A lot of friends recently keep complaining about their lives. Some really are in a difficult situation. But others I keep telling them to count their blessings.
Some blessings are financial. Some blessings are just life. I can't explain but I feel like often times we take for granted everything we have and don't appreciate even the smallest things.
A friend complained about not having enough money and being on a budget. I said at least you have enough to choose how to spend your money. Be happy that you can make choices.
Another friend is getting divorced. She began crying about how she's giving her children a terrible life and she's ruined their lives. That they have less than they used to. I told her to stop right there before we couldn't be friends. If she truly believes that having a single parent is a lesser life we couldn't talk anymore.
I love my mom and kiss the ground she walks on everyday for the life she gave me. I appreciate the fact I was raised with good values and morals. That she worked hard and no matter what she gave me the best life she could and I believe truly succeeded even without money. I feel my mom sacrificed so much and I understand and appreciate everything she did. And my friend needs to get over it. Yes divorce and single parenting is hard. But it's not a lesser life.
Another friend was complaining about how hard it is to pay off debt. I said appreciate that you are paying down debt. It would be worse to keep digging the hole deeper. Every dollar is another you don't owe. Yes it sucks and is slow but it's better than staying in debt. Look at the cup half full.
Another friend is panicking about buying a house. I said it'll happen. Everything happens for a reason. That have some faith.
Finally another friend we passed boxes onto, her husband quit his job and they aren't sure what they are doing except moving. I told her follow where they feel lead and it will unfold. That sometimes you are doing what you are meant to do. I really believe that.
All these people have a lot to be thankful for but to only focus on the negative is harder than realizing all the positives.
Sometimes I get stuck in that place but I slap my face and tell myself I have so much to be thankful for snap out of it. I have to always look at my awesome kids and husband, the health of our family, the lovely home, the nice weather, and that we are happy. I could easily write all the negative things happening like I haven't found a school for my DK2. I haven't settled on a contractor, when 3 haven't gotten back to me arrgh! I am spending an exorbitant amount of money right now. But instead I have to keep positive. I have a lot to be thankful for.
Are you a half empty or half full kind of person? Is it easier to complain or appreciate?
Viewing the 'Savings' Category
A lot of friends recently keep complaining about their lives. Some really are in a difficult situation. But others I keep telling them to count their blessings.
People don't save period. They barely save for retirement. They barely save for an emergency. Many use a tax return as enforced savings. But many really couldn't tell you what they are spending their money on. Nor do they see it as important to start saving.
One could argue that it's because they don't make enough. The truth? That saving is a priority. People make a conscious decision to not save. They also make a conscious decision to live day by day and paycheck to paycheck. I understand people who make below the poverty line struggling or around the median salary for the US. But at the same time perhaps it's time to look at your expenses and see if it's worth living where you do if you can't afford it.
I'm not a huge latte factor fan. I don't see how $5 a day works when you make $4k/month and pay $2k/month rent. It just won't work to survive without going into debt. Or $500 car payment. A lot of times just the basic outflow is to high to even pay for groceries or utilities and that's how the CC debt starts. So $5 coffee isn't going to make a difference if you start out the month in the hole. It just make the hole $5 deeper.
I'm not sure how to make people realize it might be a good idea just to save?
I find it odd. I appear to have two different sets of friends. Both are great but ones are savers and others are spenders. The savers are two other families whose kids go to piano with our kids. They both have two DK same age as our two and all 6 kids are in 2 classes of 3. We were with them last year as well and will be with them next year too. The kids love each other.
Parents #1 quit his job last May because he didn't agree with management. They are doing great and paying for private school and have a huge safety net. The Dad is deciding what he wants to do with his life. They keep up with all activities and I know live modestly. You can tell with the cars they drive and they still travel and eat out and live comfortably. The mom has said they probably have another 1-2 years expenses.
Parents #2 the mom just quit her job over the treatment from management. She applied for her own job it turns out they have been trying to hire since January. Well she tells me that they have a year of savings comfortably without worrying. The Dad owns his own business and has been the primary caregiver of the kids while she went out and was the breadwinner. She's going to take some time and reflect on what she really wants to do. Her goal is to find a job after the summer.
I gotta say it's refreshing to hear from friends that they are secure without jobs and not worried about the future.
On the other hand since I'm doing taxes, I got a chance to look a 3 different friends tax returns for free. Just in case they missed something. They all made $160k-$200k and all have some credit card debt, minimal retirement savings, and just spending everything that comes in. Making that much and saving $5k/year for retirement seemed nuts. And not having an Emergency Fund or down payment for a home. I did suggest they try to divert 5% of income into a saving account. But they said it was impossible. Where would they get the money from?
Truth is that finances no matter what you make is a mindset. You can make a lot and spend it all. You can make a lot and save a lot. I think that part of it is being satisfied with what you make and spending it wisely. The first sets of parents I think live simply and are happy. The second sets are constantly buying things, eating out, and spending on everything. Does it make them happier? I'm not sure but I know if they lost their jobs they would not be calm and happy the way the first set of parents are. Able to walk away because the job sucks. I wonder if people realize that sometimes the savings gives you the freedom of not worrying. It's not just about the money.
So we ended 2016 pretty good. How good? Our NW went up $41k. We are still down from our peak NW $120k, I'm still happy where we are. Our retirement contributions were $29k plus $2552 employer match into the 401k and we ended the year up $73k so we doubled our investment. We maxed out our 401k in 4 months. With income and savings we only "spent" $30k in cash from January to August, we didn't get our first paycheck till August 12th.
Our average spending was $80k for the year. $6500k/month including $2400/month rent. Not terrible to live on $4000/month for a family of 4. It was front loaded that we had a lot more expenses without employer provided health insurance. So we spent more on essentials till August then we splurged a lot more on eating out and stuff since we suddenly had more money. NOT perfect but we were okay.
