[Welcome to round II of our new Financial Confessions Series! We often think about how awesome it would be to have grown up rich and have tons of access to money and opportunity, but this story here shows that it’s not always as glamorous as it looks.  Huge thanks to “Jeremy” for letting us share his story and being so open about it! I get glued to these!]

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I’ll start by saying that I am very proud of my dad for all he’s accomplished in his life despite his childhood. He’s the funniest guy I know and one of the smartest, too, but he’s also one of the biggest assholes I’ve ever met.

My dad’s story starts as one of the poorest families in his hometown. I’ll spare the details (think emptying chamber pots in the late 50’s when plumbing wasn’t a thing, and being beaten for eating out of turn) but his upbringing also motivated him to be hugely successful in business.

Growing up, we took grand vacations (Christmas in Hawaii, family condo in Cabo San Lucas), had amazing cars (I learned to drive a manual transmission on his corvette), lived in a beautiful 4,600 sq ft house complete with wine cellar and full bar, and every weekend I was up at 6 am ready to help him build houses (all 4 of us kids were expected to work 7 days a week).

As a kid I didn’t complain and just did as I was told to, because saying no was never an option. Then I moved to Kentucky in my late teens and my dad disowned me for 2 years. It was then that I learned about the strings attached to Dad’s Money, and how he used it to manipulate those around him.

His money made him demand respect from all of us, but taught us that he will never give us that same respect himself… I think he still owes me about $5,000 in back wages which I’ll never collect on.

Moving away also taught me where true happiness comes from, and while I may not have the fanciest house or condo in Mexico, I’m at least not ruled by my money. I’m much happier than my dad is right now.

I never cared about labels and I didn’t want to go through life working to pay some astronomical mortgage and not live my life. I was quite content shopping at Mervyns (West Coast chain) or getting my brothers’ hand-me downs and driving an old ’83 Prelude I bought myself.

My dad equates success with people admiring him for his nice things. Money is essential to live on for bills and much needed vacations, but it is not an excuse to treat people with anything less than kindness and respect.

I believe that now at my dad’s age he’s starting to understand that. He recently sold his beloved house in L.A. for a much smaller house in Washington State. He still spends money on his wants (restoring an old car, paying cash for a brand new truck and RV), but he’s realizing that all we ever wanted as kids was his time and we couldn’t care less about how much he made.

When people who have known me for years comment that I grew up rich, I have to remind them it was all my father’s money. Though they do fondly remember all those awesome parties I threw in high school. :)

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That last part about the kids kills me every time as a father of two little ones :(  I can’t even imagine not loving and spending time with them!

All good things to think about for sure though. Life isn’t always as it looks on the outside, and I give Jeremy here mad credit for doing his own thing and sharing it with us today. Thanks man!

If anyone else ever wants to get something off their chest, you know where to find me ;)

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PS: Here’s the 1st confessional we posted up the other week in case you missed it: “I Became So Obsessed With Being Rich That I’m Now Sitting in Prison”

According to a survey of 1,911 millennials asked by Acorns, almost 10% of them would! And for only $10,000 of debt clearing too – that’s pretty ballsy.

Of course, that also means 90% of them wouldn’t dare risk it, but that doesn’t make nearly as titillating a blog post ;)

How about you? Would you do it? I asked a similar question last year about taking $1 Million in exchange for a *year* in jail, and just like with that one there’s no way I’d risk it for debt, even if for just a week! I wouldn’t survive a day there.

Interestingly enough, my friends on Twitter had the opposite reaction! Check out this poll I did yesterday, although admittedly I left out the $10k part:

The message is loud and clear – people really hate their debt! Haha… I hope no reality TV producers are reading this right now, because I’m pretty sure they’d have a hit show on their hands and I REALLY don’t want to see how it would play out in real life ;)

FYI: The company behind this report, Acorns, is a fintech app that specializes in helping people invest more automatically and passively in their lives. Long term readers will know I’ve been using them personally for almost two years now, and so far have just over $600 invested simply from rounding up my spare change. It’s a pretty cool app if you’re needing some help in this department: Acorns.com.

Here were a bunch of other juicy stats from their findings too – I can’t resist not sharing :)

“41% of all millennials admit to spending more on coffee in the past year than they invested in their retirement. “

!!!! I like coffee as much as the next person (in fact, I’m literally sitting inside Starbucks right now drinking a cup as I type this), but man does that sound bad when compared like that. If I guestimate my own coffee expenses here real quick I’d say I spend about $40/mo between take out and brewing at home, which comes out to what, almost $500/year? I’d never retire at that rate :(

(Though to give fair credit to the younger gen – I probably would have answered the same thing depending on when I was asked. So there’s always hope for a great turn around!)

“Most [millennials] are willing to give up the chance to meet their favorite celebrity to pay off debt.”

Umm yeah, I would hope so!!! Haha… Unless you could convince your favorite celeb to meet up AND wipe away your debt at the same time? That would be pretty sweet… If I ever get rich and famous, you have my word that I’ll do this for one of you every single year here on the blog ;)

“70% of millennials anticipate an impact in their finances in the next 10 years due to the new political environment.”

I only got one thing to say about this: Ignore it all. YOU are in charge of your money, no one else!!!

“Almost 75% of millennials do not have a monthly budget, and only 60% have a general sense of where their money goes each month.”

Come on, Mills! I want that to stand for Mill-ionaires as much as I do Millennials – y’all gotta up your game! It’s honestly not that hard once you get going. And here’s a secret: once you wrap your head around it you don’t have to continue tracking every last penny anymore! Just get it all figured out first and wean yourself from there.

“More than 80% [of millennials] don’t follow market trends more than once a month.”

I’m pretty sure this is supposed to be a bad thing, but GOOD JOB!! Continue ignoring it all – it’s just noise. The media is a business like any other, and all they care about is *views* – not your money. It’s fine to check in here and there and be aware of what’s going on around you (especially if you’re passionate about it AND learning), but PLEASE do your best to focus on what’s in your control vs that which isn’t. Just like with TV in general or Facebook/Twitter/social media – if you catch yourself leaving them feeling worse off than when you got there, it’s highly time for a change!

Okay, that’s all the stats for today. If you want to read the rest of the report, you can check it out here: Acorns Money Matters Report™, or hit up last month’s article on some pretty explosive money stats.

They never get old :)

So remember: track your money, invest more, ignore the noise, and whatever you do – avoid jail at all costs! You can’t even read my blog in there!*

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*I’m postulating here since I have “sexy” in the blog name, but why risk it and find out? What would you do without BudgetsAreSexy in your life, can you imagine???

What’s up party people! It’s Monday – get excited!!!

What’s that? Mondays are lame?

Okay, let’s try it again – It’s Monday, y’all!! Check out this awesome new savings idea I just heard, along with a raw and transparent history of someone’s real financial life who just laid it all out in an email for us to gawk at today! Get excited!!

Any better? :)

If so, continue reading… (if not, click here)

Hey J. Money,

I hope you’re doing well! I have been a reader since at least 2010 (WHOA where does time go?). I started out adulthood with a pretty rotten relationship with money. I came from a lower middle class family and never really learned at all how to handle money.

At 17, I was the first person in my family to go to college, and was highly encouraged by friends, family, and even my school’s financial aid office to finance my education with loans. Fast forward a few years, and I had $70,000+ in student loans and a bunch of credit card debt, which I ended up paying off through a probably shady consolidation agreement.

That was a few years ago, and I am still learning how to realistically manage my money. I am definitely guilty of lifestyle inflation. After being underpaid for years and really struggling to make ends meet, I’ve had about a 40% pay increase in the past few years, and almost no additional savings to show from it despite simultaneously reducing my cost of living. Throughout these years, I have been an on and off reader of Budgets are Sexy. It’s hard to read about personal finance, when you just want to buy cute things and pretend the future will take care of itself, ya know?

Anyway… I’ve gained a lot of tips from you and from some other blogs and would be in an even worse financial state if it weren’t for you guys. Lately, I’ve really been wanting to save more. I don’t have a healthy emergency fund and since I’m making a steady amount, very temporary belt-tightening can fund things I should be saving for (vacations, minor car repairs, etc). It’s hard to see the incentive to save when I am meeting my immediate needs and wants. (Btw, I know on many levels why saving is extremely important, it’s just hard to do.)

I have found a weird practice that has been helping me put A LOT into savings the past few months. I’m a big online shopper. I often go online, fill my cart, and then decide whether or not I can afford the cost of it. Sometimes I decide no and don’t make the purchase, and other times I decide yes.

