Net Worth – End 2016

Some really nice progress in Q4. If we can avoid too many major expenses in 2017 it should be a great year for our goals unless Mr. Market puts stocks on sale in which case it’s still good for the longterm.

Assets

  • Home (Estimated Market Value): $70,000
  • 401(k): $69,150
  • tIRA: $19,056
  • Non-Earmarked Cash: $2,450
  • HSA (invested portion): $1,027
  • Total: 161,683
  • Assets towards FI: $91,683
    • Approximate passive income this would generate annually: $3,667

Liabilities

  • Home Mortgage: $98,941 @6.5% –> PMI makes it effectively ~7.1%
  • Student Loan (Alchemist A): $801 @0.1%
  • Student Loan (Alchemist B): $20,937 @4.36% (variable rate that has been slowly rising)
  • Total: $120,679

Net Worth: $41,004

Net Worth Last Quarter: $32,905

Net Worth 1 Year Ago: $9,863

Net Worth At the Start (End 2013): -$33,948


Pulling back and moving forward

I don’t talk about it very much, but long-time readers and many who know me in person know that I struggle with depression. While I don’t have a clinical diagnosis, in a lot of ways I suspect I’m actually bi-polar. Thankfully for my homesteading, often the manic periods line up with the times I need to be the most active getting projects done. Unfortunately, the last couple weeks have been really rough on the depression end of things.

Depression is hard to explain for those who don’t struggle with it themselves, and people experience it differently. One change it’s clear I have to make is pulling back on how much I share about personal finances. I’ve learned and benefited a lot from a popular frugality and early retirement-focused forum but sharing details on there contributes to a lot of self-hate when I feel like I’m spending too much or making inefficient decisions. In reality, we’re choosing our values, and no one is living this life but ourselves.

Sharing financial details, even when no one makes critical comments, makes me implicitly feel the need to justify every expense. We’ve spent a lot of money lately getting our rabbit-chicken enclosure up, I ordered a second chest freezer, and many other things that help support our chosen lifestyle. Which in turn leads to a self-hate criticism feedback loop that is, for obvious reasons, not healthy. So I’m closing the book on that part of my life, at least for the time being.

A second change I’m contemplating is separating out the homestead posts into a new blog and keeping this one for personal reflections. As I build a little business, I think it makes sense to segregate things a little. I’ll for sure post here when that is up and running if I do end up going that route. I’ll probably also create a Facebook page for quick little posts, like interesting harvests, etc.

I’ve been busy, affected by the depression, and my carpal tunnel has been severely acting up – all of which leads to me writing much less than usual. I thank those who do read and comment. Sharing parts of my life has helped me work things through, and maybe my lunatic gardening has inspired a few of you. The garden right now is a little sad looking but I’m already compiling ideas for how to make it better next year.


Net Worth – Q1 2016

Assets

  • Home (Estimated Market Value): $70,000
  • 401(k): $59,194
  • tIRA: $17,090
  • Non-Earmarked Cash: $3,000
  • HSA (invested portion): $922
  • Total: 150,206
  • Assets towards FI: $80,206
    • Approximate passive income this would generate annually: $3,208

Liabilities

  • Home Mortgage: $101,803 @6.5% –> PMI makes it effectively ~7.1%
  • Student Loan (Chief): $–>retired since last update
  • Student Loan (Alchemist A): $1,396 @0.1%
  • Student Loan (Alchemist B): $22,624 @3.9%
  • Medical Debt @0%: $125
  • Total: $125,948

Net Worth: $24,258

Net Worth Last Quarter: $9,863

Net Worth 1 Year Ago: $5,848

Net Worth At the Start (End 2013): -$33,948


Net Worth – End 2015

Assets

  • Home (Estimated Market Value): $70,000 (lowered from 80K, because this is a more honest net value)
  • 401(k): $55,090
  • tIRA: $17,070
  • Non-Earmarked Cash: $1,000
  • HSA: we do have some HSA savings, but at this point I’m counting it as “spent” money already. Once the balance gets sufficiently large (who knows when?) I’ll factor this in with NW.
  • Total: $143,160
  • Assets towards FI: $73,160
    • Approximate passive income this would generate annually: $2,900

Liabilities

  • Home Mortgage: $102,440 @6.5% –> PMI makes it effectively ~7.1%
  • Student Loan (Chief): $1,928 @2%
  • Student Loan (Alchemist A): $1,593 @0.1%
  • Student Loan (Alchemist B): $23,144 @3.9%
  • Medical Debt @0%: $341
  • Total: $133,297

Net Worth: $9,863

Net Worth Last Quarter*: $5,371

Net Worth 1 Year Ago*: -$13,776

Net Worth At the Start (End 2013)*: -$33,948

*retroactively adjusted for lower house value.