Anyway our 2017? Save $100k and increase NW $150k. Big stretch goals.
I'm struggling with auto-bill pay. I am so annoyed by it. I put things like the internet, cell phone, garbage, water, electric bill on auto-bill pay. The problem is that the CC it's hooked up to keeps getting changed and I have missed payments because I forgot to update the credit card. The real problem is that these credit cards discover, citibank have been compromised so much that we were trying to update our accounts over the summer every month. It's so frustrating.
Plus I'm pissed at Capitol One now for not paying our CC in full even though I have confirmation numbers of payments. So now we are hit with finance charges and late fees and I'm dealing with paying everything manually and calling the card companies to deal with the fees. I'm just annoyed that it's taking so much time. Plus they refuse to help me when I have confirmation payment codes. Seriously? So I've been dealing with all of BS all morning.
I need to still evaluate our investments and rebalance our accounts. I think we're a little to aggressively invested. Of course it probably doesn't matter too much long term. Staying invested is most important.
But TD Ameritrade lost $60k of our money for 2 weeks. They couldn't find the check we mailed for our Roth IRA conversion. But after we called and complained then they suddenly found it in processing. I am ready to shriek.
The US needs to become more automated. They literally cut checks from checking accounts and mail them. Other countries do immediate electronic debiting when you pay bills. I can't help but wonder how the US is so far behind other countries with processing of banking?
At least the year is over and we have some potential good news. DH might not be the executor of his uncle's estate. There might be a will. So he doesn't have to deal with anything. Cheers. So much better because he won't have to deal with any ramifications from being executor. YES!
Went out with another 4 moms on Saturday. LOVELY night first time in new place and wow it was fun. Settling in. But my reason for writing?
I was the only one out of 5 moms who is transparent with my DH. All the other four talked about stashing money and paying for things without telling their spouse. Two work and two stay at home and the two who stay at home said they wanted to work to stash their money and not tell their husbands what they spend on. The two that do work, keep their money as theirs and spend it as they wish.
Okay I don't get this at all. This mentality is something my mom tells me all the time. "LAL you need to work so you can have your own money and spend it as you wish!" That way your DH won't tell you how to spend his money.
I say and I repeated this Saturday, why would I do that? I mean truthfully we don't have enough money (in my opinion) for me to go out and spend whatever I make on whatever I want. I don't have the luxury for us to live on DH's salary and waste mine "income" on whatever I want.
The truth is that even if I got back to work and I make say $2k/month I can't spend that on clothes, makeup, hair, etc. Honestly my DH and I would sit and look at our entire budget and work out where we should put that money. In all honesty if I go back to work the money I make is earmarked already for college savings for both DK. I can't go out and get highlights, waxes, facials, etc. We don't make enough even if I work.
My DH would be pissed and honestly rightfully so if his "income" is for us to live and save on and I blow my "income" on luxuries. My mom says that's what women who work deserve. My answer is that's fine if it's like her a 2nd marriage and you keep things separate.
But a 1st marriage? I mean I was shocked all the other moms thought it perfectly reasonable to do this. I found it shocking the SAHM are sneaking extra money on the side to do what they wish.
Truthfully I can get why people in the US get divorced. I think it's the financial infidelity. People in the US don't save enough and because we as a country like to spend money when you have two people married and NOT communicating or on the same page for spending I can see how problems arise quickly.
My DH and I aren't perfect. We do have our struggles with out budget and sometimes DH does give me "crap" about stuff I buy. I am the "spender" in our relationship. But i'm transparent about it.
I also think that he knows how practical and logical I am in general about money (i'd say I'm in the top 5% of people with financial savvy of the general population. If you are reading this you are too likely).
But I can't help but wonder how many other couples don't talk about money? And are financially unfaithful? How many hide and lie about money? Or have control issues?
I have no problem with separate accounts as long as it's transparent. But I wonder if couple divorce because they can't reconcile their habits? And then more importantly lie about it? The lying would drive me out of the relationship more than the spending or debt. I would be pissed if DH went around hiding money or charging up CC and then lied about it and it came out. I don't know if I could trust him again. Sometimes it's not the act but the lying.
Do you think most financial sound couples are transparent?
I just wanted a quick post about life. We're super happy. All of us. It's weird and good at the same time.
My DH left yesterday singing because he was so excited by almost being done. Today is hiring day and he left in an even better mood, excited, nervous, but at the same time ready. I can't explain I haven't seen him this excited about work in a long time. He likes what he does more than he has in a long, long time. Turns out the move he was against 2 years ago has been the best thing that ever happened to him. He's even said so recently. Cliche but sometimes what you need is the thing you fight the hardest against.
The kids are enjoying the milder weather and my older kid is dying for the 80s again. When will it warm up? I laughed and said next week. She said I don't miss the snow we can see it from our house. HAHAHA and I don't have to shovel it (that's my comment mentally!) She said we don't even have to wear coats or boots. What a lovely "winter".
As for me? Yesterday some friends came over to play and both ladies said they wanted to go out in May to celebrate my upcoming birthday. I said YES. And then I said I have friends to them. They stared at me and I said it's been a work in progress moving and I admitted it's hard but I feel like I'm settling in and developing roots. That I have people I can talk to. I am getting to know the area and knowing my favorite places to eat and go.
I bought memberships to places like the zoo and children's museum. We're hosting friends this weekend for a BBQ. We're being hosted again and DK1 is doing T ball.
