Assessing What We Have

Welcome!  If you are unfamiliar with this blog, see the first post for a brief introduction.

Today I am going start detailing our current financial status and our immediate plans to becoming Financially Independent / Retired Early (FIRE).

Collectively, my wife and I make $98,000 / year ($73,000 net pay) through our full-time employment. I make a negligible amount of additional money (a few hundred dollars a year)  through art-related projects but those are generally treated as hobbies and are done for passion rather than profit.  Other than minimal interest and dividends through bank accounts, our jobs are our sole source of income.

We live on about 25% of our net income ($18,000). This amount does not include any payments towards debts.  It goes up to around 30% if you include our mortgage payment in the amount.  We live relatively cheaply through various lifestyle choices that I will talk about in future posts on this blog or on a separate blog we are setting up (which I will link to in the future).

As you can see, we are far from being ready to retire but we have a plan.  The first step in becoming FIRE is to pay off our non-mortgage debt.  I am putting $2800/month towards my student loans.  Those should be paid off in a few months.  After that, the money will be put towards the balance of our home equity loan.  Once that’s gone, we’ll pay off the auto loan.  So our goal is to pay off these loans as fast as possible.  At the current rate, I hope to have these eliminated by August 2017.  Then we can finally start saving & investing. [Edit: this plan has changed since first writing this post… we are going to save/invest rather than pay off the home equity & auto loans due to their low interest rates. More on that in another post!]

 

I’ll give a brief synopsis of our current savings and loan accounts below (Current as of Nov 1st 2016).

CASH ACCOUNTS

MAIN CHECKING : $5,300

This account is for monthly spending, paying bills, etc. This is account is our primary spending hub. Our direct deposits from our employers are linked here and all of our other accounts receive transfers from this account weekly or bi-weekly.

MONEY MARKET SAVINGS : $6,500

This account was initially set up to hold excess home repair / investment / saving money.  We will still use it to hold excess money we’re saving for short term purchases.  $4000 of its current value will be going towards replacing all of the windows in our house.  The remainder will be for minor other projects but is generally unaccounted for.

SECONDARY SAVINGS : $4,400

The secondary savings account holds money from which our mortgage & auto loan is pulled from bi-weekly.  The excess money that accumulates is used to pay our property taxes ($3,500 or around 3% annually) and quarterly water/sewer bills.

PERSONAL SAVINGS : $360

We each have our own account for personal projects spending allowance. We send $20/week to each account.

CREDIT CARDS

We use credit cards to pay for most of our day to day expenses.  The cards are paid in full every month and offer cash back rewards which are always applied to the balance as credit.

LOANS

STUDENT LOANS : $7,700 @ 4.75-5.25%

HOME EQUITY LOAN : $9,500 @3.99%

AUTO LOAN : $10,500 @2.99%

MORTGAGE : $101,500 5 year ARM @ 3.5%

We pay $100 bi-weekly to the home equity loan, $150 bi-weekly towards the vehicle, and $250 bi-weekly towards our mortgage… all automatically withdrawn from our Secondary Savings Account.  All of these payments are slightly more than the minimum payment.

INVESTMENTS

STOCKS : $1,900

At the beginning of 2016 I started an investment strategy involving stock options which I will talk about in another post.  I have pulled most of this money out to pay down my student loans.  Once the remaining stock can be sold for profit, I will use it to pay down debt or invest in index funds.

401(k) ACCOUNTS : around $6,000

So there’s a good synopsis of where we’re at right now.  Had we have been smart, we would have paid off our debts (or not acquired them in the first place) long ago… before taking on major repairs and updates to our house. The point to take away is DO NOT BORROW MONEY FOR ANYTHING OTHER THAN A HOME & PAY OFF DEBTS AS SOON AS POSSIBLE!!!

Updates will be slow until the debts are paid off. As of right now, paying off those debts are my singular vision. I can’t seem to think beyond that point. Until then, it’s back to work for me!