I have been saving for retirement over the past 18 years with the expectation/desire to retire at the age of 60. For the past year I have been planning the ramp up for the 10 year plan to financial independence. This will enable me to retire by age 51 and my wife at the age of 46. So, why did it take us a year to officially start the path to FI? Well, there were things we had to finish and/or start.
What Needed to be Done Pre 10 year FI Plan:
- My wife needed to finish her Bachelors in Nursing.
- I had to start maxing out my 401k to contribute the full $18,000/year
- We needed to open up an ETF (Electronically Traded Fund)
- We needed to sell my newly purchased used Lexus for a paid off older car.
- We had to pay more attention to what we were spending and why.
- We had to pay off all debts besides the house.
- We needed to start budget pools for home projects, vacations, and rental property expenses.
Wow! I really didn’t realize how long that list was until typing it out.
I’m kind of a hurry up and get it done type person, once I am done procrastinating. This can have good and bad ramifications. Good, for financial savings, bad for spending and vice versa. Good for the desire of completing diy projects, bad when the project runs into issues. You get the point hopefully. So, how did we do? Well I’ll tell you.
What was accomplished Pre 10 Year FI Plan:
1. My wife just received her Bachelors in Nursing (Cum Laude)!
How she did it: Hard ass work on her part. Once she was accepted 2 years ago to the university nursing program, there was no turning back then.
Grade: A+ (Literally)
2. I started contributing 25% of my paycheck to my 401k so that I will be very close to the $18,000 limit for 401k’s.
How I did it: I was contributing 14% of my paycheck and decided that I would change my contribution to 25% of my paycheck which equates to the max allowed over the course of the year. I did not incrementally increase from 14% to 25%. I figured if it got too hard, I could back off the contribution percentage.
3. We opened an ETF account through Vanguard in November/December of 2015.
How we did it: I contributed around $4324 in that time frame. Since the beginning of opening the ETF (6 months), we have contributed about $8,800. I have been remodeling the master bath which has not allowed for more contributions.
4. I sold my 2012 Lexus Hybrid in October of 2015, about 5 months after I bought it.
How we did: I liked the car but my epiphany and subsequent research into FI inspired me to get rid of it even though I knew I would be taking a loss. That 5 month ownership cost me about $4,000. I bought a 2005 Honda civic hatchback with cash and have been happy ever since, just like when I owned one 9 years ago. I just had to rip off the duct tape that was suffocating our financial dreams.
5. I have always paid attention to what I spent but I did not always question whether or not I needed it, why I wanted it, and what I would do with it.
How we did: I signed up for Personal Capital, which makes it easier to track everything financial related. I have held off for some purchases and allow time to pass before deciding if I really need it. This can be hard when working on certain projects. More so if those projects are inherently expensive. There are times when you have to spend money so that you don’t have to replace things again and again eg. bathroom remodel. There is a reason they call it the gold room. We still go out to eat every few weeks, buy things for the kids, and take vacations. DIY, vacations, and time with the kids is important to us, so that is not going to change and has an impact on finances as a result. I try to find the best deal on most big purchases I make and that helps. I suspect that this will be an area of emphasis in the future.
Grade: C (More work is needed in this area)
6. We paid off all credit card debts we had except for the house and rental property. We also continue to pay off any credit card before the end of its billing cycle.
How we did it: We used savings to get rid of credit card debt and fierce weekly payments. Luckily, we only had a few thousand dollars to worry about as compared to many other people that have an average credit card debt of $15,762 per household. We sold the Lexus so that we didn’t have a car payment. Just so you know, the average car loan debt is$27,141 per household. Imagine, the average household has almost $43,000 in debt tied to items that kill their financial independence. We paid for Mrs. WR tuition and books with a credit card (to earn airline miles) and then paid it off before the end of the billing cycle with the savings we accumulated, knowing that school tuition was forthcoming.
7. I have a savings account that is a pool of money for everything. This includes diy projects, vacations, and rainy day fund. I also have a rental property expense savings account to save toward maintenance of our rental property.
How we did it: I already had theses savings accounts but now they are dedicated to specific causes. I also try to put money in each one of them weekly. This does not happen all the time. Bathrooms are expensive and it is taking its toll on the savings.
So, I give us an average solid B grade. Mrs. WB would not have been happy if this was an actual grade on her transcript.
What are the things that need to be done now and in the future? Well, many things unfortunately. We have lofty goals (lofty for us). Here are some easy to read bullet points of things that we want to happen by the end of the year or need to look further into.
End of Year (2016) goals to achieve FI by 2026/2027:
- Contribute a total of $18,000 for the year 2016, to my 401k by the end of 2016.
- Mrs. Wannabe Retiree starts her nursing job today. She will contribute 25% of her pay to her 401k. So, we hope that equates to about $7,000 by the end of 2016.
- We would like to contribute a minimum total of $17,000 to the ETF by the end of the year.
- Look for new ways to cut costs but not quality of life.
- Build up the rental property savings account to $4000.
- Build up the vacation, diy, rainy day fund to $10,000 by the end of the year.
- Start using credit card for everything possible for the purpose of travel hacking. (yes these credit card bills will be paid before the end of the billing cycle:) )
I’m sure there are many things that I am missing and will probably add in the future. We are excited to officially start our journey to FI in our self imposed 10 year time frame. I hope that others can join us and start their own path as well. Soon, I hope to have a graph, updating our percentage in relation to our ultimate FI goal.
Any thoughts/questions? It would be nice to start a dialogue with people. I would love to learn more from the FI community or from people that are starting their own journey. Maybe we can teach each other.