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Thursday, April 19, 2018

Are we Rockstars yet?

Say it to the tune of "Are we there yet?" your kids invariably sing when you're taking them on a road trip 😅

Our blog was recently added to the Rockstar Finance directory of all personal finance blogs. I had no idea about this aggregator site before a fellow newbie blogger mentioned it.

You can find us at the recently added list or the main list. We clocked in at #149.

Though this means that we're officially a part of the FIRE blogosphere, we are far, far away from being the rock stars of the demography that preach sensible personal finance. There are giants in this field and we learn and incorporate the portions that applies to us, in this phase of our lives.

Which bring me to the next point. And it is a rant. For which I'm apologizing right now. Having mentioned earlier that this is a judgement free zone, the next portion is going to sound hypocritical. But the incredulity of the stated facts are just too ...well, incredible, for me to not lose my mind.

While going through some of the blogs there were recently added to the Rockstar Finance directory, I came across this blog maintained by a lawyer. I will purposely not name this blog nor reveal the gender of the writer. This is not meant to vilify the person behind the blog, nor give them added eyeballs. This is meant to show how stretchable our various aims and goals are.

This person claims that they need access to a gym that charge $893. Monthly.

MONTHLY $893 gym expense. A completely discretionary expense. Let that sink in.

Despite the fact there is a student loan that is more than the average sized mortgage. Despite living in a city with high costs. Despite having a $30k car loan at 3.5%. All the above factors are perfectly fine, even when taken in aggregation. But all these debts, plus a $893 monthly spending habit is another thing.  Not only does this individual have zero qualms about it, the blogger goes on to make an astounding appeal to the readers to not cancel their own expensive gym membership. This is where it got my goat.

I am dumbstruck. I mean I'm sorry that I'm even doing this, but this affects me viscerally.


Thursday, April 12, 2018

Incomes (2018)

In this post we bare our incomes.

To state the obvious, we are a two income family. Both of us have professional, white collar jobs. One of us work in a large, publicly listed corporation while the other in a small, private firm. We are salaried employees getting yearly pay raises and almost-guaranteed bonuses, though the size of those bonuses vary from year to year, as do the raise percentages.

W's base salary is $95,506
W got a bonus of $2,785

M's base salary is $93,359
M's bonus was $11,422

Out total yearly income is (or would be if we continued our employment till the end of the year) $203,072

Incidentally, this was the first year that W outstripped M in base salary!

That's it, that is all our income.

In the near future, say, five months from now, one of our salary is going to increase by 50%. That will be a story for another day!

Note: If it isn't clear, these are all gross numbers.

Thursday, April 5, 2018

Purpose of this blog and why you should read it

[In our first post we had briefly described what this blog was about. This post is a deeper dive into why we are doing this.]

Another - pick your category: Personal Finance/Financial Independence/Early Retiring/Living Frugal - espousing blog? Kill me already!

Right? I'm sure that thought has gone through your mind as you came here. Relax. We're doing no espousing. No face punches. No eye roll. No shaming if you aren't saving 50% of your income. No judgment if you aren't engaged in some active side hustle. In fact, this space has less to do with you and more to do with us. Specifically, our progress towards financial independence :)

You see, the main point of this blog is to document what we are doing. Everything else is secondary. We don't see this turning into a profit making machine. We don't even envision making money off the blog, nor do we pursue any strategic or tactical ways for monetization. This is not some fall back option in retirement that will generate income. That's not the purpose of this blog.

Even though we hope to achieve Financial Independence sooner that most working Americans, we don't think that is a realistic option for many, many folks. That is just facts. The median household income in the US in 2016 was $57,617. The top 10% households earned at least $175,000. Our household income for 2017 was a tad under $200,000 (and this year has gone past the $200k mark). This is not bragging or showing-off but being acutely aware of cold, hard, reality. We understand we are in a very privileged position. We acknowledge how lucky we are to be where we are.