I guess we're all just feeling better about the move. It's crazy that 1 year ago this weekend we were listing our house. That 13 months ago we had no idea we'd turn our lives upside down and do this. But we have and it's turned out great. Well good emotionally for us. Financially DH has to land a job, but honestly even if it were a salary cut since he's singing and enjoying what he does I can't seem to care. He's happy again and maybe it's the location, maybe it's the work, maybe it's a combination of both.
But soon we'll know if the gamble pays off. I'll post more later about some thoughts I have about being financially independent and retiring early.
I read the article in the atlantic. It's here. http://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/
It's really well written. Yes the author makes a ton of excuses. The author really couldn't afford his lifestyle ever. He was a writer who probably should have lived somewhere cheap. This article on vox discusses people moving because they don't make enough. http://www.vox.com/2016/4/25/11503040/midwest-savings-atlantic
He's one of those people. He's someone who probably would have had problems even if he had moved but perhaps it wouldn't have been so severe.
I can't imagine hitting up my parents for their life savings for my kids to go to college. I can't imagine later paying for a wedding when I couldn't afford to pay for college. I can't imagine hitting up my grown child for money to pay my heating bill in old age.
But it happens. I had lunch playdate on Sunday at my friend's Ms DB. Her family is the one that made $300k last year and saved nothing. Her husband makes $200k/year and they save nothing. She said the only saving grace is the fact they don't use CC and only buy what they can afford.
But she said they are trying for the first time to budget. She said she took out $400 cash for 2 weeks of grocery shopping. They have no idea where to start but they are trying to see where all their money goes. Seriously making $15k/month gross and not saving a penny. I'm curious where their money goes too. $3k goes to rent she said and assuming $4k taxes and $1k medical premiums. That's still $7k/month unaccounted for.
I suggested mint.com but since they don't use credit cards she said it wouldn't work. They just use debit cards. Her husband when she brought it up said "we don't have CC debt so we're fine." But they can't find a way to save.
I suggested to her that they just maybe deposit $5k into a "Spending"account and use a debit card and that's it. Maybe they don't have to track every penny since I doubt her husband will. But maybe just set preset "saving" levels and with their income it won't matter.
But here's the truth of what I observed going to their house for the first time. And I really this she's a nice person and will make a good friend.
She's got 4 kids 8, 6, 4, and 2. The 8 and 6 year old each have flat screen tvs in their rooms. They both have ipads and kindles, and the 8 year old an xbox in his room. They have 2 big screen tvs in the two family room areas. There were toys everywhere and the house was very fun and cool. But I'm going to guess that their spending on the kids and stuff is more than 2x what I spend on my kids even though I have 2 kids to her 4. I don't think they proportionally spend double, more likely if i had to guess 4x as much.
I admit to being indulgent with our spending. We could very well cut many, many luxuries and have a very lean budget. But I know where my luxuries are and I'm okay with it. I make a conscious decision for each of my dollars giving it a "name."
I think that's why no matter what you earn you have to save. That even when you can outearn stupid you can still fall into the trap of living a lot higher off the hog if you don't. I didn't tell her but with a similar incomes our "burn rate" previously and now is about 1/3 what they are "burning" through every month. But I wouldn't expect her or her family to do that. She admitted it's shameful they can't seem to save.
I think that going into extreme savings mode would be to depriving. I think for them probably saving 15% is would a struggle and something they have to work up towards. I think starting out with maybe 5% and every 2-3 months increasing it would help easy the pain. And maybe for the rest of their lives they never go above 15%. It would still be better than nothing.
I know that she's trying to change. I maybe naive, but I'm crossing my fingers that they are able to turn things around. At least they aren't in debt.
In a funny turn of events DH has a call with a recruiter tomorrow. I am not sure it's a match. At least he is getting interest already and it's boosting his confidence. I have faith he'll do great. This week is hiring day so we shall see. Cross your fingers. We're about to find out if we gambled wisely or poorly. (as I type this I hear in my head the end scene of Indiana Jones and the last crusade)
Last post I said avoidance is what I am practicing. I'm going to avoid looking at our investments for the year or until I need to. Everything is just being left alone.
But I've realized my DH and I time the market not deliberately but accidentally. We sold in 2005 at the peak in southern California and bought at the peak but it worked out. Southern California still hasn't recovered but where we were did go up. Now I think like the last bubble you won't be able to tell until you are able to look back at the market. Did we sell at a high point in the market at 2015? Who knows.
I do know the stock market did go down. I know we didn't invest any home equity because we might need it. So some timing is happening to us but it's not on our decision but rather circumstances. Twice we've not wanted to be loud distance landlords.
But this stock market downturn did cement the idea that you don't invest money you can't afford to lose or ride out staying invested. We used to invest most of our emergency fund and have only 2-3 months of cash. But before we moved we cashed in about 18 months cash and home equity. We decided the risk wasn't worth it. Turns out that was a good assumption
What do you think about the housing market? And the stick market?
Okay so I've been avoiding until today looking at our retirement and investment accounts. It's not pretty.
So our cash is down $30k but that was planned expenses for the past 5 months. We moved and budgeted around $5k/month with some unexpected expenses and moving costs covered. Very planned.
What was unplanned. Tanking of the market. Our retirement savings in June 2015 hit a peak of $575k. We are currently with our contributions ending in August (we maxed out the 401k) as of today at a balance of $496k. Now in October 30th, 2015 when I checked we were down from $575k to $562k. So we had a small hit. But in 3 months we've lost about $70k in our retirement accounts and that's without me moving a penny. I left everything as is and avoided looking at it until today.
I swallowed really hard right now writing this but I am staying the course. I have a diverse asset allocation of stocks all in retirement and our taxable account right now we had it mostly in cash/cd/bonds and it's around $10k down from October. With our cash heavy position from home equity and cash for living expenses we decided to leave our retirement alone.
