The road to FIRE (Financial Independence Retire Early) for me is paved $100,000 at a time. It took me three years to lay the first of what will be a seven-brick lean FIRE portfolio.
In January, I kicked around the idea of being able to actually lay another brick in two years. It might seem aggressive but since I won’t be buying a new home while laying brick No. 2, I figured it was more than possible.
But then COVID-19 hit and the market crashed. Perhaps I need to rethink saving my next $100,000 in two years?
In February, my portfolio dropped by 23%. It was a wake-up call. I could no longer count on the lovely boosts to my net worth, fueled by the stock market rising over the last three years. I like to set goals that I have to push for but I also want my goals to be realistic or else goal-setting can have the opposite effect and create disappointment and lead to a lack of motivation.
So I had to go back to drawing board on my goals and determine how long it would take me to hit a $200,000 liquid net worth.
While thinking about how I might still reach milestone No. 2 by December 2021, I remembered an article I read by Zach at Four Pillar Freedom, which said the amount I save is far more important than my investment returns at this stage of the game.
According to the blog, because I already have my first $100,000, the dividends and interest I receive while definitely working to help my net worth grow behind the scenes is still not terribly significant. That first $100,000 will help me reach my next milestone, perhaps two or three months sooner. That means if I continue to save what I’m currently saving along with the income generated from the first $100,000, it should take me 2.9 years to reach my next milestone. Great. But it’s still nine months longer than I planned.
That 2.9 years also assumes that I’m saving the same amount that I saved during the first $100,000, which is not the case. (I have been blessed to have picked up a significant amount of freelance work this year so I can save more).
It also assumes that I have the same monthly bills, which is also not the case. Since COVID-19, my monthly bills have been reduced by hundreds of dollars a month. Here are a few things I no longer pay for: gym membership, transportation, eating out, work clothes and entertainment. I’m saving approximately $700 a month more than before the pandemic.
With an increased savings rate and a bigger focus on less risky investments, such as a CD ladder, I should be able to add another $100,000 to the portfolio by my self-imposed December 2021 deadline.
I will continue to focus on making more money to save and invest and I won’t be focusing on stock market conditions as much.
My net worth has been trending down for two straight months thanks to the market dips. Let’s find out if the streak will continue. Time for the April’s net worth update…
April 2020 Net Worth Update
Checking $ 500.00 (no change)
Savings $ 4,150.00 (+$650)
Business $ 12,141.00 (+$1,500)
MM/E Fund $ 17,717.00 (+$590)
Taxable Investment Accounts
Ally Brokerage $ 15,741.00 (+$2,737)
Investing MM $ 111.00 ($75)
Vanguard $ 1,250.00 (+$225)
Acorns $ 988 (+$144)
Bonds $ 18,034.00 (+$327)
SEP IRA $ 12,987.00 (+$1,541)
Traditional IRA $ 22,713.00 (+$2,904)
Liabilities: Credit Card: $0.00
- Credit Card: I had no credit card bill to pay his month. I always pay my balance in full at the end of the month. But since COVID-19 I only use my credit card for groceries and I pay it the next day. I’ve been making Small payments on the mortgage principle with my newfound savings throughout the month. I’m nowhere near being mortgage free but I remember when I was nowhere near $100k net worth
- Checking: This account has been growing a bit. It all started with my gym membership not being deducted. I now have a $300 padding in my checking.
- Savings (P to P): This account is headed back up and will be capped at $4,500
- SEP IRA: This account managed to climb get back from the low it reached but is still down over $1,500
- Traditional IRA: I thought this account was going to have a breakout year and hit the thirty thousand dollar mark but time will tell. The good news is the dividend income has continued to grow. I’ve been picking up additional shares of my current holdings and even added a new monthly paying stock.
- Business Account: This account is growing but it’s not making any money. I’m going to have to make a few short term investments with it
- The E/Fund: Interest rates continue to drop and it won’t be long before this account is generating less than 1.00%
- Ally (taxable): Purchased a few shares of (MAIN, SPHD, T and O) creating $11.40 in new dividend income.
- Bonds – The current I-bond rate is 1.06% .This is now less than most online HYSA’s but I will continue to buy bonds. It was great to have a small portion of my portfolio not drop when the market crashed.
Remember, it is a fight to build wealth no matter where you are in the process. Everything around us conspires to take money out of our hands. But you must fight the good fight. Continue to save, invest, and grow your net worth even when it seems impossible. Save your pennies (copper) until they become dollars (cotton).