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Refinance & Robo-Investing

Refinance Finalized

My house refinance is finally completed. We finalized at 3.37%.

If I would have paid down to 3.25% it would have only saved 11$ a month and it would have cost ~$900. So it would have taken me 6+ years to recover that amount and was not worth it.

I had to pay the escrow account up front for taxes that come out in November and the yearly insurance that comes out in October. So I’ll be getting a check back from old lender with what I’ve already paid in old escrow account.

I haven’t heard much about the new lender but we’ll see how they do, and I hope they have a lot of online tools & calculators like my previous lender did.

Betterment vs. Wealthfront (Early Tests).

betterment_logo_vertical       wealthfront-logo

Back in July I added 5k to each Betterment and Wealthfront to give robo-investing a try.

I get a discount with both companies through work so the fees are minimal or non-existent (up to a certain amount).

The market has been pretty volatile the last few months but I got a good idea of which service performed better in that short period of time: Wealthfront.

Up until last week I was sitting at about 8% return with Wealthfront and 4% return with Betterment.

Granted after 3 months this means nothing, but I did set the accounts up as mirrored as possible (high risk or 100% stocks where possible).

Wealthfront takes a couple more business days for money transfer so there is a downside to using them.

It also gives me a good idea which funds they use to invest so later on I can do it myself with Vanguard.

While I’m not paying either of them hardly any fees, I’ll probably keep using them to see what they can do for me.

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New Month, New Savings!

Status of my Refinance

mortgage-refinance-rates

So the refinance I mentioned last month is going well. We’re close to closing. My house appraised for $32k more than I bought it for 3 years ago so that’s a huge plus. I’m paying a little extra up front to bring it down to 3.25% (thanks Brexit!).

Remember, that this refinance will give me about $52k more during my 13 year goal to invest! The house will also be fully paid off at the end of the 13 years so if I do choose to retire elsewhere (likely), I’ll have a hefty down payment for a nicer early retirement upgrade.

New Savings Found

istock_000023172403xsmall

Well it’s not much, but I was looking at my cell phone bill.

Right now, the plan I have is $70 a month, I also get a corporate discount on the plan through work.

The plan is unlimited everything. I really don’t want to be bound by minutes or text limits, but I was particularly interested in my data usage the last few months.

Even on a couple recent business trips where WiFi wasn’t always available I used at maximum 200MB of data.

Well low and behold, my base plan is $50 and the unlimited data was an extra $20, which is making the bill $70. The base plan already includes 2 GB of data. Since I only use 200MB on average I saw no reason I would ever get close to the 2GB unless I was using the phone’s hotspot feature constantly.

So I yanked the unlimited data off the bill

$20 a month = $240
$240 a year for 13 years = $3120

$3,120 in savings!!!

Results after 2 months of FIRE tactics

So in just 2 months I’ve made 3 easy changes that will save me the following amounts for the next 13 years:

  • Cable – $19,812
  • Refinance – $51636
  • Cell phone – $3120

TOTAL: $74,568 in savings!!!

Now let’s say I invest that money each year for 13 years and get a 6% or 7% return:

$5736 a year for 13 years at 6% = ~ $120,000
$5736 a year for 13 years at 7% = ~ $128,000
(assumes a 3% inflation rate and 15% tax rate)

That alone gives 2-3 more years of worry free retirement!

Beginner’s Steps

Step 1.

Well I did it. I cancelled the cable tv bill.

cordcutting

This will save me roughly $127 a month.
$127 a month = $1524 a year
$1524 a year for 13 years = $19812

$19,812 in savings!!!

I still have Amazon Prime and Netflix so there is plenty to watch and keep entertained.

Most of the shows I watch can be viewed on the network’s website the next day anyway.

Step 2.

I’ve been debating the last few weeks what I want to do with the mortgage.

saving-for-a-home

There are hundreds of blogs, reddit posts, forum posts, etc… about the old question “Pay off Mortgage early, or Invest?”

I currently owe 165k on my mortgage. It’s at 4.25% (which was great at the time).

If I kept this mortgage and paid an extra $331 a month, I would have it paid off right at the end of my 13 year goal.

So my personal answer to “Pay off Mortgage early, or Invest?” is:
WHY NOT BOTH?

Thanks to Brexit, mortgage rates have dropped to the lowest in the last several months.

I spoke with a loan officer and my initial quote to refinance is 3.25%. Which would save me roughly $300 a month. That $300 savings I will put back into the mortgage as the extra principle payments. The extra $331 I would have put into the original mortgage can go towards investments.

$331 a month = $3972
$3972 a year for 13 years = $51636

$51636 in savings!!!

As a bonus, the house would be paid off by the time of F.I.R.E.

Step 3.

