Day after day, week after week, month after month, our net worth keeps changing. It’s still continuing to go up, but I have to wonder if we may be in for some pretty good dips with all the things going on in the world. I’m totally fine with a good dip as that just means I get to buy our stocks/funds at a cheaper price. Since we’ve got a few more years ahead of us, I’d actually rather see a 25% dip and then have it slowly recover over the next 5 plus years. Of course, I don’t get to choose what happens so we’ll just keep doing what we’re doing.
As of March 27th, our net worth has climbed to $1,369,581. That’s actually lower than it was last month due to the stock market but it’s still significantly higher than our January number. I’m starting to think more and more about quitting my job as soon as my daughter gets out of high school. We currently have around $65,000 in her 529 education account and I think we’ll have somewhere around $90,000 by the time she heads to college. While that might not cover the entire amount, we’ve told her she should expect to work a bit while in college and also pursue as many scholarships as she can.
As we get closer and closer to the day we can walk away, I’ve been thinking a lot about what we’ll do with our time. The current plan is that we’ll sell our primary house and walk away with somewhere around $250K in equity to invest and then move out to our vacation house (that’s paid for) and live there for about 8-9 months of the year. We’ll spend the other 3+ months of winter down in Arizona or California. We’d like to find an inexpensive place in a 55+ community but unfortunately they don’t want us around since we’ll only be around 50-51. I guess that’s one of the drawbacks to retiring early. We don’t get discounts on our meals and we can’t live in the cheaper 55+ communities. Oh well, I’m sure we’ll be able to find somewhere to stay in Arizona during the winter. It’s a good problem to have.
Over the last 5 years or so, I’ve been getting more and more serious about retiring early. As our assets have increased, early retirement has felt more and more possible. My goal for the past 5 years has been to stop working at 51. In the age of the Affordable Care Act (Obamacare for the 35% of people that didn’t know they were the same thing), I was confident that our assets, along with an affordable health insurance premium, would be able to support our modest lifestyle just as it has for Justin at Root of Good and so many other early retirees.
Then November 20th happened and the Republicans took over Congress and the Executive branch. As they’ve been saying for many years, they want to get rid of Obamacare as fast as they possibly can. While that sounds good to many people, it’s not clear how that will change the health insurance landscape. At this point, all we can do is wait. Initially it sounded like we wouldn’t need to wait long to see how the Republicans will change health care, although over the last week or so, there have been various reports that they won’t bring forward a plan until late this year or some time next year. So we wait.
So what am I going to do in the meantime? I’m going to keep getting up and going to work each day and try to just be patient. My initial thoughts are that I’ll likely continue working past 51 and head towards at least 55. That will give me an additional 4 years to keep building our assets and hopefully give us enough capital that we’ll be able to cover our health care costs from 55 until we are eligible for Medicare (currently age 65, although that could also change).
As we approach our early retirement, we’ll also seriously consider moving overseas. My wife and daughter are both British citizens so we’ve been considering moving to the UK at some point in the future. We’ve looked in to the requirements for legally getting me over there and it would be fairly easy to get approval due to my wife and daughter being British. Obviously moving to the UK has it’s pluses and minuses. Our taxes would be higher than they are here, but we’d also have more predictable expenses for health care and other social services. I think the health care would have to get pretty bad here for us to consider moving just for that but it’s always an option in the back of our heads. Before we did anything like that, we’d also have to run the numbers. It could very well be that we’d pay more in taxes over there than it would cost to stay in the US and just pay exorbitant health care premiums.
In a perfect world, it would be easy to anticipate our retirement expenses but since the world is far from perfect, we’ll continue to try to build a plan that can handle anything we throw at it. That means saving as much as we possibly can now and letting that money work for us in the market until we need it.
Well, it’s a new year and I figured I should update my net worth numbers here. We continue to make good progress on increasing our assets. Our net worth as of today is $1,314,233. We’ve been making great returns with the stock market being at it’s all time high and our continued contributions and dividends continue to add to the pile. With contributions to our various accounts and dividends, we are adding about $100,000 a year to the balance. That doesn’t include market gains. I haven’t calculated it all out but I think we’re actually beating my $10K a month increase that we were doing last year.
So, while this is considered the “boring accumulation phase”, it’s still very rewarding. We’ll just keep doing what we’re doing and watch the numbers fluctuate (but hopefully continue going up).
We continue to march forward on our net worth journey. The last couple months were pretty average, although average has been very positive. If we are averaging a little over a $10K increase per month, that equates to over $120K per year which is pretty fantastic. When I’m doing rough estimates in my head, I use the $10K per month figure to estimate how many years away we are from checking out of the workplace. While we’ve had months lower than that, and months higher than that, it usually comes out to about that average.
