Our net worth is close to $900K! After an initial hiccup at the beginning of October, the markets have continued moving up. As you’ll notice our cash holding is at an all-time high. Major part of it is due to known expenses coming up, part of it is dry powder when the markets takes a dive. Does this sound like market timing? Well, yes, it is! But the amounts are so small to what we have out in the market invested, it does not really matter in the large scheme of things. It’s more to do with mental jujitsu, that we have some cash around when the correction comes.
This is what we are on track to make through the end of the year.
- W’s base salary is $101,296
- W got a bonus of $2,865
- M’s base salary is $153,000
- M got a bonus of $11,400
Our total yearly income is (or would be if we continued our employment till the end of the year) $268,561
This puts us in the top 3% of US household income. Let’s pause for a moment and reflect on that. We are incredibly blessed to have a number of factors working in our favor, a lot of which are just plain birth circumstances. Sure, we work hard and made conscious choices to invest in college educations but that doesn’t even tell half the story.
A late monthly update post! We had some planned travel from end of September so didn’t get this out in time. Let’s dive in.
Another good month in the books. We’re hoarding some cash due to a planned expense coming in the next few months. Markets have been doing well. All is good.
Yes, carriers – plural.
We had been with T-Mobile for about 12 years. Our monthly bill, for a family plan of two, had averaged out to around $75/month for the past couple of years. Not bad. We were grandfathered into an old plan and didn’t quite think much about it.
But starting this year, T-Mobile dropped the corporate discount we used to get. Monthly bill jumped to $84. Just a $9 increase, still it got me thinking if other comparable options were out there with a lower cost.
After a bit of research and a lot of procrastinating, we finally pulled the trigger to switch in August.
W went with Google FI. You pay $20 for unlimited calls and texts, and $10/GB of data used. One month cost was $32. This is post paid with users only paying for the amount of data they use. Coverage is quite possibly even superior to Verizon as Google FI uses combination of any available network and wi-fi spots. Can keep old number.
M went with Mint Mobile. This is a prepaid MVNO operating on the T-Mobile network. They have “free” unlimited talk and text on all of their plans. You “only” pay for data. Paid upfront $66 for 6 month, with 8 GB of 4G LTE data every month. That works out to $11 a month. This is a promotional offer that anyone can avail. Regular priced plans start at $15/month for 12 months, for 3 GB of data every month; and other combinations of number of months and data limits – all prepaid. Coverage is same as T-Mobile. Can keep old number.
By switching we have effectively cut our phone bill in half, with same or better coverage. Boom.
August was the second month this year that our net worth dipped by over $12K. And that’s ok. How ok? Even with the monthly dip, our net worth is over $144K for the year! Frankly, the market run we’ve been having is almost unprecedented and it is bound to end at some point. But from that end it will rise again. All is good.
Valuation of retirement assets, which is almost 70% of all our non-property assets, decreased by ~$17K. Liquid cash in bank accounts increased over $3K but most of that increase will go towards paying off the fence we had installed couple of months ago (they billed the invoice late).
We also stopped paying the extra monthly $3K towards mortgage principal that we’d been doing since the start of the year, in anticipation of the reduction in income that will happen when M stops full-time work.
Other than that, a mostly quiet month. We’re enjoying the long Labor Day weekend. Kiddo will be going back to school this week. Some travel planned for end of September.
A quietly steady month for us. Markets have been doing their upward trajectory. There is a big group of people who think a correction is due, including me. It could come in a couple of months, in a couple of weeks, or we could be in the middle of one right now. Who knows? That’s why we keep investing every week, every month.
Major expense for last month was our semi-yearly auto insurance premium for $839. Obviously an expected expense, and we plan and save for this throughout the year.
Other than that, summer has been treating us well. We have a few short travels – extended weekend – planned for this and next month. Life is good.
In one of our first posts, The Who and the What, we had alluded to our plan (hope?) of being FIRE by 2023. The time has now come to throw some light on activities behind the scenes that will radically change the 2023 timeline.
First, why 2023? With the accelerated pay-down of our mortgage, we would outright own our home in 4 more years. Assets would have grown as well and it would be the perfect time to bow out of full-time jobs.
What’s changing? Well, we are going to super charge one of our RE (not quite the FI) date and slow burn the other’s FIRE date.
M is going to stop working full-time by beginning of 2020. (possibly earlier)
W is going to work full-time, foresee-ably, till 2030.
