Monthly Milestone #1 – September 2020

Welcome to my first monthly update, since starting this blog!

FI is a long road

I will be covering our debt, assets, and net worth and will provide graphs and charts since Mrs Free Runner and I started tracking in April of 2019.

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

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 2019Sept 2020% Change
Savings$ 121,000$170,000+40.5%
Net Worth$193,000$293,000+51.8%
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).

Total Assets and Debts

Here’s more granular detail. It’s interesting to see the effects of the COVID-19 (coronavirus) impact to the retirement accounts in March-May 2020.

Plans for October 2020

The plans for October 2020 are to pay down the credit card debt completely. This will be the primary focus.

I was paying an extra $300/month on our mortgage payment, but I have decided to stop that. Instead, we will be preparing to pay of the remaining of the student loan balance ($18.5k) before interest restarts in January of 2021.

How Close am I to my FI Goal?

I am 7.44% into saving for my FI goal of $2.5M.

Current Savings Vs. Target Savings

As you can see, we have a long way to go.

Closing Thoughts

Although I have be logging our finances since April 2019, this is the first time I have graphed our progress.

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?

5 Steps to Determine How Much to Save to Retire Early with Retire Early Calculator

You want to retire early- how much money do you need to do this?

In this post I will help you determine how much to save to retire early.

Well, first you will need to know how much you will spend in retirement.

This is what you need to know:

  1. Determine your monthly and yearly expense after your retirement.
    • After we pay off our mortgage and retire early, we expected our monthly expenses to be $2,500 and yearly expenses of $30,000. We can factor in a safety factor of $1,000 extra per month, bringing the yearly total up to $42,000. So our target is $30-$42k/per year. This is how much money we will need to withdraw from investment each year.
    • Use the 4%/25X rule to determine how much money you will need to retire. Multiplying $30k-$42k by 25 equals $750k-$1M needed for retirement – to meet our current expenses per year and never run out of money. (Your savings will grow enough to offset your withdraws each year, preventing your saving from reaching zero).
  2. Determine what age you want to retire.
    • I want to retire by age 45 or sooner (14 years from now). I want to have enough money saved to volunteer, coach for our future kids sports teams, and take them on a decent yearly family vacation.
  3. Determine what rate of return you expect.
    • We are anticipating a conservative rate of return of 7.5%. The 30 year average return of the S&P 500 is around 12%/year with dividend reinvestment. Past performance is not an indicator of future performance, but will provide a good baseline. I will be performing calculations with a 7.5% to 12% rate of return for my projections later in this post.
  4. Add all your retirement and savings accounts together.
    • We currently have $145,000 saved in the following accounts-
      • Roth IRA 1- $17k
      • Roth IRA 2- $30k
      • 401k – $62k
      • 403b – $17k
      • HSA 1 – $1k
      • HSA 2 – $2k
      • non-retirement ETFs/Mutual Funds- $8k
  5. Determine how much you can save each month.
    • We are paying off some last bit of debt. Once that’s done we can save roughly $6,000/month
  6. Use interest calculations to determine how much money you will have at your target retirement age.
    • This sounds easier than it looks which is why I created a simple calculator in Google Sheets shown below. All you have to do is enter in your current savings, how much you can save per month, how much more you can save each year, your expected average rate of return, your current age, and your target retirement age.

With the Financial Free Runner Retire Early Calculator, I have graphed 2 scenarios below. The first is with a 7% rate of return, the second is with a 12% rate of return.

Getting a higher rate of return almost doubles my total savings by 2039!

7% rate of return, $145k initial investment, $6k/month savings with 2%/year increase
12% rate of return, $145k initial investment, $6k/month savings with 2%/year increase

According to my calculations in the spreadsheet I’ve made, if I retire at age 45 I will have $2.3M in the bank with a 7% average rate of return; I will have the same amount much sooner at age 42 if I get a 12% average rate of return.

