February 2023 Debt-Free Journey Update

I know this is extra late and our March 2023 update is just around the corner. Nevertheless, I got quite caught up doing things advantages to this journey with a greater ROI on my time vested. Basically I was working an obscene amount of overtime.

The month of February wasn’t too exciting. We continued to stick to our budget and debt payoff plan, which we budget $6,389.36 a month towards our debt. For February our total went down 2.81%. Less than the 2.84% in January which suggests the snowball effect isn’t working. Turns out there was a typo on my end entering the previous balances manually on the spreadsheet.

Credit Card Debt

In total we paid $1,833.45 and $1,393.93 went to paying down principal. Credit Card 3 had the typo, so we expect the amount towards principal in March to increase slightly.

Personal Loan Debt

Here we paid $3,134.97 with $2,647.32 going towards principal. A slight increase of $16.03 from last months $2,631.29. We’ll reflect back on this in March to track what rate the snowball is growing month over month.

Car Loan Debt

For our vehicles, we paid $1,144.94 and $914.92 went to principal. This had a slightly lower principal payment due to another typo on my end again with Car Loan 1 balance.

Tax Debt

Paid $276 with $267.33 going towards principal. I was going to originally ride this one to the end with minimum payments, but I think we’re going to knock this one out when I get back to Hawaii to get that psychological edge of a win.

Moving Forward

We maintain the course and pay $6,389.36 gross towards our debt. No adjustments needed to our strategy, our numbers will be back on track next month.

How to Beat Inflation: Switch Jobs

With the rapid rise of housing, food, and transportation such that you might consider eggs a luxury item, wages aren’t able to keep up with inflation. Increasing income should be a top priority and the most effective way to get a pay raise big enough to beat inflation and get ahead is to change jobs.

My wife and I both switched jobs in late 2021. It wasn’t that we were unhappy at our current jobs at the time, nor were we actively looking. The effects during the height of the Great Resignation led to employers fielding offers that comfortably exceeded the 40-year high rate of inflation. This once-in-a-generation opportunity gave us leverage in a tight labor market. It this day and age it pays to quit your job.

Why it Matters?

Americans have been losing purchasing power the last couple of years because their wages aren’t keeping up with inflation. I first noticed it when the bill from my favorite taco shop in Hawaii came out to $60 for our typical order for two. Now I have to order 3 tacos instead of 5 and rely on the free nachos as filler. Now eggs cost 70% more than they did a year ago!

Key takeaways:

• Even though companies are increasing annual raises this year, the bad news is they’re not matching those increases to inflation.

• Median wage growth of was 3.6% back in 2019 when the annual inflation rate was only 2%. For comparison the inflation rate in 6.5% in December 2022. That means, if your real wage growth didn’t increase by 6.5%,

• Switching jobs help Americans increase their wages enough to beat last year’s inflation.

How to Avoid Financial Infidelity

Concealing credit card debt, hiding purchases, or extra money, even with good intentions, is hardly ever a good idea. The underlying cause is typically a relationship issues, and without focusing on the root of the problem risks your financial security and your future.

Secret Spending

Usually in a relationship you have one partner managing the finances and agreed upon expectations in theory. Our biggest struggle with achieving our financial goals was one of us spending more money than we’ve mutually agreed to, only to then finding out when payments are due. When we first moved in together my wife had sizeable student loans and credit card debt that were becoming unmanageable. We agreed it would be best and less stress on her if I handled all of our money matters. However, me making more money and being in control had my wife feel uncomfortable with being dependent on me and had an impact on her sense of self. Which led her to revenge spend that gave her a feeling of empowerment.

How to Avoid Financial Infidelity

Financial infidelity happens because talking about money with your partner is hard to talk about in general. Communicating openly and more frequently about money with each other has so far been the only way to keep our financial goals on track. Unfortunately in today’s society, especially in our situation, if we want to have a successful relationship, we have to be able to talk to each other about things that are difficult even something trivial like fiat currency. I found it was important to let my wife know that my way is not the only way and everything else is wrong. That we are both right based on our upbringing and life experiences we’ve had both together and apart. It’s common that people are raised to not bring up discussions about money despite personal finance being a huge part of our lives. Our issues were just a matter of trust, understanding each other, and getting on the same page. This experience gave us an opportunity to grow and continue to learn about each other at a deeper level.

How Much Money You Need to Make to Afford a Median Price Home in Hawaii?

There was an article recently about how much you need to make to afford a $600K home. I thought it would be interesting to tailor this for residents of Hawaii, specifically Honolulu County, in this current market. High inflation, increasing interest rates, and perpetually low inventory makes Hawaii an especially challenging market.

