Happy Un-Labor Day!

Financial Independence | Debt | Investments

Ah...Labor Day.  A day to celebrate the laborers and give them a day of rest.  It's also the unofficial end to the summer.

Labor is nothing more than the exchange of time (employee) for money (employer).  The problem with that arrangement is that the amount of time we have is unknown and every day spent working is a day that you can't do whatever it is you'd rather be doing; whether that's spending time with family, travel, having two stay-at-home parents, etc.

I, and many of you as well, am striving to make every day "Labor Day" by reaching financial independence.  Once your income from outside of work, be it stocks, bonds, real estate or whatever, surpasses your expenses you've officially passed the crossover point and can consider yourself financially independent.

That means you no longer HAVE to work in order to support your lifestyle.  

It's a simple enough concept: expenses < income = savings AND savings = investment capital AND investment capital + time = financial independence.

Do that consistently and you'll eventually reach financial independence.  Also the bigger the "gap" between your expenses and income the quicker you'll reach the end goal.

My own journey to financial independence started when I was laid off back in 2009 during the depths of the financial crisis/Great Recession.  It was that time off from work that introduced me to the concept, and gave me my first taste of, financial independence.  

Prior to taking the time to really learn about money I just assumed there wasn't any other way because everyone was just hopeful they could retire at a normal age, let alone early.

I had never really carried any debt, other than for my car; however, debt was a big success factor in determining how quickly you could reach financial independence.  You see debt, especially unproductive consumer debt, is a burden on your cash flow.  And instead of having compound interest working for you it's weighing your progress down like an anchor.

Over the last few years, partly due to us and partly due to things outside of our control, we had taken on debt for things other than our mortgage.  The 2 big payments, my wife's car note and the A/C replacement for our house, were eating up nearly $900 of monthly cash flow just in minimum payments.  Yikes!

That's why coming into 2018 our big goal was getting that non-mortgage debt paid off.  If we could accomplish that by the end of the year I'd consider it a success.  Fast forward to July and we'd made no progress on that except for the minimum payments.  Ugh!  Much of that was a lack of discipline in our spending, but it was also due to us playing catch up from the last couple years that included one of us being without a job at some point or another and both of us at the same time for about a 6 month stretch.  

However, that all changed in August.  We'd finally built up a solid cash buffer in case something happens and it was time to get serious about getting rid of that debt.  And we started off with a bang with $5k of extra payments made toward our A/C loan.  That was 25% of our non-mortgage debt gone just like that.  

The remainder of our A/C debt will be paid off sometime this month which will free up $300 of monthly cash flow to throw at my wife's car note.  Just throwing that $300 per month at the car note would be good; however, it wouldn't let us be rid of the non-mortgage debt by the end of the year.  I'm not one to just accept failure and since we have the means, i.e. income/cash flow, we're going to take full advantage of it.  

With the current remaining balance we'll need to average total debt payments of $3,100 per month to have it paid off by the end of 2018 or $4,133.33 to be done by the end of November.  For those that don't know my income is quite variable and as such hard to predict from month to month.  However, based on the first 8 months of 2018 I've been between $3-5k per month of positive cash flow.  I'm going to target November to have the car paid off, but if it pushes into December that's still well and good.

Even better is that once those 2 debts are gone our money will be ours once again.  At $3-5k per month of positive cash flow that's the possibility of investing $36-60k in 2019.  If that cash is invested at a 3% yield that's an extra $1,080-1,800 of increase to our forward 12-month dividends which currently sit at $6,452.56.  

By 2019 we will finally start making progress again on our journey to financial independence and hopefully un-labor day.

What setbacks have you faced on your journey to financial independence?  Have you overcome them yet or are you still working on them?