What I Want to be When I Grow Up

For myself, the goal of financial independence is so that I am not beholden to an employer for my survival, not so that I don’t have to work.  I actually like working quite a bit and I have a hard time imagining a life without doing something at least part-time.  I also cannot see myself traveling full time indefinitely, that sounds very exhausting and potentially boring to me (ECA may disagree with this sentiment).  There’s also no way that I would simply play games and watch TV all day either.  I feel like my ideal life is one that is just a bit more balanced.  I want to be able to work enough that I feel that I have a meaningful, creative impact on the world, but not so much that it ever becomes frustrating or tiring.  Sometimes, that’s not an issue of the work itself, but simply how long I’m spending doing that work day in and day out.  I want to look forward to the next time I get to go to work, rather than dread it.  I want a lot of variety with what I’m doing.  The problem is, I just don’t know how to do that with the way companies are set up.  If I could work half the time at half the pay, I would do it in a heartbeat.  Heck, I might even take 1/4 the pay if it truly meant half the time.  And although I love being an engineer, I don’t foresee it allowing me to live this kind of life.  So, this got me thinking about other jobs out there that I could do.  Basically, what I want to be when I grow up!

Haunted House / Escape Room Designer / Actor

I don’t go very often because they’re a bit expensive and I don’t have very many friends who share my enthusiasm, but I’ve always loved these types of experiences.  Even in high school, some friends and I had constructed our own small haunted house experience one for Halloween one year.  The haunted house is the easier version, just walk through an area while people try to scare you, but escape room games generally are more about solving puzzles and collaborating to get through a series of trials.  When I’ve done them, it’s been extremely fun just seeing how the puzzles were constructed and I often feel inspired by their design.  I would love to design and build my own, but even if that’s not easy to achieve, when I have more time, I would love to at least be an actor in one.

Professional Dungeon Master (DM)

I’ve mentioned that I love playing video games, but I also love playing pen and paper RPGs.  Being a player is always fun, but DMing is a rewarding experience (and I’ve been told I’m pretty OK at it).  The main problem with Dungeons and Dragons and games in that style is finding people who are willing to take on this role and to me, this means that there is likely a niche market out there waiting for people to step up into.  This is actually quite similar to the escape room experience except there’s nothing physically constructed.  Instead, everything is in a book, or in the DM’s mind.  If I were to go this route, I would host players and run the game.  There’s a lot of prep time involved for the DM and the sessions themselves can be long, but if you get the right group, it can be awesome.  I’m only a bit weary of doing something like this with a bunch of strangers since it’s such a fun thing to do with friends, but it’s been done before, so maybe this is up my alley.

Teacher / Tutor

I don’t plan to have children of my own, but it’s not that I don’t enjoy children.  For me, other than being an uncle, the next best thing to do is to give some of my time as a teacher or tutor.  Becoming a full-time teacher (with summers off) might work well for me, but there’s also opportunities to each after-school classes.  This would be a great way to better the world and hopefully inspire kids to seek out fields in engineer, science, or math which I’m also pretty passionate about getting kids involved in.

Personal Financial Adviser

I’m generally a bit of an evangelist when it comes to how to manage money.  I’m very open about it with friends and family and genuinely enjoy talking about personal finance because I think it’s important and can improve their lives greatly if I talk about it.  I feel that doing this on a more professional level would fill the desire I have to legitimately help people and would be a great way to share my experience.

Zoo / Aquarium / Museum Volunteer

Well, maybe volunteer, maybe for gain.  I’m a huge nerd in many subjects and one thing I always love when visiting a museum or zoo is running into someone working there who is knowledgeable and passionate about what I’m looking at.  Unless I work at a museum dedicated to space, it’s a little outside of my expertise, but this seems to be an extremely fun job.  Working at a zoo or an aquarium seems even more fun since you get to interact and care for animals.

