A couple of years ago, my husband and I reached Coast FIRE.
What is Coast FIRE? Coast FIRE is when you have enough invested in your retirement accounts so that without any further contributions, your investments are expected to grow to cover your expenses at the traditional retirement age.
What Coast FIRE Has Done For Us
Reaching Coast FIRE doesn’t mean we get to enjoy life under a palm tree without having to work, but it has given us more room to take chances and pursue a more fulfilling life.
As parents of three kids — ages seven and under — we still work to cover our day-to-day expenses and continue to invest for college for our three children. We also consistently invest in our retirement accounts to grow our nest egg, and in projects that we care about. Reaching Coast FIRE did not change our immediate responsibilities, but we don’t take this milestone for granted.
How We Got To This Point
The road hasn’t been easy. Within the span of three years, we had three kids — including twins — while both working full-time. We experienced a few financial setbacks, including medical bills resulting from our twins’ two-months stay in the NICU.
Investing consistently, no matter what we were facing, turned out to be priceless. Though we still have to work to face our current expenses and continue to invest, there’s a comfort level in knowing that we don’t have to worry about meeting our retirement needs.
I understand that it’s a blessing most people don’t have, especially in underserved communities. That’s why I’m passionate about doing my part to help change that. Here are a few steps that we took as a couple to get to this point.
1. Budget and Track Expenses
When I was a tween, my mother shared that I should always save at least 20% of what I had. At thirteen, I created my first budget. Though I did not know what a budget was at the time, I was allocating 20 percent of my allowance to a savings bucket. I can’t remember a time when I did not budget my money after that. Over the years, I started using spreadsheets and developed more advanced budgets.
Before getting married, my husband and I sat down to merge our finances and set financial goals as a couple. Part of that process was budgeting by allocating every dollar of income to a category to make sure that we would meet our goals. We save and invest first, and spend what’s left. That habit has sometimes made us feel broke, especially early on, but it worked out for the greater good.
We also have monthly budget meetings to review expenses and savings, and assess how we are doing compared to our targets. A few years ago, we were using spreadsheets, but today Personal Capital’s free money management tools make life so much easier.
We plan for large expenses and keep a miscellaneous line item to face unexpected expenses. We view our budget as a living document. As such, we make adjustments based on our circumstances as long as we stay within our income. The only category we don’t adjust downward during the year is how much we invest. We set a target at the end of the previous year and make the adjustments necessary to meet the target.
2. Live Below Our Means and Stay Away from Consumer Debt
My husband and I made a few critical decisions that helped us continue to invest, even when our expenses were at the highest, with three children in pre-school at close to $40k a year.
We lived below our means by being intentional about buying a less expensive house that we could afford, even though lenders encouraged us to spend more. We also kept and continue to keep an annual fund to buy our cars. That practice has allowed us to stay away from car financing and pay for our cars in cash. Growing up, my parents kept their cars until they needed to be replaced. My dad purchased one of his cars the year I was born. He was still driving it when I was well into my twenties. Today, our cars are ten years old, and we don’t plan to replace them for a few more years. Having a lower mortgage and no car payments gave us more room to invest.
We also did a few other things, such as limiting eating out or cutting unnecessary bills. In the past five years, my husband and I doubled down on reducing expenses to continue to meet our investment targets.
We still wanted to travel and have experiences we value, so we sacrificed day-to-day splurges to continue to do the things we loved most.
We had mortgage debt, and my husband had some student loan debt. Other than that, we stayed away from debt to avoid the high interest rate associated with consumer debt.
3. Increase Income and Investing
Over the years, our income increased through work promotions and job changes. We also had side hustles outside of regular jobs for most of the years. Growing up, our parents always had multiple income streams; that’s a habit we naturally picked up as adults.
Though our side hustles did not bring a huge amount of money, having a business can make a big difference from a tax perspective because of what you can expense as a business owner.
As our income increased, we also automatically increased our saving and investing.
4. Invest Consistently and Track our Net Worth
Automating our investing has served us well on this journey. It has allowed us to invest regularly whether the market was up or down. Taking advantage of tax-advantaged retirement accounts such as our employers’ 401k plans, Roth IRAs, and health savings accounts (HSA), which you can use as an investment tool, has been key. We also use investment brokerage accounts. They do not provide tax advantages but give us more flexibility in our investment picks. Though we focus on low-cost index funds and ETFs, we keep a small portion of our portfolio in other investments, which my husband enjoys much more than me.
Also, tracking our net worth, what we own minus what we owe, has been critical on our journey. Personal Capital’s free net worth tracking tools have been vital for tracking our investments and our net worth.
Read More: The Average Net Worth By Age
My husband and I check in on our net worth once a month. I also use Personal Capital for daily net worth updates. Tracking our net worth gives us an idea of where we stand financially.
As a couple, we set 1-5 year net worth targets during our annual financial reviews. Tracking our net worth allows us to make sure that we continue to make progress towards our goals. Also, seeing our net worth increase is positive reinforcement, as it provides evidence that the efforts we put towards keeping our finances organized work.
What’s Next For Us
My husband and I are now working on reaching financial independence, the point where our passive income is enough to cover our expenses. We continue to follow the steps that have gotten us to this point with slightly more flexibility.
I recently took a career pivot and decided to only pursue work that I believe to be aligned with my purpose.
Making that decision meant temporarily giving up a significant portion of the family income until I can build up my business.
Today, we are more intentional about designing a life that we can enjoy every day. While we strive for financial independence to have even more options, we believe it is equally important to enjoy the journey to financial independence.
Personal Capital compensates Anne-Lyse Wealth for providing the content contained in this blog post. Anne-Lyse Wealth is a paid content contributor and not a client of PCAC and does not make any endorsements or recommendations about securities offerings or investment strategy.