My Financial Journey

Wow – I can’t believe its already been five years since I started this blog. It really seems like its only been a year or two but looking back at where I started and where I am today its pretty obvious that some time has passed.

As I look back to those first couple posts back in December of 2005 – it amazes me how far I’ve come and how a few simple blog posts five years ago greatly affected the financial success I have achieved so far. In my 1st Retirement Nestegg Report I reported a total value of $24,616 and just 7 days ago I reported my November 2010 Nestegg report with a value of $155,708. Such tremendous progress, yet it happened step by step with lots of small mundane actions over the last 5 years that resulted in nestegg growing by 732%.

Five years ago today I knocked out four blog posts that set the foundation for this blog and my financial planning. I can’t emphasize how important it is to get your thoughts and goals written down somwhere – there is some magical power that comes from actually taking thoughts from your head and getting them down on paper/computer that drives you towards achieving whatever you wrote down. Do it!

Two posts from five years ago that really laid out my financial future were the blog posts “What are My Goals” and “Goals Rough Draft” In these posts I talked about the following goals for myself.

• Make $100,000 a year by the time I turned 30.
• Save $100,000 for retirement by time I turn 30.
• Have $1,000,000 saved for retirement by time oldest kid starts college
• Become financially independent early in life so that I can spend time doing whatever I want
• Help family and friends learn about money
• Save some money for my kids college education
• Have $10,000,000 put away for my retirement

Make $100,000 a year by the time I turned 30.
This was a goal I almost forgot about and really didn’t know if it was realistic and while I didn’t quite achieve it I came close enough to call it a victory.

Save $100,000 for retirement by time I turn 30.
This was probably my most open and visible goal and that one that seemed to get the most attention on this blog – see the status meter on the side bar. While in my final writeup I did admit to falling just a tad short of my goal – it is another goal that when I set it didn’t think was going to be possible, but in the end I was successful.

Have $1,000,000 saved for retirement by time oldest kid starts college
This one again I can’t believe I had as much foresight in 2005 as I did. I have been thinking of how to set my next financial goal for myself and turns out I already took care of it in 2005. I will be writing up a full post on this goal and this will start tracking it just like I did my $100,000 by age 30 goal.

Become financially independent early in life so that I can spend time doing whatever I want
The previous goal and this goal sort of go hand in hand and at same time they could be sort of contradictory. Having $1,000,000 saved for retirement is great, but at the time I will only be 43/44 years old and I can’t touch any of that money for another 15 years because its all in retirement accounts, so that means I won’t exactly be able to quit my job or take a low paying flexible job. This one needs more thought and I really need to decide what I really want from this goal.

Help family and friends learn about money
Regarding this goal I think I’ve done an OK job. I am certainly a person that a lot of my friends and family look to when it comes to money questions, but in the original goal I sounded a lot more ambitious about getting my younger family members into investing which I don’t think I’ve successfully done.

Save some money for my kids college education
Check – I have 529 College savings plans that I setup up for all 3 of my kids as soon as I got their social security number. I don’t contribute much to them ($15 per kid per month), but honestly at this point I’m not too worried about paying for their college education. My retirement takes priority and if my kids had to take on some college loans or work to pay off their own college it wouldn’t be the worse thing in the world. Besides by then I will be a millionaire (har har har) and could just turn my income spigot at their college education if I so chose.

Have $10,000,000 put away for my retirement
Well this was the pie in the sky end game goal and is something I think is feasible – its currently not date bound, but by my original projections I had created back in 2005 I had anticipated hitting $10M at about age 65. Now granted that assumed I would put away about $23k a year in my retirement accounts which I have not done the last two years as I have instead saved $70k for a new house we might build. It also assumed I would make 10% a year on my investments each year which is a pretty lofty task – though I have been pretty successful with my investments so far (I need to calculate my overall annualized return these last 5 years so see if its a realistic number)

Well its been a great five years for me and this blog has been so invaluable to me to be able to set goals for myself, track my thinking and decisions throughout time, get great feedback from other people in the personal finance community as well as those kind enough to leave me comments for me. I’m amazed at how often I refer back to my own blog when trying to figure out if I am on track for retirement or to send a link to a friend who asked me a financial question that I just happened to have a blog post about (all without them knowing I am the actual author of the post). This blog to me is clearly the single best financial decision I ever made and even if you don’t want to make your goals and financial status/decisions public like I have – I can’t urge you enough to write them down and keep track of your plans and thoughts over time. It is so valuable to be able to go back and re-read what you were thinking 5 years ago and what you had hoped to accomplish.

To those of you that have been kind enough to leave me comments and stay up to date with my blog over these years I want to say thank you. The readers and comments were an unexpected bonus of this whole blog experiment and have really helped me grow over these last five years. It has been a great give years and I hope the next five will be even better!

Well it seems like just yesterday I was in high school math class learning about exponentiation when a light bulb went off on my head about the power of saving money with compound interest on your side and now I’m 30 – holy crap time flies.

Since this is a pretty historic milestone in my personal finance journey as well as my life in general I thought it would be a good time to sit back and look at the good and bad from the last decade. Some of the items I list may or may not be entirely financial at first glance, but I’m certain they have all affected where I stand financially today.

