Financial/life Wizardry - Debt/Mortgage Freedom, Life according to priorities, etc.

Any life-organization wizards on here? I know there are some high earners and probably good investors around here, but that's not what I'm asking about, necessarily. I've just been thinking a lot about our family's priorities, namely investing in the social fabric of which we are a part, our toddler son and immanently due tiny baby girl and the time we want to invest in them, the giving we would like to do, how we spend our work week time, and so on... and as I look at the balance of everything, I keep coming up against high health insurance costs and our high mortgage costs and it seems like "costs" and jobs are in the driver's seat.

We have always lived on less than we made despite being low-earners in humanities fields, i.e. driven crappy cars, have no consumer debt, etc., ... but admittedly we have lived pretty high on the hog as far as food and travel. The sad news flash is, it all turned out the same shade and we spent all that money in someone else's town and we have different priorities now. I am starting to look more at the Mr. Money Mustache way of life (google him if you aren't familiar, probably one of the few not kinda skeezy-seeming proponents of the FIRE movement). While shifting gears to earn six figures just isn't likely to happen, I have the sense there is a path to more freedom. I am still sounding it out.

Is anyone here doing life like this? Anyone mortgage free? Living on dramatically low expenses? What are your stories?

At the risk of derailing this discussion before it begins, my wife & I took a different tact.

Like your family, we try to live our priorities. When our daughter was young, that meant jobs that allowed us to all be home for dinner every night, regularly show up for religious and school events, and be around during the summers (my wife has been a school nurse since our kid was 6.) We kept our housing costs down by living in a condominium in a less-desirable neighborhood. Our money went to pay for private schools and save for college & retirement. Vacations were modest, as was the rest of our expenses.

We validated this strategy with our first financial planner about ten years ago. We had three goals at that time: Pay for our kid’s education, fund our retirement, and buy a new home. We learned we were on track to meet any two of those goals. Five years later things changed. Education was a done deal, and we had a windfall from a parent’s estate. Back to a planner, this time with just the two goals and a lot more resources.

Almost as soon as we’d put the final details on the new plan we took on a shiny new 30 year mortgage. Which has really left us with the one goal, funding the retirement we want. We’re well on track to do that, along with ongoing improvements to our lovely home, financial help to our daughter as she forges into adulthood, and realistically ambitious plans for a long active retirement.

I guess my message to you is that there’s no one way to do it. Know your goals and values, and be prepared to do the hard work to make real-world decisions. It’s great that you’re thinking about this. Too few people do.

You already doing it....”We have always lived on less than we made ”
Everything else is a priority - food, shelter, retirement/savings, education, entertainment....if you want more do less of one or make more money or time (time is harder so value what you have in terms of it with your kids)

The real secret - get a good paying job in STEM, with kick ass benefits (savings plan, cash/stock bonus)

Dave Ramsey's program gets high regards. The 'Baby Steps' are the foundation of his program:

1 - Have $1,000 saved in a starter emergency fund
2 - Pay off all debt (except mortgage) using the 'debt snowball'
3 - Save 3-6 months of expenses in a full emergency fund
4 - Invest 15% of income into retirement
5 - Save for kids college fund
6 - Pay off home early
7 - Build wealth and give

We (and several other couples I know) are on step 2. We've always put a good chunk of money towards retirement ever since we started work. One of my best friends and his wife followed the program. They had an 'easy start' getting out of college, but they also made good decisions, got pretty lucky in some ways, don't spend like crazy, and he has a job that pays really well. They had no student loans, they both lived at home for a year after college before they got married and saved most of their income, bought a nice house when the market bottomed out and paid it off completely (while having two kids at the same time) before they turned 30 (edit to add, they may have actually been 31). They sold the house for nearly 50% more than they paid for it a few months ago and moved into a 4000+sq.ft McMansion that cost over $600,000 (which is a lot of coin for a house in GA...my house is half that size and about 1/4 the cost) and they were able to put about 50% down on it. They're in a position now to do pretty much whatever they want...you know, within reason.

