I've been reading a lot of these forums in recent months and I think I'm ready to share my story here
A coworker gave me the book Your Money or Your Life when I was in my late 20s. I would say I halfway took it to heart. I listened enough to not get myself deep into debt (or any debt really) but I didn't listen well enough to throw my heart into saving. Now here I stand at age 44, divorced for the past 2 years, with 2 girls to raise, ages 6 and 9. I currently have about 125K in savings with another $153K in 401k savings. My mother was a product of the great depression and for a long time I thought she had a money tree hidden away somewhere. I have since figured out that she was just very, very good at saving. But her investment strategy was always CDs. This served our family well when interest rates were high. I have always followed her model but recently I've begun to look at all that money just sitting there in a money market account, waiting for better CD rates. In the past few weeks I've made two promises to myself: first that I will become more aggressive about cutting down expenses and, second, that I will become more informed about better ways to invest this money.
For the first promise, I have begun looking ruthlessly at my expenses. Percentage-wise, my top 3 are Food, Housing and Child expenses. For March, they broke down thusly:
Food $785
Housing $1049
Kids $1457
My food bill is usually closer to $1000. Paleo is the only diet I've found that keeps me and my kids consistently healthy. I have been trying to cut down on the meat though. I personally can't tolerate any grains anymore but I do feed them in moderation to my kids. I'm going to start making more of an effort to cook more things like lentils and other beans from scratch as we all tolerate them just fine.
Housing includes rent and utilities. I chose the area where I am mostly for the kids' school (my eldest is special needs and this area has a public school with appropriate services for her so this rent is cheaper than paying for private school). Plus I am close enough to bike to work which keeps my transportation costs down)
The area which obviously has a lot of room to save is on my kids. $700 of that for March was childcare which at the moment is non-negotiable (I can't get just anyone to watch my eldest!) but would obviously go away if I could achieve ERE. The rest of it is mostly their activities with a good chunk of that being payments for summer activities. We live in an area where kids are involved in so many activities and only by going through this exercise of writing this have I realized how mindlessly I have bought in to that. Starting in the fall I'm going to limit them to 1 main activity and begin to supplement that with free stuff.
My other March expenses were
Misc $271 (already looking at each of these to see how they can be reduced)
Transportation $107 (includes monthly savings for insurance, already making a commitment to bike more)
In March I got 3 paychecks but upped my savings rate and still managed to save 18% of my gross. This includes 15% 401k savings, maxing out my HSA savings account and saving some of my net pay. I hope to see this number increase over time as I hone in on different expenses that can be reduced or eliminated.
As to my second promise to myself - to become more knowledgeable about what to do with my savings - I am trying to do some reading on dividend investing. I understand a lot of the terminology of investing but I don't consider myself anything but a novice right now. If anyone can recommend some good reading material I certainly would be appreciative of that. I will say that I have a very low tolerance for risk which is why my money is just sitting there at the moment. I am trying to get over this hurdle by educating myself better on the various options.
It's taken me a while to get up the gumption to post on here. At first I thought what's the point of posting all my numbers for the world to see?! Then I realized that there is tremendous value both in compiling all those numbers and also in knowing that other people will see them. Just the process of looking over my numbers caused me more than once to smack my head and say duh! I used to think that I couldn't be FI until after my kids were grown. But I'm slowly starting to see that it may be possible earlier than that and that makes me very excited to try to make it happen sooner.
graciouslady's journal
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RealPerson
- Posts: 875
- Joined: Thu Nov 22, 2012 4:33 pm
Welcome to the forum GL! I admire your courage to start your journal.
I can totally relate to the social pressure to have your kids signed up for all the activities. You can spend so much money, and the pressure from peers and neighbors is very intense. We went along with that for too long. It is an area where you can achieve tremendous savings. We have been cutting back on kids activities when I realized at some point that my kids were my biggest expense after taxes. That is no longer the case. If we could do it, so can you. Nowhere is it written that parents have to sign their kids up for summer camps etc. at the tune of thousands of dollars. They also are not entitled to an iPhone with pricy contract or a car. It begins with the realization of what is going on, followed by a conscious decision to change course. The rest is easy. Best of luck.