Campground Host

I grew up camping quite a bit and it’s always a pretty enjoyable experience.  One thing I’ve noticed in a lot of campgrounds we’ve visited around Seattle is that they have campground hosts who stay in an RV on-site.  They take care of the grounds, enforce rules, collect payments, just generally run the campground.  This could also be a ton of fun, I think.

Charter Boat Captain

ECA and I went to a boating event recently and had a great time.  A lot of boat owners had their live-aboards open to the public and were just showing off their homes and businesses, which really struck me as something that would be a lot of fun to do.  They live aboard their boats and charter trips aboard.  They will take you around and to places you want to go see, maybe share meals, things like that.  It’s really not that much different than hosting on Airbnb in my mind which is something I already do and generally enjoy and could make owning a large vessel a reasonable thing to do.  The only problem, ECA and I both get seasick easily…

Who knows what I’ll end up doing.  Maybe I’ll just keep working as an engineer, but there’s a lot of other things out there that interest me and I want to try to explore some of them.  I think our plan is to take a 6 month sabbatical within the next 2 years and do some soul searching to see what we both really want to do.  Maybe then I’ll narrow this down a little more!

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There are no Golden Handcuffs!

Guest post by ECA:
We have set my FI date to be shortly after my 30th birthday. Technically as of now, ER uncle and I are already FI (lean FI) and ER uncle likes his job. So I can quit my job any time. But it is really not that easy. The next 2 year is the time when my my stock will vest. The stock and salary combined for the next 2 years is looking at $580K+. To me, that’s lots of money on the table.

I would describe my job itself (not considering the pay) as OK. I don’t love it. It is to some extent busy, but not crazily busy. I work typical 9-5 hours and don’t work over time. The job is stressful from time to time, but I think I am the one making it stressful. Over the years, I have shifted significantly from a typical over-achiever to just chill. As ER uncle always point out to me, I can just slack at work, they probably won’t fire me for a while. However, deep inside me, that’s not an option, I think I will get even more stressed and unhappy if I am doing a bad job. My pride just can’t let it pass. There are hard days when work is annoying, but not to the point I want to leave the $580K+. So when you take into account the pay ($290K a year+), the job is actually quite a good job. I am not a lawyer, a doctor or a programmer, $290K a year is a lot of money.

With the FI date set in mind, I find myself frequently wishing the time just pass and I can skip through to my FI date. And then I realize this is an awful mindset

  1. I am not getting any younger, the next two years are the last 2 years of my being twenty-something. Not to say turning 30 is bad or the end of the world, but in my mind it is a big change. I know this is stupid and I am sure when I turn 30, I will be just fine. But still…
  2. As I said, my job is pretty good and my life overall is even better. We are in love. I dearly love ER uncle and our time spent together. I am still curious and passionate towards life. We are exploring and experiencing new adventures. We don’t have anything to worry about other than our jobs. There is nothing stopping us from living in the present and appreciate the life we have today. I feel this way more as winter passes and seeing more sunny days. So maybe the reason why I want to be FI is so we can be location independent and move away from the rainy grey winter. I really really hate winter here.

I think I am going to forget about my FI date (at least try to) and enjoy life as present. There are no golden handcuffs!

 

I decided to document this thought as it is part of our FI journey. I am sure 2 years from now when I look back at this, I will laugh at even worrying about the date 🙂

 

Insurance is a Scam

Recently, I heard a story about outraged caused when insurance companies in the UK charging a higher premium for customers who had a hotmail email account.  Which got me thinking about how insurance works, its purpose, and how insurance companies work.  And for all intents and purposes, it’s kind of a scam.

The entire point of insurance is to pay a small amount now to reduce risk of a large payment later.  Of course, insurance companies still make money.  So how then, can they take money from you, and pay out your expenses, but you still somehow save anything?  The answer is, you don’t.  Unless you are one of the few people who end up spending the money paid in, you will spend more money paying insurance premiums than you will ever use.  And worse, you don’t get to reap the benefits you could have had by putting that money to work for you.

