Eric and I have decided that we BOTH want to be able to retire – and soon. Within the next ten years soon. All thanks to the inspiration this husband-wife team has given us.
You all are probably thinking “WHAT?! How could anyone retire before age 65 in this economy?”
The Answer is to Keep Your Money
It’s that simple – and that difficult. By keeping half our income and not giving it away on frivolous spending, we can realize a TON of goals:
- pay off our debts
- build an emergency fund (we already have one)
- put our money to work making more money for us
Change the Way You Think About Spending
For me, this was the hardest part – I don’t like to go shopping (crowds just suck and online shopping doesn’t do it for me either), but I do like to be able to spend money. I wanted to really dig down and figure this out. When I look hard enough, there was something about having the money I didn’t always have as a kid, and being able to buy things I don’t need, that provided a sense of security. Once I figured out the specific reason I like to spend, if got a bit easier for me to work with and figure out how to keep your money. I’ll talk a little bit about this later so I can stay in sequence.
Did you all notice that phrase? “Keep Your Money” is a mantra that is always playing in my head now and you will see a lot of it in this article.
What is spending? It is the exchange of currency, services, or goods for services or goods. Period. Spending should never be an emotional experience!
I did a little research. Did you know that advertising is often a bigger budget line item than payroll? Why do we pay big bucks for an item that is really just mobile advertisement for them? I’m talking about those T-shirts with the big logos and the purses with the logo as a pattern (you know who I’m talking about Abercrombie / Louis Vuitton / Coach / Nike / Guess / Victoria’s Secret “Pink” / etc). Once I realized that all those fancy ads we see everywhere were jacking up the prices and stealing money from us, I started to really look behind those ads and scrutinize the company. I don’t want to support a company that thinks it’s ok to tell us “do what I say, not as I do”. This, of course, means more research for me, but hey, I don’t have a job, so I must have plenty of time on my hands, right?
Change Your Spending Habits
Now that we have changed how we think about spending, what it actually is, why it is necessary, and why it’s not, we took a good hard look at our current spending. In order to succeed, we are going to have to start making some pretty major changes in our spending habits.
The first, but maybe not so obvious, thing was for us to scrutinize EVERY SINGLE TRANSACTION. The question no longer became “Do I really need this?”, but “I need something to fulfill _x_ purpose. Imagine I can’t get it and have to make do with something else. Do I already have something that would do in a pinch?”. The answer has usually been “Yes – now go use that instead and KEEP YOUR MONEY.”.
The best part about this is that when you stop to think about EVERY transaction, you don’t need a budget!
Correct Past Spending Mistakes
This is the part where you will actually get to see some immediate effect.
- If you don’t use it, why do you have it?
- For us, the big one was cable television. We honest-to-goddess used it 6 whole times last year. Savings of $1,096.56/year.
- We also took a hard look at our family cell phone plan. Potential savings of $100.00/year.
- Leaner & Meaner Insurance Plans. You compare rates every year, right? Yeah, us too – now!
- Health Care Insurance. One interesting one was us dropping our vision plan. We both have issues that require we go to eye specialists – which means health insurance covers it, not vision. Our vision prescription has been steady the last 5 years, so we only need disposable contacts. The out-of-pocket cost for contacts for the both of us was less than the co-pay and allowance they give us. Savings of $142.00/year.
- Vehicle Insurance. My old truck still had the same insurance it’s had since it was new and I hadn’t updated any of my ‘discounts’ (verified mileage, anti-theft, good driver, etc). Savings of $661.00/year (and we still have one more vehicle to go!!).
- Home Insurance. We have a solid emergency fund so we might be considering a higher deductible plan. Potential savings of 400.00/year.
- High Interest Loans (we used this model: either balance greater than $10,000 or over 5 years to go)
- Consider Refinancing. Lots of loans out there at 3-4%. If yours is higher than this, why are you giving your money away???
- If you can make it, why are you buying it?
- Restaurants. We now get to ‘treat’ ourselves to one date night per week at $40.00 and one other meal at $10.00, for a total savings of 60.00/week.
Put Your Money to Work
Turns out, investing is almost exactly like spending – you give money to a company and they give you something in return (a share of the company). The even better part? That little piece of the company you now own will actually make you money so you can go out and spend more money for it to make you more money… What an AWESOME endless loop that is going to be!!
Telling Your Friends and Family
This new lifestyle means some adjustments for our friends and extended families too. Two things we think they would have the hardest time with is losing the cable and gifting.
Apparently, lots of our friends and family think it’s the norm to watch TV while they socialize with us. I don’t understand it myself – if there is a screen on, my eyes are glued to it and I completely zone out, negating the socializing atmosphere of having folks over. I have to admit, I’m secretly glad we won’t have the game on when we have folks at our place anymore – it’s so hard to focus on our friends when the ‘hypnosis machine’ is playing in the background!
Gifting this first year will be interesting as we haven’t really tied down what it will look like yet. I’ve always been one of those “I saw it and thought of you” gifters. Problem is, I have that impulse many times over the course of the year so I have quite a stash of various gifts to give folks eventually (some people are easier to find gifts for, others have every new gadget times ten). Our new frugal-ous (frugal + fabulous) lifestyle does not have a place for store-bought gifts, especially for adults. This makes sense: children are just starting out; they don’t have a lot of stuff and need some things (shoes, education bonds, etc) but they have an abundance of free time. As you get older, you accumulate more stuff and need less of it but time becomes more precious. We are looking forward to spending more time with the adults of our social units while giving the kiddos a [home-made] leg up here and there.