The main areas of NW appreciation are due to investment account contributions and company matching and also real estate appreciation. We are in the Pacific Northwest which is seeing crazy real estate values, once again. I’m starting to think this is turning in to San Francisco. While I’m booking the increases in our real estate, I’m doing so very cautiously. Earlier in our careers when I was tracking our net worth, I focused on the overall NW number which included real estate. Now I find myself looking at just the investment accounts, because a) I don’t trust what real estate is going to do and b) You have to live somewhere! All that being said, when thinking about our future, I usually count the equity in our main home as part of our retirement funds since we expect to move to our much smaller second home that is paid for when we retire.
Anyway, the march continues. I spend a lot of time on the FinancialIndependence subreddit over at Reddit looking for new ideas and to hear about other people’s stories. Other than that, it’s been a pretty boring march towards financial independence, which is pretty normal for this stage of the game. When we were younger, it was all about learning the fundamentals and putting them in to action. As we’ve progressed, it really comes down to self discipline and staying the course.
Well, we continue to make progress on our journey to financial independence. I’ve got it in my head that I’m going to check out of the working world in 5 more years. This month’s update to our net worth gives me confidence we just might be able to pull it off.
Here’s where we are at for August 2016:
Net Worth: $1,220,637
Overall we had roughly an $18,000 increase from July. Since I didn’t do a full post in July when I updated the side bar, I think it was actually higher than an $18K gain because I did do the July update later in the month. (I can’t remember when exactly).
When I look back at the June numbers, we saw an increase of over $42,000 over the last two months. I’m very happy with those figures. I’m going to try to be more consistent going forward to make sure I update the numbers right around the first of the month.
The major areas of gains for us were in our investment and retirement accounts. I haven’t been paying attention too much to the market but I think we had a bit of an uptick lately huh? Always happy to see that, although I still think we are going to see a correction sooner than later. Time will tell. (I’ve always been more of a sky is falling kind of guy). We also booked a small increase in our home values, although that was only $5000 and I think we are still being pretty conservative on our home’s worth.
This stage of saving and investing is proving to be as boring as you might expect. Once you have everything on autopilot, there really isn’t a ton to do each month when it comes to your finances. Updating our net worth once a month is about as exciting as it gets.
I had a fascinating conversation with a neighbor of mine this weekend. I had been helping him trim some of the bushes and trees around the house and we decided to sit down and take a rest in the shade for a bit. My neighbor, (We’ll call him John), doesn’t actually own the house. He is living with his brother’s family in the house due to not being able to afford a place of his own. John is 70 years old and never went to college. He is divorced and has a couple grown children and grandchildren. He has absolutely no savings or investments and is living off a low amount of social security.
Previously John and I have talked about money and he has asked me numerous questions. This weekend he asked me much more pointed questions wondering how someone that is 45 years old ends up in my situation. I had previously told him that I always pay cash for my vehicles because I don’t like debt. He also knows that we own our second home without a mortgage and that I intend to retire around the age of 50. As we sat in the shade, one of John’s first questions was how I ended up “being a saver”. I told him that there were a few influences that sent me down the path I’m on. The first was watching my parents suffer through the stress of struggling to pay the bills. Our family owned a business when I was a kid and I helped work in the business from the time I was about 11 years old. I would often go to work with my Dad on Sunday’s and sit behind the counter to keep him company. By the time I was 12, I was actively helping customers. I remember when I was about 13 years old. I was sitting in the back office with my mom as she was paying some of the bills for the business. I remember the stress in her voice and the concern in her eyes as she stacked bills in the “can pay” and “can’t pay” piles. I knew that she also had a similar approach for the bills at home. At 13 years old I remember feeling the stress of how they could pay all those bills. I swore I never wanted to own my own business or stress about paying the bills when I grew up. John was nodding his head while I told the story and said that he too grew up in a house with very little. He still didn’t understand how that sent me on such a quest to try to live the opposite of that.
It was really kind of a surreal conversation because I couldn’t help but think that my future would look similar to Jack’s if we weren’t actively saving and investing for our future. If anything, it makes me even more motivated to continue on the path we have in front of us.
A couple months ago I was sitting in yet another ALL DAY MEETING with a few of my peers at work and saw something that shocked the hell out of me. I was sitting behind my coworker who is probably about 55 or so. The way we were sitting was somewhat sideways looking forward to a big LCD display that had the meeting content on it. Because he was between me and the LCD screen I happened to be staring straight at the screen of his laptop whenever I looked down.
