The Early Early Years
I am a product of divorced parents, a fact relevant to my story due to how differently my parents managed their money. My mom and dad could not have been more different; it’s amazing they were ever married and had a child together. They divorced when I was eight, and each met their second and final partners within a year. My mom’s second husband was wealthy, my dad worked in a factory slaughterhouse for 40 years, and my stepmother managed a bar.
It is a riddle wrapped in a mystery inside an enigma; but perhaps there is a key.
Churchill – BBC Broadcast, London, 1st October 1939
The extreme polarities of living half the year with my Dad and half the year with my Mom resulted in a very confused young adult. At Dad’s house we enjoyed time in the garden doing various projects around the property. Dad taught me how to properly use tools, we built things, and I learned that amazing experiences can be had at little to no cost. I also believe Dad held himself back because he had a fear of change and possible failure. Mom introduced me to the concept of pampering yourself and I saw how money made many things in life easier. My tenacious drive to excel came from Mom. If I got all A’s she would ask why they weren’t A+’s. Mom was always pushing me to bigger and better things, she was never satisfied with enough.
The Roaring 20’s
I fully embraced my mother’s mentality after entering the workforce. Like many born and raised in the 1980’s & 90’s I bought into the traditional U.S. middle class plan. I focused on getting an education, building a career, and buying a house with a picket fence and a puppy or two.
Throughout my teens & early 20’s I didn’t date. When asked about my personal life I would explain that I’m waiting for the right girl. In 2000 I was on active duty in the U.S. Navy living in Charleston, SC and I learned that the girl I had been waiting for wasn’t a girl at all. Discovering my homosexuality launched me head first into the excitement and extravagance of the gay community. To put this in perspective, the U.S. version of Queer as Folk began in December of 2000. A couple years later Queer Eye for the Straight Guy started enshrining the fabulous expectations around the gay stereotype. As a young closeted active duty gay man living and working under the U.S. military’s Don’t Ask, Don’t Tell policy I gave up hope of a “normal” life and tried to emulate the eccentricities of what I thought was expected.
I clubbed, danced, drank and partied my way through the rest of my Navy career stumbling back to the boat in various cities around the U.S. and the world. The real debt accumulation started after the Navy however. I was still trying to keep up with Mr. & Mr. Jones which meant fabulous vacations, new cars, large bar tabs, and expensive rent in a high cost of living gayborhood.
Late 20’s CRASH
All good things come to an end. My early & mid-twenties were one continuous party. Thankfully, while partying I managed to grow a solid career to finance the debt and lifestyle I was living. At 29 I had a car loan of $14,000, two maxed credit cards with a combined debt of $28,000 and a lifestyle that consumed almost everything else. I had company stock of around $15,000 and a 401K balance of $30,000. My net worth may have been slightly positive, but my lifestyle was chipping away at the positivity very quickly.
The 30’s, a New Deal
My dad was my best friend and we talked on the phone at least 1-2 hours a week. Dad worked a very hard labor job in a factory slaughter house, he rarely complained and did what was necessary to provide for his family. When I asked him about retirement he would explain that he had to work another 5-10 years. I hated the fact that my dad had committed 40+ years doing the same job with the same company and he couldn’t retire by his early 60’s! That said, my dad was happy. Dad had a loving wife, his gardens, his big screen TV, pick-em-up truck, grandkids, a dog, a cat, a workshop where he made things, and reasonable amounts of beer. Everything my dad & stepmother owned was paid off, they just needed enough financial cushion to get them prepared for retirement. I watched my dad open his present on his 65th birthday excited that retirement was just around the corner. Dad died unexpectedly the very next morning.
My dad’s unexpected death cut to the core! My early & mid-thirties saw incremental moves toward financial responsibility. During the second half of my 30’s I became obsessed with optimizing my savings, investments and expenses. By 36 I was car-free, the credit cards were paid off, I began maxing my 401K, I bought a fixer upper house averaging 10% growth per year, and I was saving around 50% of my total income. By 37 most of my net worth was in my 401K. My new goal was rapidly growing my income while maintaining a comfortably frugal lifestyle to make up for lost time.