Goblin Hoard – Net Worth Q3 2015

Assets

  • Home (Estimated Market Value): $80,000
  • 401(k): $50,594
  • tIRA: $15,918
  • Non-Earmarked Cash: $2,156
  • HSA: we do have some HSA savings, but at this point I’m counting it as “spent” money already. Once the balance gets sufficiently large (who knows when?) I’ll factor this in with NW.
  • Total: $148,668
  • Assets towards FI: $68,668
    • Approximate passive income this would generate: $228

Liabilities

  • Home Mortgage: $103,026 @6.5% –> PMI makes it effectively ~7.1%
  • Student Loan (Chief A): PAID OFF
  • Student Loan (Chief B): $4,179 @6.5%
  • Student Loan (Alchemist A): $1,792 @0.1%
  • Student Loan (Alchemist B): $23,728 @3.9%
  • Medical Debt @0%: $572
  • Total: $133,297

Net Worth: $15,371

Net Worth Q3 2015


Goblin Hoard: Net Worth Q2 2015

The stock market must have gone backwards a bit this quarter. Nor have we done any debt prepayment lately. And we have new (medical) debt. So, not a stellar quarter from a net worth perspective.

Mr. Market will do what Mr. Market does, but we’ll be back on an offensive footing in Q3 unless more unfortunate life events happen. Hopefully I can report a lot more progress on September 30th 🙂

Assets

  • Home (Estimated Market Value): $80,000
  • 401(k): $55,044
  • tIRA: $17,109
  • Non-Earmarked Cash: $2,508
  • HSA: we do have some HSA savings, but at this point I’m counting it as “spent” money already. Once the balance gets sufficiently large (who knows when?) I’ll factor this in with NW.
  • Total: $154,661

Liabilities

  • Home Mortgage: 103,598 @6.5% –> PMI makes it effectively ~7.1%
  • Student Loan (Chief A): 1,481 @0.1%
  • Student Loan (Chief B): 5,317 @6.5%
  • Student Loan (Alchemist A): $1,991 @0.1%
  • Student Loan (Alchemist B): $24,273 @3.9%
  • (New) Medical Debt @0%: $788
  • Total: $137,448

Net Worth: $17,213

For an explanation of the FI possibility spaces, see this post.

Net Worth Q2 2015


Antifragility

I’ve been spending the past week or so reading the fascinating book Antifragile by Nassim Nicholas Taleb. While a bit obtuse at points, even to me, he develops a concept that is incredibly intuitive, yet has been neglected in basically all thought traditions. The eponymous concept is the state of all natural systems, but can we use it in our own lives and move away from the fragility so common in modern constructions?

First, some terms. He delineates what he calls the Triad:

  • Fragile: Things that are fragile are only harmed by disorder, stress, or randomness. Most artificial objects are fragile: they can be weak (non-durable) or strong (durable) but use/stress will only wear them out.
  • Robust/Resilient: Often erroneously thought of as the opposite to fragility, robust things are actually a middle ground. They neither benefit from randomness nor are harmed by it.
  • Antifragile: Things that benefit from randomness. Alternately, they can be harmed by some stressors, but in general are asymmetrically aligned to benefit from most stress. In other words, what downsides they have are mitigated, whereas their upsides are unlimited.

I’m not going to summarize the entire book, but since antifragility is a unique concept, I’ll give an easy example to understand before getting on to my own thoughts about it in regards to our life. Hormesis is a phenomenon whereby small stressors, either physical or chemical, improve the health of an individual or a system as a whole. Exercise does small harms to our body – our body responds by thriving. Most medicine is about giving our bodies small amounts of poison in order to trigger an asymmetric or disproportionate positive response. Small harm, great good. Whereas stasis will kill us incredibly quickly through atrophy.

