December 2018 Update

Merry Christmas! Happy New Year! It looks like I'm a couple days early with this update, but that's okay since the holidays and it being a weekend mean there won't be any market movement. I figured I might as well crunch some numbers, gather my thoughts, and formulate a plan for next year's investments and savings. Without further ado, my net worth at the end of December and to finish out the year is...

November 2018 Update

I'm a couple of days late with this update because I was out of town with my wife at a game convention and didn't get home to take a screen shot until late on the 2nd. I didn't feel like composing the post until today, so...here we go. At the end of November, my net worth is...

You Do You

One thing many people experience when they undertake a new hobby is comparing themselves to others as a way to gauge their progress. This is completely normal and understandable as we want to do our best at something we perceive as a worthwhile endeavor. However, this can also be a crippling deterrent for some people with weaker constitutions. After all, we're human and prone to psychological disappointments. So, I'd like to discuss concentrating on yourself and taking with a grain of salt how others might be doing along the same journey and I'd like to stick to the path of pursuing FI.

October 2018 Update

I'm a day late, but I haven't forgotten. Before we get into this month's update, let me be honest up front: this month has sucked as far as the market goes. I realize things could be much worse, but still, having a lower net worth than a month ago is just frustrating. Now that I got that off my chest, let's see what the damage is. As of the end of October, my net worth is...

September 2018 Update

It's that time again. But I have to preface this report with a warning: this was a rushed update! I was away for the weekend and nearly forgot that today was when I'm supposed to give a net worth update, so I didn't really take a lot of time to gather my thoughts, spreadsheets, etc. to put together a more detailed look at the prior month's finances. So, I'm basically going to wing-it and report from memory (which isn't as sharp as it was when I was in my twenties). Now that that's out of the way, here we go... On the first day of October, my net worth is...

August 2018 Update

Hope you're having a restful Labor Day weekend. I know I am and, boy, do I need it! Work's been a bit hectic lately, which has been causing me to have daydreams of just throwing in the towel and walking away. Of course, these thoughts usually occur in quick succession in the morning when my alarm is blaring and I stand groggily from my comfy bed to shuffle into the shower. What makes me feel good is knowing that, eventually, I will be able to give notice for the final time and spend my days the way I want. Perpetual weekends! That's the dream, man. All right, so let's see how much closer to realizing this dream I am. On this first day of August, my net worth is...

July 2018 Update

It's time for another monthly update. I have nothing witty to say because I'd rather be chilling instead of doing anything on the computer, so let's just get to it. At the end of July, my net worth is...

Savings Rate: A Key Component to Reaching FI

When striving to reach financial independence (FI), there are several variables that can affect your journey and some that, if not properly managed, can derail the best laid plans. One of the key variables I want to talk about here is Savings Rate (SR).

Savings rate isn't something that's necessarily complicated, although, depending where you look, it might sound like it is. It's how much money you're able to save in relation to your income minus taxes and spending. I came across the following formula a few years back that might put it in better perspective:

gross = taxes + spending + saving
gross - taxes = spending + saving
gross - taxes - spending = saving

saving/(gross - taxes - spending)

Basically, what that's saying is that your savings rate is the percentage of everything you save after all of your expenses have been deducted. (Clearly, the above formula uses gross salary.)

There are those out there who use net income instead of gross income. I prefer to use my net income because I've dialed in my taxes so I usually owe just a little bit of money come tax time. That eliminates the tax portion from the equation. As for my spending, I've already created a budget and whittled it down to bare necessities and a few small luxuries so life is still enjoyable, which takes care of the spending portion. (Note: I think that anyone with the goal of reaching FI in a timely manner should constantly be monitoring/tweaking a budget to prevent complacency and, therefore, lifestyle creep.)

This means I track every pay and bonus check toward net income (the government has already taken their cut). I pay rent, gas, groceries, etc., which covers the spending portion. Then I transfer large portions of my income into high-yield savings accounts or investment accounts. Tracking all of the money I receive and what I choose to do with gives me a clear map of where that money is going and, therefore, greater control over it.

Now that I know exactly how much money is coming in every pay period/month/year and how much of that is going into savings/investment accounts allows me up to track my SR easily. So, let's talk about why this is important.

It's my opinion that one's SR is everything! The higher the SR you have the sooner you will reach FI. It's that simple.

Saving 10% vs 30% vs 60% makes a huge difference

Previously, I discussed cutting expenses vs raising income (or doing both). Essentially, one can only cut their spending so much, so it makes sense to do that first and then focus on increasing one's income. But, what if you can't increase your income? Maybe the highest income you'll ever achieve is 30k a year or 50k.

