This blog will be an attempt by me, FINomad, to be clear and open about my finances and challenges and to try to explore and dive deep into topics which touch on at least one of, but preferably two or even all three topics: Financial Independence (FI), Financial independence with the goal to retire early (FIRE), Real estate investment (REI) and Digital nomad-ism/Geo-arbitrage (DN). Topics will range from everything from frugality to leveraged ETF’s, AirBNB from both perspectives and so on. I have lot to learn, a lot to talk about and I will try to be as transparent as possible. So, lets start with what I am doing…
I am 45 years old, no 401k, depleted savings and no investments I am a previous digital nomad, who like many DN’s came back in good shape but not rich. However I have a very good job and do some work on the side with brings in money. I make between $130,000 and $149,000 per year as a higher-end 1099 contract tech worker and my credit is in the high 700’s, comfortably in the ‘excellent’ column which will make any real estate loans a lot easier. I have my first child, he is one year old, and I have started a college savings plan for him which I contribute to monthly.
My son is the impetus of the effort I am now making.
goals - within one year (April of next year)
- Be 100% out of debt and have an emergency fund set up
- Save for and close on first multi-family rental unit, 2-4 units.
goals - five years
- Rapidly expand rental unit purchases to at least 20 managed rental units.
- Get my real estate license
- Have $100,000 in Vanguard funds
goals - within the next ten years
- No longer work full time
- Have passive income that exceeds my monthly budgets
- Reinvest all passive income into investments until stopping working.
- Full retirement in Vanguard funds exceeding $1,000,000
- Own and manage 100 rental units.
goals without plans are called ‘dreams’.
First things first we need a plan!
I am going to be starting this site and this whole journey in the red.
Credit card debt is an emergency and I was not paying attention to it. I typically would pay down my cards and being a travel hacking churner I run my entire life through my credit cards – hell, I pay my rent using one of my credit cards. I have done this for a while and have about 350k in United miles and nearly 150k of Chase unlimited. (This will come in handy later)
A family household move across the country in a U-Haul, outfitting an entire house and changing to a new job wiped out my meager savings and put me in the red. So, I currently owe about $13k to my chase cards. Clearly the debt is priority one but establishing systems to staunch the flow of money out is critical to the goals we have set.
steps taken to conserve money to pay down debt
- Transferring debt to 0% APR cards to stop the bleeding.
I have initiated the transfer to a 0% APR for 14 months card at BofA with amounts from the Chase cards of $3,000 at 17.24% and $10,000 at 21.24% (ouch)
- Cord-cutting, halting subscriptions not needed.
We have been cord cutters for a while and don’t have cable or land-line phones. I had several subscriptions I canceled, including video games I didn’t play any more and the most pressing was insurance using my credit card because it was causing cash advance fees.
- 72 hour rule on all new purchases
meaning if there is something I think I need, I am making myself (and Mrs FINomad) wait three days and then if I still think I need I will buy it. This is not for basic food items, this is for things like books, games, furniture etc.
- Establish a budget, an actual budget (see the Recommendations page)
I use Tiller and have been really happy with it so far, I have gone in and organized my all purchases.
- Identify current areas in the budget that are serious issues and address them.
I was being murdered in fee’s, hundreds per month in cash advance fees for my insurance payment and account maintenance fees and then our grocery bill was astronomical. Shopping at Kroger was costing us nearly $1500/month! And the “misc” category was out of control, it was just “stuff” from Amazon.
- Begin to change shopping habits and explore cheaper alternatives like low cost grocery stores and find apps that help you find deals.
In my area we have Aldi grocery stores which are low cost and apps like Flipp (I’m still on the fence about it) help with looking over the sales at stores in the area. crushing your grocery bill.
- Sticking to the list when at grocery store.
This is harder than you think, but it is mandatory for me, I am prone to finding fancy foods and thinking that I need them.
- Cooking more at home
I make a lot of my own foods at home now, including the following expensive ones from the stores; kimchi, sauerkraut, pickles, kombucha and some other pickled veggies. Buying a bottle of Kombucha at the store can be $6 or more, making a gallon and bottling at home is easy and fast. Part of cooking at home means that you need to plan ahead because you need to know what you need from the store.
- Not eating out as much
This one I set a budget of $200/month, which promptly got blown out of the water because the mother in law came into town. However, I am being careful eating out lunches at work now and will be bringing in my meals when possible.
- Take advantage of bulk savings at Wholesale stores
Costco membership costs about $1/week, I drive into the office for meetings twice per week and the gas savings alone is worth the $1/week price. Other dry items that you can buy in bulk also have savings that add up fast and meat is one item that is significantly cheaper at Costco. If you don’t splurge buy and keep your receipts for the price protection guarantee you can be okay.
- change habits
I quit smoking seven years ago, and Mrs FINomad has switched to vaping which has been a massive savings. We also have changed our drinking habits, so when going out no ordering drinks at restaurants and buying cheaper alcohol at home. No more fancy bottles of wine, but we have found we don’t really miss it and have also decided to entirely quit drinking for a time.
- Combine savings at specific stores
If you are like me you get the 20% entire purchase and $10 off coupons for stores like Bed Bath and Beyond, we save these coupons and use them together on larger purchases that we need to make.
That is the basics and I have to make sure I really work to stick with the budget I have set.
When doing this it’s important to go through your items and make sure your categories are correct for each line item and organizing each of these can be eye opening, paying close attention to your budget is critical.
Second thing, consolidate and reassess.
I need to call in a few scattered investments, perhaps $5,000-$6,000, mostly in cryptocurrencies but also some in Fundrise, TD Ameritrade, Robinhood and Schwab. This consolidation will help jump-start out of the debt hole I am in. With the current budget and consolidation I should be able to be out of debt in May.
This leaves me nine months to save for and buy a rental property. Assuming my savings rate of $6,000 month that is $54,000, I need to be able to with. My options here are:
- Buy with 20% down, a 30 year loan and entirely or partially finance the property rehab.
- Househack it with an FHA loan for the 3.5% down and live in it for one year.
- Go big and go for more than 4 units.
The house hack looks like the better of the choices and drastically opens up the door of purchasing multi-family units which may be in a much higher range range. The 3.5% down means you I will need between $3,500 and $17,500 for the range I am interested in, which would leave the rest of the money available for the rehab and to act as a buffer -or- as a down payment on a second unit which could be a single family home.
now to wait.
I will be posting here monthly with my entire budget, sometimes I will post more if there are specific things I am interested in getting into. I will begin next month with my final budget for March and what worked and what did not and will discuss what worked and what did not.
Thanks for reading, see you then.