My 25X rule calculation in the beginning of this blog determined I would need $750k-$1M to retire with our current expenses, however we have a plan to have children and our yearly expenses may grow. Therefore, I am setting our goal somewhere between $2-$3M.

I have made an easy shareable Google Sheet, shown below, to calculate my potential savings. I can share this with you, if you subscribe.

Financial Free Runner Retire Early Google Sheet

Subscribe to get access

Get access to the Retire Early Google Sheet by subscribing today.

Introduction- Retire Early & Financial Independence Goals

This post describes my background and goals. Everyone’s goals are different. If you want to retire early, when do you want to retire and how much money will you need? Write it down. That’s what I am doing.

The Kid

Hello and welcome to my first blog post! If you are still reading by my first sentence, thank you! Really! First let me introduce myself, I am Jon. I am currently 31 years old, and married to my beautiful wife (for 2 months and 3 days at the time of this writing).

We currently have no kids (yet), but we do have our sweet black lab that we call our kid. 

My wife and I are on the same page financially, but I take the responsibility of our finances.  In this blog, I will refer to myself as Free Runner. I am an aspiring multi-millionaire and I have a goal to retire early. As of September 2020, we have a net worth of $104,000.

I do not consider myself a financial expert. I read many financial books, listen to financial podcasts, and I like to learn. I especially like to learn about things I am passionate about- finances and retiring early are things I am completely passionate about. 

The purpose of this blog is to hold me accountable on my path towards retiring early, as well as to help you along the path (and in real time- unless you’re from the future!). 

As I learn more and more, I want to help you learn. 

I will be writing about many areas:

  • Finances
  • Home-ownership 
  • Retirement accounts
  • Savings 
  • Frugality 
  • Retire early strategies 
  • Goal setting 
  • Financial book reviews
  • Debt and more.

I will also be doing a monthly update post detailing our progress towards our savings goals. 

Now that I mentioned it, I should write what our goals are:

  • $2.5 Million in retirement and savings by age 45 (14 years from now)
    • Stretch goal of $3.1 Million by age 45 (14 years from now)
    • Retire by age 45
  • Paid off mortgage by age 40 (9 years from now)
    • Stretch goal by age 38 (7 years from now)

How will we get there? Hard work, some sacrifice, and lots of patience. 

I believe these goals are achievable if we stay on track and monitor our progress regularly. A castle is built piece by piece and takes time. Rome was not built in a day… as they say. 

We have a long way to get to our goals, our savings and retirement accounts are only a small fraction of our target. Additionally, we are still in debt, which will deter us from maximizing our savings for only a few months.

Based on what we can potentially save once we are out of debt and estimating a yearly investment return of 7%, we can easily hit our “retire early” goals. 

Combined Annual Income$163,500
Savings (High Interest Savings Account)$20,300
Stock Market (ETFs)$8,000
Retirement Accounts (401k, 403b, Roth IRAs,  HSAs)$141,500
Debt (Credit Cards, Students Loans)$23,300 
Mortgage (equity ~ $108,000)$190,200
Income, Savings, Retirement, and Debt

I hope to look back at this blog one day after reaching our goals.

You can do this too. Find out what all of your debts, assets, and incomes are. Write it down and make a plan. How much can you save?

We Have Debt – 10 Things You Need to do to Get Out of Debt

Debt squeezes your finances

What are you going to do about that debt? In this post, I will outline steps for getting out of debt and show our plan.

In my last blog post, I mentioned debt. It pains me to admit this: we have debt. We have credit card debt. We have student loans (all mine). We have a mortgage.

Why do we want to get rid of this debt? There are two main reasons.

  • Avoid interest
  • Increase our savings rate

We want to get rid of the credit card debt and student loans ASAP.

