NW Update – May 2021

Another month and another Net Worth update! May 2021 was the month of real estate. We had 3 closings this month. After spending months trying to find any deals in real estate and falling flat I finally found the key to success in our current market. Purchase properties from investors that come with leases. Retail buyers don’t even consider these properties that they wouldn’t be able to take possession of for up to 2 years based on a lease.

Our net worth got a large injection by becoming vested in my public employee pension and then 50% of the bump came from investment returns. Who knows when this insane bull market will end, but with 4 rental properties I feel sufficiently more prepared for any downturn than I ever have before.

I’m still toying with the idea of including our vacation cabin in our net worth calculations. It’s a small enough % of our total NW that I really don’t think it matters either way.

Assets
Real EstateValueMonthly Income
IA Rental 3818$130,000$1,050
CO Duplex 1060$580,000$1,000
IA Rental 55th$125,000$1,200
IA Rental 15th$155,000$1,200
Cabin$55,000N/A
Real Estate Total$990,000$4,450
Tax Advantaged AccountsValue
457$77,800
401k$64,300
IRA$77,200
ROTH IRA$58,200
Spousal IRA$37,000
529$16,500
Pension$55,700$20k change from becoming vested!
Tax Advantage Total$386,700$500,000 goal
InvestmentsValue
Brokerage Vanguard$74,000
Brokerage WeBull$12,100
Crypto$46,000
Retail Business$415,000
Total Investments$547,100
Cash/SavingsValue
Checking$12,000
Real Estate Checking$7,000
Sold business note$17,000
Total Cash/Savings$36,000Spent over $100,000 on real estate this month!
Total Assets$2,014,800
LiabilitesTypeAmount
Mortgage CO DuplexMortgage$399,000
Business buyout loanBusiness$93,000
Mortgage IA 55thMortgage$95,000
Mortgage IA 15thMortgage$95,000
Total Liabilities$682,000
Total NW May 2021$1,332,800

Increase/Decrease single month
$64,000

May 2021 Goals and reflections

  • Set ourselves up to max the 529 each year for the next three years. (already done for 2021)
  • $2,000,000 NW by April 2024 – May21 update- Consider moving goal posts to quit F/T job. Other avenues to get health insurance to cut 1-2 years off. Rental property income is strong and won’t make the NW goal as important.
  • Closed on 2 rental properties in May 2021. I am not actively shopping for investment properties. The market is not great for remote buyers.
  • Invest $50,000 additional into CO Duplex in improvements to create a better income property by April 2023.
  • Invest $25,000 in cabin by April 2023.
  • Continue to max 457 and 401k until April 2023 – get pre tax to $500,000

Things to note for the coming months of 2021.

  • I’ve already achieved a June 2022 goal related to rental properties. I’m going to slow down and think through next steps. With the current real estate market and us having $1mil in real estate; building up cash to purchase aggressively in the event of a turn down might be a better play. If the market continues to rise then we are still doing well with a large real estate portfolio and if the market takes a dump then we have the cash to buy up entire city blocks.
  • Look into a Solo 401k or SEP IRA for my business income. I’m finding the rules extremely complicated with our situation – Single earner, many sources of income. The IRS has lots of avenues to tax shelter massive amounts of money and now is the time to put energy into that.

Exactly 3 years left!

The FireFamily has a lofty goal of being fully financially independent by April 2024. Since it is the middle of April 2021 as I write this that means we have 36 months remaining to get our shit together and meet the goals. This seems like a reasonable time to reassess the situation, see if anything has changed, if we are still on track and go from there.

GoalCurrent StatusTo do in next 36 months
Own 5 income producing units2 current, 1 under contract – Ahead of goalPurchase at least 2 more rental properties
$2,000,000 NW by April 2024$1,268,800Increase NW by $19,500 per month – a LOFTY goal
Max 457/401kOn trackContinue – Consider changing this goal to open up after tax cash for real estate?
Max 529 each year ($15,000/yr)2021 – DONE3 years to go
Pay off business loanautomatic payments/currenton track

When I look at my goals above I feel like perhaps the goals are too conservative and we could achieve quite a bit more in the next 36 months.

I expect we will have the rental property goal met much sooner than 2024 so I have adjusted that goal to be completed by June 2022. Once that goal is met then it will be logical to increase this goal to have more cash flow in retirement/travel.

$2mil NW is the only goal on here that feels like I will really have to work to achieve it. Since the timeline is so short at 36 months remaining I am at the mercy of the market to achieve this goal. I think shifting even harder into real estate will help us meet this goal independent of the stock market.

Maxing the pre-tax accounts is pretty easy as long as I keep my full time job. Everything happens automatically so that goal is not nearly as rewarding to achieve.

Maxing the 529 does take intentional action, but is absolutely not a problem. If the contributions were not maxed I might have considered dropping $50k or more into the 529 this year and never worrying about college savings again, but that’s not how the IRS works.

Paying off the business loan is another one of those goals that each month doesn’t feel super rewarding. Since the check is cut automatically from the business account I just have to count down the months until that burden is gone.

