Net worth Update

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We absolutely love the Great Lakes!

Well, I have been away for quite some time but the family keeps me busy. Having 4 kids at home in the summer is not an easy task and my wife couldn’t do it all by herself, as well as it wouldn’t be fair.
My family and the summer have kept me away from the keyboard but I am still chugging along on the FI road; I can’t believe the year is already over the June hump. Many times I find myself wishing time to pass by quick just because I am thinking of all our financial milestones I will hit on the way but I am trying to correct that mindset; time is our most valuable asset after all.

Anyway, I will give you my net worth update and then add few more personal things in a separate section so you don’t have to read it if you don’t want to.

A Picture is worth more than a thousand words?

Well, not many thousands here but at least some. Here is where we are at and significantly better than a few years back:

:Untitled

It may seem like not much for many people but this really blows my mind. All the way unitl 2017 we were living from paycheck to paycheck, paying down credit cards and bills, gasping for the next tax return to pour it into our credit card balance and pretend to be out of debt for few months or weeks…
Now we have managed to be credit card debt-free through the whole 2018 year and 2019. No debt other than our mortgages and the pesky student loan we are battling.

Still from paycheck to paycheck

We are still from paycheck to paycheck with the exception that now our money doesn’t go to somebody else’s pocket as soon as I get paid but rather to ourselves. We are trying to always pay ourselves first. What do I mean by that? Well, we are easily having extra $800 each month after paying all our bills, but instead of using that extra money to eat out more or buy more things we are taking it straight to the most pesky debt we have, which is our 22K student loan. We have managed to pay almost have of it between last year and this year and hope to be done by 2021. Each month, religiously we take $300 out of my first paycheck and $416 from my second paycheck. Usually we save them up for a couple of months and then dump all that money on the student loan balance. That way the money saved up can be partially emergency fund.

The current balance of the student loan is 11K. By continuing making the same payment the balance should come down to about 8K. I am not that concerned about the interest we are paying; it used to be 6.5% but we lowered it to 4.75% by taking a home equity loan against our rental property.
In the worst case scenario our tax returns are usually around 10K, which should be more than enough to completely pay off this loan and remove those $716 from the debt ledger and potentially go back to fund my 403B.

Maximizing earnings

One of the key factors to position yourself in a good financial situation is to minimize your spending and maximize your earnings as much as possible. Widening the gap between income and expenses will pave your way to FI.
If you make a lot of money but you spend just as much as you earn, your net worth will go nowhere.

In the case of teachers the opportunities to maximize earnings are not quite as easy and usually require extra credit hours at an approved college or institution.
In my case, this year I was able to max out my salary after taking 8 credit hours of coursework. The investment was $900, but this small investment will bump up my salary for almost 6K, leaving me a couple of thousands short of the magic 100K! Woot -woot!

New savings

We will be enjoying some new savings once I start my school year. We finally decided to switch from PPO health insurance to HMO. The difference is about half price. I used to pay $220 bi-weekly(went up to $280) and now I’ll be paying only $122 per paycheck to cover my whole family of six people.
My car insurance used to be $100 and I was able to slash it down to $48 eliminating things I really didn’t need such as coverage for my car in case of collision with an under insured motorist a fault. I did this because I really don’t care about fixing my car in case of collision. It would be cheaper to buy another used car.
I also had some supplement health insurance in case of a collision with an under insured motorist at fault, which supposedly would cover medical expenses. My regular health insurance would be enough to cover hospitalization expenses, so I got rid of that.

I am estimating about $4K savings in health insurance and about $624 in car insurance, which I will most likely allocate to pay off our student loan.

The biggest optimization

Almost 4 years ago my wife and I took the biggest leap of faith trying to get out of the neighborhood we were in. If you have read some of my other posts you may know the story. We had to make a choice between selling our house and pocket maybe 5K after owning this house for about 12 years or rent it out for at least a year and make more than that with a positive cashflow of $500 per month.

So we moved out to an awesome area and became landlords. We have rented our first home to the same tenant for 42 months. We were scared to death at first because the only calls we could get were Section 8 recipients and we have heard horrible stories about Section 8 tenants. We had no option. We screened our tenant the best we possibly could and it was overall a pretty good run. The only hic-cup was a rent increase moratorium imposed by Section 8 to landlords due to funds cuts.

