Author: Small Budget Retiremet Page 2 of 7

I am an elementary school teacher, landlord and father of four amazing kids, trying to reach my financial retirement in the next ten years. We enjoy frugal living in one of the most sought after Chicago suburbs as we manage our small budget to push us towards financial independence and early retirement. This blog will share some of our strategies and stories of our journey from $0 to FIRE.

2021 First Quarter Update

current news for march 2021
Things happening today according to Flipboard

Now that the dust has settled and our move has happened successfully I finally find the time to write an update on our progress.

I will try to make this short and sweet. We ended the infamous 2020 with a net worth of 274K. The prediction for 2021 is about a 71K increase. 

Personal capital 2020

Most of my net worth comes from real estate equity. After our move, we pushed our RE assets to 950K.

The housing market continues to show signs of strength and this spring should trigger some healthy increases as far as rent and house prices go.

Thanks to Mint I am able to track my net worth on a daily basis. This helps a lot! Especially when you are having a miserable day at work and feel like you have lost your purpose, which as a teacher we have had plenty of those moments this school year. If you are not using Mint and Personal Capital you are truly missing out. I highly recommend it. It does all the heavy lifting for you and it helps you make informed decisions about your finances. Both Apps are part of my financial GPS.

As it is today we are standing on a net worth of $308,890. That is an increase of $34,890 since January 1, 2021, which equals a 12% growth. That is already 49% of my 2021 goal. I thought I had surpassed the middle point of that goal due to a discrepancy I have in my notes and the data I am pulling from Mint and Personal Capital, but regardless, this is freaking awesome! I can’t even imagine what it will be when the best of the real estate season kicks in this spring and summer. And granted, my take-home pay is around 68K. So, money is definitely working for us.

That is in a nutshell where I am at.

If you want to know more about our move and details of how we made it happen, read on!

Buying a New Home

After going through almost a year of a pandemic-caused financial recession and observing an increased demand in the housing market for larger spaces we became part of the statistics. Being in a 3 bedroom house with no basement and 4 kids really pushed us toward our decision. I guess that if we had 2 boys and two girls that would’ve made things a bit easier, but having 3 girls and one boy complicated it all. Plus the added caveat that we have the potential complication of my mother staying again with us for a long period of time. We needed some extra space.

We were also at the point of finding another investment property. The options were buying another rental or buying a bigger home for us and turning our then current home into a rental. We chose the latter.

How did it happen?

We had about 40K in cash for a down payment but that would’ve wiped out our savings.

Thanks to a lender that I always work with he suggested we refinanced one of our rentals, pulling some cash out and with the historic low mortgage interest rates our payments would not change that much.

Our balance in that house was 117K, with a mortgage payment of $1,218. After pulling out a bit over 40K our balance became 165K and a monthly payment of $1,283. Those numbers include insurance and taxes.

In short, we bought a house and I didn’t spend any extra money. Well, we did, but if feels like I just moved money from one house to another and got to keep all my precious cash. Yes, my standing balance went up but the way I look at it is “ I don’t pay for it. My tenants do.” I appreciate that and I tried very hard to keep them happy by providing a living space well kept.

 We have had a lot of expenses in the new place. We were given credit for some of them and some other we are just paying for it. 

Some of the expenses were: 

Windows: We got credit for 9 windows(7K), but we paid for the rest 6.(4K).

Radon mitigation. We got credit for it (1.4K)

Some DIY canned lights for our living room: Under $200.

We splurged on a Sunsetter for the deck- that was a whopping 5k. Our old house had it when we bought it. We didn’t like the look at first but we loved its functionality. These awnings turn your patio or deck is an extension of your living space. It was a big expense but during the summer we really spend our days sitting outside while our neighbors have to go inside and hide from the sun. An umbrella for 6 people just doesn’t cut it. Plus, now the fabric designs are much nicer than what we had.
I am even considering replacing the fabric in the old house. I want my tenants to enjoy their summer, plus I like to keep my rentals close to selling conditions.

Then, last but not least, we have the big expense of moving our above ground pool. I took it apart myself. We’ll have to replace the liner and pay for the new install which comes to $1,046, plus permit $120, plus the electrical $300, plus $1000 to refill and fix the crater we left behind at the other house. That last expense should be tax-deductible since that house is now a rental.

We also decided to get a beautiful reclining couch for $3K. Not very frugal decision but our old couches had taken the beating of 4 kids for 13 years and they were literally ripped and losing their inners. We could never sit all together because they were not big enough. Now we have an awesome family lounging area where we gather, chat, watch movies, enjoy each other and that has tremendous value for us.

I know. Not very frugal, and it is a lot of money but we don’t pay for pool memberships or go anywhere in the summer other than our yard and forest preserves around. We usually take one trip to Michigan in the summer, and one to Wisconsin to drop our older girls at camp and the rest is a daily yardcation all summer long. We truly enjoy our house.

So…the tab please! After all these are put together we have spent about $13,666, plus the couch that we’ll pay in 3 years with zero interest.

