Digging out of a financial hole: 18 months into our financial independence journey and 2019 goals

not climbing ropes

Looking back at our 2018 goals, we accomplished all but one-ish:

Wins are fun, so I’ll start there. In 2018, all three of our properties have increased in value! According to both RedFin and Zillow, they’re up. That’s a satisfying – and easy – lift in net worth on Personal Capital. But there are some big variations in values between those two and I’m going to look into why. Expect a post on that.

So, the hole. I feel like it’s been slow progress on debt reduction, but looking at the past 18 months since we’ve started down this path, we’ve reduced our debt by $42,901. That comes to $2,383 per month. That’s a lot of money! This includes our consumer debt, home equity line of credit and mortgages. All of our optimizing has really paid off – it  truly is the aggregation of marginal gains.

jan 2018 debt reduction review

Keeping up the momentum in 2019:

  • We’ve just consolidated our final two credit cards into one 0%, $0 transfer fee card – it’s under $15k, so we’ll knock that out quickly.
  • Then ramp up the HELOC payments and transfer some of the balance to a 0% APR to ease the interest being charged (>$200/month – UGH).
  • The car payments are 1-2%, so we’ll let those loans run their course. These monthly payments will avalanche to …
  • Increase payments on the lowest of the three mortgages; I will re-map the payment schedule once we’re at this point.

All too often though, we (probably me) fall off the FI wagon and succumb to big spends. Some we plan on, others are not planned. Planned on:

  • 2018 Income Taxes: With the changes in tax laws, we think we’ll be paying around $3k. This wasn’t planned on, but now we know, so I’m calling it planned. This was due to the new property tax deduction cap of $10k.
  • Summer Camps: we enrolled before November to take advantage of the early bird discount (saves $30 per week; with 2 kids for 8 weeks, that’s a savings of $480)
  • Finish exterior painting: about $800 remains
  • Little League: travel team + regular season = >$1000. The payments are spread out, but still, it’s a lot of money for a kids sport and that doesn’t include equipment!
  • Monthly expenses for after-school childcare and music lessons will remain the same through June.

I wonder what large unplanned spends we had in the past 18 months? I’m sure there are many – look for that post in the near future!

Retire Early and Pay for College … is it Possible?

I have nine years. What will college cost in nine years? It’s a daunting thought and I try my best to avoid it. And think I must I live on Fantasy Island when I say I’m going to retire at the same time I’m sending my two kids off to college. I honestly don’t know if early retirement will be able to happen at the same time. (Loans are not an option – personal parenting goals.)
College is a wild card. Or maybe I want it to be a wild card because all my (limited) research shows tuition will about double and that’s scary. The Vanguard college tuition calculator provides a pretty basic estimate of anticipated costs. Low-ball estimate is that a four-year college education at $100,000 today will increase to $167,000 in nine years.

  • 529s: Today’s standard for college savings. Put it in post-tax, pull it out for education-related expenses without penalty. We have two, established by the kids’ grandfather when they were babies. Our nine-year-old has ~$12k today. We contribute $100/mo. At this savings rate, using a compound interest calculator, this will be almost $40k in 9 years. Maybe enough for one year if we stay at the same contribution rate.
    • We increased our college savings another $100/mo into each of our Roth IRAs. (No, we’re not at the point where we can max these out yet.) Withdrawing from a Roth prior to age 59.5 carries penalties, unless for a qualifying reason. Your child’s education is one.
    • And there’s this: “… most parents should max out their Roth first then look at funding a 529 plan.” With that, we will make a plan to max these out. I wonder if we can squeeze that into 2018?
  • Community College Transfer: I really like the idea of saving on tuition by going for two years at a community college then transferring to a four-year, but there seem to be more drawbacks than positives. Maybe this will shift to being a more common practice in the future, but I can’t plan on that.
  • Having recently moved from Seattle, I’m wondering … perhaps moving back to enjoy the mountains and sound, while taking advantage of UW’s Dual Enrollment would be worth considering. (Reason #458 we should move to Seattle.)
  • Scholarships? This Washington Post article is old, but it probably still stands close to the truth today: 19% of high GPA students receive academic scholarships and 0.7% receive athletic scholarships. This would be really great, but I can’t count on it.
    All PGA players start somewhere
  • Go Pro: Our younger son is eight and has declared that he will be a professional golfer. So be it.
  • Real Estate: Our obvious choice and we’re so so so thankful we have it, because I really don’t think we could achieve the savings rate we’d need to pay for college without loans. We have two rental homes in the crazy Seattle market. We’ve owned one, our ex-primary, for 11 years and the other for four years. Either of them would more than pay for both kids to go to college at today’s average tuition rates. We can’t predict what they’ll be worth in nine years. I don’t have a crystal ball. But this is what will pay for college and enable us to retire around the same time.

    ​I hope.

Spreading the FIRE

I’m starting with our wins of the week:

  • Filed our taxes via H&R Block and got fat federal and state returns (this probably means we need to adjust deductions)
  • Took federal return to pay off one card! WHOO!

Going for the Gold!

golden gardens

No one wants to stop spending. I haven’t found too many like-minded friends in my circle of friends. A co-worker is enthusiastically into FI, so it’s pretty awesome to share learnings and successes with each other. But among my close friends and family, it’s not spreading. I’m not exactly pushing it either. You have to be interested in learning and open to change. And breaking away from our consumer-driven culture isn’t something a lot people are interested in. People like to shop.
But, let’s pretend.
At this point, if asked, I would recommend the following books:

I haven’t read these, but they’re on my list:

Podcasts:

Blogs: I don’t read too many – just not enough time, but I like these:

We’re nine months in and these are all common names to me now. There’s such a wealth of free information foranyone that wants it. It’s like we all have the ability to stretch this super muscle, but we don’t. It doesn’t have to be complicated, there are several simple changes you can make that make a huge impact. Anyone can do it!

2018 FIRE Goals

Building on the strong foundation we set in 2017, here are our goals for 2018:

#1: Debt reduction. We made some great strides in 2017 by simply organizing our finances and recognizing that we need to be more aggressive and focused on debt reduction. This will, of course, continue …

Hawaii, 2015

#2: Travel. We haven’t traveled much lately and we NEED to! This is a no brainer: open a Chase rewards card. Actually, I already got mine and my husband will get his soon. We went with the Chase Sapphire. I’m not sure yet if we’ll get as aggressive as the chase gauntlet just yet. We’re thinking a family vacation to the Bahamas … perhaps that’s because it’s freezing cold right now.

​#3: Max out all pre-tax contributions (401k, HSA, FSA).

#4: Increase college savings. Keep 529s at $100 per month and contribute an additional $100 per month into another, separate investment account or Roth IRA for each child.

#5: Save (more) on wireless phone bills. Change DH from Verizon to a Monthly Shared plan with Total Wireless for $60 per month, saving $67 per month. That’s over $800 per year. Cha-ching!

The debt reduction is the biggest nut: credit cards, HELOC, two car loans and three mortgages. It’s daunting, but it’s there and we’re going to make it disappear. POOF!