A Series of Somewhat Interesting Facts

Posted by FI Monkey

Do you ever check how much interest, dividends and passive income you earn on a daily basis?

Ever since I started on my Financial Enlightenment, I’ve been keeping track of my interest and dividends. I’ve been tracking a lot of things actually (gotta love spreadsheets). I figure the more I keep track of things, the more aware I’ll be of my financial situation at any given moment. This kind of awareness helps in little ways, like when my wife asks me questions about how much we have here and there.

Interestingly enough, I started out this year earning about $0.35/day passively (Hey, don’t judge me. We all have to start somewhere.). As of the end of this month, I’m earning about $2.60/day. There are still some numbers that need to come in, but here’s the chart that corresponds with the growth of that number:

Daily Interest Graph as of June 29, 2015

 

And here’s the chart which corresponds with the annual projections based on those numbers as multiplied for the year:

Annual Projected Interest as of June 30, 2015

You know, at this rate, it’s almost to the point where I’ll earn over $1,000/year without doing anything. That’s a pretty excellent achievement on the path to making about 60 – 100X that amount. It’s basically like step one has been completed, which leads me to my next interesting fact.

Today, I Invested More

My monthly paycheck finally cleared, so I decided to do two things before I send money elsewhere. One, I started the transfer that will effectively complete my Emergency Fund goal of $50,000, so look out for the post on that achievement. Second, I moved another $2,500 into VTSAX.

Coincidentally, the price dropped today — from $53.06 Friday to $51.93, so I’m not sure how much that will impact my total investment but if it works out, great. If not, I’m in it for the long haul so it doesn’t matter in the big scheme of things. What’s important is that I’m not trying to time the market. Also, I’m trying to maximize how much I put into my SEP IRA before I transition into a salaried position. Hopefully that just means more daily accrued interest and more in dividends. Oh, right, and I also just learned VTSAX pays dividends (thank you Dividend Life!).

Interesting Possibilities

Now that these milestones are being hit, I am starting to consider what to do next.

Admittedly, part of what I’ve been considering is reducing my six month E-fund down to three, and investing the rest. I won’t do anything drastic, of course, but that doesn’t mean I haven’t toyed with the idea of putting that $25k somewhere to generate higher returns overall. It won’t do much to my net worth, but it would, for example, certainly help the interest rate if I put that much in VTSAX. Right now, the E-fund is earning 1% sitting in Ally, when it could be earning much more in the long run. That would probably push me closer to $2,000/year!

But what if I invested it in something else?

A friend of mine is thinking about investing in a franchise, which would be built in a nearby location I think is perfect. The overall start-up cost? Around $250,000. It just so happens that I could put in for 10% of that. Another friend has become a decent property manager, having purchased his fifth duplex and successfully renting all but one of the units, which he lives in himself. I’m actually set to talk to him about this very thing this week, so I’m excited about that. In this area, I don’t think $25k will get me into a duplex, but it will at least give me a target number to shoot for.

I’m also keeping an eye on some Flippa web “properties” for potential investments. It seems like $25k could get me somewhere in the neighborhood of $1,000 – 1500/month in passive income. The trick is finding sites that aren’t in an irreversible (without a ton of work) decline. And let’s face it, in a lot of areas, I am green. I’m still watching though.

Lastly, I have started the gears turning on a side business that could turn out to be pretty big.

You never know.

 

As Luck Would Have It

Posted by FI Monkey
It's times like these when you think, "Man, I sure could use a shovel."
It’s times like these when you think, “Man, I sure could use a shovel.”

Isn’t life funny?

One moment, you’re stressing about things in a major way and the next moment, opportunity lands right on your face. Or desk. Opportunity lands somewhere. And if things have sorted themselves just so, it’s sort of like being stuck in a hole and having a shovel fall in with you — not the best situation, and it won’t be easy getting out, but at least you have a way out.

So yesterday, after getting my absolutely final offer from the company I’ll be taking a job from, I had resigned to the fact that I’d be making a lot less money over the next year — again, somewhere around 35% (but closer to 30% because of the way taxes work out).

In fact, this is why my posts have been sparse. I’ve been doing a lot of thinking. Thinking about how to reduce expenses, what that will do to my marriage, what that will do to my self-image. I know the amount of money I make shouldn’t be tied to my self worth and that’s quite often what I tell other people, but combined with a personal “crash” of sorts which has taken the FI Monkey “stock” down 35%, it’s much easier said than done. And that’s exactly what sort of hit me yesterday — my “portfolio” (income rate) is about to take a huge hit and because I am not diversified (having multiple income streams), I am feeling the full brunt of that impact.

And so I thought about that.

