Who are Mr. and Mrs. Barracuda?

Mr. Barracuda and I, Mrs. Barracuda (Mr. and Mrs. B for short) would like to welcome you to our blog – insight into our penultimate goal: financial independence/early retirement (aka “F*ck you money”).

To backtrack (way back), when Mr. B was in college, a spark was ignighted after reading “Rich Dad Poor Dad” and he began to think of money differently – not as a way to buy things, but as a means to buy freedom. In another State, two years earlier, Mrs. B, also in college, was opening a credit card that earned dollars towards a 529 college savings account for children that wouldn’t exist for another decade…

Fast forward many moons and these two star crossed soul mates ultimately married and began a journey focused on the pursuit of happiness and living on their own terms, all before the age of 40.

We’ve chosen to use pseudonyms at this point, but may in the future reveal more about ourselves. For now, this blog will anonymously document our journey and hopefully give readers a better understanding of how and why we are doing this…

START HERE!

Advertisements
Posted in Financial Nuts and Bolts | Tagged , , , , , , , | Leave a comment

Just in Time For the Holidays…

Mrs. B here, and let me just start off by saying, I LOVE giving presents. I love figuring out what my friends and families might enjoy, making or finding the item(s), and then more importantly, watching their faces when they open said gift. I sometimes can’t even contain myself when I have the gift in my possession – sometimes giving hints to my giftee about what they are about to receive. I don’t know if it’s the thrill of the hunt, or the genuine look of gratefulness that I enjoy, but whatever it is, any holiday in which a present is expected (even if it’s not one we personally celebrate), I adore!

So, you might be asking yourself, how does one stay on track for early retirement AND still give away tons of gifts? In my case, it requires a combination of forethought, personal skill/craft and of course thriftiness in either situation. Let’s begin with the forethought portion of this gifting dilemma.

Now some people on the FI journey believe in minimalism, and that’s great. It’s just not how me and Mr. B prefer to live. I like stuff. Lots of it. And that’s fine as long as its always kept neat and organized and doesn’t cost an arm and a leg. In an upstairs guest bedroom exists a special space in our house known as the “gift closet.” While this magical space may sound strange to you, it’s something my mother has always done, and it’s pretty darn ingenious if you have the room…

Here’s how it works…The “gift closet” is a filled with items that might come in handy somewhere down the line when I need a present in a pinch. That includes hostess gifts, housewarming presents, children’s holiday/birthday gifts, engagement or baby shower presents, etc. I accumulate these goodies over time by going to garage and tag sales, and looking for brand new items (in the original box or with the tags still on it) that might be useful as a gift. Other times, when big chains like Target or Walmart are trying to move seasonal items at the end of their peak, they put things on super clearance and I buy them up for a fraction of the cost for use the following year. In some instances, I find new items being discarded on the side of the road and those too, if appropriate, go into the gift closet. Here are a few items in the gift closet currently:

  • glass/ceramic platters which are great as hostess gifts. I simply add a homemade dessert or store bought doughnut holes and wrap it in cellophane for a nice presentation;
  • event specific picture frames (like wedding bells, baby blocks, etc.). which are perfect for when we CAN’T attend an bridal or baby shower and still want to give a token gift;
  • wine glasses, which I like for housewarming parties – I use acid etching cream and monogram the new homeowner’s initials on it (more on this in the next section).
  • “Our Family Tree,” which is a beautiful leather bound book I found on clearance at Barnes & Noble for $3.50/piece. I bought 5 of them and when I want an add on wedding gift or we can’t attend, I have the recipient’s information on the inside cover filled in by a calligrapher. The book, which can be purchased at Walmart by clicking here, is still a steal at $7.57;
  • small trinkets like candles, hand mirrors, etc.; and of course
  • children’s books, boxed toys, baby clothes, and stickers (which I also often use for rewards with our toddler).

When the “gift closet” just doesn’t have what I need, I use personal ingenuity and my ability to create as the best form of gift giving. I consider myself quite crafty and during the holidays, I like to challenge my talents in the search of unique gifts. In recent years, some of the projects I’ve taken on included knitting scarves, sewing a travel jewelry case for a girlfriend who loves baubles, acid-etching glassware and pyrex, upcycling vintage jewelry into new beaded necklaces, etc. I also have a group of friends that do a cookie swap during the holidays and if you are a great baker (I’m just eh), that is another perfect example of gift creating as opposed to gift purchasing. Here are a few photos of my final products:

(To make these necklaces, I used vintage brooches as the centerpieces and reclaimed glass beads that I restrung in rows of three)

(For this project, I traced a saying – in this case, Grammy’s Kitchen – onto dollar store contact paper in a lovely foral pattern. Then I cut out the letters with an exacto knife, paint on the acid – I use Armour Etch Acid, available on Amazon – let sit for an hour and then peel/wipe away the remaining acid. And, wellah! you have a permanently etched piece of glass or pyrex!) As I mentioned above, I’ve also done with with wine glasses and monograms/initials.  