Debt Type AmountInterest Rate
Credit Cards$4,80018%
Student Loans$18,5007-9%
Non-Mortgage Total$23,300N/A
All of our debt

When and how will we get rid of this debt? An easy answer-  pay it off with our income. Since we have consumer debt, we are not contributing any money to our retirement accounts (besides up to my wife’s 4% match, because it’s free money and our timeline to pay this debt completely off is relatively short). 

We have a plan to pay the student loans and credit cards off by February 2021.

Here are the 10 steps we are taking and you should follow.

  1. Understand why you want to pay off the debt
    • If you’re like me, you probably want to pay it off so that you can increase your savings rate and get you to financial independence sooner. However, you may have different goals like buying a nice car or new house.
  2. Determine all of your debts and interest rates
    • You will need to know what debts you have, the interest rates, and of course the amount of debt. Write down all of the debt totals. Study them. Know them. Add all the debts together. That number is your goal to pay off. Exclude your mortgage.
  3. Make a budget
    • Determine ALL of your monthly expenses and how much money you have leftover.
  4. Limit excess spending and unnecessary purchases
    • Excess spending prevents you from paying off your debt fast. Do you really need that new phone or go out to eat 3 times a week?
  5. Be Frugal
    • Spend less of the hard-earned cash and put the extra saved on the debt.
    • Use coupons, buy the generic brands, grow your own vegetables, reuse what you can.
    • Buy used. Check out local thrift shops, you might be surprised what gems you could find. Also try eBay or Facebook marketplace.
  6. Don’t pay the minimum payment, pay the maximum payment. 
    • The maximum payment is everything you can afford after necessary expenses.
  7. Make a plan to pay the debt off
    • Do you want to pay the smallest debts first? Then start by paying the smallest debt first. Get that satisfaction of knocking out one debt! Woohoo!
    • Do you want to avoid the most interest possible? Then start by paying off the debt with the highest interest rate first. Get the satisfaction of dodging the interest!
  8. Temporarily limit contributions to retirement account and use it to pay debt instead
    • Are you contributing excess funds to your 401k, 403b, Roth IRA, IRA, or other type of retirement account and have high interest debt? Perhaps temporarily reducing or eliminating contributions would help you get out of debt faster. Besides your high interest debt might be costing you more money than what you could make on your investment.
  9. Use any extra money to pay off debt
    • Getting a bonus check, tax return, inheritance? Use the extra money to pay off the debt.
  10. Make a schedule to pay off the debt
    • Having a monthly or weekly goal of how much you will pay will help you visualize paying off the debt and keep you on track

We will be paying off our credit cards first. Why? First reason is because the interest rate is higher, second reason is because the amount is lower, and third (and most important) reason is because the federal student loans are interest free until 2021. 

The Coronavirus relief package and it’s extension by executive order suspended federal student loans without until through the remainder of 2020. Since there is no interest on the federal student loans, we will pay the credit cards off first. 

Everyone’s situation is unique. The first step to paying off your debt is to focus.

Paying off the smallest to largest debts first may be more psychologically thrilling to you, or if you’re like me- paying off the highest interest rate debt may be more appealing.

Whether you need to be able to check-off smaller debts first to see progress and keep you motivated or save money on interest to keep you slugging away the debt, either way the goal is clear- PAY IT and PAY IT ASAP! 

Since January 2020, we paid off $27k worth of debt (car loan, credit cards, phone finance, fence for our backyard) and got married. We were able to accomplish this by creating a budget and sticking to it. We have been putting 95% of our extra money towards debt. We use a Google Sheet template I developed to budget, track our debt, and plan how to pay it.

We are on a roll and have no doubts we will hack off the remaining $23k. 

