The Intersection of FIRE and Disney

[Haley R]

Usually there is no penalty for paying extra on your principal. But you guys are so young - is this your forever home? If it is a starter home and you expect to move up in 5 years, I wouldn't put extra into it. There are lots of ways to shorten a mortgage. Making an extra payment yearly has always been a popular option and can reduce a 30 year loan considerably.

But, I think your hubby has it backwards: usually the shorter the loan term, the lower the interest rate, and in addition, making 26 biweekly payments as opposed to making 12 monthly ones should shorten the loan term. If you can handle the payment, both are a win-win for someone trying to get rid of their mortgage.

I think most lenders initially play it safe by negotiating a loan amount with new buyers that is well within their ability to pay.

Definitely not our forever home. Just a starter house. We’ve been in it for 2 years and dh’s job is a little up in the air right now. There’s a slight possibility we will move next year but nothing has been decided yet. He said he crunched the numbers on the biweekly payments and it didn’t make sense for us. I’m not really sure because I haven’t looked into it at all. He does a lot of our finances but I trust him. I’m sure he has a good reason

 

[Happy814]

1. Pay Down CC Debt - unless it's a 0% rate that we are using strategically. We never carry a balance.

2. Contribute to company 401k/403b match. It's silly to leave free (compounding!) money on the table.

3. Liquid Investments. Cash is king and we operate a business that requires significant liquidity. We need easy, quick access to cash for operating and growth opportunities. I put this ahead of retirement savings also because these investments we make due to liquidity on hand SHOULD result in a passive income in our retirement years.

4. Pay down auto loan. Mainly because it's annoying to pay a bill every month.

5. Max out 401k. Don't kick me out, but I don't do this. I have a 403b and they are weird about contributing extra, although I know it's possible lol.

6. Max out HSA. Don't have one anymore, but super appealing due to the tax benefits. For those on a HDHP, a sweet spot of saving enough for your annual OOP is awesome.

7. Max out IRA. Haven't really gotten there yet, but ideally we would fund a SEP.

8. Pay ahead on student loans. This is a toss up honestly. I could possibly bump it up just to get rid of the monthly payment. Typically a low interest rate.

9. Pay down mortgage. Our mortgage is 3.25%. Basically any of those options above make more financial sense for us.

 

[Haley R]

Example: A 30 yr mortgage of $200K with an interest rate of 6.5%. Te mortgage is about $1,264.14. By using a bi-weekly payment plan, you would pay $632.07 every two weeks. Doing that cuts 6 years of payments off of the mortgage and saves you $58,747 off the total amount of the loan. A bi-weekly payment plan is also more effective sending one additional payment per year. Your loan balance accrues interest every day and reducing that principal balance every 14 days (26 half payments per year) saves more in interest charges than one full additional payment every 12 months.

I’m not sure what numbers Dh used to decide it was better to do once a month

 

[snowwite]

I’m so excited you started this thread!

I’m on the path to FIRE. SO and I are 24 and started our journey a year ago when he started his first full time job. Going from college students with no money to a full time tech position allowed us to save a decent amount without feeling any penny pinching.

I’m looking forward to hearing everyone’s FIRE story.

I wish I started at your age! I did buy a condo way back then and it was definitely a step in the right direction to purchase property rather than continue to pay rent.

 

[Judique]

Definitely not our forever home. Just a starter house. We’ve been in it for 2 years and dh’s job is a little up in the air right now. There’s a slight possibility we will move next year but nothing has been decided yet. He said he crunched the numbers on the biweekly payments and it didn’t make sense for us. I’m not really sure because I haven’t looked into it at all. He does a lot of our finances but I trust him. I’m sure he has a good reason

Ah, then that could explain your husbands strategy. Starter home and a plan to move up fairly soon.