Why is the timeline changing so drastically and differently for both of us?
Long-ish story …
M started a job last year that increased the paycheck by about 50%. But with that added money comes the multiplied baggage of corporate America – longer hours, more responsibility, travel. Ah, travel. M has been traveling every week since the beginning of the year! People within this industry are are expected to, and do, travel a lot. Before taking the job we were aware about the travel aspect but did not quite understand the rigors it would put on the entire family. The burden it puts on one parent to take care of everything in the home.
Especially, not being home for our child, D. One thing that became painfully apparent was how much M was missing D, and vice-versa. So Travel, bye Felicia!
Another factor is the culture of the industry M works in. People are very, VERY driven. Most will not think twice before putting in an 80-hour work week. The unwritten “expectation” is 60 hours, which M was aware of and have no problem in following. The more M interacted with senior leadership the more M questioned whether M want to be like them in 5 years or so. So completely invested – heart and soul – into the company and what it stood for and the work. It is not in M’s nature to be that invested in work.
Maybe switching to a job that did not involve travel, or moving to a different industry, could be the cure?
This led to a greater introspection of what M wants from a job or life in general.
What M realized is that spending time with family is the #1 thing right now. Especially since D is growing up so fast that missing days away from family is akin to missing a new facet of personality developing. Even a job that doesn’t require travel would require going in to work from 9 to 5. During the summer. On a gorgeous day.
Go out and play. Hit a ball. Catch a fish. Kick a ball. Ride a bike. Throw a ball. Build a castle in the sand. Ride kayak. Get a couple of bruises to reminisce about.
When being at daycare is grandly trumped by the above actions!
FIRE, technically, should give us the time to spend together as family. There is a meme doing the rounds of social media. It says,
We get 18 delicious summers with our children. This is one of your 18. If that’s not perspective, I don’t know what it is.
As parents we get 18 years to really interact with our progeny to mold them into functioning human beings. I would argue that it is actually less than 18 years when you subtract the 0-4 years in front, and possibly the 4 years of high school. 10 full years. If we can’t give our kids the highest priority for these formative years, which is on average one-eighth of our life span, what does that tell about us?
Another thing that came out of the conversations was how W did not see the RE aspect of FIRE the same way M does. W really likes the work, the workplace, the people interaction. Even if we stayed on our current plan, and were to be on the verge of FIRE in 2023, W is not sure if quitting the full-time job would be the calling. W’s health insurance continuing through work is another added bonus, which in turn keeps our out of pocket costs down.
This double realization – where M does not want to continue full-time work and W does want to continue full-time work – made us stop and rethink our FIRE path forward. Could we be at a point where if we did not put in a single dollar towards investments, we still could end up being FIRE in 11 years?
And running the numbers, the answer is a resounding yes!
From our end of June post, we have $604k in retirement accounts. If we stopped funding all of our retirement accounts right now, at the end of 11 years, that sum would have grown to $1.16M, at 6% compound interest. Which is quite a conservative estimate.
It is a very realistic scenario that we might be truly FIRE by year 9 or 10.
Adam, over at Brewing FIRE, had this very lucid and dear to heart post about “Coast FIRE”. He explains the “stopping point” where “we will stop pedaling and let our momentum carry us to financial independence“. Encourage everyone to go over there and read his piece in entirety. He ran some good numbers as well.
We think we are at this coast point now. We can cut back on work, we can remain thrifty (maybe a bit more so), and can start to appreciate the mundane aspects of life.
Wait, what will M actually do after leaving full-time job? Being more involved in taking care of the family is where most of the freed up time will now be spent. Things like cooking dinner most days of the week. Mowing the yard and cleaning the house, and not outsourcing those chores. Less or no before and after school care for D. Even self-care activities as going to the gym regularly, playing on recreational adult sport teams.
M is certain to do some sort of part-time work as well in RE. M really wants to pursue some hands-on endeavor where the fruits of labor are tangible. Coaching athletics/sports, substitute teaching, tutoring school aged kids. Getting a commercial driving license and doing some seasonal work. Maybe get a CFP certification and become a financial planner to help families who aren’t as savvy. Maybe getting involved in local and grass-root activism. There are plenty of options around.
Netting around $1K a month shouldn’t be a huge deal with a few days worth of few-hours-a-day work.