When will we pay it off? I have our plan outline below:

Oct 2020 Income (after tax)$9,100
Oct 2020 Expenses$4,800
Oct 2020 CC Payment$4,100
Nov 2020 Income (after tax)$9,100
Nov 2020 Expenses$4,350
Nov 2020 CC Payment$700
Dec 2020 Income (after tax)$11,400
Dec 2020 Expenses$5,400
Dec 2020 Student Loan  Payment$6,000
Jan 2021 Income (after tax)$9,100
Jan 2021 Expenses$4,350
Jan 2021 Student Loan Payment$4,750
Feb 2021 Income (after tax)$9,100 (potential $5k bonus)
Feb 2021 Expenses$4,350
Feb 2021 Student Loan Payment$4,750
Mar 2021 Income (after tax)$9,100 
Mar 2021 Expenses$4,350
Mar 2021 Student Loan Payment$3,100
Debt Payoff Schedule

In December, I will receive a 2% holiday bonus and my wife will get paid for her part-time/side job teaching at a local university. We will use some of the extra money for holiday gifts and the remainder onto the student loan debt to try to decrease the balance as fast as possible before the interest kicks back in. 

If I get a bonus in February 2021 (this would be my 2020 bonus if my performance is good), I can get $5k or more. If I do, the student loans will be paid off completely in February, if not it will have to wait until March. 

After paying off this debt, we will be able to save more aggressively and pay a bit extra on our mortgage. 

We can do this. You can do it too. Pay off your debt like it’s not good for you (hint: it isn’t).

How much debt do you have and when will you pay it off?

The next blog update will be our first Monthly Milestone! Our financial goals and progress with a detailed outline will be shared. 

12 Financial Lessons from my Parents and my Background

Learn from your parent’s financial mishaps, don’t follow.

I want to start by writing that I love my parents very much. They taught me many great lessons as they raised me,  but they have not made the best financial decisions.  Both Mom and Dad have high school diplomas. My dad worked labor at a Steel Mill for 40+ years; mom worked various retail jobs on/off . 

My parents that have been in debt their entire adult lives. 

These debts surrounded them in the form of credit card bills, various mortgage refinances, home equity loans, and 401k loans for over 40 years. 

While my parents are mostly out of consumer debt, however they still owe 64% of their original 30 year mortgage amount 31.5 years later! They never saved a penny of their money. 

Dad has been retired for 2 years and is dependent on his pension checks for income. My parents lived their lives the way they wanted to, but it was a struggle. Money stresses put unnecessary burdens on them, me, and my sister.

 My dad always told me- “Learn from my mistakes, don’t make mine. I am making them for you.”

This advice resonated with me and I want to learn from my parents’ mistakes for me and my family. 

My family consists of my wife, me, and our 18 month old black lab. We recently married 2 months ago and bought our first home (3 bedrooms, 2.5 baths) in 2018 on a 15 year, fixed rate mortgage. We have plans to have 2-4 children. 

I am a mechanical engineer, and received my bachelor’s degree from a satellite campus of a good midwest, land-grant school. I have worked for the company I interned with in college, for just over 9 years in many roles. 

Most of my career has been spent as a technical sales engineer of sensors and my current role is a product manager at the same company. I am responsible for the profit and loss of the business segment I manage.  

I am an avid runner and road biker. I completed my first marathon in October of 2019. I aspire to complete a triathlon, once I learn to swim! The Financial FreeRunner name came from me wanting to have financial freedom to have more free time to run. 

Here’s the 12 lessons I learned from them on what would help with saving money.