What I have been doing differently is that, if I decide I can afford it, and I don’t really need the items, I immediately transfer that amount into my savings account instead of spending it.

Light bulb moment: if I can afford to spend it, I can afford to save it! WHOOOOA.

This has revolutionized my savings life. Before this, I would sometimes decide not to make unnecessary purchases, but the savings was intangible or never happened because I’d just end up spending that money on something else. By immediately transferring over the $70 I didn’t spend on throw pillows or $15 on takeout for lunch, I can see the immediate increase in my savings account.

It’s amazing! I feel like I finally “get” what I’ve been hearing and reading all these years from people who are natural savers. I am probably not the first person to think of this, but I am pretty proud of thinking of it for myself, haha.

Sorry for the long email, but I just wanted to share my small success with you, since your blog has had such a big impact on me. Thanks for doing what you do!

– Becky

Such a beautiful note, isn’t it? And not just cuz they said pretty things about me ;) Did you catch all the takeaways? (Don’t worry, I took notes)

1. More money does not automatically mean more savings!! It doesn’t matter how much you make, it matters how much you’re spending. A $200,000 earner can be just as poor as a $20,000 one.
2. Lifestyle inflation is the devil. The reason those $200k people are poor? They keep increasing their lifestyle as their income grows! You can’t build wealth that way. And who wants to keep *needing* to earn more to keep living?? (Now on the plus side, it should be much easier for a $200k earner to cut back than a $20k earner so the potential there is “yuge.”)
3. Saving doesn’t count unless it’s actually saved. If you buy a Ferrari for $300,000 on sale from $400,000, you aren’t actually saving $100,000. All you did was spend $300,000.)
4. It’s important to KNOW YOURSELF. See all those things Becky was self aware of in that note? Admitting to caving into lifestyle inflation? Knowing she needs to be better about saving? Or my favorite, saying it’s hard to read about finance when, “you just want to buy cute things and pretend the future will take care of itself,” haha… You have to be self aware enough in order to make good change. There’s no sense in lying to yourself about anything :)
5. You have to keep experimenting until you find what works! This is why so many financial blogs exist – not because the information is any different (PS: it’s not), but because there are 1,001 ways to get something done (and even more sometimes for it to *sink in*). We all figure it out at different stages in life, but we have to keep on trying new things until it finally clicks.
6. You don’t have to be natural savers or investors to become good at it. It might be more frustrating or take longer if you suck (for example, I COULD get better at singing in the shower, but it’s going to take me a lot longer to not make you cringe than my wife who sings much nicer naturally :)), but at the end of the day any of this stuff is do-able provided you want it bad enough.
7. Which leads us to my most favorite saying with money – YOU HAVE TO WANT IT BAD ENOUGH to get it! Everyone wants a million dollars or to quit smoking or to shed 20 pounds and retire early in our youth. It’s not like you don’t know *how* to do that, it’s just some people want it more than others and make sure to place it high on the priority list. Probably after failing a few (hundred) times too. None of this is about learning how to be good with money, it’s about getting our selves *to take action* over and over and over again.  And the only way to get yourself to do that is to really REALLY want it enough!

Man I love emails like this so much… The rawness gets me every time, especially when people aren’t afraid to admit their failures so openly like that!

Becky may not have had an easy start with things, but she’s learning and adapting and you know she’s going to go far with that awareness she has with things. Hell – she was the first in her family to attend college! So she has the drive! Now it’s just time to redirect it all back towards that money like she’s working on, and I’m sure the next email we get will be even hotter.

After all, she’s already coining phrases :) I think I’m going to have to steal that one from you, B$. If you can afford to spend it, you can afford to save it!

[Hey guys! If you ever doubted the power of a 401(k), this should help remind you again ;) My man Fritz from The Retirement Manifesto stops by today to share his own story (and love!) for his 401(k), and this might just become my new default article to send to future haters! It’s brilliant!]

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A few weeks ago, J$ shared a CNN piece on “401(k) Millionaires” over on his Rockstar Forums. When I replied that I, too, was a 401(k) Millionaire, he invited me to tell my story and I agreed to do so in complete and transparent detail.

Learn from it, apply the lessons, and you, too, can become a Millionaire!

The 9 Keys to Becoming a 401(k) Millionaire

The original story on becoming a 401(k) Millionaire cited 5 keys, of which I followed every last one, as well as 4 others I’ve learned throughout my life. I will be telling my story using all 9 of these steps, and will show you how they have helped my wife and I become 401(k) Millionaires ourselves.

Key #1: Start Young

On July 5, 1985 I started my first “career” job.  At 22 years of age, and just one month out of college, I was pleased with my $21,500 starting salary.  During my orientation, I signed up for our “new” 401(k) plan, and contributed from my very first paycheck.

Unfortunately, I’ve lost track of my exact 401(k) contribution %’s early in my career.  I believe I started at 6% (don’t give up that employer match!), and I gradually increased it through the years.  As I became more knowledgeable about personal finance, I got much more aggressive in my contributions.

I’ve been contributing 15% or more for at least 2 decades now, and max out my 401(k) every year.  I’ve never taken any money out of my 401(k).  Invest it, and forget it.

My daughter just started her first “real job” as a police officer, and we taught her these “First 6 Steps To Financial Wealth” .  Before she received her first paycheck, we set her up with a Vanguard Roth and a Capital One savings account.  We’re teaching her the lessons we learned early, and I’ve no doubt she’ll see the benefits of “starting young” as she goes through life.

Key #2: Crush It Early

While a lot of folks focus on “Frugality” as a key to wealth creation, a much bigger lever is to maximize your earning potential.  Early in your career, go “above and beyond” to create your professional reputation.  You only get one chance to make a first impression, and it’s never more important to impress the right people than in the first few years of your career.  When “the right folks” notice early, you’ll be naturally propelled in the first decade of your career, and much better positioned for lifetime advancement and wealth creation.

I was fortunate to impress some of the “right” folks early in my career, and was offered my first promotion within 18 months.  A bit of luck always helps, and the reality is that my promotion was driven by the closing of the plant where I was working, and my company’s desire to keep me in their employment.  I’ll never regret going “above and beyond” in those first 18 months.  It saved my job, and I gained a promotion in the process.  Almost everyone else I worked with found themselves unexpectedly unemployed.  I was one of the lucky ones, but I also worked hard for that opportunity.

Moving from an “internal” Customer Service role to an “external” Sales Role, I saw my salary increase to $29,800 with my first relocation to our Dallas, TX sales office in December 1986. In 1988, I received (earned?) my second promotion, this time from “Sales Trainee” to a full fledged “Sales Representative” with another relocation (this time to Atlanta, GA) and another salary bump.

To give you a sense of what “Crush It Early” looks from a salary perspective, here’s a history of my first 6 years in Corporate America (FYI: these were the days of stagflation, with high inflation, 15% mortgage rates, and much higher annual salary increases than today):

Within 5 years, I had doubled my salary through hard work, making positive impressions, and having a competitor pursue me (unsolicited, but I listened.  After careful consideration, I told my boss about the offer, and received a nice “mid-year” retention bump as a result).

Every time my salary increased, my wife and I took a portion of the increase and nudged up our 401(k) contributions before we ever saw the money.

Our Net Worth in 1988: $9,996.73

Looking through my files for this article, the earliest 401(k) statement I could find was from June 1988.  At this point, I had been in my career for exactly 3 years. I had been married for less than a year, and my wife and I were $3.27 short of the $10k mark in my 401(k), as demonstrated below:

When we got married in 1987, my wife began work as an Executive Assistant.  Knowing we wanted her to be able to be a “stay at home” Mom when that time came, we increased my 401(k) and set up some ACH transfers to mutual funds, resulting in us saving the equivalent of 100% of her paycheck.

This allowed us to avoid getting used to her income, as well as the mistake of getting into obligations that required her pay for expense coverage.  When we adopted our daughter in 1994,  my wife simply “retired” (at age 31, lucky girl!), and we cut back a bit on our savings to keep our take home pay constant.

From 1987 to 1994, our 401(k) balance increased from $10k to $59k as a result of that decision, and set us on the path toward our eventual “401(k) Millionaire” status.

Key #3: Seek Opportunities For Exposure

By 1990, I started getting more involved with a broader communication effort around the organization.  One of those initiatives was to visit our plants with a “commercial update”, providing our plant workers a report from the “front lines” on what was happening with our customers and marketplace.  I was 27 years old, and giving presentations to a room full of shop floor personnel.

