Do you reveal your numbers? If you do, then to what amount of detail? Is there a right answer?
These are questions that every FI blogger must answer at some point early into their journey to financial independence. How much do I share with my readers? The answers are personal decisions made on an individual basis, and I have the utmost respect for whichever one a blogger chooses. Because only you know what is right for you – there is no correct answer.
For the purposes of this blog, I have decided to not share my financials and talk more in percentages. There are numerous reasons why I am doing this, but the Our Next Life blog has provided a previous post on this subject that summarizes the main points much better than I ever can: Why We Don’t Talk Numbers.
Their main points are:
- Comparison isn’t always helpful
- We don’t plan on being anonymous forever
- Money is just weird like that
I strongly agree with all three and find specifically points #2-3 to be directly applicable in my situation.
So, where do my wife and I currently stand on our FI journey?
We are on track. But on track for what? That is the real question to be determined…
Background:
I have always been a prudent saver and diligent investor, avoiding debt in most circumstances and placing an emphasis on disciplined dollar cost averaging – taking a page out of the pay yourself first playbook. I’ve made my share of financial mistakes over the years (which I will be detailing in this blog), but none were major, and all proved constructive learning experiences.
My wife on the other hand, was not a natural saver. She was what I call a giver – someone who would often spend their money on other people before making sure she had enough for herself. However, before our marriage she did make some prudent financial decisions on her own: persistently saving in her 401K from an early age (12%) and paying off her car loan with accelerated payments.
The Seven Stages of Financial Independence:
A good starting point in evaluating your financial independence status is to review what stage of saving/investing you are in. We are proud stage 4’ers! – Financial Security.
Here is a summary listing if you are unfamiliar with these stages:
- Stage 0 – Total Financial Dependence (can’t support yourself without help)
- Stage 1 – Financial Solvency (can support yourself without help and pay your bills)
- Stage 2 – Financial Stability (same as #1 but you have savings)
- Stage 3 – Debt Freedom (no debt)
- Stage 4 – Financial Security (make enough from investments to cover basic living costs)
- Stage 5 – Financial Independence (investments cover current lifestyle)
- Stage 6 – Financial Freedom (have enough investment income for big dreams)
- Stage 7 – Financial Abundance (you’re baller status and Buffet might come calling)
We practice the following FI habits:
- We have no debt except for monthly credit cards paid in full each month
- We track our expenses and net worth monthly
- We max out our 401K plans and Roth IRAs
- We rent an affordable one-bedroom house in a high cost of living area
- We have a savings rate in the 40-45% range
What are our income streams:
- My W2 paycheck
- My wife’s W2 paycheck
- Paper assets – interest and dividends
I would like to pursue over the next few years two more income streams – real estate rentals and some form of online side hustle. Real estate might have to wait since we live in such an expensive housing market (think of the next most expensive city in CA not in the Bay Area – shouldn’t be too hard to pinpoint that one). For the online venture, starting this blog and learning about WordPress, websites, social media and digital marketing have been teaching me many new skills outside of my comfort zone.
What are the biggest questions we are facing (less than a year):
What do we do with our cars?
Should we downsize? Trade in for more efficient vehicles? Right now, vehicles are one of our biggest expenses that I know we can take big steps to improve. As to how big those steps are, we’ll be figuring that out over the next year.
I drive a 2016 Toyota Avalon – paid off (yes, this was a splurge and a financial mistake I’ll be detailing later, but I’m still attached to it… baby steps). My wife drives a 2011 Hyundai Santa Fe – paid off.
Neither vehicle has good gas mileage (both V6). My wife drives a short distance to her office, but I have a long commute – 70 miles round trip… ouch! I’m looking into maybe switching to an electric vehicle or trying to work from home more often.
Do we rent or buy?
Oh, this is tough one. Lots of emotions are tied up in this decision (and yep, you guessed it, another post coming detailing all the fun and glory of it). There’s not enough time to get into it here, but some quick notes:
We live in a very high cost location and have contemplated buying for some time. Our current housing situation is great – great in the sense that we rent a small one-bedroom house at a steal for the area. So what’s the problem? Well, we’ve been in this house for 8 years and feel it’s finally time that we move on. Although the rent is low, the house is old, lacks space, no central air (grueling summers here) and a lot of other reasons.
With interest rates falling and the next recession looming, this is huge life decision that we are working through at the moment.
Will we have kids?
This has not been an easy question to answer in the past and currently remains an unknown factor that will greatly affect our future FI strategy. We do not have kids as of now, but that is not for a lack of trying (or spending). For this topic, I will be careful with the amount of detail I share because this issue involves another person. For myself, I am an open book on this blog, but when discussing children, I also need to respect my wife’s privacy.
How aggressively do we save?
How much do we want to sacrifice now for later in life and vice versa? What is the right balance for us? What is our optimal lifestyle? Well, that’s the whole point of this blog, we’re figuring it out… one day at a time.
Thanks for reading.
-Q-FI
P.S. Let me know in the comments, what stage are you in on your own FI journey?
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