Mr. Fire Station’s Numbers To Put Your FIRE Journey In Perspective

*note, this post may contain sponsored content.

One of my favorite personal finance bloggers is Mr. Fire Station.  I’ve been following his journey since around the time he retired early (April 2016). His writing is outstanding and his topics are spot on…including this one. I was searching for a comprehensive list of retirement numbers in the US. And he was smart enough (and patient enough) to put one together. You can find the original article here.

No words of wisdom from the FIRE Station this morning – just some interesting numbers to put your journey to FIRE into some perspective:

AGING

  • 50% of Americans are retired at age 63
  • 18 years is the average length of retirement
  • 13% of the US population is over age 65 today
  • 6.1K Americans turn 65 each day
  • 10.K Americans retire every day
  • 55% of Americans retired earlier than they expected (health, job loss)
  • 12% of retirees continue to work seasonally or part time after age 66

SAVING

  • 80% of Americans do NOT believe they will have enough saved for retirement
  • 77% of US individual financial assets are held by Americans over age 50
  • $45K is the average retirement savings for people aged 55-64
  • $100K is the average retirement savings for people aged 65
  • $240K is the average spending for healthcare alone for couples over 65
  • 25% of employees fail to save enough to reach their employers 401k match
  • 34% of Americans do not have $2K available if needed for emergency

SPENDING

  • 60% of Americans spend all or more than they make each year
  • 44% of Americans do not have a simple budget
  • 66% of US adults are unable to pass a simple financial literacy test
  • 47% of new automotive spending in the US is done by Americans over age 50
  • 80% of luxury travel spending in US is done by Americans over age 50

DEBT

  • 19% of Americans occasionally overdraw their checking account
  • 21% of Americans have past-due medical bills
  • 50% of new retirees continue to have a mortgage for their primary home
  • 3% of seniors over 65 still have unpaid student loans
  • 40% of the Baby Boom generation (age 53-71) have more debt than savings
  • 39% of Americans classified with ‘expensive credit card behaviors’ in the last year
  • 18% were contacted by debt collection agencies in the last year
  • 9% of Americans report their homes being ‘under water’
  • 16% of Americans received ‘payday loans’ or sold things at pawn shops in 2015

SOCIAL SECURITY

  • $1.3K per month or $15.6K a year is the average Social Security payment
  • 36% of adults over 65 are entirely dependent on Social Security
  • 63% of adults over 65 are dependent on Social Security, family, friends or charity
  • 2033 is the year Social Security benefits will be reduced by 23% unless reformed
  • 20% of Americans have already taken a 401k loan/withdrawal, averaging $8K

HEALTH CARE

  • 15% of employers offer health insurance to retirees
  • 2x rate of inflation – Healthcare costs are expected to risen the next 5 years
  • 62% of senior healthcare costs are covered by Medicare
  • 90% chance that one spouse age 65 will live to be age 90

Sources:

 

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Ramsey vs Orman

I ran across this infographic on Pinterest and had to post it here. First, to share with you. And second, as a reminder to myself that there are several roads to financial success (and I shouldn’t beat myself up if you swerve off of the road).

The graphic, courtesy of Checks Superstore, really shows the difference between the two financial advice giants, Dave Ramsey and Suze Orman. I’ve typically been a Dave fan, building an emergency fund, paying off debt and then building wealth. But, I’m morphing into something more like Suze’s way of thinking. I have more than $1,000 in my emergency fund…in fact, it’s already to 3-6 months expenses, yet I still have a debt snowball. I’m already saving for retirement, again, even though I have a debt snowball. I sometimes use credit cards…but I know I have an emotional problem with them.

So I’m curious, do you follow one or the other? Do you adapt from both? Do you have your own “plan”…I’d love to hear it.

