A couple of months ago I came to the realization that it was time to take control of my finances and get back on the track to reaching Financial Independence. I began by tracking my spending and quickly realized that I was living extravagantly and on credit with next to no financial foundation. This led to me quickly cutting down on my spending significantly; I hid the credit card, canceled all my subscriptions, consolidated my investments into one brokerage with lower fees, and began living on cash. As I used my additional savings to apply more payments towards my debts, I also began to review my statements and discovered exactly how much my debts were costing me with and average interest rate of 29%. Due to this, I took a loan from my 401k and used it in its entirety to wipe out the remained of my credit card/consumer debt. Since then, I have been living frugally and striving to build a strong financial foundation from which I can further my investments from a position of strength.

Today, my primary focus is on building my savings with the goal of having three months worth of my living expenses held in reserve. Currently, I am about half way there. Once that goal has been reached, I am planning on shifting my focus from additional savings to paying off that previously mentioned, and still outstanding, 401k loan. I am considering a possible change of careers in the next calendar year and that loan would be called in full if I do so. Therefore,  despite it not being a true “loan” as the interest on it is just being paid to myself, I feel that it is best that I take care of it first and not leave myself tethered to my current employer. Following that, I am not sure exactly which direction that I want to go; but as I see it now, I have three options:

1. Pay off my auto loan.
   I was recently able to refinance this loan into a three year fixed rate at 6.99%. Paying this off sooner would lower my current monthly expenses by about a fifth, but would also have a capped return rate.
2. Continue my current rate of investing in the market.
   As the funds that I’m using to repay my 401k loan are actually just being invested into my 401k account, I could just continue to invest at my current volume with the payments factored in as I’m not needing the cash. I would likely shift the investments from my 401k to my Individual Brokerage and Roth IRA accounts though. The upside here is that my potential ROI is unlimited, but there is also more risk involved in the short term when compared to the guaranteed return of paying of my auto loan.
3. Increase my savings rate.
   One of my big goals is to acquire investment properties. Currently, I don’t have the cash for a down payment which is holding me back from getting my foot in the door. I could ramp up my savings rate and put it in a high yield savings account where I can get a return of around 4%, but then it would likely still take me a number of years to get there. I could possibly reach the downpayment goal sooner if I invest these funds into the market, but then there is an inherent risk to that.
   

All in all, I feel as though I am starting to find my footing, and writing for this blog has helped to keep me on track. I am looking forward to the near future where I will have my foundation built and then can start making some real moves!