I'm a little sickened but I'm staying strong and I'm going to ignore it. We weather 2007-2010 and I know there were years we were losing money after contributions and company matches but by contributing and not changing our allocation (cheap low cost funds) it turned out and began to pay big dividends.
I guess the only thing left to do is avoidance. Avoid watching and worrying and realize we aren't touching this money for another 20 years. We'll survive this and start pulling in big gains soon enough. Ugh.
How are you doing?
Reading a post about net worth on the forums made me think about time versus money. What my DH and I are doing right now is probably costing us a lot of money. How much? Well at least $45k in salary this year and another $100k next year. Then add in the fact we're going to likely burn through $75k in expenses from not working for 10 months plus tuition for DH's program. And we're out $220k without counting the lost opportunity cost of us not saving some and investing it.
Our kids are 5 and 3. So right now my DH is getting the opportunity to enjoy them in a way many parents can't. I'm fortunate to have enjoyed them immensely until now. He's getting to experience volunteering in class, doing field trips, etc.
I'm not sure our kids understand the sacrifice we are making right now. Or that our lifestyle changed moving cross country. We've actually mentioned to our older DK1 that we no longer have an income. That we are watching our pennies and we can't buy everything under the sun.
But the truth is that we lived very much like we did before. The only change is that we didn't shop as many sales/coupons for groceries. We ate out maybe 2x/week instead of 1x/week. We ate at more expensive places instead of places with deals. But otherwise we never shopped a lot, still give the girls extracurriculars, still go out and do experiences we did before like the zoo/aquarium/etc. We've curbed our weekend roadtrips, if we were working we'd likely have gone on 1-2 weekend trip.
But I honestly don't think our kids think our life is any different. They do understand we have a much nicer, bigger SFH with a garage that is warmer. But that's due to the fact we just moved somewhere cheaper that we could afford a home. Even if we were working we'd still have rented the same place.
I wonder if our kids will understand the huge financial risk we took when they were young? Or understand ever the financial repercussions we've done by quitting and moving? I don't know, but I hope they think we did something amazing to change our lives.
But I do know my Dk1 understands those less fortunate. And we are continuing to volunteer at shelters helping to host birthday parties for children who don't have homes. She understand that there are so many others who have so much less. And at this time of year we should be grateful for having so much.
I'm still excited for the season and while there isn't a shelter party we're going to help make goody bags instead this month. I hope that when they look back on holidays they remember these sort of things. I always remember and give my children money for the red salvation army buckets because more than once my grandfather told me he and his family were on the receiving end of the Thanksgiving and Christmas food baskets. He always gave me money to put in as does my mom till this day. If not for their generosity I don't know where I'd be.
I posted about Couple A and Couple B choosing to invest their money differently. Couple A chose to pay off the home, Couple B chose to invest in a 401k. By assuming a rate of return on investment of 6%, the difference after 30 years was $691,281.00.
Not extravagant but is a pretty penny. But making a different assumption and follow Dave Ramsey and using a 12% ROI well you get a very different scenario.
Couple A - saving $15k/year for 30 years, then saving and extra $18k/year for 15 more years
6% ROI 12% ROI
15 years retirement $358,462.00 $589,327.00
20 years retirement $566,801.00 $1,139,029.00
5 years taxable $107,773.00 $124,611.00
25 years retirement $845,365.00 $2,107,775.00
10 years taxable $251,998.00 $344,216.00
30 years retirement $1,218,146.00 $3,815,046.00
15 years taxable $445,002.00 $731,236.00
Total Savings $1,663,148.00 $4,546,282.00
So using the 12% ROI couple A would have about 3x the savings after 30 years and the number honestly seems really high.
Couple B saving $29k/year for 30 years with a 6% and 12% ROI
6% ROI 12% ROI
15 years retirement $693,181.00 $1,206,991.00
20 years retirement $1,095,510.00 $2,390,051.00
25 years retirement $1,633,918.00 $4,073,891.00
30 years retirement $2,354,429.00 $7,373,694.00
Couple B also has around 3x as much savings after 30 years. And a ridiculous amount. But then maybe I'm too pessimistic and after 30 years of saving my DH and I should have $7.3M at around age 55. I find that incredible to believe however. That we are going to be that rich. I personally think our number might be closer to $2.3M hence why I use 6% ROI.
What do most people project?
I find it stunning that so many women have no clue about their family finances. I mean literally no clue. Now you'd think okay maybe because they are stay at home moms? Nope. Turns out that many of them are also working moms. It doesn't appear to matter. I find it incredible that so many women in a marriage have no idea what they have saved, make, or spend in a month. I'll tell you a few different stories recently which left me wondering WTF?
Dr H is a primary care doctor with three kids and her husband works as well. They are super busy and never have time to manage their money. They are pretty frugal and don't overspend and save a lot. BUT they could be saving more. Unfortunately neither Dr H and DH haven't a clue what they spend. They went to their financial advisor and said we were thinking about buying Amazon Prime to save on shipping. The FA said "you've been paying for 5 years for Amazon prime and had no idea you've been paying it?" DH said "I just pay our bills in full, we've never looked." Dr H tells me and a friend this story and says the FA told them they should probably try to see what they are spending their money on. Thankfully they make enough to not care, but it could be detrimental.
Friend Mrs. C is a full time school teacher. She has no idea what she makes or what they save. She says her husband takes care of everything and he tells her what she can spend on groceries. She says that she's sure he's taking care of their retirement but has no idea if she even has a Roth IRA or college accounts for the kids.
As you all are aware Mrs A is the financial train wreck of a stay at home mom. Has no idea what they make or spend and figures if they made more they'd be fine. Her husband is having his wages garnished by the IRS because he hasn't paid taxes in 7 years and filed in as many. They are being audited.
