I’ve been meaning to calculate my savings rate and finally got down to it: 29%. Eh. I thought it would be more, but I’m maxing my 401k and the kids college will be funded by real estate.
I haven’t yet calculated my husbands, but I anticipate his is about the same but with a few differences, like funding our HSA.
We’re working to pay down debt, so our savings rate will remain flat for the foreseeable future (three mortgages!).
Here’s the breakdown:
401k: 15% (*just reduced to 13% due to bonus)
Employee Stock Purchase Program: 8%
529: 1% – this is just sad
Roth IRA: 1%
I wonder what our debt paying rate is? I’m not sure what that’ll tell me, but it will be interesting to calculate. It also varies based on other household spends like kids activities and household repairs. And skiing.
We entered this journey already on it.
With the arrival of our first son, I left the work force. We planned for it only in that we decided it would be great for a parent to stay home, but we did not prepare financially. One salary in Seattle and another kid later, I re-entered the workforce with $20k in debt. That meant we lived beyond our means by $5k/year for four years. Which – probably a shocking thing for the FI community to hear – isn’t bad considering where we were living and not being of the FI-mindset. And we were not depriving ourselves. But we also lived in a very walkable neighborhood – it wasn’t unusual to not use the car all week – and didn’t pay for daily childcare.
We knew exactly what we were doing and we took (baby) steps to minimize that:
Cut magazine subscriptions
Reduced cell phone and internet bills
Stopped dry cleaning
Ate out less
But we also did a lot of things on the opposite end of that spectrum:
We vacationed. A lot. Mostly weekend warrior trips around the PacNW, but also CA, Whistler, HI and East Coast trips. Miles/points paid for some at first, but certainly not all.
We went out. A lot. We lived in an incredible neighborhood with great restaurants, breweries, bars and live music. We couldn’t resist.
We paid a monthly fee for a babysitting service. Then paid them by the hour when we used them!
I could go on with both fronts. This was pre-FI and I don’t regret it, but it’s funny to look back and try to see the logic in these decisions.
So when I say we were already on the journey, we had already trimmed a lot of the unnecessary monthly bills about 10 years ago. It was the FI community that gave us the nudge to take savings a lot more seriously and be a lot more budget-minded. We’re almost 10 months in and we’ve taken the basic steps:
already paid off one credit card and have a plan to pay off all debt
I thought a W4 adjustment would be a logical optimization because we had a large tax return and it would be great to have a bigger paycheck instead. But I can’t figure out what our ideal withholdings should be on our W4. Files jointly with two kids … he claims 1, I claim 2. I see conflicting information on the internet and I’m confused. At the same time, the IRS calculator is not available while they’re updating it for 2018 tax law changes.
Maybe understanding this will hit me on the head or maybe it’s no big deal. A large tax return isn’t the worst thing in the world. But until then, I’m just keeping on the road of spending less, saving more, and reducing debt.
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 …
#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!
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.