When I got back from FinCon, Mrs FIRE Ready Aim saw the fire in my eyes (ha!) and asked “Alright, what’s it gonna take for you to retire? How long, and how much savings do we need?” Well dang. I don’t know. In order know where we need to end up, we need to know where we are. And besides, who doesn’t love a little peek into others’ financial lives?
I’ve actually been dreading and dragging my feet on this post. It feels weird exposing myself – It’s not at all the hard numbers – I’ll have a frank discussion about finances with anyone who’ll stop and listen. It’s actually the sheer stupidity of how I have handled money for most of my life.
So let’s get started, shall we? But first, a little diversion of where we were (especially me).
It’s hard to admit
Let’s just put it out there: I was a blithering idiot with money.
Given my inability to reasonably handle making good financial decisions up until about ten years ago, it’s kind of hard to believe we’re in a pretty solid financial state today.
Money burned a hole in my pocket as a kid. If it wasn’t the latest plastic monstrosity at KB Toys at the mall it was some electronic thingy at Radio Shack. When I got to middle school I was always buying CDs in long boxes like this (I still have some of these!):
By the time I was in high school I had hundreds of CDs and not much money (yeah, I was a BMG and Columbia House addict as well). Then there was that obsessive baseball card phase…Houston, we had a problem.
My dad declared bankruptcy when I was a freshman in high school (early 90s recession and bad biz decisions), and I actually got more serious with my money. I started working at Publix Supermarket and realized that at $3.35/hour I couldn’t blow my money like sailor on shore leave any more. I saved up enough for a used car, and fortunately my mom helped out with car insurance ($150/mo for a 16 year old male driver – in 1993 – ouch).
College…it’s all downhill…
My relative thriftiness lasted me throughout high school and into college. I attended a public university, and had a full ride scholarship from the state AND had National Merit Scholar money. Everything was covered. And then I started spending money that I should have been saving. Stereo system with subwoofer – for the dorm. CD Changer for the car (12 disc!). Six credit cards opened freshman year. No debt – yet. I managed to stay in the black through sophomore year, too.
Junior year I moved off campus. Lifestyle started to get inflated. Two phone lines (one for the dial up modem). A pager. A cell phone (because I needed both, right?). The start of my book buying addiction. $2,000 in debt after junior year.
By the time I graduated in 1999, I was $5,000 in the hole. I was managing interest rates and making monthly payments by paying one card off with another’s convenience checks and realizing a low interest rate for six months. Rinse and repeat.
Fast forward three years: $25k in debt. How? Working below my abilities. Three trips to Europe. Back in school full time. Long distance girlfriend. A move to Colorado. More books. Clutter and waste.
At least when I declared bankruptcy in 2002 I was finally working a full time steady job instead of doing door to door sales for AT&T Broadband selling high speed internet (it was a big deal back then!). The bankruptcy wiped out my credit card debt, and I promptly took out student loans.
By the time I graduated from grad school in 2006 and started teaching, I had about $50k in student loan debt. But that’s good debt, right? I clearly hadn’t learned.
Start of work, start of better decisions, plus some help
For all intents and purposes, I didn’t start saving until I started teaching at age 29. Mrs FIRE Ready Aim was 24 at the time, and this was her first job. When I started teaching, my “second mom” in Colorado, a CFP, insisted that we get 403(b)s and start saving. Thank you Carol.
I taught from 2006 to 2012, and ignored the financial crisis. We kept putting money into our 403(b)s – I didn’t even pay attention to our statements, what a blissful time – and my investment turned into $65,000 by 2014. I used part of that to invest in my buddy’s start up.
I was able to wipe out my student debt by 2011 through paying down my balance and student loan forgiveness for teaching math in a low income school for five years. It also helped that my great uncle passed away in 2008 and left us a sizeable chunk of money. He FIREd in the 60s or 70s when he was in his 40s. Guess who never talked to him about this?
Over the years we used some of that cash to wipe out home debt, some to wipe out student loan debt, and some to purchase used cars. We also funded my dad’s last trip to Norway, as well our emergency fund – and that emergency fund paid for our new air ducts when we discovered the old ones were full of mold. If I knew then what I know now, that money would have also been used for investing in property.
