Welcome! This blog is to chronicle my journey towards Financial Independence. Hopefully the title of my blog will someday be a reality and I will be Simply Financially Free.
But what is Financial Independence and why am I trying to achieve it?
Great questions! First, lets start with my definition of Financial Independence. Financial Independence is having enough passive income to cover your basic needs so that you can live your life how you choose. Why do I want to do this? So I don’t have to be tied down to a desk for the next 25 years, dreading the ring of the alarm every Monday morning. I want to structure my life so that my assets are working for me so I can get out and enjoy life. Why wait? I want to enjoy the life when I am young and healthy. When do I think I can make this happen? I would love to do it in 5 years but 10 is probably more realistic.
Who am I?
Without give out all of my personal details, here are some of the basics. I am in my mid 30’s and married but we are kidfree by choice. We live in New England where the cost of living is a little high but the quality of life is pretty great. We currently own a duplex and rent out half of it. The rent covers the mortgage and part of the taxes so our housing expenses are pretty low. The mortgage we have on the property is our only debt and has a 3.25% interest rate. We have been saving for another investment property for a few years now and have a nice little cushion saved but as properties in our area are pretty expensive we need to save a little more.
So what’s next?
Since starting the journey towards financial independence I have done a lot of reading of other blogs. I was surprised at how many other people were also on this quest or had already achieved it. (There is a lot of great inspiration out there!) The main common thread; live well below your means and save as much as you can. We have always lived well below our means but until only recently did I actually start to track my spending and savings. I started tracking my spending last year (just using a custom google docs excel spreadsheet) so I have a good idea of where my money is going. This is one of the first steps anyone should take. If you don’t know where your money is going, how are you going to know what needs to be changed? Looking over my 2014 spending I know there are some areas where I can make some cuts so I am glad this was already logged. With that in place, I was on to the next step. (Thankfully we don’t have any debt so that is not an area of concern for us.)
Now I get to the savings part. I am currently saving 20% into my 401(k). I have debated reducing this down to 10% so I would have more assets available before age 59 ½ but have decided to leave it as is for now. I am also contributing to my HSA as we have a high deductible health plan and so I will leave that as is too. With those in place, the short-term goal is to get enough saved for a down payment on our next investment property but still leaving us with a cushion. The amount we need completely depends on the property we purchase so we will just continue to add to this account until we have found the right place.
According to my budget last year, even without making any changes, I should have extra money each month to put towards my savings. I also plan on watching my spending instead of just tracking it and am confident that I can make some progress there and save even more. I set up some automatic transfers from my individual accounts to our joint savings that currently holds the down payment for our next investment property. At the end of the month I also moved some additional money as I was able to cut back my costs significantly. It is amazing how much less you spend when you are watching every dollar! So after the first month on this journey (March) I was able to save 43% of my take-home income. I see many bloggers are able to save 60-80% of their take home income. Although it sounds great to be able to save that much per month I am not sure I could save that high of a percentage without moving to a life of rice and beans and zero fun. Of course the amount/percentage anyone is able to save depends greatly on how much you make. If you are making a comfy 6 figures then I could see it as being pretty feasible to save 70% of your take home income but my income is not that high so a lower percentage will probably be a reality. I have some additional expenses coming up in the next few months but I would like to try to keep my savings level around 40% if possible. You may have noticed that I am talking about my spending/savings here. Although Mr. SFF and I do have joint accounts we keep our daily expenses and bank accounts separate. The savings goals discussed here are based on my income alone.
Now that I have established my starting point, let the journey commence!