(Here is a photo of my zebra knitted scarf, and sewn travel jewelry case made from vintage barkcloth that I always have one hand. For the free jewelry case pattern, click here.)

The internet and YouTube are wonderful in terms of finding free patterns and exacting how-tos for various art projects, and I often re-read and re-watch them a number of times before I attempt a project. Now, that being said, not every project comes out as well as the ones I note above. I’ve had some failed experiments too. But that’s the great thing about creating a gift as opposed to just going out and spending a fortune on designer perfume or forking over a gift card for later use… A giftee will always appreciate the love and time you put into the effort no matter how many imperfecions it has. And, as I mentioned before, seeing the look on my friends and family’s faces when they open my well thought out, and/or well crafted item, makes my heart swell and gets me excited for holidays to come.

Are you crafty or thrifty during the holidays? How do you manage your budget and your holiday shopping list? Feel free to let me know in the comments!

 

 

Posted in Crafty Pants | Tagged , , , , , , , , , , , , , , , , , , , , | Leave a comment

Travel Hacking For The Every Man

Being that Mr. B and I consider ourselves beginners in all of this – even though we have a quickly approaching financial independence (FI) date and a nice war chest – we haven’t really delved into some of the more “extreme” tactics used in order to get to FI faster.  I mean, we do the typical stuff like couponing, upcycling and re-negotiating our contracts/monthly bills, but there is a whole other world out there related to FIers who live off their dividends and travel the world for free based on “travel hacking.” From what I understand, this requires a great deal of time and effort, opening credit cards that offer free miles/hotel points, spending just the right amount on each card to qualify, and cancelling at the right time, etc. That’s a bit too time consuming for me and Mr. B based on our current work loads and family obligations. So… I’m going to tell you about how our latest vacation cost us just a fraction of the full value – I’ll call it travel hacking for the every man!

To preface, our plans for most recent trip came about in honor of the great Gene Wilder’s passing. We decided it was the perfect time to introduce our toddler (AKA the Nugget) to Willie Wonka and the Chocolate Factory, a movie we had both cherished as kids. After watching the entire movie (and actually sitting still for almost all of it), and several requests the next day for YouTube videos of Varuka Salt singing “I Want It Now,” Mr. B and I decided we should take the rugrat on a weekend getaway to Hershey Park in Pennsylvania. We’ve been telling her it’s called Willie Wonka’s Hershey Park so you can imagine how excited she must be.

goldenticket

Well, being that its already September, there aren’t very many days left in the amusement park season, so we opted for the last Sunday of the month in hopes of a lesser crowd. We started out by looking up hotels. We use hotels.com because they have pretty cheap rates, great customer service, and for every 10 nights you stay, you get one night free up to a certain dollar amount. Since we will be driving from NY to PA, we will have our car and aren’t locked in to staying at an overpriced hotel within walking distance to the park. We decided on a very nice 3 star chain hotel we are familiar with, with a queen bed and sleeper sofa for the Nugget (Baby B is staying with Grammy B as there would be nothing fun on this trip for her). The cost of the room is just $75. An already great price. But, on top of that, I had previously been given a credit of $40 from Hotels.com for a stay in which we requested a king bed and were given two doubles – I told you they had great customer service! So, the new cost of our room was just $35 and it includes free parking, free wifi and even better, free breakfast.. who doesn’t love waffles???

On to the tickets. So, for a family of two adults and one nugget (who gets in for free), with tickets costing $64.95, the admission alone would have been $129.95. That’s a lot of money! Now I know that AAA offers a discount of around $8 off per ticket, but that’s still $120+ for just tickets. Here is where a little know-how helped to save us a ton… The last time we took a family vacation, we went to Dutch Wonderland (also in PA) and learned from a very damp afternoon that the park offers entrants rain date or “do-over” tickets if it rains for more than an hour on the day you attend. What we discovered was that since many people drive far distances to get to these parks and the rain date tickets would otherwise go unused, a secondary market developed for the resale of these do-over tickets. So, I went onto our local Facebook buy sell swap page and asked if anyone had any tickets they were looking to unload (for a deep discount of course), and low and behold, a woman responded that she had two rain date tickets she did not intend to use. I purchased these tickets from her for $40 or $20/ticket – a savings of nearly 70%!!!