I spent most of my life with low income and lower expenses so I could do the things I wanted. I'm in a much better position now but still live well within my means. One of my biggest extravagances is that I can turn down overtime. The guys can never believe it, 24 hours at time and a half is no joke. But I don't need it and my body prefers sleeping at home.

At least 5 years ago I started using auto savings. I made several accounts for goals we wanted to save for and started auto saving into each account. After bills and necessities are paid for we split the leftover money. This has been great. I can buy bikes and she can buy camera gear and it doesn't affect the other. My wife changed jobs this year and while our day to day lives didn't change with the lower income our pocket money did. So I buy less junk and don't care.

Good luck, there are many different ways to get where you are going. You just need to find the right fit.

I don't want to play the role of some sort of authority here, because I'm not. But I suspect we're about the same age, so I'll just offer some thoughts from a fellow traveller.

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Originally Posted by zambenini

I've just been thinking a lot about our family's priorities, namely investing in the social fabric of which we are a part, our toddler son and immanently due tiny baby girl and the time we want to invest in them, the giving we would like to do, how we spend our work week time, and so on... and as I look at the balance of everything, I keep coming up against high health insurance costs and our high mortgage costs and it seems like "costs" and jobs are in the driver's seat.

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I've had a lot of the discussion you describe with my wife, and with a select group of friends.

I think the hard reality of life in your mid to late 30s is that not all visions of "social fabric" are compatible, or at least they involve tradeoffs. I can think of at least three ways of defining social fabric that imply a difference of practical values. First, social fabric might prioritize placing yourself and your family within a city or neighborhood where regular interaction with friends, neighbors, and strangers is a top priority. Or, perhaps second, you prioritize a social fabric of immediate and extended family, so that you're seeing your parents, siblings, and in-laws all the time. Or, third, maybe it means your nuclear family is important above all else, and spending time together as parents and kids in a comfortable space is the number one priority.

Perhaps once upon a time when most people were born, lived, and died in the same community, there wasn't a tension between these visions of social fabric. But today, for people who move for work and play and are similarly surrounded by mobile communities, there is tension: it is tough to balance a city or neighborhood community with both extended and nuclear families. And - I've gnashed my teeth about this a bit here - there are a lot of incentives for mobile professional folks to default to version 3 of community because it's relatively controllable and portable, even if it's not what we say we want out of life.

What you're dealing with is primarily a question of values, and only secondarily a question of resources. Once you sort out what exactly it is you value and what you're willing to let go, you can prioritize your resources around your values and you'll very likely have more than enough. Chances are, you already have more than enough, it's just that resources are disappearing for things that aren't contributing to your happiness. The good news is that those resources can be repurposed.

When you say you want to invest in the social fabric, what does that mean to you? What's your ideal social fabric?

• First, no non-deductible debt. Never pay interest on a depreciating asset. That’s an oxymoron, but you get the point. And lower your long-term debt outlook by paying a bit extra on your principal each month, even if it’s only a few dollars. Be on the right side of compounding interest.
• Save early, save often. Max out your retirement accounts. It’s not easy, but it is possible.
• Emergency cash or assets that can be liquidated in case of fiscal crisis. Several months worth of living expenses.
• Go through your monthly recurring expenses and see if they can be trimmed or eliminated. Cable? Can probably save $$$ with an online service that’s better anyway.
• Never leave money on the table WRT company matching for retirement or insurance.
• Retirement accounts should be in the lowest cost options you like for your goals. Eliminate expensive financial services, like high-fee mutual funds or advisors telling you stuff you can learn in five minutes online. Again, be on the right side of compounding interest.... You can almost certainly do it all yourself with a little reading. It ain’t as complex as those TV ads want you to think.
  
• Do as I say, not as I do, but I try to do most of these things and over time they’re beginning to pay off.

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Originally Posted by caleb

I don't want to play the role of some sort of authority here, because I'm not. But I suspect we're about the same age, so I'll just offer some thoughts from a fellow traveller.

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Let's go!

