Early Retirement, Goals

Target Retirement Date

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Our ideal target retirement date is 2027, twenty years from now, when I am 52 and my wife is 43. Realistically, this goal is going to be a stretch, but we have a long enough time frame that I think it is possible under favorable conditions.

If we believe that we can live on $60,000/year when we retire, then using a 4% Safe Withdrawal Rate (SWR), our nest egg goal is $1.5M. However, with inflation averaging 3.43% annually, our nest egg may need to be substantially larger.

We will refine and better define our plans/goal as time goes on. Some other challenges in reaching our goal include being able to purchase (and pay off) a home and finding affordable long term health care. Our desire to have children will also affect our saving/investing rate, but won’t stop us from having them.

I guess if I have to work until 53, I could live with that.

Business Travel, Deals and Bargains

Frequent Flyer Miles

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I have been traveling for business for 6 years. It took me 5 years to finally bother to sign up for frequent fly miles, even though I have had plenty of co-workers and friends recommend it. I felt like I didn’t want to have to arrange my schedule to fly with a certain airline. That was very, very dumb.

In the last 12 months, I have accumulated 31,368 miles on Delta SkyMiles and 11,316 on American Airlines Aadvantage. .. . for doing nothing more than enrolling and entering my account number when purchasing tickets. That is enough points for a free flight in the continental U.S., Alaska, Canada, Caribbean, and Mexico on Delta (see chart) and a free upgrade (see chart) on American Airlines. Best of all, since I signed up with Delta and American Airlines, I have not had to bend my schedule to fly on these airlines.

I’m kicking myself for all of those years that I flew and did not accumulate frequent flyer miles.

Goals

Short Term Financial Goals

Below are some of our short term financial goals (1-5 years). I have checked off the items we have completed.

a Pay off 401K loan

a Pay off credit card debt with rate interest over 0%

a Save up 2 weeks worth of vacation (in case of job loss / unable to work)

Pay off 0% interest rate credit card debt

Open and fully fund Roth IRA for wife

Open and fully fund Roth IRA for husband

Sell Car 1

Pay off Car 2

10% (of gross income) contribution to 401(k)

Build emergency fund to $12,000

We’ll be selling Car 1 and funding Roth IRA’s for my wife and I in the coming months, so more checkmarks will be added soon.

Budget, Income Statement

March 2007 Income Statement

We had a great net worth increase in March, but did a poor job staying within our budget. We were sadly over budget $775.68 in March (click on spreadsheet below).

A lot of non-monthly bills hit in March, such as both cars needing servicing, buying a baby shower gift, enrolling wife in new insurance program, and a mini vacation. That’s not a good excuse though because we also went over budget for some of our standard monthly bills.

Time to take back some ground by coming in under budget next month!

Stay tuned. . .

Net Worth

March 2007 Net Worth Update (+$6,462.28)

A lot of progress was made since our February 2007 Net Worth update. We have a positive net worth! Thank God! It’s a great feeling to finally have a positive net worth, even if it is only $3,293.43.

I can’t believe we were able to post a $6,462.28 change (click on spreadsheet below) to our net worth in one month. Over half of this increase was due to our Federal and State tax refunds ($2,044) and my wife receiving a $1,463 tuition reimbursement.

Here are the highlights from March:

  • Our 401(k) has recovered pretty well from the $1,000 hit it took during the February stock market plunge
  • We have $100 (starting small) invested in prosper at an average rate of 12.23%.
  • Our emergency fund was given needed attention
  • We made some serious headway on paying down our credit card debt. All of the remaining credit card debt is on 0% interest credit cards
  • My wife’s student loan balance also was hacked down by the tuition reimbursement that she received

I don’t expect us to be able to keep up this kind of a pacing in the coming months, but we’ll sure try.

Business Travel, Deals and Bargains

Business Travel

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I am currently on a business trip and have been thinking about the money I save when I travel.

I travel 6-7 times per year, usually for 1-3 weeks per trip. While it’s hard work being on the road, there are perks. My company reimburses me for my travel costs (i.e. hotel, rental car, meals, etc.). I also use a 1-2% cash back credit card for all trip costs that helps put a few extra dollars directly into my pocket. In addition, my American Airlines Aadvantage and Delta SkyMiles frequent flyer accounts earn me free trips or upgrades.

When I first began traveling for work, I did a poor job of keeping receipts (for reimbursement), didn’t use cash back credit cards, and didn’t have frequent flyer accounts. I often spent more personal money while traveling trying to entertain myself. Now, I make sure my hotel is near nice restaurants and has high speed internet.

