Monthly Milestone – November 2020

Welcome to my November 2020 monthly update!

FI is a long road

I will be covering our debt, assets, and net worth and will provide graphs and charts since we starting tacking in April 2019

I also include how close we are to our goal of FI, which is $2.5 Million in savings with a paid off mortgage.

I missed in update for the month of October 2020. Mrs. FreeRunner and I had a very busy month. We are expecting our first child and have been spending time planning our baby registry and moving rooms around in our house to accommodate a nursery. We also had a virtual gender reveal, and found out we are having a boy.

Be Accountable

The main point of these monthly posts are to hold my self accountable on my journey to Financial Independence.

Here is are progress since April of 2019:

DateApril 2019Nov 2020% Change
Savings$ 121,000$191,000+57.9%
Debt$61,000$18,500-69.7%
Mortgage$200,000$187,000-6.5%
Net Worth$193,000$318,000+64.8%
April 2019 to September 2020 Progress

Savings includes retirement accounts, HYSAs, and taxable accounts. Debt started with financing for a fence, car loan, credit cards, and student loans; it is now just student loans and credit cards.

Net worth includes equity on home, value of cars, and value of other physical assets.

Financial Free Progress Visualized – Total Savings, Debt, and Mortgage

It is nice to see some progress visually! My debt (red line) is going down, my savings (blue line) is going up, and my mortgage is doing down (at a slow rate).

This month we have a nice milestone! Our total savings is now more than what we owe on our mortgage! I am very happy to see that the blue line is now above the green line.

Plans for December 2020

The plans for December 2020 is to close on a 2.37 acre lot of land in a new residential development! This is a brand new plan for us. For the last 6 months, my wife and I have been talking with her sister and husband as well as their in-laws about buying and building our own homes in the same neighborhood.

Well, we finally found the perfect area and all 3 families are closing on adjacent lots in December. All of the in-laws are wonderful and this proximity to each will greatly help when we are all raising our young kids. Cousins can play together, and the grandparents will be helping a ton with babysitting.

We are planning to build our new home in the summer of 2023. Our current plan for the next 24-31 months is to save $4,600-$5,000 per month into our HYSA for the downpayment. We will also reduce our retirement savings to $2,500/month.

This isn’t ideal as I would love to max out retirement early, but we are outgrowing our current home already and being next door to the inlaws would eliminate the need and cost for daycare.

We still plan to pay off the remaining of the student loan balance ($18.5k) before interest restarts in 2021, but we may wait a month or three into the year to see if the new president will cancel any student debt (it’s a long shot and we’re not planning on cancellation).

How Close are We to Our FI Goal?

We are 7.65% into saving for our FI goal of $2.5M.

We still have a long way to go.

Closing Thoughts

The month of November was a large boost to our portfolio, very likely the largest month to month increase we’ve ever had.

With the news and recent FDA approval of the Pfizer vaccine in the US, we are optimistic for continued growth through 2021.

It is very nice to visualize our progress and this will help us keep on track!

What is your progress since you started pursuing FIRE?

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Win Roulette Every Time with Employer Match

If your employer offers a match to your 401k/403b or equivalent, you should be taking advantage of this FREE MONEY.

Imagine you are playing the game of roulette at a casino that is guaranteed to land on black every time. Would you place a bet on black?

I don’t know about you, but I would bet on black and double my money every time.

Contributing to your retirement account to at least get the full employer match is like betting on roulette and winning every time.

For example, if you make $1,000 per pay period and the employer match is 3%, if you contribute 3%- you instantly double your money to $60 ($30+$30).

The employer match is the same as an instant 100% gain on your investment.

Depending on your employer, you will have a different match available. Some employers may offer 3% match if you put in 6%, or anywhere in the range of 1-10% match, and some do not offer a match.

Employer match is part of your compensation and not taking advantage of it is like shredding part of your paycheck.

My employer does not offer a match, however they provide a generous profit sharing of 8% of my yearly salary once a year as a lump sum (and I don’t have to contribute anything to receive this). My wife’s employer provides a 4% match into her 403(b). In total, our employer contributions are about $11k/year.

Utilize your employer match to increase your savings rate and advance your pursuit to financial independence.

What is your employer retirement match? Are you taking advantage of the match?

Keep an Emergency Fund to Stay Out of Debt

Debt is a viscous cycle. This is especially true if you have a lot of debt. Focusing on paying off debt is key to ending the cycle. However, if a new, surprise expense pops up out of no-where what can you do, other than pay for it with credit?

If you’re up to your eyeballs in debt, it is hard to see how to get out. Staying focused, having a plan, and consistently chipping away at the debt will make it eventually fizzle to zero.

