6 Things To Shop Around For When Buying A Home

My wife and I just bought our first home together! Those of you that have already gone through the process before understand that buying a home can be quite a learning experience. I actually bought and sold one home before this joint purchase, and I learned quite a lot between my first and second home buying experiences. The first time around I was completely new to the process and just went with affiliates of my lending company rather than doing any of my own research or shopping around, which was a costly mistake. The following is a list of several items I would recommend you shop around for.

1) Real-Estate Agents

Do not be afraid to interview and vet your agent. Real-estate is a competitive industry and I would be highly surprised if there is a shortage of agents in your area. Do not be afraid to find a different agent if yours is not meeting your needs or is not acting in your best interests. Some agents will try and show you homes outside of your price range, that meet your needs, or that is located in a suboptimal or unpreffered area just to get a sale. If that is the case get a new one! You are not obligated to use the first agent you talk to. 

2) Mortgage Lender

Shopping around for a mortgage loan can save you a LOT of money. As an example, I applied for a mortgage loan through a partner company of the first agent I vetted and the best interest rate offered to us was 4.25%. I shopped around and was able to get a 3.375% fixed interest rate WITHOUT buying points (paying more money up front to buy a lower interest rate). That 0.875% may not seem like a big deal, but if you put it into context of the life of our $160,000 15-year loan request:

  • Interest Paid Over 15-Years @ 3.375%: $44,122.84
  • Interest Paid Over 15-Years @ 4.250%: $55,656.18

As if that is not a staggering enough of a difference ($11,533.34), the amount is even more significant on a 30-year loan:

  • Interest Paid Over 30-Years @ 3.375%: $94,647.42
  • Interest Paid Over 30-Years @ 4.250%: $123,357.38

So you can see that 0.875% difference is literally tens of thousands of dollars you are losing over time ($28,709.96 difference in this case). Compound interest is a double edged sword – spending a few hours shopping around and comparing interest rates is definitely WORTH your time. Some companies are competitive enough to even match or beat interest rates offered to you by other companies, so do not be afraid to send them your pre-approval letters to start that conversation and potentially get an even better rate.

It’s also important to understand and compare the types of home loans available to you. To name a few:

  • Conventional – generally  has stricter rules and requires 20% down to avoid Private Mortgage Insurance (PMI). 
  • Federal Housing Administration (FHA) – much lower credit score and down payment requirement; however, PMI will be required for the life of the loan.
  • Veterans Affairs (VA) – have much stricter rules but do NOT require a 20% down payment to avoid PMI.

Make sure to look into which options best fit your needs. Most people that qualify for a VA loan automatically assume they’re the best option. That is not always the case; it certainly was not for us (we do qualify for a VA loan but couldn’t get less than a 3.75% rate from lenders that offered VA loans).

3) Title Company

This is basically the law office that is going to mediate the transaction between the buyer and seller. Sometimes you can shop for this service and sometimes you can’t. It depends on your mortgage lender and your real-estate agent. You can and should ask what each line you are being charged for represents and if it is a service you actually want/need. You might be surprised to learn what exactly you are paying for.

4) Home Inspection

Home inspections are not usually required for purchasing a home; however, it is HIGHLY recommended you get one. Depending on the size and location of the home this price can start around $200 and go up. Don’t let that dissuade you – home inspections are money well spent. Hiring a licensed inspector not only informs you about aspects of the home that may require attention, but also allows you to revisit the negotiating table. For instance, you can ask that any/all issues be rectified OR lower your initial offer to compensate for the difference. Make sure your inspector is licensed, well-reviewed, and is willing to have you present during the inspection.

5) Property Appraisal

Home Appraisals are required if you’re borrowing money (mortage lenders are not going to let you borrow more money than your home is worth) to finalize your loan and are a service you may or may not get to shop for. Many lenders only use particular appraisal companies and handle this side of things, requiring an appraisal deposit up front. If you can shop for it, though, make sure it is a reputable company.

6) Home Insurance

Make sure to protect your property against disasters that are prevalent in your area (beyond fire – things like earthquakes, flooding, etc.). More than that, do not just go with the first quote you receive. When shopping around make sure to also get quotes for your auto insurance or other insurances to try and take advantage of bundling discounts and such. Many people recommend shopping around for insurance every 1-2 years or so to ensure your rates are remaining as low as possible.

Final Thoughts

If you have already bought your first home (or second home) hopefully you did not make some of the same mistakes I did and cost yourself thousands of dollars! In any case, we hope you found something useful in this post!

What have your experiences buying a home been like? What are some actionable tips or considerations you would recommend to our other readers? Comment below!

Why you should stop buying NEW stuff!

To be clear, we are not saying to stop buying stuff. Contrary to popular belief, Financial Independence does not mean you have to stop spending entirely or even allocate every penny toward retirement. Instead, we believe in becoming more intentional about our purchases, spending on things that will bring true value to our life. As a general rule, my wife and I make an effort to avoid impulsive purchases, sitting on an item of interest for days, weeks, or even months before taking the plunge. Most of our “new to us” acquisitions are all used items that are high quality, well-maintained, and listed way below their new retail price.

