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I WROTE MY FIRST column for HumbleDollar four years ago. In that article, I described how a midlife divorce had forced me to learn as much as I could about investing and personal finance. As part of that education process, I spent hours creating spreadsheets designed to predict my financial health over the next decade.
Planning didn’t seem difficult back then because my life was quite simple. I shared a one-bedroom apartment with my elderly dog. I was saving nearly half my paycheck. I invested that money in a few low-cost mutual funds. I had a substantial amount of cash sitting in a credit union, which acted as my emergency fund.
I set up spreadsheets to forecast my retirement account balances and net worth. I had documents designed to predict the exact day I could leave fulltime work behind. I spent hours modeling a variety of scenarios for my future self, accounting for as many variables as possible.
I anticipated annual rent and salary increases. I guessed at future rates of inflation and taxation. I estimated how much I might spend on car maintenance, veterinary bills and utilities. Every time I thought of another variable, I added another line to my spreadsheets.
There was, however, one variable I didn’t accurately anticipate: life.
In the four years since I debuted on HumbleDollar, I’ve remarried. I’ve purchased two homes. I now live with four very active dogs. And while I still have the same job, a global pandemic—something I didn’t predict in any of my scenarios—has altered nearly every aspect of my workday. The only constant in my life? I still drive a 2007 Honda CRV.
Do I regret all the time I spent trying to predict a future that didn’t come close to matching my current reality? Not at all. As it turns out, I’m still meeting all the goals I identified four years ago, just in a much different way than I imagined.
Back then, I set a target of accumulating a $500,000 personal net worth before I turned age 55. Thanks to record high stock market levels, as well as increases in home equity values, I’ve easily exceeded that goal.
In 2017, my retirement account balance stood at $250,000. Even though I no longer contribute a high percentage of my paycheck to the account, the balance has continued to grow and currently sits at $410,000. Add in my share of the homes that my husband and I now own, as well as my savings account balance, and my net worth—at age 53—is just shy of $600,000.
I’m still on track to retire early. Four years ago, I had no idea where I’d live when I left my job. I didn’t know if I’d continue to rent or attempt to qualify for a mortgage. Now, housing isn’t much of a concern. My husband and I own a home in an Arizona retirement community, as well as a house in Portland, Oregon, where I currently work.
The biggest change I’ve experienced over the past four years? These days, I’m not so inclined to try to predict my future. Instead of obsessing about the unknown, I’m more focused on enjoying the pleasures that go along with living on a day-by-day basis.
Here are three key lessons I’ve learned over the past four years:
1. Focus on the big picture rather than the small details. When I tracked every facet of my financial life, I often found myself emotionally exhausted. Any unexpected expense I incurred made me worry I wouldn’t be able to retire when I wanted. Stock market dips caused me to panic, believing my financial future was about to be derailed.
These days, I realize the only thing I need to focus on is my primary goal: Am I continuing to make progress toward a stable, comfortable retirement? The vision of what that retirement will look like, along with the path I take to get there, will no doubt continue to change. But for now, I’ve learned not to obsess about every fluctuation in my account balances, since I know I’m headed in the right direction.
2. Major life changes are easier when your financial foundation is solid. No debt, an excellent FICO credit score of 800 and a solid work history—including 23 years at my current job—all helped me to qualify easily for a mortgage. A sizable emergency fund meant not having to worry about the added expenses that go along with homeownership. Without that foundation in place, it’s likely my life today would look very similar to the way it did four years ago.
3. Some things never change. Four years ago, I didn’t have any credit card debt. Today, that’s still true. I also continue to live within my means. Despite qualifying for a $403,000 mortgage two years ago, I chose to purchase a home for significantly less than that sum. I drive a 14-year-old car rather than spending several hundred dollars a month on a car payment.
The fundamentals of frugal living, which I’ve followed most of my life, have served me well. I have no intention of abandoning them, either now or in the future.
Kristine Hayes is a departmental manager at a small, liberal arts college. She enjoys competitive pistol shooting and hanging out with her husband and their dogs. Check out Kristine’s earlier articles.
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Spend less than you earn, and save the difference in some form or another. Without observing this one basic principle, no other financial plan or scheme will work. None.
Yep. Even when I was in college (30 years ago), I took advantage of that principle. I paid for college on my own, with scholarships, part-time jobs and need-based grants. One year I got so many scholarships and grants, I was able to set aside a couple of thousand dollars in a savings account. I didn’t touch that money for years. It was the most money I’d ever had as a young adult and I treasured the comfort it brought me.
