Beginning Our Journey To Financial Independence (FI)

Finances

Financial planning has always been a passion of mine.  Luckily my wife is the same way. While financial discussions may be difficult or completely absent within some marriages, my wife and I enjoy talking about our finances and how we’re going to meet our next goal.  While the communication lines were wide open about our finances, we had an aha moment in July of 2017. We were trying to keep up with the Joneses. Maybe not the Joneses of the city we resided at the time where the average home price was over $400,000, but nonetheless we were still on that path where things and stuff mattered.  Everything changed for me in July of 2017. As a side note, I think my wife would tell you that she’s been ready for a while now, but as with everything, it takes me a bit longer to come around.

Burned Out

Back up a couple months to May of 2017; I was finishing up my fifth school year as a teacher and felt I was at a crossroads. Education is a second career for me and I will tell you that while teaching is rewarding in many ways, it  is also the hardest job that I’ve experienced. I was averaging at least 50 hours/week, even through summer, spring and winter breaks for all five years. My wife would label me as a workaholic. I love what I’m doing and have a vision for where I believe education can go, but I had worked myself to the point of being completely burned out.  

My bosses saw that I was burned out as well and were telling me at the end of the school year to take the entire summer off.  This may sound great, but to a workaholic it’s difficult to hear. I wasn’t sure what I was going to do with my time and I had a ton of work to do over the summer to get ready for the next school year. To spare you the details of the tipping point for me, I realized that something needed to change.  I also realized that getting a new job or switching careers were definitely not the answers; I knew I had to dig deeper to find the balance my wife and I were seeking.

In June of 2017, my wife and I took a trip to Miami to recollect our thoughts.  2017 had just been a terrible year all around with so many tragedies and then add this work thing I was going through, we just needed to get away.  Miami was great but expensive! Nonetheless, we returned with energy and then the following week I had surgery to repair an old injury. Traveling to Miami and undergoing  surgery forced me to take a break from work and do some soul-searching.

Soul-Searching

Throughout my time of introspection, which heavily involved Google, I found a blog post by Mr. Money Mustache (MMM).  This is the exact blog post I had read (link).  After reading all of his posts, listening to podcasts by ChooseFI, and Googling (I mean soul-searching) some more, I realized that this is the journey my wife and I needed to begin.  I sent my wife Mr. Money Mustache’s post and she was all in.

Since finding the Financial Independence (FI) community, I’ve been on a mission to help my fellow educators, family, and friends understand the many benefits of FI.  Throughout my discussions with colleagues, I’ve realized that retirement planning and financial education is not a strength for many of us, and many districts do not do enough, if anything, to help teachers plan for retirement.

Goal of TeachFI

The goal of TeachFI is to help and inspire people, especially our fellow educators.  Jack and I want to share our knowledge and journeys to Financial Independence. Neither of us are perfect in our pursuits and we’ve both made a ton of mistakes in our financial lives. We want everyone, including our fellow educators, to know that you’re not alone in navigating your financial lives. We are here to help you. Our goal is to be completely transparent about our journeys which will include the mistakes we’ve made and subsequently learned from, our monthly expenses, our net worth and our savings rate.  I believe if we’re open and honest about our pursuit of financial independence, you will find out improving your financial life is not as far-fetched as you may believe it to be.

{Reader Questions} What does Financial Independence mean or look like to you? If this path interests you, where do you stand now? What steps are you taking to move toward FI?

My Bumpy Road to a Six-Figure Net Worth by 30

Even though I didn’t cross paths with the term “Financial Independence” until 2018, it’s a notion I felt I have been naturally gravitating toward since a young age… at least I thought so until looking at the numbers for this post. I was a natural saver since childhood UNTIL going to and graduating college. “Net Worth” is an interesting and sometimes abstract concept. I say that because it’s easy to wrap our heads around its calculation (net worth = $$ assets and savings – $$ liabililties and debts); however, I think a lot of us, myself included, are guilty of letting those liabilities and debts hang out in the back of our minds. To be honest, until reflecting on what exactly I wanted to share in my first EVER blog post, I had not thought much about my own net worth and its evolution over the years. In an effort to be as transparent with our readers as possible, I think it’s important to share my journey so far. We just flipped our calendars to January 2019 as I’m writing this, AND I’m not married yet (April can’t come soon enough!). That being said, I’ll stick to my individual figures (estimations). As a consequence of choosing a career in education, my life has never really stopped revolving around a school year, so I think it’s appropriate to use that as my gauge instead of a traditional calendar year (at least for now):  