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2017 Goals

Personal finance is all about setting and achieving goals. The FIRE pioneers before me have all done the same. I would be remiss as a PF blogger if I didn’t share my goals for the upcoming year. Drum roll please…

Pay off a rental property known as 2122
We are on track to have one of our investment properties paid off this year. Most likely it will be mid-2017 around June. Really excited about this as the income will help us get the other property paid off and begin building wealth for early retirement.

Earn $10,000 in side-hustles
My plan for this is to earn extra passive income through eBay, Etsy and public relations/marketing services. I’ll also add “catch alls” like Ibotta and Ebates here.

Fully fund my 2016 Roth IRA
At this point I’m about half-way there, but will have this done by tax time.

Cut back on Boozie spending
I’m spending way too much on alcohol. Plus, it’s not good for my health.

Grow my Twitter account to 1,000 followers
I’m at about 450 now, so I think this is very doable.

Have a net worth of $250,000
A quarter of a million has a very nice ring to it. I’m at about $220,000 now and should reach this no problem.

Increase my investments to $40,000
I’m at $33,000 now. If the market holds and with my contributions I should reach this goal too without issue.

What about you? What are your goals for 2017? Do you have similar goals to mine? If so, any advice?

 

 

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2016-My Year in Review

I’m not going to lie…2016 was a pretty good year for me personally and financially. Unlike some others, I didn’t buy into the negativity with politics and dooms day predictions. I realized about a decade ago that I can’t really control those external circumstances. I have my own race and selfishly focused on myself, our finances, and my fitness.

First, I started this blog. I’ve always enjoyed personal finance and I wanted to get into the game. It’s my hope that my experiences can offer someone else an easier path to financial independence.

Second, I got REALLY focused, especially with tracking my net worth. I’ve been good at budgeting for the past 10 years, but never really knew how much I was worth financially. I also got really focused about paying off debt and developing a financial forecast for the next 20 years. I’ve started investing and paid off my car.

Third, began funding an IRA. I had an “old” Roth IRA that I began making contributions to. It’s not to it’s max yet, but will get there before tax time in 2017.

Finally, I began to work on my fitness. I go to a personal trainer every Friday morning. I’ve also started to hike and take yoga classes. I also bought a bike, but didn’t use it as much as I had hoped.

Of course I can’t close this post without posting my year end net worth. It was great…I increased $68,793 (+45%) during 2016.

Net Worth as of December 31, 2016 = $221,297.57
Cash: $26,878.81
Credit Cards: ($1,501.82)
Loans: ($330,480.75)
Investments: $33,626.33
Property: $492,775

Thanks for stopping by! Thanks for letting me be a part of this fantastic blogging community. Thanks for a fantastic 2016!

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Student Loan Forgiveness for Non-Profit Employees

student-loan-forgivenessAs I sat at the head of the conference table for our weekly team meeting in our non-profit office to talk about fundraising—we got off topic. The topic was ways to save money and student loan forgiveness because pretty much four out of six of us are frugal, money-minded folks. The youngest, just out of college, says “Because my life’s work will be in non-profits, I’m going to make sure and pay my next 120 student loan payments on time so I can get my loan forgiven.”

I say, “What? Tell me more about this!” Especially since I’ve spent my career in non-profit work (minus the two years I owned a catering company).

So he sends me this link.

And this became my understanding of how it works.

“If you’ve worked in public service or non-profit organizations you can get your loan forgiven.”

  • The loan has to be a direct loan and you have to have made 120 payments…but they don’t have to be consecutive.
  • This rule began in 2007 and student loan borrowers can begin applying for forgiveness in October of 2017. If this is you, you can start collecting and filing paperwork now and it send it in…they’ll hold on to it for you for when you hit the 120th payment.
  • There are some other rules on what types of loans apply (direct loan) and if you’ve consolidated or not. Check out the link if you’re not sure.
  • You have to make qualifying full monthly payments after Oct. 1, 2007 and be under a qualifying repayment plan. You can’t be past-due and the payments have to be while made you are employed full-time by a qualifying employer.

So I got REALLY excited. All of this seems to apply to me.