 

[QueenIsabella]

We are taking our 11th Adventures by Disney tour to Japan next year. Clearly, we have been beyond pleased with them. One tangible advantage of choosing ABD over another company in the same price range is that I can pay for it with Disney Gift Cards. I can purchase Disney gift cards for 5 points/miles on the dollar. Those points and miles in turn pay for my international flights in first class lie flat seats to my ABD or other random trip. I haven't seen any Tauck, A&K, NatGeo etc. gift cards that I can purchase for 5 miles on the dollar.

We get 3 miles on the dollar with our AAA credit card. I don't do the whole Disney gift card thing, since I don't do much with Disney. And that's the rub--it only works with Disney stuff. If ABD works for you, by all means, enjoy your travel. We weren't impressed with the tours offered or the prices, and I was surprised to read how many people were just "meh" about them on the board here. I will say that our family's Tauck Bridges tour this past summer was a life-changing event for all of us.


As to SouthFayetteFan's challenge: I will try to rank them, but you should be doing several simultaneously (i.e., at least getting the company 401k match, even as you pay down debts).

1) Credit card debt. Bad, bad! And usually a painfully high interest rate.

2) 401k, at least to company match for starters (free money people! And lower taxes! I first learned of this when I was 21 and starting my first job--it sounded so good, I thought it was a scam!)

3) Max 401k--what you don't see, you don't spend

4) Student loans, highest interest rates first

5) prepay auto loan--this one will go away fairly quick anyway (assuming a 4-year loan). Promise to keep the car at least 10 years

6) Max IRA. These days, we're partial to a Roth due to our age, and the ungodly amount we currently have in regular IRAs

7) Make extra mortgage payments

8) Max out HSA--I confess, I'm not as "up" on HSA's as I should be. We currently can't have them on DH's medical plan, although we've used one in past years. I'll have to read up if this is an option at DH's next place of employment.

 

[calypso726]

I’m not sure what numbers Dh used to decide it was better to do once a month

DH and I have gone down the battle of the numbers a time or two. Once was for the bi-weekly mortgage another the other was for DVC and lastly for travel hacking. My math won each time because his numbers wound up being "alternative facts and fake news" simply based on knee-jerk inaccurate pre-conceptions of how stuff works. I have no problem admitting when I'm wrong about anything ... so long as he can prove it. I also have no problem with being right and him still not going forward with a proposal as he handles the major financial transactions in the house. However, that means he has to admit he is cutting off his nose to spite his face My trusting is more like trust but verify. I also like to understand if a decision is being made that doesn't add up, then why is it being made and put it into context for me.

It's taken nearly 20 years but he now trusts my instincts and will put nearly any financial idea I come up with into action without much thought. A couple of years ago I called him from work and said, go buy as much as you can in such and such stock right now. This would have caused a 3 day argument many years before. He dropped what he was doing and made the purchase. That stocked tripled in value and went higher than Apple over the next couple of years. Then one day out of the blue I sent him a text to sell it. He did and shortly after it dropped in value. No insider trading, just a business that I happen to understand fairly well and read the signs correctly. I think back to when we were first married and can tell you that would have never happened that way. Left to my own devices, I am very YOLO and he is the opposite. My ideas for financial well being are very sound, putting them into practice and showing restraint is not my forte. Fortunately, he the opposite, so control freak that I am, I still happily hand him the reigns. You could say I am the Walt to his Roy

 

[calypso726]

Ah, then that could explain your husbands strategy. Starter home and a plan to move up fairly soon.

My understanding is that the bi-weekly thing is only good if you are planning to stay at least 10 years in the home. So that of course would not make sense for a starter home that one would be selling fairly soon. Definitely food for thought on a more long term residence though.

 

[calypso726]

We get 3 miles on the dollar with our AAA credit card. I don't do the whole Disney gift card thing, since I don't do much with Disney. And that's the rub--it only works with Disney stuff. If ABD works for you, by all means, enjoy your travel. We weren't impressed with the tours offered or the prices, and I was surprised to read how many people were just "meh" about them on the board here. I will say that our family's Tauck Bridges tour this past summer was a life-changing event for all of us.