Miss Hayes,
You are a very smart blonde.
Congratulations for achieving Antifragility, by using your brains, having a good work ethic and controlling what you can control (which isn’t much).
May you continue to prosper, while enjoying life as it comes.
Kind regards,
Al
Thanks Al. I appreciate the kind words. I think my work ethic was formed when I was a child. I grew up on a farm, taking care of all sorts of animals. I learned early on there was no substitute for hard work.
Enjoyed your story and hearing your goals, which sound quite like my own. I’ve also spent too much time doing mental accounting, it’s almost a hobby. Getting a handle on what’s needed in my emergency fund, paying off all debt and feeling confident with the balance of my retirement fund has settled my mind. Now it’s time to simply live or live simply.
Mary. I love your philosophy of life! And I agree with you about the ‘hobby’ of mental accounting. I still struggle with not obsessing about every financial detail. I’m getting better at not fretting as much, but there are certain habits I just can’t break. When I got my first checking account (in my twenties), I would not only write down every transaction, but I’d also spend hours balancing the account down to the last penny. To this day, I still use a notebook to record my spending. I no longer do it in perfect detail, but I can’t quite let myself leave it behind. Enjoy your weekend.
I don’t want to pry, but I assume you have a pension and SS if you are contemplating retiring early (?) because I don’t see $410,000 as sufficient retirement assets and net worth isn’t always helpful to live on. As you realistically pointed out stuff happens in life and 30-40 years is a long way to go. Have you targeted a specific income replacement percentage in your plan?
Depends on your spend and what you value I suppose
To a point yes, but realistically what you may value doesn’t preclude what you need to live and deal with inflatiin over decades.
Well said.
I do have a pension (somewhat small, but not included in my net worth figure). I will also qualify for my own SS benefit, having already put in 30 years of full-time work. I may take on a part-time job when I leave my current position–that remains to be seen. I’ll be able to take advantage of a very generous retiree health-care benefit when I leave my job as well.
The other side of the equation, which I didn’t talk about as much in this article, is that I’ve never had a particularly high salary. I’ll likely leave full-time work behind having never made more than $75,000 (gross) a year. Four years ago, I was living off of a net amount of about $35,000.
YES, I’ve written in the comments of H$ articles that it’s crucial to make choices that align with what we want to accomplish in life. So many don’t look ahead, so don’t plan and make any choices. I am very happy Kris did!
Of course there are so many ways to invest it makes the need for knowledge important.
One of the biggest investment is time and how Ya gonna spend it?
Folks may want to look at any job, carrier or vocation as what will the exit from this look like? Before starting, look at the end.
I was 19 and started working for THE phone company. A supervisor mentioned that there were many who stuck with the company, and had ‘Dun Gud’ as it were.
At the ripe age of 50, they sold part of the division and we all were made to leave and started a pension. Staying with the job so long has so far given me over $440 thousand for the last 20 years.
From that company, I looked for the next chapter in life and found the mass transit industry to continue with, also while looking at the exit.
Now, fully retired I have another pension for life.
In June 2021, I’ll be 70 and so Soc Sec will be another income stream to turn on with maximum benefits with 51 years of earnings reported.
I have also a couple IRA’s to take annualized money from in 2022.
And, If I exit life before receiving a break even amount, I’m good with that. I chose to have a bigger payout for as many years as I live.
Yes, like Kristine I never had a ‘high earning’ job. But, making choices early in life is the key to retiring rich. 😉
I have to agree with you. Unless one is not counting spousal pension/retirement funds, $410k is a great beginning but is no where near enough to last the remainder of one’s lifetime.
The $410K figure is my own personal retirement account. I also have a (small) pension and will be eligible for SS benefits on my own work record. The pension and SS benefits aren’t accounted for in my net worth, nor is the value of my husband’s pension, SS benefits and rental income.
I agree about 410k not being enough especially with the cost of ammo these days!
Thankfully, competitive pistol shooters know how to reload.
You’ve done a great job with getting your financial life in order regardless of getting remarried. I’m curious as too how remarriage has effected your plans. You’re no longer saving at the same rate, so what’s the dynamic look like with your new husband. How’s his finances. You were very transparent about your own, but clearly that’s half the story now.
I actually wrote a Humble Dollar article about the financial implications of getting remarried: https://humbledollar.com/2019/08/nervous-bride/
I don’t mind being transparent about my own finances. In fact, I also wrote an article about that as well: https://humbledollar.com/2017/03/say-it-forward/
I do, however, limit transparency to my own finances. Nobody else in my family signed up to have details of their financial lives posted on the internet, and I respect that.