One Man’s Trash Is Another Man’s Treasure

We have all learned the hard way spending a little more up front on quality goods, that will stand the test of time, tends to save you money in the long haul. I have certainly bought my fair share of “cheap” stuff over the years trying to save few bucks… just to have it quickly fall apart and have to spend more money for a replacement. I believe that many people confuse “used” goods with “cheap” or “poor quality”, but that could not be farther from the truth. A few things I have learned over the years:

  1. As soon as you open/use a new item it is now used and its value diminished (in most cases). 
  2. Most people (myself included historically) do not actually want or end up using the stuff they buy, at least not long-term. We buy stuff and then life gets in the way or we were really just not as interested as we thought we were… then we end up getting rid of it, generally losing money in the process.
  3. If you are patient you will find someone that needs/wants money more than you “need” the item you’re trying to purchase. Leverage is a powerful negotiating tool (that may sound insensitive, but it is true).
  4. The reverse is true when selling items. If you are patient enough and asking a fair price, someone that is impatient or impulsive will buy it. 
    • Example: I sold my iPhone 7 November 2018 for $350 cash when the verizon/apple stores were only offering me around $150 trade-in value. It took me a couple months to find an impulsive enough buyer, but the additional $200 was worth the wait.
  5. Selling an item for what you paid, or near what you paid for it, is far easier and more realistic if you bought it used to begin with. I have sold many items over the years for equal or even more than what I paid for them at the time used.

You have most certainly heard the idiom, “One man’s trash is another man’s treasure.” The reality is we live in a world of consumerism. People like stuff, and most people prefer to buy their stuff new. Don’t let that be you. Use that truth to make your life better and wallet thicker.

Where to shop and/or sell?

There are several free websites, apps, etc. to shop around for used goods. My first stops (in order from top to bottom) are the following:

  • Facebook
    • Marketplace
    • Local Buy/Sell/Trade Groups
      • Just search your city “buy sell trade” and request to join your local group.
  • Craigslist
  • letgo
  • VarageSale
  • eBay
  • Amazon
    • They do not only sell new stuff. Be sure to look through their used options as well (especially for books). 

Tips when buying used…

  1. DO YOUR RESEARCH: Believe it or not, taking advantage of the ignorant or desperate is a profitable industry. Make sure you know how to inspect what you’re buying for damage, flaws, etc. OR require to meet with a local professional to get it inspected before following through with the transaction.
    • When selling my iPhone, I actually met the person at the verizon store to get it inspected before we completed the transaction.
  2. BE PATIENTPatience is critical. Buying/selling used goods is all about negotiating and one of your most valuable negotiating tools is time. If you are not in a rush to buy you’ll eventually land a great deal. If you aren’t in a rush to sell you’ll eventually walk away with more money.
  3. CASH ONLYNo checks and especially no Western Union. If they ask/offer to mail payment just move on. Some people prefer to use venmo/PayPal, and I will not try to disuade those individuals. Just make sure to read the fine print and protect yourself (its far easier for someone to scam you via electronic payments than with cash). If you are dealing with larger transactions, I would recommend spending a few dollars on a counterfeit pen. It’s okay to buy the pen new, haha.
  4. MEET IN PUBLICAnd preferably during the daytime.
    • Don’t do business with people not willing to get out of their car (speaking from experience here) or meet publicly.
  5. ALWAYS NEGOTIATE: When deciding to sell your item do some research on what a fair asking price is and then list your item just a bit higher. This way when a buyer makes an offer (very rarely will it ever be asking price) you will be at or close to your desired amount. Likewise, if you are wanting to buy something always offer lower and always say you have cash in hand.

What have we bought used?

The truth is several things over the years, but to name a few (and including prices where I can remember or reference back):

  • 2013 Hyundai Elantra (Paid: $13,000 in 2017 / New: $21,000+)
  • 2015 Macbook Pro 15″ (Paid: $1250 / New: $2200)
    • Pro Tip: You can private message sellers on eBay and offer to purchase directly through PayPal if they come off the price (most sellers will because they can avoid eBay fees that way), and you still get the buyer protection through PayPal itself.
  • Fiskar’s 18″ Reel Mower (Paid: $100 / New: $200)
    • This was our newest acquisition in preparation for the house we are closing on soon. I just bought it today (the day before this post goes live). It was listed for $150 on LetGo. I offered $100 cash and said I could meet now and they bit – it doesn’t hurt to ask!
  • Nintendo Switch (Paid: $300 / New: $450+)
    • Came with 2 games and extra controllers
    • I bought an additional game (Mario Odyssey) for $30 used. Held onto it for 5-6 months and then resold it recently for $40.
  • Outdoor Bluetooth Speaker (Paid: $100 / New: $200)
    • This was actually never used and came from someone on facebook marketplace who gets large quantities at wholesales.
  • DWALT Power Tools Set (Paid: $200 / New: $400+)
    • Included a drill, hammer drill, impact driver, sawzall, flashlight, two batteries, and a bag to carry it all in. I sold the hammer drill and impact driver for $150 and kept the rest (costing me $50 in total).
  • 16′ Telescoping Ladder (Paid: $50 / New: $200)
  • Trek Hybrid Bicycle (Paid: $400 / New: $1300)
  • Massage Table (Paid: $200 / New: $500)
    • I bought this as a surprise for us just over two years ago. This particular model would’ve cost ~$500 new and included some CDs, sheets, as well as the leg and face cushions. For the cost of less than two couple’s massages (or even one in some places) we bought this folding massage table. My wife and I exchange massages every 1-2 weeks or so while watching a show, listening to a podcast/music, or just talking. It’s been a great tool for spending quality time together.
  • Couches (Paid: $200)
  • Computer Desk (Paid: $20)
  • Entertainment Stand (Paid: $50)
  • Lawn Mower (Paid: $75)
    • Sold it for the same amount before moving.

