Tuesday, April 25, 2017

April 2017


Jan-2017
Feb-2017
Mar-2017
Apr-2017
Assets
Retirement
359,774.81
378,531.17
387,058.50
391,316.72
529college
14,317.25
14,746.21
15,188.09
15,378.18
Bank Accounts
47,050.67
42,856.20
47,770.74
44,260.80
Investments
12,282.92
12,755.09
12,452.12
13,378.60
Bonds
11,888.20
12,091.76
12,114.12
12,115.86
House
300,000.00
300,000.00
300,000.00
300,000.00
Total Assets
745,313.85
760,980.43
774,583.57
776,450.16
Liabilities
287,173.32
285,683.72
284,312.59
283,333.97
Net
458,140.53
475,296.71
490,270.98
493,116.19
Change
17,156.18
14,974.27
2,845.21


Few points about this month:
- We had a hefty tax bill, largely in part due to the sale of our old place last year, which had been a rental since 2014. We were anticipating this.
- After substantial inflows into retirement accounts in February and March - a combination of bonuses, raises, and topping of Roth IRA for last year - April's inflow should be norm for rest of the year. 
- Also keep in mind that these numbers are a snapshot of a particular day; we report the current balance on the account.

Tuesday, March 28, 2017

March 2017

Jan-2017
Feb-2017
Mar-2017
Assets
Retirement
359,774.81
378,531.17
387,058.50
529college
14,317.25
14,746.21
15,188.09
Bank Accounts
47,050.67
42,856.20
47,770.74
Investments
12,282.92
12,755.09
12,452.12
Bonds
11,888.20
12,091.76
12,114.12
House
300,000.00
300,000.00
300,000.00
Total Assets
745,313.85
760,980.43
774,583.57
Liabilities
287,173.32
285,683.72
284,312.59
Net
458,140.53
475,296.71
490,270.98
Change
17,156.18
14,974.27

Thursday, March 23, 2017

How can we be FIRE by 50

In the first post of this blog we mention that our goal is to be financially independent by 50. What this means is that at this point in our lives all our expenses will be funded by our investments, and we will have no need for any active income coming in.

But HOW? To answer that first we have to take a couple of steps back. If you have read about the 4% withdrawal rate (and if you haven't, please read that first; right now! and all the other posts under the Stock Series by Mr. Collins) you know that once you've saved enough where you can comfortably withdraw from your nest egg at the rate of 4% each year, you are set. Also, check this out by MMM. And this in-depth post by the MF.

The question then becomes, what is the amount you need saved. Let's call this x.

What drives this x? Your expenses! When you're FIRE you're not saving, per se, anymore. You're only looking to get the necessary amount every month for your expenses. We will talk about post-FIRE expenses more in a detailed post later. Let's call our post-FIRE annual expenses y.

So, y = 0.04x

Pretty simple, huh?

Therefore, x = y/0.04 => x = 25y. Our total savings need to be 25 times our annual expenses. That it's.

If only we could determine y, our spending, we will know how much we need to save up, x.

We have determined that our spending when we are FIRE will be $48,000 per year, at the most. Again, we'll publish a post detailing this. For now, just know that this $48k does not contain any mortgage payment or college tuition for our child.

Plugging in, our "Retirement" bucket need to be $1,200,000 before we are FIRE.

The last step now. How long do we need to save till we have $1.2M in our retirement accounts?

In January of 2017 we had $359,774.81 in our retirement accounts. Currently we are pumping in $3,195 every month into retirement accounts. Assuming a return of 6% annually, in 14 years, using this calculator we will have accumulated $1.6M. That is over $400k more than we need!

Few assumptions here:
- An annualized return of 6% over a long time period is very conservative in the first place. Also, as you'll see in the screenshot, the tool gives your projection if your annualized rate was 5% and 7%. Even with a 5% return we still beat our projection of $1.2M!
- Assumed interest compounded annually, which is again the most conservative estimate
- We have assumed the monthly pay-in of $3,195 as a constant over these 14 years, when in practice this will certainly increase every year.
- We are basing our projections ONLY on the retirement accounts whereas we'll actually have money in our regular bank accounts and other investments.