A friend and colleague of mine who I share a lot of FI tidbits with had recently taken her family to Hershey Park and I asked her if she had any tips for a cheap/successful trip. She told me that she had purchased her tickets full price at the gate due to an unforeseen situation and it included, at no extra charge, souvenir cups which normally cost $9/cup and gives you 99¢ refills for your entire stay at the park. I asked her if she wouldn’t mind lending me one cup, which I would gladly return cleaned, and she was more than happy to do so. Water and ice are free at the park, but having some lemonade or soda to share after all that walking around is totally worth the 99¢.

souvenir-cups

Now on to another typical expense… food. I already told you that our hotel gives us free breakfast on Monday, but we still need to account for Sunday’s breakfast, lunch and dinner. Since we are driving up and going to the park the same day, we will east breakfast at home before we go and will pack the car with a cooler for snacks, drinks and lunch. Typically I stick with peanut butter & jelly and turkey/cheese sandwiches as they are always a fan favorite. What we’ve discovered though in our never ending search for easy savings, is that 1) road side eateries like McDonalds and Wendy’s don’t allow outside food in, 2) eating in your car with a toddler is a recipe for disaster and requires a change of clothes, and 3) large rest stops like the ones dotting I-95, make it hard to resist buying treats from the likes of Carvel and Starbucks. What we’ve found as a better, cheaper and even cleaner option, is a stop at a nice chain hotel. These large hotels always have really nice lobbies with ample room to spread out and eat, clean bathrooms with no lines, and sometimes even free coffee. Now, you might be thinking… that stuff is only for the guests. But, I can tell you that when we visit a chain we like, we look to stay in them in the future because we know the amenities are on point. That leaves just dinner (and park snacks) to be accounted for: I bought 3 Hershey chocolate bars for .89¢ a piece before we left so we can each have a sweet treat and the nugget doesn’t know it isn’t from the gift shop, and we anticipate buying some overpriced ice cream and/or popcorn during the course of the day ($15 estimate).  As for dinner, almost all pizza restaurants have the ability to deliver a pizza pie to your hotel and it’s always a good option. I’ve also found that many of the magazine and flyers in the hotel’s lobby will include coupons for said Pizza places which is an easy win. I’ll estimate a pizza with tip will cost another $20.

To review, what could have been a very costly trip, will actually cost us around $113.66 plus about $50 in gas and tolls. That brings this amazing weekend getaway for 3 to just under $170. I’d say that’s a pretty sweet deal.

Sound off below and let me know how you save while traveling and if you’ve ever employed any of my above referenced travel hacks!

Posted in Cheap Eats, Every Man Travel Hacking, Not So Extreme Couponing | Tagged , , , , , , , , , , , , , , , , , , , , | Leave a comment

An Ode to The Crockpot

Often times when Mr. B and I are looking for financial independence inspiration, we try and make some of our frugality and savings into a kind of mental game. For example, I try and make “fancy” dinners for our family, for under a certain dollar amount (*by fancy, I mean an entree that actually requires a pot/pan and not just something we just toss in the microwave). So, if steak or ribs are on sale, and I cook it for dinner and have enough leftovers for lunch the next day, I divide the total cost of the evening’s ingredients (minus the staples I always have on hand like oil, salt, etc.) by the number of people who eat it and the number of meals it covers. I typically can make a nice home-cooked meal for less than $4 per person per meal. While I think that’s pretty good considering we eat a protein with almost every meal, I’ve recently decided to put my cheap-style gourmet cooking to the test. And, what better way to do that than to use a tried and true tool in my arsenal – ye olde crockpot – a crockpot my mother got for free for opening up a bank account back in the day when toasters and umbrellas were used as financial incentives!

I should note that I’ve always been a fan of pickling and canning excess fruits/veggies, but I never really got into cooking “slow on low”. I understand that lesser and/or tougher cuts of red meat and chicken can be made into melt-in-your-mouth goodness by using a slow cooker recipe. Now was also the perfect time to challenge myself because Mr. B’s parents were celebrating their 34th wedding anniversary and I had volunteered to make them dinner to celebrate.

