October was a great month filled with travel, personal development, and a lot of self reflection both about financial independence, and life in general. This was the first month in a while I have had time to really focus on myself and our future. Work was of course still present, but it was much more calm and I had a lot less meetings! Most importantly the whole family went on a trip to the west coast last week, for an off-peak vacation. For seven days not only did we spend that time with each other, but I was completely disconnected from the internet which is always refreshing. During the middle of October I attended the Cents Positive Retreat in Chicago, and it was an amazing experience that I wrote about a couple of weeks ago, and I can’t wait for an opportunity to attend again in the future.
Financially things were pretty stable this month with a slight increase in our savings amount thanks to some clients finally paying my wife. Net worth increased while spending was about the same from last month, although spending was still higher than our average monthly target. This is typical and expected since we have variable expenses throughout the year (mostly kid or travel related) and our budget is designed to focus on average monthly spending rather than a set amount each month.
When I think about my perspective as we get further into this process and closer to financial independence, the monthly changes often seem small and incremental at best, especially when the market is stable. When I change my time frame however and think about where we started the changes are amazing. This always leads me to the dilemma of not caring about short term changes, while at the same time writing this update on a monthly basis.
Specifically looking at this from a month over month perspective, our net worth is up, and so was our savings . At the end of October, our net worth was $955,600 which is up from $948,991 at the end of September.
We calculate our net worth by adding all of our pre-tax retirement accounts (403b, 457b, Traditional IRAs, and ORP), our after-tax retirement accounts (Roth IRAs), and our after-tax brokerage and savings accounts together. We also include real-estate equity (i.e. our home) discounted to a price we think we would be able to get after closing costs if we needed to sell the property as quickly as possible. After we add up all the assets above we subtract our current mortgage (our only debt) to arrive at our current net worth.
This month our income was $10,075 which was an increase of over $1,000 from last month. I wrote last month that the two main levers we can control are expenses and income and we have worked hard to increase our income over the last few years since we feel mostly comfortable with our spending levels. This of course allows us to save more and still spend at the level we intend to once we are financially independent. Considering what our income was several years ago we feel very fortunate to be in our current position.
We calculate our income by taking our net income (after tax income) and adding back the amount that was withheld/saved in our retirement accounts, while also adding the 6% of my salary contribution I get from my job in my ORP account (I mean technically it is income).
This month the two of us earned close to the same amount, although after my retirement contributions and health care premiums for the family my net pay (paycheck) was only $311, plus we had an additional deposit of $417 reimbursing us from our dependent child care account which I include in our income total as well. During the Fall and Spring academic semesters my income is fairly fixed with little opportunity for side work that earns money. I have a time deficient during the academic semesters because of my job (required) and family time (choice) to earn extra income. This of course changes during the summer which is my biggest opportunity to pick up additional income. My wife’s income can sometimes be erratic since she runs her own business, although it has been fairly stable on a yearly basis over the last few years. Month to month however, it can vary wildly.
We spent $6,377 this month, which is almost the same as last month (an increase of $26) . This is actually not bad considering the additional travel during October (both personal and a family trip), but luckily the health care costs from last month usually only occur every three to four months. Total travel related costs this month accounted for almost $1,900 of our spending, plus some points used to fly us to the west coast. I should note that not included in our income this month or subtracted from our spending is $600 I received (as a voucher) for a disastrous 36 hours of delayed and cancelled flights, a refusal to retrieve luggage after the cancellations, and general customer service failures while trying to leave Chicago.
Our goal we set for 2019 was to save a minimum of $50,000 inside our retirement accounts, with maybe a little additional amount in our after-tax brokerage or savings account. So far this year we have saved $38,718 including the amount we saved this month (October) which was $4,094. By the end of the year I will have contributed the maximum allowed amount to both my 403(b) and 457(b) accounts as well as both our IRAs. To hit our minimum goal we still need to save $11,282 by December 31st. As long as my wife’s clients pay on time we should be able to meet our goal, and save the additional money in her retirement accounts since she still has a fair amount of space before she reaches her contribution limits.
Some Closing Thoughts
This month presented a refreshing change from September with a less hectic workload and more time to focus on myself and family. I also spent a lot of time reflecting on “the after” of financial independence since it is getting closer (2 years and 6 months). Spending some time with amazing women at Cents Positive really helped me gain a bit more perspective and focus and helped me by challenging and affirming some of my personal assumptions.