Now obviously I have promised myself (and my readers!) that I will start a side business (or side hustle, as they say these days) and I absolutely intend on doing just that. But as I said at the beginning of this post, opportunity landed. And that opportunity came in the form of a consulting agency that wants to farm part time work out to me at the rate I’ve been charging the company I work for.

And the more I think about it, the better it sounds:

  • I get paid the same rate I was being paid before
  • I can work at my own pace and on my own schedule
  • I can deny projects if I should so choose
  • I can even charge flat rates for projects
  • I don’t have to work directly with clients and act like a project manager
  • I don’t have to manage people
Now we're talking.
Since I was beating the stock analogy to death, here is a picture of a horse wearing roller-skates. You’re welcome.

The trade-off, of course, is that I have to charge accurately and competitively. These guys aren’t going to pay a slow horse to do a fast horse’s job. But I can swing that. The trick is staying within those guidelines while keeping my main income stream happy, but what makes me most happy about this possibility is just that — I will no longer have just one main income stream.

As of next week (I believe), I will have become diversified. Naturally, having just two income streams is not really diversified but it’s an excellent start. It just means that starting (or buying) a business will become yet a third income stream and lead to an even more balanced “portfolio.” I’ll have my stable income (bonds?) and my volatile income (stocks!) that will hopefully both grow at different rates.

The side benefit to this (not that I want to try to predict the future so early on) is that, should it somehow work out that I get close or even hit my financial independence number, I will be able to transition away from my main income stream and then slowly ramp down this side work over time in order to focus on my main business. Or who knows, maybe I’ll continue. I should probably figure out what my ideal “early retirement” looks like before waxing on about it, but you get the point.

What I have to be extremely careful about is making sure that my main job is not impacted by work from the others. But I also have to make sure I can get things done in a timely fashion with my second job. Luckily, I took the job that allows me to do all of this from the comfort of my home office. And I’m beginning to think I won’t have to keep beating myself up over the choice I made.

As luck would have it, things have a way of working out.

$1,000,000 in Lifetime Earnings

Posted by FI Monkey

Last night, I was going over some expenses to determine what is a “nice to have” and what is a “need to have.” Doing this on a fairly regular basis has become cathartic in the same way that clearing your desk is. It’s minimalism applied to expenses, which serves to remove distractions and get down to the essential.

Of course, none of the monthly expenses I have are actually essential, but I mean necessary to continue saving at rate less than dismal.

Staring at the spreadsheet of expenses, I started to wonder a few things:

  • How much money I’ve made in my entire career.
  • How much money has gone to stuff I no longer use or never used more than a few times.
  • How much money I could have saved had I not spent it on those things.

So, immediately, I searched for my salary history and found that it was missing the past few jobs. Being that I’m getting paid a lot more, it made sense that the most recent work years would amount to the biggest spike in income. After looking up the various amounts and filling them in, I was astounded to find out that I’ve crossed the million dollar mark in lifetime earnings.

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Two comma club .. sort of.

For some of you, this may not mean much. And for others, it might seem unreal. I was in the latter group. If you’ve read about my story, you’ll know that I grew up in a house where we didn’t want for things, but we weren’t exactly rolling in dough. The thought of reaching a million dollars was so far off. As I’ve mentioned before, my brother and I marveled at $1,000 when we held it in our hands. I honestly never thought I’d reach a million bucks before I was either old or dead, and yet, here it is.

Next came the easy part. To figure out how much money I’ve spent on stuff I no longer use or never used more than a few times, I could go into some crazy detail or I could just subtract my net worth to figure that number out. Conveniently, I started tracking that number not too long ago, so it wasn’t too difficult to find.

$1,000,000 – $422,000 = $578,000

Granted, a big part of that $422,000 is equity on my mortgage. I could easily include that, but it’s not something I earned through income, so let’s strip it away.

$422,000 – $256,000 = $166,000

Adding in the depreciation of both vehicles, I would bump that up to $175,000. So our new number is something like this:

$1,000,000 – $175,000 = $825,000

Credit: Ingram Pinn (I think)
Credit: Ingram Pinn (I think)

There, that’s more like it. I’ve been working since I was 17, so that means for the last 15 years of work, I only have 17.5% to show for it. In other words, I have let nearly 83% of my income slip like sand through my fingers. True, a lot of that has gone to things like rent, utilities, school — for myself and for the kids –, fuel, vacations but also to eating out (A LOT), asset depreciation and general frivolousness with my income. So it’s not like I’d be a millionaire right now had I just buckled down a bit, but my point is that I’d be a lot closer. I figure that if I’d had a modest average savings rate of 15% for that entire time, it would have come out to an extra $100,000 during that time.

Ultimately, it comes down to this: for all the time I’ve traded in for money, what do I have to show for it?

