Welcome to the first post in the FI Action Series! Before we get into a bunch of forward-looking and technical aspects of your Financial Independence pursuit we need to look at where you are today.
“What gets measured gets managed” – Peter Drucker
Love that quote. Outside of having a blast running Apathy Ends and interacting with a bunch of money nerds, this blog has shown me how important tracking baseline money metrics can be. It shows your progress over time and confirms you are making the right choices.
The first step might be a little boring and uneventful, but if I have learned one thing in the last 3+ years….. Financial Independence won’t happen in a day. Improve and apply as you learn new skills and techniques.
FI Action Series: Establishing a Baseline
Everything collected below will be used for future calculations, goals or motivation. If you already have this information at your disposal, Great! I will be using the below spreadsheet in future posts for tracking/calculating everything discussed in this series. Feel free to track everything in your own way, but if you don’t have a current system download this:
Establishing a Baseline: Income
Income has been the primary driver in our FI Journey. It is the most powerful tool you have at your disposal. There will be some posts down the road (along with some links to other amazing resources) that 100% focus on increasing your income.
Pretty straightforward, but what are you making today, and what has your income progression looked like over the last 5 years? 10 years? Since you started full-time work?
Action Item: The easiest place to get your earnings history is from the Social Security website. I didn’t know this existed until a few months ago. Way easier than tracking down and looking at tax returns!
As you enter the values by year, the spreadsheet will calculate the percentage and dollar increase Year Over Year.
Establishing a Baseline: Debt
Hopefully, this is a relatively quick section to fill out, but I know a lot of people are drowning in student loans or credit card debt. We have been there before. Still digging out from my $85,000 Student Loan Debt fiasco. It sucks – but it is doable.
Action Item: Gather the below information for each loan you have:
- Type of Loan
- Interest Rate
- Monthly Payment
Fun Fact. The amount I was paying in student loan interest alone is why I started reading about personal finance originally. The only good thing to come out of paying $5,000 in interest in ONE year.
Establishing a Baseline: Savings/Investments
If income is the driver, Saving and Investing are the super fuel to Financial Independence. Once we get the baseline and a few other things set up, the bulk of this series will be focused on increasing the amount you invest every paycheck.
Action item: Figure out how much you put away in your saving or investment accounts every year. A good starting point is your retirement accounts (401K, Roth IRA) and savings accounts.
Don’t get discouraged by your current savings levels. Everyone starts somewhere!
Next Up: Spending Review