So, based on the ingredients I already had in the pantry/freezer, and knowing that I had four adults and one toddler to feed (Baby B is just starting to eat oatmeal), I set out to find a tasty recipe on www.allrecipes.com. I came across a goody for honey garlic chicken which had great reviews, and I simply upped the ingredients to account for larger portions/leftovers.

garlic chicken.PNG

I used 5.5 lbs of boneless skinless chicken or about 8 thighs (@ $10.83), a cup of soy sauce (@ $2.49/bottle) , a cup of honey (@ $3.89/jar) and a cup of ketchup, 6 teaspoons of jarred minced garlic and  2 teaspoons of dried basil (all free because I always have it on hand – we buy ketchup in bulk because our toddler eats it on seemingly everything!). I also planned on making 2 lbs of pasta (@ .89¢/box) so we had something to ladle the chicken over. I put all the ingredients in the pot at 6 pm and set my alarm for midnight… Six hours on low!

When the cooking was over, our entire house smelled unbelievable. I packed everything up in pyrex and that night, Mr B., my in-laws, our toddler and I all feasted on this delicious, surprisingly simple and hearty meal. It got such rave reviews that I was asked to make it for the next family holiday gathering. After eating our hearts out, there was enough left over for both my in-laws and us to have for dinner the next day.

crockpot-dish

So how did I do in my effort to keep costs under $4 per person (my standard goal)? Well, the total cost with tax for the items I had to purchase was $20.65. Since 5 people enjoyed the meal the first night and 4 would enjoy leftovers the next day (our toddler opted for chicken nuggets with ketchup on day two), the total cost per person per meal was $2.29! Well below my normal goal!

I’m excited to try my hand at some other crock pot recipes and welcome your thoughts and comments below. What are some of your favorite sweet or savory slow on low recipes? How do you make money go farther at meal time?

Posted in Cheap Eats | Tagged , , , , , , , , , , , , , , , , , | Leave a comment

A dollar saved is a dollar earned

Hello everyone. Mrs. B here.

There are two tried and true ways one can reach financial independence:

1) increase revenue/income; and

2) reduce costs.

Mr. B and I consistently call our service providers like utility companies and insurance agents to see if there are new promotions or ways to reduce costs, but this post addresses an often forgotten part of cost reduction and that’s cost savings.

We all need stuff. Food, clothing, personal necessities, household goods, etc. It’s true that we could always cut back on buying some of these things or buy generic versions of those items, but I’m not a minimalist and I like stuff. Sometimes high end stuff. And that’s okay. I do however think it’s equally important to get the best price for the goods we are planning to buy (no matter how frivolous or absolutely necessary).

That being said, one very expensive and absolutely necessary item we buy in our house is baby formula. Ya see, in addition to our toddler, we have a new baby barracuda to feed.

We use Similac Sensitive, and while buying in the largest quanity (845 grams) is the best value ($31.99 at Babies R Us (BRU)) , I’ve employed some cost saving tactics to my most recent shopping trip at BRU.

To start, BRU was having a sale on the largest canisters – buy two and save $10, bringing down the cost to $26.99/canister. I also had $10 in BRU rewards (a program in which customers sign up for the free and earn points for each dollar spent). Lastly, I had two manufacturer’s coupons each for $5 off a container of Similac. Typically, these coupons come from Similac or Gerber, etc. directly, giving them your email so they can spam you everyday. But these specific coupons came from a fellow mom whose baby drinks Enfamil (I had coupons for that brand and won’t need to use it). We found each other on a local Facebook page where people buy, sell and swap, and traded said coupons. Win-win. I also picked up 3 gallons of BRU brand distilled water which is $.50 cheaper than the other brand they carry. The icing on the savings cake was a coupon in BRU’s circular for a free Dr. Browns bottle with cute 4th of July artwork (a $7.99 value). All told, what should have cost $81.95, came to $48.10, a 41% savings! Not a bad day’s work.

Posted in Not So Extreme Couponing | Tagged , , , , , , , , , | Leave a comment

A little on the trashy side

Hi all. Mrs. B here. This blog talks a lot about increasing revenue as a way to gain financial independence, but that may not seem possible with full time jobs that don’t offer commission or limited time. This post isn’t about working the night shift or selling your soul to make a buck. It’s about finding value in the ugly duckling, and then having the forethought to dust it off and sell it to someone who will love it.

