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Plans -- and Budgets -- Change

July 7th, 2019 at 01:05 pm

With the revelation that I'm headed to Idaho for our next assignment, I've been able to spend the last few days looking around at houses, and more generally, figuring out what our budget will look like out there. The biggest unknown right now is "WHEN" -- my current report date in Idaho is in October, but I'm requesting an extension for ~6 months while I'm deployed, so that my family doesn't have to try to move from Alaska to Idaho without me there to help (I'm hoping/presuming that it'll be approved). But I've figured out the general area we want to live, identified a few childcare options, found a university program for my wife to pursue her DPT, and worked out the (tragically long) commutes we'll have. Based on that assessment, I've plotted out a tentative budget plan for when we move to Idaho, and I'm making some changes to our current budget to get us ready for the move.

The biggest issue is that we want to have as small of a mortgage as possible, then once we've got it, we're going to hammer at it to pay it off ASAP. I'm looking at houses around $300k, and shooting for having at least $150k available in cash for our downpayment.

At present, I've got ~$75k in cash/money market readily available that I'm allocating to the downpayment. I have $7k more in I-Bonds that I'll eventually cash out, and $35k in taxable investments that will be cashed out over time as well (waiting for LTCG status on recent purchases). So out of current assets, I've got about $112k ready for the downpayment.

- I've redirected our monthly investments going into stock mutual funds to instead go into our money market fund. Likewise, I've turned off dividend reinvestment.
- I've redirected additional savings for home repairs on our current house, diverting it as well to the MMF
- I'm going to stop the extra principle payments on our current mortgage, and again, divert that into the MMF.
In all, over the next 7 months we should be able to put an additional $23k into cash savings for the downpayment.

Finally, with all of the TDYs that I have/will be doing over the next 8-9 months, if I keep my expenses under control, I should be able to save at least $10k-$12k in per diem.

For those quick with math, I've got about $145k either available or forecasted. That last $5k....I'll have to see where I can scrimp & save to make it. Might not be possible, but we'll see. $150k DP is the goal, and I'll shoot for that.

The good news is that none of this takes into account the sale of our current home. For the sake of minimizing what will almost certainly be a stressful time, I don't want to count on the current home selling before we buy our next one. But once I get home from my deployment, we'll be getting our house on the market for sale, and I'm expecting that we should be able to net $100k-$110k from the sale of the house. Whenever that happens (whether before or after we're into the next house), that entire sum will go straight at the new mortgage. What remains of the mortgage (maybe $50k), we should be able to knock out in about 2 years. And at that point, we'll be 100% DEBT FREE!!!

One last nagging question remains -- a part of me is asking why I want to unplug the $35k of investments for the downpayment, when I could just leave them in place and (hopefully/presumably) continuing to grow.... I already have plenty to avoid PMI, and the eventual sale of our current home will help things along alot. It's coming down to an emotional vs. intellectual decision. Emotionally, I'd prefer to lock in my investment gains and protect them so that the money is available for the downpayment. But intellectually, if I leave the investments in place, they're always still there that I can reach over at any time to totally knock out the mortgage... So as time goes on, I'll have to see exactly what I end up doing....

The First Million

July 5th, 2019 at 11:30 pm

In the forums, it was brought up that the first million dollars is always the hardest, and that things only continue to accelerate from there. The idea resonated with me, and below is my response to the OP. I decided that I wanted to save those thoughts for myself to remember later, so here they are.
I started investing around the end of 2006, but was negative net worth until sometime in the first half of 2009. As I mentioned elsewhere, I just hit $1M sometime in the last few weeks. So about 10 years to the nose for me to get from ~$0 net worth to ~$1M.

There's definitely alot of reassurance in those facts:
- Anyone can do it, and it doesn't really take alot of time if you work hard & focus on practicing good financial habits.
- Compounding is every saver's friend. I'm almost 33y/o right now. If I do nothing with my money and earn a decent ~8% average ROI, my net worth should double roughly every 9 years without saving another penny...which means I'm in a position to have ~$8M by age 60. That's not inflation adjusted, but even assuming 3% inflation, that's around $3.75M in today's dollars. Bottom line: we're in a good place.
- I'm not gonna quit saving anytime soon, which means those numbers will only get bigger, and grow even faster.

One thing that I don't think gets expressed well very often is our (or at least my) motivation for wanting to build that kind of wealth. Shoot, I don't think my own wife of 5 years even fully understood this until I sat down with her recently (after she recently took a medical retirement from the military) and I explained all of this. First and foremost, yes -- I want us to live a comfortable life & retirement, and provide a good standard of living for my family. I want us to travel whenever and wherever we want to. All of those things will be great, and alot of fun.

But beyond that, I really look forward to being able to be exceptionally generous with my time and money in helping the people around me to be successful in life. When I (hopefully/presumably) retire from the military in another 9 years (note -- net worth will have at least doubled by then), I want to be in a position that I can work in whatever job I want, and not have to worry about my income. That way, I can volunteer in communities to help teach people to learn how to improve their finances. I can work for (or start) a non-profit that focuses on helping students succeed from grade school up through college and beyond. My wife & I can serve missions for our church wherever we're needed. I can take on leadership roles (whether paid or unpaid) in my church, local schools/universities, and my community without concern for how I'll pay for our living expenses.

