Progress to Freedom 35: 2015 Q2 Update
It’s time for our second quarterly update on how we are doing relative to our financial goals. Our first update surprised us, mainly in terms of how much we were spending. We set out to reduce waste and track expenses more regularly. This has really paid off: while our income was lower this quarter than last, thanks to reduced spending we maintained a high savings rate and crept closer to being on track to meet our goal of financial independence and early retirement by 35.
We weren’t being too miserly and still managed to spend money on the things that we value: good food, fun with friends, travel to interesting places (and perhaps some wasteful spending in our luxury car). Let’s see where that left us.
We averaged ~$3000/month in spending during the second quarter of the year. Broken down by category, that money went to:
- Home – 63%
- Health & Fitness – 11%
- Food & Dining – 8%
- Travel – 8%
- Bills & Utilities – 5%
- Other – 5%
Since we’ve been tracking our monthly expenses separately, we won’t go into more detail on expenses here. We spent $1600/month less during the last three months then we did the first three months of the year. Much of the difference can be attributed to the end of pregnancy related bills, however, I think some chunk of that has to do with starting to track our spending publicly each month at a very granular level. It keeps you honest about wasting money when you know people on the internet will be judging you :). There is something to be said for setting goals and keeping yourself accountable in public.
Q2 2015 Average Monthly Income: ~$15,500
(-$6600 taxes paid for 2014)
Starting this update, we decided to try breaking down income by source:
- Wages – 92%
- Investment Income – 5%
- Promotions, Cash Back, Referrals, Etc. – 3%
The majority of our income is the boring kind that comes from performing services in exchange for currency. The major difference is that The DJ transitioned from fully paid leave to partial and unpaid leave during this time. This was mitigated somewhat by an unexpected raise and bonus, but even so, our income overall was a fair bit lower than last quarter. This was totally worth it, as she thoroughly enjoyed her time off, now if only there was some way to make that full-time…
Interest income, capital gains, and dividends received from taxable accounts (tax advantaged accounts are automatically re-invested and not counted here, since we never see the funds).
Promotions, Cash Back, Referrals, Etc.
Similar to travel reward credit card churning, we don’t pass up on bank account opening bonuses, credit card promotions, and other offers that sound rewarding and take minimal time and effort. During this quarter, we received a couple cash bonuses for opening accounts and took advantage of American Express’ generosity in paying us to buy cash equivalents. Hey, everybody needs a hobby…
As for referrals, someone seems to have used our Hanscom Federal Credit Union Referral Link: They offer a high interest savings account that you can partially fund by credit card (good for meeting minimum spending requirements). Whoever it was, thanks, and hopefully it worked out as well for them as it did for us.
At the end of the second quarter:
- Total Net Worth: ~$802,500
- Net Investable Assets (excluding home equity): ~$685,000
Our net-worth has increased ~$25,000 since our last quarterly update. Based on numbers above, this means we saved $30,000 during the past quarter and suffered $5,000 in market losses. Despite the recent losses, our net worth has increased ~$97,000 (+13.5%) year-to-date.
The market gives and the market taketh away…
As a side note, with the exchange rate at the time of writing, we would be millionaires in certain hard to find countries! This milestone is kind of arbitrary, but it was cool to us.
Progress To Freedom 35
YTD Savings Rate: 75%
We are happy at continuing to maintain a >75% savings rate. We’d like to see if we can meet our stretch goal of >80% by the end of the year.
Financial Independence Target: Q1 2018
The DJ is conservative and considers a 3% withdrawal rate safe, which means we’d have to wait over five years before retiring. The MC is ok with as aggressive a withdrawal rate as 5%, which would put us ahead of target to retire by 35! If we split the difference and go with the popular 4% rule, we are two and a half years away (one month short of our goal).
Projected retirement date at 3%: Nov. 2020
Projected retirement date at 4%: Apr. 2018
Projected retirement date at 5%: Oct. 2016
These projections are based on a lot of assumptions, some conservative, some optimistic. We’re looking to see how it unfolds and what changes.