The most recent Market Insights from Redfin shows that the median sale price of a single family home in Honolulu County is $1,040,000. Down 10.3% from their peak set in March 2022. However, prices increased 35.3% between 2021 and 2022 after remaining relatively flat in the years prior to 2020.

How much do you need to make to afford a median price home in Hawaii?

As a general guideline, you shouldn’t spend more than 28% of your pre-tax monthly income on your mortgage.

Say you’re interested in purchasing a single family home in Honolulu County.

• Median Sale Price: $1,040,000

• Down Payment: $208,000

• Loan Term: 30-yr fixed jumbo

• Loan Interest Rate: 5.68% (The average rate s of February 13, 2023)

Your total monthly mortgage payment would be $4,818 per month.

To calculate how much your gross income would need to be to be below the 28% threshold and comfortably afford a home in Hawaii, you would need to divide the total monthly mortgage payment by 28% ($4,818 x 0.28 = $17,207) and multiply by 12.

This means that you or your household combined would need to make a minimum $206,503 per year - or $17,207 per month - to comfortably afford a single family home in Hawaii. It’s important to note that this is a very general example. Property taxes, homeowner’s insurance, and HOA fees all would need to be included in the 28%.

Key takeaways:

• The per capita income in Honolulu County is $40,339. That means it will take 5 working individuals under one household making at least the median income to afford a single family home.

• There are only four occupational areas in Hawaii that would provide a couple the typical annual salary to afford a home in Hawaii without the help of a multi-generational household. Those are: Healthcare Practitioners, Engineering, Tech, and Management positions in larger companies.

Why Is My Electric Bill So High In Hawaii?

Back in September 2022 Oahu shut down the last coal-fired power plant in the State of Hawaii as part of the plan to meet the Hawaii’s mandate to transition the state to 100% renewable energy by 2045.

The coal-fired power plant produced about 11% of the state's electricity and the plan was to replace it with a Tesla Megapacks charged with industrial-scale solar and wind farms. Said industrial-scale solar and wind farms were not ready by the time the coal-fired power plant was shut down which means the electricity for the Tesla Megapacks would have to be generated by even more expensive oil-fired power plants.

This was a transition Hawaii was unprepared for and the people of Oahu are paying for poor planning with short-term pain at their wallet when electricity prices were already triple the United States average, according to the U.S. Energy Information Administration. Mostly because the anomaly of Hawaii being the only U.S. state importing 25% of its oil from Russia for power generation with the Russia-Ukraine War seriously affecting our state.

Two years ago we thought we’d be saving money whilst joining Tesla's mission is to accelerate the world's transition to sustainable energy. Today it costs more to charge our car in Hawaii than an equivalent gas vehicle….

What are some ways you guys are coping with the runaway rising costs of living in Hawaii?

$100K Salary After Taxes in Hawaii

This is what a $100K salary looks like after taxes in Hawaii:

Gross Income: $100,000

Federal Income Tax: $14,260

State Tax: $6,085

Social Security: $6,200

Medicare: $1,450

Total Tax: $27,995

Net Income: $72,005

Tax Rate: 28%

This leaves an individual with 72% of their income to be distributed to different parts of a typical budget which breaks down to:

• 28% Housing: $2,333/month for rent or mortgage payment, insurance, and taxes.

• 18% Transportation: $1,500/month for car payment, car insurance, maintenance, gas, and registration. This may seem excessive but you’d be surprised of the true cost of those gas guzzling Tacomas with mods all over the island.

• 13% Food: $1,083/month

• 4% Entertainment: $333/month (The 13% on food could also be considered entertainment as well if you eat out often or like going to bars, Pau Hana)

• 9% Savings: $750/month just enough to max out a Roth IRA and meet a typical 401(k) Employer Match.

What do you think, can you survive off of a $100K salary in Hawaii?

Is Being Debt Free Worth It?

There’s a saying that America was built on credit. So much so, that it’s considered a way of life that my wife struggles it imagine our lives without it. In addition to blogging our journey as a means to hold myself accountable, it may also be an avenue for us to look back on the sacrifices and tradeoffs we make to reflect on the case of being debt free and if ‘twas a noble ambition worth undertaking.

Mindset

For myself, the idea of owing someone or something money always gave me a sense of unease mentally. It’s always in the back of my mind that we both need not want high paying jobs just to be able to make our minimum payments. Every time we’ve completely paid off a debt instrument, it immediately relieved stress and anxiety. It amazes me how mental, emotional, and physical health issues can be tied to the stress from debt. There was a time when we were living in NYC and I was down to my last beat up pair of shoes in a quest for minimalism. I worked in an industry that required safety toe shoes, yet I was unwilling to part with $200 for proper shoes I needed because I was worried about making payments to our credit card. This eventually led to foot injuries and issues down the line and the stress of juggling whether to prioritize my health and safety or being able to payoff debt. A debt free life would enable us to completely change our mindset and focus our mental energy to things that matter to us most.

