Hristo's FI Journal

[Hristo Botev]

Hello all; I'm happy to be here. This is a great community you all have created.

I'm a 40-year-old male, happily married (my wife is 39), and we have 2 kids in Catholic school. My wife and I both work full time, and we are fortunate to have jobs that both pay well and that we enjoy doing. We live in a 3-bedroom townhouse (recently downsized from a 5-BR ranch on an acre of land) in an intown neighborhood in a large city in the South (US); our house is biking distance to my work and the kids' school. My wife and I began our FI journey towards the end of 2015, due to exposure to MMM, and although we've made some serious missteps along the way, we have managed to finish paying off 6-figure student loan debt, a second mortgage, a personal loan, and a car loan (all incurred during our pre-enlightenment days, of course). So we are now blissfully debt free, except for the (now much cheaper) mortgage, and we are sitting at about $460,000 net worth, or $283,000 not counting home equity--most of which is in tax-advantaged retirement accounts. Nevertheless, we spend way too much, and looking back over the last two and a half years the best we've ever done with respect to savings rate (not counting months when I received bonuses) is one month at 50.24%, with the average closer to 30%. So the goal of this journal is to keep me on track and honest by inputting monthly savings rate, spending, and net worth numbers, as my family works towards FI.

[Frugalchicos]

Welcome and good job fixing past "mistakes"!

What is your goal in regards to NW and plans in life?

[prognastat]

Congrats, sounds like you made some great choices in downsizing and moving to something within biking distance of your two most travelled to locations. Great work. At 50% savings in the best month I'm sure there is still some room to go, but it sounds like you've really been working on making improvements.

Are you tracking all your spending in depth either manually or through a tool like mint/personal capital?

[Jason]

Factoring in missteps and two kids, which I am assuming are not the same thing, very impressive.

[Hristo Botev]

Thanks Frugalchicos! And thanks also for the question.

"NW" means no work? Until very recently I spent a lot of time thinking about what I'd do upon becoming FI, as until a few months ago I worked at a large, high pressure professional firm, and even though I liked the work I was doing and the people I was doing it with, and even though I had managed to find a way to do the work while still being an involved husband and father, I knew that long term it wouldn't work because as I advanced the demands on my time would become too much. So I left that firm and joined a smaller, lower pressure firm where I have more entrepreneurial opportunities, and more opportunities to really custom tailor my professional practice as I see fit. I was able to make this move thanks to the smart financial decisions (inspired by MMM and ERE) my wife and I have made over the past 2.5 years, which has allowed for me to take on a job with slightly more entrepreneurial risk and less guaranteed income. So even though we are not FI, the mere fact that we are closer to FI allows for flexibility that isn't there when you're living a high income/high expenses lifestyle. All that is to say that my wife and I like our city/neighborhood and our jobs, and we love where are our kids are for school. So regardless of achieving FI we don't plan on stopping what we're doing likely until both our kids have graduated high school and moved out of the house. What's more likely is that we will just change the way we do what we do upon achieving FI (fewer hours, more selective about which clients I work with and matters I take on, take on interesting clients/matters regardless of ability to pay, more time spent pursuing interests outside of work and family, family trips, etc.). After our kids have both left the house I suspect we might change the way we do what we do more drastically, but honestly I'm fortunate to have a job that I can scale up or down to suit my wishes, and I can't really imagine not continuing to actively participate in my profession in some capacity until I can no longer do it competently. So in many ways, thanks to the recent job change (and the lifestyle downsizing that we did to accommodate the job change--e.g., the move to the townhouse), I feel as if I'm already living the life I aspire to live upon achieving FI.

[Hristo Botev]

Thanks prognastat! When I was in college in the late 90s I took what I thought was a throwaway summer course to get an A, Environmental Psychology, which had to do with understanding why we treat our natural environment the way we do (though a lot of confused education majors signed up for the course because they thought it had something to do with how teachers can create the best learning environment for their students). The class had nothing to do with my major, but the summer school elective pickings were slim and I'd heard it was an easy class. It turned out to be the most impactful class I took in college, due in part to the fact that Your Money or Your Life was required reading, and it was also required that we do the 9 steps in that book. Well, it was a hell of a lot easier to "make peace with my past" (Step 1) when I was 19/20 than it is now that I am 40, with a decade (I joined my profession late) of large paychecks behind me and not a whole lot to show for it in the bank (sigh). But I can nevertheless appreciate the serendipity of being exposed to FIRE/ERE principles through Your Money or Your Life so early in life, so that when I came across those same principles over 15 years later through MMM, they resonated with me so strongly. So although I've got some work to do to truly make peace with the wasteful spending and needless consumption of my past, I'm very much looking forward to making better choices going forward.