I can totally relate to the social pressure to have your kids signed up for all the activities. You can spend so much money, and the pressure from peers and neighbors is very intense. We went along with that for too long. It is an area where you can achieve tremendous savings. We have been cutting back on kids activities when I realized at some point that my kids were my biggest expense after taxes. That is no longer the case. If we could do it, so can you. Nowhere is it written that parents have to sign their kids up for summer camps etc. at the tune of thousands of dollars. They also are not entitled to an iPhone with pricy contract or a car. It begins with the realization of what is going on, followed by a conscious decision to change course. The rest is easy. Best of luck.
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George the original one
- Posts: 5406
- Joined: Wed Jul 28, 2010 3:28 am
- Location: Wettest corner of Orygun
> I will say that I have a very low tolerance for
> risk which is why my money is just sitting there
> at the moment.
With investing, when people speak of low tolerance for risk, they usually are referring to having their portfolio balance go down. And yet what they're really looking for from their portfolio is an income, but don't measure what the income is (except from capital gains/losses) or how consistent it is (regardless of the capital gains/losses). So shifting the focus to income, away from capital gains, usually helps.
If you also feel that you're gambling by investing in stocks, then learn more about gambling. There are a lot of parallels between paramutual betting (horse races) and picking stocks, so I like to recommend reading Commonsense Betting and its companion Commonsense Handicapping, both by Dick Mitchell.
> risk which is why my money is just sitting there
> at the moment.
With investing, when people speak of low tolerance for risk, they usually are referring to having their portfolio balance go down. And yet what they're really looking for from their portfolio is an income, but don't measure what the income is (except from capital gains/losses) or how consistent it is (regardless of the capital gains/losses). So shifting the focus to income, away from capital gains, usually helps.
If you also feel that you're gambling by investing in stocks, then learn more about gambling. There are a lot of parallels between paramutual betting (horse races) and picking stocks, so I like to recommend reading Commonsense Betting and its companion Commonsense Handicapping, both by Dick Mitchell.
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graciouslady
- Posts: 11
- Joined: Tue Apr 09, 2013 9:08 pm
@RealPerson - you are so right! If I have my way, my kids won't have a phone until they are teenagers with a job!
@George - not sure about equating gambling with investing. I do appreciate your observation though that it's more about the dividends than value of the stock. I'll have to think more on that and see if it helps relive some of my anxiety.
@Dragline - glad to see I'm not the only paleo family that spends a lot on kids.
On a good note, I just dashed off an email cancelling one kid's activities that she always complains about going to. We both feel so much better with that off our backs!
@George - not sure about equating gambling with investing. I do appreciate your observation though that it's more about the dividends than value of the stock. I'll have to think more on that and see if it helps relive some of my anxiety.
@Dragline - glad to see I'm not the only paleo family that spends a lot on kids.
On a good note, I just dashed off an email cancelling one kid's activities that she always complains about going to. We both feel so much better with that off our backs!
Thanks for sharing your story! I really liked this blog series on investing that starts at http://jlcollinsnh.com/2012/04/15/stock ... -save-you/
It's kind-of a long series but the actual advice is simple. You can get more complicated if you want later, but it seems like a good place to start. (And I'm trying not to get more complicated, actually.)
It's kind-of a long series but the actual advice is simple. You can get more complicated if you want later, but it seems like a good place to start. (And I'm trying not to get more complicated, actually.)
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graciouslady
- Posts: 11
- Joined: Tue Apr 09, 2013 9:08 pm
I had several exciting (for me anyway!) accomplishments this month. The first was that I committed to riding my bike to work as much as possible. Last month I drove a total of 871 miles which is about average for me between going to work and driving the 60 mile or so round trip to visit relatives two or three times a month. This month we did not make that trip at all plus I rode my bike to work almost every day. I drove a whopping grand total of 39 miles! And I managed to get in 133 miles on the bike.
I have been going back and forth on the issue of getting rid of the car. It's nice to have it for trips but it is so very tempting to disregard the overall cost and just hop in it for visits to relatives or the store or whatever. I am still undecided. It is a 6 year old car with zero maintenance issues right now. I have actually thought about finding somewhere to park it that would be far enough away to make it really inconvenient to use it for quick trips but available when I really need it.
