What an incredible year it has been here at the Go Finance Yourself household. So many big changes took place. An introduction to FIRE, starting a blog, and a burning desire to achieve financial independence all came about in 2016. Looking back, it’s amazing to think about the sequence of events that led me down my current path.
Out of the Blue
It all started with an unexpected cold call from a financial advisor. I typically don’t pick up phone calls from numbers I don’t recognize. This past spring, I was waiting for a call back at work when this number popped up on my caller ID. I answered expecting to hear the voice of one of our vendors. Confusion followed as I tried to figure out who was on the other line. This was followed by the realization of “crap, it’s a sales call.”
The advisor said he had received my name from a former work colleague of mine. Thanks, ole buddy. Typically I’ll cut sales people off before they get too far into their spiel. But for some reason, I decided to hear this guy out. We ended up having multiple phone conversations over the next several weeks. At this point, I was interested. My new role as an executive was leading to a much more substantial paycheck. At the time, I thought perhaps an advisor is needed to make sure I’m putting my money to good use.
The World of FIRE
It was during this time that I was introduced to the world of FIRE. It’s funny to think back on how many times I read this word in finance blogs and couldn’t figure out what it stood for. Then someone finally translated it. Financial Independence / Retire Early. It was everywhere. Every financial blog I came across was talking about it. The cool thing about FIRE is there are so many different ways to achieve it. You can live below the means of a poor college student and save every penny possible. On the other end of the spectrum, you can maximize your income in your current job, or through the numerous side hustle opportunities available today. Either way, these people were taking their financial future into their own hands.
I was mesmerized by this newfound world of FIRE. Controlling your financial future. Choosing to live different from the masses. Foregoing the instant gratification of buying “stuff” today so you can put that money to work for you. This is right up my alley! There’s nothing I love more than having control over my situation. No matter what aspect of life it is, I hate being at the mercy of someone else. I’ve also never been one to do something because everyone else is doing it. We live in a world where so many people fall into the trap of make money to spend money. This seems to be the route most of my friends are taking. But not me. I’d rather have my money work for me than getting into the never ending cycle of accumulating crap!
Choosing to DIY
During the time I was having conversations with the advisor, I came across Personal Capital and Wealthfront. I had tried to use other programs similar to Personal Capital in the past, but I could never get all of my accounts to link up. The appeal wasn’t there for me if I had to manually update it all the time. I was pleasantly surprised to find that all of my accounts would link and automatically update in Personal Capital. On top of that, I can use the software to analyze everything from fees to diversity across asset classes in my portfolio. And best of all, I can use it to make sure my current savings rate and investment choices will meet my future financial goals. All things I would be paying for through a traditional advisor were offered for free through Personal Capital.
In addition to using Personal Capital to plan and analyze my portfolio, I found that I could easily and cheaply expand my after-tax portfolio through Wealthfront. Ease of use is right up there with fees for me. My time is very valuable to me. I work a demanding job, run a blog on the side, and have numerous pursuits on top of this including a goal of getting my golf handicap down into single digits (sitting at a 12.4 right now). All of this on top of balancing family life. So while I could do my own research on investments, I would much rather let Wealthfront do it for me. On top of that, my first $15,000 is invested for free, which gives me a no-cost trial period to test it out. I’ll be posting my review on Wealthfront once I hit the one-year mark this year.
With great resources like these readily available, it didn’t make sense to go the traditional advisor route. Why pay someone a high fee who is just going to use similar software programs to do the same thing? For me, it was an easy choice to go the semi-DIY route, with a low-cost robo advisor mixed in.
As I became indoctrinated in the world of FIRE, I quickly came to the realization that I needed to up my savings rate substantially. Since I started working, I’ve been saving 15-20% of my income in my company’s 401k plan. This is nothing to scoff at, and will but you on the right track for retiring at 65. But to retire much earlier, like in my 40s, I knew I had to increase my savings rate severely. On top of that, I had to start investing in after-tax accounts that I can access without penalty.
Thus started the goal of increasing my after-tax, after-401k savings rate to 50%. Going from a zero to 50% after-tax savings rate is quite the challenge. But if you’re going to do something, you might as well go all in.
In the roughly seven months since starting this journey, I’ve increased my after-tax savings rate from zero to 37%. Included in this number is only investment accounts to fund early retirement. Money put into savings for future vacations, emergency fund, etc. is not included in this percentage. I was able to accomplish this partially by reallocating where some of our monthly savings are going. We’ve decided not to move and instead stay in our current house for at least another five years. Thus, I reallocated the excess money that was going towards a large down payment to my new after-tax investment accounts.
The biggest change, though, was increasing my income. In 2016, I was able to increase my income at my current job by 20%. As I’ve talked about before, I’m lucky to work at a company that has a real meritocratic culture. We are compensated and recognized based on the value we create for the company. By eliminating numerous time sucks, I was able to free up more time in my work schedule, despite being short-handed, to accomplish my initiatives and increase my pay. I’ll be sharing more about how I did this in an upcoming post.
On My Way to Achieving FI
There you have it. In less than a year, I went from someone who was a good saver but no real plan, to someone obsessed with becoming financially independent. I began using Personal Capital to actively plan my financial future. On top of this, I opened five new investment accounts to start building my after-tax investment portfolio. In my next post, I will be sharing more about where I invest my money and what my plans are for 2017.
Readers, how did your 2016 fare? What changes did you make to your finances that had a big impact on your life? Was it a good year for you financially? Professionally? Personally? I’d love to hear your thoughts in the comments below!