Final Thoughts

All of the above items have added value to our lives through entertainment or sheer utility; furthermore, we have not had a single issue with any of them – I’m on my computer pretty much daily, driven over 40,000 miles on the car, used and lended out my drill dozens of times, and we could easily foresee the massage table outlasting us, haha. A great side-effect of buying used is we really don’t care if my car gets a door ding or our dog hangs out on the couch. We are not sacrificing quality to save a penny in the moment… we just prefer to buy quality at a discount.

Have you experimented with buying/selling used goods? What are some of your favorite used purchases? Comment below!

5 Fun and Inexpensive Hobbies To Try This Summer

[Editor’s Note: This is an independent post written by JJ. This post may contain affiliate links. Please read our disclosure for more info.]

I am a teacher with seven weeks of school left until summer and I am definitely ready for a break. I have a lot of great professional development planned and I also have some relaxing trips to enjoy.  Additionally, I’m a father of a 4-year old who will be attending summer school which will leave some much needed ME time.

Hey, it’s kind of like a math equation: summer break + son in summer school + wife still working = hobby time for me.

Just so we’re clear, I love my wife, son, school and spending time with family, but I also feel like I can get back into the summer hobbies I had before our son arrived.  So this summer, I have some super fun and inexpensive hobbies that I am going to try and I think you should too.

1. Geocaching

I love geocaching and spent many days off during my summers (before my son was born) traveling around Wisconsin geocaching.  A person really doesn’t need to buy anything to start geocaching which is one reason I love it. You can use your phone or buy an outdoor GPS if you’d like.  I recommend riding your bike when geocaching. It gets you outside and you get a great workout.

If you have never geocached before, I highly recommend you learn about it and try it out.  It’s a lot of fun! If you’re ever in Wisconsin and look at a log in a geocache and see Prof3ssor, that’s me.  Also, if you’re in Wisconsin and interested in trying out geocaching, send me a message and let’s go treasure hunting together.

2. Dungeons and Dragons

Ok, before you judge me, I just started playing this with friends.  I was always intrigued by the game, but never really knew enough about it nor did I know anyone who played.  A friend of mine learned how to play and suggested we get together as a group so I said yes. And you know what, I love it!  My character is a Mountain Dwarf Fighter named Flint Fireforge.

I’m a fairly strong introvert who doesn’t show a lot of (or any as my wife would say) emotions, but playing this game with my group of friends allows me to come out of my shell a bit.  I’m able to act in a different way than I typically do every single day. I’m able to be silly and feel comfortable doing it.

3. Exercise

Last summer I had an inflection point in my life.  We were moving back closer to home. I was leaving a great job where I had the opportunity to do some really great things.  Moving back was the right decision and I was all-in. After our move, I realized that much of my identity, outside of being a husband and father, came from my accomplishments at work.  So leaving that work, left me with a feeling of emptiness. It was a really hard time. I was struggling. It was affecting me in all aspects of my life. I was not a great husband or father, and I was in a pretty dark place mentally and emotionally.

I look back now and realize I was at a crossroad.  I could either try to move forward on my own or swallow my pride and realize that I needed to talk with someone.  I called a therapist, made an appointment and just talked about how I was feeling. It was the best decision I could have made.  

I have friends who refuse to talk to a therapist even though I know they’re hurting inside. Swallow your pride and go talk to someone.  You don’t have to tell anyone and you can travel as far away to see someone as you want.

Once my emotional and mental health were back on track, I realized I needed to pursue healthy eating and start working out.  I loathed working out prior to last summer, but going through what I went through made me realize that I needed to get my priorities in the right order.  I also yearned for more time with my wife and I knew I could get that time in the early morning while she and I worked out. I’m in a much, much better place emotionally, I’ve lost 25 pounds and I’m working really hard at eating healthy every day.

My wife and I work out every morning.  Lately, my son has also been getting up early and working out with us. We are both seeing some really great definition and progress.

4. Woodworking

Last summer I really got into woodworking projects.  I built a few things and they actually turned out. It was great motivation to keep going so I did, but then school started and I haven’t built anything since last summer.  I found a site that I absolutely love and it makes woodworking a lot easier. Check out Ana White.  I’m excited to continue to build things this summer.

5. Metal Detecting

I recently found out a co-worker of mine loves metal detecting and is willing to show me how to do it.  I’ve always been intrigued by metal detecting, but haven’t had the time nor did I know anyone with this hobby. Now that I know someone, I’m excited to learn more about it and maybe even try it myself. Maybe he’ll let me borrow one of his metal detectors for the summer to have some fun.  

So, that’s it.  What hobbies do you enjoy?  What plans do you have for the summer?  

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Video Tutorial: A Deep Dive Into Our Portfolio Spreadsheet

[Editor’s Note: This is an independent post written by Jack. This post may contain affiliate links. Please read our disclosure for more info.]