As for tracking spending, my wife enters all of it diligently into a Google Sheets document (and she has resisted my attempts in the past to use some sort of resource that will do it automatically). I manually track net worth and savings rate in a separate Google Sheets document.

[prognastat]

That's great that they were offering that kind of information in a college class. Don't hear that too often.

As for tracking, the most important thing is that you're doing it in some way as it's the only way to find out where you can cut spending. Once you know what you're spending on, how often and how much you can start looking at which things aren't adding enough to your life to justify continuing spending on.

[Hristo Botev]

Welcome and good job fixing past "mistakes"!

What is your goal in regards to NW and plans in life?

I'm an idiot; just realized NW means net worth, not "no work." Ha! I think my net worth goal is enough to cover about $5,800/month in passive income, which I recognize is a helluva lot but would cover (1) our mortgage payments, HOA, and utilities; (2) the kids' Catholic school tuition (admittedly not necessary but nevertheless non-negotiable) and various, expensive (also admittedly not necessary) sports and other after school activities; as well as (3) groceries/restaurants, term life insurance payments, cell phones, dog, gifts/travel, internet, and car maintenance/insurance. And I think that means that my goal net worth, excluding home equity and money saved in my kids' 529 college savings accounts, is $1,740,000, which I hope to hit right around the time I hit 46 in 2024. And my goal total net worth number, including home equity and kids' 529 plans, is probably $2.1 million.

[prognastat]

Just wondering, but are you planning on keeping your life insurance after achieving FI? I mean the idea of life insurance is to help your partner survive without your income. This shouldn't be necessary once FI has been achieved.

[Hristo Botev]

Just wondering, but are you planning on keeping your life insurance after achieving FI? I mean the idea of life insurance is to help your partner survive without your income. This shouldn't be necessary once FI has been achieved.

I agree, but most likely I will keep it as it is relatively cheap ($59/month) and by the time I reach FI I will only have about 5 more years left on the 20-year term. And that additional 5 years will be helpful to get us "more" FI, especially given the uncertainty of paying for college for our kids.

[suomalainen]

6-figure student loan debt

a large, high pressure professional firm...joined a smaller, lower pressure firm where I have more entrepreneurial opportunities...fewer hours, more selective about which clients I work with and matters I take on, take on interesting clients/matters regardless of ability to pay...

Welcome from another big-law refugee. I went in-house tho. Not an entrepreneurial bone in my body. Hated that 6-figure law school debt. So glad it's gone!

$5,800/month....goal net worth, excluding home equity and money saved in my kids' 529 college savings accounts, is $1,740,000...

Sounds about right. But it sounds like your wife is on board, so you may be able to get it down more than you could without a spreadsheet-dork wife, but maybe not with the private school tuition. These damn kids...

[jacob]

Dumb lazy question: What's the difference between big law and in-house and [maybe] other?

[suomalainen]

Big-law is a big law firm, probably national. But let's say at least 100 lawyers in the firm with full-service practices (everything from litigation to tax to M&A to employment, etc). They typically serve big companies. And salaries are typically published and lockstep. Base is now $190k for your first year out of law school, topping out at $330k or so for 8 years out of law school. But your whole life goes to your job. Partners make $1MM-$4MM on average.

The rest of the industry is smaller or regional firms or "boutiques", as well as solo-practicioners. They typically serve smaller companies on more local or specialized matters and/or retail stuff (PI, residential real estate, wills, etc). Work-life balance is typically better (supposedly). Lower pay.

In-house means I work for 1 company as an employee and draw a salary. I don't charge by the hour unlike "outside counsel" or "external counsel" which can be either of the above. And I work 9-5, no weekends. Biglaw you work 9-7 at least, probably plus at least a few hours every weekend.

EDIT: I'm just guessing he's a lawyer based on his matters and clients language and other context clues. Sure sounds like a lawyer.

Not that there's anything wrong with that.

[Hristo Botev]

Dumb lazy question: What's the difference between big law and in-house and [maybe] other?

