[Editor’s Note: This is an independent post written by Jack]
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.
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?