Freedom

This is a big one for me. Becoming debt free means we can walk away from a career or living situation that we’re not happy with. The freedom to take a long trip or break inbetween jobs. The jobs I had between California and NYC, then NYC to Hawaii, involved my last day of the previous job on a Friday, then starting the new gig the Following Monday. I always wished I was able to do a cross country road trip or backpack for a few months, but I needed to start right away to ensure there were no gaps in our income. The freedom to work lower paying full jobs that have deeper meaning and values to us. Since we moved to Hawaii 5 years ago, I’ve gotten a closeup view of how human action can take a toll on the environment and wildlife around us. I’d love to have the freedom to volunteer time, money, and/or expertise to these causes without worrying about financial compensation.

Opportunity

Fortune favors the bold, and we can’t be bold and take advantage of opportunities if we’re worried about losing big. From starting a business, investing in stocks, crypto, real estate, etc. We can’t really take a meaningful leap of faith or calculated risks in any of these areas. Of course this will sound biased, but I truly believe my wife is the best or one of the best at what she does in all of Hawaii. So much so that she started her own business doing it. Yet because of our debt, she still had to work at her 9-5 while doing this on the side. It did well and her clients loved her, but the stress of working 7-days a week, managing cash flow, and not having the freedom to pursue this full time ended up taking a toll on her and I. We ended up shutting down after a year in operation. It really hurt not being able to give her the opportunity to really go at it the way she wanted to.

Shutting down her dream was the last straw that led to where we’re at today. It finally got both of us on the same page on a journey towards a debt free life so we’ll never have that feeling again.

What the Fed’s Interest-Rate Increase Means for Our Debt

The Fed continued a more modest 0.25 percentage point rate interest on February 1, 2023. Even this smaller increase will make it more expensive to carry a credit-card balance. Inflation may be cooling, but since rates and prices remain high, this will require us to adjust our financial plans weather this environment and maintain the trajectory of our debt-free journey within 3 years.

Here are strategies we’ll consider in the coming months.

Revisit our Budget

Although a small rate hike isn’t going to move the needle in a huge way, our budget is pretty much set to the penny. We will need to look for flexibility in our budget, increase our income, or it may mean adjusting our timeline for paying off all of our consumer debt.

Recalculate our Debt Payoff Plan

In a higher rate environment, we will take the time to do the math on the front end and see what is the interest over the life of our debts and the true cost of borrowing once the interest rates adjust. This may have us change the priority on which debts are paid off first to make sure we’re paying off debt as fast and as efficiently as possible.

Increase our Emergency Savings

We originally planned to use the extra money I made working OT during my current work travel assignment towards debt. However, we decided it would be best to have more cash to cover any other surprise expenses to avoid potentially putting said expenses on credits cards to make ends meet in a higher rate environment. Typically, an increase in rates means a better yield on savings products. We like to use Marcus by Goldman Sachs for the flexibility of maximizing our savings while still keeping it accessible in case of an emergency.

January 2023 Debt-Free Journey Update

The first month of the year is done, and 2023 is off to a slow start! It’s time to reflect on the past month to hold ourselves accountable on our 3 year goal.

The start of a debt-free journey is interesting to look at. We stuck to our budget and debt payoff plan, yet despite paying $6,389.36 in January towards our debt, our total only went down 2.84%!

Credit Card Debt

In total we paid $1,833.45 yet only $1,591.34 went to paying down principal. Thats the power of compound interest working against you. Credit Card 1 shows the largest drop due to the balance being currently under a 0% APR promotional rate. This particular credit card has the highest interest rate of all of our debts so we’re starting the debt snowball method here. If we stick to our current strategy we’ll have this debt paid off before the promotional rate expires.

Personal Loan Debt

Here we paid $3,134.97 with $2,631.29 going towards principal. This one sucks because it show’s we’re paying $500 a month in interest for our personal loans alone. That’s enough to max out a Roth IRA annually yet is disappearing into the ether due to our poor choices.

Car Loan Debt

For our vehicles, we paid $1,144.94 and $916.62 went to principal. To put into perspective for myself, our total monthly payment for our cars is more than the monthly payment of my dream super car that was just recently released, the Lotus Emira. Not that I’ll get one, it’s just motivating to know that if we get our finances under control certain things don’t have to be dreams.