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Originally Posted by caleb

What you're dealing with is primarily a question of values, and only secondarily a question of resources. Once you sort out what exactly it is you value and what you're willing to let go, you can prioritize your resources around your values and you'll very likely have more than enough. Chances are, you already have more than enough, it's just that resources are disappearing for things that aren't contributing to your happiness. The good news is that those resources can be repurposed.

When you say you want to invest in the social fabric, what does that mean to you? What's your ideal social fabric?

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That's dead on... I'd say our priorities are pretty specific, what's not clear is what goals could/should look like in light of them, and then how to allocate the resources (time, too, not just the mammon).

The sentence I wrote about our priorities was accidentally vague, in that the social fabric I named had a specific content I was thinking of, namely a combination of the first and third possible outlooks you named (neighborhood and nuclear faimly). The second one, extended family, we value, but we're far away because we've done what all millennials do - move for college, move for job, move for grad school, move for real job - just like we were told to do by our antecedents. I thought I was raised one religion, but it turned out the cultural religion I was raised in was "workism," which has basically the life story arc with the moves that I mentioned. My parents didn't necessarily raise me this way, but accidentally fed the other religion in forcing the college hand (which, what well-meaning parent wouldn't want their kid to get the education they didn't have?). I was having coffee with our priest yesterday and we were lamenting the workism way of life, as it seems people were basically designed to know ~150 people, have a tightly knit core group of friends and family, learn to work beside family, and more or less make a home in a particular place and be from somewhere cf. modernity's completely schizophrenic and atomizing way. It does seem like being from everywhere and going where the work is is a way of life that's exhausting people and making them lonely.

Anyway, the social fabric I have in mind includes the third vision, the nuclear family like you mentioned, in that we want time to invest in our kids and parent them; didn't have them to farm them out, at least not til their backs are stronger ;), but I would also not want our family to be turned in on itself in any way. We aren't raising a nuclear family, so to speak, we are raising social, human adults we want to be part of a community - my boy will always be my boy, but I want him to be a friend, neighbor, and so forth. For us, it's basically people I went to grad school with, a bunch of people from our church, and then a buncha people in our neighborhood; we have a lot of multi-generational friendships with random people from over the years that are really life-giving.

Anyway, the guy I want to be is available to all of them. Our mortgage is our only debt. If we could get out from under that, the freedom to work less and be available to all of these social circles would be within reach. Childcare and healthcare costs in the face of parent work time allocation is the big dynamic that keeps that from happening. In a sense I have been able to be somewhat available to these spheres (could have used that time better I suppose), but not with much, if any, margin. In addition to full time childcare, I have two part time jobs. That has been underwritten by my wife working full time, though, and she hasn't been able to be available to our kids as much as me, nor to the rest of our community, which isn't fair to her. Anyway, I am rambling now, but figuring out how to carve a few thousand out of every budget category might help us work around the big structural factors and attain the freedom I'm talking about. Sounds pretty hard, though. :)

What are you guys doing to organize according to your values?

@dgaddis, congratulations and keep it up. Dave works for a lot of people. We kinda pick and choose which way to manage the flow of cash, but envelopes are the best way for groceries for us. DR really helped my parents get out from under consumer debt.

I had the insight recently that all the food/travel money we spent in our 8.5 years as DINKS was fun in the moment but the free art museums are really the only lifetime memories :) I got to thinking after we did a babymoon in a fun city a few months ago, why would I spend money in someone else's town, pay someone else for an Airbnb, and spend on restaurants I will forget, when if I had put that money into a vacation rental property I could earn cash from it, and then just stay in the cabin when I want to go away?

Anyway. Still curious how people are hacking life in order to live.

I am 63, and reevaluating.

We invested in our community, a small New England Hilltown: bought land and houses. Sold 275 acres of the former to the State Division of Fish and Wildlife, biologically important land to be protected permanently. The houses were rented affordably.

At this point I cannot continue in this direction. I am done. I wanted to do one more deal with the State, 150 acres I don't have to own and would like to see protected, but I can't get my wife to agree. The rentals were kept affordable by my labor, which was not compensated. One serious injury and this won't work at all, and I will be pretty unhappy thereafter.