This guy, we’ll call him “Bob” decided to bring up his 401K account through our internal website. While I tried not to look, I couldn’t help glancing in his direction a few times. At one point he brought up his asset allocation screen that showed where his money was invested. I was SHOCKED to see that he had 100% of his $700,000 retirement fund in the company stock. Now this isn’t some kind of tiny company stock. Think Fortune 100 blue chip stock. Regardless, I couldn’t believe Bob had his entire retirement account in ONE stock. Our company stock has been relatively volatile compared to the overall market and frankly we are always one bad news article away from wild swings in the price. If Bob was 25 I wouldn’t really have thought twice about it (although if he was 25 and had a $700K retirement account I probably would have left my wife and tried to marry him). Unless he’s planning on working to 75 or 80, I just can’t comprehend why he’d think it was a good idea to have zero diversification in his retirement account. Of course maybe this account is a small portion of his overall net worth and I’m just imagining the horror that might be, but statistically, I think he’s probably just got all his eggs in one single basket.
I was messing around with one of the tools on the MadFientist site and when I punched in all the numbers it said I could retire in 5 years at 50 years old! I’ve somewhat been obsessed with the idea of “early retirement” and keep up with all the new posts on the Reddit /r/financialindependence subreddit. While, compared to a lot of people on that subreddit, 50 isn’t exactly groundbreaking for a retirement age, I know that it’s pretty darned early compared to most people.
I used the figure $60,000 as a retirement income and only used my investment account totals (as opposed to my total net worth with assets like houses etc) and was surprised to see that it calculates I only have 5 more years. That assumes that neither my wife or I work once I turn 50, which would not be the case. My wife actually likes her job and is expecting to work about 5 years longer than I do. That will give us the safety buffer of living off her income for 5 years and letting our investments continue to compound. We also will have the added benefit of getting our health insurance through her job.
So, my five year horizon is giving me hope and helping me hang on at work, even though I’m not very excited about my job. (And yes, it will be very hard to walk away from a job that pays over $100K per year.) I think what I’m most excited about is getting through the next five years and then knowing that I could pull the trigger at any time. As the saying goes, “I’m just one bad day away from retirement”. At this point, I’m 5 years and 1 day away from a bad day!
Time flies when you’re having fun and apparently money piles up too. We have seen some very good gains in our net worth over the last 10 months. Overall it was an increase of over $150,000. That’s more than $15,000 a month, which is more than we make by far. We are starting to see the rewards of compound interest for sure. I’ve also been keeping an eye on dividend income. I don’t know why I never spent more time paying attention to dividends but now that our balances are larger, it’s awesome to see that money paid in to our accounts every quarter. I’ve been aggressively transferring excess income in to our brokerage account by using automated transfers. It’s much easier to pay yourself first consistently when the transfers happen automagically!
I’m starting to think more and more about an early retirement. While I won’t be setting any records in that territory, it’s starting to look more and more like I’ll be able to check out of the rat race at around 51 years old. I’ve chosen that as my target because my daughter will be heading off to college (using funds from a 529 account we’ve been building for years). I expect my wife will work a few years longer than me since she’s a bit younger and that will help us continue to compound our investments that much longer. I’d like to get our net worth as close to $2M as we can before I retire but I’m not going to make that a mandatory requirement.
I’m also spending a lot more time on our after tax investment accounts. Looking back, this was the single biggest mistake I made during all of our years of saving and investing. I had always been somewhat scared of the tax requirements on after tax accounts but it’s not nearly as tough as I thought (especially now that brokerages have to track my cost basis).
Anyway, that’s the quick update on our net worth. I’m hoping to get to $1.25M by the end of the year. We’ll see how it goes.
Just doing some quick analysis of our saving progress. In my handy dandy net worth spreadsheet, it shows we are saving 31% of our gross income in our 401k accounts and additional payments to our mortgage. We put an extra $200 towards our mortgage balance each year just to help speed up the payoff a bit. While many will argue we should be directing those funds towards our investment account, I can assure you we are also contributing a decent amount to the “after tax” investment account as well. The goal is diversification and moderation with all of our money.
Overall we have about $237K left on our mortgage with an estimated home value of $380K. That’s our only debt and has an interest rate of 3.75% so we aren’t too worried about it. When we decide to quit working, we’ll sell our primary home and move to our other house that is paid for. The good part of that plan is we’ll be able to invest the equity from the house sale and have zero tax liability on it. That combined with our other “after tax” accounts will help us manage our pretax withdrawals to maximize tax efficiency.
Another statistic that I keep an eye on, although it’s not nearly as important, is what I call our “net worth savings rate”. This includes all dollars that we put towards all of our accounts. That savings rate is 47% and includes things like my daughter’s 529 account, all the 401k contributions and additional mortgage payments and also includes what we are putting in our after tax accounts. I’d like to get this up to over 50% but we’re pretty happy with the current overall progress.
At this point, we are really on autopilot. If we were to stop contributing to all of our accounts today, we would just have to wait longer to retire comfortably. We are continuing to aggressively save because, a) we don’t need all the money we make to live day to day and b) we’d like to have the option to retire earlier than the traditional age.