No financial blog is complete without progress towards financial independence. We are looking for financial independence, one with no debt. We call it FIND, financial independence, no debt. I don’t consider anyone with debt to be financially independent, the two things are mutually exclusive. When you have debt you are in a fragile position. Debt makes you a slave to someone else. Our mortgage is an example of debt that we are trying to eliminate.
Savings rate
Why is knowing your savings rate so important? While you are earning a income savings rate is the best indicator financial health.
We keep track of savings rate by the month and year to date. We have a goal of saving at least 60% of our income in 2018. 2018 year to date savings rate through April is 62.7%.
Mortgage
We are aggressively paying off our mortgage. Why? The feeling of freedom that it provides. If we don’t have a mortgage we require much less income. If we own the house we are more robust to job loss or other financial disruption. In 2017 we crossed below 50%. We expect to get below 25% by the end of the 2018. We make extra payments pretty much each time we get paid which makes a long term thing like paying off the mortgage more tangible.
1/1/2018: 46% → 5/3/2018: 38%
Net worth
We don’t spend much time calculating net worth. It is Assets-Liabilities. The only physical asset that we count is the house we don’t bother trying to assign a dollar value to our stuff. The point of keeping track is to see the trend, the dollar value isn’t as important. We aren’t naive enough to believe that getting to some magic number like 25 times our living expenses means that we are suddenly financially independent. Living expenses are fluid. Assets are fluid. Still it is nice to see the trend.
Bimodal strategy
We’ll write about this more in the future. A bimodal strategy or barbell strategy popularized by Nassim Taleb in The Black Swan is a strategy with low risk, low reward on one side and high risk, high reward on the other side. One bimodal strategy is to have a steady job and a side hustle. Starting a blog is a side hustle and part of our bimodal strategy. As long as you have your job (low risk depending on your occupation) then you will be able to survive. Your side hustle(s) may or may not ever pay off, but you are less likely to have to live on the street or move in with the in-laws because you went all in on the equivalent of a lottery ticket.
Other investments
Watch this space for other investments. Why other investments? Once we pay off our house we will have a large monthly increase in cash flow. We will be looking for investments that will either provide some sort of periodic income or reduce long-term expenses.
Tools
This is a special category of other investments. A tool is something that can produce income or reduce expenses. We plan on investing in tools that we last for a long time.
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