Glad to see someone else who is also using credit card perks to their benefit! We do a lot of Disney so the gift card thing works really well for us. I posted about it for those who are on this thread and also do Disney a lot, whether it's ABD, DCL or park trips so they'd see a new avenue for maximizing their spending if they aren't currently on our credit card thread and/or know about discounted Disney gift cards are getting Disney gift cards for 5 miles on the dollar etc.

I'm on the ABD board quite a bit and while I have found some that felt meh about it I do see more that feel very positive about their experience. I also see as many that aren't married to the idea of any one company and are happy to go with whoever has the dates and itinerary that works best for them. Tauck has a good reputation and I am not averse to giving them, or any other similar company a try. In less than 2 weeks we are going to Antarctica for my 50th with Lindblad/NatGeo. ABD doesn't go to Antarctica so they were not an option. W did miss getting 5x miles on the dollar for that one though. None the less we used the British Airways Visa card and earned a travel together ticket, so at least it was something.

Do tell, which trip did you go on with them? I'm all about life changing experiences! I'd like to read the itinerary and see if it's one to add to the ever growing bucket list. Thanks in advance!

 

[speedyfishy]

Ok my ranking:

1. 401k to the match. I think this makes sense at first since it’s free money and lowering tax liability.

2. Pay of credit card debt. I don’t have any, thankfully but this would be a priority to pay down the interest rates are insane.

3. IRA. We don’t get the tax deduction for the traditional but the Roth will limit our tax liability in the future.

4. Taxable account.

Our parents insurance is better than the HSA insurance we could get through SOs job so we dont have one. Plus I don’t think a High deductible insurance is right for us. We go to the doctor a lot and I’d hate to be sick and push off the doctor because it would actually cost us. We go to the doctor and I don’t even have a copay.

5. Pay ahead on student loans. I have six figures worth. (Don’t go to law school lol SO has a college degree in computer science and makes more than me.) The interest rate isn’t too bad and SOs is only 3% so I’m not paying that early.

6. Mortgage and car loan. I don’t have but both typically have super low interest rates I wouldn’t pay these early. I would probably pay off a mortgage right before FIRE just to lower our expenses and taxable income.

ETA: I didn’t add 401k to the max and that would fall for me either before or after the IRA depending on the account fees for the 401k through work. Since SOs 401k has low fees and good options we would do that before the IRA just to keep everything in one account and to get the tax deduction but if the options were high fee. We would do the IRA.

 

[QueenIsabella]

Glad to see someone else who is also using credit card perks to their benefit! We do a lot of Disney so the gift card thing works really well for us. I posted about it for those who are on this thread and also do Disney a lot, whether it's ABD, DCL or park trips so they'd see a new avenue for maximizing their spending if they aren't currently on our credit card thread and/or know about discounted Disney gift cards are getting Disney gift cards for 5 miles on the dollar etc.

I'm on the ABD board quite a bit and while I have found some that felt meh about it I do see more that feel very positive about their experience. I also see as many that aren't married to the idea of any one company and are happy to go with whoever has the dates and itinerary that works best for them. Tauck has a good reputation and I am not averse to giving them, or any other similar company a try. In less than 2 weeks we are going to Antarctica for my 50th with Lindblad/NatGeo. ABD doesn't go to Antarctica so they were not an option. W did miss getting 5x miles on the dollar for that one though. None the less we used the British Airways Visa card and earned a travel together ticket, so at least it was something.

Do tell, which trip did you go on with them? I'm all about life changing experiences! I'd like to read the itinerary and see if it's one to add to the ever growing bucket list. Thanks in advance!

