Since my last post three months ago, we’ve hit a bit of a bump, but at the end of the day, it will get us to FI sooner.
At the end of July, I knew I would be out of a job in 30 days. Not really ideal, but also not an ideal job. It was the kick I needed to high tail my job search, seeking a change in industry and location for the reasons listed below. After many applications and even more interviews, I got an amazing job offer just six days after leaving my job. This provided a 4-week, unpaid break in which I was able to knock out a lot of the household “To Do” items, but was a little financially tough.
This career change was necessary for my mental health, but was also FI-driven:
Geoarbitrage 1: Change from working in the city to the ‘burbs = save 3.5456% in city wage tax
Geoarbitrage 2: Change commute from daily $10/day train or $10/day parking to 25-minute drive with free parking = save $200/month ($2400 annual savings)
Job Arbitrage: 8.9% salary increase with signing bonus, annual bonus and employee stock purchase option
This is all pretty awesome and we’re in the process of adjusting our finances to ensure we take advantage of and max out our pre-tax contributions. And, more exciting, updating our spreadsheets and FI timeline.
Another financial advantage of this change was our shift to my husbands insurance. We were pre-FI when we chose our insurance with my old employer. Being on the path, we’re scrutinizing the details. We chose to stay on a high-deductible plan, but switched to his employer for these added benefits:
Employer adds $2,000 per year to our HSA (free money!)
Transferring my old 401K to Vanguard. It’s currently with Fidelity at an expense ratio lower than Vanguard, but charges $12/quarter in book keeping fees.
Changing jobs (and changing industries) is hard and it’s a lot of work, but because we’ve made some less-than-financially-ideal decisions in our past, we have to keep working for now. I love my new job and the financial rewards; the path to FI is getting clearer!
We’re about 2 months into this journey to financial independence and we had an awesome month in June! We knocked out some serious budgeting, reduced bills where we could and made a serious debt reduction plan.
The fun stuff:
We’re tracking and budgeting with Every Dollar. I can’t say it’s any better than Mint because I haven’t used Mint as heavily. And now I’m too deep into it with Every Dollar to quit. From May to June we spent $7,000 less … WHAT? How is that possible? Home improvements in May: kitchen table, plumber, etc. We’ve only been in this old house a year, so home improvements are definitely a part of the budget for now. (OK. I spent too much on that table, but I love it and we’ll have it forever.) And we had to pay upfront for summer childcare for two kids – this means we won’t have childcare come out of our budget for 3 months. Despite those large expenses, we still came out of June having spent less on “stuff” and more on debt and savings.
Cutting R’s mobile phone data – using wireless where possible (home, office) and not letting the kids use it – cut the bill in half! From $104 to $49 per month! DING DING DING!
Credit card payments – the first one we’re paying off received weekly payments last month. Being our first full month, we weren’t sure what was going to shake out and where. Happily, we were able to make 3 extra payments! That debt pay off schedule is moving on up like … the Jeffersons. (I had to.)
Account consolidation: Definitely a work in progress. We transferred several 401k and IRA accounts from all over the place into Vanguard accounts. Phew. There were some seriously high expenses that I never knew to look for with other institutions.
With that … my fail. July has just begun and already I’m an FI failure! I spent way too much on a frame. That’s right. A frame. It’s a beautiful, old blueprint of our house and it was screaming to get out of the dusty tube and into a frame on the wall. And the architect was the great uncle of a good friend. That same friend who’s married to the person that introduced us. Pretty wild, right? But it’s really big, so … yeah, I’m justifying another big purchase. I promise I’ll be good for the rest of the month. Bring lunch every day, take the train vs drive and park. And perhaps less wine with dinner.
A colleague mentioned she was inspired by a financial independence book. Intrigued, I did some searching and found the FI community. Wow. I am encouraged and determined by this community and I have so much to learn. I wish I would have found this 20 years ago (I’m in my 40s) rather than doing what’s expected: college, debt, work 40+ hours/week, retire at 65. No, thank you!
My husband and I are committed to achieving this and sharing this journey and knowledge with our two kids (under 10). I’m still trying to work out our timeline: the point we don’t have to work. We’re about one month into this new mindset and just analyzing our budget, fully understanding where we spend and making short- and long-term plans has really jumpstarted this for us.
Our journey begins with 3 tools: education, debt reduction and saving more.
EDUCATION: It didn’t take much to get my husband on board, as I’m typically the spender for unnecessary stuff. There are so many great tools and resources. I started with the ChooseFI podcast – their Pillars of FI (episode 21) is the gateway drug. These guys are an amazing resource and have provided me with the resources I need to start on the path to FIRE.
DEBT REDUCTION: Armed with little financial knowledge, we’re starting with what we know we can do – it’s common sense – debt reduction. Between job changes, cross-country moves and buying (and filling) a new house, we’ve managed to rack up an embarrassing amount of credit card debt over the last decade and just haven’t focused on getting rid of it. It’s stupid, we know … so we’re getting rid of it ASAP. Based on the debt reduction tracker worksheet I found through Choose FI, we’re looking to have our credit card debt paid off by May 2019. That sounds so far away, but at least we have a plan and end date now. I’m 99% sure that we are underestimating how much we can pay each month and I’m certain that we will be getting all that paid off months sooner.
SAVING: Vanguard. It’s all over the FI community. I had no idea that I should be looking at fees or expense ratios. I already have 529s for both kids into which we contribute monthly and I opened an IRA into which I rolled over a Fidelity IRA, keeping a 401k with Fidelity. We’re going to keep our monthly IRA contributions low until we have the debt paid off. Then we’ll max it. HSAs … this little gem! I already had one and didn’t take full advantage. I’ve increased my contribution, lowering my income while socking away pre-tax earnings into an investment account. No brainer!
NEXT 3 GOALS:
Transfer both our Wells Fargo IRAs into Vanguard.
Better understand maxing out the retirement savings – I’m not clear on limits. I think its $5500 per year. Is that for IRA and 401k? I’m assuming that doesn’t include employee contributions.
Set realistic goals for 529 savings and our FIRE date.