Seek opportunities!  The effort paid off with even more folks starting to recognize me as a “young guy with potential”, and my reputation continued to grow:

Keys #4 and #5: Get Out Of Your Comfort Zone (and Find A Mentor)

After 15 years in Sales, I was getting restless.  I had a strong mentor who ran one of our larger plants, and I had some excellent career discussions with him in my mid-30’s.  He kept an eye out for me, and within a short amount of time I had moved from a commercial role into my first “plant job”, planning the production & scheduling of a large operation.

That experience later led to opportunities for career advancement into national and global management roles, and I’m sure I would have never made those advancements without breaking out of the “sales track” which I had been on for 15 years.

Ironically,  looking through my career files for this post, I found a note I had written to myself at the same point in my career when I had decided to “branch out”.  Looking back, I had no idea how significant the quote would become:

Key #6: Watch Out For Fees

Fortunately, my employer had chosen Vanguard as their 401(k) provider, and I was rewarded with a low cost 401(k) plan that had excellent investment options.  My employer also continued to improve the plan over the years, with expanded investment choices and continued low fees.

If you don’t have a good plan, I would still encourage you to participate in your plan.  At a minimum, do not give up the employer match.  It’s free money, and the 50 – 100% “return” you get from your employer’s match offsets any high fees and poor investment choices you may have in your plan.

Review your plan now, and if you’re not maximizing your employer match, increase your contributions before your next paycheck!

Key #7: Max Out Your Contributions

As my salary continued to increase, we continued to increase our 401(k) contribution.  If I received a 3% raise, for example, I’d increase my 401(k) contributions by 2% in the month the raise took effect.

Our take-home pay would increase by 1%, and we’d feel like we had a bit more money.  More importantly, our 401(k) investments increased on a compounding scale.  We did that every year, until we hit the limit that I was allowed to contribute to the plan.

We still do the “mental gymnastics”, but we now (since we’re maxing out the 401) use external mutual funds and ACH transfers to capture the increases in annual savings %’s.

Key #8: Live Frugally

As my salary increased over the years, the strategy of increasing my contributions at the same time we received a raise helped avoid lifestyle inflation.  I’ve seen many, many co-workers increase their living expenses as their salaries have increased, and I suspect most of those are not yet 401(k) millionaires (or any millionaires for that matter).

My wife and I have always lived below our means, and I firmly believe that’s played the biggest role in becoming a millionaire.  We’ve always been generous, and have contributed annually to our church and charities of our choice. [Editor’s Note: And also to projects your blog friends put on! Thanks again for the financial boost to our Community Fund :)]

We also only pay cash for our cars, and of course drive them right “into the ground”.  Today, at 53 years of age, my wife drives a 2011 Hyundai, and I drive a 2010 Nissan.  We could both be driving newer and fancier cars, but why?  Our cars get us where we need to go, and they keep our expenses down.  Keep up with The Jones??  Please!

We recently downsized our home in preparation for an early retirement, and are now ENTIRELY DEBT FREE.  As my dad used to tell me early in my career:

“It’s easy to become wealthy.  Just spend less than you make, and do it for a long time.”

Key #9: Automate Your Savings

For the past 31+ years, I’ve automated my savings.  Starting WAY back in July 1985, when I had my very first paycheck automatically directed into my 401(k) which hasn’t stopped since.  Automating those savings has “forced” us to live frugally, below our means.

We Officially Become 401(k) Millionaires!

For years, our 401(k) balance inched, ever so slowly, “Northward”.  It wasn’t too exciting for the first 10 years, and we pretty much ignored the growth.  Starting in 1992, I began tracking my Net Worth (if you’re not doing that yet, start NOW!).  I now have 24 years of annual Net Worth data, in a nice little spreadsheet that shows us what we’ve accomplished.

Pulling from that data, you can see the progression of our 401(k) balance through the decades:

In March 2013, we officially crossed the $1 Million mark in our 401(k).  After decades of diligence, we can now officially say: “We’re 401(k) Millionaires!!”

In Conclusion…

There you have it.  The 9 steps that led me to becoming a 401(k) Millionaire:

1. Start Young
2. Crush It Early
3. Seek Opportunities For Exposure
4. Get Out Of Your Comfort Zone
5. Find A Mentor
6. Watch Out For Fees
7. Max Out Your Contributions
8. Live Frugally
9. Automate Your Savings

Apply as many of them in your life as you possibly can, then give it time.  Do it right, and you’ll find yourself among a very small minority of folks who will have realistic opportunities to retire at an earlier than “normal” age.

My wife and I plan on heading out for extended road trips in a 5th wheel within the next 18 months.  We’ll be 55 years old, and will never have to work another day in our lives.  We’ve not done any crazy extreme “frugal” living.  We’ve lived well, we’ve traveled the world on vacations, we raised a daughter (and paid for her college!), and we don’t feel we’ve sacrificed while on “The Journey”.

Learn from our experience.  With time, and a bit of luck, someday you can also be a 401(k) Millionaire!

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Fritz is a commodity trader with a large multinational corporation, with his eyes on achieving an early retirement in 2018.  He writes about personal finance and his preparation for retirement at The Retirement Manifesto, and can also be found on Twitter (@RetireManifesto) as well as on Facebook (facebook.com/TheRetirementManifesto).

Hi guys!!!

I’m soooooo excited to share this today. We finally got our philanthropy project off the ground! Check it out –> RockstarCommunityFund.org

Now I know what you’re thinking, “Ugh – another charity project out there, borrrring….” To which I’d respond, “See what we’re doing first Judgy McJudgerton! I guarantee you’ve never seen this before ;)” To which you’d probably hit back with, “Okay fine – but I’m not giving you any money!” And which I’d say, “Great! Because we are the ones who are actually giving YOU money!”

And that’s very much true.

After literally YEARS of trying to figure out how to best harness our community here TO DO GOOD, my partner-in-crime and I (Nate St. Pierre, who you might remember from our Love Drop days) finally come up with an idea that we think is half genius/half crazy. And thankfully we already know it works because we tested it last month :)

We handed out fifty $20 Visa cards (what we’re dubbing #GivingCards) to people in our forums, with the only rules being that they have to go out and use it to better someone’s life, and then come back and tell us what they did.

And what they did was AMAZING.

We hit roughly half of the entire United States, all the way through Canada and even as far as India (!!). One person even snuck a few into the White House for random acts of kindness.

Yup, the White House.

(Last we checked it was still sitting in a coffee table book right outside the Oval Office – hah)

I couldn’t even make up this stuff because it was all done by people in our community dropping love in their own personal way. Here were some other things they did that completely blew us away:

• One person turned the $20 into over $300 from her own community, and then anonymously used it to pay off the overdue lunch accounts at their local middle school for underserved kids. (Which ended up landing on the front page of their town’s paper!)
• One giver used it to help make a Syrian refugee’s resettlement house feel a little more like home.
• And then another person went totally personal and custom-made a pillow for a grieving widow, using shirts from her late husband (!!). I’m not going to lie – I teared up.

All of these were done with just $20 and putting in some thought. Proving once again that small acts of kindness stretch far!! Especially when you do it in a way that’s meaningful to you.

And that’s what our new Community Fund is all about. Helping people give in a fun and meaningful way. And to help facilitate that we’re starting with three simple projects:

1. The #GivingCards Project — What I mentioned above, where every month we hand out a stack of $20 Visa Cards to whoever wants them, so long as they promise to use them for Good and share what they did.
2. #DebtDrop — Where we look for people struggling with debt, and then shoot them a no-strings-attached $50 to give them a little hope for the day and let them know they’re not alone. This project was inspired, and is led by Melanie Lockert of DearDebt.com who has been doing this behind the scenes on her own blog going on a year now (and having given out over $900 already!).
3. And then lastly, our Just-In-Time Giving initiative — Where we set aside a little money to be used on the fly anytime we see a need for it in our community. For example, last month we found out that fellow blogger Athena Lent was diagnosed with cancer, so we were able to quickly give some money to her fundraising page for future surgeries. It’s nice having money set aside to be able to help fast!

And that’s what our Community Fund is in a nutshell:  a pot of money to be able to help those around us in a direct, and powerful way – every single month.

