WEALTH FOR TOMORROW

We made some good progress in a quiet first quarter of the year. We are steadily moving forward in our journey to get out of debt and achieve financial independence.

After graduating from college a few years ago, I joined the rat race and started making my way up the corporate ladder. It did not take long to think about retirement and what it would be like to never have to work again. So, I started learning a lot about personal finance, investing, and anything money. However, due to having entry level jobs and my wife still in grad school, it was difficult to get any momentum going in our finances. Also, due to the massive student loans we took out, our net worth when we got married was about $200,000… in the negative. Since then, we decided to live below our means and really try to pay down our debt and save as much as we could. Since my wife started working full time after she graduated last year and my salary has been increasing, it feels like we finally starting to see more progress with both our savings and paying down debt.

Some important pieces in starting off on the right foot were: tracking all our spending, automating our bills, and making extra payments to our loans, starting with the highest interest rate first.

This is the first quarterly net worth update of 2016. Our retirement accounts include a Vanguard account for my wife with her old rollover IRA, her Roth IRA that we contribute to each month, and Simple IRA with her current employer, as well as my Roth IRA, and my 401k. I also opened a brokerage account at the end of 2014 where I invest/trade and contribute to when I can. We are not currently focused on having a large amount of cash on hand (emergency fund) as we still have some high interest student loans we are paying down (close to 8%). We always have at least a month or two in our savings account, but extra income after that is designated for extra loan payments. If there was an emergency that cost more than what we had in cash, I could sell individual securities, use contributions from our Roth accounts, or use a credit card. It is just a personal decision we made to do it this way, although I know there are many differing opinions.

 

ASSETS

	Retirement savings accounts	Brokerage account	Liquid cash
Q1 2016	$23,199.80	$6,363.87	$7,960.31
Q4 2015	$20,715.93	$5,228.28	$6,198.14
% Change	+12.0%	+21.7%	+28.4%

 

= $37,523.98

Our only debt is student loans. We use the avalanche method, putting all extra payments towards the highest interest loan until that is paid off, then moving on to the next highest.

We use a credit card with no annual fees and pays 2% back on all transactions, and we pay it off each month.

Liabilities

	Student loans	Credit card
Q1 2016	$144,561.57	$323.05
Q4 2015	$147,304.82	$2,843.49
%Change	-1.9%	-88.6%

 

= –$144,884.62

Net worth:  37,523.98-144,884.62= -$107,360.64

The following stat serves as additional encouragement to our loan situation. It is difficult paying so much each month but hardly making a dent on the initial balance due to the incredible amount of interest. I like seeing the amount we put towards the loans as well because that number moves a lot faster. This is the remaining loan balance and the amount we have paid off including interest.

Loan Balance	Paid towards loans
$144,561.57	$62,420.88

 

The spirit of this blog is to educate and inspire others to achieve financial independence. My wife and I got married right out of college with almost $200,000 in debt but with patience and discipline are working to one day become financially free. If we can do it, anyone can. With smart decisions today and plenty of patience, you greatly raise your chances to have wealth for tomorrow.