Emergency Fund

Emergency Fund Update – 100%

I don't care if it's cheesy. I'm using it.
I don’t care if it’s cheesy. I’m using it.

I just checked my Emergency Fund and as of today, I have surpassed my goal!!!

You know, I’ve said it before, but I honestly didn’t know if I’d ever reach this goal. It’s the most I’ve ever saved for anything, ever that didn’t involve buying something tangible. In the beginning, it felt the same as trying out a new diet. Every time I’ve done that, there’s this sinking feeling I’ve gotten that I won’t hit my target weight and I imagine that’s the little devil on my shoulder who likes to mock me for past failures.

Today, however, that devil gets the cone of shame. In your face, little mocking demon.

I will personally celebrate this moment tonight, maybe with a nice glass of wine. And what else? Uh-oh. I feel a Warren Buffet quote coming on.

Someone is sitting in the shade today because someone planted a tree a long time ago.

— Warren Buffett

I know that one gets used a lot, but it’s a personal favorite. And so true.

And so ends my first major financial goal, hopefully the first of many. Next comes my incursion into actual investing. As you know, I’ve been deciding on what I should do, given the fact that I’m going to be heading into a lower-paying position for a while. I was planning on getting into taxable investing right up front, but I think the smarter thing to do is to maximize my SEP IRA investing while I can. So in addition to the huge chunk of change I sent over to my E-fund, as I mentioned in a recent post, I also bought up some additional shares of VTSAX during the latest market drop. I’ll probably do this a couple more times before I’m temporarily relegated to a lower paycheck.

On to further adventures!

My Financial Enlightenment

So, I’m not quite sure when it happened. The whole thing is still a little bit hazy, but I know there was a before time and then an after time. The exact point where the skies opened up and I saw the possibility of not working for the rest of my life is somewhere between, but remains a mystery.

The Dark Ages

I remember going to look at a used BMW one day back in 2013. I’d been working as a high-paid consultant for a couple of years without much to show for it in terms of status symbols. Sure, I’d just bought a house a few years before, but the glow had since vanished from that shiny thing, so it was on to the next! Plus, the car I was driving was starting to do some very funny things that the repair shop kept charging me not to fix.

The price on the car was lower than it should have been for a 5-series, so I felt like I should go for it. On the other hand, I had a very specific number in mind so I told the sales guy and he dismissed it saying he had other interested parties. Not wanting to get emotionally suckered by a car salesman, I gave the car salesman my details and walked off the lot.

The next day, I got a call from him and he begrudgingly said he’d agree to my terms. So I went in, paid around $45k in cash (after buying a warranty, final fees and all that good stuff), and drove off the lot in my new toy.

For the record, I still love that car, despite how much it has depreciated.

That was the way things went. Saving a bunch, only to spend it on something new. Sure, we had a small cushion in savings on the side, but it was nothing compared to what I have today. It was just meant to avoid over-drafts on months where our high income was met and nearly wiped out by our high expenses. Did over-drafts happen occasionally? Yes, once or twice a year.

And yes, we never missed payments on our debts and never let our credit card debt ride. But the only investments we had were my high-fee IRA that had no on paying attention to it for years and what was left over from my wife pulling money out of investments to come up with our down payment. In other words — not much.

Certainly not enough to carry us into our twilight years.

And there were times when I’d get into a kick on the topic of personal finance. I’ve mentioned this before, but I used to buy personal finance books. I’d basically read a few chapters, set it down and then forget about it for another year. Rinse, and repeat.

Yeah, not terribly effective. All it did was add another annual expense — the very book that was meant to help me get my finances in order. I’m not sure, but there’s irony in there somewhere I think.

So to sum up where I was during the dark ages, I had a high-paying job, my wife and I bought whatever we felt like buying, we saved a little, invested virtually nothing and were both 30-ish with not much to show for it.

The Turning Point

As I type it out now, that was probably the initial catalyst and driving factor in turning things around. Just thinking about having nothing to show for all the hard work and long hours I was putting in. I was sleeping in hotels four nights a week. I was spending part of my vacations on my computer glued to the phone.

