What do most people find after doing this exercise? This awareness allows you to set up a system for the household. Record your cash flow. Fill in all your monthly expenses in column 1 and your annual expenses in column 2. You can leave column 3, the estimate for your future spending in retirement for a later date. Tally up your expenses in both columns and subtract them from total net income on both a monthly and yearly basis. The result is your cash flow deficit or surplus.
Then add in expenses that only come up a few times a year, such as travel, car repairs and gym fees. Estimate a total for these and divide it by 12, and put that figure in the monthly column of your worksheet. You may not pay the bills in 12 monthly installments but imagine you are setting money aside each month so that you have the total amount when the bill comes due. Adjust your spending Look closer. Are your expenses higher than your income? This step is not about punishing yourself or laying blame. If you decide to cut back, there are some less painful ways of doing it.
Consider renegotiating your mortgage to a lower rate or cutting out one major expense completely. If you have a cash surplus, congratulations. You can start allocating money to meet your goals right away. Compare your spending to your goals. You could try using only one car and taking public transit to work. You make them happen. This step requires you to assess where you want to be five, 10 and 20 years from now and answer some big questions, such as where you want to live in retirement and when you want to stop working.
One tip is to visualize what your life will be like 10 years from now if you do everything right. Set your top three goals. On Worksheet 5, list each of your top four or five goals and assign a dollar value to each, as well as a time frame for achieving the goal. Now, compare how closely your goals align with those of your partner.
In Worksheet 6, list the three most important goals that you both agree on, in order of priority, in column 1. The usual route is to spend less than you earn and invest the surplus in such a way that you can get where you want to go. Chart a path to your goals. Then, in column 3, write down the action steps that you and your spouse have both agreed on to make that goal a reality. The main obstacle may be that your household income is low because one partner works only part-time.
That partner may decide to work full-time in order to earn extra money. The key is to develop strategies and appropriate timelines to make your goals materialize. But is it enough? If you feel confident enough to do some basic calculations yourself you can find out. Then look at your life insurance needs. The general rule of thumb is to get enough life insurance to cover 10 times your income if you have kids under 10 years old five times your income if you have kids over 10 , plus the amount needed to pay off your debt.
At this point, it may make sense to have an agent review all your insurance policies—disability, life, auto and home—to make sure your coverage is adequate. If you need more life insurance, chances are renewable term is the right product for you. Consult an independent insurance agent for a quick review.
We are not greedy. We strive for a min of 3. In , the rate is 4. No more stocks since the dot com bubble in By age 60, we hope that it will generate K combined yearly. Our Passive income at different ages Age 52 to There is another re-org at work. Rumour has it that I am affected it. Since I am so close, Wifey wants me to work until 55 and I agree. Since life always throws a curve ball, I rather be more financially secure. With 21 months left to go and being miserable, how about aggressively asking for a raise or a better project a sabbatical or a relocation for a new adventure?
Not too much left to lose, except for your pension amount at your level of net worth. What is your fear that makes you not want to more aggressively ask for what you want at work to be more happy? Sam, I am not miserable, just less happy. I will be in the same company this summer for 31 years. It is just that I am so antsy since I am so close to retirement. I have been planning my retirement and counting down since age Having no more close friends and a backup at work makes it a struggle to get thru the day.
It is basically no fun at work without my buddies since they were all replaced with Indian consultants. It has been over a year being on my own and I just have to get used to it. Many of my co-worker that were laid off are struggling to find another job. Some had to relocate to another state or commute daily to another state.
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- The Mongols at Chinas Edge: History and the Politics of National Unity (Asia/Pacific/Perspectives).
- Roadmap to Financial Freedom: Accountability Report May 2018.
Some are still unemployed. That is why I am so appreciative to have the same job and I am still able to build up my pension. Losing 31K less pension plus 8K for medical is a total loss of 39K passive income. Then we can stop buying munis and that 2M of principle can be used to buy a decent place in Hawaii if we choose to. Wife said NO to buying so I have to work on her. More money for my salary will not make me much happier. I just want to support my existing systems until they are rewritten externally or until I reach In fact, I am mentally prepared to not get any more raises or a bonus from this day forward and I am OK with it.
I am not the poster boy suckup or the golden boy on the team. Those guys work on the new stuff and they attend meetings all day to show how busy they are. They do the dog and pony shows to mgmt. I make K a year and I only work hours a week from home. When there are problems or after hours or late weekend work then it can be stressful.