Part of the reason behind these scandalous purchases has been the stimulus money we have been receiving. We really didn’t need it, more is coming and I just want to enjoy my house and my family. It seems like I always make everything nice for my tenants. I fix our house and instead of staying and enjoying it we just move. So now, we are good to go. 

Today is the first day we will enjoy 70 degrees around Chicago and I just can’t wait to enjoy our awesome house this summer. After all, FIRE has no purpose if you can’t enjoy the journey to it. Right?

How about you? Any big financial movement this 2021? Any splurge? I would love to hear about any of your new plans or goals for ‘21 down below.

Final Net worth update 2020

January 1st, 2021

It’s hard to believe that the year we never imagined coming to an end has indeed ended… and at the same time, we look back and it’s unreal to see ourselves in hindsight going through all the things we went through; politically, socially, financially, health wise, as parents…this year really had it all and it has tested us in many ways.

I f you are reading these lines I hope you and your family made it through 2020 OK. Or at least I hope the worst is in your rear mirror. I wish you the best in this new yearly cycle. I don’t know about you but I sometimes feel even guilty for being in a position of somewhat comfort, whereas many other people are out of jobs or impacted directly by the pandemic.
With that said, I think that the end of a year is always a great moment for reflection; for looking into our past year’s goals and make plans for the year ahead.

So here we go…

Just like for everybody else, health wise this year sucked.
Financially though, this year was luckily fantastic for us.
Given the nature of my teaching job and my several years in it, my family and I were shielded from losing my job and I am extremely grateful for that.
We started 2020 with a net worth of $189,000, mainly in home equity between our primary residency and our rental property. Plus a little bit on my 403B plan which did also pretty good.

Personal capital 2020

If I didn’t have Personal Capital I would have said, “meh, my year was just ok.” But when I look into my Personal Capital account I realize that what I did financially this year was simply amazing! My growth was $85,000!!! That is pretty close to my year’s salary (101K)!!! With a family of six? That is extraordinary I think!! That is a growth rate of 44% !!! Even discounting the almost 10K we received from the government due to Covid relief that would put us at a growth rate of 39%, which is still extraordinary.
Why am I so excited about this? Well, first of all, I never thought it was possible to grow your net worth like that.
Second, it is almost double the growth I had in 2018-2019, which was about 23% from what I can gather through Personal Capital; although I must confess I didn’t set it up correctly at first. So, the information I have is accurate only from April 2018 on. In other words from April 2018 until December 2019 the growth was 23%.
But even If I was able to replicate this kind of growth in the neighborhood of 30% the results in just 4 years will be amazing!

Interest Compound Calculator from Moneychimp

Not to mention that I am still 8.6 years away from my early retirement age of 55. Even if I could hover around a 20-30% growth rate for 8 years the results would be more than enough for me.

Goals for 2021

As the year starts, we are all packed up and ready to move. If you have read some of my previous posts of this year you know that we have been contemplating the idea of moving. Despite the fact that we absolutely love this home we live in, a family of six people plus a grandma that comes to stay for long periods of time, puts a lot of stress on the family dynamics. This situation has pushed us towards a need for more space.
Likewise, we have been contemplating buying another rental property that can provide a decent cashflow like the one we currently have.
When we put all this together and the environment of historically low interest rates, we came up with the idea of simply moving to solve our space issue, at the same time that we would get to invest in another rental.
By converting our current home in a rental property we are diversifying our portfolio. We currently own what I would call a B- property, and now we would add a Class A rental to the portfolio but modest enough that is still at an entry level in the neighborhood.
If everything works out as planned my expectations are a 71K net worth increase or 25% growth rate.

So, there it is! One more year and I will be revisiting this post as I write to my future self today trying to hold myself accountable for these goals.

If you haven’t set up financial goals for yourself I hope this encourages you to do so. It has really been life changing for me and my family. This has helped me to take control of my finances.
If you have any suggestion, comment or simply want to drop a line below, please do! I would love to hear from you and your FIRE journey.

For now off to a new 2021!

October 2020 Net worth update

This is a short post and update on the Net worth. My last net worth update was in August 2019, when I was around $185,000.

Today we are about 36% above that previous number.

We have had few hiccups due to our car accident. This spiraled down into a train of expenses that we did not expect but thanks to our financial discipline we have saved up an emergency fund that has been a life saver.
We were in need of a different car after the accident, we got it. We did get a small loan because, why not? I may pay it off after we settle the car accident with the insurance, but in the meantime I prefer stashing the cash.
I also had the opportunity of getting another car for an awesome price and then selling my current vehicle; that was another expense that I’m expecting to make back when I sell my current vehicle. I may even make a decent profit.
The rest is the same as usual. We got a budget. We have automated everything so that every time I get my paycheck, money gets withdrawn and deposited right into our savings account.
Looking into your net worth is a great exercise. I love Personal Capital and how easy it is to analyze where you are.
Just few years back I had nothing, but a credit card with 9K in the red. I felt like I was drowning. I felt like there was not progress regardless of how much I worked.
Today I feel excited about my finances and my future retirement. I feel that I am in charge of my money and I feel how little by little that money is freeing my mind from the daily oppression of having to work to cover my basics.