I’ve been making a pretty good supplemental income doing just this. Most of the time I go to garage and tag sales and buy vintage designer jewelry and handbags, reselling them on an online marketplace like eBay, Etsy, or Poshmark. But ventures like that require some kind of investment, monetary or otherwise: the purchase of the item (for a low price so you can make a profit); the cost of materials for shipping; gas money for travel to the sales, and time. Time to find the sales, learn about what you plan on buying, and ultimately, time to photograph and write up your listings. So, what doesn’t require all that time and perhaps expensive effort? Garbage picking.

Now I know what you’re thinking. “I’m not touching someone else’s trash.” Well you should just toss that kind of negativity if you don’t want to work until your 67! Mr. B and I have no shame when it comes to stopping the car and picking up a potential treasure. I admit though that it took Mr. B a good long time before he was ok with this endeavor. Pride and dignity often get in the way when other people’s garbage is involved. But all that trepidation quickly went out the window for Mr. B when I sold my first piece of reclaimed junk.

So, on a recent drive home from my parent’s home 3 miles away, I saw what looked like some garden decor on the side of the road. I asked Mr. B to pull over and it turned out to be a very cool and slightly rusty weathervane. It had an Irish Setter at the top and lovely graphic letters attached to four arms. Now, most people would keep on driving, but I knew that this would be a desirable piece for someone looking for authentic shabby chic charm and not some reproduction made to look old. We packed it up in the truck and headed home.

I wire brushed it clean and adjusted the arms, making it good as new (if new were old and chippy). I took a few photos and then threw it up on a local Facebook page where people who love shabby chic items go to buy and sell. I asked $40 and quickly got a taker – a woman who loves her rescue dogs, all things vintage, and wanted to put this atop her garage. She came to my home to pick it up, we exchanged pleasantries and the deal was done. I was $40 richer, the landfill was a little smaller, I hadn’t really invested any time into the effort, and I certainly didn’t invest any money.

I urge everyone to look for value in the seemingly valueless. Remember the super cliche ageold adage: one man’s trash is another man’s treasure. Just know, unless you pick up that trash and sell it or donate it (I’ll discuss this in a later post), the treasure will end up in a landfill and no one will benefit.

Posted in A Little Bit Trashy | Tagged , , , , , , , , , , | Leave a comment

The War Chest

Oh hello, I’m glad to see your still reading. I was hoping you would continue after being bombarded with all those numbers in my previous posts. I’m still trying to remember that not everyone is a numbers/data nerd like I am but since your still here maybe I’m rubbing off on you a little? Ok well, on to the next topic…

Now that you have gotten to “know your numbers”, you’re probably wondering what to do next. I’ll tell you how Mrs. B and I started out on our financial journey together. When we were married in 2011, I’ll admit we actually didn’t have this whole grand financial independence plan put together or figured out. We were both natural savers and knew we wanted to grow our wealth so the first thing we did was open a joint savings account. This was to be the cash account that we would always maintain for emergencies. We never wanted to be in a situation where an emergency like a large medical bill or home repair would hinder our wealth building process. This is where I recommend you start. Don’t worry about investing in stocks or bonds right now. Let’s get that emergency account started first. When I explained this emergency fund concept to my sister and potential future brother in law recently, he called it a “War Chest”. I liked that expression, so let’s call it that going forward.

Most financial experts recommend keeping between 3 and 12 months of your expenses in your war chest. This will be easy to calculate now that you have your “Prosper Daily” app. I would set a goal for yourself of 3 months to start. When Mrs. B and I got married, we wanted a bit of a larger war chest. Even though it was quite a bit more than 12 months of our expenses, we set a goal to accumulate $100,000 in it. We’re pretty conservative by nature and just thought this nice round number sounded like a great goal so we immediately shifted all of our resources to hit this number ASAP. We ended up reaching it in a little more than a year! Impressive yes, but what I didn’t tell you was that we also put all of our individual savings accounts and gifts from our wedding in there so we probably started with somewhere in the neighborhood of $30,000.

We now use the war chest as our emergency fund but also as our “slush fund”. Whenever there is a large purchase to make like plane tickets for a vacation, quarterly income tax payments or when we paid off Mrs. B’s car, we feel very secure. We still add a significant amount to this account every month but it doesn’t really grow as much anymore because we constantly use it for various things. We don’t worry about where we will come up with cash when those inevitable emergencies or luxuries arise, and when they do, they won’t hinder our plan for financial independence.

We like the online banks because they typically have higher rates than brick and mortar institutions. We use Capital One 360 who offers a whopping 0.75% on our money. WooHoo *sarcasm*. Take a look at bankrate.com for current offers for online savings accounts and get started right away.