I am the ONLY one that knows my systems so if they want to get rid of me than so be it. I just want to gracefully try my best to make it to 55 and just retire. My mgr just told me today that I am not being transferred. The other boss would have been a micro mgr and that could cause me to quit. My boss wants me to stay another years and he also wants me to work on something new so that I stay interested.
I suspect he knows I want to retire at 55 but I am not saying so. Hang in there, Adam. Neither me or wife have pension or medical coverage, but we do have K and some prior HSA savings. Work wise i'm a bit fortunate to still work at a good company and managers, so it's not a big deal to continue working, although the work can be repetitive and lack of challenge, i consider that a blessing. Still, once you know the date it seems hard to keep still, but the anxiety seems more from the retirement itself what would I do , rather than the current work.
I think for people who are fortunate enough to not worry about financials after retirement, our real challenge is the lifestyle choice and psychological change we need to adapt to. We are very lucky to have pensions and retiree medical. This is why I need to reset my brain to appreciate what we have and to get out of my funk. Our company has gotten rid of many workers before age 55 so that their pension will be much lower. I agree with you about setting a date. I am just so antsy to get out. I have several hobbies to keep me busy so I wont be bored in retirement.
I am OK just chillin in the house doing nothing. I also have many older co-workers and friends that are retired which we can visit. We also plan to travel. In fact, some clarity around before or after tax income levels would be helpful for all the dollar figures in this post. The new tax structure significantly affects people in the Blockbuster FI cayegory, mostly on adverse ways, so.
I would suggest adding another dimension to your pyramid that would take into account geography. This dimension could be a plane stretching out into the distance from your 2-D pyramid. But you could live like a king for half of that or less in many parts of the country. Even lower if you go international to some geographies in Asia or South America.
I may have to post a visual graphic on Twitter to explain what I mean with the 3D pyramid analogy….. The question though is: Just light one of the fireplaces! Perhaps its biggest asset is fresh water. Four lakes and close proximity to the Great Lakes is huge. With other parts of the country drying out, access to fresh water is only going to become more and more valuable in the future. I just want to get rid of the fear and pressure that comes with being dependent on money.
The fear of losing a big client, or the pressure of having a competitor undercut me with prices, and always being on edge. Now I just have to keep building it. Always enjoy stopping by.
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I hold rehab notes for real estate investors. My cash utilization is also very high. My retirement job has a great following now, I rarely have enough capital to meet all the needs. Mostly because not many people pay attention to it. Like FullTimeFinance mentioned, it is not very good is to have the money if you are always worried about it. I practice gratitude every day and play sports 3X a week. That helps with relieving pressure and staying fit and happy. Also pumped no gray hairs have sprouted out yet at The second half of my life will be all about finding ways to take it easy and increase productivity as well.
I want to be solidly in the middle — i. Right now I could hit the frugal FI button likely in the next year or so, but would not be happy there. I like the idea of the continuum. My in-laws are shooting for blockbuster FI, but they both own tech businesses that are doing well…so their reality differs slightly from mine. You are spot on and a talented writer. Living FI lifestyle is a total mental game. Only works on mobile or iPad for some reasons.
I recall an article about this very topic from a long time ago early s? These would be much higher today after adjusting for inflation. Perhaps that article was directed towards mid-level executives looking to escape the grind. Now that living off passive income has gone mainstream these three levels have downscaled a bit. In silicon valley these days these three ranges inflate on the high end— maybe something like seven, eight, and nine figures blockchain FI? I used the leverage from my financial situation to present my employer with an ultimatum about working conditions i. I control my location, schedule, and work content , and they seem happy to accommodate.
I read a lot of blogs and there is this one Blogger who goes on every single other blog and shouts from the top of his lungs that he is a multimillionaire. But he has no self-confidence because his wife still works. His writing oozes insecurity probably due to the lack of friends, lack of success from his site, and lack of purpose. I have to say I also read a ton of blogs and I am darned if I know for sure who you are talking about. I could guess but that would be rather inappropriate…. I do agree with your general point that screaming form the top of your lungs that you are a millionaire or stable genius….
I guessed right, and mostly agree with your comment. However, I am guessing he has no losing stocks.