We are considering plunging into buying another property. We are debating if we should go for another rental near us, or a vacation home with potential to rent on a weekly basis through Airbnb.

I am wondering if we can keep that 36% growth rate for the next five years.
Please feel free to share any ideas and opinions you think may help this family of six(Plus one) on their FIRE journey. I am thankful for being able to share this adventure with you.

Surviving the Summer Pandemic 2020

Pandemic Coronavirus Composite
As we crossed the line of over 1 million deaths worldwide we got our share of health issues.

One makes plans, life simply laughs at us.


I wanted to start my post today with this quote because more than ever quote speaks volumes to me. We all read and discuss how important setting goals, being determined, frugal, and resilient is. We make plans and along with that, we create expectations of success and certainly we hope to reach our goals within the time frame we have estimated.
Unfortunately, more often than not, things do not exactly go as we planned. Life likes throwing curve balls at you. You plan to go from A to B, but somehow the whole alphabet happens in between those two and you may end up in a totally different place from what you planned; sometimes for good, sometimes for worse, or sometimes you may find yourself right back at where you started but with different priorities. Life is just simply full of unexpected surprises and unknowns.

This can lead to frustration and disappointment, making you give up your goals or even your desire to plan anything. “What for?” You may ask, if anything ends up going sideways. Unless, of course, you understand that these frustrations and disappointments are just part of the journey. Rarely a journey is one straight path.

Needless to say, the FIRE journey is not an easy one. It is simple. Yes. In the sense of what you need to do it is very simple. Maximize your earnings, maximize your savings, invest and widen the gap between earnings and spending. Likewise though, there are many parts of your life interconnected that must synch and align for everything to work out and fall into place. From your own physical and mental health, to your own variety of responsibilities with your family. It can be very complex.

I have been dying to sit down and write more since my last post called “Pandemic Proof Finances.” When I thought I had everything all aligned, even during this Corona virus time and I was perfectly on track to reach my goals this year.

Everything was secure. My teaching job gave me nothing to worry about as I saw thousands of people losing their jobs and feeding the unemployment rates. My rental was doing fantastic and I had nothing to worry about because my tenant is a subsidized housing program participant; which means that I get paid mainly by the government not the tenant.

The only thing I had to worry about was making it through these crazy times of uncertainty as we face a potential fatal virus of still unknown consequences.

Like everybody else we went through the pain of wiping our groceries, paying extra for food, hoarding a few things trying to create a small inventory of food to feed our family of six, plus one more person (An extra family member who got stuck with us due to the pandemic) in the given case the food distribution chain broke down.

Jewel grocery deliver
This is a privilege not available to all people around the world. We don’t take it for granted.

Of course, we also faced the “gruesome” fear of getting to our last roll of toilet paper!!!

Somehow though, things worked themselves out. Financially we made it. Safety wise, we kept to ourselves, we practiced social distancing rigorously, as we saw the images in New York of refrigerated trucks outside of hospitals storing deceased Covid-19 victims. We also saw the horrible images of a world that is still ravaged by inequalities. Countries where the most basic access to medicine is a privilege that only a small percentage of the population can enjoy. 

To add more stress to our pandemic situation, we added a new member to our family. My mother, who had come to visit for just a few weeks, got stuck with us since the time when the world shut down. This added a lot of stress to our marriage, our family dynamic, and of course it gnawed on our budget and finances one day at a time. This could be a whole post in itself, but I will summarize it as this: I have one heck of an amazing wife- It has not been easy!

More of 2020

We made it to August, enjoying our small pool, which became the focus of our summer entertainment. Usually in August we go on a family camping trip. This year though we were leaning on the idea of just calling it off. However, by August we noticed a lot of people taking small trips and enjoying themselves. The kids were devastated with the idea of not going on our yearly adventure. So on a whim, we decided to go for just a few days. As long as we followed the same safety guidelines recommended by CDC, such as washing hands, social distancing, etc, we should be OK, we thought.  Usually we go for 10-15 days, we decided to go for only 5 days.

We got everything ready. New front tires for the car, small muffler repair to our old trusty minivan, bought our provisions, etc. We were ready!

 Before we knew it the days flew by and we were all waking up early, getting in the car, all bags in, even the dog was excited for the big adventure. Coffees set in the car’s cup holders. Camper hooked, all the lights on, cruising the last minutes of the night as the sun was trying to come up. Little did we know that our trip was not going to go far at all. 

About 10 minutes away, maybe one mile from reaching the highway, we settled in our seats, ready to enjoy the ride, maybe take the first sip of home-brewed coffee with Gregory Alan Isakov at dawn as the soundtrack of our 2020 summer vacation. 