As I see it, we need about $2M-$3M (today's dollars) to be financially independent, and I plan to be there within the next 9 years. At that point (by my estimates), I'll have ~$1.1M in retirement savings growing on autopilot, ~$500k accessible in taxable investments, ~$500k in 2-3 paid off rental properties throwing off income, and our military pensions (~$6k/mo total, today's dollars) serving as a baseline income stream. All of our efforts over the last 10 years have made achieving those goals not only possible, but highly likely.

I'm a testament to this singular truth: deliberate efforts & sacrifice while young will, without fail, reap enormous opportunities and financial security in the long run.

Chaos and Order

July 4th, 2019 at 08:10 pm

It's been a busy number of weeks recently, fraught with continuing chaos.

My career plans have suddenly taken a hard right with a few short-notice opportunities that presented themselves to me... But in the process, I've been on temporary orders all over the country recently resulting in very little time home with my family. I spent most of June in Hawaii for a stressful, sleep-depriving exercise, had 1 week home, and now I'm in Las Vegas for an intensive training course that'll take me through the end of July. After this course, I'll have 1 more week at home before I have to leave again, this time for a whopping 7 months out to South Carolina. In the background, I just today found out today that my next assignment will be taking us out to Idaho.

It's tough to be away from my family so much, especially knowing how much of a strain it is on my wife. Our boys, often too smart and willful for anyone's good, are often challenging to handle alone. But at the same time, this series of temporary assignments that have basically fallen into my lap are outstanding opportunities (both in & out of the military) for my otherwise generally average career prospects. We're working on options for mitigating the impact for her, including frequent Space-A travel, them going to live with her brother/SIL for a month or so, and maybe having a friend/family member come up to live with them for a little while.

A side effect of all of this travel on military orders meant that I had to cancel my airline ticket for a trip my family is taking in July to see DW's family. Some airlines are really good/understanding about such circumstances....I've discovered that is not so much the case with JetBlue. I've had to spar with them on the phone 5 times over the last week, spending 3-4 hours trying to get them to follow their company's policy to waive the $200 penalty.... After finally convincing them, now I'm just waiting for confirmation from them with the airfare credit (not a refund, unfortunately) that I'll somehow have to figure out how to use in the next year. What a pain.... Gratefully, I'll at least be able to drive up from Las Vegas to see my family & in-laws over an upcoming weekend.

The good news of it all is that we're finally at least getting some resolution about what's gonna be happening for our family in the coming year. With the news that we're headed to Idaho next, I can start with getting a pulse on where we'll want to live next (apparently the area is experiencing a boom), and I found a DPT program in the area that my wife should be able to apply for and finally pursue the career as a Physical Therapist that she's been wanting for years. So through the chaos, some degree of order and predictability is beginning to fall into place.

One last thought.... I was looking at things today, and discovered that we're officially millionaires! Details on the left, but alot of it is due to home equity and the bull market that has continually pushed our investments up.... So we'll see how long it lasts. But for now, I'll cheer the milestone.

Changes (and Decisions) Abound

May 24th, 2019 at 01:47 pm

As is typical with military families, we're once again entering into another round of life-contorting changes. I'm up for my next assignment, and the most likely locations are scattered around the world... Germany, Italy, Saudi Arabia, Korea, Arizona, Colorado, or Idaho are all on the table, and we should find out exactly where we're headed next within the next month, with the actual move probably sometime in Oct/Nov. I also just signed a contract to stay in the military for another 5 years, but it did come with an annual lump-sum $20k/yr bonus, so we're going to use that money to help us with our upcoming move & our to-be-determined housing situation (more on that to follow).

As for DW, she was just medically retired from the military in April due to some mental health issues (she's now mostly doing better, gratefully, but was disqualified from deployment & therefore got the boot). She's struggled with accepting the abrupt end to her military career, suddenly becoming a SAHM, but I'm slowly convincing her that it's really a good an opportunity for her to pursue her actual passion, to become a physical therapist. She's been taking a couple pre-req classes, and soon she'll start shadowing the physical therapist on base to regain some recent experience, then depending on where my next assignment takes us, she'll be applying to schools for earning her DPT. Financially, we're in a good place for it -- she gets a small retirement/disability pension from the military, plus she's got the Post-9/11 G.I. Bill that should cover most of her costs. I'm excited for her, and as long as we can keep her focused on that end goal, I think she'll end up very grateful for this opportunity.

