Focus On the Wins

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Day 2866…134 days in.

It is a GOOD thing to look back and find your wins.  Especially if you have been knocked on your butt a few times.  We’ve been thrown a few lumps recently as described in my last post.  Because of that, I thought it would be a good idea to look back and examine a few of our accomplishments since starting this journey back in July.

Now, when we started we took a very good look at our budget and we cut several things.  Cable. The gym. Reduced our cell phone bill.  Paid off a few accounts.  And that was a great start.  We reduced our discretionary spending significantly as well.  At the time, we were like, “wow, that’s pretty stinkin’ good.”  and it was, TOTALLY!  (I am 46-year-old California girl through and through; “Like” “totally” and “awesome” are part of my permanent vernacular. And sometimes they all get thrown together even.) 

Then, we started gaining some momentum.  Started talking to more people about what we are doing.  Talked with and listened to others that are on this same journey, some behind us and some way ahead.   It’s inspiring.  It’s motivating.  Even so, this BIG goal we have does not seem real.  It still seems like a dream.  Because when it happens – it WILL be a dream.  It will be something that most people never reach because they are afraid.  Or stuck.  Or because they just can’t envision a life of MORE than what they already have.  We want more than that.  We want to be able to choose.  Choose whether or not we continue to work in some fashion after we “retire” from our current careers.  To choose to pursue passion projects or volunteer.  Choose to pick up and go wherever we want to go, whenever we want.  All because we have laid the groundwork for it now.

Have you ever taken a moment to watch construction? It is hard, labor intensive, exhausting work.  Not many people choose to do it.  Having previously lived in Phoenix for fifteen years – I especially felt for them in the Summer months.  Its not a job you can do forever.  But their job is so important. A structure built on a crappy foundation is ultimately worthless or at best will cost a lot of money to fix.

We are in the foundation building stages of FI (Financial Independence).  Its not fun a lot of the time.  It is work.  There is sacrifice. But it must be done in order for our plans to work.  Without our foundational work now – Financial Freedom and Early Retirement, will not happen.  We will be on the hamster wheel until we die.  No thanks.

So this morning, I took a step back to look at our work. And I was pleased with our progress.  (That is an understatement for sure.) Here is a summary of the monthly costs we have cut and/or paid off since we started a few months ago:

July: 

Cell 25.00

Cable 120.00

Gym 110.00

Care Credit 49.00

Aug/Sept:

Tuition Wendy 400.00

Dentist 215.00

Department Store 27.00

Tuition Maddie 781.00

Oct: 

Nov: 

State Taxes: 250.00

Karate 375.00

Water Delivery 125.00

Gym (again) 159.00

TOTAL MONTHLY SAVINGS:  $2636.00

But wait….now times that by 12….That is $31,623.00….$31,623.00!!!!

Whaaaaat?  That is a pretty freakin’ awesome number, right?  And this does not include our reduced discretionary spending for things like groceries and fuel.  Cool fact? If you look at most of them, individually, they are fairly small amounts.  The lesson?  Small wins add up to BIG ONES.  When I see what we have been able to decrease from our budget, I get excited.  It makes me want to go back through it and look for more costs we can reduce. It makes me jump up from my desk, run into the other room and, excitedly, tell my husband, “Babe look at what we have done!”  Really, I did do that.

Now you may look at our numbers and be thinking, “I can’t do that.  You make waaaaaay more money that I do.  Of course YOU can do that.”  But I challenge you.  Listen up! Becoming debt free and saving money can be done, and IS done, by people who make significantly less that what our family is fortunate enough to make.

Have you looked at your monthly spending lately?  What are you spending money on that you can cut or reduce?  Make a goal.  Start small.  Cut $100.00 from your monthly spending and put it in an investment account.  (I put ours into a Vangaurd VTSAX account.  Unsure of why you should or where you should put your money, go to JL Collins site and read his stock series, or buy his book The Simple Path to Wealth.) Then the next month cut your spending by another $100.00 (or 1% – whatever is achievable for you and will not cause you to freak out. And invest that amount in the same way.)  Then wash, rinse and repeat.  Its MAGIC.

$100.00 in savings a month, equals $1200.00 a year.  $200 a month, equals $2400.00 a year.  $300 a month, equals $3600.00 a year.  Compound each of those over ten years at 8% interest and you get $17,383.87, $34,767.75 and $52,151.62 respectively.  How would it make you feel to have that much sitting in an investment account growing by simply making a few simple cuts to your budget NOW.  Life-changing. Truly it is.  If you can grasp this one thing – you will have changed your life and that of your family’s.