Whether through one of our current three initiatives above, or future ones we are inspired to fund that are sent to us by our members. So if you have an idea of your own you’ve always wanted to do (or are currently doing and want to amplify it!), let us know! We’re thinking of the entire initiative really as an “incubator of good” :)

There are other ways to get involved as well if it’s something that moves you. Here’s our main page with details – Get Involved With the RCF – but the thing we REALLY need the most right now is just getting the word out. The bigger we can make this thing, the more good we can do month after month after month. (And of course $$$ always helps too)

Last month’s test was just a quick hacked together go at it, and that alone produced over $1,900 of good in literally a matter of weeks. So just imagine what we can do when we really pour on the focus! I can’t even explain how excited I am about it all right now…

As someone who doesn’t naturally go out of his way to give back financially,  this will be helping ME as much as it does others. And to be able to harness our whole community HERE to do it?? With my favorite people in the world??

Man…

So thank you so SO much for being such a big supporter of me and my projects over the years, because honestly without that the RCF or this blog – or any of my projects for that matter – wouldn’t have seen the light of day. It’s because of you all that I’ve had the confidence to run with all these crazy ideas, so thank you from the bottom of my heart for continually supporting me. It really does mean a lot.

Okay, that’s enough mushiness for now ;) Just wanted to share my enthusiasm and give you a quick heads up on the latest venture here, and would love to see y’all in the mix as time goes on.

Any questions/concerns/ideas at all about the RCF, shoot ’em on over. We’re still very much in “launch” mode here, but we’ll be ironing out the kinks and getting better as we go… You can also find a list of FAQs we’ve put together here.

Thank you thank you, thank you!

Not all of us can do great things. But we can do small things with great love.
– Mother Teresa

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PS: If you’d like to experience the #GivingCards project, I’ve set aside 5 extra cards (All gone now – sorry!) this month for readers of this blog as we’ve already gone through our first batch for Jan :) Just fill out this form here and the first 5 people will get one!

Over four MILLION dollars – Isn’t that crazy?? From just linking up our accounts w/ Digit and literally doing nothing else?

Either we all suck with our money or we’re incredibly brilliant ;) And I’m going to go with the latter – hah.

It’s been a while since I’ve updated y’all on my savings with them, but after seeing this note from the founder I couldn’t help jump in and start writing. He had their tech guys track all the referrals attached to my name the past two years to see how much everyone’s saved in aggregate, and to say we were both surprised is an understatement. Not that we didn’t believe it, it’s a killer app!, but it’s just so wild to see how fast money can add up like that over the years. And even crazier to wonder about where it would have all gone had it *not* been saved??

Anyways, in my original review two years ago I stated “this is going to be big,” and I’m proud to say that for once I was right :) They’ve gone from 0 people saving $0.00 to GOBS of people saving over $350 million (!!!). That’s a lot of freakin’ savings.

Here’s a snapshot of my own accumulations so far:

This is after 24 months, and on top of everything else I’ve saved/invested over the years. So it’s not just for people who need help with saving money – it can be a great side pot too! One year I used it to help max out my Roth IRA :)

Here’s a look of the progression over time:

• Savings after month #1: $199.04
• Savings after month #3: $750.37
• Savings after month #7: $1,398.84
• Savings after month #12: $2,628.20
• Savings after month #15: $3,284.70
• Savings after month #18: $4,495.83
• Savings after month #21: $6,733.72
• Savings after month #24: $8,266.49

Perhaps what I like the most though is logging into my account and always seeing the $$$ go UP!! Unlike other accounts, haha… Even with the beloved Mints and Personal Capitals you never know what you’re going to see, and even then you still have to *take action* as they don’t do anything for you!

So What is This Digit Thing?

In a nutshell, it’s an app that analyzes your checking account, and then moves over small amounts of money every few days that it knows you won’t miss right into savings for you. Thereby helping you automatically save without having to lift a finger.

You can check them out here: Digit.co

Interactions with them are all through text messaging, and you’re able to check the balances of your savings anytime you want, as well as the balance of your *checking account* at all times (I actually have it set up for them to text me every morning so I always know what it is!), and a whole bunch of other things. Like speeding up the rate they save for you, or slowing it down, pausing it, getting recent bank transactions, and even one-time pushes when you want to save extra, say if you just saved $5.00 using a coupon somewhere and want to quickly FOR REAL save it ;)

You also have the option to withdraw your savings anytime you want via text ‘cuz IT’S ALL YOUR MONEY!, though hopefully you apply it to something *good* or else all that saving was for nothing.

Every now and then they surprise you with random gifs too:

(Note: You miss out on the gif goodness if you rock Republic Wireless like me, *tear*)

It’s all stored in an FDIC insured account, and the security and everything else involved with it are maxed for ultimate protection. Because obviously giving a robot access to your banking doesn’t come without concerns :)

So that’s it, really! I’ve been using them for two years straight now and have saved way more than I would have otherwise.

Jay, You Seem Biased? What’s The Deal?

Hell yeah I’m biased! And not just because I’m on their board of advisors now either (true story: I was asked to be on their board of advisors when they found out how obsessed I was with them :)).

I genuinely think what they’re doing is helping out so many people. Not everyone of course, they certainly have their list of haters (see below), but for those who *do* end up using them it’s like a world of a difference. And mainly because it takes the action right out of their hands because what most people *say* they’re going to do, and what they *actually* do are usually quite different. Digit was set up to help these people connect their wants with their doings.

Here’s a message I got from a “Lynn R” about her experience so far with ’em:

“I signed up for Digit several months ago and love it! I’m working in Japan and had trouble signing up with my Japanese cell phone number. They were quick to respond to my emails and helped me get set up. So far, I’ve saved over $1,200 without trying and didn’t even feel it! Even though I know I can withdraw money at any time, it’s easier for me to leave it in there since it’s separate from my normal checking and savings account with Navy Federal. For the first time in my life, I feel like I have the ability to build up an emergency fund. Oh, and I’m able to see my Digit balance in Mint just fine! I had no problem connecting the accounts.”

I get emails like this every single month. It’s awesome.

Okay I Get It, On With The Cons Please!

Okay, so the cons? There are a few of them, but actually a much smaller list than when I first reviewed them two years ago as they’ve been busy upgrading. Let’s start with that list first:

Old Con: Digit didn’t pay you any interest on your money. This was by far the biggest concern people had, though it was also pretty ironic that missing out on *pennies* were more important than actually SAVING HUNDREDS OF DOLLARS, haha… But hey, that’s the way our brains work :)

The fix: They started implementing “Savings Bonuses.” Every 3 months you will automatically receive a 0.20% bonus in your account based on your average balance over the last 3 months. It won’t make you rich of course, but at least now you don’t have to feel bad about “not getting any interest” any more!

The Con: They didn’t actually have any apps – it was all web and text based.

The Fix: They got apps! For both iPhone and Android now (*bows in thanks*)

The Con: They don’t work with every single bank in the U.S. or internationally  – not even Canada.

The Fix: Oh wait… that’s still a problem (Come on guys!!! The world is waiting! ;))

Other Cons/Questions/Things to Consider:

Here’s a smattering of everything else I can think of before wrapping up…

You have to give out access to your checking account. No way around that if you want them to pull out money for you to save. They do have protections around it all, but if you’re uncomfortable with this – just like any other apps or services where this is required — then Digit is definitely not for you.

You have to be okay with them literally taking out your money for you and putting it elsewhere. It’s really weird in the beginning, not going to lie, and takes some getting used to. Once you learn that the robots don’t take off and never return though, you start feeling better about it all :)

***You have to have money to be saved!!!*** If there’s no money in your account, ain’t no one going to be able to help you out. No money = no savings.

It takes a business day to withdraw your savings. You text in “withdraw $100” and you have to wait a full biz day to see that $100 show back up in your checking account.

It’s TOO automated and might make you even lazier. But to which I always reply, what’s better: being lazy with no money or being lazy WITH money? :) But in all seriousness, yes – it’s always good to be *conscious* of where your money is at all time whether you’ve automated things or manually move things around yourself. Just like anything else you automate in your finances (bill pay, savings, investments) you need to have an eye on it all.

Digit is FREE to use.

Digit has a “no-overdraft guarantee” that will reimburse you if they ever bounce your account by accident. (Something they are VERY careful of, and constantly monitoring/tweaking their algorithms to make sure this is not a problem).

You can also do what I do and set a threshold for them to STOP pulling money from once it hits a certain amount – again, all via texting. I have mine at $1,000 which tells them to never go below that whenever my checking account hits $1,000 (I like always having a padding in there. And I know for others there’s sometimes a bare minimum you need to keep in your account so your bank doesn’t fine you (those bastards))

You don’t have to set up any accounts of your own – they automatically set up (and manage) your new account for you for all your savings. (This is how they make their money)

All savings are FDIC insured up to $250,000.

