There I was, sitting at my desk in my company’s office building at 5:50 in the morning, two weeks before Christmas, slowly trying to wake up while reading and responding to emails that had come in overnight. I usually get in to the office at 5:30 in the morning to miss the ridiculous traffic that starts to really build by 6:00 am. The office is pretty much a ghost town at that hour, although there are about 5 other people spread across the 3rd floor of the building at that hour as well. Two of those people actually sit on the other side of the cubicle wall from me and I can’t help but hear their daily conversations.
That morning their discussion was centered around Christmas gifts and what they wanted to receive. Bob, who is about 40 years old and married with one child, was telling Jason that he really didn’t need anything for Christmas because he usually bought everything he wanted during the year. “I’ve got to think of something”, Bob said. “My wife keeps asking me what she should buy me for Christmas and I don’t know what to tell her. I was thinking I’d tell her to buy me an Ipad Pro with the large screen, even though I already have two other regular Ipads.”
I couldn’t believe what I was hearing. Bob was considering telling his wife to spend $800 on an electronic tablet that he didn’t need, just to get her off his back. Previously I’d heard Bob mention that they were tight on their bills and were having trouble putting any money away for their retirement. It’s not hard to see why, when hearing things like that.
Fast forward 3 weeks to another early morning sitting in cubicle land. I heard Bob tell Jason that indeed his wife had bought him the Ipad. I just shook my head and went back to focusing on my emails. I won’t miss sitting there early in the morning listening to them when I retire long before they do.
Wow! I haven’t really been paying attention to our net worth and didn’t realize that in just about a month and a half we saw an increase of nearly $47,000. It’s actually hard to believe how quickly our net worth continues to increase. It sure is going to be a bit of a shock when we have a massive market crash.
Here’s a graphical view of how our net worth has been increasing since I started keeping records:
As you can imagine, we are very happy with our overall progress. Yes, we could have saved more. We’ve been trying very hard to live a rewarding life with some perks, while also making sure we save for our future. We continue to live on about 42% of our after tax, after investment income. That basically means we are living on 42% of our take home pay. We’ve been fortunate to have a pretty high income during our careers so that we were able to save a lot and also enjoy the fruits of our labor. We’re quickly getting to the point that we could do the “Barista FI” approach where we basically take low paying jobs with less stress and coast until we decide to stop working all together. Over the last couple weeks, I’ve started to realize the smartest thing we can do is just continue to grind away at our careers until our daughter is well through college so we can make sure she comes out of college with no debt and we have plenty of investments to pay for absurd healthcare rates. Another wrinkle that is starting to develop is that our daughter wants to be a doctor but is very debt averse (due to her father’s programming). We’ll be looking for creative ways for her to fund medical school if she indeed does continue on that path as we’ll only have about $100K in her 529 plan. The reality is that she may not be able to avoid debt to get through medical school.
Geez! Time flies when you’re saving money! I just realized it’s been too long since I’ve updated the blog. In the last 3 months we’ve continued to see our net worth increase. The key areas we’ve seen increases are in our 401k’s and our home values. I recently booked some of the increase we’ve seen in our escalating real estate market. The real estate market in the Pacific Northwest is going bonkers. It feels exactly like the market of 2008 where every month saw big increases in our home values. We’ve now surpassed the peak of 2008 by almost 10%. It sure does make you wonder if it will all come crashing down again. I’m hoping that it keeps going up for the foreseeable future simply because we will likely be selling our house in about 4 years and every bit it increases or at least levels off helps our retirement “after tax” account. Since we own our vacation house with no mortgage, we’re planning to move out there so we’ll have all the equity of this house to use towards our early retirement.
Anyway, the new net worth number is $1,447,765. To many people that likely seems like a pretty big number. The reality is that it’s not enough to carry us through the next 40+ years of an early retirement so we’ll continue our march toward financial independence. Once we have about $2M in invested assets, we’ll think long and hard about pulling the trigger. I’m continuing to watch the health care situation in the US. It’s certainly not trending toward being helpful for early retirees. It’s hard to believe that the politicians will really make health care crazy expensive for older citizens that haven’t hit the medicare age of 65. If we are faced with $20,000+ health care premiums in our 50’s and early 60’s, we might have to work longer than we want to. The other option we are still exploring is moving to the UK when we retire since both my wife and daughter are British citizens. If we moved there, we’d likely pay more in taxes, but I think it would still be cheaper than paying all the taxes we do in the US, plus healthcare costs. Time will tell.
Edit: Holy moly! I just realized that from July 2016 to June 2017 we’ve averaged a monthly net worth increase of $20,416 and we still have the rest of June to go. Wow!
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.
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.
I was really impressed with an article I stumbled on to in the Atlantic about an author who decided to be open and honest about his financial state. It turns out he is like a majority of the US population: Broke and one problem away from financial disaster. While I found it somewhat depressing that a man at his age is so “stuck”, without any retirement savings, and no end in sight for his working career, I also appreciated his candor and detailed descriptions about the choices he’s made. I highly recommend it!
Also fascinating are the comments at the end of the article. There were so many contributions, that the Atlantic created a whole separate “Notes” article about some of the comments that were left.
As I browsed through the comments, I found one that spoke to me. It was about a community college art teacher that decided to devote a whole lecture on the subject of basic personal finance (even though it had nothing to do with the subject he was supposed to be teaching). While I’ve known these things for many years and they’ve helped me to build a sizable nest egg, it was still worth looking over again. He covers both concepts and basic “spend less than you earn” type stuff. He was shocked to see that it was the most attended, well received class he had ever taught and it was optional for the students. It just goes to show this stuff needs to be taught in schools at a much more detailed rate than it is now.
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.
I’m a completely irrational human being. I often find myself fretting/obsessing or just plain paying waaaay too much attention to small expenses and then freely throwing around a few hundred dollars on *want* items without a second thought.
A great example of this is my reaction when I opened a toll summary statement to see that my wife had driven in the express carpool lanes three times last month. These are the lanes on the road that you have to pay a variable toll to drive in depending on how bad traffic is. We’ve always done well staying out of those lanes but my wife had been driving a carload of kids back from a camp and just couldn’t stand the thought of sitting in traffic any longer than she had to. Unfortunately the price of admission on that particular day was $10.00!! Basically a frugal guy’s version of a dagger to the heart. It KILLS me to spend money on things like that. To add a tiny bit of a shove to the dagger, she apparently enjoyed that trip so much, she decided to use the lanes twice more last month, luckily at a cost of $.50 a trip. I guess I have such a strong emotional reaction to a small charge like this because a) it’s not worth it to me and b) I see it as an unnecessary tax that we can easily avoid. Yes, I know we could spend lots of time discussing what our time is worth (and believe me, my rate is much higher than the $10 toll), but regardless, it’s still something I hate paying.
Compare that to the ease at which I willingly hand over a couple hundred dollars for things like a new Stihl weedeater or a new electronic gadget and it does make me look like an idiot. The phrase “penny wise and pound foolish” has entered my head a zillion times. What I’ve had to try to do is step back and look at the big picture. We’ve never really budgeted for “misc” type stuff each month, but in a sense, we are spending a few hundred dollars a month on just plain miscellaneous stuff. As a percentage of our budget, it’s really not much and should probably be expected. I think the most important aspect of this is that we are using cash, not accruing any debt and are meeting all of our other financial goals. Regardless, it’s really tough sitting here with the dagger poking at my side.