Let's say you currently spend 24k a year and bring in 40k a year. If you've managed to wrangle your spending into control and it's relatively consistent, you'll be able to save the remaining 16k. That's an SR of 40%. Not bad. It means you would need 600k to reach FI (as defined by having 25 times your annual expenses, so 25 x 24k). If you never received a raise and maintained those annual expenses indefinitely, it means it would take you about 21 years to reach FI (calculator).

Hopefully, you're able to increase your income at some point. So, let's assume you maintain annual expenses of 24k, but you've managed to increase your salary to 60k. Now, you're able to save 36k annually. A 12k increase. Your SR is now 60%. You've reduced the time it will take you to reach FI by about 9 years! (calculator)

Imagine 9 fewer years of having to wake up to an alarm clock, commute through traffic to a drab cubicle where you spend eight (or more) hours staring at a computer screen or sitting in meetings for projects you are barely involved with. Instead, you get back 9 years of living life on your terms, whether that be doing opposite of the above or exploring other options. Pretty sweet when you stop to think about, right?

As my simple example demonstrates, one's SR has a huge impact on when they can reach FI. I chose the salaries above because I wanted to illustrate that a more common salary can still achieve FI, just as well as someone making six-figures. Sure, it could take considerably longer for someone making less, but it's achievable nonetheless. One way to increase one's SR is to minimize (if not completely avoid) lifestyle inflation.

Lifestyle inflation could be the topic of its own post, but it's ultimately up to each individual whether they succumb to it. If you receive a raise and choose to spend all of it instead of saving it, that's up to you. However, I would strongly encourage anyone to seriously consider banking that money. I'm sure their future-self would greatly appreciate it. Especially on those morning when it's hard to drag yourself from a comfortable bed to make that trek into a place you'd rather not be stuck for eight (or more) hours doing something you'd rather not be doing.

June 2018 Update

Hey, look! This month's update is on time. And today is one of the hottest on record for the year here in NY with a heat index of 111. Ugh. You can bet I'm gonna stay in the nice air conditioning today. Okay, enough about the weather. Let's take a look at my financial status during the past month. Hint: it's pretty good. At the end of June, my net worth is...

May 2018 Update

It's that time again, and, to be honest, it kind of snuck up on me. I've got a vacation coming up and that's what I'm anxiously looking forward to. This report will be short and sweet since not a lot really happened. So, without further ado, let's get to it. At the end of May my net worth is...

A Tale of Two Cities: Cut Costs or Increase Income

Maybe that title should be: A Tale of Two Camps? Oh well, I couldn't resist the Dickensian lure of the other choice. This is an age-old debate that's been pondered and analyzed for as long as the concept of financial independence has been around. There are some good arguments for both sides and, if you're on this path or looking to traverse it, you're bound to consider it yourself. In this post, I want to express my opinion on the topic and explain why. So, for the record, I'm a believer in...

April 2018 Update

Spring has finally arrived. Finally! And instead of doing something outside, I'm sitting here writing this update. At least I can still enjoy the great weather with the windows open. Let's not beat around the bush and get to it. At the end of April, my net worth was...

March 2018 Update

Happy Easter weekend! Unlike my couple of previous updates, I'm on time with this post (even a little early since the first falls on the weekend when the market is closed). So without any further ado, let's get to the matter at hand. To wrap up March, my net worth is...

February 2018 Update

The short month is over, which means it's time to look over the numbers, reflect on my finances, and see where my net worth stands. So, without any dilly dallying, let's get down to it. Shall we? As of yesterday, March 1, my net worth is...

January 2018 Update

I know, I know. This post is a few days old. The reason for its tardiness is because I was out of state and didn't take my laptop with me. Didn't matter because wifi was spotty out in Colorado where I was. Regardless, it was a nice chance to relax and recharge my batteries. So, here we are. A couple of days late, but an update no less. Let's jump in and see where I stand. After the first month of a new year, my net worth is...

The Crypto-Craze and FOMO

I've been struggling lately with the impulse to purchase some cryptocurrency. Every day I see at least one post on the Financial Independence sub-Reddit about cryptocurrency or it's mentioned several times in a single thread. There's not a shortage of it in the news media, either, if you're financially minded. Basically, it's hard to escape the stories of how high it's valuation is or stories of people who've made a fortune already. These stories play on one's emotions, stimulating that fear of missing out or FOMO. It's certainly done a number on me. So far, I've resisted the temptation. Here's why...

December 2017 Update

Happy New Year! Here we are on the first day of a new year, so that means it's time for another monthly update. It also means it's time for a year-end wrap up. Lots of financial reporting to do. I hope you're enjoying your day off from work. You better believe I am. I'm also excited to see my numbers are up, ever closer to that 100k milestone. Without further ado, let's dig in and see where I stand. My net worth at the end of December and to round out the year is...