All personal info is anonymized, encrypted and securely stored using state of the art security measures.

Okay – Anything Else, Lay It on Me :)

In summary, Digit can save you a butt ton of money and is perfect for anyone really struggling to find a good way of doing so, as well as those others (like me) who are good at saving but want to amplify it even more. They are not for everyone – especially those who want to be 100% in control – and they don’t work with every bank or around the world (yet).

But I will tell you this. The savings part is only the beginning. Imagine once they move on to other things like bill pay or crushing debt or even investing for you? And the ability to have it all automated AND optimized??

I can’t go into it much more than that, but let’s just say I still stand firm with my original statement that they are “going to be big” :) And it’s a pretty cool thing to see when it means millions of people will be effected in a positive way like that.

If you want to try Digit out, you can do so here: Digit.co

Now where all my Digit users at? Let us know how much you’ve personally saved so far, and what you’ve been able to do with it! (Or tell us if you now hate it – it all helps future readers :))

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Yes, all links here are my refer-a-friend links which means I’ll get paid $5.00 for anyone who signs up to it through this blog.. Of which I will then owe you one beverage of your choice in the event we ever meet up in real-life :) But seriously – only sign up if you think it could help you! Never try something you’re uncomfortable with just because someone on the internet said it was a good idea.

[Yo yo yo! Got another killer guest post for y’all, this time around by my new friend Chris Biggs who decided to call it quits and go travel the world with his beautiful fiancée. If this is their idea of a vacation, I can’t wait to see what they do for their honeymoon!! ;)]

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After college I had three friends who, all separately, quit their jobs and set off to see the world. Following that time-honored tradition of taking selfies with the Mona Lisa, skinny dipping on Brazilian beaches, and stumbling around Amsterdam’s Red Light District’s smoky haze.

That kind of drop-everything-and-go travel has become so commonplace in recent years that I would be surprised if you didn’t know someone who’s also taken a similar path. Heck, they’re as American as apple pie and the Electoral College!

Now in our early thirties, my fiancée Lori and I began to yearn for that adventure, too, albeit in a more PG-13 sort of way.

Struck with a palpable desire to experience life beyond the daily grind of emails, meetings, and PowerPoint presentations, we made a pact one warm Northern California day in February 2016 to figure out how we could create lives based around world travel.

Wrapping Our Heads Around it All

A big change like this becomes exponentially harder to make as you get older, given career aspirations, the desire to have children, and the various other factors. I’m sure you know a handful of friends (and maybe even yourself?) who tossed around the same idea but ultimately chose to continue grinding things out at work.

In our case, we knew that travel was integral to our happiness and that revamping our lifestyle would require a comprehensive budget planning process to instill the confidence we’d need to make this life-changing leap work for us.

As a couple, Lori and I had all the trappings of a brick-and-mortar lifestyle: an overpriced San Francisco apartment, a car payment, employer-sponsored health insurance, etc. – all things that would need to change if we were going to press pause on our careers and go travelling full-time.

We also both felt that if we were going to quit our jobs and travel the world, we would need to do it for at least two years – if not longer – in order to justify to ourselves this major change. This needed to feel less like a sabbatical for us, and more like a total lifestyle transformation. Hence, the budgeting aspect was uber important.

How Do You Budget For Years of Travel??

In the beginning we were beyond puzzled. Most travel bloggers told stories about how they saved a few hundred dollars, bought a one-way plane ticket to Vietnam, and figured it out from there.

That plan didn’t appeal to us for a number of reasons – most notably because we would be leaving behind upwardly mobile careers into which we’d invested energy, passion, and years of our lives. So we wanted to make sure we were designing our new travel lifestyle with plenty of intention and forethought.

Compounding those fears, we were also unsure how to identify a target savings amount that would allow us to get through two years of plane tickets, Airbnb stays, and an insatiable hunger for Thai food? (Fact: I will never say no to Pad See Ew, which is a popular stir fry featuring delicious wide flat rice noodles).

So what did we do first? We sketched out the costs we expected to incur over the next two years regardless of travel, or what you could consider the “fixed” costs associated with day-to-day living, such as our cell phones, car payment, health insurance, food, and more.

To create even more budget flexibility, we opted to slash our housing costs by ditching our West Coast digs and moving in rent-free to the basement of a generous family member’s home, where we could live in-between trips. We decided to keep our car even though it would sit in the driveway during our overseas excursions, as it would come in handy for long road trips across the U.S.

A Look At Our “Fixed Costs” Budget

Here’s the initial estimate we put together, which assumes that we will be traveling outside of the U.S. for at least eight months per year over the next two years:

So we now knew that $35,000 would be the floor for our savings – meaning, that we would need that amount PLUS the actual costs of the travel itself in order to arrive at our target savings amount.

Conceptually, we wanted to focus on traveling to places where the cost of living was relatively low to increase the likelihood of our funds lasting longer. For our first year, Lori and I agreed to embark on an expansive Asia trip, a tour through Central and South America, and a road trip covering dozens of America’s beautiful National Parks.

A Look At Our Budget Including All Future Traveling!

Now came the hard part: attempting to estimate travel expenses for trips we hadn’t taken yet! Lori and I spent a lot of time together in front of our computers, searching for pricing details and discussing what kind of accommodations we felt most comfortable booking for each trip.

When we were done, the budget for one leg of our trip (to Central and South America) looked like this:

Here’s what we did: we picked the fifteen Central and South American countries we were most interested in visiting and made our best guess about how many days we would spend in each location. Then we estimated our daily expenses (hotels, food, transportation) and added up flight costs to and from the region – plus any additional flights between countries that we expected to incur in lieu of bus transportation. (Note: South America is a bus-friendly place in which geography requires fewer flights than Asia and other regions).

Our total cost estimate for the two of us to spend nearly three awesome months in Central and South America with modest accommodations? Just over $10,000. We did this same math for the big trips we expected to take and, finally, added together all of those costs to come up with our total savings number.

We Officially Quit Our Jobs!

After nine months of extremely aggressive saving, I’m proud to report that Lori and I have hit our personal savings goal and officially quit our jobs to travel the world!

We just wrapped up a cross-country road trip that took us to six U.S. National Parks in California, Arizona, and Utah, and are now on our way across Asia which will undoubtedly be an exhausting, exhilarating five month excursion for the first half of the new year.

We have one-way plane tickets booked to Kerala (in Southern India), and beyond that, all we have currently is a Google doc filled with notes on destinations we’d like to see in Nepal, Myanmar, Thailand, Vietnam, Cambodia, the Philippines, and various other countries.

If you’re reading this thinking, “Hmm… that doesn’t sound like you’ve got this whole thing planned out yet, Chris,” you’d be partially right. And hey, to be fair, part of that is intentional – we want to have a general game plan, but also not feel bogged down by the rigors of locking in an hour-by-hour itinerary that would control our every move.

The greatest advantage Lori and I have now as travelers is that we’re unbound by most normal rules of travel, which allows us to be totally opportunistic in our decisions. My previous vacations while employed were usually time-boxed (translation: I could only get, let’s say, 10 days off of work), and I would need to pre-plan my location and activities every single day to get the most out of the vacation.

Now, however, we can jump on cheap last-minute flight deals or decide on a whim to spend an extra day on that beautiful beach in Bali! The best part, too, is that we no longer have the guilt of taking a vacation during the busy season at work, nor do we face the anxiety of returning to 3,000 unread e-mails.

Our Future Goals and Plans

In our second year (after our trips to Asia, the U.S. National Parks, and Central/South America), we’re planning to pick three to four cities to live in across the world, giving us greater opportunity to get to know the local culture over a period of several months.

That said, we are also are fairly certain that two years of full-time travel is about all we’re capable of doing; we have no desire (at least not right now – don’t hold me to it!) to live a nomadic lifestyle. Part of that is because we’d like to settle down and start a family, but it’s also because we have such great relatives and friends in the U.S. that it’s tough to imagine how rarely we would see them otherwise.

Ideally, Lori and I would like to move back to the U.S. and buy a home after our two years of travel, at which point our goal will be to either continue building out Over the Map, or re-entering the workforce. In either case, we know that regardless of our next career move, it will need to be something flexible enough to allow us to set our own schedule and support our passion to explore more of the world.

Planning Out Your Own Adventure

Even if you aren’t able to save for your world travels quite as quickly as Lori and I did, there may be opportunities for you to start traveling sooner than you think.