A few weeks ago I shared a post discussing our Retirement Portfolio and the Spreadsheet we use to track and rebalance our portfolio. Today’s post contains the promised follow-up video tutorial, which includes some examples on how we have used to aid us in rebalancing our portfolio.

This was my first go at experimenting with Quicktime for video/audio recording, so thank you in advance for your patience and feedback! The video turned out to be roughly 26 minutes in length… I guess that’s the teacher in me!  Moving forward we will definitely make an effort to try chunk videos into more discrete segments, but for now please feel free to use the time table below to jump around at your leisure:

https://www.youtube.com/watch?v=kB8BTIX7_Mg&feature=youtu.be

  • 0:00 – Introduction
  • 4:05 – Accessing the sharable spreadsheet file and making a copy via google docs OR microsoft excel.
  • 5:53 – Explanation of the “Simpler” version of our spreadsheet (labeled as “529s”). We actually use this very tab when adding new money to to our 529 plans (which are essentially a “two-fund” portfolio).
    • 7:57 – Rebalancing Example 1 – rebalancing via adding new money.
    • 9:15 – Rebalancing Example 2 – rebalancing after shifts in the market.
  • 12:25 – Explanation of the “More Complex” version of our spreadsheet (labeled “Portfolio”).
    • 15:35 – Rebalancing Example 3 – rebalancing via adding new money.
      • 16:05 – “5/25 Rule” & conditionally formatted cells
    • 17:46 – Rebalancing Example 4 – rebalancing after shifts in the market while avoiding “taxable events” in taxable brokerage accounts.
      • 19:00 – NOTE: I realize it is a tax-exempt fund so some taxes on the gains would be avoided upon the sale of those funds, but many people do not invest in municipal or tax-exempt bonds so I wanted to make sure to bring that point up in the video.
      • 23:20 – additional column explanations.
  • 24:43 – wrap-up & final thoughts.

Final Thoughts:

I apologize for the abrupt ending and ad-lib performance. Admittedly, I did not prepare an exit strategy, and after 26 minutes of non-stop, unscripted, unedited recording I just stopped the video in panic, haha. We live and learn as the saying goes! I am looking forward to learning new skills and growing as we put together more instructional videos in the future!

Leave us some feedback on how we can improve in the comments below or through our Contact Us page. Let us know what other video tutorials you would be interested in!

Not Spending Is Hard!

[Editor’s Note: This is an independent post written by JJ. This post may contain affiliate links. Please read our disclosure for more info.]

The weather is finally turning and I love it!  It was a long winter with so much snow and finally we’ve been having some warmer days full of sunshine.  The older I get, the less I enjoy the snow; ugh!

With warmer weather comes the feeling of wanting to go out and do more and spend more.  That’s not good for our budget so we work hard to control our tendencies and emotions to ensure we don’t break our budget.  If I had so much money that I never needed to work again and needed to figure out a way to spend all of my money, here are the things that I would buy right now (I included links so you can see what I would want):

  1. Private island
  2. House on the beach
  3. House in the mountains
  4. Tesla Model X
  5. Yacht
  6. Private jet
  7. Hire people to manage all of my new stuff

While it’s fun to dream, I actually am getting anxiety over thinking about how much money we would have to spend and stuff we would have to manage which is why I included number 7.

Since we thankfully (yes, I’m serious) don’t have the problems of too much money, let’s get back to real life.  Warmer weather does still make us want to spend money. I’ve noticed my wife and I wanting to spend more on clothes, outdoor experiences and fixing our house.  Also, thankfully, my wife and I are on the same page so we don’t break our monthly budgets. We methodically plan out our purchases and budget for the wants.

Quarter 1 Update

So with all of that, let’s take a look at how we did for the first quarter (January through March).  If you haven’t read Jack’s Q1 update, I highly recommend you check it out.  He talked about how to calculate savings rate, provided spreadsheets for you to download and use, and also discussed his savings rate.  It’s a great post.

Calculating Your Savings Rate

In Jack’s update, he writes that there are multiple ways to calculate your savings rate and I definitely agree with that statement.  Regardless of how you decide to calculate your savings rate, please make sure you calculate it the same way each month so you can accurately compare. The only difference we make when calculating compared to Jack is we include the principal pay-down on our loans in our savings rate. Let me walk you through an example of that.

We have a small car loan of about $12,000.  Each month our payment is about $267. That payment amount is split between principal and interest like any other type of loan.  The interest amount is about $50. The principal amount which is the amount the loan decreases is about $217.  We also pay an extra $400 towards our loan each month for a total payment of $667. I include the extra payment and principal reduction towards our savings rate which is about $617.

January:

Income: $7,075

Savings: $3,923

Savings Rate: 55%

 

February:

Income: $7,176

Savings: $4,265

Savings Rate: 59%

 

March:

Income: $7,090

Savings: $2,662

Savings Rate: 37%

March, what happened?!  It’s not as bad as it looks.  This summer, we’re going on our annual vacation with my in-law’s (whom I love dearly). This is a vacation I look forward to every year.  We paid for our summer rental during the month of March which decreased our savings rate. We actually absorbed that amount without stressing at all.  It’s cool to be able to pay for something like that and not have to worry about paying our other bills.

