The road to financial freedom is not a freeway for most of us. It is a winding road with many ups and downs. The key, at least for me, is to set goals and tune out the outside noise as I navigate the road to financial freedom. Another month has passed so let’s take a look at how did in February.
Spending was kept in check for the most part this month. A little extra was spent this month on vehicle maintenance and repair but not a significant amount. There was a time when spending $200 on vehicle maintenance was a big deal and would hurt my finances. Since I have taken charge of my financial life which includes budgeting and saving, an expense like this is just a minor blip because I have plenty of money in reserve to cover the little issues that life throws at me. My savings actually increased this month by about $330. I know last month when my savings increased I said I would focus on paying down debt this month instead of saving. Well, things change. My work has been impacted by the global shortage in semiconductors and the recent winter storm down in Texas and the surrounding states. I work in a factory that produces plastic parts for the automotive industry. The automotive manufacturers have reduced production which in turn means my company has had to slow down production. Some employees are having their hours cut. Fortunately, the slow down has not impacted my income as of now but I think it would be prudent for me to increase my savings to provide a little more cushion just in case.
This month I received $328.62 in dividends. Last February I received $.01 in dividends. Again, this is because I had very little invested in the stock market at the time as I was waiting for the majority of my retirement savings to rollover into my IRA from a previous employer. Still, this was a much better month for dividends than last month. Options premium was down this month compared to last month but I still managed to make $338.70 in premium this month. Last February I did not trade options. Combined, dividends and options premiums were at $667.32 which was better than last month but still considerably short of my goal of $1,000 a month. After just two months I am $739.91 behind my goal. I may have set the goal too high but we see how it plays out over the course of the year. I should also work on my options trading strategy in order to increase my returns. All proceeds were reinvested into the account.
My debt went down by $1,241.27 in February which is below my goal of $2,083 per month. This was due to concerns over the slow down in production at work which led to me increasing my savings rather than paying down debt. Despite this minor setback I am still over $350 ahead of pace to reach my goal of paying down $25,000 in debt this year.
The Traditional IRA was up over $2,300 from last month. The estimated annual income from dividends also increased this month to $3,605 up from $3,596 last month. The annual income number is the important one to see go up rather than the overall account value. My plan to retire in 10 years is centered around being able to generate enough annual income to be able to retire. The overall account value will take of itself.
The Roth IRA finished the month up by $36 over the previous month. The estimated annual income increased from $9 to $11. The gains in estimated annual income may seem small but over time the miracle of compounding interest should kick in and increase the rate of growth exponentially.
The 401k is up again this month to about $6,000. This is pretty much a set it and forget account. Each payday 6% of my pay goes into this account. I have set up the allocations in order to preserve capital rather than for growth.
The taxable growth account in M1 Finance is higher in overall value this month that is because of contributions. The account actually lost value this month. This is okay though. This is a high risk/high reward account. Volatility is to be expected. You check out all of the positions in this account here: https://m1.finance/enQz4omNnspo .
I continue to be satisfied with my progress. My savings is up to provide a cushion in case something happens at work. It was a really good month for dividends and an okay month for options premiums. My estimated annual income continues to grow. My debt is going down. My net worth grew by about $5,000 this month to $24,000. As I am writing this on 2/28/2021 I have reached the 10 year mark until I reach financial freedom. The goal is to retire on 2/28/2031. The progress I made this month will help to keep me on track to reaching this goal.
*Disclaimer – I am not a financial professional. The information shared here should not be considered financial advice. I am just a factory worker sharing my experience as I strive to achieve financial freedom. Before investing or making any financial decision do your own research and due diligence and consider seeking the advice of a financial and/or tax professional.
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2 thoughts on “February 2021 Financial Update”
Working on a cash cushion makes complete sense in case the slow down impacts you. Combine that with taking control of your expenses and reducing debt has to make you feel a little bit more in control as you now have the tools & resources to deal with adversity. (I’ve been there).
Interesting you are using your 401K to preserve capital. With only 7 years left until I retire I have been using my 401K the same way with only 25% in equities and 75% for capital preservation. Look forward to future updates on your progress and love to read about people taking control of their life.
Thanks for commenting Ken. My 401k does not have the greatest selections, essentially just mutual funds. It also has an excessive trading policy. For these reasons it is much easier for me to set it forget and preserve capital until I retire in 10 years and roll it over into my IRA.