I have a number of friends who have tried living abroad semi-permanently and have funded their lifestyle using remote work gigs, which are perfect for folks with a background in high-demand areas like programming, web design, project management, marketing, and a handful of other crafts.

There’s a chance Lori and I will look at those options in our second year of travel (the first will be 100% focused on the blog – and taking killer photos for our Instagram account), and while I haven’t used any remote work platforms myself, my traveling friends have found good short-term projects using both Upwork and Fiverr. The latter even has some cool non-traditional options, including… wait for it… PET MODELING! You can literally get paid for snapping a shot of Mittens napping on the couch.

(Fair warning: if you e-mail me looking for consolation about how hard it is to fund your travel experience, I’m going to remind you that people pay pets to model. No excuses.)

However, since we’re currently pet-less and I’m definitely not model material myself, I made sure to end things well with my former employer (a large management consulting firm), as did Lori with her company.

It’s good to leave things well with your employers in case you need to come crawling back, and now we both have verbal offers to re-enter as employees after our travel is complete – even though we’ll probably be looking for something different at that point.

Whatever you can do to alleviate the anxiety of such a major lifestyle change is a win! But good luck trying to convince all of your friends or family not to freak out. Some of ours still think we’re lunatics for throwing away stable employment and paychecks.

Some Great Resources to Get You Going

That brings me to my last point: if you’re personally interested in making a change that will help you travel farther (and better), there are plenty of resources available to you.

Beyond our blog, you should check out Nomadic Matt – one of the most resource-rich blogs out there and often considered the gold standard in the business. Matt will guide you in identifying everything from your top travel destinations down to the best electronics for your trips.

Additionally, I’d highly recommend the podcast series Extra Pack of Peanuts hosted by Travis and Heather Sherry, a couple who share a similar story to ours. The podcast itself covers significant ground and, beyond being really well-executed, is a great place to get deep in the weeds on topics like travel hacking (free frequent flyer miles, anyone?) and how to start a location-independent business.

In the meantime, Lori and I will continue to make the most of our time on the road while working to bring you valuable insight, tips, and tricks along the way over at our own blog.

Questions, comments, suggestions?

Leave them below and I’ll be happy to answer them! At the very least, I hope you take a few minutes to revisit your own dreams again, whether they’re travel-related or not. They may not be as hard to achieve with a little planning and boldness!

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Chris is a travel blogger who, along with his fiancée Lori Kackenmeister, writes about the joy of travel life on their website Over the Map. You can also find them on Instagram, as well as Facebook.

[EDITOR’S NOTE: If you liked this post, check out our other one on how (and why) to take a sabbatical. We’re gonna just keep plastering stories like these up until everyone chases their dreams!! :)]

“The challenge is not to touch it!” That’s what I overheard a 65 year old guy telling a 13 year old kid the other day while checking out at Target :)

I *of course* had to switch lanes so I can get closer to eavesdropping territory, and from what I could tell they somehow got on the topic of becoming a millionaire, and more particularly how HE became a millionaire by the time he hit 65. (And probably earlier)

To say the kid was glued to every word coming out of his mouth was an understatement. Who doesn’t want to become a millionaire??? And why aren’t they teaching THAT in classes?? I guarantee attendance would perk right the hell up with a juicy word like that thrown in. No kid cares about budgeting and financial management – they all just want money! :)

But I digress…

Once this guy had this kid’s attention, he started dropping all his nuggets of wisdom on him:

• “Start now while you’re young!” (yup)
• “It’s better to put *something* in there every month, even if it’s not a lot.” (double yup)
• “Let compounding do all the rest.” (you’re on fire, sir!)
• And then the whopper of them all which we’ve already touched on twice – “just don’t touch it!“

It really doesn’t get any easier than that… I considered chasing the kid down and asking for his email so I can follow up with him over the years and see if he acted on his advice, but I figured that would come off a bit too creepy :) Plus, do 13 year olds even have emails? (What am I saying, they all have like 10 iPhones and computers these days – those bastards… I could barely get my hands on a Gameboy at that age!)

Anyways, that’s how you get a young person’s attention right there. Or *anyone’s* attention for that matter. Everyone wants to know how to become a millionaire, but none of them want to “learn” about finance! You gotta lure them in first and THEN hit them with the knowledge! It’s trickery 101.

Millionaire stuff aside, here are some other fun convos I’ve overheard lately. Why stop there, right? :)

“I got 8 homes… pairing down to 3”

At first I thought this guy was a baller or something, but turns out he was actually retired and wanted to offload some of his real estate to better enjoy his time and money! And good for him! He looked about 70 or 75 so if you’re not going to enjoy it then, when are you??

“I’m not as materialistic as my mom!”

Haha.. I wish I could have heard the rest of that convo, but unfortunately I got caught looking and had to turn straight ahead while of course minimizing the screen in case she were to come over and confront me :) It’s hard work sleuthing sometimes!

Then this one was as sad as it was surprising:

Me to an elder friend of mine: “Well you’re looking sharp today, sir!”
My elder friend back to me: “I’m going to my 4th funeral this week.”

Ugh… Just another reminder of how precious life is!! Turns out one of his friends had a brain hemorrhage out of nowhere and was dead 10 minutes later. At 55 :(

I’ve blogged about this before, but MAN does my tune change anytime I’m round these guys here at my local coffee shop. They’re a group of about 4-5 guys in their 70s and 80s, and all they do is talk about life and what’s important to them without all the b.s. and petty crap we’re so used to hearing. It’s like I get a shot of reality every time I sit next to them. No one’s afraid to be themselves 100%!

(What I also find fascinating is that they pass around the obituaries every morning taking turns reading it. I asked them if they do it to look for friends, and they said that yes – it is one of the reasons – but the main one was to LEARN about all the cool stuff people have done in their lives! Said you never get to hear anyone’s stories until they’re gone, and its quite a shame since everyone has led pretty interesting (and different) lives. Now I check the obituaries myself whenever I come cross a paper :))

But we’re not going to leave here on a sad note, no sirree… So let me hit you with my favorite line of all recently. Cracks me up!!

“Stay away from those amoebas!”

(A teacher saying goodbye to his students)

Haha… Have a great week everyone. Stay away from those amoebas AND from touching your money! They need some time to multiply :)

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For more overheard stories, check out this juicy post by Mr. Money. Who apparently likes to talk about himself in 3rd person now.

[Cute little meerkat pic by Jans Canon]

[Every month we share our raw numbers here to give you a real life snapshot of a family’s finances. This was game changing for me when I first stumbled across the blogging world 9 years ago, so we’ve made it a consistent feature here on the blog in hopes it helps you along your journey as well. Enjoy!]

Hey $$$ Trackers!! Another month, another net worth update! And what an update this month has been, whew…

Part of that cash hit for my new partnership with Nate and Han here (my friends who are helping me manage the tech/behind the scenes of this blog in exchange for a minority stake in it) and for the first time in years our cash reserves are topped off again. Feels like a huge weight has been lifted off my wallet – not gonna lie!

To put in perspective how low I’ve let it go over the years, it was once at $94,642.15 back in October of 2012, and then gradually whittled down to a paltry $4,126.04 which it was hovering at last month. A $23,000 average loss a year, or almost $2,000 a month (yikes).

Now a lot of this was my own doing over the years (putting $$ into offloading our house, turning down too many side gigs, having multiple kids ;)) but the fact was I let it drain way more than I should have, and the past few months have been a blessing to get back to stable again. Even without this nice cash infusion here… (thanks for getting that new job, wifey!) Needless to say, we’re finally out of panic mode, and now it’s all about maintaining cash flow and not letting it happen again.

Oh, and speaking of that new partnership, we’re moving to a dedicated server right now to handle larger loads on the site and help speed it up (woo!), so if the blog gets wonky at all the next few days, that’s why! And should be back to normal again soon!