My favorite insurance to avoid is collision coverage for your auto.  I do have liability insurance (but perhaps I should consider self-insuring there too).  I drive a cheap car, but even an expensive car should give similar (if not even better) results.  I currently pay about $560 annually for my insurance.  I got a quote to see how much it would cost to get comprehensive coverage with a $1000 deductible.  This would cost $444 more.  So, is that worth it?  Well…  My car is probably worth about $6,000 according to Kelley Blue Book, and after the deductible, I could expect to receive $5000 if I totaled the car.  Alright, so $444 to get $5000 sounds alright, but realistically, how long should I expect before I actually total the car?

Forbes had a pretty good article on this which gave an expected time between accidents of 18 years.  OK, so then, $444 x 18 = $7,992.  So, I should expect to pay (if I’m an average driver and let’s be honest, I’m much better than average!) about $8000 in premium before I get that payout of $5,000.  Ouch.  So I’m paying $3,000 over 18 years for the peace of mind to not lose $6,000 in one year.  But, it’s worse than that!  Ignoring the fact that the car is constantly losing value and therefore the payout would be lower, I would be missing out on any gains that money would have.

If I put $8,000 aside and get at least 4% returns after inflation, I would be sitting on $19,250 in 18 years!  So, by not buying the coverage, I’m $11,250 better off.  Other insurances work the same, but the amounts are greater and may be out of reach.  If you, for some reason, have an expensive car, the amount you would need to bank would be higher.  Medical and house insurance would also cost more.  Of course, not everyone has that amount of money lying around, but if you do, you should definitely do this.

Another weird quirk about all of this is that insurers charge higher premiums to those who they believe are a higher risk.  This makes perfect sense, of course, but in our world of big data, it is getting easier to show a clearer and clearer picture of exactly how much of a risk it is to insure specific individuals.  And with this newfound certainty, insurers have nothing to gain by charging you a lower amount than they *know* they will have to pay out.  So, the cost of insurance as time progresses certainly will approach the cost of whatever loss you are insuring against (plus profit for the insurer to pocket)!

Knowing this, I think it makes the most sense to self-insure when possible.  On the long term, you will come out on top, but it requires diligence, planning, and a wealth of resources that might put this just out of reach.

Year in Review: 2017 – Savings & Growth

So, expenses are fun to track and they do matter for long term retirement plans as we need to have a really good handle on how we spend our money, but here’s the real fun, the fruits of our labor, and our long-term money making machine!  We managed to save nearly $233,000 and our investments grew over $34,000 on top of that!  This figure includes employer contributions to 401ks and HSAs, our pre-tax contributions to these accounts, and our post-tax contributions to appropriate accounts.
account balances.jpg

#1  New Jobs, Higher Salaries.

The easiest way to save more money is to make more money.  ECA had her first full year at her new job, and I also received a large bump in income when I switched as well.  We expect that our salaries will go up further thanks to ECA’s bonus structure and me working a full year (and probably receiving a raise as well).

#2  No More Extra Payments on Mortgage

The last few years, we put most of our money towards the house.  It was probably not the best idea at the time, but hey, it was safe and we can finish off that loan anytime we please now.  We’re keeping it around though since it’s such a low cost for a decent chunk of money that will do better elsewhere.  This did improve our net worth of course, so it’s not like that money is just gone!  Not until our house value crashes, at least!  But, by putting more money into our brokerage instead of the house we were able to take advantage of…

#3  Massive Growth in the Markets

Our performance has been phenomenal.  We don’t do anything complicated with investing (just index funds), but this past year was outrageously profitable.  The growth translates to about $35,000 this year, which is considerably more than our expenses for the year.  I doubt that this can continue forever, but I have my fingers crossed it will persist for another couple of years.  Some of this growth is taxable though, which reduces the true gains a bit here.  We don’t plan to touch anything in our investments until after we retire, so capital gains are not an issue, assuming the 0% bracket remains, but any gains on our 401ks or HSAs will be taxed when we finally pull it out, or backdoor convert it to Roth accounts.