 

Decide what else I can save on (and eventually invest).

 

The Plan

If you have my previous posts, you know my goal is to become Financially Independent and Retire Early.

Last week I realized how many challenges I’m going to have to overcome to achieve my goal within 13 years.

To not get discouraged so soon in my path toward Financial Independence, I told myself if I’m retired by age 46 or 47 (instead of age 62), I’ll be getting 15 years to start living my life how I choose to.

I then had to ask to myself: What exactly did I want to do during early retirement and how much would it all cost?

Part One: Where would I live?

I currently own a house (with mortgage) in the same town where my job is located. It is in a safe neighborhood and does require some repairs.
After soul searching this last year and recently discovering the F.I.R.E. movement, I realized I don’t want to retire here.

I have family in Idaho and housing market in the Boise area is booming, with tons of new neighborhoods popping up at a relatively smaller bill than comparable houses in my current area.

Yes there are better markets where cost of living is much cheaper, places like Casper Wyoming, but the housing market is a bit stale (similar to my town) and the housing options vs the cost don’t align with what I want.

I do want a comfortable house to retire in. I plan on spending a decent amount on relocating  as soon as I retire early. The likely destination is going to be Idaho.

Part Two: What do I want to spend my extra time on?

If you have taken a glance at my about page, you’ll see I enjoy reading, a variety of outdoor and indoor activities.

Reading: The cost of reading isn’t high at all, unless I want the hardcover versions of new releases. If I choose to continue filling my bookcase with hardcovers I can budget for this. Ebook prices are indeed rising, but there are often sales on my favorite genre (Sci-Fi/Fantasy). I definitely plan on reading a lot during my early retirement.

Gaming: I do like a good video game, especially one with an interesting story-line and action mixed in (Assassin’s Creed series for example). I can easily limit myself to not buying a new game at full cost and generally stock up during Steam Summer Sale. I could spend 100$ on games that would last me the whole year. Unless I outgrow it, I do plan on gaming during retirement.

Golfing: This is one expensive sport! Balls, Tees, Grip repair, green fees/memberships, and more. Golf in my area is a bit more expensive than where I’m planning on retiring. In my retirement I’d likely want to golf once a week minimum.

Other: Movies/Travel/Hiking/Biking are all activities I’m interested in but details on how often will come about during retirement. I do plan on pursuing all of these hobbies in early retirement.

Part Three: How much would it all cost?

I ran my numbers last week. Based on where I want to live, the activities I have planned, and of course all my living expenses, it looks like I will want to achieve around $2.6 million.

$2.6 Million is a big number to reach in 13 years.

I’m not discouraged, it’s a huge challenge that will require sacrifices.

Part Four: Where can I start?

Immediately off the bat I can think of several areas where I can cut down expenses to have a larger income during the month (and thus extra money to save or invest):

  • Cable bill.
  • Golf Membership.
  • Book Purchases.
  • Extra $$ into Mortgage.

I will go through all the numbers in a future post, but as of right now I have a goal and a plan. $2.6 million in 13 years.

Oh boy…..

A change that is challening

The Early Speed Bumps

So last week I started this blog. I gave myself a goal that I’m very passionate about. I want to be Financially Independent and Retire Early, and want to do this within 13 years.

Now, I have to buckle down and make the changes that are required to meet my goal.

I’ve been reading several Financial Independence Blogs, reading reddit/r/financialindependence, checking my numbers, and calculating what I’m going to need to achieve my goals.

The numbers are in (which I’ll share in a later post) and they are very daunting.

There are some significant speed bumps. Current spending habits, my mortgage, and my future plans during retirement that are going to make my goal challenging.

It is disheartening, but the end goal….what I truly wish…is to retire early. There will of course be sacrifices in order for me to achieve this goal.

It’s going to be challenging, but I am committing myself to this goal. After all, it’s MY life and I’ll be getting an extra 15 years that are MINE.

 

I’m 33 and want to be F-I-R-E!

The Goal

For those who don’t know, F.I.R.E. stands for Financially Independent & Retiring Early.

Think about that for a second….

Wouldn’t you LOVE to not have to work anymore and live the rest of your days however you choose?

To be financially independent and able to retire early seems like just a day dream for most people. Similar to glancing at the powerball sign, the thought of retiring early is just a “What if” for them.

In this consumer driven society, where commercials shove in your face all the things you need to buy just to be able to survive, it’s a hard pill to swallow that people could even afford to save enough retire early.

Guess what? There are tons of people who have done it already, including bloggers like Mr. Money Mustache and 1500days.

Everyone’s situation is different and I can’t compare my goals to theirs exactly, but they have inspired me to create a goal for myself and GO FOR IT!!!

My goal is simple: I want to retire within 13 years.