M has worked all 15-years of professional life sitting in front of a computer. That is about to change and the excitement is palpable 🙂
We hit two milestones last month. First, our assets crossed over the $1M mark for the first time ever. Second, our Net Worth went over $800K, for the first time too.
Mostly this is a result of the markets swinging up by over 7% in June. Always remember, the markets will show volatility in the short term, but over the long run – think 15, 20 years – the markets will trend upwards.
Major expenses for June was $1,379 as down payment for a fence we are getting installed. The work will be done in July. Remainder payment of ~$2.5K will be made later this month after the installation.
We also bought an ecobee – smart thermostat – last month for $214, which is supposed to “pay for itself” in a few months due to reduced electricity and natural gas consumption. I have my reservation about how much we will actually save, but hey, the little device is cool. It is integrated with Alexa – Amazon’s voice assistant – and now our thermostat can play music. Wow.
Debt went down by almost exactly $4k, which is about par for us.
I’ve alluded to some changes coming about. Need to find the time and the mental clarity to put that in a post!
Our first month in 2019 where we turned red month-over-month.
The markets declining about 6% in May had a major role to play.
Major expense last month was a $2.5K payment for an emergency room visit from 2 months ago. All good on health front though. Another $2.75K on flights for one set of parents. This is a yearly expense baked into our finances.
Reduced debt by $4.2K by mainly paying extra on the mortgage principal.
Besides that another month of the usual. Markets could go down even more. Or it could rise. That’s how the markets work. It’s all good.
The basic premise of this post is this:
You should get the longest term mortgage that you can get. Say, 30 years.
You should try to pay it off much faster. Say, 10 to 12 years.
Note: If on the 30-year mortgage you were to pay every month as if you were paying a 15-year mortgage, you WILL NOT be able to pay off your 30-year mortgage in 15-years.
It will take you a few more payments, depending on the rates of each mortgage. That is the premium you would be paying for having lower monthly payments, but with a greater rate of interest.
But, let’s suppose, you were to pay your 30-year mortgage as if it were a 10-year mortgage, you WILL pay it faster than if you took out a 15-year mortgage and paid the standard calculated mortgage payment every month.
As an example, let’s work with the following numbers. Here is the link to the Google sheet that lays out the numbers …in all their gory details 😀
(Rates are from about 5 months ago)
Principal mortgage amount: $300,000
Rate on a 30-year mortgage: 4.5%
Rate on a 15-year mortgage: 3.875%
If you were to take out the 30-year mortgage, and if you were to make the full 360 payments, you will end up paying $247,220 in interest on your $300k loan.
But we don’t want to do that. This is the control option. We want to know what the interest number is but we will not be following this option.
If you were to take out the 15-year mortgage, and if you were to make the full 180 payments, you will end up paying $96,057 in interest on your $300k loan.
Now …the scenario we want to focus on.
In this scenario, you are paying your 30-year mortgage as if you were paying down your 15-year mortgage – i.e. you are rounding off your monthly payment to what would amount to if you were paying a 15-year mortgage, an extra $680.26 that goes directly in reducing your outstanding principal every month. In this case, you end up paying $120,893 in interest, and you pay this over 192 payment.
More than a 50% decrease from $247K to $120K. Voila! But still more than what you would pay for a 15-year ….
Why 192 payments? Because it won’t be 180 payments as less is going towards paying down the principal than if you actually had a 15-year mortgage. This amounts to paying around $96 more in per month for what I call the “premium for safety” that you pay for not taking out a 15-year mortgage.
Whew. Still with me? We have one more scenario to cover.
Now …we come to the scenario that I really want to focus on.
Look into the second sheet/tab in the worksheet.
What if you were to pay down your 30-year mortgage as if you’re paying a 10-year loan (with the rates from the 15-year loan).
You would end up paying only $76,035 in interest and pay off your mortgage in 125 months (still more than 120 payments if you actually took out a 10-year mortgage, but close enough).
I’ll repeat the theme of this post here again: Get a 30-year mortgage. Then pay it down as if you were paying a 10- or 12-year mortgage.
You will pay far less in interest, $20K in our example. But you also have the option with a lower monthly payment if you cannot accelerate fast enough.
There you go. Download the worksheet and play around with your own numbers.
There is one more scenario which in the third sheet, that tells you what is the optimal number of payments you should aim for if you want to come closest to paying the total interest if you had a 15-year mortgage. In this case it comes out to 148 payments.