It can be a rough awakening when you first realize that you haven’t had a great relationship with money most of your life. You might be deep in debt and adding it all up in a spreadsheet might reveal a small or even negative net worth, with little equity or assets to show for. The reality of it can make you want to puke.
Shit, I know how that feels because that was me seven years ago: lots of red ink and very little black. I wasn’t broke back then, but I was living paycheck to paycheck and weeks away from a financial collapse. When I first put all my finances in front of me, there were many money blunders and very few wins to show for it.
Fast forward to 2017 and I have a very different story to tell. I no longer see the red ink. Black and green are now our most used colors! However, it took a lot of effort, discipline and a great partner to get to this point. A little reflection shows that just one year of managing money wisely can make a huge difference in anyone’s finances. Money didn’t fail us last year because we no longer suck at money.
At any point in our lives, we have a choice to make: we can choose to follow the herd and live a lifestyle fueled by debt, or we can pursue a lifestyle fueled by financial independence, which is the least traveled path. We chose to walk the least traveled path that is leading us to a financially free and simple, happy life.
Since we understand the meaning of being financially independent and how that translates to having our time back, the choice is easy for us to make. We have our investing strategy mostly on autopilot and based on an asset allocation that meets our needs. Money goes in and out in different ways, and last year it came to us in unexpected ways. Now, let’s see what kind of moves we made in 2016 to ensure we kept on track to achieve FIRE.
1. Found money in the trash
I know, I know, you didn’t see that coming! No, we didn’t go around trash-picking for hard cash. That wouldn’t be a good use of our time, plus who literally throws away cash anyway? Well, unless they forget it on a meal tray! After enjoying a packed lunch in my building’s cafeteria, I went to trash my avocado peel and as I peeked into the trash, there they were: three $1 bills waiting for me to pull them and keep them in circulation. At first I thought I was on hidden camera, but no, these dollars were abandoned by a forgetful owner. We parted ways a few weeks later as they ended up going as tip to a waitress at our favorite Vegan buffet restaurant.
2. Maxed out our 401(k)s
Yes, we did it again folks. We were able to front-load our accounts last year. A good lesson we learned from the wealthy is that minimizing taxes should be a priority to attain wealth. It’s simple: the less taxes we pay upfront, the longer our investments get to grow.
3. Maxed out our Roth IRAs
We didn’t have Roth accounts prior to last year because we wanted to build up our taxable accounts, given that our journey to retirement was less than a decade away. However, had we known years ago that we could withdraw our contributions at any time without penalty, we probably would have started investing earlier through this vehicle. So last year we opened Roths and were able to contribute for 2015 and 2016 since we did it before the tax deadline.
4. Met our dividend goal
By the end of the year we met our dividend goal of $17,000 with a total of $18,130. Of course, most of these dividends are coming from our retirement accounts, which means we won’t be able to touch them until later in retirement, but a dividend is a dividend no matter where it comes from. 🙂
5. Invested a nice chunk of dinero in our brokerage accounts
Since we are close to early retirement, we invested new money in a high dividend yield ETF in our taxable account. This money will help us fund the first five years of early retirement. The goal is to cash out the dividends and take some capital gains while in retirement to help offset our living expenses.
6. Discovered trash a la carte
Trash a la carte…it feels that any word gets fancy by adding a la carte. We found more money in the trash, trash category that is, by doing the trash a la carte. Last year, we found out that we could pay $4 per trash bin instead of signing up for the quarterly unlimited trash plan with a weekly pick up. We recycle much of our waste and don’t have a lot of trash, so we only fill up one trash bin per month in the colder months. We plan to have it collected more frequently in the summer to avoid breeding maggots though. Given that recycling pick is free every week, we’re bathing in extra trash dough. 🙂 This will save us at least $120 a year. Drop by drop the water bucket fills (investment accounts).
7. Accumulated some serious points in travel hacking
Mrs. Enchumbao is doing an awesome job getting us points for travel hacking. Last year we accumulated 315,000 points between airline and hotel credit card sign up bonuses, and already used some of them to save on hotels. We were able to take advantage of three free hotel stays with points last year for a total of six nights. That’s an estimated value of $1,025 for those three stays.
8. Earned some dough by trying out new banks
I like it when banks make nice offers to try out their services. We ended signing up for four accounts last year and made $1,200 in bonuses. That’s a nice chunk of money considering that it took us less than 15 minutes to sign up online and maybe another half hour to close the account, if we had to walk into a branch. We ended up keeping one account, since it was convenient to deposit cash and their branches are all over the U.S.
Some people like to say that el dinero esta hecho (money is already made). Well in this case, yes, that money was already printed and waiting, we just had to hustle a tiny bit to get it. Now that money is invested in a high-dividend yield fund and it’s paying us 3% annually in dividends while growing at a nice rate, since the fund is up by 20% from a year ago. Caching, caching…
9. Increased our Freedom Fund by 24%
Wow, we still can’t believe we got that far. We almost reached financial independence last year and way ahead of schedule. It feels amazing, but then again, this is just the result of a very simple formula: spend less and invest the surplus. Just because money comes our way doesn’t mean that we need to spend it. It starts with cutting an unnecessary expense here and there, and then it’s just a matter of letting the money grow on its own.