We went on the Tauck Bridges Grand European Adventure. Now, the "bridges" tours are meant for families, so if you don't have kids in your group, there are probably better options. DH and I took DD23, DD15, and DS12 (our other son stayed home, by his choice). There were actually more grandparent/grandchildren groups than parent/child groups on our trip. The tours/activities were carefully balanced between things for kids and things for adults, cultural and more "fun", if you will. So, we did a Harry Potter tour in London, followed by a trip to the Tower of London. In Paris, we ate at a fancy chocolate place, then the kids made chocolate bars while the adults did a chocolate tasting. Some of the highlights included: visiting an alpaca farm (DD23's favorite), visiting a truffle farm and truffle hunting with dogs (DD15's favorite), and seeing the Eiffel Tower twinkle at night (DS12's favorite). But hand down the most amazing thing for all of us was the after-hours tour of the Vatican Museum and the Sistine Chapel. Words simply can't convey how amazing it was. On the good side, you could do a European tour on your own, and do the Vatican after-hours tour (pricey, but worth it), if you're interested. I had visited the Vatican during regular hours last year--the uncrowded after-hours tour is worth every penny.

We would do another Tauck Bridges tour in a heartbeat. The kids are lobbying for the Alpine Adventure tour, but it just might kill me--I'm afraid of heights, and a complete wimp!

P.S. My oldest, especially, loves to travel, and would kill to visit Antarctica! At 23, she's been to Spain, Peru, Ecuador, England, France, Italy, and Cuba. She's teeing up a trip back to Paris and one to Thailand. Of course, she's young and spry, and not the least bit intimidated by little things like not knowing the language.

 

[Mome Rath]

I think how you tackle this is very individualistic in most cases, but there are some baseline things everyone "should" do on your way to FI, or after FI. I tend to agree with Ramsey on one thing I don't see listed separately and that is an emergency stash, at least until you are truly FI. So I would add that in as well in a more concrete way other than just general savings. Also, as others have said, many should be done in tandem.

1) Emergency stash. How much is dependent on your current lifestyle and financial position
2) Credit Card debt will kill you. Even if starting with a low interest new account, people get comfortable not paying it off. So, if you can't pay off your balance every single month, just don't have one period. If you have one, get one with some benefit.
3) Anything that gives you a company match.
4) Any other taxed advantaged accounts; IRA, 401k, HSA, etc...
5) Get rid of Auto loan and avoid going into debt for vehicle in the future
6) Get rid of Student loan debt
7) Liquid investments and extra mortgage payments

I think 2 important aspects to FI for everyone to give a lot of thought too is health care, and passive income. Health care is a mess right now and is perhaps as large a hurdle for FI as debt is (within that, a person's overall health and what they do to maintain it becomes really important such as taking care of oneself, exercise, eating well, etc... as that has a potentially huge effect on expenditures). And, passive income seems to be key in the FIRE way of thinking, alongside savings.

 

[alryan]

1) Pay down credit card debt. I remember my freshman year of college buying a new jacket, probably less than $100, putting it on a credit card knowing that I wouldn't be able to pay if off for a few months until I was working in the summer. I absolutely hated the feeling! I knew then that unless something drastic happened I would never have credit card debt. The idea of buying things that you don't have money for is still very foreign to me.

2) Pay down student loans. Same principal for me. I graduated from college with about $15,000 of debt. Even though I was just working as a waitress, I wanted those student loans gone! Can't remember how long it took me, but I don't think more than 3 years.

3) Contribute up the the full company match. Free money!

4) Pay ahead on student loans. Don't like debt

5) Max out IRA. We aren't to the point of maxing out yet...hopefully someday

6) Max out 401k

7) Make extra payments on mortgage. We took out a 15 year mortgage so that the house would be paid off before retirement, so currently are not doing this either.

8) Liquid investments. This one confuses me a little. We do not currently have any. I'm taking the approach that until we would max out IRA and 401k it doesn't make sense to do this, unless we were planning to retire before age 59 1/2 and needed money that wasn't in retirement accounts. Any thoughts on this?

9) Max out HSA. Don't have much knowledge of this either. @SouthFayetteFan I see you have this higher than maxing out IRA or 401ks. Do you think this only makes sense for higher income earners who are really putting away a large sum of money? DH just got the opportunity for a HSA with a high deductible health plan. While for the most part we are all healthy DH does have some chronic health conditions that require daily medications. When I looked at how much we would have to pay for those we would end up spending thousands of dollars just for those. It just didn't seem to make sense for us.