I remember one vacation where I literally did not leave the hotel room the entire two days we were there. I didn’t swim with my kids in the pool. I didn’t eat dinner with my wife. I just ordered room service while staring at a screen. And being a consultant, that’s just part of the life. It’s going to happen to you once in a while and that’s perfectly fine. My family was understanding. At least, as understanding as they could be. But it’s when that kind of life became the norm that I saw things a different way.

That was when the seed was planted. It wasn’t until I started working at the next high paying consultant job where I got to work full time from home — the one I have now — that I actually started doing anything.

And maybe that’s it. Yeah. That’s the actual turning point. Though I probably did more actual work than I’d ever done since I lacked a commute, I was also able to focus on anything that needed focusing on. In retrospect, that’s kind of a no-brainer.

The Enlightenment

When I started working from home, I remember my wife and I sat down and decided we needed a financial planner, and she’d heard something about LearnVest, so we tried that for a while. In the short time leading up to actually establishing an account with them, I had started to participate in r/personalfinance on Reddit. From what I’d learned in the very short time I’d been active there, I basically needed to establish three things before I could start investing (my actual goal through all of this).

First, it was an emergency fund (E-fund), with three to six months of expenses in there; I chose six! Second, I needed to fill my Roth IRA to the maximum every year. Then, and only then, could I start taxable investing.

This isn’t something I came up with, of course. It’s the general advice for many people who frequent those forums, but it was the best advice I’d read in a long time. Better, in fact, than all the cumulative information I’d learned from all the books on personal finance I’d paid money for. And the advice preached in r/personalfinance is free — the best price there is.

So I started on that journey around a year ago. Actually a little more than a year ago according to the first e-mails I received from LearnVest. It was around March. So that puts a number on it. I’ve officially been “enlightened” for over a year now. I did actually pay for LearnVest though, which was sort of a sunk cost because they essentially set me up with the same plan I’d already established, only with more concrete goals (i.e. actually setting up an IRA account and destroying my old one). As it turns out, that was just the bit of fire I needed to get things going. And the fire I’m talking about was paying for LearnVest.

So I accomplished those goals, weened myself off of LearnVest and started focusing solely on Mint to track my financial life. Well, that and a whole bunch of spreadsheets.

Since then, I’ve come a long way. As of this month, I will have completed my six-month E-fund (watch out for an upcoming post!). I’ve significantly reduced my expenses and continue to find ways to do so. I’ve contributed a lot (compared to how much I’ve contributed in the past 30 years of my life, that is) to my IRA and will continue to do that as well.

I’ve also picked up a lot of advice along the way from the community I’ve come to be a part of. There are some amazing people in the circles of personal finance, including those from Reddit, Bogleheads Forums and the general awesome people who take the time to comment every day on my blog and answer my myriad stupid questions.

This blog has been alive for a month now, and it’s gone by so fast. I hope to keep writing like this for a long time coming. I’ve still got so much left to learn. My financial enlightenment, as I put it in this post, is clearly just the beginning.

It’s more of an awakening from years of mindlessly doing what society is comfortable with me doing into a life of mindfully investing my time and money for a better future.

A Series of Somewhat Interesting Facts

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.


Setting Goals for the Long Road Ahead


In a few short days, I will complete my big primary goal to fill my Emergency Fund to 100%.

I will, of course, post when it happens but with the end of that goal approaching, it has occurred to me that even though this is only one of three major and ongoing goals, there’s something missing.

After much thinking, I believe that missing thing is the finite number attached to this goal. For some reason, without that number my mind starts to sort of go fuzzy. And knowing myself, that usually means a loss of interest which will mean the next goal goes up in smoke.

Maintaining That Hustle

This realization, along with a conversation I had with a friend of mine earlier today, got me to thinking about the reason why I have dropped the ball on some things in the past, despite promising starts.

Part of it definitely has to do with being too quick to share my early successes. It is easy for me to feel that sense of completion and fulfillment out of something without having actually seen the thing to completion. That’s a problem.

Another part of it is that I often start things for the thrill of just starting. Starting new things does feel good. Even finishing them feels great. It’s that boring middle ground where there are few successes to share and all the work to do in order to push a thing along.

That’s where things often fall out of order.