We really picked up the savings when I left teaching and started making more money. I switched to a 457 and increased the savings as income increased. When I found out about Mr Money Mustache and before our second kid was born, we maxed out our 403b’s, 457s, and IRAs in one year. We had to roll back after that.
So where does that leave us?
Now I’m almost 42 and Mrs Fire Ready Aim is almost 37, and all of our savings have happened in the past 13 years. and that’s with retiring $50k of student loans.
Despite the idiocy of my youth – and I really did just hit the highlights and barely scratched the surface – I’m proud of how far I’ve come, and am excited to do better.
Alright. that’s enough ancient history. Let’s dive into the numbers:
Tax-advantaged retirement accounts(457’s, 403b’s, IRAs, 401k solo): $455,000
Non-tax advantaged investment accounts: $21,000
Roth 401(k) solo investment in a startup: $100,000 (we have $50k invested at a dollar a share, but the latest round of shares sold for $2 each).
Kids UTMA accounts: $17,000
Kids’ college accounts (Coverdells, 529s, Florida Prepaid college fund): $57,000
Home Equity: $100,000 (ish)
Value of home: $290,000, according to Zillow
I am counting the kids’ UTMA and college accounts because that represents money that we would have been saving elsewhere and pulling out when the kids are older. Your mileage may vary.
That puts our assets around $940,000.
After mortgage debt is considered, our net worth clocks in right at
$750,000 – that’s three quarters of a million dollars.
For a guy who’s been a blithering moron with money, I think this is a damn good start.
Some other considerations
We really don’t have a savings account anymore (the great Mold-in-the-air-ducts-debacle of 2017 wiped that out), but we do have a HELOC just in case.
We also have about $30k in the bank account, but our tax bill will be heavy for tax year 2018 (401k to roth 401k solo conversion), so we have been saving towards that.
So are we good? Are we FI?
Am I happy with where we are? Yes. We are far ahead of most Americans – and we have done it in a relatively short amount of time. But measuring against the typical (thank you bull market) while on two teachers salaries, and living a larger than necessary life. And no, we’re not FI. Yet. Unless we lived in, say, Guatemala. But HQ shot that down.
But we have gotten better with money. So how’s the savings rate?
Really glad you asked. It’s better than I thought. Not where it needs to be. And holy crap, who knew that sitting down and figuring out savings rate would be a little more complicated than expected?
For a good rundown of calculating savings rate, check out Big ERN’s article. We are using Savings Rate #3 from his article. The formula goes like this:
Using this formula our savings’ rate for the year is 38%.
If you add principal paid toward the mortgage in the numerator, we’re at 41%.
If you want to be strict and not include kids college savings and not include mortgage, we’re right at 30%.
That’s not terrible!
In fact, Mrs FIRE Ready Aim was pretty impressed with those percentages. And then I told her how much we made.
“Where the hell did we spend all that money?”. Glad to have you on board, baby.
But seriously, that’s not too shabby. And honestly, our spending has been a little flabby (food spending will come in close to $12k for the year. OUCH. And I don’t classify food purchases on vacation in that category).
This feeling of financial tubbiness has us setting a goal of a 50% overall savings rate, even with Mrs FIRE Ready Aim dialing back her work schedule due to the new baby. In future years, we will increase that goal to 60% and 70%.
Those are aggressive saving numbers. How are we going to do it? We’re going to cut back on spending (food is an obvious place to start). We also had some unexpected expenses this year – dad dying, cat going on insulin and then dying, Mrs FRA’s grandfather dying – and these won’t be line items (I hope) next year. Finally, we’ll be upping our side hustle game, too – I’ll detail those plans in a later post.
So what is your FI number?
Not to mention this post has gone on long enough. In the next post I’ll detail my FI number calculations, and break down how we’re going to decrease spending, increase income, and where we’re going to shove that extra cash (hint – not under the mattress, or in my nether regions).
Were you an idiot with money in the past? How long did it take you to get yourself straight?
No matter where you are with you money, you need to be tracking it. I love Personal Capital for investments, and Mint for spending tracking (PC doesn’t allow you to hand-enter transactions or do splits. I’m a little anal, and want that feature). If you’re a budgeting person or want to become one, YNAB is the place to be.