In trying to internalize the book, it’s very clear our current financial life is fragile. Not as fragile as it used to be some years ago, where we were literally paycheck-to-paycheck, but the breathing room we’ve carved ourselves still isn’t enough to move out of fragility into robustness. Our primarily fragility is debt. We have a lot of it (a hair under $139K to be exact). Debt can be “strategic” but in imposing obligations on yourself, even then, you’re still making yourself fragile. Both of us agree: we really, really want to be debt free. If we were debt free, our minimal lifestyle (~$20K annually including taxes and estimated capital expenditures on house and vehicle maintenance) could be funded so many different ways. But right now we’re locked into a certain path, until we begin to mitigate our downsides by severing obligations one at a time.

Kids don’t need as much as many people convince themselves they need to have, but our goblins are another reason to move from fragility to robustness. Thinking of feeding your children when faced with, say, a job loss and cavernous debt is NOT something you want to face. Even a Stoic using the power of negative visualization to prepare herself for it can recognize it is a situation they could respond adequately to, but she’d much rather not experience it at all.

Going from Debt freedom to true financial independence entails a mixture of fragility and robustness. For us, debt freedom will instantly move us into robust territory, because the asset side of our balance sheet is more than large enough to qualify as “fuck you” money. If we wanted, it would be enough to fund our entire lifestyle for 5-10 years. Alternatively, we could find enjoyable yet minimally remunerative jobs, enough to skate by on, and let the stash compound for a decade or two – and then we’d be set. Or we could, obviously, stay our current course and simply wash our hands of mandatory work in short(er) order.

What does it mean to be antifragile, however? How can one truly benefit from positive randomness, instead of merely being immune to either kind? Taleb uses the example of a 90/10 investment strategy, where 90% of your funds are invested in low-risk near-cash equivalents, and 10% is invested in a highly speculative manner. It’s almost impossible to lose 90% of the stash, but the upside on the 10% is limitless. (One of his pre-writing careers was as an options trader, so this makes a lot of sense.)

I think, for us, antifragility is only partly found financially. But the main antifragility is time freedom. Having the free time to engage in unexpected opportunities is a massive boon. Time, or life energy, is a far more precious commodity than money.

We could have achieved financial robustness faster if I continued to work. While there’s some economization I’ve been able to do as a radical homemaker, it’s nowhere equivalent to the loss of even my modest income. But the things we’ve been able to do with our time together? Absolutely immeasurable in financial terms.

Leaving oneself open to spontaneity, at first glance, seems to run contrary to my essentialism experiment with routine. The whole point of routine for an Essentialist, however, is to remove clutter and lessen decision fatigue so that you’re able to respond agilely and quickly when real, essential opportunities and decisions arise. If you don’t provide yourself structure, the stress of deciding every last thing results in an exhaustion state where even truly interesting options can’t be exercised because the mundane has worn you down.

For right now the Alchemist is still trapped in a demanding job, thanks to our collective fragile state. Based on the way we’ve been talking, however, I think there’s a lot to be said (for us) about the appeal of banishing debt and then downshifting on the career. In other words, achieving time independence before financial independence. I think the former is far stronger than the latter. No matter what path we choose, we’ve got years ahead of us in fragile waters, but that’s my thought so far.

And what about navigating fragility? The mathematical optimal way to slay debt and move forward is to massage cashflow such that you’re not paying a penny more of interest as possible. You know what? F*** mathematical optimization. Managing a budget that way is nerve-wracking as hell. It’s also a more fragile response, in many ways. You’re giving yourself a fixed upside (less interest paid at a defined rate) but by living cash-poor you’re exposing yourself to massive downside (predatory lending rates, penalty interest rates, late fees, etc) if Black Swan events hit. And Black Swans will happen. We just had one when Beta wiped out hard on her bike and needed an ambulance ride to the ER. Facing that, low cash, was terrifying. Luckily it happened to be the same month the Alchemist had a triple pay period, so it was easy to claw back to having a cash buffer while we wait for the bills to hit.

I’m never letting that buffer drop again. The downside is just too bad versus the fixed upside of paying a few months less of 6.5% interest. Plus, having cash allows one to pounce on opportunities as well. I’m not looking for any right now, but in the future? Maybe.