Tax Debt

Paid $276 with $266.56 going towards principal. I’m just going to ride this one to the end with minimum payments. The interest rate is so low the benefits would be negligible. This tax bill was capital gains from a stock that popped off for me back in 2019 for those who were wondering.

Moving Forward

It’s interesting to see we paid $6,389.36 towards and only $5,405.81 went towards principal. I know others going through the same see the amount they pay towards interest per each debt as minuscule. But as you can see from our example we’re basically spending $1,000 a month towards interest when you look at all of your debt as a whole. That’s real money. For the next month we’re going to maintain our current trajectory. In the future when I get back from my work trip we hope to sell Car Loan 2 which would get rid of that debt and potentially payoff Credit Card 4

Good Debt: Car Loan

Good debt can be defined as money owed on things that build wealth or increase income over time, such as student loans, home loans, or business loans. Bad debt refers to high interest consumer debt such as credit cards, personal loans, etc. that doesn’t benefit your economic outcome. However, this is an oversimplification and on this post we’ll go over a study on how we came to the conclusion to finance a car and not payoff the loan early.

Car Loans

Debt is almost certainly unavoidable for many lower-to middle-income Americans who which to purchase a car. Dave Ramsey recommends saving around $500 a month until you have enough to buy a used car with no strings attached. However, my wife and I found ourselves in a situation where we needed a second vehicle ASAP, due to her job at the time being inaccessible via public transportation in a timely manner that suits her schedule.

We opted to finance a new car as opposed to used, the reason being that her commute was far and with the possibility of inclement weather in Hawaii, she wanted something safe, reliable, and 4WD. So we got a new at the time base 2019 Subaru Crosstrek and financed $21,000 at approximately $420/month for four years. Why do I consider this good debt? Because we financed it at a 0% interest rate. Not only that, should we sell our car in today’s environment, our Cosstrek’s private party value range $20,987 -$23,391 per Kelly Blue Book. With private sellers on Craigslist and Facebook Marketplace listing for even higher. We have a chance of “increasing income” or effectively renting the car for free for four years if we sell at the lowest price range.

I understand that today’s used car market is an anomaly and will probably never happen again in our lifetimes. The lesson for the story is that there is no one size fits all in personal finance. What some may view as bad debt can be pivoted into an opportunity. The key to getting ahead is to position yourselves to be able to take advantage of those opportunities when they present itself. When the car salesman was trying to close us, he kept on pitching the monthly payment. I told him I don’t care about the monthly payment. I wanted the lowest total cost over the life of the car which was the 0% interest rate they were advertising. Now we’re sitting on a potential asset while having met the personal and emotional needs of my wife required in a vehicle that most financial gurus out there will call bad debt.

Get Paid to Travel

Depending on how you look at it, I am in an enviable or undesirable position of getting paid to travel for work. There aren’t a lot of places in the country that would make one jump at the opportunity to leave Hawaii for a long term assignment. I’ll be honest, I took the opportunity for the money.

Get Paid to Travel: Pros

First the positives, I’ll get paid for any OT worked. All flights, rental cars, and gas paid. All food and hotel paid for under GSA Per Diem rates. The potential plus to this is as long as I don’t go over the daily rate for meals, I pocket the difference. This plus the OT pay could greatly accelerate our debt payoff plans if we play our cards right. I’m also crediting all my stays to a single hotel brand and will reach Hyatt Globalist by the end of my assignment without a single penny coming out of my pocket. Opportunities like this could help you achieve top tier loyalty status with airlines and hotels all while earning points and perks that could be used for future personal travel at no cost to you. Reaching these loyalty tiers would typically cost you thousands of dollars in spend. Another positive is you get to put all of that travel spend on your own credit card and earn additional personal points to use however you would like.

Get Paid to Travel: Cons

These perks come with a cost. Travel-friendly jobs that pay well typically require specialized training, time commitment, and talent. OT was mentioned for a reason. My schedule is 10-hour days, Monday to Saturday, from 4 PM to 2 AM in not the most glamorous setting. I always get asked how it’s going or if I’m enjoying exploring a new area. To be honest there isn’t a lot of exploring going around. By the time I get off and when I’m mostly awake, everything is closed. During the day and early afternoon I’m asleep, and on Sunday’s my only day off I’m usually doing laundry and preparing for the following week. Not to mention living in a hotel for months on end means you probably don’t have a kitchen or microwave, and are eating out for all of your meals. Without proper planning and discipline, working odd hours and eating out at places that are open during those times can be detrimental to your health. These are just the individual issues I’ve come across. The toll it takes on your relationships and loved ones is another article in itself.