Another friend Mrs K also works part-time is being audited because her husband handles all the money and she too has no idea what it's being spent on.
I have many, many more friends both working full and part-time, and non working moms, NONE of which have any clue how they are spending their money. They have no idea what their mortgage is, but they know what daycare costs. They have no idea if they have a retirement account or how much they are saving.
I found it incredible that all these well educated women have completely handed over control of the finances to their partners/spouses. They have no clue if these people are being at all responsible. They have no idea what they have saved for retirement if anything. They just assume whatever financial decisions are being made are the right ones.
Granted the two under audit have realized that something is not right, but still. Does it take getting audited for someone to get concerned? And when I said perhaps they should take over the finances the response was "it's too much work and it was a mistake."
Really? I know that people of both genders here on SA are more concerned and aware of finances than the general population. But I can't wrap my head around women just having no idea about their finances period. And literally they aren't even worried or concerned that they could be eating cat food when they get older or are in debt, or not paying taxes.
My DH and I are both aware of our finances. He's not as detail oriented, but he knows the gist and well aware of our spending habits and our savings plan. He knows roughly what we spend and doesn't care for those details. We make joint decisions and I'm well aware of ALL accounts and track them. I know it's a bit obsessive, but why don't more people care?
It's been awhile since I posted and I really need to write a bit more. Right now we are wrestling with whether to do a Roth 401k. It would mean we can save tax free but there is a 34% hit on savings. We'd have to save an extra $6k/year not a big deal, but I am more looking at the tax implications.
What if we withdraw it and it's lower? Should we have taken the tax break now? What if brackets go up? Obviously the tax brackets will get larger, but our deductions will go down as we age and the money will grow tax free. That means if we let it grow 15 years it'll double 2x by the rule of 7. So potentially we'll have another $750k saved or more. This is counting doubling of savings and assuming we are done working in 15 more years or by 50.
I'm leaning towards the Roth 401k for a couple of reasons. At most my DH has 2 years working for this company and where he moves to we may not have it offered. I don't know what the future hold but I suspect we might make more in the future since we are on one income.
Anyway though on a positive note our retirement accounts are at $515k so we reached our goal of the year to break $500k. Our taxable accounts have broken $220k and increased $25k/year and we've paid off $20k in debt. We paid off $4k car and $3k on the other (only $4800 left) we had the interest rate of 1.9% but decided we were tired of seeing the payments. We also paid off a CC we put my dental work on that was 0% $4k and still am paying on the lasik also at 0%. Both were on 24 months interest free but again I got tired of payments. Finally we paid off the last tiny bit of my super cheap 0.9% student loans $8k that I left hanging around.
Life is pretty good.
I've talked about LBYM not being easy and it's not. And I've said that we've put certain things on hold because it makes financial sense. What I haven't discussed is the why.
So in 23 months we'll be shaking the dust from our boots of where we live and moving without jobs. If we had a job offer we'd move sooner. It would decrease the uncertainty and make moving palatable.
But why? To buy a house? To gain a king size bed? Nope.
The real underlying reason that Another Reader (yes I'm calling you out) is to be closer to our friends and family. Another Reader are you 3k and 6k miles away from family and friends? Are you not withing driving distance of any family? Have you ever had a child and knocked on a neighbors door at 1 am to watch older child and made it to the hospital with 20 minutes to spare? Have you ever take a cab to the hospital with a sick child so one parent can stay at home with the other in the middle of the night? Have you ever panicked and realized that if anything happened to you, the soonest a family member could get to you is 12 hours maybe?
We live at least 1 connection flight away from either sets of parents. My step-siblings are flights 4 hour flights away, my BIL is 5-6 hours cross country flights away. Grandparents at least 24 hours. That's dropping everything and hopping on the next flight.
I am not selfish, I am talking about the reality of being alone. Of being a SAHM and sick and calling my DH to come home because I'm vomiting and unable to walk my dog and am too dizzy to walk. I worry about my two kids and because I'm sick I can't ASK another mom friend to put herself and her kids at risk of being sick. And YES they've said no they don't want to catch what I or my kids have had.
I've experienced living with family, my BIL lived with us for 4 months during a period of job hunting. It was great to have help and family around. I've got family and friends up and down the West Coast and so does my DH. We'd be a flight away from his parents and mine. Actually my in-laws just visited before the 4th and they said it would be easier if we lived on a direct flight from where they lived, said wistfully not accusing or demanding. Say what you will but I would love to be closer to them and that is the driving desire to move.
The house, bed, etc is all material things that will occur when we move forward with our lives. If we choose to stay put we would buy those things and get a more permanent home. But we've decided that's not the plan. And it's possible we're moving to the SF Bay area even more expensive than where we are, and will be stuck with a townhouse or a more expensive mortgage.
But at the same time we'll have help from our families with our kids. We would have less worries about something happening to us. Our children would know their grandparents intimately and extended family; and if the price is living in an even more expensive COLA so be it. We'll make it work and make sacrifices. I'm NOT willing to make those same sacrifices to live where I LIVE now. There aren't the same benefits to living in a HCOLA for a job. For family? Yes. Just for a job?
I've had a case study on MMM. The advice was MOVE. http://www.mrmoneymustache.com/2014/02/23/reader-case-study-going-west-for-early-retirement/
Ideally we'd like to live in Seattle or Portland. My DH's top two choices. I'd prefer San Diego or SF, but finances play a role and that bumps those lower. He missed the seasons when we lived in San Diego. I don't care for seasons but I like the cost of living in Seattle and Portland.
This move might be tough for us financially but I truly believe it'll pay dividends in the long term. My DH agreed to it without a JOB, because he knows companies are fickle. He was laid off from his job where we are 3 months after we moved from San Diego to the East Coast. So companies suck and have no loyalty.
