In the my last post, I told you how I found the path to (early) financial independence and how I got to where I am today. What I haven’t told you is where “here” is, which is the topic of discussion for today.
I’m about 2 years and 9 months into my journey to financial independence and I’m feeling very positive about the future.
I’ve been at it longer than that, you see, but I sat on the idea for a while for various reasons, even after I had figured out exactly what I needed to do. I had researched passive income for a while before I finally settled on real estate as my means to achieve it. But my family wasn’t ready financially for about a year after we had made up our minds.
So we started saving our money for a rental property and cut our 401k contributions. (I can hear the gasps ringing out through the personal finance blogosphere.) When we got educated in locating and managing property, and had a decent amount of money put aside, we went after it and sure enough: we bought our first rental 3 months later. We didn’t know everything but we had a team of people to help us from contractors to insurance agents, inspectors and mortgage brokers.
That one house got us started down the right path and added $300+/mo in rental income to our family.
It wasn’t really up until this point that I realized we simply weren’t saving enough. I think at the time my wife and I were saving about 12-15% of our income, and while that is higher than the “standard advice”, I knew that we could do better. Over the course of the next year, we focused a lot on the other side of the personal finance equation: spending (less).
We dropped our cable, cancelled our gym memberships, and raised the deductibles on our insurance and otherwise upped the seriousness of our finances. In 2011, we saved about 40% of our income, which i consider both an achievement and also “Not quite good enough.”
Fast forward to today: we’ve purchased two more houses and between our 3 rentals we’re making $1209/mo in rental income, which at this point gets 100% reinvested back into our business.
Here’s a little graphic I made to summarize our business as it stands right now:
Note: this only takes into account income and expenses related to the properties and not to general business overhead. Our overhead is pretty small and strictly optional: we have an online fax service that we use and we have an umbrella insurance policy. Total monthly overhead: $46/mo
We made a lot of progress in the last two years but things will probably be slowing down from here on out: Mrs. Dollar is going to quit her job at the beginning of March to work for the family full time. This was always in the plan: raising our own kids is very important to us.
She’s also a licensed realtor and a freelancer so she can still bring in some cash part-time but it won’t be the same as she brings home with her 9-to-5. We’re also going to start having kids this year which will be a huge, new adventure.
Still, my goal is to purchase 2 more houses in 2012 and for our rental income to exceed our bills within the next 5 years.
Difficult? Also yes, but I’m up for the challenge.
Stay tuned for case studies of the three houses we’ve purchased in upcoming posts!
How about y’all? Do you have plan for financial independence, and if so, how far along are you?