Here’s a quick glance of how this entire year’s gone net worth-wise:

And then here’s a play-by-play look at it in chronological order ;)

• Jan: $437,562.07 (-$51,000 – sold house + market crash)
• Feb: $440,023.40 (+$2,500)
• Mar: $488,217.20 (+$48,000 – market rebound + taxes + gift)
• Apr: $496,016.17 (+$8,000)
• May: $503,939.92 (+$8,000 – HALF-A-MILLIONAIRE STATUS!)
• Jun: $494,758.25 (-$9,000 – bought a car)
• Jul: $511,782.60 (+$17,000 – market growth)
• Aug: $513,016.99 (+$1,000)
• Sep: $512,820.73 (-$200)
• Oct: $502,883.49 (-$10,000 – market down)
• Nov: $524,910.47 (+$22,000 – markets up!)
• Dec: $599,826.38 (+ $75,000 – new partnership)

Eight increases and four decreases, with an overall trend upwards. I’m sure there will be plenty of more wild swings to come in the new year/decade, but as long as it continues to go up we know the plan is working! And hopefully you’re seeing the same results with your money too :)

Here’s How The Month of December Broke Down:

CASH SAVINGS (+$63,911.03): A 1,548% increase, haha… that’s wild. We already talked about where it all came from, but if you want to read more of the backstory on the new partnership, you can do so here. (Spoiler alert: it was to help me not burn out and to improve the blog at the same time)

BROKERAGE (+$24.25): A nice little bump here too! Always better than the opposite eh? ;) All this money here consists of solely our Acorns account which rounds up our daily transactions and drops the difference into an investment portfolio for me. Something I set up almost two years ago now (wow) and haven’t touched since. It’s not a life changing amount of money sitting there at $570, but it’s all better than $0.00! So we continue on and use it as a nice back up in case we ever need it for anything.

THRIFT SAVINGS PLAN (TSP) (+$439.71): Another nice increase here as well! Just from my wife steadily siphoning away some of her paycheck every two weeks right into her sexy new retirement account. We’ll probably increase this # as time goes on, but for now she’s putting in enough to get all those FREE matches from the gov’t, and the rest of her paycheck pretty much goes straight to childcare – hah. (Funny, but also NOT FUNNY). Thankfully we stumbled across the Dependent Care FSA which will save us a few thousand over the year, but man…

ROTH IRAs (+$2,058.13): Nothing new added here lately, but over the next few months I plan on using some of those cash reserves to help max it out again and continue growing the investment machine. I remember my brother-in-law once telling me that his one and only goal every year is to max out both his IRA and his 401(k), and as long as he does that he’ll be set for life. And it’s true! That’s over $20,000 every single year compounding on top of each other which will grow well into the millions over time. Of course, not everyone can put this amount in during certain stages of their lives, but once you get going and can swing it, it’s smart. The only reason our own net worth is as high as it is today is because I’ve been doing exactly that for the past almost decade! It works!

SEP IRA (+$7,990.28): Same goes for this guy too. Nothing new added, but shortly that will change once it’s time to max this out after running our numbers for the year (the amount allowed is tied to what my business profit was for 2016).  Here’s a cool screenshot from my Vanguard account though that shows how our investments have fared over the past couple of years (or, I should say – investment – since our money is literally all in one fund: VTSAX!)

CAR VALUES (+$33.00): How this goes UP I can’t tell you, especially as they’ve been going down $600’ish total every month, but it is what KBB is telling me so we stick to the consistency and update it as so. Here’s what they say both our rides are currently worth:

• Lexus RX350: $12,891.00
• Toyota Corolla: $3,957.00

CAR LOAN: (-$459.51): Down down down every month! I know half of you will say that we should just pay it off now that we’ve got a chunk of money again, but at the risk of going down that same cash dwindling path again, we will not be taking any drastic measures at the moment :) Plus, I actually don’t mind holding a little debt to be honest with you at such low rates. You know that game we played when I asked you if you’d rather have a ton of cash with an equal amount of debt – OR – break even at $0.00? Well, you can probably guess the position I prefer. And it will of course be different for everyone… (The trick is knowing yourself well enough to choose the *right* one for you!)

And that’s December!

Here’s a look at how our ENTIRE journey has gone
since paying attention to this stuff in ’08:

Just more proof that it’s all worth it in the end! And really, it’s not that detrimental to your lifestyle either, am I right? How many of you are hating life right now while saving away? I know some months and parts can blow, but overall it’s amazing how little we need to actually *enjoy* our lives.

So even when we all DO become millionaires one day – and I can promise you, we will! – it’s not like it’ll actually change our lifestyles that much anyways. It just means we’ll have way more peace of mind, and options! The best things money can buy :)

Speaking of the best things in life, here are the net worths of my babies as well. Who really aren’t babies anymore at 2 and 4 – eek!

And that wraps up the year! Hope your money went well too! Keep tracking it and hustling… It’s all about letting time do its magic and amplifying things FOR you. And it works like a charm!

You can see all 108 of our net worth reports over the years here, and once you’re bored with those you can head over to my other site, Rockstar Finance, and check out the money of 250+ OTHER bloggers too. It now ranges from $4,156,344 all the way down to (-) $532,304. Different stages, different wallets!

See y’all in the comments :)

[Hey guys! Have a feisty one for you today from fellow blogger ERN at EarlyRetirementNow.com. Some of these you may disagree with, as do I (no emergency fund? Blasphemy! ;)) BUT I always love hearing other peoples’ perspectives, and Ern here can surely put up a convincing fight. Regardless of where you stand though, I hope you’ll find some takeaways here to help you in your own journey.]

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As members of the FIRE (Financial Independence, Retire Early) community, we are all nonconformist. We scoff at conspicuous consumption of our neighbors in their full-size SUVs and McMansions, and instead budget with a very sharp pencil (spreadsheets are fine, too) and grow our stealth wealth, one dollar at a time.

But the FIRE community is far from monolithic. For example, I consider myself nonconformist even inside our nonconformist movement! I hold some pretty strong non-consensus views on many financial topics. I’m a rebel among the rebels, imagine that!

Here’s a list of my seven favorite disagreements with the personal finance consensus:

#1: The 4% Safe Withdrawal Rate is safe! (No it is not)

The Trinity Study and the resulting 4% recommended safe withdrawal rate have become the gold standard when designing a savings target (25x annual spending) and the eventual withdrawal strategy. Even J$ here uses it. There are (at least) two problems when extrapolating the Trinity calculations to the early retirement community.

First, instead of a 30-year horizon in the Trinity Study, the average early retiree faces a 50-60 year horizon. That wouldn’t be a problem if the success criterion in the Trinity had been capital preservation, i.e., preserving the purchasing power of the initial portfolio value for 30 years. If your capital lasts for 30 years, then why shouldn’t it last another 20-30 years? But for the Trinity Study, even a portfolio value $0.01 after 30 years is considered a success. That one cent will not last another 20-30 years!

To gauge how much of a “haircut” we should apply to the 30-year safe withdrawal rates when extending the retirement horizon, let’s do the following thought-experiment.

Imagine we have a $1m portfolio that generates 4% p.a. (per annum) of real return in the long-term, but we got unlucky and suffer 10% losses for the first three years, followed by three years of 10% gains and then 4% returns after that (assume all returns are real and all withdrawals adjusted for inflation). That’s not even a worst-case scenario, more of a garden-variety bear market.

Our portfolio can then sustain a withdrawal rate of about 4.27% p.a. for a 30-year horizon. But over longer horizons that number will be significantly lower: Only 3.26% over 60 years, a whole percentage point less and that’s all because of the longer horizon!

[Figure 1: Path of portfolio values over 30, 40, 50, and 60-year horizon with different withdrawal rates, targeting capital depletion.]

The second objection is that today’s expected asset returns are significantly lower than the average returns observed since 1926. The Trinity Study averages over many decades with different financial market regimes. Sometimes the stock market was overvalued, sometimes undervalued. Sometimes bond yields were very high, sometimes they were very low.

Does anybody else see a problem with that procedure? Relying on safe withdrawal rates that are averaged over the past 90 years is a little bit like calculating the probability of getting into a traffic jam by averaging over the entire 24 hours of the day. That may not be the most informative figure if you already know that you will be driving during rush hour!

For today’s retirees, only today’s market conditions matter, not the averages over the last 90 years. And more than seven years in the current economic expansion, equities look more expensive than over the last 90 years (measured by the CAPE ratio) as I show in this blog post. Bonds don’t look too hot either. Since 1926, the real, inflation-adjusted bond returns were solidly above 2% for government bonds, and even above 3% for corporate bonds, but today’s yields are far lower. Lower bond yields and expensive equity valuations support only significantly lower safe withdrawal rates than 4%.

If 4% doesn’t work, then what’s the alternative? Personally, I plan to start with a lower withdrawal rate of 3-3.25% out of our equity portfolio to account for today’s expensive valuations and the long retirement horizon. Having income-producing assets with a less than perfect equity correlation is also a good idea, so, I started moving some of my investments into rental real estate. Owning rental properties with a 4%+ rental yield (after all maintenance and repair costs!) I can probably push the overall withdrawal rate to 3.5%.

