"I've been beat up so much over this, I wish I could retire." - a coworker about 20 years my senior
For the better part of an afternoon earlier this week, a few of my coworkers and I edited a document. To be fair, in terms of what we do, it is a pretty important document. They went back and forth, offending and getting offended by each other. I offered my opinion here and there. After all, if this is what I'm being asked to do for my paycheck, I'll do it. But that's all it was, a task to be completed. If my inputs were rejected by the group (and they were, more often than not), I didn't take it personally. And, until now, I have barely thought about it since that afternoon.
Why? Because I don't really care. Don't get me wrong, when I do a job, I do it well. But, in this case, we were discussing semantics and it was largely a matter of personal preference. Oh, and I don't really need this particular job. If worse came to worse, Mr. B and I could easily and immediately liquidate enough assets to cover our expenses for the next 8 years. If we tapped into our less liquid investments, maybe up to 12 years. Of course, I'm sure it would completely crush my spirit to take an 8 year hiatus only to start back at financial ground zero, so I do appreciate the fact that this particular job is a great vehicle for my journey to the ultimate goal of complete financial freedom. At the same time, this particular job is not the only job out there. And given our 8-12 year cushion, either me or Mr. B could certainly take our time finding something that is a better fit if our current jobs started to affect our personal lives or emotions too much.
That's the beauty of the journey to financial freedom. We are still far from our end goal, but we're already at a point where we do not feel trapped in our jobs. Because that's all they are to us - jobs. A means to an end. They do not get much weight in our day-to-day lives or emotions and they certainly do not define us as individuals.
Friday, July 13, 2012
Sunday, July 1, 2012
How We Got Here - Renting
Since Mr. B and I graduated college, we have been renters. And we have been told repeatedly by friends and family that this is throwing money away. Of course, all of these people are adhering quite blindly obediently to the series of adulthood rites of passage. Degree, job, new car, starter home, dog, marriage, baby, larger "family" home, and more babies. Try to be the first of your group of friends to achieve all of them! There's nothing like keeping up with the Joneses.
Many of these people only scratched the surface of the financial implications of owning amortgage home prior to taking the plunge. Can I afford the monthly payment on a 30 year mortgage? Can I save a few thousand dollars for a down payment? If yes, then why the hell not? Buy as much house as you can possibly afford (or, at the very least, the biggest, fanciest house among your group of friends). Nevermind if you're so house poor you don't even think about saving for financial freedom until your 40's.
At the current 3.7% national average fixed rate on a 30 year mortgage, Mr. B and I could trade our $1,000/month rent payment for a $1,000/month payment on a $217,000 mortgage. Toss in some of our savings for a down payment and we're easily in a quarter million dollar home. Not too shabby. (For reference, we're talking Mid-Atlantic real estate here.) So why are we not all over that?
First and foremost, it's not that simple. The $1,000/month mortgage payment does not include taxes, homeowner's insurance, and the cost of our time and materials to maintain a personal residence and property. Secondly, the total interest paid on such a mortgage is $142,573. That's more than 11 years and 10 months of $1,000 rent payments thrown in the trash.
Of course, our rent payment will probably go up over the next few years and we do pay renter's insurance, so the above is not an entirely accurate picture. However, the argument that renting is just a straight waste of money is becoming much less persuasive.
Now don't get me wrong. We do plan to build/buy a home eventually. But we're talking the graduate level personal finance approach - buying a house in CASH MONEY (to avoid all interest and maybe even be in the position to do a little more negotiating on the price) and only getting as much house as we need, rather than as much as we can afford. It's a moving target, but we'll probably rent for at least another 2 or 3 years depending on how our net worth grows and how long it takes for the housing market to hit absolute rock bottom.
Is it tough to wait? Absolutely. First and foremost, I'm mildly obsessed with interior design and am itching to decorate a home. Sure, I can fix up our rental, but only to a point. I'm not going to put too much money or effort toward something that is only temporary and, not to mention, will have to be put back in its original state when we leave. Secondly, despite my talk about graduate level personal finance, I find myself keeping track of, if not keeping up with, the Joneses. Because buying a home is a major milestone for many people my age and is talked about with such pride, I am sometimes tricked into feeling as though I'm behind the curve.
At times like those, instead of daydreaming about my future home, I decide to daydream about the glorious day in the future when Mr. B and I will pay for a house in cash. And for the following 20 years, while all of our peers are still paying down some nauseating mortgage balance, Mr. B and I will be one step closer to financial freedom.
Many of these people only scratched the surface of the financial implications of owning a
At the current 3.7% national average fixed rate on a 30 year mortgage, Mr. B and I could trade our $1,000/month rent payment for a $1,000/month payment on a $217,000 mortgage. Toss in some of our savings for a down payment and we're easily in a quarter million dollar home. Not too shabby. (For reference, we're talking Mid-Atlantic real estate here.) So why are we not all over that?
First and foremost, it's not that simple. The $1,000/month mortgage payment does not include taxes, homeowner's insurance, and the cost of our time and materials to maintain a personal residence and property. Secondly, the total interest paid on such a mortgage is $142,573. That's more than 11 years and 10 months of $1,000 rent payments thrown in the trash.
Of course, our rent payment will probably go up over the next few years and we do pay renter's insurance, so the above is not an entirely accurate picture. However, the argument that renting is just a straight waste of money is becoming much less persuasive.
Now don't get me wrong. We do plan to build/buy a home eventually. But we're talking the graduate level personal finance approach - buying a house in CASH MONEY (to avoid all interest and maybe even be in the position to do a little more negotiating on the price) and only getting as much house as we need, rather than as much as we can afford. It's a moving target, but we'll probably rent for at least another 2 or 3 years depending on how our net worth grows and how long it takes for the housing market to hit absolute rock bottom.