Once the war chest is built up we can move on to more exciting things like investments which will provide the growth your money needs to reach your ultimate goal…

Posted in Financial Nuts and Bolts | Leave a comment

The unveiling of your financial independence date

Mr. B here. After reading my last post, and now that you have the first month or two of your spending data, let’s have some fun! This formula will be covered in more detail in a future post, but let’s go back to that 5% theoretical investment that I previously discussed. (We are personally shooting for an investment return/withdrawal rate of 4% per year, but again, I’m trying to keep things simple for now.)

Take your monthly spending total and multiply it by 240. Random number? No, I didn’t just pull it out of my ass. It’s just an easy way to find out how much money you need to accumulate in order to generate your current monthly spending at a withdrawal rate of 5%. The number is 300 if you are only planning on generating 4% per year like us.

For those more mathematically inclined:

Assume you are spending $50,000 per year on your various expenses and lifestyle. At a withdrawal rate of 5%, you need $1,000,000 to generate that income. $1,000,000 divided by 20 (5%) = $50,000. $50,000 then divided by 12 = $4,166.67.

20 times 12 =240! Voila!

From there, go ahead and play around with your numbers. See how much less you will need to accumulate if you can cut $100, $200 or $500 from your monthly spending. So for example, if you can cut $500 from your monthly expenses, then that is $120,000 less you’ll need to save. 

Once you have “your number,” we can try to get a very rough estimate of how long it will take to reach that number. Hint* it’s going to be a long-ass time, especially if you are just starting on this journey with minimal savings.  Over time though, as your lifestyle becomes more efficient and streamlined, your date will continue to get closer and closer.

Your financial independence date will be a product of your current savings total, how much you are saving each year, and what your assumed rate of return on the savings will be. To calculate this information, I use a compound interest calculator.  The simplest one that I’ve found is from the website moneychimp.com. Use the following link and let’s try a made up scenario:

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Mr. And Mrs. Smith currently have $50,000 in retirement savings. They bring home $100,000 combined after taxes and are saving $25,000 per year (they’ll get that savings rate up over time after reading this blog). They believe they can average an annual return of 5% on their investments and also believe they can slash their spending to $50,000 per year going forward. Using our formula from above they will need to accumulate $1,000,000 ($50,000/12 months = $4,166.67 X 240 = $1,000,000). As you can see, the calculator tells them they will reach their number in about 20 years!


After seeing this, Mr. And Mrs. Smith decide to really ramp up their savings because 20 years is simply too long to wait. They used the “Prosper Daily” app (discussed in a prior post) to see where that additional $75,000 of after tax income was going, and realized that they could cut an another $25,000 of spending that really wasn’t making them any happier, and add that to savings. This change cut over 7 years off of their financial independence date immediately.


Now try plugging in your own numbers and see how much money and time you will need in order to reach financial independence and leave that 9 to 5 job forever.

If you are unhappy with the results, it’s ok. Keep following this blog to see how we have managed to save more than 50% of our income for the past few years. Each dollar cut from spending and added to savings will slash your timeline to financial independence! In case you were curious, our financial independence date is January 9th 2020. Mrs. B and I will be 37 and 35 years old respectively.

Posted in Financial Nuts and Bolts | Tagged , , , , , , , , , , , , , , , , , , | Leave a comment

Know Your Numbers

Hi all, Mr. B here again. Now that you understand the concept of financial independence and what it means to us, I will share our day to day operations for becoming financially independent. We do not want to preach to you the “Two Ambitious Barracudas” gospel. Rather, give you insight into how we do things, and hope that you might pick up some pointers if this financially-free lifestyle appeals to you. Ultimately, you must decide how the process will work best for you, as we have decided for ourselves.

As I mentioned in the previous post, what we do is not brain surgery, but it does take a lot of commitment, time and effort. I wasn’t kidding when I said that the most important first step in financial independence is “knowing your numbers”, and specifically your “cash flow”. Before you start saving or investing, you need to know where all the money is going. I find that this step is usually ignored by most people, while I consider it to be THE BASIS for which financial independence is achieved. If I were to ask you what the balance of your 401K or bank savings account is, you would probably be able to give me a pretty accurate estimate within a few seconds. But what if I asked you about your average monthly spending on entertainment like going to the movies or out bowling on a date night? How about what you typically spend every month on dining out (restaurants, lunch breaks at work, Starbucks runs, etc)?

$309.40… That is my answer!

