Freed by 50

What a crazy and productive year 2019 was!  If anyone were to look back at the money we laid out on home improvements and repairs, they would balk, saying we’re spending far too much and saving far too little.  Having laid out roughly $61,200 in home improvements and repairs in one year, I’d love to agree.  But on the flip side, I managed to stash almost an equal amount of money into retirement and savings accounts, shoring up our emergency fund, maxing our 401k, shaving four years and $98k in interest off our mortgage, and saving a significant portion of the money for our final home improvement/repair project.

Here at the beginning of 2020, I’m standing on the cusp of uncharted territory.  I have but one debt left to pay.  I have a generous income surplus.  I have covered all of the emergency bases.  I’ve lowered my expenses without reducing my quality of life.  I have one major project left to do.  My wife and I have had all of the conversations about our future and we are on the same page.  This is the first year I feel like we’re moving beyond the basics of personal finance and into the more advanced levels.

I need to preface the rest of this article with a statement.  In many cases, the amounts of money I’m talking about from here on out seem absurd to me.  It was only six short years ago that my wife and I were terrified of running the lights in more than one room at a time, and had to scrape together cash to pay our $700 oil bill.  We had to finance our $4500 boiler when it died because we just couldn’t get that kind of money together after buying our house.  I continue to struggle owning up to our financial and career successes as I’m a humble person by nature.  If you read this and think that it’s absurd please look back at where I was just ten years ago and consider how momentous this feels now (and how much farther I still have to go).

Minor Goals for 2020

1- Fully Fund our kitchen remodel: I am fully aware that kitchen remodels are bougie and that the personal finance community sees this kind of renovation as unnecessary, or something that can be done with Ikea cabinets and Home Depot appliances by your average DIYer in a weekend.  If my plans for the next 10 or more years included moving or renting out my house, I may be able to stomach a budget DIY kitchen.  As it stands, my kitchen cabinets are falling apart.  They were low end when the previous owners installed them, and they’re downright dangerous now.  Each day one doesn’t fall off the wall is a miracle.  My counter tops are awful and impossible to level (I have up to 1″ blocks of wood getting them as close to level as possible).  I’ve already had one appliance fail and one is on the verge of failure.  Finally, the floor plan is outdated and doesn’t properly use the space.  We are expecting this project to cost between $40,000 and $55,000 and have budgeted in kind.  I dread this project almost as much as I dread waking up in the night to the sound of my dishes exploding on the floor when a cabinet lets go.  This is a minor goal because 3/4 of it is already saved, and it’s on autopilot to be fully funded in February.

2- Investigate feasibility of using the back door Roth method: Long have I read about back door Roth’s, and long have I considered them to be annoyingly complicated.  Now I find myself obsessed with them and the possibility of saving a lot of future tax money.  In my case, I need to find out if I can roll my IRA into my 401k in order to start this process.

3- Grow a lettuce and tomato garden: No foods are more wasted in my house than lettuce and tomato.  We buy them with great intentions, and by the time we get around to eating our tomatoes, they’re rotten.  As for lettuce, we used to eat Romaine primarily, but every time we buy the stuff, it’s either throw it out or risk e.coli.  It’s easy enough to grow our own, so I’d like to start this year.

Major Goals for 2020

1- Hit the mortgage hard: One of my major goals for 2019 was to pay down my mortgage to $350k and I decided to forego that goal in favor of refinancing.  Now I’ll hit $350k with regular payments later this year.  Our new goal is to spend the next three years aggressively reducing our mortgage.  I have earmarked 100% of our ESPP (employee stock purchase plan) money to be sent to the mortgage in a lump sum in August.

Why August?  Three reasons: First, August is when I receive my second of two ESPP payouts of the year, the first time being February.  Second, sitting on my first ESPP payout in February will give me the opportunity to back up any budget overruns my kitchen project may incur.  Third, thanks to the magic of math, somehow paying one lump sum to the mortgage every year pays the mortgage off faster than breaking that sum of money into smaller payments.  It’s counter intuitive, but I keep running the numbers and that continues to be the result.

This will amount to roughly $28,000 in additional mortgage payments for 2020.  If I can keep this up for three years, in August of 2023 my mortgage will be $199k and I’ll have taken seven years off of the loan, putting us where we’d be in 2030 without additional payments.  In the event I can keep this up beyond three years, we’d pay off our 20 year mortgage in seven years.

2- Invest 90% of surplus income in the market: Whether it’s through the back door Roth mentioned above or contributing to our individual investment account, with our emergency funds fully stacked and our home improvements fully budgeted, it’s time to expand our post tax investment portfolio.  In 2019, I quietly funneled most of my tech blog earnings into an index fund (VTI), amounting to $2000 of “free” money invested.  This year I’m expecting to significantly expand that number.  I’ll most likely be investing $50-100k in the market over the next twelve months.  The current plan is to put 100% of it into VTI, which is a total market index.

The other 10% of any surplus income will go towards parties, vacation, frivolous purchases, and probably sunk into my new (old) truck.  You have to remember to have fun sometimes or what’s the point?

Wrap Up

Given these lofty goals for 2020, my biggest concern is my complete lack of patience.  Although I get two paychecks a month, two bonus payments a year, one website check a month, two ESPP payouts a year, and four RSU distributions a year to keep things moving, I suffer through the in-between times.  I’ll routinely pour over numbers and continue to try to find a new area to focus on.  With the mortgage refi in place, and very few places left to trim financial fat, I’m going to have to rely heavily on my other hobbies to keep me busy.  This is difficult with two little kids begging to be entertained for 12 hours a day.

I’ve also begrudgingly started tracking net worth again.  So far I have two data points, one from July 2019 and one from today (1/15/20).  It shows a healthy increase in net worth of $113k in six months, which is crazy, but I’ll need a lot more data to see if there’s a trend.  I’m going to start plotting my net worth on the 15th of every month, so hopefully that’s not depressing.