10. Did some tax-loss harvesting
Tax-loss harvesting is still a new concept for us. We tried it last year and took a long-term capital loss of $1,800 by exchanging an international fund to a similar fund. We’ll be able to use that number to offset other income gains.
11. Took advantages of other cash rebates
I suck at doing all the necessary steps to save more by spending less when shopping. That’s where Mrs. Enchumbao comes in as she knows what links to hit to save us money even before we enter a website. Last year we got $53 in cash back from Ebates. Hey, it’s more than the trash money I found. And no one looks at you funny for that the way they would for sticking your hand in the trash bin. 🙂
12. Won some class action lawsuits. Who knew?
There’s nothing more pleasant than getting checks in the mail for lawsuits that you won without taking an active role in it. When I moved to Pennsylvania back in 2005, I needed to find a quick job to pay the bills, while looking for a full-time permanent position. So I applied to a few retailers ahead of the Christmas season and got a part-time gig at Sam’s Club.
I’m not ashamed of applying for lower positions when push comes to shove. After all, the money that you don’t make today, you won’t make tomorrow. Tomorrow’s money is new money.
Therefore, I took the job at the customer service desk, even though my resume screamed: “overqualified!!! Don’t hire this guy, he’ll be leaving as soon as the next opportunity comes.” My sales pitch to discount my resume qualifications was that I was inspired by the entrepreneurship of Sam Walton and wanted to grow within the company. I basically gave the hiring manager what she wanted to hear to get the job.
To make a long story short, I kept the job for less than a year until I secured my current job. Somehow though, there was an overtime hours/no breaks lawsuit from Pennsylvania against the retailer and a check showed up a few days before last Christmas for $630.65! Greeeaaat! That was a nice unexpected gift that helped us reach our FI goal.
We also got a $23.21 check for a Consumer Finance Protection Bureau class action lawsuit. I forget who was sued, the important thing is that we got paid! I think it was either a major wireless carrier or a mortgage company. I’m confused because we’ve gotten settlements from both. Hopefully the new administration keeps the CFPB in place as it’s a major win for consumers. (March 1, 2017 Update: We uncovered the wireless carrier check under another category. It was for $38.16. This brings our total rewards to $692.02.)
13. Spent too much on alcohol
We spent more than we anticipated in alcohol last year. It was just a little over than what we spend the year before, but the fact that we intended to spend less and failed makes us upset. A total of $1,726 was spent on alcohol. That was too much according to our expectations. This year we have a challenge of no alcohol. So far, so good!
Credit card late fee
We got charged a credit card late fee and interest charge because Mrs. Enchumbao missed hitting the submit button after scheduling a payment. Remember that the playing the credit card rewards game can be dangerous. That’s why I let her handle it. Anyway, we called, explained the situation, asked for reimbursement and they waived the fees as a one-time courtesy. Ask and you shall receive!
Note on late payments: late payments are only reported to the credit bureaus when they’re 30 days or longer past due. So the fact that the payment got there a few days later didn’t affect our credit scores.
Library late fee
Our library was closed the day after a book was due. Since you have all day to return it, basically until they open the next day, we chose to return it the night before it opened. They tried to charge a late fee, but waived it after I explained my logic. I know it sounds silly to try to get that waived, but we don’t like to be charged unfairly. Ok, we don’t like to pay any late fees, period!
A 3-step action plan you can implement today!
We hope you learn something from our successes and our mistakes. If you have more money flaws than strengths, here’s a quick plan you can put in action today to get your finances in better order.
- Track your expenses. I can’t emphasize this enough. Tracking your expenses is vital to improving your finances. How will you able to manage your money if you don’t know where you are heading? It will make you alert of any wasteful spending in your life. Record every dollar that comes in and out of your accounts. Mint or Personal Capital are free online software tools that are easy to use and easily automated once you link your financial accounts.
- Define what makes you truly happy. Analyze what has brought happiness to your life. You’ll be amazed to realize that what brings real meaning to your life doesn’t require much spending.
- Take action based on your findings. Cut wasteful spending, optimize your lifestyle and go in full pursuit of your true happiness.
Considering that our only failure was that we were nice and tipsy at times, that was a hell of a good year, financially. I guess if we were to grade ourselves, we could give us a 12 out of 13 or A-. Wow, that sounds like the grading of a tough and heartless college professor, considering all the heavy duty goals we accomplished. Let’s give us an A! Yeah! We couldn’t have achieved most of these successes without putting in much required effort and that effort is paying off beautifully.
You probably know how much I love quotes, so I’d like to end with the following motivating quote from the real Wolf of Wall Street: “The only thing standing between you and your goal is the bullshit story you keep telling yourself as to why you can’t achieve it.” ― Jordan Belfort
What financial goals did you meet last year? What were your setbacks? Are you happy with the outcome overall?
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