The Importance of an Emergency Fund

Your emergency fund is a tool that you can use to avoid getting into debt and gathering more debt. Debt is the enemy of those pursuing financial independence as it prevents you from maximizing your savings rate.

Think of your e-fund as a tool with a singular purpose, and only this purpose- debt prevention.

Do not use your e-fund for superfluous purchases, like getting the newest phone because last year’s model is now too old or upgrading your car because you saw one that was shinier.

Emergency expenses are any expenses that are unplanned and you had no foresight to set aside cash to pay it. E.g. a flat tire, unplanned car maintenance, unplanned medical expense, your laptop that you use for work was stolen, losing your job, etc – you get the idea.

If you are in debt, you need to know your debts, make a list and make a plan to pay them off. Don’t include your mortgage in this list since mortgage interest rates are at all time lows.

Depending on your situation and goals, I recommend the following e-fund amounts:

  • You are currently in debt
    • Save $2,000 or 1-2 months of expenses (whichever is greater)
    • Do not add any other debts. If an emergency expense comes up, use your e-fund to pay for it. Then rebuild your e-fund.
    • Focus all of your extra income into paying off the debt
  • You have no debt (besides a mortgage) and are on the way to financial independence
    • Save 6-12 months of expenses
    • Do not add any debts
    • You can use credit cards to gather points and cash-back, however be sure to pay them off completely each month to avoid interest.
  • You have debt and are financially independence
    • Save 6-18 months of expenses
    • Do not add any other debts. If an emergency expense comes up, use your e-fund to pay for it. Then rebuild your e-fund.
    • Focus on paying off the debt
  • You have no debt (besides a mortgage) and are financially independence
    • Save 12-24 months of expenses – (I recommend a larger e-fund when you are FI so that you can avoid drawing down on your investments when there is a market downturn/bear-market)
    • Do not add any debts
    • You can use credit cards to gather points and cash-back, however be sure to pay them off completely each month to avoid interest.

These are my recommendations, choose whatever e-fund amount you feel comfortable and confident with.

Mrs. FFR and I are on the long road to FI, and we currently have an e-fund of around 8 months of expenses. We have student loan debt (0% interest currently due to the CARES ACT), that we will pay off before 2021. Once we pay this, it will bring our e-fund down to 5-6 months of expenses.

Once we’re debt free, we will build our e-fund up to 10-12 months of expenses. When we’re FI, we’re planning on keeping 18-24 months of expenses in a combination of HYSA and CDs.

How much is in your emergency fund?

The Top 2 Ways to Prioritize Paying Off Debt

Paying off debt is one of the first things you should focus on before maximizing your savings in pursuit of financial independence.

If you have a lot of different debts, what order should you pay them off?

This questions has left many borrowers scratching their heads, however the large consensus agrees with 2 different approaches- Highest Interest First Strategy and Lowest Balance First Strategy.

Whichever strategy you use, pay as much as you can each month to minimize interest

  1. Highest Interest Debts First
    • This strategy would have you list your debts in descending order of highest interest rate first, lowest last.
    • Pay minimum payments on every other debt, and pay all your extra money onto the highest interest debt. Once its paid off, put all extra money onto the second highest interest debt and repeat until all debts are paid off.
    • With this method, you avoid the most interest
  2. Lowest Balance Debts First
    • This strategy would have you list your debts in descending order with the lowest balance first and highest balance last.
    • Pay minimum payments on every other debt, and pay all your extra money onto the lowest balance debt. Once its paid off, put all extra money onto the second lowest balance debt and repeat until all debts are paid off.
    • With this method, you eliminate the smaller monthly minimum payments quickly, allowing you to free up more cash each month to throw at the other debts
    • Additionally, you also quickly get a positive reinforcement on your debt attack, further motivating you to destroy the larger debts with a vengeance.

Make a Plan

Whichever method you pick, make a plan of how much you will pay onto the debt each month and the date you plan to have each debt eliminated. It will help to keep you motivated and efficient.

Remember- all extra cash goes to debts until they are all eliminated

As of September 2020, Mrs. FFR and I have paid off nearly $65k in 18 months and we will be debt free (minus our mortgage) before 2021 – see our progress here.

Our last debt is my student loans which we are waiting until December to pay since federal student loans have interest and payment suspension until January 2021 per the CARES ACT of 2020. We have the money to pay them now, but are making (a small amount of) money in a HYSA until then.

Once all of your debts are gone, you will be entirely focus on savings and investing. Just think of how much more you can save if you cut out your debts- image no car loans, no credit card bills, no student loans, no 401k loans, and no personal loans. Imagine the growth potential. You can do it- get after it and attack!