Out of nowhere, and in a matter of a split of a second a car traveling in the opposite direction rear ended another car that was waiting for us to pass, so it could turn left. The rear-ended car got driven right into us.
That is really the aftermath explanation after we were able reconstruct what happened. In the moment it simply felt like a drone attack; out nowhere we were impacted, and it was hard.
Our driver’s side took the brunt of the impact. Our car got impacted all the way from the front to the back. The airbags got deployed. I managed to keep everything going relatively straight despite the impact and in a blink of a second we stopped. My wife asked me to call 911. She was hurt. I felt extremely tight on my back and neck, but I was conscious and facing probably the worst moment of my life; my kids!

Taking that first look to the back of the car wondering if they were OK was terrifying. I was fearing the worst. Were they hurt? Or even bleeding? Killed? Had I just lost one of my kids?

Luckily, they walked out of the car completely unscathed. Unreal! The rear window on the side of the impact also exploded. The sliding door was also damaged and caved in, but nothing touched our kids. Unfortunately, my wife suffered a triple femur fracture. We don’t know if it was caused by the impact, even when her side was not impacted directly, or if it was due to the impact of the airbag.

Airbag deployed
I hope to never see this again in my life.

She was rushed to a nearby hospital and had to have surgery that night to have an intramedullary nail; which I thought it was a pencil like kind of support but in reality it is more like a rebar, driven from the top of your hip all the way down towards the knee.

Intramedullary Nailing of Femoral Shaft
This is one of her last X-rays. everything is in the right position and moving towards full recovery.

Since the day of the accident until now it has been a whirlwind of doing, from taking care of her, the kids, phone calls, answering to our lawyer’s emails, making meals, going back and forth to the hospital, appointments, and my own physical therapy. I was supposed to get back to work few days later after our trip but I had to take two weeks to stay home  as she regained some mobility, and we sorted out the so many things going on in our lives.


Did we get off completely off the FIRE tracks? Is everything lost?

Well, my first thought was this is the end. We are going to be buried with bills. Right away I was advised by a good friend of mine, who is a lawyer, to get legal representation. He didn’t have to say much more than “Insurance companies feast on people who are not represented legally.” 

That ended up being a pretty smooth process, although from the beginning I knew there were going to be some hard pills to swallow with all this.

When you get in a car accident there are two parts, maybe three, to deal with. The simple one is property damage. The cost of reparation or replacement for a vehicle. Who is at fault, etc.That is pretty straight forward. In our case I knew my car was worth nothing. I had bought that car for two thousand dollars 5 years ago, and although it was reliable I knew I would have been lucky if I got even one thousand back.

The other issue to deal with, is bodily injuries. This can be extremely difficult to deal with, because in reality sometimes all the money in the world can not repair an injury that will also have life long consequences. It is difficult to determine what the needs for therapy may be in the future, how much suffering a person will sustain in the coming years as a consequence of an accident. It is hard to put a price tag on a missing limb, brain injuries, the ability to walk, or even losing a family member. Likewise, it is extremely difficult to face the bottom line, which is the fact that your recovery or reparation paid to you and your family will be determined by the kind of coverage the person at fault has. If the amount of that coverage is not enough, you can then tap into your own insurance policy if you have underinsured motorist coverage. Which means exactly that; if you get in a car accident, as long as it is not your fault, and the damages can not be covered by the insurance of the other driver, your own insurance will kick in to cover those expenses and compensation.

The third aspect to deal with, is the one related to justice and the desire of seeing the law punishing reckless behavior such as speeding, cell phone usage and in other instances DUIs, etc. 

In our case, there was very likely some sort of distraction going on in the vehicle that caused the accident. The accident occurred on an ample two lane road on each side(4 lanes total), straight, very light morning traffic. For the kind of damage we suffered, and given the fact that we were impacted by a car that was not in motion, but pushed with such force into us that totaled our car, it leads me to believe that the car at fault was going easily over sixty miles per hour on a 45 zone. Was the person texting, talking on the phone or watching videos while driving or didn’t even brake? We will never know, because unless there is a fatality in a car accident the police does not check phones at the scene of the accident, and getting those phone records may cause another hefty expense ultimately diminishing your compensation or reparation. 

You hear all the time of people getting sued left and right for what seems to be petty things, but it is not as easy as you would think. Besides that, it may not be worth it at all if the person you are suing does not have the means to pay for damages or bodily injuries. For example, it would not be worth it to sue an individual who is 40 years old, living in an apartment building, earning a minimum wage, with no assets. What could you possibly get to compensate your damages even if your lawyer ends up garnishing wages? If a driver hits you or someone in your family, by a driver that only has a 50K coverage, it may look like a 35K payment(Standard fee for lawyer’s is a third of the compensation paid) is nothing but that may be the very best shot you got at getting some compensation for damages. With that said, if you sustain a severe injury that will impact your life forever, this compensation will indeed be a drop of water in an ocean of medical bills. On the other hand, suing the driver may get you nothing at all but frustrations.

Legal representation is also expensive. This is not a complaint. There are many costs involved in litigating a case and lawyers have to upfront these expenses hoping that they will be compensated when the case is resolved. The standard fee is one third of the insurance pay out or compensation goes to the lawyer’s office. If you are compensated with $100,000, the lawyer will keep roughly $33,000. 

