Back in 2016, we had just started on our journey to destroy our debt, while mapping out a plan to achieve financial semi-independence. A lot has changed since then, including the addition of twins and moving to a forever homestead. Have our goals or strategies changed too? What can we use from this re-evaluation, going forward?
I recently started reading a few posts from the beginnings of this blog, for some perspective. It’s getting close to a whole decade in which I have felt trapped in my occupation, craving more time for my family and hobbies, and struggling to side hustle, while living a frugal life. Sometimes, motivation to persevere can only be found in progress of yesterday’s efforts. This is an excerpt from: “Road Less Traveled Challenge: Reverse Engineering A New Lifestyle” published on June 21, 2016:
If there is one road for the traditional spending and saving patterns and another for early retirement, we’re traipsing through the forest, making our own path, somewhere between those two roads.
First of all, unlike many other personal finance bloggers, we do not rely on formulas and spreadsheets. We are not waiting for a magical number representing an amount that we can draw exactly 4% from and not have to worry about money ever again. Our debt prevents us from just saving a high percentage of our income to amass significant investments. Yet, we want to find a way to not spend the next few decades of our life working full-time employment.
Our solution? We are reverse engineering our freedom. We have set a (somewhat flexible) deadline for fixing our finances. The goal is to have all of our debt paid off by then, including student loans and mortgages for our house and the rental property. Once the debt is gone, we will save as much money as possible. This will allow us to only worry about earning enough money to cover low living expenses due to our adherence to a frugal lifestyle. It doesn’t take very long to calculate how much you need to survive, with no mortgage, car loan, credit card interest, or student loan payments. The total is really not all that much. We have one rental property that will bring in some income. Mr. Smith and I will do miscellaneous work here and there to bridge the gap.
And, I have a 401K that will grow until we need it in our old age. Finally . . . compound interest will be working for us instead of dragging us down!
The average individual allocates their earnings to make minimum-due payments and a small contribution towards retirement. The rest is spent. The person striving for early retirement puts as much as possible in savings, so they won’t have to bring in any income.
We’re forging our own path by creating a middle ground where we pay off debt while funding assets that will give us financial security. I really like the phrase used by Slowly Sipping Coffee. Their plan is “to begin a fully funded lifestyle change.” Again, regardless of the specifics, everyone’s goal is more freedom. When you are chained down by debt, whether it be credit cards or a mortgage, your job is essential. If you were fired today, wouldn’t you first thought be, “how am I going to pay the bills?”
While the details may be different, many of us are on a mission rid ourselves of that uncertainty. As opposed to those who have fully retired early, we will still have to do some part-time work, but it will be on our own terms. There will be much more flexibility in our schedules, allowing us to experience life more fully in the near future, instead of decades from now.
Well, for better or worse, it was a vague roadmap for our journey. The first thing that struck me, when reading this again, is that the old plan did not include a new home, as I discuss only ONE rental property. Clearly, we did not account for our new, 16-acre homestead, in the original plan (with a big new mortgage). I don’t remember exactly when we decided to look for a new home, but it was definitely at some point after the size of our family jumped from five to seven, with the addition of our twin boys.
The overall goal of flexibility is the same. We understand that when we are able to retire early from traditional jobs, there will still be a need to earn some income, even with a frugal lifestyle. The debt is now paid off, including student loans, but we still have three mortgages. Another thing that is aligned with our prior roadmap, is building up a 401(k) for old age. I have continued to invest in my 401(k) over the years, and received some profit sharing contributions. Of course, we also had hoped to be semi-retired by the age of 40, but Mr. Smith and I both celebrated our 41st birthdays this year.
Another change from the previous plan is that my crochet is actually becoming a side hustle. At the time of the previous post, I had just started dabbling with crochet, and expected it to be only a hobby. But I’m actually signed up for two craft fairs this fall. There is definitely a learning curve to making money at craft fairs, but I appear to be on the right track. In addition, I foresee us adding more to our inventory at craft fairs in the future, with different products from our expanding homestead.
At this point, it seems like we need to focus on paying off mortgages, especially for our first home which is down to about $30,000. In addition, we really should try to make the most of our new property, finding new sources of income, and to further decrease our spending. We have been planning on selling some of the eggs (as we’re now getting a ton of duck and chicken eggs). Mr. Smith has been cutting lots of wood to help keep heating costs down this winter, and has also talked about selling either bundles or cords. I want to look into more things to grow on the land, from garlic and mushrooms, to raising bees for honey, with the goal of producing enough for us and some to sell. These amounts may seem negligible, but our success in paying off debt has taught me, that little amounts can add up very quickly.
We do now have two rental properties to rely on for somewhat-passive income. Our friend is still occupying our first home, for a rental rate less than our mortgage, because it needs to be fixed up. He is planning on moving out in December, so Mr. Smith will be focusing on that property in the new year. Once the work is done, we can rent it out for a good monthly profit (even more if we can pay off the small amount remaining on that mortgage). Mr. Smith spent months sprucing up our last home, and it was rented out to a nice little family as of August 1st. It is currently making us a profit of about $600 per month (after mortgage and insurance). We have had some discussions about selling both properties, and using the funds to pay off the mortgage for our homestead. However, then we would be without these sources of income – and once the mortgages are paid off, this is probably going to be at least $3,000 per month.
In conclusion, it looks like it will take more time and financial effort to attain financial semi-independence, in that we now have a third mortgage to pay off. We need to find more ways to use our new property to generate income. However, once the mortgages are gone, we will be in a much more stable position, with two rental properties to support our living expenses.
Life always seems to throw you off track, so it’s important to build flexibility into all roadmaps.