Even though these are estimated figures, reflecting on my net worth was a very valuable, enlightening, and humbling exercise. I would encourage you and your partner (if applicable) to do the same! You might be surprised what you see. Without going into too much detail (yet), I would like to elaborate on the above chart:

  • I worked full-time over summer and winter breaks to help fund my expenses during college. I did not work during the fall/spring semester of my undergraduate years (2007-2011).
  • My savings rate include things like IRA’s and brokerage accounts toward the latter years.
  • You’ll notice a lot of red. I spent most of my 20’s living in debt like roughly 80% of Americans do today. You probably also noticed I had a net worth of zero upon graduating college and could have kept it that way by using my savings to pay my student loans off at the time. Instead I took that savings and put a down-payment on a car [a dumb mistake and one I’ll go into more detail about in a future post].
  • 2011-2012 I spent studying for my Master’s Degree. I worked as a graduate assistant (tuition covered + small stipend), part-time as a substitute, but I took more loans out [a story I’ll save for a future post].
  • 2012-2013 was my first year teaching. My folks were gracious enough to let me stay at their place for most of that school year, which enabled me to allocate most of my income to paying off my car. How’d I reward myself for paying down that debt? I took my “whopping” 3k of savings and recently adjusted credit score to take out an FHA loan and buy a house. So, as a teacher my debt to income ratio is now approaching 4:1 (didn’t think about it that way at the time).
  • Moving forward I stopped buying shiny new things, increased my savings (both at the bank and by opening an IRA), and started paying down my debt. I also decided to get my Ed.S., which I paid for with cash over the ~16 month program rather than taking out new loans. Between earning my M.A. and Ed.S., I boosted my income by ~$10k+ per year for as long as I teach.
  • In 2016 I sold my house and rented for a year, cutting my living expenses by well over half. I started investing some of that money in a brokerage account at Vanguard. Why didn’t I go ahead and pay those pesky student loans off? I did… kind of. I was paying down the interest quarterly (notice they didn’t grow) until I qualified for [Federal Teacher Loan Forgiveness]five years into my career.
  • So, 2017 marked the year I was OFFICIALLY debt free finally. Zero debt. I can’t even describe how good that felt and still feels going on two years later.

It’s obvious that I made several financial mistakes. I still do. I want you to see that. YOU can still put your debt behind you, increase your net worth, and reach financial independence… even on a teacher salary! The most important thing is having a reasonable [plan] in place to follow. In essence, I just increased my savings rate by cutting expenses and increased my income by getting advanced degrees. I’m going to swim a little against the current, and maybe catch some flack for it, by saying you shouldn’t complain about teacher pay. Would I like to get paid more? Of course! Do we deserve to get paid more? Most would argue yes. Simply complaining, though, does nothing to increase your net worth – action does. Focus your energy by controlling and changing what you can. If I can do it, you can too.

Financial Independence doesn’t look the same for all of us. I think it’s extremely important before you embark on this path that you sit down and reflect on what it means to you. I’m going to conclude by sharing some of the goals Victoria and I share on our pursuit to FI:

  • Strive for an overall healthy lifestyle, including work-life balance, healthy eating, exercise, etc.
  • Increase and maintain our financial literacy, including managing our own finances/investments, retirement portfolio, and filing our own taxes.
  • Become financially independent of our jobs. Not so we can quit/retire necessarily. We currently love what we do; however, we do want the financial freedom (savings) to decide whether or not we work and under what conditions. Our goal is to earn/save (through employment and investment income) 40x our annual spending by 2035; furthermore, we need to have roughly 40% of that savings accessible prior to the age of 59 ½.
  • Fund our (future) kids higher education, providing them the opportunity to graduate debt-free.

In the next week we will be writing a post discussing the importance of creating an Investor Policy Statement (Written Financial Plan). JJ and I will be sharing our own written plans with you in that post, which will include not only our goals, but also our investing philosophy and steps we plan to take to achieve those goals.

{Reader Questions} What does Financial Independence mean or look like to you? If this path interests you, where do you stand now? What steps are you taking to move toward FI?