What’s your plan to pay off your debt? How much can you pay off before 2021?

Do You Really Need a Brand New Car?

No.

A brand new car is a nice luxury that most yearn for, including myself. I can easily finance a new car, but since my focus is to be financially independent, I will not.

What does a brand new car cost you?

If you can pay cash, which you should if you can afford it to avoid interest, your cost is the price you pay. However, all vehicles are depreciating assets and will loose 20-30% of it’s value when you exit the dealership.

If you finance, this is a much more drear situation. You are losing value and you are paying interest.

I will agree, the below actually isn’t a bad deal since interest rates are at record lows.

Not my Chevy Camaro

Let’s say you buy a 2021 Chevy Camaro (base model) for $24,000. You put down $2k and finance the remaining $22k on a 5 year loan at 3% APR. With about $2k in overall interest, you will be paying almost $26k total once the loan is paid off.

Did you know, your new car will be a “used car” after you own it for just a bit of time?

The extra $2k coupled with the 20-30% depreciation is what deters me from new cars. I can get a used Camaro, a couple of years old with 30-50k miles, for $15-$16k. This is a saving of $10-11k versus a brand-new car.

If you invest the $10k you save instead, it could turn into more than $20k in ten years (using a conservative interest rate of 7%).

Satisfaction Vs Buyer’s Remorse Vs Your Financial Goals

These 3 criteria are the ultimate deciding factors when deciding to by a car.

Would you be as satisfied with a used car as you would with a new car? I would be just as satisfied if not more satisfied because I’d be able to save more money. Even if I could fit a new car payment into my budget.

Would you have buyer’s remorse if you bought a car? I’m only 31, but I’m old enough to need that the excitement of getting the “new, shiny thing” is fleeting. Once you have “it” you’re often disappointed.

Does this purchase help or hinder your financial goals? When comparing buying a new car to buying a used car, a new car is a financial hindrance.

My Philosophy on Cars

As long as the car can get me from A to B, reliably, is safe, and is full efficient, I am happy. I don’t need anything flashy.

In my early 20’s I financed a brand new Camaro. Granted, I loved the car, but it was a large financial misstep. I could barely afford the payments at the time and would have been just as happy with a used one. I learned my lesson the hard way.

Mrs. FFR and I own used cars that are completely paid off (that we bought used). We have a 2013 Toyota Camry (70k miles) and a 2015 Subaru Forester (100k miles), that we will drive until they hit 250k miles, die, or cost more to repair than their value. 

Tip: Routine maintenance and regular oil changes are your friend. Reliable vehicles, if taken care of, could last you well beyond 200,000 miles.

When the time comes for us to get a different vehicle, we will be getting a used replacement with 30-50k miles, 2-5 years old, and we will pay in cash to avoid interest.

In summary, don’t get a new car just because you can afford the payments. It will delay getting to financial independence. If you absolutely need a replacement car, buy used and buy reliable (and take care of it).

How have you saved money on vehicles?

Be Frugal-er 23 Ways to Reduce Your Essential Expenses

Essential expenses include things such as mortgage/rent, heating, power, water, transportation, insurance, etc.

Essential expenses are probably the bulk of your outgoing cash each month, likely making up 70-80% of your total expenses.

Focusing on reducing this portion of your expenses will typically yield you a bigger bang for your buck, unlike smaller expenses like the grocery budget (which you can reduce, but only so much).

Here are 23 Ways to Lower Your Essential Expenses Today
  • Rent/Mortgage
    1. House Hack – Multi-Unit: Buy a multi-unit property like a duplex, live in one half and rent out the other half.
    2. House Hack- Rooms: Buy a multi-bedroom house and rent out the bedrooms
    3. Rent-Hack- Sub lease rooms in your rental, i.e. have roommates
  • Electric Bill
    1. Be mindful of your consumption- turn off devices and lights when you are not using.
    2. Get low energy light bulbs
    3. Make sure your fridge is full. If you fill your fridge with bottle water, it will stay cooler for longer than an empty fridge without having to run the compressor.
  • Gas Bill
    • If you have a gas fired oven and stove- be efficient at cooking and cook in bulk if you are able to. The less often you use it, the less gas you’ll use.
    • Heating- lower the set point on your thermostat. Wear layers and use blankets. I also use heating pads and heated blankets.
  • Water Bill
    • Again, be mindful of your consumption. Turn of the water when your brushing your teeth.
    • Check for leaky faucets
    • Turn off all your faucets and look at your water meter. If the dial is turning, you have a leak somewhere.
  • Transportation
    • Carpool to work.
    • Don’t buy new, buy used. new cars lose 20-35% of their value in the first year.
    • Don’t lease vehicles. Leasing is by far the most expensive way to own a vehicle.
    • Bike or walk to work if you live a reasonable distance.
    • Routinely get quotes for car insurance.
    • Plan all your errands for one day. Don’t make multiple trips, be efficient.
  • Toiletries
    • Make your own soaps
    • Get freebies when you can – I used to travel a lot for work and would take home the hotel soaps with me.
    • Buy in bulk, when on sale.
    • Buy generic brands.
    • Make your own surface cleaners.
  • Groceries