I have my own student loan forgiveness plan. I’ve worked in non-profit, minus the two years catering…and I make all of my payments on time. So I’ve outlined my game plan below and when I think I may have my $22,000ish in loans forgiven.

Step One: Begin compiling my work history and get it verified.

  • October 2007-August 2008: Worked full-time at an institute of higher education. (11 mos).
  • August 2008-October 2009: Worked part-time at an art center (14 mos). This may not qualify because I was considered part-time. Plus, I lost my job at the institute of higher education and my loan was in deferment some of this time…I think.
  • May 2011-September 2014: Worked full-time at a museum (40 mos).
  • September 2014-present: Working full-time with a performing arts group (25 months at present Nov. 2016)

Total months: 76 months. Still need 44 months (3 years, 8 months) July of 2020 maybe?

Step Two: Make sure my student loan qualifies
It’s unclear by looking at my student loan paperwork if it’s a direct student loan or not. By reading all of the information about student loan forgiveness, it looks like it probably is, but it’s not clearly marked. Also, I’m not sure when I went into deferment. I’m hoping it was in the gap period where I wasn’t working full-time with a not-for-profit.

Step three: Let them tell me if I qualify.
I’m really hoping that once my paperwork is turned in, that they will tell me if I qualify or not. People can start taking advantage of this opportunity as early as Oct. 1, 2017. I also hope that this opportunity doesn’t go away.

Check out these other resources like this fact sheet and these Q&As

Tell me…are you planning on doing this too?

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Front Loading Your Life

front load your lifeI ran across the term “front loading” your finances awhile back. Unfortunately, I don’t know where exactly where I found it in order to attribute the author of the article. Essentially front loading is what I’m doing.

Front loading is an easy concept. Do all you can now in order to do what you want later. For us now that means paying off all debt (including the house), reaching a net worth of $1m, investing as often and as much as we can, and living frugal to make it happen. Later for us means we retire around 55 years old to travel and do things we enjoy.

Reasons I think front loading is for me and could be for you.

Interest income over time
Investments into the stock market have proven to have an average around a 9% increase on the S&P 500 for nearly the last 100 years. If you’re patient and diligent, you’ll make money on your money. I’ll admit this can get nerve wracking watching some stocks dwindle, but some are winners and balance out the duds. Right now I’m hovering around a 7% gain on my stocks.

Destroying debt is always a good idea
There is no denying that debt is bad. According to Matthew Frankel at Fool.com, the average American household has a total debt of more than $130,000 and that debt burden is costing the average household more than $6,600 in interest per year–about 9% of the average income. We use Dave Ramsey’s snowball plan (Baby Step Two) get out to debt as it makes the best sense to us.

Set a financial foundation
This is more than just having a nest egg or a rainy day fund. This involves a multi-pronged approach. For us it means first having an emergency fund. Ours would cover us for at least 6 months in the unlikely event that we both lose our jobs. Second, investing in our retirement. For us that means my husband’s matched workplace 401k, maxing out a Roth IRA for me, putting extra cash into stocks and buying rental property. Finally, making a commitment to stay in the house we have now until the mortgage is paid off…and even then staying here until we can no longer go up and down stairs. In our town the housing market is increasing by about 12% annually. When we do decide to downsize in 30-40 years, that should give us a pretty good return.

Tax deferment
I will admit that I find tax deferment confusing, but I know it’s a good thing. It’s mostly for your IRAs and 401ks and allows you to make more money now, and pay taxes on it later when you’re likely in a lower tax bracket in retirement. I found this article at John Hancock Investing to be the best explanation of how this works.

I always love learning more. What do you do to front load your finances?

 

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5 Good Reasons to Borrow Money

The financial industry caters to borrowers from all walks of life, seeking funding for myriad causes. As a result, dozens of types of loans are available, many aimed at particular functions. Mortgages, for instance, are funded exclusively for the purchase or transfer of certain types of property – most commonly residential and commercial real estate. And government-backed student loans can only be applied toward college tuition and related expenses.