The other big change (or decision, really) on the horizon will be what's going to happen with our current house. We like our house, it's in a great neighborhood, and we'd love to come back to live here in Alaska at some point in the future. We also love the idea of building a small portfolio of rental houses, and currently have one in OKC (our previous assignment) that is doing very well. However, this house is double the value of our other rental, we still owe $279k on it, and our total PITI (not escrowed) is ~$2700/mo. Realistic rent for it is probably between $2500-$2600/mo. So the cashflow would be tight, particularly in vacant months. One option we're considering is to recast our incredible 2.375% mortgage, and doing so with a $50k-$60k payment would reduce the payment to $2200-$2300/mo, which would make it much more manageable. The ROI isn't phenomenal, but we'd be looking at ~12% IRR on it, so not terrible either. On the other hand, if we just went with selling it outright, we'd probably do no more than break even (perhaps even take a "small" loss of $10k-$15k. We're starting the conversation with our realtor friend, and we may end up just dual-listing it (sale or rent), and take whatever bites first that looks good.

On the back side of the upcoming move, what's next? Buy again, or rent? Between our cash & investments, we'll have at least $40k-$50k available regardless of what happens with our current home, so that should probably cover at least a 20% downpayment if we do buy another home. However, depending on the location, just living on base & renting might not be a bad option either. We'll have to evaluate it carefully once we know where we're going. I really like our current rental, and I'd like to keep some property here in Alaska (either this one or a different place)... But I don't want to overextend us with rentals dotting the country. Once I eventually leave the military and we settle down in one place, I'll most likely sell everything and rebuild the real-estate portfolio locally (whether that's here in Alaska or perhaps elsewhere).

Who knows what the next few months/year will bring for us... Alot will be driven by the location of my next assignment. I hope they release our assignments soon!

Saving is simple -- do it early & often

May 24th, 2019 at 02:33 am

So I guess for my kickoff post, I'll lay out the foundation of everything that has brought me to where I am. And honestly, it's a mind-boggling reality. As I was putting together the numbers for my 'About Me' section, I was shocked to realize where we actually stand. As a 32 y/o military officer, I have built up a net worth of nearly $1M... I almost don't know how it's possible.

I went to college in 2004 with $3k to my name. I had gratefully earned a full scholarship to an outstanding university, and my small income of a few hundred dollars a month was sufficient for my needs (not much, obviously). In 2006, an instructor pulled me into his office with a few of my friends, and he taught us about retirement accounts, budgeting, debt, investments & mutual funds, and a bunch of other financial topics. In a way, he's my inspiration, because that's exactly what I want to be able to do for other people. I want to help them learn how to be successful with their money. And successful I have been, and I credit him with starting me on that path.

Soon after, I started my Roth IRA, and set up automatic transfers into the IRA and into my savings account. Mind you, I had a $10k annual income, so it wasn't much... But that didn't matter -- I had started! The next year, as a senior, I managed to max out the IRA, and have never stopped doing so ever since. That has been a cornerstone of my financial life.

When I commissioned as a military officer, I was young, inexperienced, naive, and relatively well-funded (suddenly earning $40k). Gratefully, I applied the lessons I'd been taught, created a basic budget, and started saving aggressively. I had been living on almost nothing, and with 2 roommates, continued to do so. That meant that saving 40% of my income was no problem, even in spite of my car payment (man, if I could go back & not get an 11% car note on a new Civic... Lol).

From then on, 40% toward savings has just felt right. In spite of living in (and enjoying) Florida, Oklahoma, Japan, Oklahoma again (stinking tornados), and now Alaska, I (and eventually my wife) have always managed to save right around 40% of gross income. "Live on less than you make." It's simple advice, but so very fundamental to financial success.

Which brings me to my point: by starting early, saving consistently, and living well within my means, I find myself in the strange position of nearly being a millionaire in my early 30s. I started my career with absolutely no expectation of wealth (after all, who joins the military for the money?!?). I simply created my budget based on priorities: 1) tithing; 2) basic essentials of housing, food, utilities, transportation; 3) saving; 4) everything else. By taking out & sending away my savings before I spent any of my disposable income, I simply never missed it, and it was always there when I needed cash for something: a car, buying a home, emergency airfare, paying for our wedding & honeymoon, or wiping out my new wife's student loans. Saving early & often has given me the freedom and flexibility to do a great many things. With the foundational philosophy of saving aggressively, as I've moved up in rank and pay, the dollar figures involved have grown, but it has merely accelerated my small family's financial strength. We stick to the plan, safe regularly, and we want for nothing. When something is important enough to merit spending our money on it, we do so with little hesitation. That freedom is directly enabled by the savings habits that I learned in college and have applied ever since.

Getting started!

May 24th, 2019 at 01:33 am

I'll start by explaining my purpose here: I'm creating this blog with the goal of it serving as a clearinghouse for my thoughts & ideas related to money matters, family finance, or anything else that impacts or is impacted by them. I live in my head (I'm a strong INTJ by personality), so my thoughts are often widely varied & ephemeral. I'm hoping I can use this blog as a means for me to process & think through my ideas & opinions. Anyone is welcome to join in my ruminations, and your comments, ideas, advice, or opinions are welcome...But in the end, please just understand that I see this blog as being solely for my own benefit (or therapy, perhaps). Welcome to my world!