Liquidity

When I look at our net worth, the first reaction to that number is – hey we’re doing pretty good. Go us! However, I’m not interested so much in net worth as I am interested in becoming more liquid. Sure, net worth is a good indicator of financial health, but it does not account for all the goals we’d like to meet. In my first post, I set the goal to gain better clarity on money. We want to retire early, that is, not live for our jobs and to make money per se, but live to give better of our time, treasure, and talents. Net worth tells me that if we keep doing what we’re doing, we will probably be okay in a traditional retirement framework. With respect to saving for retirement in our 401(k) plans, we’re contributing – myself to the max and my spouse slightly above his company match. We will definitely increase his contribution, as the dollars are tax free, but again – that doesn’t address liquidity. So how do we become more liquid? A few thoughts below – comments and ideas anyone?

  1. Invest more after tax into our joint brokerage. We have a HELOC that has to go. There exists a chunk of stock we can sell to accomplish this in one fell swoop; we’re likely to pull the trigger on this soon and stash some cash to pay the capital gains taxes for 2017. Once the HELOC is gone, we will pretend we’re still paying it and contribute the same amount to our joint brokerage account. We do use a financial advisor to manage this account, as we are pretty clueless at picking stocks. So to toss an actual number out there, our current brokerage balance is around $140k. Let’s say we contributed nothing other than the $1300 freed up from the HELOC, plus the coffee and landscaping cash as identified in “Apparently, we like to spend ūüíį¬†“. That’d be about $1600/month *7 (Jun-Dec) = $11,200 additional cash deposited into brokerage by end of 2017. Now brokerage carries risk, we are well aware, but it also confers potential gains and contributes to our increased liquidity. My current estimate on primarily liquid assets to retire early is about $1.25M. I know – it seems hefty, but inflation and the unknowns….sigh. I will feel sound¬†with plenty of cash at the ready. We can lower the risk, as the balance increases.
  2. Downsizing our home and stashing the extra cash from sale. I don’t know where we currently stand on this issue. Our home is in a perfect location, with walking and/or bike access to nearly everything we want to do. Mr. Money Mustache encourages biking to get groceries and anything else within reason, not only for health benefits but also because you don’t have to use your car – fuel, environment, mileage etc etc. We currently have wayyyy too much house, square foot wise. Its not a McMansion or anything – its an older brick ranch¬†fixer upper (hence the HELOC). We couldn’t buy smaller in proximity¬†and get out any less mortgage,¬†as growth has caused property values to go¬†gangbusters. But we could move further out and reduce monthly payment and lower monthly utilities etc. Its a bit of a quandary. It needs more work, but that could be chipped away at over time with all cash…and there’s no rush on any of it. We have cash on hand for emergencies.

So those are my initial musings on becoming more liquid. We are also selling our crap, as Adam Baker encourages. It’s amazing the amount of unused stuff we have laying around to donate or sell. Maybe the ever increasing empty space around the house will show that downsizing is a good move. More to come.

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