We’ve been on the FIRE journey for a year now. Over that time we have increased our networth by $140,000 and cut our estimated time to FI from 22 years to less than 5. What strategies did we use to get where we are today? We started with an open mind and never met a life hack we didn’t like. Here are just a few of them:
Track Your Expenses
Before we found FIRE our financial picture was like catching rainwater with a sieve. Money would flow in while continuously flowing out of our lives. We didn’t understand how it happened but it just disappeared. I felt like our finances were out of control.
Tracking our expenses turned the invisible visible. Once we could see where our money was going- we could see where the waste was and how seemingly small purchases add up. This one step made it possible to cut our monthly spending by $1,250 or 43%.
On the first of every month we sit down and add every expense into a google sheet. We go through every credit card and bank account over the previous month. Every dollar gets tracked. We also track our income and that helps us see that we are getting closer to our FI goal every month.
Automate the Bills
A year ago missing a payment was normal for us. We would pay the internet, phones, car payment, and utilities late almost every month. It wasn’t because we didn’t have the money, we just didn’t have a system in place to take care of them. It’s really pretty embarrassing. I was so overwhelmed with my job and renovating our fixer-upper that I didn’t have the mental space to figure out what was going on with our finances.
That kind of financial neglect could have easily turned into a much larger problem. If we weren’t already natural savers we could have easily ended up in major debt trouble. As it was, the biggest issue was that we were continuously incurring late payment fees.
Once I set up the auto-pay on all our bills, it fixed the fee problem. We keep enough cash in our checking accounts to cover our expenses and they are all set to pay in full when they come due. If we notice any fees come up in our monthly finance check up that we weren’t expecting, we can handle it then. If you have a good relationship with your bank, they should be willing to reverse the rare bank fee.
Cook At Home
Tracking our expenses opened our eyes on how our money was being wasted. I realize now that a lot of the overspending was due to a lack of balance in my life. My work life took over my entire life. I didn’t have the time or energy to properly take care of myself and my responsibilities and that led to a lot of unnecessary spending.
We were spending on average $350 per month on restaurants. This was a huge one for us. It wasn’t spending that we were necessarily really enjoying. It was a crutch to make up for feeling overwhelmed with life. I would leave work after a 10-12 hour shift and just want something comforting and fast so that I could relax for a few hours and be ready for another tough day tomorrow. I would get through another stressful week and want to treat myself with a nice dinner and a couple glasses of wine. I was trying to make up for being miserable and overworked by indulging.
Our grocery spending was way out of line as well. Since we’ve started tracking it, we’ve been able to cut it down by 47%. We were eating out several times a week but spending about twice as much as we are now. A lot of that spending just ended up in the trash because we couldn’t eat all the food that we were buying. Over the last year, we have made it a priority to eliminate food waste- both for our budget and for the environment. And we eat healthy, delicious food even though we spend half of what we used to.
Tackle Every Recurring Bill
Tracking our spending paved the way to finding all the holes that our money was following out of. Once we found the holes, we found a way to address them. Our food was a major one, then came the recurring bills. We cut out our streaming services, Netflix and Amazon Prime. We paid off our car loan early to skip 4 more years of interest payments. Then we shopped around for car insurance and got the best deal we could find.
Our mortgage was roughly 50% of our income last year. We were paying too much for housing. Finally, in August, we found a solution. Some friends were moving to town and we offered to rent them our guest room. That cut our mortgage expense significantly and also cut our utilities as well. In total this one hack cut our cost of living another 30%.
Of course living with roommates has its challenges but we try to think of them as an opportunity to grow and work on our interpersonal skills. In America we spend a lot of money to avoid challenges. The flip side of this is that struggle can be an opportunity for personal growth. By avoiding it, we are robbing ourselves of that opportunity. Sharing our 1,000 sq ft home with another couple really forces us to work through any issues that may arise. We can’t just avoid the conflicts that come up- no matter how much I may want to.
Re-Valuing A Dollar
Finding the FIRE path changed how we value every dollar. Once I realized that we could use our “disposable income” to literally buy the freedom to never work again. I realized that no thing could compare to the value of my freedom. No fancy coffee, no great deal from Amazon. Really any enjoyment that I used to get from buying treats for myself was, at best, momentary. The things that make me happiest- biking, meditating, being in nature, and spending time with my husband- don’t cost anything.
Every next dollar we save is a dollar closer to our financial freedom- to never having to work a job I hate again, to being able to spend time with family, to being able to travel full-time, to being able to make my life’s work something I choose rather than whatever pays the bills, to being able to really live rather than sleepwalk through life. There is no part of our income that is “disposable” because money is time and our time is not disposable- neither are our lives.
Rethink Your Income
A year ago I was working in a field that seriously undervalued it’s workforce. So despite having a bachelor’s degree, a masters degree, and years of experience, I was barely earning $40k before taxes. Forty thousand USD is not nothing. That still put me among 1% of the world’s richest people but I knew I could do better. I had my dream job- something I had been dreaming about since high school- and I was miserable. Shrinking budgets had led to replacing 2 or 3 jobs with a single hire and it was impossible to keep up with all of the responsibilities. That coupled with office drama, a constant treadmill of new interns that I had to train (and keep alive), and very physically and mentally demanding work- I was overwhelmed and underpaid. I looked for another position for 2 years and wasn’t able to find anything in my field that would have been a marked improvement.
I looked around and found that my best option was to learn some new skills. I learned bookkeeping, and a couple other skills that I could market through my husband’s fledgling business. And over the past year we have moved the business from earning about $20k per year to it making about $10k per month- profit. I used the resources that were available to me and made them work to our best advantage.
It took a lot of out-of-the-box thinking and brainstorming to find the best solution for our little family. This is not a one-size-fits-all solution. Everyone has to evaluate their options but there are tons of free resources out there to learn new skills or even learn how to take better advantage of your current position. Check out Coursera, or EdX.
A year ago we didn’t know much about investing. And we paid for our ignorance- with high fees on under-performing investments. Since then, we have rolled all of our old retirement accounts into IRA’s that we opened at Fidelity and we purchased Fidelity® ZERO Total Market Index Fund (FZROX). This fund tracks the entire US stock market and has zero fees. We max out all the tax sheltered retirement accounts (401k, IRA, and HSA) that are available to us and next year we plan on also opening brokerage accounts as well.
If you don’t have access to FZROX, choose a total market index fund with the lowest fees possible- something comparable to VTI https://investor.vanguard.com/etf/profile/overview/vti. Even fees that sound small can add up over the life of your investments.
Make Space In Your Life For Growth
Until I left my last job, I just didn’t have the time nor the mental space in my life to really tackle these issues. I never would have found the FIRE path if I hadn’t found this space. I needed to learn a ton and do a lot of self reflection to figure these things out and that was only possible when I wasn’t so overwhelmed with the work part of my life.
This pandemic has brought a lot of changes. For one it’s been an opportunity to spend a lot more time with ourselves, less time commuting, less time on social obligations. This extra time might just be exactly the mental space you need. It is an opportunity to reflect on your goals, take time to really understand yourself, and your personal financial picture.