the first real step in my journey toward my future goal of Financial Independence and Early Retirement.  In the 2+ years since, my wife and I have accumulated 4 more homes which provide us a monthly profit of $2400/month as of this post.  I plan to get into more details on the properties in another future post.

All of this leads me to state my goal.  Ultimately Financial Independence and Early Retirement for myself and my wife.  I have built out some other shorter term goals that will lead us to that point, hopefully sooner than my expectations.

Here is my timeline of goals:

7 Years(Age 40) - Financial Independence and Early Retirement for my wife and I. This will be achieved when our passive income gets to approximately $10,000/month.  I believe this metric will change over time as we improve our budgeting and spending habits, but as of today, this is what I feel comfortable with.

2+ Years(Age 35) - Net worth of $1,000,000 combined.  This goal should be easily attainable due to our household combined income being roughly $250k/year including our rental income.  Most of this is attributed to my wife's high salary and great stock option and 401k that she has taken advantage of over the last 8 years with her company.  Her income allows us to invest in our rental properties.  A large part of this plan is dependent upon her continuing to work.  We may have another child within the next 2 years so that may alter things.

1 year - I have a goal of adding at least 1 more rental property per year as a way to increase passive income.  This will be dependent upon the real estate market though.  If the market is still up, I may look into alternative investment options.

This is a very rough outline of my plan. A plan that is always being tweaked and modified due to the new things I learn and other ideas I come up with.

I plan to begin a new series of posts to update the status of my goals and a snapshot of where we are in our progress.

Stay Tuned.

And as always, I appreciate any feedback.

Living With a Spending Problem

Today as I was reading through some of the financial articles that I like to browse, I came across one that I think summarizes most peoples financial issues.  I should clarify that a bit.  The article doesn't really summarize that, the article explains a phrase that I feel summarizes most people's financial woes.  Here is the article.

"They don't have an income problem, they have a spending problem."

I assume I got this from one of the financial writers that I enjoy reading, but I recall a conversation I was having a few years ago and that was my comment on the topic.  If you consider your own finances or just about anyone else, most would have out of control spending in some form or fashion.

Most people simply live their life and spend what they make.  Saving is not the priority it should be. Spending is what its all about.  We have a problem with instant gratification and cannot put off having things for a later time.

The interesting part of the article is that its focus is on high income individuals who still live paycheck to paycheck.  The assumption should be that the more you make, the more stability you should have, but that does not seem to be the case.  Many people in that category probably assume that their high income will have them set for life.  That is the thing about emergencies.  No one ever sees them coming.

These issues can all be addressed simply by following the simple budgeting process I laid out in my previous post. Check it out Here!

It all comes down for having a plan for your money and being disciplined in sticking to your budget.  Once you get some momentum, it can be very exciting to see your balances grow and your debt disappear.

Good Luck.