This number, though, is not set in stone. If the CAPE ratio were to drop to a more normal level, say, under 20 (currently around 27) I could move the withdrawal rate closer to 4% again.

#2: Robo-Advisers are great! (If by “great” you mean “expensive”)

You can’t read through the personal finance blog world without finding glowing endorsements of Robo-Advisers, like Betterment and Wealthfront. I beg to differ though, and recommend Robo-Advisers only to my most financially disinterested friends.

But folks in the FIRE community? We are the masters of budgeting and frugality, financial hackers (not hacks) and always on our toes to find new ways to eke out a basis point (0.01%) of return. Why would we want to throw away anywhere between 0.15% and 0.35% in fees p.a.?

Robo-Advisers do nothing magical and are nothing but expensive gimmicks. You can go to their website, find out their recommended asset allocation and simply implement it with inexpensive index funds at Vanguard or Fidelity. But do you even want to use their recommended asset allocation? You could do significantly better by further hacking their recommended allocation, for example moving ETFs with a high dividend yield and taxable bonds from taxable to tax-deferred accounts.

But what about tax loss harvesting? Tax loss harvesting is a neat tool that can lower your taxable income by up to $3,000 p.a., so folks in high tax brackets can save $1,000 or more on their annual tax bill. In taxable accounts, simply sell your underwater investments, i.e., equities, ETFs and mutual fund shares that have a cost basis greater than their current value, and the loss can be used to offset up to $3,000 of ordinary income per year. Check Bogleheads for more details.

Robo-Advisers can do this process really well and in a systematic and automated fashion. But apart from the fact that we find Tax Loss Harvesting overrated (see #7 below), it’s also something that most investors should be able to do themselves. Here’s my guide to becoming your own homebrew Robo-Adviser. Do it yourself and save thousands of dollars over the years!

Finally, under no circumstances should anybody ever shift an existing brokerage account with sizable capital gains to the Robo-Advisers, because they might first liquidate your holdings to purchase their recommended ETFs.

And that’s true whether you are an experienced financial hacker or complete finance novice. I’ve saved $42,000 by not switching to Betterment! The tax bill could be so excessive you’ll never recover the loss even under the most optimistic assumptions for harvesting future tax losses.

#3: Everyone Needs an Emergency Fund! (Not everyone)

The almost universally accepted wisdom is that not only do we all need an emergency fund, but building that emergency fund is the number one priority of personal finance, taking higher priority than saving for retirement. Some even want you to start an emergency fund before paying off high-interest credit card debt. That’s nuts!

I laid out our plan for having no emergency fund (featured on RockstarFinance on 5/25/2016!) and two follow-up posts as well to debunk some of the common arguments in favor of the emergency fund. With our savings rate of 60%+ we are usually able to finance all expected and unexpected expenses out of our current cash flow.

Just to be sure, I’m not saying that anyone should forego savings altogether. An emergency fund is better than having no savings at all. I merely take offense in keeping large amounts of money in unproductive, low-interest money market accounts. I consider our entire portfolio our emergency fund and like to put our hard-earned dollars where they can work harder for us: in equity and real estate investments.

Am I not afraid of having to dig into an equity portfolio right when the market is down? Yes, to a degree, but as a passive investor, I try to stay away from timing the market. Keeping cash on the sidelines for fear of a market decline exactly coinciding with a cash flow need is market timing on steroids!

#4: Use bonds to diversify equity risk. (Don’t get your hopes up too high!)

What was the correlation between an all-equity portfolio and a portfolio with 80% equities and 20% bonds over the last ten years? 0.998. For all practical purposes, that’s a correlation of one.

To be sure, the 80/20 portfolio has a lower volatility; pretty much exactly 20% lower. But that volatility reduction came from the lower equity weight and had little to do with bonds reducing risk. In fact, simply keeping the 20% in a money market account would have achieved that exact same volatility reduction. That said, bonds delivered very nice average returns over the last few years, so the appeal of an 80/20 stock/bond portfolio came mostly from better returns than investing 20% in a money market account.

But that could change in the future; yields have been heading higher since November 8th, and bonds could have a rocky road ahead of them. In addition to having little diversification, they could also lose their potential to boost returns.

#5: Bonds are safer than stocks. (Depends on the horizon!)

Of course, stocks tend to have higher daily, weekly, monthly, even annual volatility than most bonds. No discussion about that. So, for folks with a very short investment horizon stocks may seem unattractive. But over a 50-year investment horizon, we should weigh the short-term volatility with the long-term sustainability of funding our expenses in retirement.

There have been extended periods of very poor bond returns. For example, there was one 80-year window (!) of zero real (inflation adjusted) bond returns from about 1900 to 1982. True, equities can be volatile in the short-term. You see overreactions both on the upside (late 1990s) and downside (2009). But equities normally return to a long-term trend growth path within a few years, see chart below.

Bonds, on the other hand, can move sideways for many decades. That’s poison for the retiree who relies on a nest egg to last for half a century! And what’s worse, the spectacular run of good bond returns that started in 1982, might be overdue for a reversal as has happened with the other two bond bull markets in the late 1800s and 1920-1940. I’m not saying that this will start now, but bonds did get crushed after the spike in interest rates since November 8th!

[Figure 2: Which one is the risky asset now? Cumulative real total returns (CPI-Adjusted) of the S&P 500 and 10-year U.S. government bonds. January 1871- December 2015.]

So, to stay with our “financial rebel” theme, just like our American Founding Fathers preferred “dangerous liberty over peaceful servitude,” this writer likes dangerous equity volatility more than running out of money for sure with low volatility bonds!

#6: Cash serves as great bear market insurance in retirement. (Think again)

The idea sounds almost too good to be true: simply keep a few years’ worth of expenses in a money market account, enough to fund expenses during the occasional bear market, and we never have to worry about market volatility. Unfortunately, it is too good to be true.

The first issue is opportunity cost. The cash cushion is a little bit like leaving the house every morning wearing a Robin Hood costume, just in case I might come across a fancy-dress party that day. That strategy works beautifully every year in late October, but it would be a bit of a burden for the rest of the year. Likewise, the opportunity cost of carrying too much unneeded cash when there isn’t a bear market can compromise the average portfolio return. Remember, timing Halloween parties in late October is easier than timing the next bear market!

But even if you do get lucky and have the cash cushion ready to go at the onset of a bear market, it’s not going to make much of a difference. If you were unlucky and started your retirement too close to the market peak in 2000, then with or without the cash cushion your retirement portfolio would have been seriously compromised; we are talking about “going back to work” compromised! True, the portfolio with the cash cushion would have been slightly less compromised than an all-equity portfolio, but still seriously underwater. The cash cushion is no panacea because you will have to replenish the cash cushion right around the time when the stock market rallies again.

One way or another, opportunity costs will catch up with you! It’s very simple: there is no true bear market insurance. A good start would be using a lower withdrawal rate (see #1 above) and being prepared for plan B, plan C, and all the way to plan J (Money).

#7: Tax loss harvesting saves you a ton! (It’s nice, but you won’t get rich)

As mentioned above, I do the tax loss harvesting by hand without any help from the Robo-Advisers and my guide on how to be your own Robo-Adviser has a lot of the details on how to do this right.

Did I become rich from tax loss harvesting? Absolutely not! The claims of 0.7% or even north of 1% of additional annual returns from tax-loss harvesting claimed by the Robo-Advisers are vastly exaggerated. If you are like me your taxable portfolio is the result of many years of regular investments. So, even a bear market with a 20%+ drop right now would result in much less than 20% harvestable losses. I have some tax lots that would require a 50%, even all the way up to 70% drop in the stock market before generating even a single tax loss dollar.

My personal estimate is that I have generated less than 0.10% in additional annual return from tax-loss harvesting so far. Going forward, especially once I retire, the benefit will likely go away altogether.

I put together some calculations on how much extra return you’ll likely generate depending on different marginal tax rate scenarios and portfolio sizes. Under most realistic assumptions, the benefit is even lower than the 0.15% to 0.35% Robo-Advisers fees. It’s a benefit large enough to not leave on the table, but don’t get your hopes up too high. And don’t pay anyone 0.35% p.a. to do it for you, either!

I’ll now be taking all questions and concerns below :)

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About the author: Mr. ERN runs the EarlyRetirementNow blog where he writes about his path to early retirement, planned for early 2018. He currently works for a large asset management firm and holds a Ph.D. in economics.

[Top photo cred: hobvias sudoneighm]