Although these expenses are necessary for you to live, you can and should be paying less! Many people over look these expense categories in their budget by waving a hand and saying “well I need water, power, food, etc”.

Don’t become complacent, be mindful. You’re watchfulness will payoff.

How do you plan on reducing your essential expenses?

Cooking with FIRE. 15 ways to reduce your grocery budget

Don’t put all your money in the grocery bag.

Groceries budgets can vary vastly depending on the type of food you purchase. If you are looking to reduce this budget item, you might be surprised how easy you can lower it.

I budget $350/month for 2 adults for our groceries and most of the time, we are under budget.

Cutting your grocery bill in half will help you get that much closer to financial independence.

Here’s 15 ways to save money on your groceries
  1. Learn to cook
    • Cooking all of your meals is MUCH more cost effective than buying pre-made meals. If you have connection to the internet, learn to cook (it’s easy).
  2. Plan Meals
    • Planning your meals will help you determine what you need to buy in order to cook your meals at home.
  3. Have a List Prepared
    • Once you plan your meals, and you have in mind what you need, write it down. When you go to the grocery store, only buy the items on your list.
  4. Coupons
    • Use coupons! Once you have your grocery list, search for deals and coupons! Also compare stores.
  5. Buy Bulk
    • Buying larger quantities of items is very often much less expensive than buying a single pack. Only do this with items that make sense and have a long shelf life. E.g. don’t buy 50 bananas because they are on sale, do buy a 50 lbs bag of rice that’s on sale.
  6. Dry beans
    • Dry beans are much cheaper than canned beans. They also have lower sodium! Dry beans do require some prep work however.
  7. Grow Herbs
    • You can grow many herbs indoors or in a small sections of your yard. Garlic, sage, green onions, and more are very easy to grow and maintain.
  8. Grow Fruit
    • Have strawberries, blueberries, raspberries for FREE! Well, free minus your time to plant, pick, and water. Depending on your climate, you can grow other fruits too, like apples, oranges, and others.
  9. Grow Vegetables
    • Also, Vegetables for free! If you are inexperienced in gardening, do a quick YouTube search for starting a vegetable garden. It’s very easy to grow peppers, tomatoes, potatoes, and squashes.
  10. Eat Less
    • Don’t eat in excess, maintain your weight and your wallet.
  11. Make your own breads
    • Flour + Yeast is much cheaper than buying bread in the store. It’s also not very difficult. I routinely make bread loaves, english muffins, waffles, pancakes, pizza crust, and more.
  12. Farmer’s markets
    • Your local farmer’s market may have fruits, vegetables, and more cheaper than you’d find at the grocery store.
  13. Chickens
    • Raising chickens is a good source of eggs and chicken meat. This is not for everyone.
  14. Hunt
    • Get your meat how our ancestors did it- hunting. This one is also not for everyone.
  15. Know timing of cost reductions for items expiring soon
    • Our Mejier grocery stores in the midwest mark down 20% off meat that expires within 2 days. They add the 20% off stickers in the morning around 7:30. Ask the employees to find out.
  16. Eat Leftovers
    1. Don’t waste your leftover food – eat it. We almost always eat our dinner leftovers for lunch the next day.
  17. Avoid Restaurants
    • Restaurants are 4-8 times more expensive than making your own food. This includes fast food too!
  18. Make your own snacks
    • Make your own applesauce, chips, fries, yogurt, granola, roasted seeds, cookies, protein bars, etc.
  19. Utilize Rewards Programs
    • Many grocery store chains have loyalty rewards and better coupons for membership.
  20. Buy Generic
    • Never buy the name brand, unless it’s on sale for less than the generic brand.
  21. Make use of the scraps
    • If you have leftover bones from roasting a chicken or turkey, you can make stock or broth.
  22. Grate your own cheese
    • Blocks of cheese are cheaper than shredded cheese. Get your grate on!

How ReFinancing Can Help You FIRE

Refinancing your mortgage is a quick way to save extra cash through interest savings. You can also benefit from a lower payment as well, allowing to save more money each month.