#4  A Few Lucky Coincidences

Sometimes, you just get lucky.  When I left my previous employer, they paid out my unused vacation hours (which was expected).  In addition to this nice bonus since I had so many hours banked, I also somehow received a cash bonus from profit share, and a 401k bonus months later.  Totally unexpected there!

Estimations for 2018:

I doubt we will see any drastic improvement for our savings in 2018…  It should increase due to ECA’s bonus becoming vested, and general raises, but it’s not going to jump up like it did this year.  We went from a contribution of $170k to $233k, about a 37% increase in savings.  I don’t think that’s sustainable year-after-year.

 Still, I’m super happy with our results this year.  I think we far exceeded our expectations and our wildest dreams!

Year in Review: 2017 Expenses

Should old expenses be forgot, and never brought to mind?  Should old expenses be forgot, and auld lang syne?  It’s time to say goodbye to 2017, but before that, it’s that time again to review our expenses and gains!  On our path to financial independence, this was our best year yet!  We’re also getting a clearer and clearer picture of where our money goes and where it grows.

2017 review

trends.jpg

Bills & Utilities:  $6,454

There’s a very unsettling trend in our bills and utilities.  Year-over-year, we’re seeing a marked increase, nearly doubling since 2014, the first full year we were in our home.  It’s hard to say where this one is going because e

ach year has been pretty different.  In 2013 we were in an apartment until November, 2014 was the first year in our house, in 2015, we started doing Airbnb, last year, we had a long winter.

expenditures

The cost is really not bad when broken down further.  This year, we spent about $540/month on all bills and utilities.  Since our house is no longer considered “new”, our home insurance rate went up, but is still hovering around $45/month.  Our HOA bill has gone up to $180/month.  And we pay a fee for the sewage for a new construction of $150 quarterly, or $50/month.  Internet costs us about $40/month after it’s all said and done.  Cell phones cost us about $20/month since I don’t pay for one and ECA has Ting (it’s super cheap).  The remaining $205/month is split between our electric, gas, trash pickup, and water bills.  So, overall, our bills are reasonable and it’s hard to see where we can make any meaningful difference in any of these amounts considering we really only have control over the utilities, and they only represent about 1/3 of the costs.

If I had to guess, I would expect costs in this category to flatten out, but continue growing, probably around 5%-10% per year.

Food:  $4,232

Our costs of food, including groceries and eating out has stayed rather consistent over the past 5 years.  It just ebbs and flows, but is hovering right around our average of $4,000 per year which comes out to just around $340 per month.  This figure may also include some non-food items since I’m too lazy to track and split the costs of non-food grocery items.  It also includes all our fast food and restaurant expenditures which came out to be $224 and $247 this year respectively, or around $19/month and $21/month respectively (our target is around $50).

I expect this cost to raise slightly over time as the costs of food goes up, probably just above inflation or around 2-3% per year.

Transportation:  $2,316

Big drop this past year thanks to the new job!  Sparky has been going strong without any major trouble.  Unfortunately, I did have a fender-bender this year which reduced the car’s value (my fault, and only cosmetic damage, yes, I have liability insurance too), but since I have no intention of selling it anytime soon, that doesn’t really factor into our costs.  Of course, just like last year, I haven’t captured the total cost of the car which we bought with cash back in 2015 for just under $10,000.  I’m hoping that it lasts me at least 10 years total, but we’ll see exactly where and how that goes.

I’m betting that this coming year, we’ll see a drop in this cost since I will be working the whole year at my current employer and last year, 1/3 of the year, I was still driving a ton.  This category has a large chance of volatility though depending on gas prices and the chance of catastrophic loss of the vehicle.