Despite the specialized nature of modern lending, some loans are issued with greater discretion, leaving borrowers to spend the money as they wish.

Personal loans and most forms of short-term financing are extended with few strings attached, placing spending discretion in the hands of those borrowing the money. Unfortunately, these flexible loans can become problematic, when cash is borrowed for ill-advised purchases. To avoid problems, hold high standards when spending borrowed money and don’t let easy access to financing color your spending decisions. Among others, the following examples represent good reasons to take out a loan.

Education/Training
Investing in yourself is almost never a bad idea. Truth is told, in most cases, money spent on personal improvement increases your earning power. College education and advanced certification, for instance, may open doors to higher-paying jobs, or add crucial credentials needed to earn a salary raise. An education loan (and some hard work at school) may be all that’s standing between you and higher take-home pay Federal student loans are available for U.S. students, issued by the William D. Ford Federal Direct Loan program. Interest rates and repayment terms offered by the Government are very competitive, so filing for public aid is a good first step. Private financing is also available, adding to federally-backed financial aid availability. Personal loans are commonly used to pay for classes furnishing fast funds to carry-over students until their financial aid checks arrive. It is important to compare various lending scenarios, in order to assemble the best college funding package for your circumstances.

Start a Business
Entrepreneurs need financing, so if a start-up is in your future, it probably calls for a loan. Borrowing to seed a business venture is a positive step, provided your business plan allows for growing pains and eventual profits. New businesses typical require years to become established, during which owners often work long hours, for little pay. Your start-up investment presents similar possibilities, so the pressure of carrying financing can add to the strain of a fledging enterprise. On the other hand, an old adage aptly points out “it takes money to make money”, and another succinctly identifies the nature of entrepreneurism, stating “nothing ventured, nothing gained”.

Relocate for Opportunity
Employment conditions continually evolve, creating new opportunities for enterprising workers. In some cases, relocation is the fastest path to prosperity and career advancement. A move with your employer likely includes compensation for the effort, but packing-up of your own devices can lead to considerable out-of-pocket costs. A short-term loan, funded to expedite an opportunistic move is another form of investment in your future, so the financing quickly pays for itself.

Add Value to Your Home
Homeowners typically maintain a “wish list” of renovations and improvements they’d like to complete. If your home would benefit from a makeover, it may make financial sense to borrow money, in order to carry-off the updates. Kitchen and bath improvements typically pay the greatest dividends, adding value, comfort and convenience to your residence. Other low-cost improvements include paint and landscaping, which are easily accomplished using a small personal loan or equity financing.

Travel
In some cases, borrowing money for a vacation can save you money. Better to fund travel with cash on hand, but a low interest loan represents a better alternative than paying travel expenses with a high interest credit card. It is up to you to crunch the numbers, and spending money on travel you can’t afford is a step in the wrong direction. A once in a lifetime travel opportunity or a long-anticipated retirement tour may justify borrowing for a leisure venture.

It doesn’t always make sense to go into debt, but when financing is justified, several types of loans are available. Investing in yourself, for instance, can become a money-maker, so taking a loan for education or an entrepreneurial venture makes good sense. Improving your home is another good way to spend borrowed money, and under some circumstances, borrowing for recreation is not an irresponsible approach.

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How I paid off my Lexus in 22 months

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This Wifes Life Lexus PayoffI almost feel like I need a quick disclaimer on why someone who is frugal would a) finance a car and b) buy a luxury car like a Lexus. Here’s the story.

Twenty-three months ago I was driving a Volvo XC90 and with was a huge POS. I purchased it from a friend for $8,000 and soon realized there were a plethora of things wrong with it–most notably, the odometer didn’t even work so I didn’t even know how many miles it had! Plus, every time something broke down on it (and this was often) it cost at least $2,000 to repair.

