How I Increased My Capital by $ 27,000 in Six Months

According to You Need a Budget (YNAB), my total net worth is currently $ 108,940.66.

This is $ 6,193.91 more than at the beginning of last month .

$ 11,657.14 more than two months ago .

That’s $ 27,213.44 more than it was six months ago when I switched my budgeting app from Mint to YNAB and started focusing on increasing my net worth as quickly as possible.

To be honest, I didn’t expect the numbers to go up that fast.

So let’s see how they did it.

Moving to an area with a lower cost of living

In November 2017, I moved from Seattle to Cedar Rapids, Iowa. This move, which I wrote about in detail for Vox , cost me $ 5,929.10. (This includes travel, delivering my belongings, buying new furniture, etc.)

It also cut my expenses by nearly $ 1,000 a month, most of which is in rent.

This means that the move “paid off” in six months. After that, all the money I saved living in an area with a lower cost of living turned into net profit for lack of a better term.

This move has also significantly improved my quality of life – I have become closer to my family, I have joined social and artistic organizations and, finally, I can afford to live in an apartment that is not held together by mold and dirt.

On all counts, it was a win-win.

Striving for financial independence

Moving to an area with a lower cost of living reduced my expenses, which allowed me to think differently about my future. The more money, the more opportunities – not only today, but in years to come.

It took me a little over a year to think about what I can do with these new capabilities – or even realize that I have them. My expenses were lower than my income, I regularly put money in retirement and brokerage accounts, and I really didn’t think about long-term growth; I thought it would take care of itself.

I then received a copy of Grant Sabatier’s book Financial Freedom: The Proven Path To All The Money You Will Ever Need .

This book amazed me. More importantly, it made financial independence attainable even for someone like me, who makes about $ 70,000 a year (before taxes).

I read Financial Freedom three times from cover to cover. I did all the exercises and inserted my numbers into Sabatier’s online calculators . I realized that with my current expenses, I could “retire” and live off my investment as soon as that investment reached $ 750,000 – which at that time, calculators predicted, would take twelve years.

Of course, I’m not going to retire after 40 years. I am both a writer and a novelist ; we try to work until the last hours. But I am also a realist. I’ve been a freelancer for seven years, but I can’t guarantee that my career as a web writer will last another seven years; even if the demand for articles and content stays the same, I may start to move away from fresher faces with a better understanding of pop / youth culture.

In addition, I may have different requirements for my time in the future, which may make it difficult to devote the same amount of time to freelancing (or other work).

So in fact, I see this financial independence plan as a form of insurance. Freedom, borrowing a term from Grant Sabatier, to curtail my freelance work if need be. Spend more time writing novels, taking care of yourself, taking care of your own health, or what might happen next.

Invest as much as possible

As soon as I realized that “all I need to do” to achieve financial independence is to get an investment portfolio in the amount of 750 thousand dollars, I began to ask myself how I can get to it as quickly as possible.

This meant investing as much as possible. Pouring every additional dollar into my IRA or SEP IRA or my brokerage account. (The freelancer has an interesting twist: every dollar you invest in a traditional IRA or SEP IRA is considered an “over-limit” tax deduction, which means that the more I can put in those accounts, the less taxes and more ACA health insurance subsidy. which I am entitled to. It gives a huge incentive to make the most of both accounts, which I did in 2018.)

According to Vanguard, $ 4,729.49 of my $ 27,000 net worth increase came from investment income. This is 18% of the total increase.

Increasing my income

Another way to reach that $ 750K portfolio as quickly as possible is to increase your income. As a freelancer, this is easier for me than for someone with a traditional job; At the end of the day, I am the upper limit of how much I can earn. (At least until I get to the age where clients might want to replace me with someone younger.)

So I got a few new clients, including a few higher paying clients. My income is currently higher than ever and it looks like it will stay that way for at least the next few months – and yes, I’m already thinking about how I can close the income gap if / when one of my freelance gigs is ending.

This is the part where I should mention that my spike in income coincided with my decision to stop using The Billfold (and that a portion of my 2018 SEP IRA contributions came from money I had originally set aside for Billfold after all closed, and pay to freelancers, vendors, accountants and lawyers). If you’re unfamiliar with my entire career — and there’s no reason for that — I have been writing and editing for five years The Billfold, a personal finance site that was part of the Awl network. When the Awl network stopped publishing in early 2018, they asked me if I would be interested in launching The Billfold as a standalone project, which I have been doing for a year.

It would have been very, very easy for me to write this post as a story of consistent growth and triumph, but I realized that I could no longer support Billfold – and then decided to embrace that awareness after going through each stage of grief. – did not feel much triumph. It was both personal and career failure; Worse, it meant telling the community of readers and commenters that the site they had visited every day for years would go out of print.

And then, when it was over, everything worked out – at least for me. (I know many Billfold readers still miss the site.) In many ways, it was like leaving Seattle for Cedar Rapids; The decision was not easy, people were sad to see that I was leaving, and I still miss many aspects of life in the city. But as soon as I started my new life, I realized that I had made the right choice.

Live a humble life

There are many reasons why I can save as much money as I am saving now: I am single, healthy, I have no children, I live in an area with a low cost of living, and I’ve been developing my freelance career for almost ten years.

I don’t have a car either.

I cut my hair myself.

I spend an average of $ 55 per month on dining out.

I find one shirt I like and buy nine, so I never have to think about what to wear. Also, I rarely look in the mirror and think, “I need a new outfit because I don’t like the way I look today.” (If all my clothes look the same, I always look the same – that means I always feel the same way about how I look.)

I do a lot of very modest, rather strange things in the name of keeping my costs as low as possible. I eat the same thing every day: breakfast Huel plus a banana; Huel lunch plus an apple; dinner – quinoa, which I buy in bulk, cooked with frozen vegetables and spices and served with cottage cheese and frozen blueberries for dessert. I visit the library probably three times a week (it’s good that one isn’t that strange). I got rid of Netflix and only signed up for HBO long enough to watch the final season of Game of Thrones .

I try to save money wherever I can, so I have the freedom to spend money on things like self-publishing my novels and spending a week at Walt Disney World.

I now lead a humble lifestyle, so I can work towards achieving financial freedom.

If you haven’t done the reverse math: In order to achieve financial independence with a $ 750K portfolio, I need my monthly spending around $ 2,500. It’s not difficult for me, partly because I have been living very frugally for a very long time. Will it become more difficult in the future – well, we’ll see. This is why I see this project of financial freedom as insurance, and not as a point where I no longer have to work a day in my life.

The calculators have already updated my target date from 12 to 10 years.

Let’s see how my net worth changes over the next six months.