As you'll notice, all of our assumptions are on the VERY conservative side. Quite possibly we should be able to retire even earlier than the 50-year old mark that we have set for ourselves.



This FIRECalc tool is a great way to see the probabilities of how your money will last in retirement.


Tuesday, February 28, 2017

February 2017

Jan-2017
Feb-2017
Assets
Retirement
359,774.81
378,531.17
529college
14,317.25
14,746.21
Bank Accounts
47,050.67
42,856.20
Investments
11,082.92
11,535.76
Bonds
11,888.20
12,091.76
House
300,000.00
300,000.00
Total Assets
744,113.85
759,761.10
Liabilities
287,173.32
285,683.72
Net
456,940.53
474,077.38
Change
17,136.85


All numbers are in USD.

Assets and Liabilities buckets

Here are some details behind what goes into our Assets and Liabilities columns.

Retirement bucket
We both have 401(k) accounts at our respective jobs. One of us also has a Roth 401(k). We both have individual Roth IRA accounts with Vanguard. One of us has a Roth IRA account with CapitalOneInvesting, an old account that doesn't receive any new funds (but reluctant to roll over to Vanguard, just "playing around" money). One of us has a fully vested pension component, from work, as well.

529 college bucket
We have a 529 college account with Utah Educational Savings Plan, for our child. We also have different accounts for our nieces and nephews but those are not included in our assets column.

Bank Accounts bucket
Pretty self explanatory. Only checking and savings accounts. We do not currently have any CDs.

Investments buckets
Individual taxable brokerage accounts with Vanguard, Computershare and Loyal3. This is mainly "playing around" money. Computershare offers DRIP in major companies, a lot of them with no fee on buying. Loyal3 is a commission free online brokerage platform, which also allows ordinary investors to take part in IPOs.

Bonds
A bunch of Treasury bonds given as present from grandparents. We let them go till final maturity.

House
Our primary residence. The valuation of $300k is from 2015 when we refinanced. We know there has been appreciation but we don't factor that in.


The following make up our liabilities.

Mortgage
30-year fixed at 3.875% (~$238k on Feb 28, 2017)

Car loan
5-year fixed at 0.9% (~$21k on Feb 28, 2017)

Student loans
Government loan at 6.21% (~12k on Feb 28, 2017)
Private loan at 4.99% (~15k on Feb 28, 2017)

Credit Cards
We do NOT have any credit card debts. We use our cards for any purchase, for any amount, where ever they are accepted, and we pay off the full balance every month.


Monday, February 27, 2017

What is this NetWorth blog?

After being inspired by MrMoneyMustacheJLCollins, and MadFientist for a number of years, we decided to, anonymously, create this site where we put up our net worth every month.

What is Net Worth?
If you add up all your assets (bank accounts, retirement accounts, CDs, investments in the stock market, real estate investments, treasury bonds, 529 accounts) and then subtract any outstanding loans and debts you have (car loans, mortgage, tuition loans, credit card debts) the answer is your net worth.

Why is Net Worth important?
Net gives you the single most reliable number where you are at the moment. Or how far you've come. Or where you need to be. To be Financially Independent and/or Retired Early (FIRE).

Who are we?
We are a mid-30s couple, with a pre-schooler (as of Feb 27, 2017). We both work. We live in the American midwest. Our combined annual gross salary is ~$200k. Details about us are intentionally vague because the point of this blog is not who we are and where we live and how much we make; the point is how are increasing our net worth every month.

What is our goal?
To be FIRE by age 50. That would mean all of our expenses at that point will have to come from our investments.

Why this blog?
Two reasons:
1. To publicly, though anonymously, document and show what we are doing; and
2. By showing it to the world, inspire others that it can be done
We will post our net worth, and the changes, at the end of every month, ideally on the last day of every month, but practically it will be within the last week of the month.