They do not have to take your case either. They can decide if they want to represent you or not, which makes it for a good profitable business.

Besides losing 33% of a possible settlement from an insurance company, you may also have to pay back to your own health insurance company. The expenses of your treatment upfronted by your health insurance, such as surgery, ambulance transportation, therapies, etc, may have to be paid back. Once that you are compensated, if your health insurance company paid for your expenses in the first place they will very likely exercise what is called subrogation, which basically gives your health insurance company the right to be reimbursed for what they paid on your behalf.

It has been a very trying year. And this where we are at… deep sigh!!!
A wife who is recovering from a triple femur fracture. A summer vacation that got ruined after the first 10 minutes of the trip, E-learning unfolding, still at the mercy of a threatening world pandemic, a very unclear financial horizon, and possibly on the hook with some medical bills. Plus, last but not least a co-living situation with an extra family member who is still stuck with us. How many more months of 2020?

But there is always a silver lining to any situation, and I have learned that when you think you got it bad, for sure there is always someone in much more pain and suffering. I am thankful for having my family all together, and despite our accident situation we are getting our lives back day by day.

Lessons Learned During These Few Months

First of, I regret, and I think it was a terrible decision to simplify my auto insurance buying only liability. The underinsured motorist coverage is a must, at least for bodily injuries; for property damage depending on how old your vehicle is, it can be debatable.

 If you are in a car accident and you are not at fault, but the other party has, let’s say a 50K coverage, you may be in trouble to cover all your medical bills. Even if your own health insurance is terrific and covers most of the bodily injury, it is highly likely that you will not be compensated for the pain and suffering from a severe injury, such as a broken bone, losing a limb, a brachial plexus or brain injury where your current ability to even work will change forever. 50K will hardly cover medical expenses.
And let me share this nugget with you: There are companies out there selling products with only 50K coverage for bodily injury. So protect yourself and your family. Underinsured motorist coverage is a must.

Likewise, if you are on the other side of the equation and you are at fault with only a 100K coverage, and the other driver suffers a severe injury, your 100K coverage will not be enough if that person, for example, loses the ability to walk or any cognitive ability as a consequence. If you are working towards FIRE it is likely that your net worth will be above that amount and lure any lawyer to file a lawsuit against you on behalf of the victim. 

For all these reasons, I went from only having liability coverage to full coverage with underinsured motorist coverage plus an umbrella coverage up to 1 million dollars. Yes, it costs more but I sleep better. I would hate to lose everything I have managed to save in the given situation I get in a car accident and I am the one at fault.

Two Years of FIRE 

Maybe almost three…
I am still far far away from FIRE but my short journey proves to me every day that I am simply much better off today that I have ever been.

First of,I have saved enough to feel secure. I have no financial worries about covering any expense, mortgage, etc.

We are still undergoing a world crisis and potentially we will be facing a financial one in 2021. I have no worries. My job is secure, my rental is paid by the government; life is good.

We had a devastating event that a few years ago would have caused us a lot of financial unrest. Today, thanks to working towards financial independence we had no concerns whatsoever making it over this hurdle. I was able to purchase a new used car in no time and I felt empowered when negotiating for it. I felt like I could get anything I wanted and on my terms, or at least for what I considered a fair price.

I am estimating a small compensation from the insurance company representing who caused the accident and by no means I am happy about this. There is no money amount that could equate the suffering my wife has endured. But that’s life. Unfortunately we cant rewind time. Once we fully make it through all this craziness we will deploy again our plan of buying another rental; we are currently evaluating the option of and Airbnb as well.

I will be posting soon and update on the net worth. 

In the meantime, we are happy we are all together again. Our sails are filling up again and we continue on our journey.

Blackwell Forest Preserve
Lately we have been enjoying our small sailboat in local lakes.

Learning from other people’s experiences can be a great help. Feel free to share this with anybody that may benefit.

If you have any question, suggestion drop me a comment below.

Stay well.

Covid-19 pandemic crushing the world markets

Pandemic Proof Finances

This will be a time to remember. We just have to survive to tell the story.

I went from publishing my delayed post on March 8(talking about financial goals) to this current post in the middle of a full blown out pandemic a la 1918, when the Spanish flu shook up the structure of civilization and the human race.
Inevitably, our intertwined economies, amazing means of transportation and our human connection to family and friends in different parts of the world make us more vulnerable and maybe more profoundly affected by these kind of challenging events than we were 100 years ago. However, with all the medical and technological advances of our current world you would think that we would be able to dig ourselves out of this one and minimize the human cost.
We’ll see…In the meantime…

Is the FIRE movement dead?