We weren’t able to increase our rent for almost 4 years and we were opting for the security of having a tenant that was always on time with the rent at the expense of some more income. However, nothing is forever and this summer I received the infamous call from my tenant explaining that after getting married she would no longer qualify to receive assistance. According to the tenant they couldn’t afford rent even when I didn’t increase it for almost 4 years.

Luckily I put a lot of effort on building an emergency fund that would cover a potential vacancy and repairs. As they started looking for a new place I also started to look for a new tenant. In the process I realized that rent has simply skyrocketed in the area. According to my area rental market I should be able to collect about $500 extra a month, which would leave me with a positive cash-flow of about $850 monthly. From 3.7K annually we were getting, now we will go to 9.9K!
Unfortunately, my tenant changed her mind and decided they wanted to stay with me after realizing they couldn’t find anything cheaper. Sadly, I had to say no. That sent things in a down spiral of nastiness and rudeness but at the end things worked out and she is willingly moving out after a few threats of evicting her. I felt sorry for the family but I can’t subsidize housing for someone who thinks that honeymooning in the Bahamas and going to Disney is more important than affording housing for her family.

This is a huge move for our family! We plan to use all those savings to continue investing and paying off the mortgage of this rental before we invest in another property.

Summer 2019

This summer was outstanding. We took a a trip to northern Michigan to bask in the sun and enjoy the unsalted, free-shark waters. We took our camper (used) up there and spent about ten days enjoying each other’s company. I have not calculated the total cost of the trip but I am estimating close to $1000 including gas, food, ice cream and a few eating outs with the fam. We did lots of biking, kayaking, hiking, paddle boarding, fishing, etc. Most of the things for free except for our ice cream nights which ran for about $24 for a family of six people; totally worth it!
In the next two weeks the whole situation with our rental should unfold. Old tenant moving out, new one moving in, Section 8 inspection, and sometime in between I will need to lay down 600 Sq Ft of laminated flooring to replace the rental’s beaten up carpet.
Wish me luck!

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Found this awesome Traffic Master floor for $0.49 at Home Depot

In the meantime, I just sewed a couple of holes in my old work shoes and I am just ready to start a brand new school year. I would love to squeeze another year out of my old Sketchers 🙂 My older kids don’t stop saying “why don’t you just buy yourself some brand-new shoes?” They don’t get it yet.

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Saving my shoes for another year of rumbling at school

I would love to hear about your summer. How are your financial goals for the year panning out? Are you hitting your financial milestones?

 

 

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Vacation on a very small budget

Michigan beach for a vacation on a budget
One of our favorite places to hang out.

 

As a teacher and father of four kids, summer vacations is something that we plan for with a lot of anticipation and look forward to.

From the beginning of our marriage, traveling was a necessity because my family didn’t live in the U.S. We took a few trips down to my native country in South America and enjoyed ourselves. Nothing extravagant, and for the most part we had where to stay for free.

As the years went by, we got more responsibilities and our trips became more sparse; instead of traveling every year, we did it every other year, then every four, five, and now we really don’t go anymore due to political and safety reasons. Especially after becoming parents it was just too much to afford the airplane tickets. For the six of us to fly there would be easily over six thousand dollars. Thankfully, we never got crazy with credit cards to make it happen. I wasn’t thinking about Financial Independence back then, but I always had in my mind the idea of “you can’t pay for what you can’t afford.” So, we were Ok with it.

At some point, we had a trip to Disney that was gifted to us by my in-laws. We all traveled together to ” The Magic Kingdom” and sure we had a great time ( the most exhausting time ever). But definitely a great contrast with what we have been doing for the last 8 years.

Most of us you know how hard it is for adults to escape social pressures and collective desires for wishing things. Even more difficult it is for kids when they go to school and talk to their peers. Working in a school it is not unusual to hear kids talking, even those in financial need, how they spend their weekends going to a plethora of places such as movie theaters, arcade places, trampoline ville, coffee shops, etc; especially in the winter months, although summer time doesn’t lag too far behind. Those kids conversations translate into lots of “wants and demands” from our kids, particularly at a young age.