My other big accomplishment was upping my gross savings rate from 18% to 25% this month. One change I made in my spending habits was to go back to an all cash system for groceries. I have done this in the past with stellar results. Then I talk myself in to going back to the credit card in order to earn cashback which I usually end up spending on books. It's really not worth it in the long run though because I am far more likely to forgo unnecessary purchases in the grocery store if it involves forking over that cold hard cash.
I have also been working very hard this month to educate myself about investment options for savings. I have decided to go with a dividend growth strategy and have already begun building my portfolio. I have a little over 157K in retirement accounts that I will be investing this way. I also have 86K in non-retirement accounts. I've already moved almost 11K into some dividend stocks. A little less than 20K of it is currently in CDs (one of which was a 5 year 5% that matures in October). I plan to move all this money into dividend stocks as the CDs mature. I was also in a position this month to make a loan to my folks for 56K for a house they are building. We made it a 5 year loand and they will be paying 4% interest. I am exploring the possibility of doing some hard money lending to a friend of mine but I approach that situation with much trepidation as there is so much that could go wrong!
It is so energizing to become educated about investment possibilities and then take action on them. It is hard for me to forecast an ERE timeline at the moment but it is quite easy to focus on the details of gross savings rate and how to steadily improve it. It is inspiring to look at my combined savings (both pre and post retirement) and see that, at a 4% return rate, it would generate $9741/year. Although I'm still 14 years away from age 59, it is really nice to see that total number!
I have been going back and forth on the issue of getting rid of the car. It's nice to have it for trips but it is so very tempting to disregard the overall cost and just hop in it for visits to relatives or the store or whatever. I am still undecided. It is a 6 year old car with zero maintenance issues right now. I have actually thought about finding somewhere to park it that would be far enough away to make it really inconvenient to use it for quick trips but available when I really need it.
My other big accomplishment was upping my gross savings rate from 18% to 25% this month. One change I made in my spending habits was to go back to an all cash system for groceries. I have done this in the past with stellar results. Then I talk myself in to going back to the credit card in order to earn cashback which I usually end up spending on books. It's really not worth it in the long run though because I am far more likely to forgo unnecessary purchases in the grocery store if it involves forking over that cold hard cash.
I have also been working very hard this month to educate myself about investment options for savings. I have decided to go with a dividend growth strategy and have already begun building my portfolio. I have a little over 157K in retirement accounts that I will be investing this way. I also have 86K in non-retirement accounts. I've already moved almost 11K into some dividend stocks. A little less than 20K of it is currently in CDs (one of which was a 5 year 5% that matures in October). I plan to move all this money into dividend stocks as the CDs mature. I was also in a position this month to make a loan to my folks for 56K for a house they are building. We made it a 5 year loand and they will be paying 4% interest. I am exploring the possibility of doing some hard money lending to a friend of mine but I approach that situation with much trepidation as there is so much that could go wrong!
It is so energizing to become educated about investment possibilities and then take action on them. It is hard for me to forecast an ERE timeline at the moment but it is quite easy to focus on the details of gross savings rate and how to steadily improve it. It is inspiring to look at my combined savings (both pre and post retirement) and see that, at a 4% return rate, it would generate $9741/year. Although I'm still 14 years away from age 59, it is really nice to see that total number!
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graciouslady
- Posts: 11
- Joined: Tue Apr 09, 2013 9:08 pm
This month I saved 27% of my gross income which is the best I've done in a two-paycheck month (I get paid every 2 weeks). My spending was 48% of gross which is also the best I've done in a two-paycheck month.
One of the major improvements I made was bringing food costs down. My daily food cost per person in May was $8.07. Last month it was $10.86 so I am definitely making progress.
Another noteworthy achievement for me this month was not filling up my gas tank at all (I last filled it towards the end of April). I drove a total of 95 miles (way down from my usual 600-800) and biked a whopping 264 miles! I also picked up a used trailer that I've been using for grocery trips.