The historic bull market run that started in 2009 is one of the major reasons our assets multiplied. We would be doing a disservice to not call this out. A whopping 80% of our assets are tied to the markets. There will be a crash/correction. We don't know when. But from the crash, the markets will rise again :)

The *perfect* audience of this blog is someone who is in the similar income range as ours AND still not on the path to financial independence! We really hope we can inspire YOU - 30-something, probably dual-income, with kid(s), high salaried, white collar worker - to bring about a change in how you look at life, work, and freedom. Build your net worth and then control if you still want to go to the corporate job you have every morning. The answer could very well be yes, but at that point you're making a conscious choice.

Does that mean all others are excluded? Certainly not!

Some of you reading this might be discouraged. Discouraged that the $60,000 job you have supporting your family of four is absurdly low to even think about retiring before 65. That's not our intention. We hope you see what we are doing and take heart from it. We didn't start off with these salaries when we got married. If you are serious about gaining financial freedom start working on YOUR net worth, with strategies strewn around in the FIRE blogosphere!

If you're in a very similar boat as us, welcome aboard! Would love to hear from you.

Others who have gone through this stage we're in right now - we ask for words of encouragement! Or witty admonishments. We don't follow the typical FIRE truisms - we have 2 cars (with a loan on one!), we eat out a few meals every week, we have cable, we still use an electric dryer, we have no side gigs.

But we do everything in moderation.

The car loan is 0.9% and we still pay more than the minimum payments; none of the restaurant meals are exorbitant; we love live sports; we run exactly ONE laundry cycle every week; and we don't have time for side gigs (we had a rental for 2 years and sold it; too much hassle) with work, family, sporting, and volunteering commitments (and till this past February, part time school!). At least for the time being, we have absolutely no qualms and guilt about keeping it that way. And still be on track to be FIRE before our mid-40s, a couple of decades before the overwhelming majority of Americans do.

As for giving advice about how to get started on this path, we think, make that we know, that there are other bloggers who have done this for a long time, in a fashion that is far better than we could (probably!) do. There is no need to reinvent the wheel. Though from time to time we might sprinkle in tidbits about some interesting concepts. At times we will do some deep-dives sessions on something new we learnt or a future-state plan.

So, to recap. This blog is for anyone who cares about growing their money, and increasing net worth. We bask in the warmth (some would say "cold"; we beg to differ) of numbers. Everything you see in our monthly reports are what we are dealing in real life. No make-up, no mark-up.

Sunday, April 1, 2018

March 2018

Jan-2018
Feb-2018
Mar-2018
Assets
Retirement
477,705.20
468,813.18
495,327.97
529college
19,853.29
19,096.68
20,315.59
Bank Accounts
41,349.08
51,254.82
54,582.04
Investments
19,844.21
19,575.18
21,422.73
Bonds
12,371.98
12,584.32
12,607.70
House
300,000.00
300,000.00
300,000.00
Total Assets
871,123.76
871,324.18
904,256.03
Liabilities
264,002.67
260,845.04
257,299.46
Net Worth
607,121.09
610,479.14
646,956.57
Change MoM
23,077.28
3,358.05
36,477.43

A net increase of $36k for March, easily besting the $23k from Jan 2018! That's pretty good! We had a triple whammy of bonuses flowing in, the markets going up (till Mar 9, at least!), and paying down our debts by over $3.5k.

We're very aware of the fact that we're in the midst of a historic bull market. The crash will come, at some point. Maybe we're in the middle of it. We don't know :)

Here is what all constitutes our Assets and Liabilities. We have updated this a bit since some things have changed from over a year ago.

Friday, March 30, 2018

Some changes around here

This post is the 5th published post for March! Wow. Don't think we saw that coming when we started this blog.

Now that the master's program is done, we (I) have a little bit more time on our (my) hands. With that time, besides the increased writing, we incorporated a couple of administrative change around here.

  • We have now moved from www.networthanonymous.blogspot.com, to www.networthanonymous.com - bit more "professional"
  • Modified the name of the blog from New Worth, to Net Worth, Anon
  • Which prompted the new logo: NWA, which you will see on the top left hand corner of your browser tab


Let us know what you think!

Thursday, March 29, 2018

The CFI ...falacy?