We have never liked those places for our kids. Not even the play places from fast food restaurants. We also hate the idea of paying money to buy little trinkets through tickets and reward games. We feel that all those places are germ pools. I don’t think of ourselves as germophobics, but you know how it is, kids are sneezing, coughing all over the equipment, balls, game controllers and it is just inevitable.

Beyond that, there is also that feeling of being overwhelmed by people all wound up trying to win prizes, frenetically, shouting out their excitement with a soundtrack of some random upbeat pop music blaring from somewhere. Kind of like the same feeling as when you go to a mall. Everybody is there to consume food or buying goods of some sort.

Or like going to the grocery store when you are hungry, right? You end up buying more than what you actually need. You go to the mall, where everybody is buying and consuming and it looks so normal. Why not buying an ice-cream cone to each one of your kids so they can be like everybody else? Before you know it you are nearing your first hundred dollars spent; even when you could’ve pleased the family sweet tooth with a 2 for 1 sale at the grocery store for under $5 and still have ice-cream for another night.

Well, when it comes down to vacation time there are plenty of places where you can spend your money as if it grows on trees. Waterparks, amusement parks, museums, aquariums, zoo, you name it.
In our case, about 8 years ago we decided to go camping with our two first girls. My wife had some camping experience with her parents, and I also had my share of camping with friends in my native country.

With the girls being not older than 4, we decided to take a trip around The Great lakes. We started in our Chicago suburb and went up north through Wisconsin to spend the night with a friend, who kindly offered to host us in the Upper Penninsula of Michigan; better known as the U.P.

Beautiful scenic driving, great conversations with my wife and lots of sharing with the kids, as well as the expected crying and bathroom emergency needs.

We crossed the whole peninsula and made our way towards the Mackinac Bridge. We didn’t quite know where we were going to spend the night but were up for whatever.

My wife had heard about a place called Leelanau County, west of Traverse City, with various camping opportunities in the area. We decided to take the drive and made it to one of the campgrounds late that night. We helped ourselves to a campsite, set up and spent the night.

The following morning we woke up in the middle of a gorgeous forest about 50 yards away from the turquoise blue shores of Lake Michigan, with miles of white sand. Lots of historical sites to explore, mom and pop restaurants, quaint little towns and just magnificent scenery everywhere. Since that one time, we have been going back every summer to spend our family vacation time together in the same spot.

With my photography side hustle, I have been lucky enough to travel as far as Hawaii to cover a wedding event. I absolutely loved it. Also, in my younger years, I traveled on a dime to Europe a few times to stay with friends and explore what I could.

You may be asking, so what? Well, to each their own, but when I think about what makes a vacation a “vacation”, to me it is not necessarily where you go, or how fancy of a place you stay at. Sure a nice dinner by the ocean might be nice, but like the little trinkets you get at the arcade place, those things wear off. How much you spent in a hotel room, the wine you drank, the water slide at the water park, and all those things are just that. Things! What truly makes a difference in your vacations is the people you are with; how many times you laughed, chatted and truly spent time together.

Visiting a nice place is nice; don’t get me wrong. But I question how many times we judge our vacations by the level of fanciness and price tag on it vs. quality time that we spend with each other.

It took me a while to realize that I was just as happy going camping in Michigan with my family as I can be going to Hawaii to a fancy hotel. It may seem simple, but this thought really enlightened me. Many times we absorb desires from our social environment and we fall into the trap of making an irrational connection between happiness and material things. At the same time, these connections are costly and perpetuate a self-imposed obligation of keeping incurring into the same expenses that we expect will grant us happiness.

If there is one thing I love about the pursuit of FI is the idea of helping me align my priorities; time with my family Vs. possession of material things.

Usually, our summer vacation runs for about $1500. Six people plus a dog, for two weeks of camping, full of canoeing trips, kayaking, paddle boarding, swimming, biking, rock hunting, cherry picking, beer/cider drinking, lots of fires with smores and sharing.

I would not trade my very affordable vacation for Mickey ears or the most amazing Luau.

How about you? What’s your affordable way of having a memorable and affordable vacation?

Sharing memories by the fire with smores.
Lots of memories close to the FIRE.