Sunday, December 27, 2015

Financial Retrospective - First Steps to FI

With this post, I want to capture where I'm at financially for posterity's sake. I hope to fine tune my savings/investing strategies in 2016 to better achieve my goal of getting closer to financial independence within the next decade. I'd like to revisit this post in the following years to gauge my progress. So, let me lay out what I've done so far:

I didn't get serious about becoming FI/REd until August or September of this year. I discovered some subreddits of interest (Personal Finance & Financial Independence) and, from there, some blogs by individuals who had already reached FI and chose to write about it. Many of them tell how they did it and then there are some who tell about the psychological changes they experienced on their way to FI. This really helped to fire me up.

I already had a Roth IRA at Vanguard with a target retirement fund. I moved my money into a more aggressive fund and purchased another to better diversify my allocations. In addition, I opened an investment account with Betterment. I increased my 401k contributions at work, too. Previously, I was only contributing about 4% (without employer match--won't get that until 2016). Now, I'm contributing 10%. I exchanged the funds in my 401k to some that were more aggressive with lower expense ratios.

I attempted to make a budget and am still trying to fine tune it to maximize my savings rate. Initially, it looks like my savings rate was about 58%, but I'm not confident with the accuracy of that number. I managed to cut spending by switch car insurance to save about $1,500 annually. I reduced my budget in other areas to maximize savings. Mainly, I stopped eating out and cut my daily work commute to only 2 days a week, which helped cut costs. The biggest hurdle was my grocery budget, which was difficult to cut because I enjoy good food. I managed to slash it more by eating more left overs and buying stuff to make more sandwiches and soups.

Overall, I built an emergency fund of roughly $15-20k. I contributed to investment accounts (taxable and non-taxable) to increase my net worth, which has finally broken the $40k barrier (just barely).

Some set-backs I encountered:
  • Got started late in the year
  • Had to buy a car for my son
  • Unexpected repairs on my vehicle

I'm not sure what else to document in this post. Like I said, I'm just starting out on the path to FI with the hope to reach my goal in 10 to 15 years. I plan to take what I've learned this year into 2016 and make more changes to get the greatest returns I can. I think having a full year's worth of data will better help pinpoint areas where I can make changes. However, knowing that I've finally opened my eyes to the fact that FI is definitely attainable within that time frame is like a breath of refreshing air. All I have to do is look back at the last 10 to 20 years to see how bad off I was financially. My only regret is that I didn't discover this way of life earlier, so I could be much closer to, if not already, financial independence.

As for my plans once achieving FI, I want to indulge more of my time in my hobbies: reading, writing, making masks, drawing, and piddling with my guitar and bass. I have a bunch of novels that could occupy much of my time. As a matter of fact, I have a second anthology due out in January 2016 called Negative Spaces. With more free time, I could publish more books faster. Time will tell what happens. If you're interested in following the path to FI, then I encourage you to come back and see my progress.

Sunday, December 6, 2015

Return from Sabbatical

It's been a year since my last post. I won't offer any apologies because I just didn't feel the need to post anything. For me, blogging is not organic, it feels forced most of the time. I don't like to be forced to do anything. My job is something I'm forced to do, but that's different. Everyone needs money to pay bills and survive. My writing, however, is something I do out of passion. Even then, I only write when I feel the need to write. I don't force myself, which is a reason there is no book to publish this year (more on that a little later).

I've mentioned before that I have several hobbies. Mask-making, drawing, writing, etc. When I have news on any of these fronts, I like to share it. Well, I experimented with making a paper mache mask this year and it was quasi-successful. Enough so that I will take another stab at it now that I know what pitfalls to be aware of. That's not really why I'm writing this post though. During my break I found another interest. Something I was never passionate about before and, looking back, I kind of regret that. I discovered the world of Financial Independence and Early Retirement.

There's a lot of forums out there where people on the path to FI/RE discuss this subject and, as I read some of this stuff, I found myself intrigued. It's always been a dream of mine to be my own boss, not have to wake early to commute to a job where I sit in a cubicle and perform a task for someone else in exchange for money to get by on. This is one of the reasons I started writing years ago. However, I learned that supporting myself through writing was extremely competitive and a big gamble. For every one hundred writers, probably only a small group (enough to count on one--maybe two hands) will go on to make it a sustainable career. And by "sustainable career" I don't mean they're rolling in dough, living a life of luxury. They will, most likely, be writing day in, day out trying to hit multiple deadlines with several publishers in order to cobble together an annual income somewhere in the range of $30-$60k. I make way more than that now doing IT work and I have evenings and weekends free (time I use to pursue and indulge in my hobbies that bring me happiness). Not to mention, I'm fortunate enough to work for an employer who allows me to work from home three days a week, so I only commute twice a week. Win!

Still, I have to wake up early in order to join conference calls and do work I don't feel like doing. That may sound like a privileged person whining. I realize things could be worse for me. After all, I had worse jobs in my youth, so I am thankful for where I'm at. Yet I'm at a place in my life where I need to start planning for the future. Something I should've done when I was much younger. I don't want to do what I'm doing for the rest of my life. I'd like to have whole days free to indulge in activities I want to do. Not doing things dictated by others.

Enter FI/RE. I read many accounts of people who have managed to work hard for ten years or a slightly longer, socking away half or more of their net incomes in investment accounts, who were able to finally walk away from their jobs to enjoy early retirement. It was very much like reading the success stories of people who've managed to win the lottery but not fritter it away. For someone who hasn't been putting money away for retirement, this came as a revelation; a breath of refreshing air. So, I opened an investment account, started socking away money, changing my spending habits so I transition from consumer to saver. I've been watching my net worth rise and that builds momentum, much like the snowball effect, that keeps me on track to retire early.

So, that's what has consumed much of my year. And, since this blog is where I discuss things that interest me, I decided to write about it. Finances may or may not interest you. That's okay. I will warn you now, though: I will be writing more about my travels along the path to financial freedom in addition to my other interests: making masks, writing, etc.

As for my writing; I'm still very much plugging away at it. As a matter of fact, I've written numerous short stories this year as well as moved the progress needle on some novels I'm working on. I don't like to let a year pass without publishing something, but as I've stated many times before, I won't publish anything not up to my standards. I was hoping to publish my novel What Goes Around. Unfortunately, it hasn't met my standards, so I will need additional time to edit/rewrite it. With that being said, I decided to gather some of my shorts to produce a second anthology. I'm getting close to finishing, but I doubt I will be done before the end of the year like I'd hoped. So, it may not get published until January 2016. I already have the cover finished. It's called Negative Spaces. It contains 13 stories ranging from the bizarre to horrific. I hope you'll enjoy it when it hits virtual shelves soon. Here's a sneak peek of the cover. Also, I hope you'll return to see how I'm doing on the road to FI/RE and, most of all, I hope you get a lot of knowledge from my progress that will help you too.