Don’t get me wrong — I do finish many of the things I start, but those things are typically important to other people. It’s the things I start on my own that get the least love. So I’ve spent some time contemplating why I’m putting other people before me when it hit me.

I put priority on completing things for other people because they demand progress. There’s no one demanding progress from me for the stuff I want to do.

So the way I see it, I’ve got to trick myself into the same kind of accountability.

Setting Mini Goals

A thing I’ve often read about tackling big tasks or projects is that you should break them into smaller tasks. The same can be said for big goals. My next goal, for instance, is to start investing in general.

Could that goal be any more scary and vague? Probably not.

So the logical next thing to do is to break the menacing goal into little ones. For general investing, that’s easier said than done. At least for me.

First of all, I have some questions to answer. Like where I’ll invest, whether it’s taxable and then how much in each.

Last month, I would have answered each of these questions differently. However, now that I have some rough seas ahead of me, things have changed. As a recap, my primary three goals are:

  • Fill my Emergency Fund to $50k
  • Fill my IRA to at least $5500 every year (diversified and rebalanced often)
  • Begin non tax-advantaged investing

So by July, goals one and two will have been completed actually. And for those of you who are paying close attention, you probably noticed I said “at least $5500,” and that’s because I have the current benefit of having a SEP IRA which allows me to contribute up to 25% of my income or $53,000, whichever is the lesser. However, not being an expert on tax law, I don’t know how much longer I’ll have the benefit of adding to that fund.

And there we have it. My first goal is to figure out when I have to stop contributing to my SEP IRA based on my transition from a self-employed freelancer into a salaried employee. And on top of that, I have to figure out whether I can even keep my SEP IRA or if I have to change it into some other investment vehicle.

Now, depending on the answer to that, I either have to stop putting money into my IRA immediately or I still have some time left to put up to about $45,000 into the account before I have to roll it into (most likely) a Roth IRA.

If I do have to stop, now I have the option to start a brokerage account or wait 90 days to begin investing in my 401k (with 5% matching, I might add).

At this point, my decision tree is getting a little bit complex. I could either plan for all of these scenarios or just get started on goal number one and, once I figure that out, establish the second mini goal.

I think I’ll do just that.

Keep On Keeping On

For me, the most important thing is to keep moving and stay positive. Every step on this long journey counts, no matter if they were at a racing pace like they’ve been for the past year or at light jog, like they’re about to be.

It’s that forward movement that matters.

After all, it could be worse, right? There are so many positives in my life that, even when the wind gets knocked out of me, it’s not hard for me to get back up knowing I have so much to be thankful for. I’ve got my family. We’ve all got our health. I’m still gainfully employed. I’ve got a new community of like-minded people that I love catching up with on a daily basis, who often do the same for me.

Life is good.

Emergency Fund Update – 90%

Hey guys,

As of this morning, I have hit the 90% mark and it feels amazing!

Though I must say it’s less amazing, however, than hitting the first 10%. I suppose there’s some psychology behind the idea of throwing money on a small pile as opposed to throwing money on a big pile — the former probably feels far more rewarding. Regardless, the bigger number — 100% — is what I’m after and to be this close to it really does feel great. And just to clarify, it has been no easy feat. I am really moving things around to hit that target because I am determined and focused. For those of you paying attention, my last Emergency Fund Update post had me at 80%, so it’s really incredible to me that I’d be able to increment 10% at a time.

To put things in perspective, the amount I’m saving each time is more than I used to make in two months when I was younger. Just insane.

Moving forward, I am trying to see what I can do to make that last stretch and finally hit 100%. The gears are already turning. Because, you see, I intend on hitting that goal before the month is over, but it is not yet immediately clear how I will get there. What inspired me to hustle this month is a few things, but also remembering this important quote:

Don’t save what is left after spending; spend what is left after saving.

— Warren Buffett

Ha! This seems laughably obvious, yet in practice is counterintuitive. I love when things can be put so succinctly, yet have such an impact.

One thing is clear — you can bet when I hit 100%, I will be celebrating that milestone. That marks the end of one journey and the beginning of another. The achievement of my first huge goal and the beginning of actually investing.

You get the idea.