So I am rethinking my future. I want it to be predictable to the extent it can be, spend more time with friends, travel by bike, volunteer or work for humanitarian relief organizations and live as simply as I am able. Get the kids out of school with no debt. Have a third chapter that resolves the prior two.

I did not have a plan, ever. Just knew what I did not want to do.

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Originally Posted by zambenini

What are you guys doing to organize according to your values?

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Here are the top three changes we've made in the last two years that have massively improved our quality of life. They may or may not work for you, but they've worked for us.

1) Automating our finances

It's good because it frees up time and emotional energy that we can put toward the things we value doing. It means we don't have to talk about money or think about money when we don't feel like it. Money just happens. It's mechanized.

It's good on a background level because it forces us to have a financial plan. If you're going to build an automated money machine, you need to know the inputs and outputs you want from it. Figuring out where everything is coming from and where it's going were important for us.

Making a money machine helped us create financial and emotional order.


2) Fixing our housing

Until about 18 months ago, we had one house in New York and one house in Minneapolis. We commuted 1300 miles.

We consolidated the work and households in Minneapolis, and bought a place where we're both < 3 miles from work with good access to bike and transit commuting infrastructure.

We bought a smaller house that meets our daily needs, but doesn't exceed them. Our housing expense (mortgage, property tax, and insurance) is equivalent to 12% of our gross income.

Making deliberate housing choices has clarified some of our values. We like to host people, and our house is great for dinner parties and the like. However, it's never going to comfortably host extended family and friends overnight. The solution is that there's a nice AirBnB less than a block away, and we're happy to rent more space when necessary. Also, we value community, but we don't really value fitting in. Most of our friends live in houses that are worth 2-4x what our house is worth. We initially thought that might be a weird dynamic, but it turns out that it's not at all. Being the people with the small, tidy house hasn't felt socially strange a bit, at least on our end.

The financial benefits of buying only the house you need are pretty clear, even putting the initial purchase price aside. Imagine that going from a 3600 square foot house to a 1200 square foot house saves you $5000/year in property taxes, and $2000/year in maintenance (I imagine these are pretty low numbers for making that move in Durham). Assuming that savings remains consistent for the sake of simplicity, if you take that $7,000 and invest it annually for 30 years in an S&P index that's likely to return about 6%, you end up with $553,407.30. Keep it up for another decade, and you're well into seven figure territory simply by reducing the carrying costs of your housing by foregoing some square feet that are often/usually unused. And we haven't even considered the savings on the initial purchase price.

Houses are an asset under the right circumstances, but they're also a liability.


3) Fixing our commutes

Once we fixed the housing situation, we were able to fix our commutes. I ride my bike, and my wife either bikes or takes transit using the pass her employer heavily subsidizes.

Since we don't drive regularly anymore, we sold one car. Many weeks the remaining car only gets driven on the weekend. It's pretty fully depreciated at this point, and I'll be surprised if we break $2k on insurance, maintenance, and gas this year.

Not sitting in a car to start and end every day is a win in every way - mentally, physically, emotionally, and spiritually. It allows us to breathe fresh air, see animals and the river and dogs, and be physically present in our community rather than teleported through it in a metal box.

As of 2013, the average annual cost of owning and operating a single sedan was about $9,000. So by going from two normal cars with normal driving habits ($18,000/year) to not driving an old grocery getter ($2000/year) we bank $16,000/yr. So invest that savings at the same 6% annually for 30 years and you end up with $1,264,930.98.


All three of the changes above are net "wins" for quality of life without even considering the financial part of it. None of them reduce our quality of life, so there's no tradeoff. Our experience has been that it's all upside, even before you get to the financial trajectory.

That's good stuff, Caleb.

1) We have about half our stuff automated: most bills, not all; all the 401K/matchy stuff, etc. I need to just sit down and do this. But, I have a friend who pays his mortgage on a commercial building in person every month. He said he wanted it to motivate him to get out from under it. I think he's free of it now.