Housing:  $4,506

Our housing costs consist of the interest on the mortgage and our property tax since all of the utilities are covered above.  Since we mostly have payed off the mortgage, our interest is very low, just under $740 for the year.  Our property tax has been steadily increasing, at $3,769 this year, up again from the last two years.  We will pay off the loan in about 10 months our standard payments, so I expect that we will spend about $250 in interest this year.  Our taxes will probably go up again, so I expect to pay around $3,900 in property tax.  I would assume that this will continue to grow at its current rate at about 5%-10% per year considering Seattle’s propensity to vote to tax itself.  Well, I have voted to agree to some of those in the past, so I can’t complain too much!

Shopping & Entertainment:  $3,634

There’s very little rhyme or reason to this category.  Sometimes, we want to buy something, so we do.  Sometimes that thing is expensive.  This year was my turn.  I bought a VR headset and a computer powerful enough to use it, together costing about $1500.  It’s awesome though and I’m glad that I did it.  The rest of the $2000 was mostly another $175 or so on video games, $200 in miscellaneous things we’ve done just for fun, but the rest was pretty much all clothes (mostly ECA’s clothes :P).  So, we probably split this category 50/50 this year!

This category is one of the hardest to predict, but it’s also one that we have the most control over.  If I had to guess, I imagine it will be lower next year.  We could also practically eliminate this category if things ever did get rough.  I imagine it will continue to ebb and flow due to the way we use technology, we probably will continue to spend every 4-5 years to replace our existing equipment and upgrade.  So, I expect to see a sinusoidal pattern with peaks about every 2 years where either I buy something or ECA buys something big in the peaks.  Over the long term, it should average out to about what we have been spending and will track with inflation.

Vacations:  $1,872

This category is the strangest right now as this does not necessarily reflect the true costs of the vacations, but instead what we paid out of pocket.  This past year, we got into credit card churning pretty hard, both opening a Chase Sapphire Reserve as well as several other cards.  Through these rewards, the vast majority of our costs were covered since we used those points for airfare and rental cars.  This was by-far the best way to use these rewards since Chase offered a 1.5x bonus when used for these expenses than what we would have received as cash and we planned to take the trips anyway.

Overall, this category acts a lot like our shopping & entertainment.  It’s completely discretionary and the cost varies just based on what we want to do.  I expect this to go back closer to average over the next year, perhaps increasing if we decide to go somewhere expensive.

Summary:  $23,016 spent in 2017!

Bringing our average annual expense to around $26,800.  At this rate, we could maintain our standard of living with one of us working 40 hours per week with an after-tax income of $12.90/hour (without any savings).  Or, using the 5% rule, an account of $536,000 would suffice.  Of course, any more we gather will allow us greater flexibility, and the freedom to increase our lifestyle if we desire.  Either way, I think we’re on fire!  Happy New Year!  Here’s to a wonderful 2018!

A Very Happy Balance Sheet

After 5 years of cultivating wealth, as of today (9/12/17), ECA and I are millionaires!  Well… at least on paper (and being very generous with estimations on a few points).

Here’s the breakdown:

balance sheet

Almost all of these figures are the present market value of our assets, in other words, what is shown on the account balance pages. There are two exceptions to this. The value of the car is based on the Kelly Blue Book value for selling directly to a buyer (assuming it’s in good condition) and the value of the house is the high-end that Zillow estimates, so it’s unlikely that we would actually be able to sell it at that price if we sold it right now (and we would have expenses, reducing what we receive).

Still, we are right on the precipice, and in a few months, we will definitely be there (barring any huge market crashes).  Still, thanks to diligence, hard work, and a little luck I’m really happy with what we’ve accomplished in 5 years!

The experience of crossing over this level of wealth is a bit surreal to me.  Growing up in rural southern Indiana, it was a big deal that someone was a millionaire and it was common for us to talk about what we would do if we had a million dollars.  Now that I actually do have it, I know the answer.  Nothing.  I would and will continue to do exactly what I have been doing.

 

 

The Wonderful World of Credit Card Churning

We have been using credit cards for all our purchases for a very long time.  We always pay off the balance every month and never buy any more than what we would anyway, so there has been no cost to do so.  And other than the shear convenience, with cash-back on every purchase that all of our credit cards offer, we have made a few hundred bucks every year.