Generally speaking, a "big law" law firm is one that is in the top 100 or 50 or so law firms in the country in terms of total revenue generated. These are generally firms with hundreds and sometimes even thousands of attorneys, and they pay top-of-market salaries and large annual bonuses to attorneys right out of law school with the expectation that they will bill over 2,000/hrs a year. Many of these firms don't actually expect associates to last more than a couple years before moving on to go in-house (i.e., to be an attorney employed by a corporation), or to another firm, etc. "In-house" means you are an attorney employed by a corporation, and your only "client" is that corporation. As an in-house attorney you are on the cost side as opposed to the revenue side of the balance sheet. The work expectations in-house are more generally defined by the culture of the corporation you are at; as opposed to big law where regardless of how great and kind and accommodating the people are around you, the revenue model is such (hours billed = revenue) that the demands will always be that you work/bill more hours. Boutique or smaller firms can suck just as much as big law firms, but I'd think as a whole the hours expectations are generally lower, and with fewer people you have more say in what your practice looks like. The idea is that small law firms have much lower overhead expenses than big law firms, so you don't have to work as many hours at a small firm to be as profitable as you would be at a big firm. But again, the revenue model is still the same.

[Hristo Botev]

EDIT: I'm just guessing he's a lawyer based on his matters and clients language and other context clues. Sure sounds like a lawyer.

Not that there's anything wrong with that.

Ha! You got me.

[Hristo Botev]

July 2018 net worth numbers

Net worth w/o house: $285,563.28
Net worth w/ house: $461,222.93
% of $2.1m target net worth: 22%
Net worth change from last month: $7,328.21
Monthly PPI from total net worth: $1,537.41
"True" PPI (excluding house, 529 from net worth): $893.54

[Hristo Botev]

Now for the hard part.

July 2018 savings rate numbers

Total after-tax income: $14,087.69
Total expenses: $10,019.45
Surplus/profit: $4,068.24
Savings rate: 28.88%
NW needed to cover expenses: $3,005,835.00
[S]WR based on total NW: 26.07%
[S]WR based on total NW, excluding home and 529 accts: 44.85%

[Hristo Botev]

And now for the harder (and embarrassing) part. Good news is that there is a lot of room for improvement. The wife and I sat down last night and agreed upon a plan/budget to get our expenses down $3,319.60 for August, from $10,019.45 to $6,699.85. And assuming our income plays out like we think it will for August, that would mean a savings rate of over 65%, which would be a PR for us.

July 2018 expenses

mortgage, insurance, property taxes: $1,925.30
less mortgage principle: ($330.44)
health/dental/vision insurance (and wife's workplace gym membership): 431.18
HOA (water, trash, landscape, insurance, etc.) (includes an extra payment; normally $200): $400
electric: $99
gas: $37.67
my cell: $73.41 (need to get on family plan with wife; my former employer paid my cell bill but I lost that with the job change)
wife cell: $51.23
kids' tuition: $1,517.60
dog: $444.98 (boarding for a week while at the beach; need to figure out a smarter way to do vacation)
grocery/home: $1,572.66 (wtf)
restaurant: $1,106.14 (wtf)
car: $202.62
clothing: $935.85 (includes kids' uniforms for the year, but nevertheless, wtf)
entertainment: $697.05 (wtf)
gifts: $286.84
cleaning lady: $130.00 (have switched from 2x mo. to just 1x mo, and we are working on phasing this out completely)
internet: $19.99
term life insurance premium: $59.15
ATM: $165.25 (probably mostly babysitters)
Playstation Vue: $44.99 (got it for the World Cup; have already cancelled it)
wife gym: $109
me gym: $29.99 (working on cancelling it)
Spotify: $9.99 (already cancelled it)
Total: $10.019.45

[Hristo Botev]

Glorious St. Joseph,
Model of all those who are devoted to labor,
Obtain for me the grace to work conscientiously,
Putting the call of duty above my many sins;
To work with thankfulness and joy,
Considering it an honor to employ and develop,
By means of labor,
The gifts received from God;
To work with order,
Peace,
Prudence,
and patience,
Never surrending to weariness or difficulties;
To work, above all,
With purity of intention,
And with detachment from self,
Having always death before my eyes
And the account which I must render of time lost,
Of talents wasted,
Of good omitted,
Of vain complacency in success so fatal to the work of God.
All for Jesus,
All for Mary,
All after thy example,
O Patriarch Joseph.
Such shall be my motto in life and death.

[fell-like-rain]

July 2018 savings rate numbers

My reaction to that post was something like "Alright, pretty solid spending... not quite Jacob levels, but getting there. Wait, why do they need $3 million to retire if they only spend $10,000 annu- OHHHHHH!"

I imagine those mustache people would punch you in the face right about now, but I'll just say good for you for committing to cut so much from August spending- the first step, as always, is admitting you have a problem. Besides, this journal promises to be an interesting look into how the other half lives