How much can refinancing really save you?

Your savings could be ten of thousands of dollars throughout the life of your loan. Here’s a simple comparison I did with Zillow’s Refinance Calculator.

My wife and I bought our home in 2018 for $256k on a 15 Year Loan at a 4.25% interest rate, we put 20% down to avoid PMI- our initial mortgage loan amount was 205,600.

In 2019, the credit union we had the mortgage with had a lower rate available (3.125%), low refinancing fees, and a $1,000 cash back offer if we signed up for a checking account and credit card.

This was a no brainer for us. Our shiny, new mortgage loan was $199,500.

By refinancing, we saved $27,000 over the life of the loan and it dropped our monthly payment $200 (although the mortgage will now be paid off in 2034 instead of 2033).

With record low mortgage rates, refinancing can save you a lot of money – just look at what lowering our rate by just 1.125% saved us.

The $200/month we saved by having the lower payment has been going to our higher interest debt- credit cards and student loans.

Once we are out of debt, we will be investing the extra $200 each month.

$200 is not a lot of money, but in the grand scheme of things will help us get to Financial Independence sooner.

To me, $27k is a lot of money. Saving this over the 15 year period, plus being able to invest the extra $200 per month will have an even bigger return.

Since our interest rate is so low, we will make more on investments than repaying the mortgage.

How much can you save by refinancing your mortgage?

20 Ways to Make Extra Cash – Get to Financial Independence Faster

Making extra cash is a fantastic way to increase your savings rate.

If your goal is to retire early, why not spend some of your time getting more cash to invest?

For Mrs. FFR and I, we budget monthly based on our income from our full time jobs. Any extra money we make through side-hustles, goes directly to pay down our debts or into an ETF.

In this post, I will explore ways you can make some extra money. Here’s some ways to make some extra dollars!

  1. Overtime
    • If you have the opportunity for overtime, this is the easiest way to make extra money.
    • Overtime also gives you the opportunity to save more into a work retirement account (401k, 403b, etc).
  2. Second Job
    • If you have the time for a second job, you can make some decent cash through part time employment.
    • Mrs. FFR does a second job every semester at a local university as an adjunct professor.
  3. Rental Properties
    • This requires upfront capital to get a loan, but can be a good source of income if your rent is larger than the mortgage on the property. Of course, there is a potential downside of not having renters or having bad tenants.
  4. Gig economy jobs – contract based work
    • Examples include: Postmates, Instacart, Amazon Flex, Shipt, Doordash, Grubhub, Uber, and Lyft.
    • Taskrabbit is also a great app to find small jobs if you are a skilled laborer.
  5. Peer-2-Peer Lending
    • Individuals, businesses, & startups borrow money from you online.
    • Examples: Lending Club
  6. Airbnb / VRBO
    • Rent out your extra room or property for money
  7. Blogging
    • If you get a very large following, it is possible to make money on blogging multiple ways.
    • Examples: Website displays ads, affiliate marketing, and sponsored posts
  8. eBook Writing
    • If you are the creative type, Amazon makes it easy to publish and sell your book
  9. Create digital products
    • Courses, webinars, software, etc
  10. YouTube
    • If you get a very large following, it is possible to make income on YouTube videos multiple ways.
    • Examples: Displaying ads, affiliate marketing, and sponsored videos
  11. Stock Photography
    • Take high quality, intriguing images and post them to sites for sale.
    • Examples: ShutterStock, iStock
  12. Creating mobile Apps
    • Requires coding knowledge and experience
  13. Design and Art
    • Create artwork that companies print for you
    • Examples: RedBubble, merch by Amazon
  14. Website Domains
    • Buy and resell web domains
    • Examples: GoDaddy, Flippa
  15. Build a website to sell
    • Construct, design, build, and gather enough visitors/day to sell.
  16. Ebay / Amazon
    • Sell your unused goods or flip items by buying at a lower cost at thrift shops, garage sales, or clearance sections at brick and mortar stores.
  17. Cash back offers
    • Get cash back offer by signing up for credit cards, investing applications, bank account, etc. Watch out for fees.
  18. Sign up bonuses
    • Look for sign up bonuses on any service you routinely use.
  19. mTurk
    • Complete various tasks, surveys, etc for money
  20. Instagram Influencer
    • Gather a large following and make money from affiliates and other marketing.

There is no sure-FIRE (pun) way to make extra cash fast, many of these things take up time. I tried to list them in order of easiest barrier to entry to hardest barrier to entry.

Do you side-hustle? How do you make extra cash?

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