I’ve written previously about my plan for financial independence. Twice, actually. Once in My 10 Year Plan post and again in it’s sequel, My 10 Year Plan: 2016 Update. I know, I’m real good at coming up with titles. Be jealous of my skillz.
For those of you that have just stumbled across this little slice of FI heaven, I’ve give you the TL;DR version:
Work and save lots of money
Retire when I hit $587,500 by 35
Live happily ever after
That was last year. This is now.
This year, I’ll be changing the plan more times than a 17-year-old girl trying to get ready for a date with the football captain. (and no, not basing that off any personal experiences.…. or am I?)
I’ll be covering them in a series of posts, based roughly on how I expect/anticipate/hope things will go.
First up is this post, which will cover everything in the Accumulation phase.
The second post will cover everything the Financially Free phase (say that ten times fast).
The third and final post will cover everything after that.
Notice a distinct lack of numbers and dates. Things can change so rapidly one way or the other that I’m not sure it’s worth trying to pin a date or dollar amount to anything. I mentioned 2019 a few posts ago and almost immediately regretted setting that date on it. I would certainly like it to happen, and I’m going to strive for that with everything I’ve got, but as with much of life, there are no guarantees.
Before I look into the future, I want to take a quick peek back at where I’ve come from.
Start: Age 23, Net worth $10,000
|Year 1 (2014): Age 24|
Net worth $45k
Partially maxed 401k
Maxed Roth IRA
|Comments: I made a mistake when calculating how much went into my 401k. I included the company match. So, while I ended up with almost $18k saved like I thought I would, I actually only saved $13k. I did max out my Roth IRA though, and also rented a house. Total income: $76,314 (pre-tax)|
|Year 2 (2015): Age 25|
Net worth: $83k
Maxed Roth IRA
|Comments: As of December 2015, my net worth was $83,000 (ish). I maxed out my 401(k) for real and vested my employer contributions, in addition to maxing out my Roth IRA. I rented an apartment for the last 6 months of 2015. Total income: $80,526|
|Year 3 (2016): Age 26|
Net worth $128k
Maxed Roth IRA
partially maxed HSA
|Comments: My last year in the development program. I tried to buy a rental property that didn’t work out, so I continued to rent. I maxed out my 401(k), Roth IRA, and put some money into my HSA. I got a new job at the end of the year that came with a big fat raise! I moved from the apartment into a friend’s basement while I waited to buy a multi-family rental property. Total income: $82,269|
It’s nice to see I beat my 2016 estimate for net worth by a few thousand dollars! 3 years with really close estimates gives me a lot of faith in my estimating skills.
Which is a good thing.….. because it’s about to get way more complicated with the rental property thrown in there. But it’s a good complicated and I’m happy to add in the complexity!
Accumulation phase going forward
In the next two years I project I will have the following financials:
Total estimated W2 income: $150,000
Total estimated rental income: $62,000
Total estimated misc income: $25,000
Total estimated expenses: $60,000
Those numbers are before tax. However, I happen to know some pretty smart tax accountants, so I’m hoping my tax burden will be a great deal less than it was in years past. Between my rental property business and the blog, I’ll have lots of opportunities to apply as many deductions as humanly possible. Which, if you’ve ever taken a gander through the US tax code, add up to a significant number of deductions.
I make just about $77k per year. Not too shabby for someone 3 years out of college and in the Midwest. I do not expect to get any major bonuses or raises before I stop working. I do expect, however, to continue to work hard and have fun while on the job. I love my new position and don’t want to change jobs after the 18 month ‘freeze’ is up.
It’s so nice to come into a job I love with great coworkers. Having had several not as satisfactory jobs in the past taught me how valuable a good team and fun job is. I also like the fact I can make plans for projects in the future! My last jobs all had firm end dates, so I always felt like I was being left out when they discussed future projects.
The income from my W2 career will provide the capital I need to start and expand my rental property business.
Speaking of rentals.… I am staring down the barrel of closing on my first property! Now that the time is here, I’m equally parts terrified and elated. This is incredibly important to me and the last thing I want to do is mess it up. So you can bet I’m doing tons of research and coming up with a bulletproof lease (that’s being checked over by a real estate attorney just to really cover my bases).
This first property will produce just shy of $10,000 this year in income. Next year it will bring in approximately $17,000. If, you know, everything goes exactly to plan and I encounter no major issues. Knock on wood!
That will account for a good chunk of the rental income I’m projecting. So, you ask, where’s the other $35k coming from?
Ah-hah! Another rental property! (or two, or three!)
My goal is to have at least 3, and hopefully 4 rental properties to my name by the end of 2018. I want to buy another one this fall. That will be straight income producing, without me living in it. Then in the spring of 2018 I want to buy another property, one I can live in through 2019. Then in the fall of 2018, buy the 4th one (hopefully)! What a fabulous birthday present to myself that would be.
I’m guesstimating low for the income the properties will produce, since I can’t guarantee they’ll all be triplexes bringing in $1,500/mo. Property number two I’m guessing will net me around $5k for the year, depending on when I close and take over the property. I’ve set that number at $15k for 2018. Property number three I’m guessing will bring in $10k if I buy it in the spring. Property number four, the fall purchase, is set at $5k.
The “other” income category is exactly what it seems. Any money I make on things not my career or rental properties. That includes things like this blog, stained glass sales, and any other side hustles I come up with (anyone want to have me house sit while they travel the world!?). I’m working towards bringing in $10k this year, and $15k next year.
If any of this seems confusing to you, just know you’re not alone. I had to create a handy dandy graphic just so I could keep it straight!
On the other side of the equation is expenses. I’ve guesstimated those to be $60k for 2017 and 2018 combined, but honestly I have no idea. Buying properties and sprucing them up for renters comes with a fair amount of one time expenses. I know for sure my expenses will be way lower than 2016 as I’m no longer having to cough up $1057 in rent every month.
That brings me to the close of my accumulation phase. I’m going to continue to work hard, save lots of money, buy properties, and just generally diversify my income streams while keeping my expenses as low as I can.
.…I also said I wasn’t going to focus so much on numbers, and then proceeded to create an entire post around the anticipated numbers. The irony.
What do you think of my plan so far? Any suggestions or words from the wise?