Retirement Tracker

Best_Budgeting_Advice_Millennials

Yes, I’m 30. Yes, I’m talking about retirement. Call me crazy, but this girl just can’t help that I like to plan! πŸ˜‰ I went into our frugal philosophies and goals before, but since it’s officially been 1-year since we became retirement saving ninjas – I wanted to give everyone an update on our progress. Our goal has always been to live a simple, meaningful life. Especially now that we have this kiddo (soon kiddos) romping around, I’ve found a stronger and stronger desire to work toward a goal of financial independence. I know for us that will never mean not working cause this girl has got to keep busy (and frankly I LOVE my job!), it will just mean the flexibility to choose the life paths that present themselves to us, vs. feeling locked chain and anchor to the 9-5. Because let’s face it, feeling forced into anything is just not a recipe for a happy life, and yolo y’all!

I’ve referenced Mr. Money Mustache before, who’s principles have always been a guiding beacon for us. One of his big tenants is the 4% rule – essentially, in order to retire off your nest egg, you need a sum that allows you to meet your living expenses by drawing down 4% at a time. He actually breaks it down here into the multiplier you need for that which is Monthly Living Expenses x 12 x 25. So the multiplier here is 25 times your annual living expenses (for others that may be interested in following a similar formula). We will personally aim for a number slightly higher than this, but it’s a good baseline to reference for starting.

Our general game plan for retirement savings and income stability has been two fold. Although we’re trying our best to invest heavily in conventional retirement accounts in this season of life, we’re also super focused on paying off our home and our condo. I personally feel tied to both of us working full-time until our mortgage is paid off in full. Many frugal living advocates advise holding on to your mortgage (you keep tax deductions, many loans these days are low interest) but again, I guess it’s the risk adversity in me that really doesn’t like the idea of having TWO mortgages hanging over our head – it’s just a lot of capital that is no longer needed – not to mention, once paid off, the condo we own becomes part of our income generation as well (since our monthly living costs are so low, this income stream (albeit nominal) will help get us much of the way toward monthly expenditures.

To date, we’re 37% paid off on our mortgages (so 63% more to go until we hit financial independence here). If we continue to have similar income streams over the next few years we’re between 6-7 years from having these paid off. So still a while, but certainly shorter than a conventional 30 year loan. To pay these off as quickly as possible, we’ve increased the principle dollar amount by supplementing it with any rental income we have coming in. When H starts K in 2-years, we will also funnel his monthly daycare payment into this pot, and we will do the same with our daughter when she starts up at elementary.

For our retirement assets, we’re about 14% of the way toward this goal. I stated initially that we’d like to be financially independent within 10 years (so 9 years, now).Β The market is also bound to fluctuate – a lot – which is not something I stress too much about y’all. We don’t change our investment strategy during ups and downs in the market, we just keep plugging at the max contribution rate we can afford. Much of our retirement income will not be available to us without a penalty before we’re old geezers so if we get to our goal retirement amount by 40, for instance, and then let it sit for 25 more years, even assuming 5% growth (which is my conservative figure year over year), that’s actually much more than we’ll ever need. Because we’re limited in what assets we can pull down from when we’re younger (40-60ish) we’re focused on paying off our house, etc, so that we can have very minimal monthly expenditures sans mortgage and can use our rental income for our monthly needs like groceries, etc.

Y’all – my one word of encouragement on this would be to just *start* saving. Like $5 a week start saving. If you have an employer contribution, max it out guys! That’s wasted $ on the table! And if you think that there is no money to save, I’d *really* encourage you to look at your spending and see where you can eliminate something that you’ve come to take for granted. For me – y’all – it was Target runs. Cliche, I know. But cutting this down and just asking myself – do I need this (?) has been a critical (small) way I can move toward better spending habits. And don’t get be wrong, I still lurve me some target, but I’ve found it’s much more fulfilling to buy our clothing, etc second hand much cheaper, and I don’t have the guilt or the burden of the excess spending.

One more life hack – I swear y’all – one of the biggest drains I think on families nationally is our expectation of owning new (and excessive amounts of) cars. When Jay and I got married we sold both our crappola cars and bought a 2007 Toyota Prius, which we drive sparingly. Not having a monthly car payment, or an expectation of a fancy/new car, has been critical for us. Cars are the biggest depreciating asset around, they’re nice to have from a utility standpoint but unless I’m feeling like Tevye after he hit it big and became a rich man, don’t expect me to be driving around in no Lexus πŸ˜‰ (BTW – all time fav dance move is the rich man shoulder shake – go watch Fiddler on the Roof if you don’t know what I’m talking about – it’s a hit at parties)

Ultimately – $$$ is all about finding what works for you and your family. If you like eating out every week – go for it! If you prefer a new dolce purse, that’s awesome. But if you find that you regret some of those expenditures at the end of the month, I’d encourage you to take a hard look at your monthly bills and see if there are ways you can funnel funds toward more productive long term goals. For us, we’ve found the equation to happiness is simplicity – and ultimately – what makes both Jay and I happiest these days is spending time with our little humans, so the sooner we can optimize that, the better!

Psst – I also loved this very simple, straight forward analysis by MMM shows how (2) teachers can reach financial independence in 10 years or less. πŸ™‚ Hint, I make about as much as a High School teacher (aka NOT a lot) – so early retirement is definitely something that’s attainable for many!