Yes, I understand that I’m effectively complaining about having so little when I obviously have a lot. But it doesn’t hurt to stop and look back for some perspective. I don’t want to hold my former self accountable too much, because I was ignorant. Things could have gone much worse for a person ignorant of finance. Not that I’m Buffett at this point or anything, but I’ve come a long way.

In fact, this post is more about the next million than about the previous one. The real question at the heart of this post is: now that I know, how much of that next million will I use to become financially independent?

And where past meets present, I now understand that even that 15% is hard to maintain when the future starts looking a little difficult. It’s hard to take income volatility into account when you’re making these numbers up. And 15% isn’t even a good savings rate. I’d rather be saving at 40-50%, or more.

But when it’s not in the cards, it’s not in the cards.

Even if I only save 15% of the next million, that will still be another $150,000 tacked onto my net worth. And while I won’t be financially independent by that point given my current spending habits, I will be that much closer to early retirement.

And, as I’ve maintained, I will continue to push through that earnings gap to make up the difference. Be it through my main source of income or some side hustle, I’m determined to stay focused on that one goal.

 

Took Monday Off But Now I’m Back

Posted by FI Monkey

So, there was no post yesterday, not because I’m lazy but because there was a lot going on. Not that I’m not lazy, but I just wasn’t yesterday. You understand.

As most of you know, I’m going through a rough patch in my life and having to sort of take a step back to examine where I’m headed. That means I had a big decision to make between two job offers, both of which were a cut in terms of pay but one allowed me to keep working from home. Unfortunately, that’s the job that came with the biggest cut.

That being said, I went with it.

Just the facts, ma'am.After comparing each point of both jobs in an Excel spreadsheet and weighing the pros and cons, trying to ignore the ease of just working from home as a factor and paying more attention to the pure facts, the answer became clear.

Clear, that is, assuming I work steadily to create a decent side business. As that’s been my intention for a long time coming anyway, it really made sense and is just the fire I need to get going with it. Even if that means starting small.

And actually, the offer isn’t as bad as it was previously. After some more back-and-forth, I was able to decrease the damage from around 38% down to about 35%. That means I’ll be able to take more advantage of my upcoming 401(k). It also means there’s less of a gap to bridge in terms of side income earnings. The amount isn’t laughable, but every bit I can shave off the distance helps.

Good Listening

In other news, Mad Fientist released his new podcast recently, which I listened to almost immediately. I’m listening to it again right now, in fact. So good. In this episode, he rapped about financial independence, early retirement and geographic arbitrage with Ed Mills from The Millionaire Educator. I don’t know if it was the fact that I was just out of Fientist podcasts for a while or if it was just a particularly interesting episode, but I found this episode the most inspiring by far. Ed Mills apparently started out 40k in the hole after going to grad school, then got to zero net worth at 35.

In other words, he started on his FI journey at 35. It took him a few years after that — I think when he was 37 or 38 — to hit the $100k mark, and then it just kept going up from there. The kicker, though, is that he and his wife did this as teachers.

Did you hear that? Teachers.

So many of us are ahead of the game in this respect. I know a couple of people in our community who are in their early 20s who have hit $100k net worth. To think that someone in their late 30s could hit that number, but then just consistently hit goal after goal is such a great example to the rest of us. One, that someone could do that in such a short time (I think he and his wife achieved FI within 15 years), and two, that he and his wife were on the same page for so long to the point where they achieved what we’re all after. And they did it all as teachers.

Just … wow.

The Library

Don't Touch My CakeAnother thing I’m excited about is learning about my local library’s collection of audio books. For a long while before I cut back on some unnecessary expenses in my life, I was paying $14.95/month or about $180/year for Audible. It’s a great service, but just unnecessary for me. So I put it on pause to make it easier to use up the credits that are just sitting there without accruing more in the meantime. Then I come to find out that my local library has a very similar service and it’s all free!

So now I can have my cake and eat it too.

Oh, and did you know that there’s this other service the library offers? It’s sort of like Netflix but offline. Apparently you can borrow actual books from this place, and as long as you don’t keep them too long, you don’t have to pay anything. I know, I know. I was blown away by it too.

Just keep that between me and you. We don’t want everyone to find out.

Wealthometer – How This Monkey Measures Up

Posted by FI Monkey

So I was checking on my Twitter feed and noticed this post from @BudgetsAreSexy (J. Money):

Naturally, I had to go and check this ‘Wealthometer’ out. So I did. And here are the results:

Wealthometer

And to my surprise, I actually over-estimated where I fall in my wealth comparison. I wagered I was in the 75th percentile where I actually fall into the 70th percentile.

On the other hand, not too bummed. I definitely consider myself well on the side of fortunate.

After playing with the numbers a bit as I often do, I could magically be on the upside of the 80th percentile if my mortgage were paid off. No big deal, right?

Enough about me. How do you measure up?