Lordy, Lordy, look… NO
Well, ff.. ffoo… foouuur… fourty finally arrived! In my early thirties I assumed I would be working until my sixties. I’m happy to share that my consistent saving, investing and lifestyle management is quickly propelling me down the path to financial independence. I should be in a position to move away from required work by the age of 43. I live a comfortable life in a very high cost of living city. My house is in a walkable neighborhood with two groceries, a butcher, a baker, no candlestick maker, pubs, restaurants and much more, yet I’m able to maintain my annual spending around $70,000 including my mortgage.
What’s the plan stan…
Real Estate
My long-term goal is to move closer to family in a much lower cost of living area. I was lucky to buy my current home at $365,000 in 2015. My little single family housing development was constructed in the early 1980’s. The homes on either side of mine are exact replicas and in 2018 & 2021 they both sold for over $650,000. I anticipate continued rapid real estate growth based on permits in my neighborhood to add an additional 2,000 apartment & condo units, 100,000 SqFt of retail/commercial space and some of the highest planned economic and job growth of any metropolitan city in the United States. I plan to live in this home until sometime in 2030 when I believe most of the current development will be complete. Alternatively, I’m planning to sell the home earlier if the annual property appreciation drops below 6% for two years consecutively. That said, since buying the home RedFin, Zillow & actual comparative sales put my annual growth rate around 10%. Should I choose to buy near family, I could purchase a new or recently renovated home for $200,000 – $300,000 significantly lowering my living expenses.
Tax Deferred Retirement
401K
Thankfully, even though I made a lot of mistakes during the roaring 20’s era I always contributed my company match to a 401K. Starting in my late 20’s I increased my 401k contribution equivalent to my annual raise and by 33 I was maxing it out. Even with the minimal company match for many years that compounding effect has still resulted in a considerable sum.
Health Savings Account (HSA)
My former employer offered a High Deductible Health Plan (HDHP) and contributed $1,500 annually to the associated HSA account. My current employer offers an HDHP, but they do not offer an HSA so I opened my own. Because I contribute after tax money my HSA lowers my taxable income when I file each year. I currently use HSA Bank with an associated TD Ameritrade account. I am required to keep $1,000 in the HSA for potential medical expenses, but I move the remainder to TD Ameritrade and invest in index funds.
Taxable Retirement
Taxable Investment Account
I have a Vanguard account where I mainly invest in VTSAX. The long-term plan is to invest most of my home equity in the Vanguard account when it’s time to sell. In early 2020 I challenged myself to contribute $1,000/paycheck to the Vanguard account.
FI Launch Money
I’ve been reading a lot about sequence of return risks. As I understand it, the 4% rule is most prone to failure if a large crash occurs during the first 5 years of Financial Independence. To counter this risk, I’ve devised a plan to live on untracked stock & savings for 4-5 years once my tracked investments reach my target FI goals.
I worked for a publicly traded company for 9 years in the 2000’s. That company paid half our annual bonus with company stock that I, thankfully, ignored for years. I’m estimating the stock will provide a payout of around $100,000 when I’m ready to sell. I realize the better investment would have been to sell the stock 13 years ago when I left that company & invest in index funds, but honestly if I had sold the stock 13 years ago I would have spent it! So, I consider the fact I left it alone a blessing.
I also plan to grow my Emergency Fund and work part time during the first 5-years. I believe the part-time work, savings, and prior company stock should cover me for 3 – 5 years after Financial Independence.
Emergency Fund (dumb money)
I keep about $15,000 in my local preferred credit union which equates to three months of expenses. I’m also very diligent about managing my lifestyle costs. My largest monthly uncontrollable expense is my mortgage, but beyond that almost everything else is adjustable. I haven’t had a car payment in over 10 years. I don’t have credit card debt. I pay for home renovations and upkeep with cash on-hand. I’m told I’m an Xennial meaning neither Gen-X nor Millennials want to claim me. I identify with the Millennial preference for spending on experiences rather than stuff. My second largest monthly expense tends to be my dining and entertainment budget (no haters please). If necessary I could reasonably reduce my monthly expenses by about half to $2,500/month extending my emergency fund far beyond three months.
Liabilities (debt)
I refinanced my house in 2020 with a VA IRRRL at 2.5%, I have no other debt.