For me personally, the jury is still out on whether the extra money is worth it. I’m halfway through my assignment and this lifestyle is starting to get a little long in the tooth. I feel like I live at the hotel, I’ve been there long enough that the whole staff recognize and greet me by name. I’ll reflect back on this post in a couple of months when I’m back in Hawaii and report my findings. For what it’s worth, my job is a Civil Engineer.

8 Tips for Living on One Income

A Two-income household living on a single income is one of the most effective ways to turbocharge debt payoff towards our goal of a more financially free life. The past year we’ve been accustomed to living on the lower of our two incomes and start using the higher of our two incomes to payoff debt. This method will rapidly accelerate our payoff rate. I’m aware that living on one income is not possible for everyone, but maybe the tips outlined below may help you towards being in a position to do so:

1. Communicate Often

   Communicating early and often is key. Especially as you both take the first step, you are both accustomed to living on both of your incomes. Reducing that 10% alone is a drastic lifestyle change, let alone 50%. It will be important to check in with each other to make sure both of your thoughts and feelings are on the same page.

2. Have an Emergency Fund

   Having an emergency fund enough to cover six to nine months of living expenses will shield you from unforeseen expenses that may derail your plans. Essentially medical costs or an unexpected home or vehicle repair.

3. Set a New Budget

   Make necessary adjustments and figure out a new monthly budget before you downsize to one paycheck. By closely scrutinizing our spending habits for the past year, we were able to get a good look at where we could cut costs.

4. Cut Costs Early

   Once we figured out our new budget, we had a better idea of what spending cuts we needed to make. Since we don’t live in the nicest neighborhood and live in a smaller home, downsizing wouldn’t have much of an impact. We do however, live in a pedestrian friendly neighborhood and will explore the option to sell our second car and carpool with each other to work. This is something we’ve been doing actively for months that helped prepare us for this decision.

5. Combine checking account

   Unpopular opinion, but I prefer managing our finances with a joint checking account. It’s easier for me to track finances from an efficiency standpoint and even though I primarily handle money matters in our household, it’s important to my integrity that my wife has transparency and easy access to our funds.

6. Use Time Efficiently

   There is a wealth of information out there from Google, TikTok, and YouTube. Learn from those resources and use time instead of money to prepare meals instead of takeout, DIY on home repairs/improvements, perform your own routine maintenance on your vehicles. Knowing these useful life skills can save you money and lead you towards becoming self-sufficient.

7. Embrace Minimalism

   Minimalism helps you get to debt freedom and financial independence sooner. Minimizing your lifestyle, lowers your cost of living, and in turn reduces the amount needed to retire comfortably. My favorite outcome of minimalism in our household is less cleaning time, less maintenance of stuff, and less laundry to fold with capsule wardrobe. Simplifying our life gave us more time to do the things we enjoy.

8. Keep Your Eyes on the Prize

   Know that this doesn’t have to be permanent. An anonymous quote that I always seem to fall back on when I find myself a passenger on the struggle bus, “Live a few years like most people won’t, so that you can spend the rest of your life like most people can’t.”

How We’ll Pay off $190,000 in debt in 3 Years!

We knew that paying off that amount of debt, in a relatively short amount of time with compound interest working against us and living in a HCOL area, Hawaii, is crazy.

To get started on our debt free journey we had to understand the following and execute accordingly:

• How we got into debt.

• Why we decided to pay it all off.

• How we plan to pay it off within 3 years.

• Why we decided to pay off our debt instead of prioritizing investing.

How we got into debt

My wife and I are both under 40 years old originally from Southern California, lived in NYC, and currently reside in Hawaii. We’re both DINKs (dual income, no kids). I’m a civil engineer and she’s a physical therapist.

We both worked very hard in school, landed great entry-level careers in NYC, and felt that we deserved to play hard too living the city life in Manhattan and the island life in Hawaii with everything they had to offer the last 10 years.

Why we want to pay off all of our debt

We both don’t feel like we’re tired of the rat race, the ambition and drive are still there, but we realized we enjoy spending time with each other.

While we haven’t really got to the point where our debt wasn’t manageable, we aren’t living the life and time with each other we desire. In retrospect, we could’ve been living that life had we been responsible with our finances.

While I always had the desire to be debt free for the flexibility, my wife always thought that we’d be paying off debt for life.

Her thought was that this was the American thing to do. That this nation was built on debt. For years she had a hard time visualizing what life could be like without debt, until she came across patients who are financially independent and are living the lives we’ve always dreamed of. After encountering several real world examples over the years it came to the point, “Why not us?”