Mr. Cubert at Abandoned Cubicle, who is a very talented, determined, and resourceful fellow (and a fellow Midwesterner!), has this strange article out there, extolling the virtues of Cash Flow Indexing. In a nutshell, CFI determines which loans to pay off first, freeing up, well, you guessed it: Cash Flows. It does not take into account the interest rates or the term of the loan. Mr. Cubert does a great job explaining why this works for him. I'd suggest you read his article first. This post, if not a refutation, is certainly an addendum to his!

One thing that is ignored in the CFI method is how not paying down your highest rate loans first, makes you pay MORE INTERST, in the long run and the short run. There's no going around this fact. You are freeing up CFs at the expense of paying more in interest.

Here is a Google doc (which you can download and play around) I created, a pretty simple one at that, which shows the affect of paying more - extra towards the principal - on 2 hypothetical loans: a 15-year $150k mortgage at 4%, and a 5-year $20k car loan at 0.9%. To make for an easier comparison, we'll assume both of these loans are taken out at the same

The CFI of the mortgage is 135, while the car loan is 59. According to CFI principle, the car loan is an "inefficient" loan and should be paid off early.

An extra payment of $1,333.79 every month will wipe off the car loan in one year, saving interest payments to the tune of $66.19. Whereas the same extra payment when applied to the mortgage would save interest payment of $296.72 over one year. The CFI method would certainly free up the monthly payments that was going towards the car in year. That is indisputable. What is also indisputable is that you are paying more by following CFI.

One thing that I still agree with Mr. Cubert is here: "technically smarter move would be to put any extra income towards higher yielding investments, as opposed to paying off the mortgage. But this is a long-term cash flow play for us. At early retirement, we plan to avoid as many recurring monthly payments as possible. Which is cash flow smart." We hope (and planning) to be mortgage free in the next 4 years.

I should stress another point here. I will take a 0% loan any day, even if I had the money to pay it in full and not take out the loan. Heck, we have checking accounts paying 1.55% now! With inflation, which is around the 2.5% mark now, any loan below that mark is essentially lending you money and paying you interest on that loan!!

In the first worksheet I've provided the year 1 numbers. The second worksheet has the whole life amortization schedule for the mortgage. You can plug in your own monthly extra payments to see how soon you can pay off your loan and how much interest you save.


Sunday, March 25, 2018

Earnest, SoFi, and CommonBond review

As mentioned in the last post, we consolidated the couple of outstanding student loans. To start the process, I looked to where most people turn to when looking for answers. Prof. Google. A quick search revealed some lenders who were consistently coming in top in most rankings such as Nerdwallet, USNews, and LendEdu.

On top of that, a few years ago MMM had published a post on how great SoFi was, at that time.

Decided to start off the process with SoFi, Earnest, and CommonBond. Tried LendKey as well, but they were pointing me to some Credit Unions implying the rates that were being offered were by Credit Unions rather then LendKey being the lender and servicer, so I dropped them from consideration.

Earnest
Their online interface is the best I've seen. Not only is it pleasant to look at, the guiding questions were relevant and intuitive. They asked more questions, gathering information about me to build up a holistic profile. Whereas SoFi and CommonBond (it seemed as if) treated me as a typical graduate, coming out of grad school, Earnest saw that I was part time student with a full time job. They took into account the steady source of income; the meaty bank, 401(k), and brokerage accounts. They offered me 3.25% 5-year fixed.
Pros: Lowest rate; quick turnaround; great customer support; approved loan
Cons: Can't think of any. Might have got a better rate if I'd gone for variable (as we intend to pay it in a few months) but that is mostly a call I took
Verdict: Clear winner

SoFi
Simple online process. They offered me a 4.125% 5-year fixed. That seemed to be high, but ok. I didn't take them out of consideration. Then they started asking for additional documents. I complied. Then they started sending out texts and emails about how they need the degree to process the loan. I told them I don't have the degree yet. The coursework is complete but I'll only get the degree in June of this year. I uploaded my official transcripts which clearly indicated all my course requirements have been met. I eventually mailed the CEO about my unhappiness with the process and the rate they offered. Someone called me back in an hour apologizing that I was frustrated enough to reach out the CEO. But they couldn't offer any solution to the impasse. No degree, no consolidation. I asked them to withdraw my application.
Pros: Nice interface; would have got $300 bonus by using the MMM referral; fast turnaround
Cons: Highest rate; rigid rule; more documentation than others; pushy
Verdict: Last

