As Mrs. Butter Passing Robot hinted, I’m a spreadsheet guy. I still remember the first time I actually worked with Excel. I was a kid playing baseball and one of my dad’s friends gave me a copy of the spreadsheet that he used to track the team statistics. I spent that summer updating formulas, and I’ve been hooked ever since. You should expect to see lots of charts, graphs and tables popping up here over time.
I’ve been creating various spreadsheets for household finance related things pretty much since we left college back in 2006, but it wasn’t until a decade later when I quit my job, moved to Salina and started staying at home with the kids full-time that I really got serious about managing our money.
I guess I felt like if I wasn’t going to be bringing in a paycheck, then I needed to find a different way to add value to our family’s financial picture. This was a year before I was introduced to ChooseFI–a year and some change before any kind of commitment to financial independence–a year and a half before a developing a real, shared goal with Mrs. BPR that had a meaningful monetary component. We didn’t have the “why,” and I wasn’t exactly sure how to get there, but I knew that regardless of how long it took, we would be better off if I started compiling a better picture of the “what.”
I started tracking our income and expenses at a detailed level on September 1, 2016. It is the first thing I do every Saturday morning. As of March 31, 2018, I currently have 2,162 line items in the “Transaction History.” I applaud the members of the financial freedom community (like the Frugalwoods) that are able and willing to post the detailed records of their expenses. I’m not that brave. Perhaps someday you will see some dollar-signs around here, but for now, I’m going to keep things on a relative basis.
Let’s start with the wisdom of Mr. Money Mustache’s “Shockingly Simple Math Behind Early Retirement.” This chart shows the history of our monthly income, expenses and the corresponding savings rate:
I would love to be able to extend this back in time to the day I started working full-time out of college. Unfortunately, I wasn’t that put together. All I can tell you is that I always made sure I got the match in my 401k from my employer, but over the course of 10 years, I never successfully maxed out the account. If I have a goal right now, it is to get our savings rate up above 75%.
In addition to tracking the transaction level cashflows, I also monitor our net worth. I update the balance sheet once a month for all accounts where there are monthly deposits and withdrawals. For accounts like legacy 401k and HSA’s, I update the values on a quarterly basis.
The chart below shows the relationship of our net worth to our target savings, where the target savings is calculated using the monthly expenses shown on the red line above and multiplied by a factor of 28.6 which corresponds to a safe withdrawal rate of 3.5%:
This chart gives us one way of assessing how much progress we have made towards our goal. The chart below gives us an idea of how much further we have to go. The black dots represent estimates of how long (in years) it will take us to reach our target if we use the same assumption of a safe withdrawal rate of 3.5% and combine it with an estimated compound annual growth rate (CAGR) of 5%:
Our target here is to our goal by 7/1/2021, the date at which Mrs. BPR will be fully vested in her company-sponsored retirement savings plan. That is 39 months (3.25 years) away. The trajectory is good, but pace Frost we’ve got “miles to go before I sleep.”