But we decided jointly in April 2014 that we were really going to buckle down and start to save to move. We were going to try and cut expenses more and take the risk. My DH was willing to go June 2015, but I decided that we could afford to sacrifice and endure our situation for 2 years to buffer our financial position.
The few things I want and am saving for, I'm starting to think as little rewards as I wait to settle down permanently. As I wait for the opportunity for us to put down roots and really settle.
But we're ready for life's curveballs. We decided if DH ever lost his job again we'd sell our house and be off in a bloody minute.
So the plan? List house in Spring 2016. Sell it no matter what. Move with job to west coast or move without and hope for the best. Job prospect 1 is post-doc for me. Prospect 2 i am hoping to become an enrolled agent and do taxes as a career change. Prospect 3 for DH take an entry level business position. Prospect 4 take any job.
Fearful? Yes. Trying to accomplish goal? Definitely. Perhaps it is selfish to move. But at the same time nearly 10 years ago we agreed we'd live out west by our families. We decided this move was temporary or we'd have ended our relationship. It was a very deliberate decision and one that we did not take lightly.
And Snafu point about leaving a job you like. What job do you love forever? I have only pointed out the truth to DH. We are stay put for him to like his job for "now"? He's already this year dissatisfied without a promotion. He feels he's been put over. His reason for moving next year? If he doesn't get a promotion he'll be very unhappy. If he's unhappy then he should look for a job where we live? Or should we just move and take the risk? My opinion? Leave. We aren't staying for anything other than him liking his job. And what happens if he doesn't like his next job? We stayed for what?
I don't mind living below my means, but it's not easy. This is to reiterate to those who are getting out of debt and think afterwards it will be. It's not. I like my life, I don't like where I live.
So I am unhappy. I am unhappy but trying to change the situation. First, when we moved into our townhouse my DH made a deal with me that if we suffered with our old furniture when we moved (back to the west coast) and bought a SFH, we'd buy all the furniture we wanted. He said it doesn't make sense to buy stuff that may not fit or won't be worth shipping in 6 years. Well it's been 9 years and it's hard to still see our same stuff. And yes I've been setting aside money for new stuff. I have $15k saved so far. Delayed gratification for sure. So what do I want?
1. King Size Bed (won't fit up 3rd story staircase, thank you 1880s victorian and no window big enough to shove it through). Our neighbors had to put their king bed on the second floor and suck up a queen to make the hairpoint closed turn on our staircases to the master which was a converted attic.
2. Dining Table - I'll be honest I don't think we could fit a bigger one in our house, so I shouldn't complain.
3. Couch - At least the kids will be older and it won't get as dirty and we may not have dogs at that point.
4. Dressers for us and the kids - ikea used stuff or hand me downs. Kids are also in plastic bins since their closets don't fit real hangers. The closets are too shallow. Maybe even bedroom sets
5. Headboard - for us at least.
6. TV - move our single HDMI tv to our bedroom and get a new family tv. We bought ours when we moved in 2005 and are waiting until we move again.
7. New Grill - DH replaced parts on ours but is also waiting to dump our when we move (he's practicing delayed gratification too). I'm going to get him a grill and tandoori oven he's dreamed about when we move. And install a gas line to his grill ($1k well worth it).
These are a few of the things I've on my list of items to get when we know how big our next house will be. It could all be moot depending on where we live.
So what else am I waiting for? Well to buy a SFH. To see the size and layout. Stuff I want?
1. 3 bd/2ba - I want a master bath or space to install one if it's only 3/1.5ba. Older capes make it impossible.
2. garage attached if possible, detached is okay.
3. patio/deck where we can sit and have a grill. Current deck adequate to have grill and smoker but not much space else. I think it's 5x5.
4. yard - potential to be fenced, more than 5000 sq ft, preferably above 10000 sq ft and no more than 1 acre.
5. basement - potential to be playspace for kids, or family room for kids.
6. Under $1M.
That's it. Move in ready would be awesome but some work is fine. I'd like to be able to make it energy efficient, but as long as it's 1960s and newer i'll be satisfied. I know the wiring will work, there will be insulation, and we won't have to deal old homes. I HATE charm now. I don't even care what style is it, just as long as it's 2000 sq ft and in good shape.
So things on my list I want now but am "earning" with extra money, and have considered buying. FWIW, my DH never says no. Actually he tells me all the time if I want something buy it. I usually don't shop and spend so if I want something I probably have looked at deals and considered it a long time.
1. Dyson DC59 $549, used to be on my when we move list, but I'm tired of vacuuming and sweeping so much and not being satisfied with our really old vacuum.
2. Wustof knives - debating buying set or each piece at a time, opinions? I have a great set of calphalon cookware that I use DAILY. Best investment ever. I want the same out of my knives. Any other brands to check out?
3. Le Crueset Dutch Oven - borrowed my neighbors a few times this year. Considering Staub as well.
4. Slow cooker - got mine in 2000 for $10 black friday. I have a really small one and need a bigger one. Is the all clad worth it?
5. Cookie sheets - can't decide between sheets and mat.
So I have a couple of things I can get now and earn. But the majority of stuff it just makes sense to wait. But it is hard to feel like life is "on hold." And you are waiting for it to happen and start.
Yes living below your means often means you have nothing material to show for it. Often times it means passing on a fancy car, cool vacation, eating out, fancy groceries, branded clothes, or even furniture. It is hard and in some ways I think it gets harder as you get older.
When I was in my 20s with DH none of our friends had money or things. They weren't buying houses, they weren't driving luxury cars yet, they were getting of school, getting careers started, paying back loans, etc. Most people were young and broke and starting out. But then the 30s/40s hit and people began starting families and making a real salary instead of entry level earnings.