But then there’s credit card churning which is on a whole ‘nother level.

Continue reading “The Wonderful World of Credit Card Churning”

2016 in Review

Happy New Year!  One of my favorite annual pastimes is to review the previous years and find out how we did financially and I’m happy to say that 2016 was a very frugal year!  EC Aunt and I have only been out of college since 2012, and there’s a huge difference in our costs from then and now, so I really am only able to compare our expenditures from the last 4 years, but this year we managed to spend the least!

expenditures

This does exclude buying a car in 2016 which I prefer to distribute over several years if possible (assuming that I will be able to continue to drive it during that time).  This does include the cost of my previous car which we did not keep very long, so it’s cost was pretty much entirely in 2014, although we did have it for a bit in 2015.  These expenditures also do not include some costs of buying our house incurred in 2013 such as the closing costs on the house.  The biggest concern for costs not shown on here regarding our path to financial independence is the lack of health insurance, which I currently receive as a benefit through my employer.

Trends:

A few trends that are noticeable for the past few years is the decline in transportation cost, an increase in bills, a fairly consistent expenditure on food, a huge decrease in shopping this year, and a large decrease in vacation.

The transportation costs have been reduced primarily from getting a more efficient car, a slight drop in average price of gas, and the fact that EC Aunt’s work now provides her with a monthly pass for the public transportation.  I would expect once we retire that this cost would actually be even lower since the primary expenditure in this category is the cost to get to and from work.

The increase in our bills over the last few years are primarily due to moving into our townhome in 2014 and starting to pay for our HOA in addition to the other bills we already had and again increasing in 2015 and 2016 as we started to rent out our spare room.  Although I feel like these numbers are high, we’re better off in this position overall since the cost to lease would be higher than the cost to own and we’re actually making a decent amount of money on the house through renting out the spare room and the appreciation of the value of our home.  I’m really not sure how this category will be affected by retiring.  It depends on what we plan to do, and we haven’t quite yet figured it out.  I believe we will sell our home due to the high costs of bills such as the HOA, but whether we buy a new home, or rent, or just travel around for long periods with short rentals to break up trips is still up in the air.

Food costs have been relatively stable, and although we spent quite a bit less on fast food and restaurants, we spent a bit more on groceries this year.  This cost would also be quite variable in retirement depending on how much we travel and when we settle down again.  Traveling generally would make this cost go up quite a bit I expect, but it depends on where we are traveling since the cost of food might also be lower or higher in certain countries.

The decrease in shopping is almost entirely due to a huge cut-back from EC Aunt.  After getting her new position, she has decided that working for money is too hard and it’s easier to just not spend it!  The expenditure was especially high in 2015 for this category as well since EC Aunt bought a new MacBook Pro, an expensive LV purse, and an IPhone 6s…  Of course, she’s still using these, so their cost should carry over a few years as well.  She also cut back on buying clothes this year, although I don’t think her sense of fashion has suffered for it!  We also cut back a bit on our entertainment spending, opting for less expensive activities like clamming on the coast and playing Pokémon Go, heh!

The last major category that we can control actively is vacations.  In 2016, we simply did not travel as much as the last few years.  A big part of this was that EC Aunt felt she was traveling a bit too much with her new job and didn’t want to do it as much.  We were also both very busy with work and finding time to plan out a longer vacation is difficult.  There’s also the fact that we really want to spend more time in each location when traveling but when work is waiting for us to return to, it’s difficult to really enjoy the time we travel.  Of course once we retire, I expect this to be the largest portion of our budget so, this trend is not something I expect to maintain, nor do I want to maintain this low amount.