This is our average monthly spending on dining out/entertainment over the past 12 months. How did I come up with this number so quickly? It was easy. I just opened my huge 3 ring binder that I carry everywhere I go, hauled in an over the shoulder canvas satchel. Once I’m ready to complete my purchase, I simply place the binder on the counter, open to the current dated page, ask the cashier to repeat the full cost of the purchase and enter it under the proper spending category. That’s it! Simple, right?

Hopefully by now you have caught on to my sense of humor. Well Mrs. B thinks I’m funny anyway. But in all seriousness, we really have spent an average of $309.40/month on dining out over the past 12 months, and it took me about 4 seconds to give you that information. I simply picked up my Iphone, opened up the “Prosper Daily” app, put my thumb on that neat little finger scanner thingy, and there it was! It also shows me how much we’ve spent on gas, utilities, insurance and everything else that drains our bank account. I use this particular app because I find it to be the simplest and easiest to use to track spending, but there are countless others on the app store for both Android and Iphones.


Why do I think knowing this number is so important that I decided to make it the first step in my financial independence blog posts? Because, if you don’t know how much money you are spending, then it’s not possible to know how much in assets you will need to accumulate in order to reach financial independence. The second, and equally as important reason is because this will help you to reduce your spending and decide where to prioritize your precious resources.

For example, about a year ago, Mrs. B and I were carefully looking through the spending tracker trying to find ways to decrease costs and increase savings. We decided to review how much it was costing us both to buy lunch every day at the office. We were always hesitant to cut spending on this because it seemed like such a chore to prepare lunches every single day before work, in between taking showers and trying to get the kids ready. When I ran the numbers though, I found that we were spending approximately $10 each per day at the office cafeteria. Between the two of us, that’s $100 per week or $400 per month or $4,800 per year or $48,000 over the last decade, in which we have been working. Needless to say we decided to suck it up and start packing lunch every day (other than the occasional restaurant outing with coworkers). Oh how I wish I could go back in time and add that $48,000 back into our portfolio. It may mean a lot of PB&Js going forward, but it’s okay, I love PB&J, and I love $48,000 even more because it will bring us that much closer to freedom.

Now I don’t want you to think that you have to immediately stop buying lunch at work. What I’d like you to do is make your own informed decisions once you have the data. Decide what is really important to you with the understanding that every dollar that flows out of your pocket will ultimately delay your financial independence day.

So, before moving on to bigger and better things, stop reading this right now, go download the free “Prosper Daily” app or one like it and I’ll wait right here for you to come back…

…Wow! You must have a really slow internet connection, but I’m glad you finally got it. Go sign up and link your credit cards and your bank accounts and that’s it. Now go about your everyday life and spend money like you always have. It will take a month or two to really get an understanding of where your money is going, and to start seeing trends. At the end of each month the app will show you exactly how much you spent. This is great news! You have obtained the HOLY GRAIL of financial independence data: Your monthly expenses number! This number will obviously change from month to month, but over the next 6 to 12 months, you will be able to calculate an average and see where it is trending…hopefully downward.

In my next post, I’ll discuss what to do with this vital data now that you’ve acquired it, and how it will begin to reveal your path to financial independence.

Posted in Financial Nuts and Bolts | Tagged , , , , , , , , , , | Leave a comment

How Are We Going To Pull This Off?

Hi everyone, Mr. B here. In our last post we explained WHY we are working to achieve financial independence. As the CFO (chief financial officer) of the family, I’m here to explain HOW it can be done. I’m more of the financial nuts and bolts guy while Mrs. B (CEO and sales manager of the family) is in charge of overall family operations and finding new ways to generate revenue/savings.  In this post, I do not want to get into any in-depth financial strategies or how to invest, but want to convey the general concept of what we are doing.

As we mentioned, to us, financial independence is defined as having your savings/investments generate enough income to pay for all of your expenses.

So, imagine that you found a theoretical investment that could indefinitely generate a 5% annual return. If you were to invest $100 in that investment, it would pay you $5 per year, every year, forever.  If you could live on $5 per year you could retire with one crisp $100 bill. If you have one in your wallet, then congratulations! You did it! You may stop reading right now and go enjoy the rest of your life free from financial woe! Unfortunately, I don’t think even someone from the poorest third world country can live on $5 per year, so you’re probably going to have to save a bit more than $100. I.e.:

  • If you can live off of $5,000 per year you will need to accumulate $100,000;
  • $20,000/year means saving $400,000;
  • $50,000/year and you need $1,000,000;
  • And so on…

You might be thinking: “Whoa, a million freaking dollars! How am I going to accumulate that much?” Yes, it’s a lot of money and, if you haven’t already been saving for a long time it’s not likely you will be able to hit that number in the next 12 months (unless you hit the lotto or inherit 7 figures from your long lost uncle or something like that). Financial independence is a long term commitment and usually takes years to achieve. If you are just starting on this journey and don’t see the path to full financial independence, start small.