Excellent read. Very helpful lessons learned. Thank you
Thanks for the kind comments. I’m glad you enjoyed the article.
Good read! Big picture is so important as are the spread sheets. Most financial decisions are emotional and made over a cup of coffee or a glass of wine.
Thanks! I agree there’s a certain amount of balancing between future plans and current lifestyle that must take place to maintain ones financial ‘health’. I’m still trying to find the perfect balance, but believe I’m making progress.
Well done, Kristine! Thanks for sharing!
Thank you. And, you’re welcome. I really enjoy the Humble Dollar forum. It seems like I learn something new every week.
I agree. I learn something new every week – thanks to you and the other contributors. I am 54 years old, and a couple things keep me awake at night: the cost of health care – now and in the future, and wills and estate planning issues: who do I ask to take care of my day-to-day financial decision-making responsibilities if and/or when I am unable to do so? I will keep reading the Humble Dollar posts from you and the other contributors. I am sure you have or will provide some guidance.
Kristine – I like your humble and self-aware realism. Keep writing so we can all continue to learn from you.
Dave
Thanks so much. I appreciate the kind words. I love writing for Humble Dollar.
Congrats, don’t regret the hard work that put you in this position today. “Chance favors only the prepared mind.” – Louis Pasteur. It could be argued that if you hadn’t done all the fretting and planning these subsequent favorable events wouldn’t have occurred. Sure, could you have done a little less of this, or a little more of that? True for all of us, but I’d contend that, from where you are today, it should be a lot more comforting to say, “I made a plan and exceeded it” versus, “I rolled the dice, took a chance, and it didn’t work out”. I personally lean towards over-planning, but am learning what you’ve written about, that focusing on overarching themes is likely a better guiding focus than planning step by step. Thanks for a solid read.
Thanks for the thoughtful comments! I absolutely agree about fretting and planning being a necessary prerequisite for my current position. In a matter of a year’s time, I went from living a (relatively) carefree life with a large house, a new car and lots of ‘toys’, to living in a 700 square foot apartment, decorated with second-hand furniture, and driving a ‘well-loved’ car. All the ‘toys’ were sold and I had lost half of my pension. I had options. I could have accumulated massive amounts of credit card debt to ease my pain but instead I chose to save as much money as I possibly could, living off a fraction of my take-home pay. The sacrifices I made back then were worth it–they allowed me to be where I am today–but at the time, I questioned if I’d ever be on solid financial ground again.
Kristine: Thank you. Your retirement planning experience very much describes my own – even including a now elderly CRV that my wife insists on driving. I’m retired now, but spent years in the investment business telling clients they needed to write down on paper where their money comes from, and more importantly, where it is spent. Unfortunately, to do the kind of planning that you have done takes time and commitment – something too few people seem to have. I also completely agree that no amount of planning will anticipate everything in life. However, if you are willing to put in the work and defer a little short-term gratification, you may have a few more choices when life does throw you the inevitable curve ball.
You’re welcome! I’m glad you enjoyed the article–and aren’t CRV’s awesome? Mine still has less than 120,000 miles on it so I know it still has years of life left in it. As for planning? Well, let’s just say I’m something of a compulsive planner. It’s served me well in both my personal life, as well as my professional life. I actually can’t remember a time in my life when I wasn’t a planner, even as a child. Thanks for your comments!
We bought a 2004 CRV for our college age daughter. It had 184K miles on it. We took good care of it, making sure my daughter changed the oil regularly, etc. We sold it three years later with 214K miles (didn’t need it anymore) for the same price and they buyer was happy to buy it. Great cars!
Why did you stop contributing to your retirement account? Seems strange, although I’m sure you had a good reason
One word: Mortgage. Also property taxes. I am fortunate to work at a job where my employer contributes an amount equal to 10% of my gross salary to my retirement account, regardless of how much I do, or don’t, contribute myself. I still make small contributions out of my own check, but I traded large retirement account contributions for mortgage payments. The value of the house has increased at a rate of about 6% a year, so I think it was a reasonable trade. And, of course, having a house means having the ability to live with four dogs.
I’m late to this though wanted to tell you great read, Kristine – thank you.
You’re welcome. I’m glad you enjoyed the article.
Thanks for the article and sharing your insights.
You’re welcome. I enjoy being a contributor to Humble Dollar.