We’re In This Together

I’m happy with how quarter 1 went for us.  We still have some work to do, but we’re working on it TOGETHER. I’m not sure where you’re at in your financial journey, but here are some things that work for us:

  1. Make savings automatic.  A large percentage of our monthly savings is automatic.  The money gets taken out of our checks and deposited into our investment accounts.
  2. If debt is an issue for you, check out Dave Ramsey.  His programs helped us a ton!
  3. Check out ChooseFI.  I regularly listen to their podcast and read their blog articles.
  4. If you’re in a relationship, communicate with your partner.  Check out our monthly meeting article where we discuss and analyze our spending.  It’s not easy, but it’s important to make sure we stay on the same page.
  5. Save, but also live.  We recently spent some money on tattoos.  This would probably be frowned upon in the financial independence community, but I also want to be happy in my journey; and I love tattoos!

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Tracking Your Savings Rate

[Editor’s Note: This is an independent post written by Jack. This post discusses our savings rate and major expenses for Quarter 1 (January – March) of 2019. This post may contain affiliate links. Please read our disclosure for more info.]

One of our major goals for 2019 (discussed in our Written Financial Plan) is to save at least 40% of our gross income for the year. At TeachFI we believe in maintaining transparency with our readers, so JJ and I will each (in seperate posts) be sharing our saving rate and spending quarterly/annually. We feel this is an optimal way to get a pulse of your savings rate (since spending can vary quite a bit month-to-month) and categorical spending habits. We highly recommend you go through this exercise as well because the results can be quite enlightning for informing your current and future financial decisions. Mint and Personal Capital are both great tools that can track and categorize your spending if you don’t feel like tracking it all yourself. 

Calculating Savings Rate:

There are a number of ways to calculate your savings rate (%). Regardless of the method you choose, it is important that you remain consistent and also understand how others calculate their savings rate so you can compare apples to apples. We calculate ours by dividing our savings by our gross income (+ employer retirement contributions). Our savings calculation:

  • Includes:
    • EmployER Retirement Contributions
    • EmployEE Retirement Contributions
    • Money NOT spent (labeled as “Other Savings”).
  • Does NOT Include:
    • Mandatory Deductions (federal/state tax witholdings)
    • Optional Deductions (insurance)
    • Spending

A lot of our savings is actually generated from automatic deductions we setup with our employers that goes directly into our retirement vehicles (401k, 403b, 401a, TSP, & HSA) before the money hits our bank account. Additional savings (labeled as “Other Savings” is put toward our taxable brokerage account, college 529s, and savings for major expenses (like front-loading our IRAs each January and a downpayment for the house we are closing on in May)!

Click HERE to view a copy of the spreadsheet we use to calculate our savings rate. Feel free to make a copy of it and use/edit it to meet your needs.

As you can see we BARELY made our savings rate goal this quarter. Below are some of our major areas of spending for the last three months:

  • Wedding = $7671
  • Rent = $3477
  • Food/Dining = $1730
    • Groceries – $1606 
    • Restaurants/Bars – $525.50
    • Fast Food – $49
    • Coffee Shops – $14
  • Disability Insurance (Annual Policy) – $1884
  • Auto = $897
    • Auto Insurance (6 Months x 2 cars) – $530
    • Fuel – $367

Major Expense Categories:

Unfortunately weddings aren’t cheap. Neither is disability insurance, but it’s a must have and fortunately only comes out once a year. We could probably make more of an effort to decrease our food spending, particularly because it’s just the two of us (I AM PROUD of only spending $49 on fast food); however, we do get a lot of personal joy and fulfillment cooking at home (for both ourselves and friends) and going out with friends. We do actually make an earnest effort to not eat out more than once a week and meet that goal most weeks. 

Final Thoughts:

In order to achieve Financial Independence you HAVE to save a reasonable portion of your income. If you have not read the post The Shockingly Simple Math Behind Early Retirement yet, you definitely should. I am excited about the fact that even with some major expenses in unusual areas we still maintained a 40%+ savings rate for the quarter. We have our sights set on 50-60% for the remainder of the year. We are excited about continuing to make a conscious effort to avoid lifestyle creep and save as much as we can while spending money on things that we find true value in.

What was your savings rate this quarter? What are your major expenses? Do you find true value in them? If not, what steps can you take to reduce your spending in those categories? Comment below!

Setting a BHAG

[Editor’s Note: This is an independent post written by JJ. This post may contain affiliate links. Please read our disclosure for more info.]

BHAG stands for Big Hairy Audacious Goal.  According to Wikipedia, a Big Hairy Audacious Goal can be described as a strategic business statement similar to a vision statement which is created to focus an organization on a single medium- to long-term organization-wide goal which is audacious, likely to be externally questionable, but not internally regarded as impossible.

While the Wikipedia definition is targeted towards an organization, I like to think a BHAG can be used when setting personal goals as well.  My wife and I sat down this past Saturday to review and finalize our 2019 goals and to set our 10-year BHAG. We actually have two 10-year Big Hairy Audacious Goals.  Both of which are extremely questionable, but not impossible. We will need to work hard and work together if we want to reach either of our BHAGs.

For transparency purposes, my wife and I are very goal-oriented people.  We enjoy setting goals and tracking progress, but we also understand that life can change in an instant.  We all are in different seasons of life.  These goals are based on our current season, but life can change quickly so we will adjust our goals as needed if and when our life season changes.