Is it tough to wait? Absolutely. First and foremost, I'm mildly obsessed with interior design and am itching to decorate a home. Sure, I can fix up our rental, but only to a point. I'm not going to put too much money or effort toward something that is only temporary and, not to mention, will have to be put back in its original state when we leave. Secondly, despite my talk about graduate level personal finance, I find myself keeping track of, if not keeping up with, the Joneses. Because buying a home is a major milestone for many people my age and is talked about with such pride, I am sometimes tricked into feeling as though I'm behind the curve.
At times like those, instead of daydreaming about my future home, I decide to daydream about the glorious day in the future when Mr. B and I will pay for a house in cash. And for the following 20 years, while all of our peers are still paying down some nauseating mortgage balance, Mr. B and I will be one step closer to financial freedom.
Saturday, June 30, 2012
The "How We Got Here" Series
We're currently sitting at 28.3% progress toward our goal of financial freedom. At 5 and 4 years in the "real world" under our belts for me and Mr. B respectively, I'm content with our progress. Not thrilled, because there are things I wish I had done differently. Not disappointed, because I've gotten my financial act together fairly quickly.
The path to 28.3% hasn't always been easy, or even obvious for that matter. Of course, you begin by spending less than you earn and saving the remainder. Then, at least in my case, you start hearing common rules of thumb and striving to achieve those. 10% for retirement, 30% for wants, 30% for needs, and so on and so forth. Finally, over the past year and half since Mr. B and I have combined finances, our objective has been to save as much as possible in order to reach financial freedom as quickly as possible. If you're curious, we're currently saving at least 61.1% of our combined gross salaries.
How did we become such a well-oiled savings machine? Well, we've made a lot of changes in our lives over the past year and a half. Some were easy, and even enjoyable. Others are things that me and Mr. B did not see eye-to-eye on initially and were the cause of some heated debates. And a few have our close friends and family questioning our sanity...
So, with that, the following is a list of topics I plan to discuss over the next couple weeks. These have been the highlights of our path to financial freedom thus far.
-Renting
-Sharing a Car
-Sharing a Phone
-Enjoying Inexpensive Hobbies
-Eating at Home
-Exercising at Home
-Using Our Library Card
-Working Side Hustles
-Delaying Gratification
-Dominating Conventional Savings Advice
-Tracking EVERYTHING
-Ignoring the Haters
The path to 28.3% hasn't always been easy, or even obvious for that matter. Of course, you begin by spending less than you earn and saving the remainder. Then, at least in my case, you start hearing common rules of thumb and striving to achieve those. 10% for retirement, 30% for wants, 30% for needs, and so on and so forth. Finally, over the past year and half since Mr. B and I have combined finances, our objective has been to save as much as possible in order to reach financial freedom as quickly as possible. If you're curious, we're currently saving at least 61.1% of our combined gross salaries.
How did we become such a well-oiled savings machine? Well, we've made a lot of changes in our lives over the past year and a half. Some were easy, and even enjoyable. Others are things that me and Mr. B did not see eye-to-eye on initially and were the cause of some heated debates. And a few have our close friends and family questioning our sanity...
So, with that, the following is a list of topics I plan to discuss over the next couple weeks. These have been the highlights of our path to financial freedom thus far.
-Renting
-Sharing a Car
-Sharing a Phone
-Enjoying Inexpensive Hobbies
-Eating at Home
-Exercising at Home
-Using Our Library Card
-Working Side Hustles
-Delaying Gratification
-Dominating Conventional Savings Advice
-Tracking EVERYTHING
-Ignoring the Haters
End of June 2012 - 28.3%
Mr. B and I have been at this personal finance thing, as a team at least, for about a year and a half. Prior to that, we both lived well within our individual means (admittedly, him to a greater degree than me). So we're off to a solid start. Out of respect for Mr. B's privacy, I will not share actual figures, so I am going to have to be a little creative in tracking progress towards our goal of financial freedom. I've chosen an arbitrary dollar figure to represent the goal. And, in reality, if we had this amount of money in the bank today, I would skip into my boss' office on Monday and turn in my two weeks notice. Who knows if it that will be the case - we may eventually settle on an actual figure that is more or less than this amount.
Anyway, as of the end of June 2012, we are 28.3% of the way to financial freedom.
The end of the month stock market rally substantially padded this figure and, to a lesser degree, we rocked the expense portion of the equation this month. I didn't come right out and tell Mr. B this (fear of failure, maybe?), but I personally made a conscious effort not to spend any money on nonessentials and succeeded! Usually there will be something - a lunch out with coworkers, craft supplies, a movie rental, etc. that I just can't resist. This month, however, I didn't find myself feeling especially tempted by anything. For the record, Mr. B has the discipline of a monk and rarely buys nonessentials for himself.
Looking forward, I do not expect that we will rock out on expenses next month. The car needs its registration renewed and Little B Pup is due for a vet visit. And call me a wimp, but it is highly likely I will be luxuriating in an air conditioned house next month.
Anyway, as of the end of June 2012, we are 28.3% of the way to financial freedom.
The end of the month stock market rally substantially padded this figure and, to a lesser degree, we rocked the expense portion of the equation this month. I didn't come right out and tell Mr. B this (fear of failure, maybe?), but I personally made a conscious effort not to spend any money on nonessentials and succeeded! Usually there will be something - a lunch out with coworkers, craft supplies, a movie rental, etc. that I just can't resist. This month, however, I didn't find myself feeling especially tempted by anything. For the record, Mr. B has the discipline of a monk and rarely buys nonessentials for himself.
Looking forward, I do not expect that we will rock out on expenses next month. The car needs its registration renewed and Little B Pup is due for a vet visit. And call me a wimp, but it is highly likely I will be luxuriating in an air conditioned house next month.
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