On the accumulation side of things, I have been rolling over almost all my IRA money into dividend stocks. The learning process on that adventure has been quite fun. I have over $90K of it so far and still have over $25K to go. It will be very exciting to enter the phase of watching the dividends roll in!
Where I sit right now, my the dividend stocks in my retirement funds would generate somewhere in the neighborhood of $6K/year while the non-retirement funds (which include some dividend stocks but mostly several real estate loans) would generate just under $5K/year. Seeing as I'm still 15 years away from being able to touch the retirement income, I still have a ways to go on saving!
One article I read this month was from Mr. Money Mustache on the power of constant optimization (http://www.mrmoneymustache.com/2013/05/ ... ustache%29). One of his tips was to list your top 10 expenses and see what can be optimized. I did this for May and it just so happened that one of the expenses was a check for property taxes on some land I own. The way I do my accounting is to transfer over money every paycheck to a separate savings account for this, so I don't normally see it as a big expense until the annual check comes up. Seeing this forced me to do some thinking about why I was holding on to it and whether I really needed to. In the end I decided that I need to sell it and put the money to work in other areas. If/when that happens, that will add $80-$90K to my coffers which will put me that much closer to my goals.
More and more I realize that achieving retirement (early, extreme or otherwise) is a process on both ends of the spectrum. I have to pay just as much attention to reducing expenses as I do to increasing income-generating capital. Finally I am beginning to understand the power of the charts in the Your Money or Your Life book - once you see those lines start to veer in the direction of each other, it fuels the desire to keep them on that trend!
One of the major improvements I made was bringing food costs down. My daily food cost per person in May was $8.07. Last month it was $10.86 so I am definitely making progress.
Another noteworthy achievement for me this month was not filling up my gas tank at all (I last filled it towards the end of April). I drove a total of 95 miles (way down from my usual 600-800) and biked a whopping 264 miles! I also picked up a used trailer that I've been using for grocery trips.
On the accumulation side of things, I have been rolling over almost all my IRA money into dividend stocks. The learning process on that adventure has been quite fun. I have over $90K of it so far and still have over $25K to go. It will be very exciting to enter the phase of watching the dividends roll in!
Where I sit right now, my the dividend stocks in my retirement funds would generate somewhere in the neighborhood of $6K/year while the non-retirement funds (which include some dividend stocks but mostly several real estate loans) would generate just under $5K/year. Seeing as I'm still 15 years away from being able to touch the retirement income, I still have a ways to go on saving!
One article I read this month was from Mr. Money Mustache on the power of constant optimization (http://www.mrmoneymustache.com/2013/05/ ... ustache%29). One of his tips was to list your top 10 expenses and see what can be optimized. I did this for May and it just so happened that one of the expenses was a check for property taxes on some land I own. The way I do my accounting is to transfer over money every paycheck to a separate savings account for this, so I don't normally see it as a big expense until the annual check comes up. Seeing this forced me to do some thinking about why I was holding on to it and whether I really needed to. In the end I decided that I need to sell it and put the money to work in other areas. If/when that happens, that will add $80-$90K to my coffers which will put me that much closer to my goals.
More and more I realize that achieving retirement (early, extreme or otherwise) is a process on both ends of the spectrum. I have to pay just as much attention to reducing expenses as I do to increasing income-generating capital. Finally I am beginning to understand the power of the charts in the Your Money or Your Life book - once you see those lines start to veer in the direction of each other, it fuels the desire to keep them on that trend!
No, you are not alone. We are Paleoish of late and it is expensive especially when trying to fuel two adolescent swimmers.
Riding your bike that much is no joke. Good for you!
You mentioned the spectrum of capital/spending. I think less spending is the Golden ticket. When reduced, it makes the capital appear quicker and be less needed.
Not a whole lot of peeps here deal with children but I think those who do automatically are more reserved and/or conservative with their plans.
Riding your bike that much is no joke. Good for you!
You mentioned the spectrum of capital/spending. I think less spending is the Golden ticket. When reduced, it makes the capital appear quicker and be less needed.
Not a whole lot of peeps here deal with children but I think those who do automatically are more reserved and/or conservative with their plans.