1,095 days remaining until I can quit my full time job. FireDad will be 39 and FireMom will be 34 with 100% freedom to take back our days. The FIRE community is one of the most important things I’ve ever studied in my life and I’m grateful every day for the skills I have learned and honed from this community.

NW Update – April 2021

Another month and another Net Worth update. Despite some expensive hobby purchases, bordering on excessive to drop at once, we still increased our Net Worth by $56,200 in the previous 30 days. That is well ahead of track to be at $2 million by April 2024, but this massive bull market can only last so long. I continue with my goals to move as much after tax savings from equities to real estate as possible.

We have a $122,000 real estate purchase with a tenant already in place that will close mid May. This is on track with the goal of purchasing 3 rental properties by June 2022. This property is the first rental property I’ve purchased that I’ll be using traditional commerical financing. I’ll write a detailed report of how that goes in a future post. For now, onto the updates.

Assets
Real EstateValueMonthly Income
IA Rental 3818$130,000$1,050
CO Duplex 1060$580,000$1,000
Real Estate Total$710,000$2,050
Tax Advantaged AccountsValue
457$75,000
401k$62,200
IRA$78,200
ROTH IRA$58,000
Spousal IRA$37,000
529$16,500
Pension$35,800
Tax Advantage Total$362,700
InvestmentsValue
Brokerage Vanguard$68,500Moved all single stocks to Real Estate checking
Brokerage WeBull$12,100
Crypto$50,000
Retail Business$415,000
Total Investments$545,600
Cash/SavingsValue
Checking$61,000BIG spend on Astrophotography this month…..
Real Estate Checking$67,000 (multiple closings soon)
Sold business note$17,000
Total Cash/Savings$145,000
Total Assets$1,763,300
LiabilitesTypeAmount
Mortgage CO DuplexMortgage$399,000
Business buyout loanBusiness$95,500
Total Liabilities$494,500
Total NW April 2021$1,268,800

Increase/Decrease single month
$56,200

April 2021 Goals

  • Set ourselves up to max the 529 each year for the next five years. (already done for 2021)
  • $2,000,000 NW by April 2024 – Current FI goal date.
  • Continue moving after tax investments from apps and into real estate; purchase 3 rentals by June 2022. – Under Contract with 1 property to close in May 2021
  • Invest $50,000 additional into CO Duplex in improvements to create a better income property by April 2023.
  • Continue to max 457 and 401k until April 2024 – get pre tax to $500,000

Things to note for the coming months of 2021.

  • $54,000 going to cabin purchase in May 2021. This will be a hobby/luxury expense and will not count towards the $2mil NW goal as it will be a liability property with additional expenses and will not be monitized.
  • Closing on rental property 2625 Mid-May with a mortgage. 20% down at 4.125% for 30 years is just crazy.
  • End of May/Early June FireDad’s pension should double as I become vested.

Budgets are stupid, exhausting and need to die

Budgets are the worst lie being told by the personal finance industry. People like Dave Ramsey are happy to sell you a shitload of useless products to budget more effectively. All you have to do is pay him some money for those products and he promises he will save you even MORE money back!

If you’re brand new to the concept of how money works then sure, budgeting is a great form of training wheels. Once you have a basic understanding of saving, investing and Money 101 then budgeting is a colossal waste of time and resources. How is budgeting still a thing that is being sold to people in the FI/RE community? 

Over the years I have tried every budgeting approach you can think of. I kept trying different approaches and then always giving up or failing. The reason I kept going back was I would fail then end up reading some blogger or article about how budgeting is the number one key to financial success! Turns out, that’s all bullshit.

When you look at ways to simplify your life you’ll want to look put the magnifying glass on every way you spend time each day. After multiple failed attempts at budgeting I was trying again. Putting each item I had bought in a spreadsheet to figure out how much I spent, trying to figure out how to categorize some random purchase and I realized this is a colossal waste of time. Don’t believe me? These are Dave Ramsey’s top 10 signs you need to spend MORE TIME on your budget.

1. You’re constantly worrying about money emergencies.
2. You use the same exact budget each month. 
3. You aren’t tracking purchases.
4. You don’t have a budget line for giving. 
5. You overspend in one category. A lot.
6. You forget annual expenses. 
7. You need space for a new budget line item. 
8. You aren’t budgeting to zero. 
9. You just hit a Baby Step milestone. 
10. Your budget doesn’t line up with your money goals. 
11? You Need to Refresh Your Budget by Season 

How many hours a month am I supposed to dedicate to this bullshit? I have to spend every single dollar before the month begins……why?

Here is what I do now and I have done for the last several years. It takes almost no tracking, no line items, no seasonal budget adjustments and it maximizes our savings.

FireDad’s budget approach:

  1. Automate all your savings and investments
  2. Spend less that what’s left in your account
  3. Don’t waste money on stupid shit

There you go! If you follow the patented FireDad budget not only will you not stress about your zero balanced budget, you won’t think about budgeting at all! Even better there are no envelope systems to buy, no software, no step by step books, this budget can fit on a sticky note you attach to your credit card and can sit in your wallet unaltered for years like that expired condom.

Stop wasting time on worthless tasks that over complicate life.