Absolutely not. I think it is more alive than ever!!! As someone that jumped on the bandwagon of financial independence two years ago I can tell you that thanks to looking into my finances I can still go to bed and have a great sleep in the middle of this global disaster.
If the Corona virus would have hit two years ago I would have had only $400-600 in the bank, 6-8K of credit card debt and the pending burden of non-discretionary bills, such as my mortgage, utilities and food.
Today, in the middle of this pandemic chaos I am in the best position I can possibly imagine. No debt, living in a great area with nice trails, a decent amount of cash stashed away, and with our mortgage as my only liability.
I am far away from retirement. Maybe 9 years, according to that awesome countdown timer on my splash page.
I’m not even financially independent, but my situation illustrates perfectly why the FIRE movement isn’t dead, but more alive than ever. I depend on my salary heavily, but being part of the FIRE wannabes has given me the capability to endure this unprecedented time.
The desire for FIRE has secured a solid financial foundation to weather this financial storm with my family.

My Biggest Financial Concerns During this Pandemic

I was sent home on March 13, 2020. Not much later than that, I received an email from my school district confirming that we would continue getting paid while being home. At first, those days were supposed to be accounted as snow days, God events, but later we moved into the idea of E-learning.
Luckily, we were guaranteed our regular payment as we continue working from home. Of course, if everything extends further than expected, and people start losing their homes, not paying taxes, etc., that would eventually impact my school district as well and trickle down to me. Hopefully we don’t get there.
My biggest concern, besides continuing getting paid my regular income, was to secure my rental income. That would have put a big dent in my pocket if I had to absorb an extra mortgage. Luckily, what once was an iffy decision due to all the horror stories around affordable housing and the Section 8 program, I can tell you that today I feel like the luckiest man on Earth for having a Section 8 tenant. My current tenant is responsible for about 2% of the total rent amount and the government pays the rest. The tenant not only keeps the property in superb condition but also pays electronically right on time; sometimes even earlier.
Again, you would think that in these difficult times money should be the least of our concerns, but it’s not. It’s the main concern besides avoiding getting sick with that Covid-19 crap! Money and money related stresses are going to devastate a lot of families and individuals. I am confident that we will see the financial repercussions of this pandemic for several years to come.
Now, thanks to my FIRE goals, all I have to worry about is staying healthy and keeping my family entertained in the comfort of our home.

The Emperor Has no Clothes

Analyzing this pandemic with a critical perspective, you just can’t deny that besides being an unprecedented event, it’s exposing what we knew all along, but we refused to see.

We live a in a world full of inequalities and abuses that will be now accentuated by this pandemic, bringing dramatic consequences to countries where medical care is available to only those with economic power within that particular social group. While the pandemic keeps unfolding in less fortunate countries, not only will medical attention be limited , but also food, water, electricity and transportation. Besides, of course, information! **India less than 500 deaths with a population of of 1.3 billion people, really?**

So, if you are in a developed country, I hope you realize how privileged you are. Getting your groceries delivered to your door, having a guaranteed network of food distribution and Amazon providing you with any crave you may have to satisfy your hobbies and intellectual needs is as privileged as privileged gets. That is not the normal for most of the world.

This is not to say that in developed countries there are not less fortunate folks being ravaged by the consequences of this pandemic, but never at the levels of countries like Venezuela where poverty is rampant.

Can we really overcome this chaos if we continue overlooking the fact that we don’t give an absolute shit to what is happening in other countries as long as we can continue getting cheap labor and products? Or do we call this pandemic an “externality” of our privileged lives and move on as we watch the John Hopkins Corona Virus Map gain another death?
It is hard for me to imagine a pandemic free world and coming out of this one triumphantly without focusing on some of these challenging issues pertaining social justice domestically as well as internationally.
I am left wondering if this pandemic will trigger the necessary changes for some less fortunate countries. Likewise, I hope this chaos settles for once and for all that health care should not be just a money making enterprise or privilege for a few people, but a right that helps us all.

Corona virus map by John Hopkins Hospital showing the current state of contagion and death in the world.

Lessons Learned from an Unprecedented Event

First of all, I would not recommend anybody to make any drastic changes during this time. This is not the time to take chances using your emergency fund to invest it on a winning stock, with hopes that the market will rebound after stocks have dropped more than 20% of their value.
If you already have money in your 403B/401K , IRA, Roth or any other account, likewise, this is not the time to be moving things around if you are a conservative investor like me. Not worth it! To me, my sanity and tranquility is worth more than a few thousand dollars.
Now, if your expenses are covered and you have extra cash to play the game of buying the dip without jeopardizing your current situation, that’s a different story. Increasing your current contribution to your tax deferred accounts can certainly bring some reward once we are out of the woods with this pandemic. In my case, that is not part of my game right now. Besides, I recently increase my 403B contribution right before the pandemic dilemma started. Hence, I feel like I already put a check mark on that one.

My second lesson learned from all this, and please, imagine myself kissing the ground thanking the universe for this one, is start your FIRE journey as soon as you can, which is right now. Remember, any drastic changes aren’t worth it at the moment, but start thinking about it! What is your number? What is your blueprint to become financially independent? Once you start that journey it doesn’t matter how fast you walk it, you will always be in the best position you can possibly be financially.