How we plan on paying off so much debt fast

A key strategy we’re going to use is by living on one income, and one of our incomes entirely to paying off debt. This is also a strategy we’ll deploy in the future on our journey to financial independence.

To successfully make this transition, we will need to be intentional with every dollar we have and set a new budget. We did a trial run the second half of 2022 with varying success and failure. After a few months of trial and error, we feel we’re ready to transition to our new reality for the foreseeable future.

We’ve had to cut expenses early and drastically. Starting with listing all of our monthly expenses, and cutting everything we could do without. This included/will include everything from canceling gym memberships, streaming services, to selling our second car and adapting our diet. This process took us months, so don’t wait to get started.

We’re projected to live off of $62,000 combined for 2023 with a budget of $75,000. Between the two of us we love buying quality and local ingredients at the grocery store, dining out with each other and with friends, and shopping. To mentally get through this journey we won’t stop doing those things, we will just do so within our budget.

2022 Year-End Debt-Free Journey Update

2023 is starting off with a bang, and not in a sudden and exciting way or the consumption of the sweet nectar that is an American brand of energy drinks. Moreso as in the starting point of the insurmountable debt we have to payoff in our debt-free journey.

As daunting as it is, we have no one to blame but ourselves. We’re high income earners living an unsustainable lifestyle. Truth be told, we didn’t do this to flex or keep up with the Joneses, our taste was just simple, only the finest things in life.

This didn’t happen overnight, but over 10-years of emotionally charged spending with reckless abandon compounded over father time himself. We make enough to meet our payments and live an okay lifestyle. I wouldn’t say comfortable but definitely appreciative of what we have, the experiences we’ve had, and the opportunities we were given.

We the Fed rate hikes of 2022 things are starting to get real and we’ll need to take care of our debt before it gets away from us like a runaway locomotive. Plus we’ve both worked really hard to get to where we are in our careers and would like to enjoy our efforts with our finances optimized efficiently.

I shan’t blame our situation on society, culture, suppression, ad-supported big tech, on anyone or anything. No free handouts will be asked. We got ourselves in this mess and it will be only up to us to get ourselves out of it. Here goes nothing!

How-to Prepare for a Recession

The best way to prepare for an imminent recession is to strengthen your financial situation:

• Beef up your emergency fund

• Payoff any high-interest debt

• Develop alternative income streams

What we’re doing:

1. Save $1,000 for a starter emergency fund per Dave Ramsey’s Baby Step 1. We’ll keep this in an online high yield savings account. We like to use Marcus by Goldman Sachs.

2. Funnel any free cash flow we have to paying off our credit cards starting with the highest interest rate first using the Debt Avalanche strategy.

3. Develop alternative income streams by freeing up free cash flow from redundant/inefficient liabilities such as:

   • Switching our wireless provider to a prepaid phone plan with Mint Mobile. This will reduce our phone costs by 57% and free up $80/month or $960/year.

   • Selling our second vehicle which is no longer a need. This will eliminate $421/month in payments, $62/month in gas, $426/year in routine maintenance, and $373/year in registration fees. This would provide us with an additional $549/month in free cash flow or $6,595/year that could be used towards paying down credit cards.

Pivoting for 2023

I originally created this site as a tool to share when I received the same question multiple times from different people. Instead of retyping a text or spending time on the phone, I would just send a link to a post.

Most of the information I provide is cookie cutter and readily available on Google, and increasingly on other channels in short form formats such as Instagram, TikTok, and YouTube to name a few. There are also several intelligent financial educators out there in the ether who’ve reached financial independence and have been singing it’s praises with their newfound freedom. I’ve noticed however, most have bequeathed after the fact that they’ve reached financial independence and provide little, if any, of their trials and tribulations of their journey.

Henceforth, thou shall pivot this site, to a thinly veiled roman à clef, documenting the journey of from debt payoff to financial independence. I hope this new format will provide you value distinct from what’s currently out there and the coming onslaught of AI.

Your House is Not an Investment

Here’s the truth about real estate: Unless you’re a landlord and someone else is paying your mortgage, your house will probably be the worst investment you ever make.

The illusion of home ownership is that it’s a great investment, a way to build equity rather than wasting it on rent.

Bollocks.

My parents bought their 5 bed/3 bath home in San Diego, CA for $231,000 back in 1991. Redfin estimates it is now worth $1,407,829 in 2022. “$1,176,829 profit? Homeownership is a great investment! I hear you saying. Okay, fair enough. Let’s do the math.

