Saving for Long Term Travel v2.0
We want to create a travel blog and not a finance blog, but our first post about saving for this trip got great feedback so we wanted to share more details! If I went back to school right now, I'd study to become a financial advisor. The idea of creating freedom through planning, saving and budgeting speaks to my soul. I don’t believe people should be tied to a job simply to be able to live their lives, and Michael and I have worked hard to educate ourselves towards that financial freedom. This is the concept of F.I.R.E.
F.I.R.E. stands for Financial Independence, Retire Early; two separate concepts that often get lumped together. To be financially independent (FI) means you don't need to work for money to live your life. Doesn't mean you don't work, or don't have income, it means you don’t have to be tied to a job simply to live your life. This is what Michael and I are working towards, but to be able to retire early (RE) would be an added benefit.
What steps have we taken?
1. Education - You don't know what you don't know until you learn about it. I went through a massive accumulation of knowledge phase in 2019 and am still trying to read and learn more wherever I can. I began by listening to hundreds of hours of podcasts from Dough Roller and then Choose FI. I've attended in person Choose FI meetups in Austin to meet like-minded people. I've also spent evenings watching YouTube videos on taxes and social security. These are other resources we’ve used:
Favorite Books:
Die With Zero
One Up Wall Street
Your Money Or Your Life
The Intelligent Investor
Favorite Bloggers/Websites:
Mad Fientist
Doctor of Credit
The FI Tax Guy
Nerd Wallet
Favorite Movies:
The Big Short
Money, Explained
Inside Job
Maxed Out
2. Created an Emergency Fund - We've saved enough money in our online savings accounts to cover one year of expenses since we're taking a big break from our jobs and most future income. This gives us the peace of mind to enjoy our time off without worrying about quickly finding jobs when we return.
3. Never Carried Debt - Michael's $9,000 student loan (paid in a year) and five year auto loan (paid in two) are the only debt we've ever had. I worked through college to pay for my living expenses and bought a used car in cash. I then cut back on travel and shopping for several months until the savings account was replenished. We've scaled back when needed to avoid interest payments and we fully pay off our credit cards each month using automatic payments so we don't accidentally miss one.
4. Utilized Retirement Accounts - I've been maxing out my 401k since 2019, and Michael has been close to maxing since 2014. We've both maxed out our Roth IRAs since 2014 and 2017, respectively. We make sure we're investing in low-cost mutual funds which are like a basket of many different company’s stocks. I'm a strong believer that for 95% of us, mutual funds are the investing way to go. They have minimal fees and help you diversify without picking individual stocks. Even better, I only invest in index funds. These are mutual funds that aim to track a market index without being actively managed. This means the fees are typically lower and because a real-life human isn't buying and selling stocks for you each day.
4.1. Reaching Coast FI! The FI community has created many steppingstones on the way to financial independence, and one of my favorites is Coast FI. This means we have enough money saved in our retirement accounts (401ks and IRAs), that if we don't invest another penny, by assuming an annual return of 6%, we'll have over $1.5 million accumulated by age 65. This was a huge mental hurdle to pass, and has allowed us to focus on the now, instead of our older, traditionally retired selves. Technically there are no future 401k or IRA contributions needed because we're not worried about saving for traditional retirement anymore. This gives us freedom to choose lower paying jobs that are more meaningful to our lives.
5. Continuing Investments – Even though we have enough saved to fund a traditional retirement, we never stopped contributing to those accounts or our taxable brokerage accounts. By investing as early as we can, we're able to utilize compound interest to our greatest advantage. To us, enough savings means we can stop working. Unfortunately, we're not there yet, so we'll continue to save and utilize tax efficient retirement funds and put any excess in a brokerage fund until we reach that point.
6. Monthly Check Ins - the first of each month, we update our net worth excel sheets and recalculate our future projections given present values. We make sure our accounts don’t vary widely from the last month, we discuss large upcoming spending events, new financial law or concepts, and we ensure we're saving enough now to cover major future expenses. It's a way to make sure we're honoring ourselves and each other by providing a place for open communication to check that we're working towards the same goal: to live a life that's meaningful to us.
And that's my basic summary! Lots of math and many Excel sheets go into our future projections, but most of it boils down to investing as much as we can, as early as we can, and minimizing fees as much as we can. I’m probably too open when it comes to finance, but my world absolutely changed when someone told me I didn't have to work for the rest of my life and then gave me the steps to get there. I hope this is meaningful to some of you, and you've learned a new concept or two. Just like before, please reach out with questions! I'd love to hear your thoughts and maybe find FI friends along the way.