The only other trends worth mentioning would be the difference in the cost to lease and mortgage interest and property tax.  In 2013, we didn’t have a full year of a lease, so the cost was quite a bit lower for these categories.  We did buy the house that year, but the first payment was not realized until 2014.  Of course, if we continued to lease, the price would have gone up as well, so I’m pretty happy about buying when we did.  Over the last few years, we have been paying off our mortgage at a very accelerated rate.  We owe about $32,000 currently.  This has brought piece of mind and a greatly reduced cost of interest which of course has many pros and cons.  A considerable portion of our expenditures though is our property tax which has been going up and up every year and will go up even further now that Seattle has passed a major expansion to the public transportation system…  Still, as mentioned before, we’re better off owning the house than we would be to lease, so it’s just the cost of living and working in a growing city and really can’t be avoided.

The Breakdown and Its Impact on Financial Independence:

On average in the past 4 years, we have spent just under $28,000 a year, with a high of just under $34,000 and a low of just under $22,000.  Using the 4% rule (ignoring whether or not it is completely valid), we would need at least $550,000  using the low, $700,000 using the average, and $850,000 using the high number.  Furthermore, the high number might not actually be high enough for our retirement since we plan to travel more, we plan to have a modest budget at around $40,000 per year to cover everything, which would allow us a great deal of freedom, but would leave us plenty of room to fall back into super-frugal mode if anything goes badly.  For this, we would need $1,000,000!  So, to be extra sure, EC Aunt and I are shooting for a net worth of a bit over $1,000,000 in our retirement accounts in addition to the house.

balances

Our Progress to our Goal of Financial Independence This Past Year:

This year, we managed to save much more than previous years, not only because we were able to reduce our spending, but also due to the fact that we just made more money.  EC Aunt and I both maxed out our 401ks for the year, saving $18.000 each.  My company matched me $3210 for the year, contributed $3100 into my HSA, and a 401k bonus of $6,100.  Ending the year with a balance of just under $73,000 in my 401k, an excellent gain from my starting balance of $37,200.  We also contributed the remaining amount allowed to max out the HSA with an additional $3550 for a total of $6,550 contributed for the year, putting the final balance at $23,500, up from the starting balance of $14,470.  EC Aunt put in $18,000 into her 401k and received a match of $2850, she also started a Roth IRA, maxing it out for the year, ending her retirement accounts at $84,000, up from their starting balance of around $52,100.  We paid off a great deal of the premium on our mortgage this year!  We started the year with a principal of right at $100,000 and now we’re down to $32,000!  We also started a brokerage account this year which has a balance of $41,500!

In total, we managed to save just under $170,000 for the year, an amazing feat!  We also gained around $16,500 from growth of our accounts.  I expect that we should be able to maintain this rate of savings for the next few years, putting our timeline for Financial Independence at 5 years without any gains!  As long as the markets don’t crash, we could achieve this even sooner!  Here’s to 2017!  Hope it’s a wonderful year!

Pay Off the Mortgage or Invest?

Eccentric Cute Aunt and I hate being in debt.  I’ve always hated asking for a loan, even just borrowing a buck or two from someone.  And anytime I’ve had a loan in my life, I’ve tried to pay it back IMMEDIATELY.  In college, I was forced to take a few Stafford student loans which I started to pay back well before graduating, and was fortunate enough to end college with around $8,000 in loans which we promptly paid back before the grace period ended (whew! No interest!).  And although I have never found it difficult to save up enough money to buy anything that I need, including cars (I’ve never had a car loan and I’ve always owned, never leased), saving up enough money to buy a house with cash was not something that seemed reasonable.  So, we got a mortgage…

We bought our home in October 2013, with a down-payment of around $80,000 which we had saved the prior year and a half after graduating.  We were debt-free at the time, and then suddenly, $225,000 in the hole.  Of course, we owned the house too, but if you’re like us, that somehow feels like a small consolation (I know it’s irrational).  So, with our obsession to be debt-free, we started to pay down the loan.  Today, the balance sits at just under $48,000 and we are extremely far ahead of our 15 year timeline.  If we don’t make any additional payments, the mortgage will be fully repaid in April, 2019, 9 ½ years before the original December, 2028 timeline for our 15 year mortgage.  And knowing us, we will almost definitely be putting in more, so it will likely be paid off within the next year!

