Talk about a reversal! Here in Minnesota we went from a 12″ blizzard to a 100 degree heat wave in month. That’s just nuts. Just like the weather though, my life has also taken a big turn. My stock’s number finally came up and I cashed out with a $40k gain pre-tax ($32k post-tax). I took out a few thousand and paid off my personal loan…and that felt so good that I pulled some more and nixed my student loan and most of my personal credit card debt too. What really pushed me over was the realization that by paying off these debts my savings rate would jump from 31% to 56%, moving my retirement timeframe up from 26 years to 12 years (if I used the 4% rule as my goal). I just couldn’t pass up the possibility of retiring in my mid 40s vs. mid 50s.
It’s wonderful to have so little debt now. That’s a $1,000 a month in payments I can keep in my pocket for the rest of my life. I can actually have a social life again and not worry about whether I’ll have enough cash in my accounts for every payment on the day that they’re due. Maybe I’ll even lose some of my grey in my hair as a result 🙂
A big reason this is possible is because of new tenants that I took on, a couple that kindly paid the first two months’ rent up front. That gave me enough cash in hand to take the leap and pull out more money for the student loan. I spent all last weekend showing the place off to various applicants and had the pleasure of seeing each one of them ask if they could have it. Some of them even went so far as to flash me dollar bills to secure the place. This gave me a large group to pick from and I went with the first couple who showed up, as I felt they loved the space the most. The final rent price turned out to be $850/mo + half of the internet bill ($34/mo) for total of $884. Not quite $900/mo as planned but dang close.**
Otherwise, with those loans paid off and my cash flow reestablished, life is looking great. I’ve got a $100k saved up in my investment account that I can use to trade with, or put toward my home mortgage and pay half of it off. I’ll give it until the end of the year before making a decision on that. By paying off half my mortgage I can jack up my savings rate from 56% to 68%, but this only shortens my working life by two years. On the other, I can keep trading with this money and perhaps make another good score or two and retire in half the time. I only need to have another $50k in the bank to make it worth my while to cash in my 401k and pay off the house entirely. I would then hit the 75% savings mark and be able to retire in 8-9 years and my personal expenses would be down to only $18k a year. Ignoring retirement entirely, I could really reconsider my career at that point and do whatever I want. It would take me years to have another $100k floating around like this. There is security from reducing risk, but I am also playing for time here and I should take my chances.
Lots and lots of stuff to think about in the next few months 🙂
In the meantime, updated figures are below. For the chart, the green assets line is plotted against the left axis, and the other lines against the right axis. The projected passive income is what I would get if I converted all of my assets to an index fund with a 3% return (the average 7% market gain – 4% inflation). Next month I will adjust this chart so that the debts are on the same scale as the passive income.
$1.2k in cash ($2.1k previously)
$34.6k in 401k/Roth IRA ($32.8k previously)
$101k in stocks (previously $75.6k)
$115.5k home equity (House value $300k – Home mortgage $184.5k) (previously$115k)
$1.2k employee stock contributions ($1.1k previously)
$0k (@9%, being paid off at $534/mo) (previously $5k)
$0k (@6%, being paid off at $600/mo) (previously $14.7)
$184.5k at 4.125%, being paid off at $1400/mo, half from me, half from a mother-in-law unit I rent out) ($185k previously)
$400 in credit card debt ($900 previously)
$7,000 owed to father for electrical work & contractor pay (previously $7,000)
$884/mo in rent.
** I will say though that I got particular pleasure turning down one guy who showed up three hours late for his showing, and then asked what he could do to convince me that he was the best candidate. It’s like, “Dude, the interview started three hours ago and its waaaaay to late to start thinking about first impressions.The dozen other people who came here didn’t waste my time.” Let that be a lesson to all applicants everywhere. Good units will always be in demand; show up on time or not at all.