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.

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