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. It is difficult to 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 last remaining debt is the mortgage on our house, but its days are numbered.
Savings rate
Why is knowing your savings rate so important? While you are earning an income savings rate is the best indicator of financial health.
We keep track of our savings rate by the month and year to date. We have a goal of saving at least 60% of our income in 2018. In July we took a vacation to California and Oregon. This was one of our biggest expenses of the year. We reduced the cost by travel hacking our flights with Southwest Credit Cards and earning a companion pass. The total cost for the vacation was still over $2,000. The good news is that we are still right on track to be over our 60% savings rate goal for the year. Our July 2018 savings rate is 60.6%.
Since we started tracking expenses in 2014 the breakdown is still pretty much 50/50.
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. No debt means more options. In 2017 the percentage of our mortgage remaining crossed below 50%. We expect to get below 25% by the end of 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. From January to the end of July we have paid off 13% of our mortgage.
1/1/2018: 46% → 8/1/2018: 33%
Net worth
We don’t spend much time calculating net worth. We simply use Mint to track Assets and Liabilities. The only physical asset that we count is the house. We don’t bother trying to assign a dollar value to all our stuff. That would take up too much time. 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. Unexpected things will happen. Still, it is nice to see that the trend has been up.
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.
Returning to school for a Master’s degree.
Mrs. LOTT has been admitted to a fully online M.S. program for Nursing Education. Higher education right now is the definition of buyer beware. Young people are taking on a tremendous amount of debt to get a degree that might not ever pay off. But for Mrs. LOTT there is a large difference in salary between a B.S. and an M.S. degree at the same employer for doing the same job. Upon completion of the degree, the pay off time due to the increased salary will probably be about 1.5 to 2 years. The M.S. not only makes a difference in the current job but it opens up more employment opportunities for the future. Obviously, there will have to be sacrifices. Night and weekend activities will now be replaced with homework, papers, and study.
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.
TEKTON 24335 1/2-Inch Drive Click Torque Wrench
We needed to change the brakes on my car and the video on YouTube suggested using a torque wrench. I didn’t own one so I bought this one.
Delta 26-2250 12″ Dual Bevel Sliding Cruzer Miter Saw
This is a large miter saw, but unlike some of the others, it can be closer to the wall so it doesn’t take up as much shop space. We plan on building a miter station around it.
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