Roadmap to Financial Freedom Accountability Report May
Who would after an 8 yr bull market? I think I have over 80 positions and they are all up big, no losers. Why are you being so rough on him? With Blockbuster money, thoughts of leaving the cold Midwest for paradise? Well I do when its cold…spent 5 weeks last year visiting Oahu, Kauai, Maui, and the Big Island, 2 weeks sailing in the Bahamas, a week driving the French Riviera, a week hiking the Tetons, and spent Christmas through new years in Costa Rica.
Thanks for the mention! I think the problem is that I still have the budget FI mindset. Fear of a big market crash is a big factor too. Not having to commute to work and deal with knuckleheads is huge! I know you would never go back, and neither would I for less than….. She likes working, but would like to cut back a bit.
To me, financial independence is being able to live how I want without worrying too much about money. Things always come up. A new roof, new septic system, etc. Also, I want my kids to go to whatever college they want and not be burdened with student loans. I want them to follow their dream careers, not be cajoled into a career because of the earnings potential. What do people do all week when they are retired, especially when retiring early? I retired early and struggled with being preoccupied after 3 months. It turned into boredom and slippery slope of troublesome lifestyle.
I finally returned to my career part time after bucket list. I consider myself semi-retired and enjoy working more once I had balanced time off. My partner enjoys working and is seeing how far she can go. I have improved, but have not arrived. I guess this is a good problem to have, but I just wanted you to know retirement is not always paradise, and semi-retirement may help make the transition.
I moved to a remote tropical Island once FI. This idea was not spontaneous, and I had planted seeds for years working off and on as an expat in the medical field. I worked with royalty and even had the life changing experience of using a gold toilet. The toilet was not really life changing at all, and somehow sad. I also had opportunities to work with orphanages literally in the tree tops and cultures who thought their medical issues were caused by spirits.
There were amazing times, but I also suffered through cholera. The remaining time I worked for years in high stress, high salary, with little time off. It made me sick. When I took the plunge it was paradise for about 3 months, but got bored of the lazy days, warm beaches, and amazing sunsets. Kind of like the big island once the nature wears off. I was drinking more. I know some of you may think I am an alcoholic, but I have never been, but I did not like that I was drinking more.
I also got a dangerous reputation for having money. I never showed real wealth, but I tend to give money away especially for education and this caused some jealousy. The ladies started to have more interest in me, and the local men did not always appreciate it. An analogy could be a celebrity with money and time off. I am no celebrity. I eventually moved to a major city and enrolled in a language school, because I could not adjust to just being alive. Two years later I returned to my career in the bay area after meeting my partner from Japan who is a well-known designer in those circles.
You have never heard of her. Sometimes she designs hands bags for fashion industry and secret startups. I only mentioned her because I think the goal is to find something you enjoy and get paid for it. Why would she not want to work. Semi-retirement has been a better path for me. Your story is fascinating! I often worry that many people are chasing this end goal at the expense of really living their current life, and what you ultimately end up with in FI may not be all that rosy, like your story. Any level of FI used to be a huge and urgent goal of mine, but its funny how finding work you enjoy doing and keeping life balanced and interesting can take away the urgency of FI.
Buy a Fitbit and get walking! Not bad for a year-old, if I do say so myself. A little over miles in My goal was miles in Reached that goal mid-November! The formula-lover in me wonders about doing something like this for defining these levels based on the avg income of cities. I like that idea of planning for options. I guess there is a correlation with cost of living and best places in the world to live e. Therefore, problem solved with Blockbuster FI!
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I like the pyramid visual of different levels of financial independence. Most are both spouse working, some day care. College funds, food for teenage boys, sports equipment, musical instruments, kiddie activity travel all add up. I like the results provided by firecalc. Recommend everyone take a look at it, very easy to use and very flexible for more complex situations pensions, annuities, investment style, social security.
I would put this closer this above Baseline at Basic income levels, all due to no debt. You can really live well for little when the debt is gone and not sacrifice. Channeling Dave Ramsey, I guess. Yea, no taxes listed…adding taxes would incorrectly skew the picture, sold a rental with lots of tax owed, our investments generate significantly more taxable income than we use and I was not aggressive enough to find ways to reduce. Sounds like Kay will soon be an empty-nester no more kids living in the home.
