No, this post is not about bragging.
It's about inspiring to help you see the possibility on what you can achieve with a bit of vision and hustle.
So when retirement comes knocking, and you find your pension isn't quite buying all it used to, you won't end up staring at missed opportunities on the rearview mirror.
In case you haven't read my first blog... husband and I are both nurses, ages 36 and 38 years old, living in San Francisco Peninsula since 2008. Prior to moving here, we had no savings and were both in debt. Since 2015, I only work 7-8 shifts per month, while the husband continues to work full time.
SF Bay area cost of living is over 3 times the national average, with San Mateo County median home prices 3 times that of California and over 7x the US average.
But, how did a couple of staff nurses, only initially armed with community college degrees, who just moved here 10 years ago, afford 2 properties in SF peninsula and a few more?
No, we did not inherit wealth.
No, we were not gifted money or win the lottery.
No, we didn't invest in Facebook or Tesla stocks. (we all wish!)
No, we didn't start a business nobody's ever thought of.
No, we did not eat ramen and leftovers for the last 10 years, nor did we work 2 jobs or
overtime while squirreling away our paychecks.
No, we didn't stay homebound and avoided vacations.
No, we didn't stay at home with parents rent-free.
And no, we didn't go "Breaking Bad" either.
But my belief has always been this:
Hard work puts bread on the table. Extra hard-work may make savings and simple luxuries possible. But, it's through taking risks with sound investment that affords peace-of-mind.
And at the end of the day. That's what we all want for our families-- financial peace of mind.
How? Because of Passive income-.
It's the income you can make while not working.
What do you need to initially put more? Risk.
When you're young and single, explore and travel cheaply. Work the extra hours. Educate yourself. Read not just about nursing (or whatever profession you're in), but about life, spirituality, finance, philosophy, history, current events. Don't be afraid to learn from people. Life is not all just about work. Trust me, when you leave your workplace, your employer will not remember how hard or how long you've worked for. Life is about a multitude of things. Think twice about getting advanced degrees from fancy schools. Fancy schools = large debts. Be practical. If advanced degree from a fancy school = much higher earning potential than the non-fancy alternative, then it may be justified. If not, perhaps try a more affordable institution if you must go back to school.
If you didn't get to start saving for your nest egg in your 20's, and now, you're in your 30's and 40's, it's still NOT too late.
1) Spend after you save. Don't live within your means; live significantly below it.
When we started out, I was adamant with living on 1 income which was quite challenging with a mortgage.
If 50% is too much, then try living on 70% of your income. If it's still not possible, find a way to earn more money through a side gig or overtime work. For us, we took in a roommate to help us out with travel money.
2) Change your mindset.
Don't put your heart on material things. Remember, we bring nothing to our graves. So, don't buy unnecessary things. The point of saving and investing is to ensure your family and yourself are cared for. So, value experiences and relationships instead. Besides, true relationships are much cheaper and more valuable than that Gucci purse.
3) And if you must buy, buy gently used stuff.
Even now, when I pass by a good deal, I buy used- like my China set, retailing at $500, which I got at an estate sale for $50. Avoid brand names just 'cuz the "Joneses" have them. I'm telling you, those Joneses are probably mortgaged and indebted to the hilt.
4) Drive that old car proudly!
Yes, my 11 y.o. paid off Toyota lets me sleep more soundly at night, than that new shiny Benz. In general, maximize the life of any depreciable asset. This goes with tech gadgets and appliances.
5) Hold off on that pricey vacation!
Delay until you have enough 6-months emergency savings if you're single and at least 1 year emergency savings if you have a family.
Save and pre-pay for that trip. The drool-worthy Instagram pictures can wait. You will smile more genuinely when you have no credit card debts waiting when you get back to the grind.
6) Pay off your credit cards, student loans, car loans as quick as you can.
7) Pay off that home equity loan of credit (HELOC) faster too.
After the first few years, fixed HELOC rates become variable and are at least 2% higher than previous teaser fixed rates. Also, HELOC interest is not tax deductible with the new tax laws.
So, wait for that kitchen renovation when you can pay it off out of pocket. I can assure you, your food will cook just the same on a new or old kitchen stovetop.
8) Have adequate property insurance.
If you're renting, get a renter's insurance. If you own your house, get an earthquake on top of your regular homeowner's insurance. It doesn't hurt to have an umbrella policy either if you and your spouse have a higher net worth in case you come across an extra litigious person.
9) Have adequate life insurance in the event of an untimely death.
I don't believe insurance should be used for savings, as insurance companies impose huge premature cash out penalties (some almost 40%) among other things. But life insurance policy from reputable carriers, held for unforeseen events is always a good idea.
10) Max out your retirement accounts.
When you think you'd have more time, is when you realize you actually don't have any. So, take advantage of those pre-tax, employer matched contributions.
To make it simple, if you are in the 25% fed tax and 10% Ca state bracket, for every $10k you make, the government takes $3500. Now if you set aside $2k in 401, the government only taxes $8k or takes $2800. In other words, from your $2k contribution, the govt. pays $700 while you pay $1400 into it. And when it gets taxed at retirement withdrawal, it would be taxed on your future lower tax bracket.
11) Find ways to invest your extra savings to beat out inflation.
"Inflation is when you pay fifteen dollars for the ten-dollar haircut you used to get for five dollars when you had hair."
Invest. May it be real estate, mutual funds, government bonds, REIT, annuities, 529 plan. Canvass online financial institutions such as vanguard and fidelity. They may have lower fees than traditional brick and mortar banks.
12) Make a budget.
Since I started work at 15, I already kept a monthly budget. Writing you're your income and expenses on paper easily helps track of what's essential and what you can do without.
(To be honest, I haven't stuck to the budget the past 3 years, but with my new goal of paying off our mortgage before 45, it's not a bad idea to get back at.)
13) Lastly, remember to give back, not lend out.
If you must, only lend out what you're ready not to get back without destroying the relationship. Otherwise, save yourself headache and money.
With this said, I'm a believer of giving back the blessings to the church, charity or a random homeless person. Donate whatever you don't need or barely use. I firmly believe your blessings will come back to you and... its tax deductible.
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