Mixing Maroons - Spend Less, Save More … Get Marooned!

Mr. Maroon

February 13, 2014

January 2014

Tags: , , , ,

The Results Are In

January marked our lunge from the starting gate; our chance to kick start frugality and make a bid for financial independence.  And, boy, did we kick!

January 2014

Initially, 2014 was going to be dedicated to putting $30,000 in “Emergency Savings”.  To be honest, I never saw the need for it, but I learned quickly that Mrs. Maroon felt comforted by having a safety net.  Plus, plenty of “experts” recommend it.  As we began our quest for financial freedom, however, we soon realized that socking $30,000 away in a savings account at 0.85% (our current FNBODirect interest rate) might be safe, but it certainly isn’t going to help us careen towards our $1.5 MM goal at the speed we’d prefer.  So, to better understand our goal, we probably should break down exactly what the $1.5 MM is comprised of.

Currently, our “savings” looks something like this (assuming no change in salary or employment):

  • Mr. Maroon contributes 6% of his salary (pre-tax) to 401(k) in order to receive the maximum employer contribution of 4%.  2014 projected total:  $7,119.03.
  • Mrs. Maroon contributes 6% of her salary (pre-tax) to 401(k) and receives an employer contribution of 1.67%.  2014 projected total:  $6,369.17.
  • The Maroons contribute $100 per month to a 529 College Savings Plan.  It’s not much, but I have mixed feelings on college savings so I don’t care to throw a lot of money into it.  (More on that later.)  2014 projected total:  $1,200.00.
  • The Maroons contribute $2,366.00 per month and two whole Mrs. Maroon paychecks per year to “savings”.  2014 projected total:  $32,070.42.

That gives us a total projected “savings” of $46,758.62 per year, or $3,896.55 per month.

Behold The Power of Interest

Without interest, it would take us thirty two years to achieve our goal.  But we want to do it in half that time!  At 0.85% interest over sixteen years, we reach $801,094.40; not bad, but approximately $700,000 short.  At 7% interest, we’re at $1,372,630.31.  Now we’re talking!  At 11% interest, we’re at a whopping $2,025,931.67!  But how can we improve our interest earning potential?

Betterment

After reading many reviews online, we opened an account at Betterment.  The process was extremely simple, we got a free $25, made the first deposit, set our sights on aggressive investing, and began to watch the money grow.  Soon, we no longer wanted our spare cash just lying in a savings account somewhere doing nothing when the potential there was so much larger.  So, we did just that.  We took money that we’d been hoarding as buffers in our checking and savings accounts – $1,000 here and $2,500 there – and put it to work.  We also had the chance in January to put one entire paycheck straight to investing.  We still have $6,000 in an “emergency fund” in case something bad happens.  But, when the dust settled, we were able to put $5,849.06 (post-tax) into “savings”.  Helluva start!

Stay tuned for February… Exciting things are on the horizon!

Something's Fowl
FF #5 - Where are Your Loyalties?

Leave a comment

RSS feed for comments on this post.

CommentLuv badge