All this is great, but was it the right choice?  Is continuing to pay down the mortgage the way to go, or would I be better off investing that money?  I looked at how much and when we put in extra towards the mortgage and compared it to the amount we would have made by investing this money into the S&P 500 with reinvested dividends.

Here is what we actually did (approximately) for the past year: 1

And here is the theoretical alternative would have been for the past year:2

5

I used this calculator to determine the gains on the S&P 500 for each month.

From the theoretical version, if we were to take the total value of the portfolio and use it to pay down the loan at the end, we would end with a loan amount of $55,893.  Compared to the actual value of $57, 611.  Therefore, we would be about $1,700 better off investing just over the past year.

The discrepancy gets a little bigger when I look at the entire life of the loan.  When I go further back and do my “what-if” scenario, I found that we would be around $6,000 better off if we would have been investing the extra money instead of paying down the mortgage.

So in the end, we could have been a little richer by investing, but we have earned a greater peace-of-mind going the safe route and getting that mortgage off our backs.  I’m not sure which is the best choice.  What would you do?

Plugging a Tire DIY

 

Recently, I picked up a self-tapping screw in my tire.  Not sure where it happened, but I’m betting it was in the parking lot of my work.  Fortunately, the screw itself made a pretty good seal, so I wasn’t leaking air very fast, (about 7 psi overnight), so I went and bought a tire repair kit.  The kit I ended up getting has everything you might need to plug or patch a tire and cost me just around $10, but it’s pretty common to find just a plug kit for around $5.  Once I had my repair kit, I grabbed a few other tools and went to work!  It probably took me about 10 minutes to do it, but I got lucky that I didn’t need to remove the tire.  I decided to just plug the tire for now since the hole was pretty small and I don’t have a tire changer, but next time I go get an oil change, I may very likely patch it then.IMG_2348.JPG

Tools used:

Flat-head screw driver

Vise grips (pliers would be fine too)

Tire reamer (comes with repair kit)

Plug Hook (comes with repair kit)

Utility Knife

Gloves (not needed, but keeps your hands clean)

First, I used my screw driver to get the bolt out far enough to grab it with my vise grips.  I didn’t need to take the wheel off the car to do this, I just parked it in such a way that I had access.  I just put the car in park, but I should have probably used the e-brake too since the car moved a few inches when I put in the plug.  Once I got a good grip on the bolt, I slowly pulled it out.  I didn’t let out any air or anything so, air started escaping pretty quickly after doing this.  I then inserted the reamer into the hole and pushed it in and out a few ti

mes.  This is just to clean the hole and make it big enough to put the plug in.  I left the reamer in the hole to keep the air in while I prepare the plug.  I took out a plug and threaded it through the eye of the plug hook.  The one I bought actually splits apart when you pull it out, others are actually more hook-like.  I tried to push in the plug, but the hole was a little too small, so I reamed it a little more.  I then pushed the plug in, with some effort, until only about 1/3 of each end of the plug was showing.  I then very quickly pulled out the hook, leaving the plug behind.  The last step is to cut off the tails of the plug, I left a little bit on assuming that it will be smashed while driving.

IMG_2351
The offending screw.

And that’s it.  It was really easy.  You can get this done at a shop for pretty cheap, so it’s not an amazing way to save money, but you will save a buck or two by doing it yourself and maybe some time.  I know that Costco does this for around $11.  I’m sure other places are about the same, but for how simple it is, and how little time it takes, it’s a nice little DIY repair that I think pretty much anyone can do and I would personally much rather do it myself than wait for an hour or so for a shop to get around to it.  It might even be a good idea to keep a kit in the car in case you need to plug while on a trip.  Of course, if you are unsure, always err on the side of caution.  If the hole is too large or in the side-wall of the tire, the damage may not be repairable.  If the steel rings in the tire get damaged, or exposed, they can rust and the tire can fail catastrophically later too due to rusting.