Financial Freedom - July 2015

I recently (better late than never!) came across a couple of blogs that I really enjoyed on personal finance:  Root of Good and Mr. Money Mustache.  Both blogs focus on early retirement and different techniques to become financially independent - my goal numero uno.  Mr. Money Mustache has a way of conveying to readers the proper mindset one needs to go down this path and the differences between those who achieve this goal and those who do not.  My favorite part of Root of Good is the financial update and transparency he provides into his family's financials with monthly updates. 

After being inspired by these two blogs of men who have successfully obtained financial freedom, it occurred to me that, while it is extremely beneficial to read about the reflections of those who have succeeded, it may be even more beneficial to document the journey as it unfolds.

I have made a number of financial mistakes throughout my life and, while I am not proud of them, I have learned many valuable lessons along the way.  I was determined to get out of the hole and resolved to reach financial freedom and obtain the life free of the chains of money I dream about.  I began reading everything I could about investing and personal finance, studied successful people and their habits, and began reforming my lifestyle.  Check out my "Good Reading" page for some suggestions.

Even though I've been in the workforce for some time, I have finally reached the point where I need to make a change - hence, the beginning of my quest.  With a child due in the coming weeks, my priorities are completely with my family.  I want to be able to spend as much time with them as possible and working 10 hour days for someone else is not the answer.  Here's a quick rundown of where I sit from a savings standpoint.

We are currently saving approximately 27% of our take home income and I am constantly tweaking this to increase it.  We have recently bought a house and used the majority of our hard earned savings on a down payment.  I have mixed feelings on this cash utilization; we felt we bought at the lower end of the market cycle, with a good interest rate, and we hope for appreciation on the asset, but we do not view this as an investment - it is our forever home.  On the other hand, it is difficult to park so much of your money into a somewhat illiquid asset at one time - especially for someone more used to stock investing where your money is at your fingertips.

Regarding other expenses, we like to go out to dinner occasionally on weekends, but are very frugal with what we purchase at the grocery store each week.  We only buy what we can/should eat!  This is good for our pocketbooks and promotes healthy eating habits, as well.  We rarely buy snack food, which minimizes the unnecessary downtime munching.  We have two vehicles, one paid off and one leased.  This will be an ongoing expense.  And, once the student loans are paid off, that would add another 4% monthly savings.  The small ones add up!

Speaking of small ones, we have a few other items that we hope to cut in the future.  Lawn care?  We pay someone to mow our lawn currently, as neither of us has the time or inclination with a child on the way.  At some point, we hope to purchase a mower and eliminate this recurring cost - even though it is a reasonable price, only for half of the year, and negotiated so that it is only done on demand.

While budgeting is great and necessary, my main focus is on increasing income through additional streams.  The "Afford Anything" blog is a great resource for this mentality.  I focus heavily on investments.  I spend a lot of time studying the stock market and other investment ideas.  I'm not a huge Jim Cramer fan, but in his "Real Money" book, Cramer points out that you should spend at least an hour per week per stock that you own on research.  I think this is a great rule.  I will write more about this later, but the point is, if you can't spend enough time to properly research your investments, you shouldn't be doing it yourself.

This is a work in progress, but I feel with some tweaking and wise investment decisions, I can use this plan to reach financial freedom at some point down the road.  The obvious ultimate goal is to have a monthly investment income greater than monthly expenses - with a combination of budget cuts and income growth.  Investing 27% of our take home income won't ultimately cut it, but it's a start!