A gain of $1,176,829 on $231,000 between 1991-2022 equals a rate of return of 6.10% annually. It’s important to note that $1 million dollar profit occurred over the course of 30+ years. On the surface not half bad, but it still underperformed the market over that time period or, 8.62%. However, that’s not the full picture. So, let’s crunch some more numbers, shan’t we?

What’s The Real Rate of Return on My Home?

6.10% assumes my parents’ only cost them $231,000 the entire 31 years. That’s only the principal, what about property taxes? Yearly taxes on their home average $3,823. Over the past 31 years you’re looking at total cost of their home:

• $231,000 Purchase Price

• $116,625 Property Taxes

• Total Cost: $347,625; Today’s Value: $1,407,829; Annual Return: 4.69%

As you can see the true cost of a home is not what you see on the purchase price. Property taxes are real costs my parents paid over that time period, and we’re not done yet. My immigrant parents weren’t in position to purchase their home in cash so they had to get a mortgage on the property. Since no one will just lend you money for free there will be interest to pay, over the life of the loan and you’ll need insurance. 10% down, 30-year fixed at 4.5%. Now the total cost of their home breaks down to:

• $231,000 Purchase Price

• $116,625 Property Taxes

• $171,324 Interest

• $15,377 Insurance

• Total Cost: $534,325; Today’s Value: $1,407,829; Annual Return: 3.23%

Congratulations, you just made 3.23% a year on you investment in a primary residence, which would barely keep up with inflation, historically. Wait, that’s not all. That total cost is JUST purchase price, taxes, and insurance. We still haven’t accounted for repairs, maintenance, and upgrades. Such as replacing a roof, wood flooring, remodeling kitchen and bathrooms, new appliances, etc. Even the cost of replacing a light bulb would lower your annual return. That’s just how the math works. And the numbers never lie.

Why it matters: Going back to my previous statement of real estate only being an investment if you’re a landlord, had my parents rented to cover their mortage over the years and instead put that money to work in the S&P 500, their return value today would be $2,527,489 PLUS the value of the home $1,407,829 since your tenants are paying the cost for a grand total of $3,935,318. You would have compounded your original 10% down payment by 14.42% over 30 years handedly beating inflation and crushing the market.

Key takeaways:

• Your parents, aunties, uncles, relatives, home they bought for dirt cheap was a lousy investment if they’ve been living in it this whole time.

• There is more to the real return on investment of a primary residence. That’s why you can’t just take a quick glance at purchase price vs. today’s value or price sold over time and say it’s a great investment. There are added costs of taxes, interest, insurance, repair, and maintenance costs.

Hawaii Extends Crypto Pilot Program to June 30, 2024

Today, the Division of Financial Institutions, Department of Commerce and Consumer Affairs and Hawai‘i Technology and Development Corporation announced a two-year extension of the Digital Currency Innovation Lab, Hawaii’s crypto pilot program that was initially set to expire in a few weeks. This allows the current cohort of the following15 companies to continue to conduct virtual currency transactions without meeting the state money transmitter requirements:

1. Apex Crypto

2. bitFlyer

3. Bitstop

4. BlockFi

5. CEX.IO

6. Cloud Nalu

7. Coinme

8. ErisX

9. Flexa

10. Gemini

11. Novi

12. Provenance Technologies, Inc.

13. River Financial

14. SoFi

15. Uphold

The existing list of approved companies of the pilot program have the option to continue, subject to the acceptance of a new agreement and additional fees. However, you run the risk of no way of withdrawing your assets should your exchange of choice choose not to continue in the extended pilot program for an additional two years. This is where a hardware wallet such as the Ledger Nano X come in to play. Allowing you to transfer your crypto and NFTs away from the mercy of the exchanges.

Why it matters: Prior to today’s announcement, any digital currency issuers without a state money transmitter license would have no longer been allowed to do business in Hawaii after June 30, 2022. The only transactions supposed to be allowed between July 1 to December 30, 2022 were to close accounts.

Key takeaways:

• Cryptocurrencies are pushing deeper into the mainstream and it’s a positive sign that Hawaii will be participating in progress and innovation.

• For context, there are approximately 134K Hawaii residents who transacted over $800 million in digital currencies through the approved companies of the pilot program.

• It is still important to understand the benefits and utility of a hardware wallet. As a hedge against risk it might make sense for those who don’t actively trade to do so.

A 40 Year Case Study of an Investment in McDonald’s

Who can resist the siren call of the Golden Arches? Not thou. This case study looks at what would happen if my parents made a $15,000 investment in McDonald’s around the time my older brother was born.

Imagine it is June 4th, 1982. You take $15,000 out of your savings and purchase 221 shares of McDonald’s at the closing price of the day, which is $67.64/share. You plan on ignoring it for holding it for the next 40 years to pass down to your heirs. How did your investment turn out?