Anyways, let’s start with our 2019 goals:

2019 Goal #1: Payoff car by October 19, 2019

In February, I published a post called Financial Independence on a Teacher’s Salary in which I discussed our goal that we created in our late 20’s of having all of our debt paid off (except mortgage) by the time my wife turns 35.  In order to complete that goal, we need to payoff our last loan by October 19, 2019.

We were on track to completing this goal until our flooding disaster last fall which my wife wrote an article called Hello Mauston. Not only did we lose our entire finished basement, we also lost both of our cars to the flood.

2019 Goal #2: Save $35,000

This is a pretty lofty goal.  Since moving to our new city and getting a new job, my income was decreased by $25,000.  That’s right, I took a pay-cut of over $25,000 when we moved and I couldn’t be happier with life right now.  With my lower income, we still set a rather lofty goal of saving $35,000 in 2019. To be clear, that’s $35,000 in contributions not market value.  

We actually set this goal at our last monthly household expenditure review meetings and made changes to our budget to try and reach this goal. $19,000 will go directly into my 403b, which will lower my take home pay.  That leaves $16,000 to save to reach our goal. By our calculations, if we are able to only live on my wife’s income, we will reach our $35,000 savings goal. That’s if we don’t overspend all year long and we don’t have anymore disasters.

2019 Goal #3: Maintain Healthy Lifestyle

I love bread more than anything in this world, but bread does really bad things to me when I step on a scale.  Last summer, I realized that things needed to change so I did what many people are doing right now and jumped into the keto diet. It was so hard! For 2 months, I was able to stay strict on keto and dropped 25 pounds.  It was a great feeling.

I’m now working hard every day to keep the weight off. I’m not fully keto right now, but working towards a healthier lifestyle with a bit more balance than keto allows.

Components of a BHAG

We learned earlier that a BHAG is a Big Hairy Audacious Goal.  I’m a fan of creating SMART BHAGs. SMART stands for Specific, Measurable, Attainable, Realistic and Timely. Here are the components for SMART BHAG setting:

  1. Specific: The goal should be clear and specific
  2. Measurable: We need to be able to track our progress. We are goal-oriented people and we need to be able to see progress.  We have charts posted in our house which allows us to track our progress.
  3. Attainable and Realistic: The goal needs to be challenging enough to motivate us, but not so challenging that it’s impossible to achieve.
  4. Timely: The goal needs a completion date.  Our BHAGs are set for 10 years.

BHAG #1: Payoff Mortgage

We bought our house about 1 year ago.  We financed our house for 30 years since we were moving to a new city and I didn’t have a job secured at the time.  We bought the house based solely on my wife’s income. She’s the breadwinner and I just live in her house.

We recently listened to a great podcast episode on ChooseFI where the guest talked about paying their house off in 5 years.  After that episode, my wife and I looked at each other and knew that was our first BHAG. Our goal is to payoff our house by December 31, 2029.  In order for that to happen, we need to pay an extra $775 on our mortgage every month.

Here’s the great news!  This BHAG ties into our 2019 Goal #1.  Once we payoff our car by October 19, 2019, we will be able to use the money that we’re paying towards that loan, $667, and move it to pay towards our house.  We will only need to find an extra $100 every month to make our first BHAG a reality!

BHAG #2: Save $450,000

Just like our first BHAG, this BHAG also ties into a 2019 goal.  If we’re able to consistently achieve our 2019 Goal #2, we should be really close to completing this BHAG.  It’s still not easily attainable though because there’s some room that needs to be made up based on our 2019 goal.  

If we’re able to reach these two BHAGs, it opens up so much flexibility for us. Luckily, we both love our jobs, but who knows how we’ll feel in 10 years.  If we want to pursue something different for even less pay or no pay, we can because completing these two BHAGs will allow us to not have to work for a w2 income anymore.

My Challenge To You

Set at least one financial-related goal for 2019.  Track your progress and report back at the end of the year.  I will definitely be publishing an article on our 2019 goals to see if we were successful or not.  My second challenge to you is to set at least one BHAG.

So that’s it, let us know in the comments below what your 2019 goal(s) and BHAG(s) are.  I’m excited you’re with us on this journey to financial freedom. Keep up the great work!

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What’s in your retirement portfolio?

[Editor’s Note: This is an independent post written by Jack.
This post may contain affiliate links. Please read our disclosure for more info.]

What to invest in?

Once you land on a Risk Allocation that you’re comfortable with the next step is to figure out how exactly you want to allocate your investments. I can’t make that decision for you, but I have linked a couple books and blog posts below that I have found very helpful and used personally for guidance if you are unsure where to begin:

Jack@TeachFI’s Portfolio:

As you can see above our portfolio is a pretty simple one (five funds) at its core:

  • 55% U.S. Stock Index Funds (40% Large-Caps & 15% Small-Caps)
  • 20% International Stock Index Funds
  • 20% Bonds/Cash
  • 5% Real-Estate Investment Trusts (REITs)

You’ll notice we are strictly index fund investors – we do NOT pick individual stocks. One of the beautiful thing about index funds is that with we are quite diversified with only a handful of index funds – over 10,000 companies worldwide. Where it gets a little more complicated is deciding which retirement vehicle(s) to invest each of those funds in a way that reduces expenses, fees, taxes, etc. as much as possible. Combined our employers provide us with the ability to invest in a 401k, 457b, 401a, and TSP (military thrift savings plan); furthermore, invest within our IRAs, taxable brokerage account, and a savings account. Here is the breakdown of our portfolio:

  • Large-Caps Index Fund (S&P 500)
    • 401k, 457b (Roth) , 401a, TSP, & Taxable Account
  • Small-Caps Index Fund
    • IRAs (Roth) & TSP
  • Total International Index Fund
    • Taxable Account (we only keep this in our taxable account to take advantage of the Foreign Tax Credit).
  • Bonds/Fixed
    • TSP, Taxable, Savings
  • REITs
    • IRA (Roth)
  • Future Considerations:
    • Increasing our real-estate allocation by potentially investing in rental property, syndications, etc.
    • Moonlighting as a physician will enable my spouse to contribute employER contributions to a solo-401k.
    • Investing within our HSA (won’t be able to contribute to this after April during military years).

How Do We Keep Track?

Looking above you can see we are technically invested in 11 funds in addition to our cash. In a perfect world we could simply invest in our five-funds in one account and watch it grow. Unfortunately that’s not how saving for retirement works. Each of our retirement vehicles has different funds available with different expense ratios, management fees, etc. While our spreadsheet probably seems overwhelming at first glance, once you start to wrap your head around it you’ll see how comprehensive and informative it is. In addition to the name of each fund, its ticker symbol, there is also the following information:

  • Column A & B = the account(s) the fund is held in. 
  • Column B & C = If it’s held in taxable brokerage account we put the order of investing for tax-loss harvesting purposes.
  • Column D = When we invest in the fund. For taxable brokerage account the specific dates the most recent shares were purchased or sold.
  • Column E = Expense Ratios (ER) assessed by the fund manager.
  • Column F = Actual asset percentages.
  • Column G = Current $$’s in each fund.
  • Column H = Desired asset percentages.
  • Column I = Desired $$’s in each fund.
    • Based on total $$’s in all funds and desired asset percentages.
  • Column J = How many $$’s to add/remove from each fund to rebalance according to our desired asset allocation.
  • Column K = Since our portfolio is a combination of retirement and non-retirement accounts, rebalancing our portfolio is not as easy as buying/selling funds. I Column J to get a ballpark figure of where to start and then start adding/removing money in Column K
  • Column L = Calculates new totals based on changes made in Column K.

We generally rebalance as we add new money to our portfolio using columns I & J as guidance; however, we also have the “Actual %” cell blocks triggered to turn red if we are outside of the 5/25 Rule and will rebalance then as well by moving money within our retirement (tax-protected space).

A Simpler Version

Most people’s portfolios are much less complex than ours, and many are far MORE complex than ours. What if yours is simple, though? If you don’t have a taxable brokerage account, aren’t worried about tax-loss harvesting, have just a few retirement vehicles (or less), you may find our spreadsheet for tracking our 529 accounts far more desirable. In essence it’s just a two-fund portfolio (90% large caps / 10% bonds):

The cells are formatted to trigger to the color red if they’re outside of +/-5% of the desired asset allocation to remind you to rebalance; however, we just rebalance by following the “To Correct” column when adding new money.

Let’s reference Student 2 as an example. If we wanted to add $5000 to their 529 plan, we simply type it under “Added $$” in Column G and then Column J tells us how to allocate the the new money to reestablish a 90% stocks / 10% bonds allocation.

Putting It All Together

The above image is a what our spreadsheet looks like in its entirety.

Click Here if you’d like to make a copy of this spreadsheet and modify it for your own use!

Upcoming Video Tutorial

In the coming weeks keep your eye out for a video describing in more detail how we use both spreadsheets to inform us when adding new money to and/or rebalancing our portfolio.

What do you invest in and how do you keep track? What strategies do you use to rebalance your portfolio? Comment below!

You Bought How Many Cars?!

[Editor’s Note: This is an independent post written by JJ. This post may contain affiliate links. Please read our disclosure for more info.]

I graduated college in December of 2006 and started my first job at a bank in January of 2007.  I had landed my dream job, the job I had wanted since I was a sophomore in high school. I was hired as an Agriculture Loan Officer, with the intention of transitioning to a Commercial Lender by June of the same year.

Our current president announced he was retiring so someone needed to be the bank’s network administrator and since I was the youngest person at the bank, I was it.  Quite literally, I was hired as Network Administrator for a bank with $90 million in assets because I was the youngest person.

I look back and laugh. I also think how badly that could have gone because we’re talking about people’s bank accounts and I was the first line of defense to ensure they and no one else had access to their accounts. I would like to take credit that we had ZERO data breaches, so that’s good.

I did partner with an IT consulting company so I wasn’t alone. So here I was, just graduated college and I was a Commercial Lender and Network Administrator at a multi-million dollar company. I had made it!

New Money = New Debt

Getting this promotion also brought a nice increase to my salary which of course meant I needed a new car!  I remember justifying that thought with, “I had worked hard so I deserve to have a nice truck!” That spring, I bought a sweet new Nissan Titan.  It was beautiful. Silver with four doors, tinted windows, sweet stereo system and a loud exhaust. It was everything I had ever wanted. I was making money and still had money left over after paying all my monthly expenses. 

So, like the great young adult I was, I had to figure out a way to spend that extra money; and it just so happened that my wife also “needed” a new car. I did what any good husband would do, I followed the lead of those commercials and surprised her with a brand new car.  Saturn Ion with 18 miles on it. We were living like kings and queens. New cars, new jobs, new house…and new debt obligations.