2) Housing, yeah, that one's complicated. Made some compromises to afford our old neighborhood when we moved; as a result mortgage is about 25% of take-home pay (I know, I know); four of us now in 1500 sq-ft. Not bad on that front. There are other financial reasons I was willing for us to make the stretch - it was a good buy close to Duke and Duke Hospital, so it's a place I will always want to own, whether I live in it or not. They are finding every reason to subdivide lots in the neighborhood and build places going for half a mil which is a good sign. What it also underwrites is a lot of the lifestyle we value (neighborhood/townie life, lot of parks for our kids nearby), and it does facilitate number 3 for me.

3) 100% bike for necessaries for me, like work/errands; my wife unfortunately teaches at a school out on "private school row" where there are a million impatient parent SUVs. I ride there to drop stuff off for her sometimes, but only between 10AM and 1:30PM! Nevertheless, our crappy cars are paid for and one of them doesn't get driven except to the Home Depot or a MTB trail. It's a $4700 van I could probably do without, but then I couldn't go mountain biking whenever I wanted. :) Compromises. I saw a bike hanging up in a shop in Colorado Springs. It had a sign: "This bike is worth $100k," and the owner said he put away everything he would have spent on a car into his kids' college funds. If you were stringent about it, it would be hard to earn less than that if you were saving that stuff I guess.

I think one big hack is going to be restaurants for us. Need to not do that anymore. I won't share what we spent stimulating the service industry economy in the last year. Nevertheless, Pizza delivery is for millionaires. What I have done, though, is given up buying coffee at cafes except in extenuating circumstances. I also don't just buy beer at the supermarket any more unless it's Sierra Nevada Pale Ale on Sale at the price I really like. :( It's for the best.

You’re doing fine! You’re aware of the choices you’ve got to make, and approaching them thoughtfully and with balance.

Money Moustache is a fanatic. He’s not wrong about his math, but for him it’s become the End, not the means to an end. Too much according to my opinion.

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Originally Posted by zambenini

Nevertheless, [URL="https://www.mrmoneymustache.com/2019/11/18/pizza-delivery-is-for-millionaires/"]

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With most personal finance writers, it seems like they have one really good insight.

With Dave Ramsey, it's that debt will eat people alive, and it's worth taking drastic steps to get out of it.

With MMM, it's that houses, cars, and commutes are eating people alive, and by changing those "givens" we can have greater financial health without sacrificing happiness.

I think both of those can be life changing insights.

But, drilling down to the nitty gritty of little budget items, like pizza delivery (or house cleaning, or whatever), seems a bit more fraught. MMM is pretty against purchasing services across the board. I don't know that I agree, at least in every case. Sometimes it makes total sense to order pizza, or have Amazon deliver my groceries to my doorstep. For others, though, it might not. The small stuff seems pretty situational, rather than categorical.

To @davids 's point that MMM is a little off, I would tend to agree. The endless penny pinching seems a little ... off. I don't mean this about anyone in particular, but I didn't dig very far into the FIRE world before going, "Whoa, there are a lot of people around here who sure seem like they might fit a layperson's understanding of being on the spectrum." At the very least, it seems a bit odd that someone would have millions in the bank, give hundreds of thousands away, and yet spend a large chunk of their life writing and/or podcasting about not spending money.

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Originally Posted by davids

You’re doing fine! You’re aware of the choices you’ve got to make, and approaching them thoughtfully and with balance.

Money Moustache is a fanatic. He’s not wrong about his math, but for him it’s become the End, not the means to an end. Too much according to my opinion.

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I agree in principal, esp. re the fire movement writ large. I want my life to be about a community... Minimalism, too, sounds fun for a season but I want to have people over for supper.

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Originally Posted by zambenini

I agree in principal, esp. re the fire movement writ large. I want my life to be about a community... Minimalism, too, sounds fun for a season but I want to have people over for supper.