I recently turned 35 and started blogging again and began reading posts about getting out of debt and turning over a new leaf and LBYM. There are many posts about the monotony and struggle of savings.
I'm about to admit it's HARD. Right now and probably for the past 4 years we've been on cruise control. We've been cruising along saving at the same rate and pace actually putting more aside in our taxable savings, but accruing some debt (car loans I want gone this year). But this year a couple of things happened. I realized that we are potentially early retirees or financially independent couple. But at the same time I realized we also haven't upsized our lifestyle at all in a LONG time.
We bought our townhouse with plans for having kids and we had them. We have the same furniture pretty much we bought in our 1 bd condo, $100 dinner table, $20 coffee table, $50 desk from IKEA, $40 dressers from IKEA. We haven't bought any really adult furniture, except our foam mattress from costco 5 years ago. We did upgrade our cars to 4 family sedans instead of compact cars we had, but base model and used for the other. So in little ways our life has improved but nothing noticeably drastic.
So I'm going to buck the "mustachian" trend and ADMIT that I do find it hard. I find it hard to stay the course and LBYM. I find it hard to not compare and wonder what it would be like to buy a couch that cost 4 figures or a dinner table that seats more than 4 people. Or lusting after a mininvan but hesitating because even used it's a lot.
So no it doesn't get easier after getting out of debt. According to Mr Money Mustache saving 15% of your income only gets you to retirement in 43 years, saving 50% = 17 years. I can agree because I recently calculated our savings rate at around 50% of "net" = 17 years and that's about dead on for when I project we'll hit "Financial Independence" at age 45, perhaps sooner.
It's hard to save monthly without seeing any returns. To look online at other people's posted budgets even and realize that people "take home" more than we do but also feel like they have nothing to show for it. I feel like we live a very frugal middle class lifestyle because our money is siphoned away into savings before I even see it. Yet I also know mentally truly "middle" class aren't able to save anything.
So no it doesn't get easier. To quote Dave Ramsey "you should be debt free in 7 years is Bull SHIT!" Saving 15% puts you on the path to retire in 40 years. You still have other expenses to save for. You are living like no one else because you are living with a safety net. But to be truly financially free takes a lot more time and sacrifice.
What keeps me moving forward even when it sucks? That I'd rather be where I am today in less debt than I was yesterday. Everyday and choice moves me closer to the goal and though it feels like I'm treading water, I'm still ahead than digging myself into more debt.
So have a little faith fellow LBYM. It's not easy and we often lack material goods or experiences. But would you rather be here or where you were 3 months ago?
Guess I'll start tracking some extra cash I seem to make doing focus groups. I am curious what I made this year. I just usually use the prepaid visa cards to pay for cable or cell phone bills online and not hassle with it. Otherwise it's on auto-pay. And I don't count rewards I only cash them in once a year.
6/23 $100 - 30 minutes
6/11 $150 - 120 minutes
5/1 $225 - 90 minutes
3/18 $150 - 60 minutes
3/13 $85 - 45 minutes
2/28 $175 - 60 minutes
1/27 $125 - 45 minutes
Total = $1010
It's a great hourly rate. Too bad it's so infrequent that it's just an occasional side hustle.
I never considered early retirement for DH and I. I still don't. I've always planned for 55 for DH to retire and I join him. I hate planning that far out because it seems weird to assume return rates and that we should have "millions" according to the savings calculators.
But rather I just have lived by the motto, save as much as you can, as early as you can, and see where life takes you.
So we've done that. I guess I should add I am soon to be 35 and DH will be 37 this year. Our financials are stable. But early retirement? We'll definitely hit it by 55. But any earlier? I'm not sure.
Let's assume we live on current budget of $60k/year. Right now that consists of half our mortgage and half our spending. At a Safe Withdrawal Rate (SWR) of 4% we'd need $1.5M. To be extra conservative for retiring early perhaps 3% WR would be better so we'd need $2M nest egg. This is of course assuming we have no Social Security draw. We could split the difference since FIRE Calculator says we'd have 0% chance of failing a 50 year retirement with $1.75M and a $60k/year spend rate. Also I'm assuming we get to spend all $60k on health insurance, health care, car replacement, home repairs, and we'd have no mortgage.
How long would it take us? Well using $475k retirement starting balance, assuming a $30k addition to retirement annually and a 6.5% return we'd have after 10 years $1.3M. We'd be $200-400k short of the nest egg I'd need to be comfortable. However if we looked at 15 years we'd hit $2M, the high end of our number
However that's not looking at our taxable accounts and assuming we're mortgage free. I find it hard to account for all variables because we haven't settled in a final home. We have no idea what our spending budget would be in a final home or how much we could really have saved outside of retirement. I mean our annual spending could go up by a lot over the next 5 years. It could also go down depending on where we live and what sort of house and lifestyle we live.
Just looking at the numbers I'm pretty confident we are securely on track to retire by 55, and possibly by 45 we could "retire" or at least be financially independent where a job loss wouldn't matter. Sometimes it's the knowledge that you could walk away and not worry financially is the best feeling.
Would we retire at 45? I don't think so. While I think we'll be set to FIRE, it doesn't account for the college expenses we'd be looking at after we FIRE. I think we probably need to wait until 50 because our nest egg would be enough solely in retirement accounts and I think our taxable accounts and cash flow at that time will be going to college. Of course I have no idea if our kids will want to go to college or get scholarships. I'm not even sure we're done having kids yet.
But I'll reevaluate every year. Of course the other factor is everything I budget off of now is based on living where we live. That I plan on changing sooner rather than later.