If this is the case, the biggest expense she probably has is her home, which at the moment is probably a three-bedroom. Kay will need to down-size, even though her instinct might be to keep the home to provide a place for her children to visit. My suggestion to dramtically reduce her costs and make her dollar stretch further is to rent a one-plus-one bedroom apartment. Emotionally this might be tough, but fiscally, it is probably the easiest way to dramatically reduce her costs and enable her to start allocating money towards savings and debt-reduction.
I think your first priority should be creating a lifestyle where you spend less than you earn. Making this one very significant change in your lifestyle is more important than having lots of personal finance knowledge. I think having the right mindset should be your first step. You have plenty of knowledge, but continuing to learn reaffirms that knowledge and inspires you to stay on track.
I hope things turn for you! All great suggestions for Kay. The hardest part will not so much be creating the plan, but living the plan. It will take years for sure to work your plan, but once you devise the big picture, break it down into short-term goals — meaning 3-month intervals so you can review and feel the success. Like I said, the hardest part will be sticking to it.
Change is fun to imagine but difficult to live out. My household does the Dave Ramsey plan with a few small tweaks. We felt like we needed to be saving for the just in cases because of the economy but are open to using those savings to pay off debts if things get better. The great news about working alot is that you dont have time to spend money. I definetely reccomend putting savings in a bank seperate from the one you use day to day. The debit card, checkbook, and one credit card that we kept open are all in the safe so we have to think twice before we use them.
We both get a little blow money every month that goes for any fun purchases we want and eating out. We are new at this but as newlyweds we felt that the best thing we could do for our future was get free of the debt. Putting a plan in place and regularly talking about the finances has completely eliminated most of the fighting that our other newlywed friends talk about having.
That seems…scary to me. Maybe because in one summer, we needed a new roof, had to deal with a downed tree, and once of us had emergency surgery. The emergency fund went — and then some. Personally, I was not able to change my spending habits until after I started tracking all my spending. If her kids are going to be 18 soon, she will be losing child support but she will also have fewer expenses. If they are headed to college they should still be working to off-set their expenses. In January I made a modified debt snowball and have seen results but was frustrated by my lack of progress I have made progress, but not enough.
Last month I started using mint. I now have mutliple tools dealing with the problem, but I have had to add them slowly to for it to be effective. My point is that baby steps really help when tackling what for me has been a life long debt problem. This is an interesting one. I can see the logic in creating a well filled savings account. In this case, the savings account will hurt you bottom line. I would say get out of dept first using the snowball technique described in the article above.
Although I would start with paying of the dept with the highest interest payments. Psychological you might want to start with the smallest dept but financially you want to start with the dept that is hurting you the most. In response to Rob, the Ramsey SnowBall is set up smallest to largest debt and not by interest rate because when you pay off those first couple of debts you get quick positive feedback and you keep going. Ramsey preaches that personal finance is mostly emotional and not math. Sam lobbied hard for paying off our debts from highest to lowest but I won in the end since I was doing the heavy lifting on the project.
Tried and true advice once again! Track your expenses…every penny! In response to Rob: Imagine taking an entire year or more , and using every cent you have to pay off debt. Then as hiccups along your path to debt-free happen, you are not knocked off track! The purpose of paying off the smallest debt first is to give one a sense of achievement and to renew the motivation for getting out of debt in the first place. I spent literally years listening to my Dad make your exact argument to my older sisters as their debt continued to pile up because they never had any savings and they never saw any results of paying off the debt.
For almost anyone who is struggling with a lifetime of habits, the emergency fund and snowball strategies seem to work best. Kay has blessed herself with the magnificent benefits that come to a person who bares her soul in a difficult situation. The article and the posts contain a wealth of outstanding ideas.
You will need to radically cut expenses, but you have a choice either to do it now while you have the support as a cushion, or next year when it will be cut in half. Live on your non-support income and use the support as your emergency fund until you can save up enough from the unused support money to have an actual fund.
Once you have a satisfactory emergency fund, apply the support money to reduce your debts. At 39 you still have at least 25 years to fund that, which will be that much easier when the debts are gone. Aperson 16 has the single best suggestion on expense reduction in downsizing your house. Diana 22 suggested having the kids work. Gas, clothes, entertainment and even cell phones. What a great lesson it will be for them to pay these themselves and to learn early what it costs to do and have the things we want.