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graciouslady
- Posts: 11
- Joined: Tue Apr 09, 2013 9:08 pm
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graciouslady
- Posts: 11
- Joined: Tue Apr 09, 2013 9:08 pm
Re: graciouslady's journal
I woke up this morning thinking that I need to go update my journal over on that ERE site! I have no idea why that thought occurred to me, seeing as I haven't updated, much less really thought about this post since June of last year! But seeing as it's on my mind now, I thought I'd check in and chart my progress.
Almost 18 months ago I was proud of myself for saving 27% of my gross income. Last month I saved 38% of my gross income.
When I wrote my first post here almost 2 years ago, my annual expenses were budgeted at $48,600. Right now my annual budgeted expenses are sitting at $33,550 and I am on a mission to reduce that to $25K in 2015. What's changed? An entire mindset! I got rid of a high-priced cell phone and went with the Republic Wireless $10/month plan. I started turning off lights and putting on sweaters. I opened the windows in the summer. I found a new place with cheaper rent. I took a long hard look at the activities my 2 girls are involved in and cut those down to the ones they really enjoy. I cut out the professional piano lessons for my youngest that were running $1000/year and now I sit down with her at the piano every week and draw on all the years of lessons that my mother gave me. I started packing lunches for school. I found a different, much cheaper afterschool childcare option. I stopped driving so much and started riding my bike. I spent many Saturday mornings this past summer hitting garage sales and buying kids' clothes for pennies on the dollar.
All those things saved me money that I turned around and invested. But more importantly, they put me in a different frame of mind. Previously I was assuming that I had another decade of hard work to get me to retirement. Now I look at it differently. Now I see that I can reduce my expenses and also reduce the number of hours I work each week. I'll still be working but somehow the difference between 40 and 30 hours a week is incredibly mind-freeing. I'm less stressed and my kids are happier for it.
I've shared my story with several people at work. Mostly I get the "are you crazy?!" type of reaction but two of them have taken it to heart. One is a young man just out of college who is eagerly plotting his own retirement now. The other is a woman my age in similar circumstances. She was previously drowning $45K of debt and all the associated stress that brings. She is now charting to have that paid off in less than 12 months and physically looks like she has a whole new lease on life.
I'm very grateful to have discovered this website and for all the people who have contributed their own stories to it. I know I could not have gotten where I am today with the inspiration!
Almost 18 months ago I was proud of myself for saving 27% of my gross income. Last month I saved 38% of my gross income.
When I wrote my first post here almost 2 years ago, my annual expenses were budgeted at $48,600. Right now my annual budgeted expenses are sitting at $33,550 and I am on a mission to reduce that to $25K in 2015. What's changed? An entire mindset! I got rid of a high-priced cell phone and went with the Republic Wireless $10/month plan. I started turning off lights and putting on sweaters. I opened the windows in the summer. I found a new place with cheaper rent. I took a long hard look at the activities my 2 girls are involved in and cut those down to the ones they really enjoy. I cut out the professional piano lessons for my youngest that were running $1000/year and now I sit down with her at the piano every week and draw on all the years of lessons that my mother gave me. I started packing lunches for school. I found a different, much cheaper afterschool childcare option. I stopped driving so much and started riding my bike. I spent many Saturday mornings this past summer hitting garage sales and buying kids' clothes for pennies on the dollar.
All those things saved me money that I turned around and invested. But more importantly, they put me in a different frame of mind. Previously I was assuming that I had another decade of hard work to get me to retirement. Now I look at it differently. Now I see that I can reduce my expenses and also reduce the number of hours I work each week. I'll still be working but somehow the difference between 40 and 30 hours a week is incredibly mind-freeing. I'm less stressed and my kids are happier for it.
I've shared my story with several people at work. Mostly I get the "are you crazy?!" type of reaction but two of them have taken it to heart. One is a young man just out of college who is eagerly plotting his own retirement now. The other is a woman my age in similar circumstances. She was previously drowning $45K of debt and all the associated stress that brings. She is now charting to have that paid off in less than 12 months and physically looks like she has a whole new lease on life.
I'm very grateful to have discovered this website and for all the people who have contributed their own stories to it. I know I could not have gotten where I am today with the inspiration!