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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:

 

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.

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?

 

 

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!

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?

 

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.

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?

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?

What I learned my first week of blogging

My first week of blogging in the personal finance blogosphere has exceeded my expectations! Although according to Google Analytics, only a handful of people have stopped by to actually read my blog (thanks mom), the experience and connections have been amazing. I’m following several fellow bloggers such as She Picks Up Pennies, Millennial Money Man and Thrifty Meets Spendy on Twitter and learning something new from each of them daily. Bonus, it’s been an inspirational and motivational week as one fellow blogger hit early retirement and chronicled his entire experience here.  It has been a tremendous experience and if nothing more comes of this blog, I won’t regret the connections, friendliness and willingness to help from those who have a passion for getting out of debt, living a frugal lifestyle…it is definitely infectious. Onward!