As I mentioned in our previous post something had to be done to leave where we currently are. And I think at 34 and 36 we are going to "Early Retire" and switch from "high cost/high pay" to something else. Our current savings will give us the freedom to move.
It was mentioned that we may not want to move away from an exciting HCOLA, but I honestly I don't think any of the locations we are considering are "boring". I actually think they fit us better than NYC-BOS-DC does. We're more nature, outdoors, relaxation people.
This weekend we biked and hiked with the kids and I wish we just had better location to do it in. I was worried the entire time biking about being hit by cars. I'd like to also be able to take the kids to hike more somewhere closer. Perhaps one day.
Is it worth it to live in a HCOLA? Does the income you can potentially earn outstrip the costs? Maybe.
But the truth is that there are more expenses than just a large mortgage although I'll get to that later.
I hadn't realized all the extra expenses but the small stuff all adds up. Our heating expense are $3k/year, $2500/year electricity, $4800/year for gas for cars. Small differences in price could give us financial freedom somewhere else. Saving on heating and electric bills or even gas could be diverted to paying for an individual health insurance plan.
But what really made me start looking at our financials and future plans was we decided to look at houses. We've been in our townhouse for 9 years now. Bought at the peak in 2005 and we've been happy. As I explained in an earlier post we never expected to stay here past 1 kid. Turns out we're still here with two.
But the truth is we started looking at homes this year. We decided why not make the jump, we've been prudent, paid down our home and increased income. Truthfully we can't afford it. Insane you say? I agree.
We looked at our monthly budget and decided okay we'll increase our payments a little, loosen the purse strings, and cash in some home equity. We bought our current townhouse for $575k and can sell it for $729k low end. With what we owe I estimate we'd have comfortably $300k in equity to put down on our next place or 20% and bank the rest.
Well we started our budget search at $750k. After looking around we realized no way in hell were we going to be able to buy a house. We upped it to $800k and started to finally see homes sort of. We looked a house 0.5 miles from us 3 bd/3ba 1500 sq ft on a 3400 sq ft lot listed at $749k went in a bidding war the first weekend with 10 offers, 3 over $800k and settling at $830k. Um no thank you bidding war.
Well that meant our budget needed to head to $900k to get into the market at an "entry" level home that might need work. So we stepped back.
Trust me as you read you're probably screaming move the f$*% out LAL! You're insane. But my DH I think wanted to cry because he loves his career, he wants to continue at it, but the reality of us living here is a tough pill to swallow. Yes DH loves his job, but even if I go back to work we'd be one job loss away from losing the house if we took on a huge mortgage. And honestly we'd be working for what? To make more money to spend it on housing and living expenses. I pointed out we are constantly chasing a lifestyle that people in lower COL already have. It was time to reevaluate the true financials.
Honestly I wasn't comfortable spending so much and getting so little. I didn't like the idea of DH or potentially me being a clown car commuter where he drove at least 1 hour or at "least" an hour on public transit. What's the point of having a family you don't see? Why should he get up and leave the houose at 7 before the kids do to come home by 6 and maybe see them 1 hour??? Why live so far way to afford a home? Then we'd be better off staying put. But do we want to raise our kids in a townhouse forever? Do we want to yard or indoor playspace?
These questions are what ultimately lead us to the hard decision that we need to move. That we need to reevaluate and restock our life. We need to consider working smarter. We've amassed a pretty sizable pot of money, perhaps it's time to maximize what we can do with it.
The next step? Early retirement...but not quite what you think.
I'll start by breaking down our pretty boring path down savings lane. High income helped and it did increase a lot, but we do live in a very expensive area with lots of expenses. That'll be another day, another post.
Income let me explain that in 2000 when we met I had landed a job paying $25k and DH started out in graduate school making $18k. Yes we were living in sunny Southern California being pretty poor. Trust me our "rent" for a one bedroom was $900/month. I moved to LA and lived in bachelor apartment, apartment without a real stove or fridge for $750/month. Basically 2 stovetops, a microwave, and a bar fridge. So you can imagine $40k in CA is not $40k in Texas. Definitely below what you seriously needed to live well, thank god we were young and healthy and had health insurance. And we had car loans and student loans. We were young and in love. However since 2004 I can look at our joint tax returns and see some of the story.
2000 - $20k maybe?
2001 - $43k
2002 - $43k
2003 - $35k - I started graduate school at $20k salary
2004 - $39,562 - OMG maybe we didn't break $40k those years before!
2005 - $147,728 - company paid relocation taxable income
2006 - $111,289 - company benefits added to taxable income
2007 - $92,417
2008 - $106,390
2009 - $112,790
2010 - $143,487, single income had DK1
2011 -$172,303 - $25k Rollover IRA to Roth conversion
2012 -$196,459 - $25k Rollover IRA to Roth conversion, added DK2
2013 - $200,524
So yeah our income has gone up a lot, 5x what we made when I have my first pdf tax return. We've maxed out since 2006 DH 401k and two IRAs.
As you can see below starting when the market was terrible in 2006 it was not hard to see balances going up but going down since we were saving more than it went up. But we stayed the course period.
Savings - Retirement, Cash
2005- $6500, $13762
2006- $34,782, $23,296
2007- $67,785, $18,680
2008- $74,245, $4,441 - started paying MBA cash, considering we were adding $25k to retirement a year not including company match and it went up $6k...ugh
2009- $117,055, $4,798 - also not really tracking our cash in EF/taxable accounts until 2012
2010- $196,398, $5,060
2011- $232,534, $3,968
2012 - $302,841, $90,924 - started tracking better
2013 January - $396,055, $74,496
2014 January - $439,650, $218,816
Have you changed our spending? Not really. But we did start really making steep savings. Our mortgage is another topic for another day.