So 22 months ago, my husband and I had our eye on a Toyota 4Runner at a Lexus dealership. I will admit, I had always wanted a Lexus and sort planned this out to look at the used Toyota at the Lexus dealer. We drove the 4Runner and hated it. The car salesman suggested we try a Lexus RX350. We did, and the rest was history.

And as to why? The Lexus was actually $10,000 less than the 4Runner. It is a 2010 and had 70k miles, but, come-on, it’s a Japanese car that will run virtually for 300,000 miles. Because of the high miles and with my trade-in for the POS, I financed $20,000 with a car payment of $405.80. If I would have paid the minimum for the 60 mos. the total would have been $24,348. Overall, the Lexus is a safe, excellent quality car that will last me many more years.

Emotionally, I justified the purchase as a 40 year birthday present to myself and I had just passed a major accreditation in my field of work…time to celebrate. I financed the car because I didn’t want to wipe out my savings account to buy it and I was worried the Volvo would break down and keep costing me money in repairs. I also knew I would pay it off quickly.

How I did it?
1. Paid more than the minimum payment–always.
2. Paid toward the principal balance (although Lexus Financial doesn’t make this easy…I had to mail the payment in)
3. Every penny of my side-hustle went toward paying extra to the car loan
4. Made this part of my debt snowball and got after it. This is done by paying the minimum to other debt then taking as much as possible from my budget to pay extra.
5. Enjoyed watching the balance dwindle.

I’m so happy to have purchased this car. It will last me for years to come. Getting it paid off early and being able to move on to the next debt (my credit card) is one more step closer to becoming debt free, financially independent and retiring early.

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Tax Time 2015

Taxes are due in the United States on Monday, April 18. It’s always that dreaded time of year where we pay to be citizens of this fine country. Or it’s dreaded for me because I haven’t gotten a refund since the mid-nineties.

My husband and I file jointly to save on taxes, and we have them prepared by a tax company. Sure, we could do them ourselves, but we’re worried we could mess something up. They also do this nifty report that tells us we pay 14% of our income to Uncle Sam. We are able to save off of our mortgage, student loan interest and depreciation on our rental properties. Like everyone else we pay on our interest income and bank bonuses. I’m going to look into investing in an IRA next year to save a little bit more.

How do you save money on taxes? Do you prepare them yourself? Do you set up an IRA for tax purposes?

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Will you keep Netflix?

netflixIt was just announced today that Netflix will raise it’s monthly fee from $7.99 to $9.99 beginning next month. Moreover, most of the 17 million customers who will be affected don’t even know it yet. So, I went on a hunt to see if my account would be increased. I’ve been such a zombie about this automatic payment that I had to request my password to login. Once logged in, it appears that my pricing schedule is good until May 9, 2016, which probably means I’m due for the increase.

Sure, the $2/month increase doesn’t seem like much, especially to those who aren’t money conscious. And, at $7.99 or $9.99 it seems pretty inexpensive, but it’s still about $96/year and will be $120/year. If I invested the $120 into my Lending Club account, I would make approximately 8% and at the end of the year would have almost $130. If I saved this for 10 years it would compound and I would have $2,137. This is an indication that Netflix is a waste of money for me especially since we only watch House of Cards.

This news began a conversation with the husband about how we really DON’T even use Netflix–at all. In fact, as mentioned before the ONLY thing we watch is House of Cards. We’ve decided to cancel the service regardless of the price increase. Adios Frank Underwood we’re investing ourselves.

Speaking of investing. It also appears for those of you holding stock in Netflix, Inc. (NFLX) won’t see an uptick in your holdings. Read more about projected Netflix stock in Dan Burrows online article “Coming Price Hike Doesn’t Mean Squat for Shares–Cancellations Should be Minimal and Already Baked Into NFLX Stock.”

After this analysis, I actually feel guilty for keeping Netflix for so long. So, will you be keeping Netflix? Do you have an automatic payment that you forget about? Did you already drop Netflix years ago when you made the decision to be Financially Independent?

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