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Ha! That resonates with me. We went through several rounds of shedding stuff before and after we moved. For about a year I felt pretty self-righteous about living with so much less. Then I began to notice all our new stuff... honestly it’s made both me and my wife more conscious about our acquisitions, and we do have less stuff than before. But we ain’t living any kind of minimalist life!

I love your focus on community. I finally have a home where we can host our friends and families comfortably, and it brings us joy to welcome the people we love into our home. I didn’t get there until I was 55.

I think the best thing we've done financially is move from the big city to our mid-sized one because it has allowed us to make more decisions. That became my priority after getting married and having a child: have fewer decisions made for me by others or circumstances beyond my control. Saving money on housing, saving sanity/liver with workplace flexibility from a lower overall cost of living and being in the proximity of in-laws who help with childcare have been the main ways we've benefitted.

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Originally Posted by davids

I love your focus on community. I finally have a home where we can host our friends and families comfortably, and it brings us joy to welcome the people we love into our home. I didn’t get there until I was 55.

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I've downsized a lot and frankly I do not care if I can have accomodation for friends and family. If my family wants to visit me there is always an airbnb available close to my place and frankly this is much more convenient than sharing the bathrooms, or being wake up because your relative leave bed earlier than you. During my last bike ride I came across a family spending the afternoon in the middle of nowhere. They had just set up tables in a field near a river, a 15 minutes drive from their home. Anyone can also do that in any public park in the middle of the city really as long as people clean their shit from the place. When I moved to spain and discovered my appartment ( I chose it remotely from pictures ), it felt tiny compared to the one I sold in Switzerland. Now I don't feel it that way, I just got used to it. There is a lot of shit I sold or gave away before moving and a lot of them I didn't even care to replace. Like I don't have a microwave, an old 32" computer monitor serve as a TV, a bottle of wine serve as a rolling pin when I need one, I didn't even bought back an hi-fi stereo because frankly this is useless when you have noisy kids. I now own probably around 40% of the things I used to own a year ago but I don't feel like I miss anything. I sold my car in Switzerland and don't plan to buy one unless we need it for work but me and my partner will always focus on small commute that we can do with a bicycle or short public transports.

Also living in a warm climate does a lot for downsizing because you tend to spend most of your time outside with friends. Kids don't need much toys either when they are outside most of their time. We have a nintendo switch at home and frankly our daughters use it much less nowadays. We used to put "time quotas" so they don't spend too much time in front of a screen, we don't need to anymore. They are just outside.

Also I don't replace anything for vanity anymore ? My computer is old ? well it works. My TV is small ? We will discuse a bigger screen only if that one will die. We are in a society that tries to replace needs** by wants**. Were our parents less happy with less things. That doesn't mean you can't have none of them but replacing something that is still working well This is a no go for me, also from an environmental perspective.

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Originally Posted by marley

”We have always lived on less than we made ”

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This reminds me of one of my favorite quotes from the rock'n'roll canon, attributed to Rolling Stones' guitarist Keith Richards:

"People assume that just because you make a million dollars a year you're a millionaire. But what if you spend more than a million dollars a year?"

you can have minimalism and community, just find a community that appreciates your minimalist ways, or accustom them to your minimalist ways.

and as to the bit about havign a million, donating a bunch, and writing about not spending money. it makes perfect sense. sounds like me (though i do spend a bit of excess at times)
its not "spending" if you are saving or investing (charity is investment). "spending" does not leave one with anything tangible or valuabale at the end. spending is the little stuff, the luxuries, the upgrades, the nights out, the cleaning service, the carwash. these things we spend money on that are not necessity but luxury and comfort. spending.

so people who minimize this type of spending and maximize the other 2... they are maximizing potential.

other tidbits that may or may not help: avoid debt, ill go contrary and also say pay your mortgage faster if you can (Im very debt averse, i dont like the idea of not actually owning my house, so i do bi monthly payments now which saves on interest), save or invest as much as you can and make it a monthly habit, save for your car and pay cash, then drive it less, find hobbies which dont cost money to participate in (like not skiing or golfing, these are expensive).

I am older than most here.
I have always been in small business ( now retired ) and I have never liked debt.

That's all.