While on my business trips, I save money on food, gas, and entertainment. It’s also nice getting away from the office for a few days.

Deals and Bargains, Entertainment

Cable/Internet Savings

My wife cancelled our old Time Warner cable/internet plan and restarted our service to take advantage of a 2-year promotion they are running for digital cable. She was even able to coordinate it so that there was no interruption in service.

We just received our first bill, only $72 compared to the $94/month we were paying previously. This represents an annual savings of $264 for us. With digital cable we get many additional channels including music channels and On Demand. Plus, Time Warner provided us an HD box so that we can access High Definition channels. Let me tell you, the HD box alone was worth the effort. We purchased a 42” Panasonic plasma a year ago and the theater-like picture of HD is absolutely awesome. Tonight, we were getting a kick out of switching between watching American Idol on Fox and American Idol on Fox HD. What a difference.

Deals and Bargains, Entertainment

Affordable Movie Rentals

There is nothing like relaxing on the couch with your girl, a cocktail, and a great movie to watch. At $4.95/movie for new releases, movie rental costs add up. We’ve thought about signing up for Netflix, but never liked the idea of having to wait for the next movie to arrive in the mail. Blockbuster Total Access solved that problem by offering low cost online movie rentals, and the ability to pick-up rentals at your local Blockbuster.

We chose to go with the $14.99/month plan that allows us to have two online movies out at any time.

Here’s how it works:

1) Select movies online and add them to your queue
2) The movie is mailed within 1 business day
3) After watching the movie, mail it back in the supplied envelope or return it to your local Blockbuster
-Each movie returned to the Blockbuster store in the supplied envelope is good for one free in-store movie rental
4) Once the movie is scanned into the system, either at the store or when they receive the mailed return, the next movie in your queue is mailed

We plan to always return the online movies to our local Blockbuster so that we maximize the number of movies we get per month. You’re also given one free in-store movie rental each month. So, if you run out of online DVD’s to return for in-store rentals, no problem.

You could conceivable get 25 movies a month for the price of what it would regularly cost to rent 3 new release rentals. I doubt we would ever have that much free time or even the desire to watch that many movies. Nonetheless, I’m sure we’ll watch our fair share.

401(k), Investing, Roth IRA

Investing Plan

My wife and I have been putting investing on the backburner while we paid off some debt this past year. We feel that we’re in a position now to begin investing again.

We currently have $12,242 invested aggressively in my 401(k), broken down as such:

25% – JH Lifestyle Aggressive (1.15% expense ratio)
25% – Pacific Rim Fund (1.72% expense ratio)
25% – Real Est. Securities Fund (1.54% expense ratio)
25% – Natural Resources Fund (1.51% expense ratio)

We also have $700 in ADVENTRX Pharmaceuticals stock.

We’re choosing to focus on fully funding Roth IRA’s thru Vanguard, mainly because my company’s 401(k) plan has high expense ratios and no company match. That being said, we’ll still be contributing 2% to my 401(k) plan beginning mid next month.

Roughly $630/month (more some months) will be deposited into our Emigrant Direct savings account until we have the $3,000 minimum required to open a Vanguard 500 Index Fund. The Vanguard 500 Index Fund closely approximates the S&P500 which represents 70% of all U.S. publicly traded companies, and is considered the benchmark for U.S. equity performance.

We’re shooting to invest 10% of our gross income for the year because we need to build up an emergency fund and want to pay down some additional debt. Next year, we should be able to increase our investing.

Emergency Fund

Emergency Fund

We keep our emergency fund in a high yield (5.05% APY) Emigrant Direct savings account. We currently have a whopping $1,541 in the account; our goal is $12,000.

Most financially savvy people recommend having enough money in your emergency fund to cover 3-6 months of total expenses. I personally do not want to tie up that much money in a savings account. I’d rather pay down debt or invest the money. Our goal of a $12,000 emergency fund represents 2 months of total expenses for us. If we have an emergency that goes above that amount, our credit cards would then be used. In addition, I have 2 weeks of vacation saved up that can be cashed out for about $2,000, if needed.

Monthly deposits of our ‘extra’ cash will be made into the emergency fund. In addition, we will deposit $302/month for condo taxes and roughly $630/month for funding our Roth. Our condo taxes are due in December and April each year, and the Roth money will be used to open Vanguard Roth IRA accounts for my wife and me once we have $3,000 (minimum required for Vanguard 500 Index Fund). These monies are not really part of the emergency fund, but will provide some short term cash if needed, and gain some decent interest before we actually need them

We’ve got quite a ways to go, but my wife’s commission checks and our annual tax returns will help us get there.

Our path to financial independence and retiring early.