Imagine how thankful future you will be if you start saving today
  1. Save. And Save early.
    • My parents did not invest into any retirement accounts until they were in their 50’s. My dad’s plan was to rely on his pension and social security to live off in his retirement years. The steel mill he was employed at for over 40 years, went bankrupt multiple times, and was bought and sold a half dozen times. Through all of that a large chunk of his pension from the original company disappeared. If you have a pension, I implore you to invest in a 401k or Roth IRA/Traditional IRA (or equivalent) as well.
  2. Have an emergency fund.
    • The many times my dad was laid off, we really struggled. We never went hungry, but my parents finances suffered every layoff because they were living paycheck to paycheck. They spent all incoming money on credit cards bills, three car loans, and their mortgage. They added home equity loans, 401k loans, and balance to the credit cards with every layoff. They were stuck in a stressful cycle. If they didn’t have debt and had an emergency fund, they would have been financially stable through the layoffs.
  3. When times are good, don’t spend all your money!
    • When work was going good and stable, my parents would each get a brand new car both we brand new loans with negative equity rolled over from last years new car. Just because you are approved for a loan, does not mean you should get it. Think of your financial future. How much money can an extra $300-$500/month for 5 years grow into in 10 years? The answer is $30,000 to $50,000 if your investment makes a very conservative 7% rate of return.
  4. Don’t buy a brand new car.
    • Brand new cars have that great new car smell- I’ll give them that. Vehicles are depreciating assets. Once you drive off the lot, you’ve lost money. If you are trying to retire early, don’t buy new. Buy a 2-5 year old car with less than 50,000 miles and high reliability. If you can pay cash, do it. If you can’t pay the loan off ASAP.
  5. Plan meals.
    • Having your meals planned will help you determine what you need when you go grocery shopping. When you are there, buy what you need and avoid buying extra unneeded items. My parents had a weekly purge of spoiled and expired food that was never even opened. Planning meals will also help you limit restaurant visits too.
  6. Limit restaurant visits.
    • Eating at a restaurant is much more expensive than cooking your own food. It is also healthier. Your wallet and your heart will thank you.
  7. Pay extra on loans – vehicle, mortgage, etc.
    • Get rid of the debt as soon as possible. Imagine not having a car loan and a monthly credit card bill. Think of how much money you would save. These days, mortgage rates are very low and you should be able to make more money investing in a mutual fund than by paying down your mortgage. I have a mortgage and pay approximately 18% extra because we want to be mortgage free by the time we retire early.
  8. Avoid debt.
    • You can finance everything and anything these days. Don’t. Be comfortable with what you have. If there is something you absolutely need to purchase save your money for it. Even if it takes months. Often times, after the wait, you will find you do not need the purchase after all.
  9. Grow fruits and vegetables
    • Here in the US, fruits and vegetables are relatively affordable. What’s even cheaper is growing them yourselves. In Indiana, we can easily grow tomatoes, zucchini, garlic, green onions, corn, squash, berries, peppers and more every year. You can also learn to can to save for the winter months too.
  10. Find free/cheap hobbies
    • My cheap hobbies are all outdoor activities. Jogging, hiking, biking, and gardening. I also like reading. Find a hobby that suites you that is not expensive. Bonus if you can make money off your hobbies by creating a product or service.
  11. Live a healthy lifestyle
    • Healthy lifestyle will keep you healthy. Unfortunately medical expenses continue to rise, invest in your health to avoid this expense. Staying healthy also means you can keep a job and an income.
  12. Save for your children’s education
    • ESA and 529’s are great financial vehicles to save for your children’s education. If you start early and you can avoid having to put you and your child into debt.

My parents could not afford to help me pay for college, and I took on many student loans that I still owe today. Even though I worked and probably could have afforded it out-of-pocket if I saved. 

Oh if only 31 year old Freerunner could send a note back to my 18 year old self on what not to do… 

My wife is a registered dietitian at a local hospital, she received her bachelor’s and master’s degree from the main campus of the same land-grant school. 

We met in 2017 and married in 2020. Like me, she is an avid runner. She is also into anything lifestyle/health/fitness related and is a bookworm. 

She was much wiser than me as an 18 year old and took on no student debt. She also had financially savvy parents that started an education fund for her the year of her birth. 

Our current gross income is below. 

Our families annual income 2020

Our income is our greatest tool to getting out of debt and getting to financial success. We will not be playing any “get rich quick” schemes, we will be investing a large percentage of our income into savings and retirement. 

The higher our savings rate gets, the quicker we will get to our financial goals.

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