Trust me…. you can do this.  It is just math.  Math and determination.  I believe you can do it. So get to it.

Love and Prosperity, 

Your GirlFIday 

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Mountains, Mistakes and Missteps

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2884 days…116 days in…

I expected there would be bumps in the road.  That at some point on this FI journey we would have some hiccups in our plan.  I did not think that it would come so quickly.  I naively, I suppose, put a plan together and thought all I had to do was execute.  It’s all just math, right?  It is.  And it isn’t.  Because we are humans.  With human problems.  Kids – that need STUFF.  And food.  You have to feed them. Fears. Impulses.  All of those things and more.

Since my last post, not much has changed.  In fact, due to a mistake I realized I made after speaking with our CPA, I had to halt my retirement contributions until the first of the year.  I discovered I misunderstood how much I could contribute as the employer into my individual SEP and due to that, I have until the end of the year to make up my “income” so I do not go over the percentages allowed by the IRS.  Ah yes, Uncle Sam, he seems to always show up and at JUST the right time.  So in a nutshell – I contributed too much money, too soon.  A good problem to have I suppose, but who wants to be in trouble with the IRS?  Not me.  Been there, done that and it stinks (still paying on that one after 8 years.  Seriously, trust me, a good CPA is CRUCIAL if you are self-employed.) Our CPA is wonderful and has really given us some of the most sound advice.  The problem is follow through.  Much like errant children, it has taken us some time to truly value his wisdom.

Ah taxes. What’s that saying? There are two things certain, death and taxes.…It will be a MOST wonderful day when we have finally put ourselves in a position to not pay so much of them.  Reducing them is part of our overall FI plan – but much like chess or a puzzle box, there are moves that must be made, in order, first.  But right now they are killing us. I am all for paying my fair share.  I like the things they provide – roads, schools, national parks, infrastructure – those things are all good things.  But if I can pay LESS – that would be super-duper awesome too.  As it is, the more we earn to pay our taxes, the more taxes we owe, so we must earn more, to pay the taxes…and so on and so on.  It’s the definition of the “hamster wheel” and we are dying to get off.  This year we have to pay more in estimated taxes for 2017 than we have ever before.  It made my heart leap out of my chest when I saw the number.  I was not prepared.  And therein – is the misstep.  2018 will be much better because we will be going into the year with one of our primary objectives being to reduce our taxable income.  We will do that by investing as much money as our budget will allow into pre-tax retirement accounts.  (Not sure what all of this means?  – Go check out some of the recommended blogs and podcasts mentioned in my last post).

My husband is incredibly fortunate in this regard.  He is a teacher and his school district allows him to not only contribute to a 403B but also a 457 plan…say whaaaat? (If you work in a service field; teacher, police officer, fire-fighter…you likely have the availability of a 457 plan as well and should consult your benefits department to learn more.  Seriously, this is like the most awesome thing ever for you.)  What this means is that we are not limited to contributing $18,000.00 a year into one account.  We can actually contribute double that amount, $36,000.00, $18,000.00 into each.  This was a new discovery for us and we were both floored when we learned of it.  The hurdle is to be able afford to max out both the 403b and the 457 as quickly as possible.  That will be extremely difficult with this mountain of debt we are carrying.  Sometimes I look at the numbers and I am overwhelmed.  Keeping positive and focused, which I usually succeed in doing, is sometimes difficult.  This plan of ours would be so much easier if we didn’t have the debt.  But there is no way around the mountain.  The only way is to painstakingly keep climbing.

Adding to the difficultly of the climb up the mountain, is that the debt service also requires a certain influx of income to also be maintained to keep up.  So not only are we climbing steep terrain, we are doing it with a 200-pound monkey on our backs.  It makes changing careers impossible without adequate replacement income. (and that, folks crushes my spirit and is a discussion for another day.)  It also delays how quickly we can achieve financial freedom.

So…the income is needed to pay the debt, thereby necessitating an increase in income – which increases the taxes, which requires more income to pay the taxes…and here we are right back on that hamster wheel.  Trapped.  That is often how I feel.  It can be so discouraging…

And then something happened….it was as if the clouds parted and a choir of angels began to sing….Well, no, but almost.  I went and looked at my Vanguard account…and there, sitting in my brand-new three-month old account, was quite a nice little chunk of free money.  Interest.  FREE MONEY.  And that was enough.  It was enough for me to catch my breath and look up ahead.  The top of the mountain in the distance, it is far, but I see it.  So we take a deep breath, we stick to the plan, and we keep on going.

Love and Prosperity,

 

Your Girl FI-day.