I was born in Maracaibo, Venezuela in 1980 and I think that makes me a borderline millennial with some behaviors from Generation X. I was raised by frugal parents who taught me the value of hard work and saving for the future.
My parents came from low income families. In South America this meant a dual income was a need, not want. They exchanged their time, away from us, for money.
Despite my family’s circumstances, my father understood the importance of using money as a tool. As a teenager, I remember my dad telling me that in times of abundance, my savings rate should be at its highest levels. The reason for this was simple, always prepare yourself for when things go south. He wasn’t thinking about a catastrophe, but as a full time employee himself he knew he wasn’t indispensable. He was, and still is, a big believer in living below your means and avoiding lifestyle inflation. These lessons stuck with me and I credit them for my starting to save at such a young age.
I graduated in 2004 with a Mechanical Engineering degree and soon started working in the Oil & Gas Industry. After a few years, I wanted a change. In 2007 I began looking worldwide for job opportunities. The competition was fierce and opportunities were pretty much non-existent. As a result, I took a step back and decided that my best course of action was to go back to school. This led to the ultimate decision to come to the US and pursue graduate studies.
I moved to College Station, TX at the end of 2007 to attend grad school at Texas A&M University. Considering I was coming from a city that had a population of ~ 1.4 MM, moving to this small town brought a lot of excitement to this new chapter in my life. I won’t lie … It wasn’t easy leaving my family, girlfriend, and friends, but today I can say the sacrifice was worth it.
My experience at Texas A&M University was awesome. It wasn’t just about getting a diploma and getting back to work. It was about learning a new culture, being in a diverse environment, and creating friendships with individuals from all over the world. This experience was priceless and gave me the opportunity to call the US my new home.
I graduated with a Masters of Science in Petroleum Engineering at the end of 2008 with absolutely “0” debt thanks to a scholarship I was granted from day one. I feel blessed with the opportunity I was given as I realize a lot of folks leave school with a ton of debt.
After graduating, things started off great! I landed a job with a great company that paid really well.
Investing Round I: Fear of the Stock Market
There was an onboarding process on day one. Unfortunately, the Human Resources representative did a poor job explaining the retirement plans and benefits that came with full time employment. Some of them included: 401(k), HSA, typical health insurance and others. In Venezuela, we did not have a stock market so investing was something completely new (and scary) to me.
I heard the typical horror stories about people losing all their money in the stock market and I did not want to be one of them. I was completely dismissive of my 401(k) thinking that it would take care of itself. As a new employee, my goal was to learn, start delivering value and progress my professional development within the organization. Personal finance and investing had no place on my list of priorities.
Aside from investing in a 401(k), I was saving more than 50% of my take-home pay. My savings bucket was growing substantially, but guess where I parked the money? …. in an amazing 0.01% APY savings account.
Investing Round II: Pushing Fear Aside
Personal finance for us meant saving as much as possible and stashing money away. Anything beyond that was scary territory. Hearing folks talk about the stock market generated a lot of curiosity but fear had its grip. Risking our future doing something we didn’t understand felt irresponsible. After some debate we hired somebody to manage our money. We decided to have my 401(k) managed by a company that was charging 0.53% annually for AUM (assets under management). I remember thinking it was a phenomenal deal.
As a couple, we felt our relationship with money was in a good place. Working, saving (low-interest) and investing in a 401(k) seemed like the perfect plan for retirement. In 2013, we became home owners for the first time and this felt like the perfect seal to common expectations society had from us. That same year we were blessed with the arrival of Tomas around Christmas. By far, the best present ever and an event that triggered seeing life from a different perspective. Suddenly, our attitudes toward money began to change.
The Financial Independence Journey Begins
My 401(k) was in good shape but the majority of our savings was sitting in a low-interest savings account. Starting an HSA was simple but we weren’t intentional about how to manage it in order to maximize its value. Everything about Personal Finance (PF) started to appeal more to both of us but at the same time we felt overwhelmed by the perceived complexity of the subject.
I did make the best decision of my life marrying my girlfriend from Venezuela. Yes! the one I left when I came to the US. She joined me in Gillette, WY. After we married, we discussed our finances but at the time, my wife showed little interest.
We moved to Colorado in 2015. During the commute, I started listening to podcasts about money in an effort to see if there was a way somebody could democratize these concepts for me. Little did we know this would cause a major inflection point in our lives.
Going down the rabbit hole is probably an understatement. One podcast led to blogs, books, other podcasts and, best of all, the discovery of a community pursuing this crazy idea about being Financially Independent (FI). Early retirement sounded fascinating and super exciting.
Where are We Today?
Fast forward to 2019. We are now a family of four! Tomas (5 yo) and Matias (1.5 yo) bring so much joy to our lives.
Our relationship is as strong as ever and we are now on the same page with our finances. We are big fans of low-cost passively-managed index funds (VTSAX and FSKAX) and of keeping fees down to the bare minimum. We’ve become DIYers so our costs are essentially the fees funds charge.
For the past five years we’ve paid ourselves first maximizing annual contributions of all tax deferred vehicles including: one (1) 401(k), one (1) HSA, two (2) IRAs (via backdoor roth) all while investing in a taxable account at Vanguard and having a savings rate of approximately 40% based on one (1) household income.
Last year, we also did a mega backdoor roth conversion which allowed us to stash up to the maximum defined contribution limit in 2018 ($55,000). This has been possible thanks to after-tax 401(k) contributions available at work. In 2019, it’s game on!
Real estate is also part of our portfolio. We currently own 5 rental properties (2 SFH and 3 condos) that have done pretty well for us. This is one strategy we would like to continue to explore based on the potential of generating passive income. We believe net worth is a great key performance indicator (KPI); however, cash flow could enable us to cover our monthly expenses, especially when thinking about retiring early.
Why Achieve Financial Independence?
Our “Why of FI” is about having options to do what we love: spending time as a family, traveling around the world, and enjoying life on our own terms. Today, we see time as a precious commodity and we can’t wait to get to the point where options start to emerge, providing us with the opportunity to do the things we enjoy the most.
We’re super goals-driven (no goals, no glory right?) and as such, have put a plan in place to guide us on our quest for achieving FI. Our plan is simple, pay ourselves first, leverage automation, live below our means, avoid lifestyle inflation, and be intentional about our decisions.
Everything around PF and FI is fascinating. Even though my wife is not as hard core as I am, she supports and trusts the blueprint we’ve put in place. I’ve discovered blogs, podcasts, strategies, tools … but more importantly, a community of generous individuals that are there to support each other via meetups and retreats like CampFI.
I’m not an expert in personal finance and I will never pretend to be one; however, we plan to share our journey including lessons learned, mistakes, tips, small wins and ideas to keep life simple, and fun while making progress on our Journey to FI.
By Juan and Maria Fernandez of A Journey to FI