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I can’t believe it has already been a year of blogging since my last financial snapshot. If you’re interested in where I was last year about this time check out my first financial snapshot to a get a fuller picture.
I’ll cover the main things that have changed about our finances in the past year. Pitfalls that we’re still dealing with. And where we stand on the path to financial independence.
How I’ve Done Since Last Year
Last year my goal was to build a six month emergency fund. That didn’t happen for a few reasons. First, I felt comfortable enough in keeping my job and making money that I didn’t think it was necessary to have that much cash on hand right now. Others may disagree, but I think that it is important to use my cash more aggressively when I have less of it.
Related: How to Budget When You’re Broke
Second, we moved which costs a lot of money. That was an investment in lower cost of living and higher wages that has already paid for itself.
And third, I’m pouring money into investments right now so I’m not growing my emergency fund much.
Related: How Much Oh Crap Money Do You Need?
Pitfalls That I’m Still Working On
Anyone who says they are perfect financially is lying. I’m far from it. So here are a couple of pitfalls that I’m working on.
First, I still am a sucker for a sales pitch. I’ve learned a lot about how to avoid falling for the sales pitch, but it is hard. This year I made a few purchases that I’m not happy about because I wasn’t careful.
Second, I haven’t made investing a priority. I’m so laser focused on real estate, which I have made very small progress on, that I’ve neglected the easy win of investing in index funds. I’ve done a little bit, but every day I wait is less money an index fund will put into my pocket. So I really need to start investing some of that money.
I’m sure there are other pitfalls I have, but those are my problems right now. Hopefully I’ll correct them this year.
Progress Towards Financial Independence
The stated goal of this blog is to help people with little money make their way to financial independence. I’m trying to achieve financial independence on very little income myself as an example. And let me tell you, it is a difficult task.
But we’ve made some adjustments to our life to make it easier.
First, we moved to Texas. For those that have read my last financial snapshot you know that I used to live in Colorado. While I loved Colorado and I miss it very much we just couldn’t afford to live there.
There were a lot of reasons for moving to Texas, but some of the biggest were cheaper housing and higher pay.
Our monthly house payment went down about $300 and my monthly base income went up about $500 (not to mention less taxes). So that was a financial win.
Second, I increased my income with my side hustle. Last year I was already doing my side hustle as a notary signing agent, but because I lived in such a remote location I would drive for 2 hours at a time to get to appointments and it was getting difficult to do.
In Texas I live next to a large city so I’m able to take more appointments and drive much less, which gives me more time with my family. So it is a definite win.
On top of my increase base salary I’m looking at at least $1,000 a month in extra income doing my notary work very part time.
Third, we’re investing our money into cash producing assets. I haven’t talked much about our asset allocation, or anything technical like that, mostly because I’m still figuring it out myself. But we are putting our extra income towards cash producing assets.
Our biggest project right now is building a tiny house on our land. Part of moving to Texas was buying acreage to monetize. One way we’re doing that is building our tiny house.
So while our bank account isn’t growing right now, it will be once we start renting out our tiny house on Airbnb.
We’re doing other things to make money and reduce expenses as well. I ride my bike (with a motor on it) ten miles to work each day which saves a ton on gas. We rent out our land to campers which is slowly turning our home into an asset. My wife is working part time from home. We’re negotiating our bills. And other things that save us money.
Related: What is a Good Return on Investment?
My Goal And Where I Stand
All of the adjustments we’ve made have put us on better footing, but I must say that progress has been very slow.
My financial independence goal is modest to some, but it is really all I need. I want enough passive income to cover $3,000 a month in spending. I plan on getting this through a combination of real estate, index fund investing, and other residual income.
Real Estate Income: Basically $0
We haven’t started to make money on real estate yet, but I plan on finishing the tiny house and buying my first property in the next 6 to 12 months.
We do have some money in a REIT, but the dividends are quite small, so that is currently negligible.
Index Fund Income: Basically $0
I’ve been pouring money into my tiny house, so I have put very little money into index funds. Currently, the total amount invested is less than $2,500. So potential passive income is negligible.
Other Income: $30 a month
I’ve made a whopping $0.15 from this blog, which hasn’t been paid out to me yet. Also, I’ve put way more than that into it, so that doesn’t count.
I do have residual income from work I did in self publishing that amounts to between $20 and $40 a month.
At the moment that is my passive income. I know it isn’t impressive, but it takes a lot to get a train moving.
I’ve gone from backwards and making no progress to being 1/100 of the way to my goal of $3,000 a month in just one year. Yay!
Seriously, that may not sound like much, but momentum in the right direction is worth it.
The change between this year and next year will be much bigger!
By Next Year
Next year I plan to have $800 a month in real estate income. A minimum of $5,000 in Index funds. And I might even grow my other residual income if it strikes my fancy.
We’ll see where the year takes me.
What are your financial goals? Can I help you achieve them? Tell me about it in the comments below.
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A list of definitions used on this blog can be found here.
Emergency Fund: Money set aside to be used in emergencies only. When you use money from your emergency fund you will need to replenish it as soon as you can.
Assets: Things that put money into your pocket every month (or year). Sometimes equity in your house is also included as an asset, but I prefer not to include it. A car loses value every year (depreciates) so it is NOT an asset.
Asset Allocation: A snapshot of where you have your money invested that is usually compared to other asset allocations by how risky/rewarding your position is. For example, of all the money you have you could have 10% in stock, 80% in bonds, and 10% in cash which would be a very low risk and very low reward asset allocation. On the other hand you could have 90% stocks, 5% bonds and 5% cash which would be a higher risk and higher reward asset allocation.
REITs (Real Estate Investment Trust): A way to buy stock or ownership in large real estate projects. They operate almost exactly like a stock, but with real property instead of companies determining the value of your shares.