CommonBond
Similar steps as SoFi, though the interface is not quite as polished. I had problems logging in a couple of times. The page uses a lot of CSS. They offered a 3.65% 5-year variable. But here again the dreaded degree-rule reared it's head.
Pros: Lower rate
Cons: Slow turnaround; rigid rule; not a very pleasant interface; they ran my credit check as soon as I applied even before they could guarantee an approved loan (this pissed me off)
Verdict: Joint last

Note: If you are interested to apply for loans at Earnest, I have a code where you get a $200 sign-up bonus and I get $200 referral bonus. Please indicate in the comments section and I will reach out to you directly.

Wednesday, March 21, 2018

A deep dive into student loans

We took out student loans when one of us were in grad school. There were two loans taken out.
  • A Federal Sallie Mae (spun-off into Navient) loan in 2014 for $20,500 at a fixed rate of 6.21%
  • A private Discover student loan in 2015 for $15,000 at a variable rate of 4.99% (at origination), which now stands at 5.615%
The coursework of this program took 3 and half years. The total cost of this degree was about $80,000 including tuition, books, papers, case studies, "collegiate fees", a two-week international component, parking - basically everything included. So we paid out-of-pocket for the remaining $45k.

We've been making payments on the loans since they were taken out, even though nothing was due till after graduation, with a grace period built in. We've been pumping in around $1,500 each month into these loans for the past 5 months. Now that the last of the coursework is done, we decided to roll them into one low-cost fixed-loan and pay them off in the next 9 to 6 months. Here are the current outstanding balances on the loans
  • Navient: $2,745.67
  • Discover: $12,999.64
Earnest was the provider we went with and locked in a fixed rate of 3.25%. In the next post we'll talk about our experiences with Earnest and a couple of other highly rated student loans consolidation services. 

Friday, March 2, 2018

February 2018

Oct-2017
Nov-2017
Dec-2017
Jan-2018
Feb-2018
Assets


Retirement
438,995.45
444,555.30
457,770.07
477,705.20
468,813.18
529college
17,872.05
18,155.43
18,828.16
19,853.29
19,096.68
Bank Accounts
38,914.60
42,484.08
43,357.97
41,349.08
50,238.30
Investments
16,771.70
17,219.82
18,323.18
19,844.21
19,575.18
Bonds
12,353.96
12,355.76
12,357.52
12,371.98
12,584.32
House
300,000.00
300,000.00
300,000.00
300,000.00
300,000.00
Total Assets
824,907.76
834,770.39
850,636.90
871,123.76
870,307.66


Liabilities
271,658.75
269,276.88
266,593.09
264,002.67
260,845.04


Net Worth
553,249.01
565,493.51
584,043.81
607,121.09
609,462.62
Change MoM
15,583.90
12,244.50
18,550.30
23,077.28
2,341.53


Even though we pumped in more than the usual into our retirement accounts, due to the correction in the stock market, our Assets decreased in February. We also paid back over $3.2k towards our debt obligations. Result is still an increase in Net Worth.

Wednesday, January 31, 2018

January 2018

Sep-2017
Oct-2017
Nov-2017
Dec-2017
Jan-2018
Assets





Retirement
426,672.84
438,995.45
444,555.30
457,770.07
477,705.20
529college
17,214.84
17,872.05
18,155.43
18,828.16
19,853.29
Bank Accounts
40,419.20
38,914.60
42,484.08
43,357.97
41,353.08
Investments
15,237.29
16,771.70
17,219.82
18,323.18
19,844.21
Bonds
12,352.20
12,353.96
12,355.76
12,357.52
12,371.98
House
300,000.00
300,000.00
300,000.00
300,000.00
300,000.00
Total Assets
811,896.37
824,907.76
834,770.39
850,636.90
871,127.76





Liabilities
274,231.26
271,658.75
269,276.88
266,593.09
264,002.67





Net Worth
537,665.11
553,249.01
565,493.51
584,043.81
607,125.09
Change MoM
16,543.64
15,583.90
12,244.50
18,550.30
23,081.28

Another month of steady increase of Assets and decline of Liabilities, culminating in the largest MoM increase in Net Worth.