Imagine becoming financially independent from something like your cable bill. At $150 per month or $1,800 per year, you will need to accumulate $36,000 (remember the hypothetical 5% investment) to generate enough income to pay that bill forever. Once you have the cable taken care of, move on to your $250 per month car lease which is $3,000 per year. You’ll need to accumulate another $60,000 to pay for that, for life. Then keep going and knock out all of your expenses one by one until they are all gone. This may also help you shift your mindset as to what is really important in your life. Is your cable TV really worth $36,000? That is for you to decide.

While this concept of financial independence may seem radical, it’s actually what everyone does. However, most don’t reach it until their 60’s.  We are just aiming to hit our number a bit faster: in our 30’s, while we still have our health and our kids are young.

The key to financial independence is not becoming some kind of investment whiz, trying to outperform Warren Buffet year after year or obtaining your Masters degree in finance. In fact, achieving early financial independence has little to do with what investment returns you can achieve. The key is maintaining a very high savings rate.

Mrs. B and I have consistently achieved a savings rate of over 50% for the past few years. This means that when we receive our bi-weekly pay checks, at least half is kept for ourselves, while the other half goes into other people’s pockets. 

In the U.S., the average savings rate is about 5%. That means that for every $1,000 paycheck earned, you keep a measly 50 bucks for yourself and send the remaining $950 to other people. While a 5% savings rate is better than not saving at all, or God forbid consistently spending more than you earn and using credit cards to make up the difference, this minimal rate will surely lock you into the rat race until age 67.

In order to achieve a high savings rate like ours you need to KNOW YOUR NUMBERS!! I can’t stress that enough. We know where every penny of our money goes every month. Most people have no idea where their paychecks end up. This may sound like such a chore and it would be if this were 15 years ago. Imagine recording every single Starbucks Latte or McDonalds cheeseburger purchased, by hand in your spending notebook. Thankfully in the age of the smart phone, there are numerous apps that will connect to your bank account and credit card and not only record and tabulate every purchase you make, but also automatically categorize each purchase so you can see where all of your money goes. Tracking your spending is THE MOST important first step in achieving financial independence. Do this before you think about anything else. Once you see where all the money is going, you can decide what is really important and where you can cut back to add to your savings plan. If you don’t track your spending, you can’t determine how large of a portfolio you need to accumulate.

As I mentioned, reaching early financial independence doesn’t really involve much in the way of study or some naturally endowed brain power. It’s more about commitment and sticking to the plan. Much like dieting or becoming physically fit, you can hire the greatest personal trainer and nutritionist that money can buy but if you don’t show up to the gym you will never see results.

Mrs. B and I have been on this journey together since we got married 5 years ago and are only a few short years from becoming financially independent. Stay tuned to track our progress and get tips on how you can reach your goals to live a happy and free life!

 

Posted in Financial Nuts and Bolts | Tagged , , , , , , , , , , | Leave a comment

What is financial independence (to us)?

For us, two people who have worked in corporate America for more than a decade, financial independence means no longer working for money, but making our money work for us.

What we mean by this is that should we decide to leave our high-paying jobs (or worst case scenario, get laid off), our savings and investments will pay for our lifestyle indefinitely.

Why are we doing this? I think that answer is a bit obvious given the fact that no one wants to work for the man forever, spending the best hours of everyday behind a computer screen. Don’t get me wrong, we don’t dislike our jobs. We just don’t want to waste our very limited time on making money to buy things – things that aren’t as fufilling as spending time with our two beautiful children.

Most of our peers fall into the consumer trap – a constant buzz of commercials telling them that they will be happier or perceived as successful if they just buy a fancy car or a bigger house. Like most Americans, we enjoy luxury items and would love to live in a mansion, but we’ve just come to realize it’s not worth the extra years of corporate slavery to pay for those things.

In our case, Financial independence may not provide for a brand new Mercedes or 4500 square feet of living space,  but it will provide for freedom to spend our time how we wish with who we wish – all before the age of 40.

The next question then is, how are we going to do this?

 

Posted in Financial Nuts and Bolts | Tagged , , , , , , , , , , | 1 Comment