Things I accomplished financially in my 20s

• Earned my Bachelor’s degree in Computer Science
• Got Married
• Had three children
• Bought a house (not sure that’s an accomplishment given the times I bought it in and well my position on the financial benefits of a house)
• Earned my Masters Degree in Business
• Started 401k, Roth IRA, 529 College savings fund (STARTING is the most important thing)
• Own two vehicles without any auto loans
• Never carried a balance on a credit card in my life
• Basically attained my $100,000 by Age 30 retirement nestegg goal
• Able to have my wife stay at home and raise our children
• Saved up $35k for our dream house fund
• Never had an argument with my spouse about money problems (I’m the luckiest guy in the world here where my wife and I see eye to eye when it comes to money)
• Never had to worry about how to pay the bills (I get extremely nervous when our checking account falls below $2,000)
• Created this blog

Overall from the positives I really was lucky enough to “get it” financially at a young age and then be lucky enough to get married to a person who thinks and acts the exact same way as me. Now don’t get me wrong we aren’t a pair of tightwads who don’t know how to have fun or enjoy life – its just that we both know whats truly important in life and what will truly make us happy. We don’t need to drop $30,000 on a new car to realize after the fact that owning something new and shiny is not going to make us truly happy.

For us the peace of mind of knowing that by forgoing so called pleasures now will give us the security and freedom to do what we want with our lives and not be worried about trying to pay down debt or being stressed out wondering where the money will come to pay the bills. Money doesn’t control our lives in fact I think its just the opposite – we control our money and are able to live our lives the way we want it – instead of so many people who have it backwards and don’t bother to learn how to manage their money because they don’t care or don’t want to deal with money when deciding what to do or what to purchase and then it ends up running them the rest of their lives.

Overall though I’d say from the list other than marrying an awesome wife – would be my degrees as they are the drivers of my income – amazing how a little work to get a few degrees early on in your life can change the trajectory of your income for the rest of your life. Quite possibly the best investment you can make. Obviously staying clear of bad debt and managing our money is good too, but I’d probably have to put starting this blog very high up on the list. This blog has been invaluable to me to get me thinking about my finances, setting goals for myself and writing them down (amazing how powerful this is), and then being able to constantly be able to come back to my thoughts and plans on this blog really has been a tremendous benefit. I’m sure everyone at some point in time starts planning out their lives or what they want to accomplish, but so many people don’t write it down somewhere and then after a few months/years those plans/thoughts are completely lost. The added benefit of doing it in a blog format is you can get incredibly insightful feedback from people who are kind enough to provide comments or emails on your content (this being a prime example).

Overall I am very happy where we stand today, but as you can see from the list below it wasn’t all easy and mistake free and I wasn’t exactly a model example in my 20s.

Financial Mistakes I have made or areas where I’ve fallen short

• Buying individual stocks on a whim when first starting out
• Investing $1700 of “dream house” money into individual stock
• Purchasing a whole life insurance policy
• Philanthropy
• Don’t have a will

Certainly the two stock related items on the list I probably knew better before hand, but can chalk it up to experience. When I first started out I had no clue what I was doing and like 99% of people should have invested in low cost index funds from vanguard and left it at that. I invested all the money at once in 4 individual stocks that I knew nothing about and looking back now lost a fair amount of money – in fact one of those stocks is now bankrupt. Before I bought those stocks I actually got talked into buying a whole life insurance policy and a rather large one at that. I understood compounding and didn’t understand the stock market at all so this was an easy way for me to get started “investing”. The more I read up and learned the more I realized what a horrible “investment” whole life insurance was and eventually cashed out for a term life insurance policy that I purchased over the internet and invested the rest.

Another area where I feel I have fallen short of so far is Philanthropy. My wife and I give to our churches, we pitch in on special items such as donations to Heifer International, family members running marathons for LLS, I volunteer at church and am a member of a Lions Club, but I feel that we could do a lot more with the amount of money that we give to charity and the regularity that we give to charity. We get better each year, but in the end I’d like to see us get at least to 10% of our income in cash donations. I have no idea where we stand on this right now, but I know its probably less than 5%.

A will – I have brought this up a couple times on this blog, have a family member who works for a law firm and can get us a family discount, have over $1M in life insurance, 3 kids, and still have no will. No excuse and this is something we need to do this year.

Things I have not accomplished but should in the next decade

• Create will (this year darn it)
• Build house
• Find job that gives me even more time to spend with family and travel during summer

I have an entire other post that I am working up with goals for myself before I reach age 40, but in general I see the next decade as my major earning years and at the end of the next decade I really hope to be in good shape. About the only stupid thing I plan on doing in the next decade is to build a house. Other than that I hope to continue my retirement savings and build up a nice nestegg heading into my 40s.

I have not calculated out my nestegg values going forward in quite a while but I know a few years back when I did I expected to hit $1 million dollars in retirement accounts by about age 42. This was very dependent upon getting good returns in the stock market, but in general I think by the time I hit 40 things should really be in cruise control. I hope to have most of my house paid off and a very nice cushion in my retirement accounts. When I hit 40 my oldest kid will be 14 years old and I hope that at this point in time since money will be less of a concern that I can become a free lance consultant, become a teacher, or do something that will afford me considerable free time where I can enjoy summers off and vacations with my family. Again look for a post on my XX by Age 40 goals.

In conclusion I feel like I made a number of positive steps in my 30s, I made mistakes that I can learn from, and hopefully in 10 years when I am writing up my “Holy crap I’m 40 – my 30s financial review” I will feel as good about the next 10 years as I did the last 10.