I think this was a good exercise, a little hard though. It was hard to rank things if they don't apply. For example I did not have access to a 401k until all student loans were paid off, so I didn't have to make the choice. One thing this exercise reinforced was that even though math is important in personal finance so is psychology. There a many ways to get to financial independence and probably more important than the order is just that you do something that works for you.

 

[alryan]

In doing posts for this thread and looking at our numbers I decided that we could probably be saving more. We really haven't upped our contributions for a while so I just went online and doubled my Roth 401k, that's only about $1000/year, but still it's something. I think the thing that has been holding me back is when your timeline for withdrawals gets shorter a hundred or even a few hundred dollars a month just doesn't move the needle that much.

I was playing around with numbers to see what we would have to save to get to our number when DH is 62 (12 years), an additional $600/month. I'm not sure if that is doable, but thought I'd start somewhere, and then maybe try increasing by a hundred every month.

 

[SouthFayetteFan]

I think how you tackle this is very individualistic in most cases, but there are some baseline things everyone "should" do on your way to FI, or after FI. I tend to agree with Ramsey on one thing I don't see listed separately and that is an emergency stash, at least until you are truly FI. So I would add that in as well in a more concrete way other than just general savings. Also, as others have said, many should be done in tandem.

1) Emergency stash. How much is dependent on your current lifestyle and financial position
2) Credit Card debt will kill you. Even if starting with a low interest new account, people get comfortable not paying it off. So, if you can't pay off your balance every single month, just don't have one period. If you have one, get one with some benefit.
3) Anything that gives you a company match.
4) Any other taxed advantaged accounts; IRA, 401k, HSA, etc...
5) Get rid of Auto loan and avoid going into debt for vehicle in the future
6) Get rid of Student loan debt
7) Liquid investments and extra mortgage payments

I think 2 important aspects to FI for everyone to give a lot of thought too is health care, and passive income. Health care is a mess right now and is perhaps as large a hurdle for FI as debt is (within that, a person's overall health and what they do to maintain it becomes really important such as taking care of oneself, exercise, eating well, etc... as that has a potentially huge effect on expenditures). And, passive income seems to be key in the FIRE way of thinking, alongside savings.

You might have missed this little part in my write-up: LOL!

For this exercise, let's first assume you have an emergency fund and are covering all of your daily expenses (of course you could debate whether you'd fund an emergency fund before or after paying down CC debt, but let's not worry about that right now since I'd imagine none of us have that dilemma anyways).
​

No biggie, haha - just figured I'd point out that it was assumed you had that.

 

[SouthFayetteFan]

Appreciate everybody who put some thought into ranking priorities so far. I for one have really enjoyed reading all of them (especially the reasons behind it). Of course the exercise is a little goofy given that you don't necessarily have to go all in on just one priority at a time.

Please don't judge me as goofy though since that was actually how I approached our finances though haha! I actually have followed my plan to a T and through the years I've maxed out one bucket before even moving on to another. It's worked very well for us, but I don't argue with anybody who tackles things differently.

 

[Cruising Engineer]

We are taking our 11th Adventures by Disney tour to Japan next year. Clearly, we have been beyond pleased with them. One tangible advantage of choosing ABD over another company in the same price range is that I can pay for it with Disney Gift Cards. I can purchase Disney gift cards for 5 points/miles on the dollar. Those points and miles in turn pay for my international flights in first class lie flat seats to my ABD or other random trip.

I totally agree with your strategy. Using Disney gift cards, acquired during the year when they go on sale, is how we subsidize our yearly cruise costs. Then use the CC points to also pay for the first class seats to and from the port city. It's a constant chase to determine the best way to spend the money for something we want to do, but I love a good chase.