I Loved My New Car, But…

Here’s the problem and it’s not what you might be thinking right now. We loved our newly purchased cars, but we loved brand new cars even more.  A car is not brand new once you drive it off the lot and we like brand new cars. We loved the excitement of looking and test driving new cars. We loved the smell and feel of a new car.  We loved the new features of new cars. Leather seats and steering wheel, heated and cooled seats, sunroof, stereo, apps….oh man, it’s taking me back right now.

The one thing I liked the most that every new car did for me was the way people would look and admire my newly financed vehicle! For the next seven years, we had a different car every six months.  You read that right…14 new (sometimes new-to-us) cars in 7 years!!! Whoa! Every time, we would justify our purchase in some crazy way. We were addicted. Life was good and fun!

No Regrets

That was six years ago.  I’m often asked if I regret going overboard on car buying and I don’t regret it at all.  I wish I would have learned my lesson sooner than seven years, but I don’t regret it. I feel that my wife and I needed to go through that time in our lives.  I feel that we would not be where we are today if we had not experienced what we did in our twenties. Luckily, we were able to get past that time in our lives and see our future differently.  

No Going Back

We’ve come a long way and every day we have to make decisions to stay the course.  Would I love to go out and buy the toys that our neighbors have — new cars, snowblowers, ATVs, snowmobiles, bigger houses, vacation houses, vacations every month, and more?  Oh yeah, but I don’t need those things to be happy. Our lives are full of joy, but it took time to get here.

Regardless of where you’re at in your journey to financial freedom, let me tell you that it is possible.  It can be done. We are achieving our goals and you can too. It’s hard work, but it’s so worth it. Make a plan and get after it.

We found the FI movement in 2017.  Since then we’ve been on fire for FI. It took us a while to dig out of the hole we had created, but we are on our journey to financial independence. Here are some resources that helped us get started on this path. Maybe they’ll help you as well!

{Reader Questions} Have you gotten stuck in a rut like we did?  Did you feel like you learned from that experience?  Do you regret those choices?

Where are you in your journey to financial freedom?

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Book Review – Taxes Made Simple: Income Taxes Explained in 100 Pages or Less

  • Piper, M. (2018). Taxes made simple: Income taxes explained in 100 pages or less. Simple Subjects, LLC.
  • Category: Taxes
  • Recommended Financial Literacy Level: [Novice]
  • Recommended Audience: 
    • Anyone interested in either learning how to file their taxes or learn more about how to reduce their tax burden (effective tax rate).

I’ve filed my own taxes (using tax software for convenience compared to the paper forms) for about six years now. Mike Piper and I agree that there are huge benefits in learning the basics of filing your taxes. I know there were for me. Not only did I save money by not hiring out, but I also learned how to maximize the ROI of my investments and lower my overall tax burden. I am confident reading his book and/or using google/forums as you file on your own will allow you to make more informed decisions about your financial planning, which will, in most cases, also result in a lowering your effective tax rate.

His book is very well written to define/explain terminology and introductory concepts to even the most uninformed tax filers; furthermore, he provides relatable examples consistently throughout the book to aid in your understanding. See below for the table of contents:

  • Introduction – Is this the right book for you? Why bother learning this stuff?
  • Part One – Basic Concepts
    • Chapter 1 – Income Tax: It’s Progressive
    • Chapter 2 – Deductions and Credits: What’s the Difference?
    • Chapter 3 – Calculating Your Refund
  • Part Two – Taxable Income and Taxable Gains
    • Chapter 4 – Taxable Income
    • Chapter 5 – Capital Gains and Losses
  • Part Three – Important Deductions and Credits
    • Chapter 6 – Saving for Retirement: IRAs and 401(k)s
    • Chapter 7 – Other Important Deductions
    • Chapter 8 – Important Credits
    • Chapter 9 – Tax Breaks for Education Expenses
  • Part Four – Other Important Things to Know
    • Chapter 10 – Tax Forms
    • Chapter 11 – State Income Taxes
    • Chapter 12 – Alternative Minimum Tax
  • Conclusion – Do it Yourself or Get Help from a Professional?

Jack’s Biggest Takeaway:

We are interested in increasing the real-estate portion of our

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at some point through the purchasing of rental property. I did not realize that passive income (rental income as an example) is not subject to Social Security and Medicare Tax. Additionally, Mike Piper described some of the common deductions/credits associated with rental properties that I was not yet aware of.

Final Thoughts:

Do you NEED to read Mike Piper’s book to successfully file your taxes? Nope. Is it a great resource? Absolutely! Like I mentioned before, I’ve filed my own taxes for six years now and still learned from his book; furthermore, as a teacher myself, I feel like Mike does a great job breaking down a subject that is often daunting for people. Another great advantage of his book is it’s updated regularly to reflect tax code changes. Consider adding it to your own library or purchasing/sharing it with a friend that has been on the fence about deciding whether or not file their own taxes or is just curious about how to reduce their effective tax rate.

If you’d like to support our mission and are interested in purchasing Taxes Made Simple, please click here for your purchase! 

Have you read Taxes Made Simple? What are your thoughts, likes/dislikes, and biggest takeaways? Comment below!