The FI Journey Begins
It was fall of 2015, and I was increasingly dissatisfied with my work. The day to day grind was bringing me no joy, and I was rarely ever doing any direct patient care (which does bring me joy). I did not hate my job, but I did not love it either. I did not see myself continuing to plug away at the same ole same ole for the next 20 years.
I was trolling the internet for low cost of living places to retire. We currently live in the Portland, OR metro area, and prices keep creeping up. Family is in the Midwest and Southeast, and we envision ourselves moving back east in the future. In my internet search, I stumbled into the Mr. Money Mustache (MMM) blog. There were two articles from that blog which, in all seriousness, made me feel like a veil of financial ignorance had been lifted from my existence: The From Zero to Hero article, which led me to the Shockingly Simple Math article. I proceeded to read every article in the MMM blog over the next couple of months, and began to plot our own numbers down on spreadsheets.
Financial independence was totally within reach. Holy $#&%!
Although I have always eschewed debt, and was doing a pretty good job of contributing to my 403b, I had allowed myself to fall prey to lifestyle inflation. I was not fully maximizing that tax advantaged space, nor was Mr. HG, although we were always sure to contribute enough to receive our employer’s matching contributions. We certainly were not contributing to Roth IRAs or into post-tax investment accounts. Sure, we had a good emergency fund, no debt except a mortgage, but we were frittering away literally thousands of dollars a month.
We had hit our strides with our careers. We worked hard. We “deserved” things. Only those things weren’t necessarily making us happier. We just did not realize it at the time.
I am thankful that my father had raised me to be debt adverse. He has always followed the tenants of FI, and was teacher of those tenants :
- Avoid debt.
- Live below your means. Invest the rest.
- Never pay a dime in credit card interest.
- Never be without health insurance.
- Buy reasonable cars with cash.
We had done a lot of these things right. I followed all of the principles like a good frugal Jedi. However, I realized that we could be doing more. We could achieve FI sooner, which would free up time for us to pursue our passion projects. And we certainly had made some financial mistakes along the way.
Financial Mistake # 1 – Lifestyle inflation
Seriously, why does one 7# little dog need 8 designer leashes with matching collars, each of which cost approximately $50???
Or – 40 pairs of shoes, some never worn, and 10 skirts with tags still on them (slightly too tight because the owner needs to lose 5# for them to fit correctly).
$100 cable, $150 cell phone bills with new phones every 1-2 years, designer gym memberships when barely attending
Shopping when bored
Paying the grocery store to cart away food, store it a while, and then eventually throw it away
YIKES! Yes, we were doing all of that!
Financial Mistake #2 – Buying too much house, at the top of the housing bubble
OK, well we couldn’t have predicted the housing bubble, but had we been paying more attention, we may have picked up the indicators. We might have been able to sit on the sidelines until after the decline. Oh well, hindsight is 20/20, and I consider it a valuable learning experience.
We built a home in 2007, just prior to the housing bubble bursting. We also added a bunch of upgrades, which inflated the house cost, and some of which I would skip in the future. Our builder actually filed for bankruptcy during the building process, which was a bit stressful at the time. Fast forward 10 years, and the home has finally recovered to the same purchase price value. We were never underwater, having put a sizeable chunk of money down. But there were some drawbacks. Interest rates dipped to a level where we wanted to refinance. We got a killer interest rate (2.625%) but had to pay PMI for 2 years because our loan to value ratio had decreased to 70% and we did not have the cash to close the gap. It’s not like we were taking any cash out either, and we were paying closing costs up front! The PMI was only $57/month, and we were required to pay it for minimum of 24 months. So a small opportunity cost outweighed by the larger savings from refinancing overall.
Although we love our home, and our neighborhood, and our private, greenspace backyard, it is definitely way more house than we need. It is a large, 2-story, 4 bedroom home. We will definitely be downsizing to a smaller place in the future. The timing and future location of making such a change is uncertain, so we will stay put for now. We have the stellar interest rate, and much of our payments are going to paying down the principle. We will bite the bullet on the property tax (and the unfortunate limits on State and Local Taxes under the new tax bill – boo) for a little bit longer. We do love the home, our commutes are reasonable.
Crunching the Numbers, and Making Changes
I began tracking our spending, and this naturally led to optimizing our expenses. I will chronical those changes in more detail in another blog post, but in general, we took action on the following:
- We began to accelerate our savings.
- We opened Roth accounts and fully funded them.
- We maxed out our 403B contributions.
- We stopped paying extra principle to the house and redirected it into post-tax accounts.
- We developed reasonable budgets. And stuck to them.
- We began taking advance for credit card rewards for travel.
- We developed a FI target and began tracking our progress.
Our FI Target
Once we had a better sense of our monthly expenditures, it became easier to determine what our numbers would be to become FI. We established a goal, and began plotting it out on paper. It has been extremely motivating to see the numbers accelerate. And of course, the 2016-2017 market surge was a boost during this time.
We continue to plod along with our savings. In addition to our FI number, we employ the following assumptions:
- Fully paid off house
- A significant budget for health care expenditures
- Travel budget (which includes using travel rewards)
- We both will have small pensions + social security, and we consider those things as “padding” to the retirement budget rather than including it in our FIRE projections
We continue to follow the climate as it relates to healthcare options, and will sit on the sidelines as this situation is volatile. This issue is the single greatest concern about derailing the FI path.
In good times, happiness, and health.