Scenario 1: You Do Not Reinvest Dividends and Hold your McDonald’s Shares

When you looked at your balance after May 27, 2022, you would have found:

• 8,982 shares after stock splits of McDonald’s at $251.87 per share for a total value of $2,262,305

• Cash dividends of $417,947 that would have been paid to you over the years you held your ownership stake

• Grand Total: $2,680,252; Annual Return: 13.84%; Return on Investment: 17,768%

To put into perspective, you have not bought a single share after your initial $15,000. You are sitting on $2,680,252 in MCD stock. You’ve cashed checks totaling $417,947, which you could have used to travel the world, buy a Tesla, send your heirs to college, decorate your home, purchase expensive clothes and accessories, or fund whatever hobbies you could think of. And now, you can sit back and collect an annual income of $49,581; a figure that should continue to grow as long as McDonald’s continues to profitably sell SPAM, Portuguese sausage, eggs, and rice!

To achieve all of this, once you had made the initial investment, you had to do nothing more. You had no commute. No boss to answer to. No meetings to attend. You had no responsibilities. You would have compounded your original $15,000 by 13.84% for 40 years.

Scenario 2: You Reinvest Dividends and Hold your McDonald’s Shares

What would your results be after 40 years if you hadn’t spent the $417,947 in cash dividends along the way? Instead, you reinvested the dividends and bought more shares of McDonald’s:

• 12,549 shares after stock splits of McDonald’s at $251.87 per share for a total value of $3,160,179

• Grand Total: $3,160,719; Annual Return: 14.31%; Return on Investment: 20,971%

You would have $479,927 more money if you chose to reinvest your dividends. That extra wealth came from the fractional shares your dividends bought you, which generated dividends of their own, which bought more fractional shares, which generated more dividends, in perpetuity.

In other words, for giving up spending the $417,947 in Scenario 1 over 40 years, you not only get to keep the $417,947, but you also earned an extra $479,927 on top of it.

Your 12,549 shares would pay you $69,270 per year instead of the $49,581 in Scenario 1. That extra $19,689 represents the dividends on your dividends that are now working for you. You would have compounded your original $15,000 by 14.31% over 40 years.

Why it matters:

For almost the entire 40 year holding period, McDonald’s stock never appeared to move between $68 to $250 per share. On paper that just represents a 3.34% annual return over 40 years. That’s why you can’t just take a quick glance at the stock price on Google Finance to tell what’s going on with a business. There are splits. There are dividends.

Key takeaways:

• Don’t sleep on old, boring, profitable, dividend paying companies.

• Invest in good businesses you believe in, sit back, and let time do the rest.

What’s an NFT?

“Non-Fungible Tokens (NFTs) are just JPEGs that anyone can right-click and save.” Is what I’m often told whenever NFTs are brought up in conversation. However, the JPEG/Art is not the NFT. NFTs are the tech behind the proof of ownership of an asset, which is a type of smart contract mainly on the Ethereum blockchain. A smart contract is a program that will execute automatically when predetermined conditions are met (If This Then That).

Imagine having a plane ticket NFT with the condition that if the flight is canceled, then the airline automatically refunds your fare back to you. In reality, that situation would probably require you to wait on the phone with customer service for hours on end only to receive an airline credit that may expire on an inopportune time or a reduced cash refund if at all. A smart contract would cut out the middleman/call center, save you time from waiting on hold, and execute your refund without bias.

Another feature of NFTs is their ability to be a productive asset by providing passive income and generating yield through rental, lending, etc. or revenue sharing through royalties attached to the smart contract. I envision artists selling music NFTs that split royalties with their fans, HBO Max/Netflix movies and shows funded by NFTs and sold to HBO Max/Netflix with the original creators sharing revenue back to their NFT-holders, and the ability for the owners to lend or rent the cash flow on these NFTs.

Proving sole ownership of A simple JPEG or any digital file is something people all over the world could just copy and save for their own unlimited use. But we are at an age where technology can prove an individual’s ownership of that basic pixelated JPEG, and that ownership can not be duplicated, forged, or counterfeit. That’s just one use case. As developers’ creative juices get flowing, the possibilities are theoretically limitless. And to me, that’s very disruptive.

Why it matters: NFTs can represent credentials, memberships, financial positions, baskets of assets, tickets, music, in-game items, real estate, social networks, identities, etc.

Key takeaways:

• We are still in the early stages of unlocking NFT use cases.

• NFTs are not JPEGs. JPEGs/NFT art is just one use case and the first stepping stone.