 

[Jaime4004]

My Friday Challenge plan: Disclaimer, this is based on my personal feelings and may make no financial sense

1. 401K to the company match. Because, free money!
2. CC debt - I think CC debt is a horrible feeling, like a ball and chain that you carry around.
3. Student loans - another ball and chain. I hate the feeling of owing money to have a career. DH and I had around 120K in student loans combined when we married. The monthly payment was way more than our condo mortgage. Luckily we both had good first jobs and were able to pay it off pretty quickly, after throwing all extra month towards it.
4. HSA - nice pre-tax saving account for something (healthcare) that will always be necessary. We are not eligible for one now but have had one in the past, I wish we still could.
5. Pay off auto loans - we have about a year left on ours. I'd like to stay car loan free forever, saving enough cash to buy another eventually. DH is a car guy and I'm not sure i'll be able to hold him off that long
6. Max out IRAs
7. Max out 401K. We're not there yet for 6 or 7, but working on it.
8. Pay off mortgage
9. liquid savings

I think I have a little Dave Ramsey in me, I don't like owing money so most of the debts are higher on my list. Definitely opposite thinking on credit card rewards and owning beat up cars though.

 

[speedyfishy]

anyone want to share their expenses in 2018?

I budgeted for $3,500 a month but spent $53,000. Way over budget. This sounds bad but my budget didn’t include vacation costs. I would stash bank bonuses that I got for opening accounts into an account and used that for travel. Idk how I could account for this in MINT. Up the budget and income?

We also had some unexpected expenses. $500 car deductible for an accident. $500 in medicine costs that insurance didn’t cover. Had to buy a new MacBook (our old ones were 6 years old and instead of each getting one we decided to share to save money) I’m going to put electronic replacements in our new budget eventually. I also had about $2200 in credit card annual fees. Any idea how I should account for this? The cards always give me the cost back in the value. And Disney annual passes were $1000. I hope I can spend less next year. We did good sticking with the budget for the items I actually had listed. And the vacation stuff was mostly take care of with bank bonuses.


My budget beak down was:

Transportation- $355
Includes public transportation, car lease $100 and insurance and gas.
Phone $120
Internet $42
Utilities-$90
Student loan-$218
Fun-$400
Dining out- $100
Groceries-$400 (trying to get this down to $300 and I was successful the past few months)
Rent- $1730 (this is going up $100 in April)

Anyone want to provide a critique and any ideas to cut spending for 2019?

 

[alryan]

anyone want to share their expenses in 2018?

I budgeted for $3,500 a month but spent $53,000. Way over budget. This sounds bad but my budget didn’t include vacation costs. I would stash bank bonuses that I got for opening accounts into an account and used that for travel. Idk how I could account for this in MINT. Up the budget and income?

We also had some unexpected expenses. $500 car deductible for an accident. $500 in medicine costs that insurance didn’t cover. Had to buy a new MacBook (our old ones were 6 years old and instead of each getting one we decided to share to save money) I’m going to put electronic replacements in our new budget eventually. I also had about $2200 in credit card annual fees. Any idea how I should account for this? The cards always give me the cost back in the value. And Disney annual passes were $1000. I hope I can spend less next year. We did good sticking with the budget for the items I actually had listed. And the vacation stuff was mostly take care of with bank bonuses.


My budget beak down was:

Transportation- $355
Includes public transportation, car lease $100 and insurance and gas.
Phone $120
Internet $42
Utilities-$90
Student loan-$218
Fun-$400
Dining out- $100
Groceries-$400 (trying to get this down to $300 and I was successful the past few months)
Rent- $1730 (this is going up $100 in April)

Anyone want to provide a critique and any ideas to cut spending for 2019?

I get nervous critiquing anyone's plans, but hey you asked right?! The thing that jumps out at me is the rent at almost 50% of your budget. I know that $3500 isn't your actual income since this doesn't have the amount you are saving, but 50% seems like a lot. You could just include the vacation costs into your fun line, but just set aside that money until your vacation. Now that I've done some bank bonuses my emergency fund is all over the place. But my original savings account is CapitalOne360. I like it because I can set up multiple accounts. So within the one account I have sub accounts for things that I don't pay monthly, like a new car fund, real estate taxes, vacation. So maybe something like that for your technology. Maybe you should just add an additional line of annual fees to the monthly budget. But I get how you're saying that is hard because you end up getting those back.