My other lesson learned from this pandemic debacle is DIVERSIFY!!!
It doesn’t matter what you do, diversify!!!
In my case, what once was an uncertain path of doubts holding me back from renting to Section 8 tenants, it has become a life saver. Thanks to the fact that my rent is back by the government I have no worry about getting paid or not. In my mind, Section 8 will always be part of my rental portfolio as I continue acquiring properties.
I am planning on getting one or two more rentals in the future and I think that government backed tenants are a great mix in a landlord’s portfolio as long as you do your diligent work of screening your tenant properly; just like you would do with any tenant.
Another nugget of wisdom that I will continue to treasure is to avoid high leveraged deals. All those folks out there preaching OPM(Other people’s money) strategies sound very smart when the wind is blowing in their favor, but if by any chance you get stuck in the doldrums of a financial havoc, things can get ugly pretty quick. Especially if a 2008 Tsunami all of the sudden comes your way it’s unlikely you’ll survive. That leverage can work both ways!
We don’t know exactly how the housing and rental market are going to react to the Covid-19 scar, but undoubtedly we are already seeing some consequences and it will definitely have some profound effects as we see record high unemployment applications; even if a Covid-19 vaccine was found tomorrow it will take some time for the economy to recover, including the time to convince the antivaxxers to get the shot.

Don’t be ashamed for sitting on a nice cushion of property equity. Buying and holding a rental until you pay off your mortgage before you move on to buy another property is perfectly fine and quite risky as it is. There is no reason for gambling.
Call me lame, but that’s what I am doing, and life is great!

2020 Goals Modifications

After getting out of debt this year 2020, we set up a new target: Paying our rental’s mortgage off.
Right away, after paying our student loan we received our 2019 tax return and stashed it away. Using the snowball debt paying strategy we started detouring the former student loan payment towards the new debt target.

However, I didn’t want to wipe out the account right away and just dump it on the mortgage; not quite then. And thank God I didn’t! Not much later, after we pooled all the money together and we were going to make a move, Covid-19 started creeping in. By March 13th I was sent home as the Coronavirus had made its way to the Chicago area.
Now, a month later, I still haven’t moved any money and it is just accumulating in the bank as a safety net. I am still getting my regular income and actually we are saving quite a bit of money by staying home. I am still hesitant to make a big move and nearly zeroed my account by dumping money on a mortgage. We will wait.
I have also been tempted to buy the dip and sink the money in the stock market, but sincerely a 20-30% gain doesn’t justify the peace of mind I have right now, knowing that I can cover all my expenses if necessary using that money stash.
Call me risk averse, but I prefer having a nice sleep at night. I have a wonderful life and I can provide for my family quite comfortably. That’s what matters to me. Why push it?
My biggest financial move during this pandemic, which I also accredited to my pursuit of FIRE, is having just scored a nice refinancing opportunity through a local credit union. We had a 4.75% 30 year fixed mortgage. Now, we will have a 3.3% rate which will bring about $140 in savings monthly. It doesn’t sound like much, but yearly it will save us $1,680. At the end of 30 years we would be saving $50,400! That’s quite a bit of money. And I prefer it in my bank account rather than the bank’s!
To conclude, my 2020 goals are keeping the course with a few changes. Financially I feel that we are secured. Now, we just need to make sure the whole family makes it through through these troubled waters. If so, I think we will come out in an even better situation we had anticipated for 2020 due to our mortgage savings, going nowhere and so far one stimulus check that just came in.

I would love to hear how is this pandemic affecting your financial goals and what changes you have had to make.

Setting Goals for 2020

New year means new financial goals.

A bit late confessing my 2020 resolutions but this has become a must for me. Setting up financial goals for the year helps me stay focused and stick to the plan. If you have not set yours I hope this inspires you to do so.

So far, from the moment that we started our journey towards FI, besides getting out of debt, my second goal was to free up some cash. We didn’t have big amounts on credit cards and it was relatively easy to pay them off once we got on a budget. However, my wife’s student loan was a total  @#$**!!! We had acquired it around 2003, and by 2016 we had barely made any progress. After moving to our new place and settling in we became   landlords but we were still sitting on the debt pile for the student loan  for $22,000.

After looking at our budget and sticking to our guns we decided to go hard at the student loan. If our calculations were right, after two years of making extra payments the loan would be gone. A little miscalculations made us miss the finish line but not by much, and we actually had some unexpected gains that we didn’t account for, which I explained in my previous post here.

But finally and without hesitation, I can say proudly that we have accomplished our goal. We have completely paid our student loan!!!
Now we have available to us all the cash we were using towards that payment. The regular payment was $235, but we were paying $716.
Now we have set free those seven-hundred-sixteen bucks, who are now diligently working for us 24/7 helping us to increase our net worth.

What’s next?