Great ideas here J. What does it matter? We are all trying to get to the same place anyways…. You have to get to enjoy saving, not to see it as a negative. Try cutting out one big item and see if it is as painful as you worried it might be. For example, cut cable. Happiness is what you do, not what you have. About debt snowballs — credit card debt. This has been pointed out by Suze Orman.
You can go to bankrate. Thanks so much for this post. I am in a similar situation and keep losing hope due to mistakes I keep making over and over. All these comments are helpful to know that if I take steps back, I can still get up and try again and that success is possible. Ten dollars a month is only 35 cents a day. Just to clarify, I ment when the kids were out of High School. Once they are legal adults and they will declare themselves as such, teens are like that: They should be taking care of or contributing to support themselves.
My parents gave me the choice of getting a job to have spending money, be able to purchase my clothes or not have a job and not have spending money and be able to buy clothes when we could afford it and what we could afford. They provided for my needs while I was underage. My advice to her is to set a goal, and stick with it. Break up the big goal into manageable chunks, and set timelines to keep you on track. Easier said than done. For me, I realized that I am in my early 20s, but going the way I was going would screw me up eventually.
I like having my money to myself, not having to pay a big portion of my paycheck to Mastercard, and not being at the mercy of whatever I see at the mall. I needed to grow up. I am slowly but surely on the road to financial freedom. Cut expenses and spend less. I find the debt snowball method works well, and I am down to 1 credit card my only debt. Little victories help keep you motivated. I am considering getting a second job to eliminate debt faster — you should definitely consider that option.
If you consider getting out of debt in the same light as moving a heavy object, it is much more difficult to start that object moving from a standstill than to keep it moving. Kay is suffering from something like this as she is trying to motivate herself to start paying off her debt. It does no good to sit around and worry about what to do, or to lament your past mistakes.
The time to take action is now, using the knowledge she has gained over the past year. Personally, it makes sense to me to begin with some combination of building an emergency fund and debt repayment depending on what she can afford. Even though neither debts nor savings will be at their desired level immediately, as you progress you will begin to feel some of the weight lifting — that is when the momentum begins to build.
Worrying about it only makes things worse. Action is the antidote to anxiety. Not only take into account how much you owe but how much your payments are. Another option is to take the debts with the largest payment and see if you can reduce them. Even so, when I was unemployed the car loan was the biggest payment I had every months outside of my home, and made things very tight. If I had more then a week of warning I would have probably sold the car to avoid the payment. Linear Girl—thanks for the compliment!
Theo—solid take on car payments. Paying it off would prevent this from happening as well as improve cash flow, a double benefit.
It all depends on the details of the situation. Sell, Sell and Sell. My income is good, but I need to see the results to keep me moving. I have cleaned out the closets, basement and piles of stuff to sell on craigslist or buyback sites for books. Keep in mind any progress is still progress. Instead of paying my debt bills monthly, I pay then weekly. The credit card interest is based off a daily percentage, any little bit I can decrease the balance, the better I am.
Even if my card was not in my wallet, I found it and used it. This was not much, but it can add up. It was not until I completed cut up all the cc and saw that my checking balance was the ONLY way I could buy something. It was only then did I have to wait to buy things. It was the little things like buying gas for the car, it had to wait until payday instead of going on the cc.
Some of the comments were expected. So the emotional part is probably very different. Everyone should choose the style that they think is best for them. I guess my biggest point is to look at your cashflow. Debt can be good and bad depending on the purpose. Using your credit card to pay for a cup of coffee, I would consider bad dept. Taking a loan for a medical operation to save your life… I would say good debt hey see it as an investment.
So it basically comes down to: For REAL emergencies you can still use your credit card and use it like you would with a savings account. It all about the total balance. So why not take the cheap road and have only in debt? In the end… is Emergency accounts are an important part of breaking the CC habit. But I have another idea for Tracy who spends her savings. If you are spending your savings for those little irregular, regular things…gifts, small home repairs, etc, try this:. What I did was set up two savings accounts.
One is at ING —the real emergency account, with automatic withdrawal from my checking, for if I lose a job or something catestrophic happens. But I have another savings account in the bank, right next to the checking account. I budget a certain amount to go into this Buffer account, so it will about break even or build up a little over a year. Just start with something and adjust. Then the rest of the money goes to debt snowball.
In order to get out of debt, almost everyone needs to make adjustments to their lifestyle and spending habits, and once you are out of debt, saving is easy as pie.
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