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! 😉 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). 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 😉 (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. 🙂 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!

Money Honey

It’s no secret that home ownership has a pesky habit of taking all your moolah and making you wonder where you put it. This house, well, let’s just say it’s been all that and more, on steroids.

It started with the basement, see ya later $3,500!

Fixing Basement Wall with Ramjack

Then we moved on to a furnace. In July. In North Carolina. Just where you want to be spending your dollar bills in the middle of summer. Farewell, $5k – nice knowing ya!

Converting from Oil to Gas

And now we’ve got our kitchen, which after appliances, new cabinets and counters, will be setting us back north of TEN THOUSAND DOLLARS. I may or may not be weeping as I type this.

Cortina Counter Top

The good news is, we’ve gotten a lot of big ticket, necessary items out of the way on the front end of this house, which gives us 1) more time to enjoy said improvements and 2) less concern that a big old expense is looming around the corner.

Ok, scratch #2. There are always expenses looming. 😉

The bad news is that in the last 3-months, it’s been feeling like we’re hemorrhaging green backs faster than we can replace them. And I’m not talking the George Washington variety, I’m talking the Benny Franklin crowd.

The last two months, we’ve had credit card bills over $10,000. Y’all, I made less than that two months of spending my entire YEAR of working the first year out of college. That’s a lot of money, it’s too much money and it was starting to freak me out. Like whoa.

Now most of this spending was planned. We sold our Ann Arbor house at a profit and we were able to use that money for a solid down payment on this house, along with a bit of extra cash to help with these known expenses we’d have walking into this fixer upper of ours, but still. It wasn’t something I felt comfortable with and I told Jay that starting in August a new sheriff was in town. 🙂

Downpayment on House

When we did sell our house, we took about 85% of the profits to pay a downpayment on our new home, and squirreled the rest away to pay for pending projects. Overall, I’m super glad we kept some cash on hand to help with some of the more unexpected extra costs that hit us (ahem, washer 2.0), etc.

Jay and I have always been really big savers, so luckily we’ve been able to pay for all these expenses from our savings, but truth be told, watching our savings account whittle down these last few months has been a bit frustrating. I know that they’re all temporary expenses and I know they’ll all improve the value of our property, but still – spending that much money is just hard for me to stomach, yo!

In general, our monthly breakdown of where the dollars go, looks like this.

Budget Breakdown

That little pie above has been our general budget since we’ve both been employed, and it works out great for us. We treat our savings account as a house slush fund, too, so it’s general $$ that we throw into our savings account each month to use for unanticipated + planned house/life/other expenses. We always keep a set minimum in there though, as an emergency fund.

Even when we have really bad months, where I’m slamming my head against the wall, I’m so thankful for a few things Jay and I put in place early in our marriage that have really be crucial to being pretty financially independent at 27 years old.

Steps to Financial Freedom

1) Live Off 1-Income: Ever since we’ve been married, we’ve always treated my income as our “non-essentials”. Jay’s income pays for necessities, mine pays for all savings. We started using this strategy early on in our marriage to pay off $30,000 in student loans, and just kept bank rolling it forward to pay for house down payments, car loans, etc.

2) Save Early, Save Often: Our first influx of money as a couple was from wedding gifts. Instead of going out and buying big ticket items – we put the money in the bank. We’ve followed suite since.

3) Pay off debt! I felt overwhelmed by the amount of debt Jay had coming out of college (nearly $30,000) – but by prioritizing our expenses and consistently placing needs over wants, we did it. In less than 2-years. Did I mention I made less than $20k my first job out of school?! We were not in fancy well off jobs – very normal – very moderate pay! Any tiny bit you can do, helps! We started payments at $50 a month (before legit jobs) and then started using my income to pay it off quicker once employed.

4) Simple Living: If I could give any new couple, or seasoned couple, one bit of financial advice it would be to live as simply as possible with a lifestyle where only one income is needed. In our 5 short years of marriage, it’s made such a difference for us. If you can’t pay for it in cash – don’t buy it! (mortgages withstanding…) 😉

5) Identify End Goal: Now – not everyone wants/needs to be Bill Gates, right? Jay and I know we’ll always be looking to live a modest lifestyle, so although saving is the name of our game, we’re not looking to buy a yacht, ya know? If that’s your goal – that’s awesome! But keeping your financial goals in perspective can help to keep you motivated and going strong.

Creative Ways to Add To Income

 

One last thing I’ve found to be helpful with financial security – ya got to learn to hustle, y’all! Get creative! Figure out something special you can offer to generate extra income. Sell stuff on craigslist, babysit or do lawn work for neighbors, open an etsy shop.

Along that vein, last month was a really big month for me with my design business. As of the end of August, I’m going to be bringing in almost as much as I was making when I was working full-time. Whoa. Crazy, right?! It’s exciting, and it’s also been a bit overwhelming to learn how to balance the demand that I’m getting for my interior design service. I’m totally humbled, and definitely up to the challenge, but it’s been a pretty crazy ride this month – that’s for sure! Although it’s never easy to start a business, it is very rewarding to see what some hard work and dedication can do over 6+ months.

This is our first full month of being back on track, and I’m happy to report that our financial situation is finally back where it needs to be to keep us in the black. No more kitchen renos or furnace replacements for a while, that’s fo shizzle.

How do you guys keep your finances on track? Any tips and tricks to get into good financial shape?