Well, after surviving our first run as landlords we have stepped up our game bringing some extra rent income. Now we have some extra cash-flow in rent and $716 that were previously going into student loan payments. All this together gives us a lot of flexibility and brings awesome investing opportunities.
Besides all these good news, we have always had an awesome tax return averaging about 10K . This year we broke that mark!
I know. We loan money to the government for free but we love that juicy check in the spring. It’s like a forced saving stash of cash.
In the past, we have used whatever we get in tax returns to just pay credit cards and do few little repairs around the house. We would stay afloat for few months, and then around November we were gasping for the next tax return again to pay off debt. A pretty frustrating cycle. Sounds familiar?
Luckily, that’s a thing of the past. After working our budget, we were able to brake that cycle and become more intentional with our hard earned income.

Debt Snowball Method

If you haven’t heard of the snowball method to pay debt, it is one strategy that can really help you further your financial success.
How does it work? It’s pretty simple. You determine what debt you would like to pay off, such as a credit cards, student loan or even mortgage; the general recommendation is to choose the smallest amount of debt with the higher interest rate; most likely credit cards. After paying one debt, and eliminating that liability you will repurpose that payment and dump it on the next bucket of debt.

To illustrate, I would use my own case. We first chose to pay off our credit cards by making not only the minimum monthly payments but also paying additional cash towards the principal we owe. Once we paid the credit cards, instead of saying, “look! Now we have extra cash to spend,” we pretended the money was not there and kept a tight budget. We looked again at our budget and chose what debt was next. In our case the student loan was next, with a balance of 22K at a 6.5% rate. We used the regular monthly payment of $238 we were obliged to, plus the cash we had freed up from the credit cards debt. Our final number was $716. Now, instead of continuing paying $238 to the student loan debt, we were paying a total of $716; $478 extra towards the principal every month.
Was it easy? Well, some months were better than others. Some months were a real squeeze. But we stuck to the plan.
One of the strategies we used to help us out a bit paying off the student loan was using a home equity line of credit. By doing so, we reduced the interest rate from 6.5% to 4.5%. This gave us an estimated saving of $416 yearly if we committed to pay the debt within two years.
However, if we didn’t pay this debt and continued on the minimum payment track we would have stayed on that same track until 2028; that was the loan’s maturity date and it also included accruing $1430 of interest payment yearly (22K x 6.5%)!
Instead, we saved 8 years of burden saving us $11,440($1430 x 8 years) of interest payment! This is nuts! Now I can expect that number to eventually come on my side of the ledger as years go by.

Next target

Now we are aiming to pay our rental’s mortgage off. That is what I envisioned as part of our blueprint to reach FI. This one is not going to be an easy goal and will require some perseverance to endure 4 years of sticking to a plan. By doing this, we will increase our yearly income by 35K.
17K from gross rental income, 8.5K from cash that we have freed up from debt( Student loan and credit cards), plus approximately 10K that we get yearly in our tax return.
In 2024, we are thinking about getting one or two more rentals, in the same area we have the current rental. We feel like we could comfortably manage one or two more properties as the first rental will be completely paid off.
In 2024 I will have only four more years left before I reach my goal of retiring in the summer of 2029. In this mix, of buying real estate we also would like to buy a small house in Michigan. This may be the place where we think we would like to retire once the kids are done with high school. That’s a bit ahead of the game and will remain a thought for a while, so more on that in future posts.

Silent Weapon

Something that I highly recommend and has helped us tremendously as well is technology. I like using regular Excel spreadsheets or even Google Sheets to keep track of our budget. But I also like using Personal Capital and Mint.

With Personal Capital I can really look closely to all my accounts, budget, and even take a quick snapshot of our Net Worth.
Mint, on the other hand is what I use on my phone for just a quick look of bank accounts and ongoing expenses on a daily basis.

However, the ONE silent weapon that we use all the time is automatic money transfers through our bank. We look into the budget, set up a goal and schedule these transfers as a one time event or re-occurring events. By doing so, all you need is to figure out your strategy, setting it in motion and forget about it.

In our case, we sat down to determine the amount we needed to pay toward the student loan in order to meet the pay-off date we desired and we were done. At times we just made sure we were still on track and simply kept on going.
If you are in the same situation of trying to pay off debt, start with your budget. That is really a financial GPS. Determine what is the maximum extra payment you can make and schedule that payment to be made as soon as you get paid. Don’t wait for the month’s left overs in your account to figure it out; that’s a recipe for disaster. Pay yourself first. Figure out how many payments will be required for you to reach your goal and stick to it. Ask yourself what will be your next goal? Pay more debt or invest? Likewise, is there anything you could do to increase your income? Maybe a side hustle or cutting off some unnecessary expenses like cable?


Financial literacy is a must for everybody. I wish I would have taken a more active approach in my early years and set some financial goals as my younger self. However, I am amazed at how much progress you can make financially by just paying attention to your expenses, determining your priorities and setting financial goals every year. It’s never too late; never too early.
You don’t have to be on a beans and rice diet to achieve financial goals. I still have an amazing life with my four kids and wife. I have become just more intentional with my money.

I would love to hear about your financial goals for this year 2020 or any achievement (Big or small) you feel proud of on your FI journey.

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