Each month I will post an update on my finances to both give you, the reader, some insight into my situation and to give me markers of my progress on my financial journey. My updates consist of two parts:
- Financial Progress Table – Tracks joint net worth progress.
- Spending Table – Compares monthly spending to an average (for us) budget, keeping us accountable for additional expenses. I will also include my personal discretionary budget as well; I will not include my spouse’s discretionary spending, which I do not see.
Each net worth goal in the Financial Progress table is broken down into undisclosed units of money. Our goal has been to hit “Financial Freedom.” This means:
- A retirement account that can support us when my husband hits 65
- Two college savings funds funded for four years of in-state public university tuition, room, and board
- An emergency fund for six or more months of living expenses
- Sufficient liquidity for my husband and/or I to make a career change with one to two years’ runway
- A mortgage less than two times our combined gross salaries without bonuses or equity.
Well, guess what? We hit Financial Freedom this month. Woohoo!
Now, even though I expect our net worth to gradually decline over the next few months, I’m going to switch us over to our next goal: “Financial Equilibrium”. By the time we hit this, we’ll be roughly at a 4% withdrawal rate for financial independence, more or less.
Note that as we track for our new goal, we’re going to switch over to a new unit measurement (confusing, I know). New Units = Old Units x 0.25. Now on with our new progress tracker:
We’ve created a joint budget which represents the average amount we can expect to spend each month. This is average amount we need to comfortably live in case of a job loss, emergency, etc. I expect to frequently mostly keep in line with our budget when amortized over the year, even though amounts may vary from month to month.
For privacy reasons, there are two things I do not include in our joint spending updates: our monthly mortgage and charitable donations (pegged at 10% of our net income).
Here is my own personal discretionary spending for the month. I try to spend $600 or less each month for my “fun money” since that’s the allowance that’s apportioned to me and my husband.
We hit our Financial Freedom (inflection) point! This required a little optimistic accounting; in particular I am including the value of my exercised equity based on the stock’s current FMV (“fair market value”). But I feel comfortable with that.
Looking at the markers for “Financial Equilibrium” (which is more or less around 4% withdrawal rate), we are such a long ways away. All the financial calculators say around 6-7 years assuming healthy stock market returns and my old income level. I wish I could come up with a milestone that’s a little… closer?
In other news, I quit my job this month, so I’m expecting these numbers to degrade a bit over the next while. It was the right decision though. My stress levels are about 20% of what they were. I’m a little antsy about career and money things, I’ll admit, but I don’t feel like I’m about to have a heart attack every other day like I did while I was working. My energy levels have taken a hit– I was clearly running on adrenaline and office candy. It’ll take a while, but I’m feeling pretty confident that I’ll land back on my feet.
How were your finances in July? How do you muster up motivation when there isn’t a financial milestone coming up soon?