Mr. LL and I have been regularly tracking spending for about 9 months using a simple Excel spreadsheet into which we enter all our receipts and debits for the month. We have a master category of lists (from gym and mobile phones to toiletries and sewage capacity charge) that we itemize along with one total that doesn’t include our mortgage, and a grand total that includes it. That way we get the actual amount of money that we are spending each month, along with the total amount of spending that is adjustable based on various small decisions that we make. We can also see what specific categories that we can spend less on. It has been really inspiring to see how much we can cut in a variety of areas to add up to big changes.
When the stock market started to dip after a long period of highs, I asked my husband if we wanted to buy more stocks with our “extra” money (extra service contracts, money saved from housekeeping and hair-cutting, etc.). To which he said, “What, you want to try to time the market?”
Our strategy has just been to do dollar cost averaging through identical automatic investments every month in a variety of different funds. It’s worked out well for us thus far, although we do occasionally make large purchases (from tax returns or bonuses) into our existing stock and bond funds. When we have extra money to invest, it makes sense to spread it out and maintain a diversified portfolio – stocks, bonds, REITs, international, domestic, etc.
I recently did a quick reallocation of my retirement funds. When I first opened my 403(b), I opted for a 2040 target retirement fund (although obviously I am planning on retiring earlier than that). The Fidelity fund had a .79% expense ratio, which is really quite high. I was really paying a pretty steep fee for the automatic reallocation of my assets, when I could just do it myself quite easily.
I went ahead and re-balanced my retirement funds so that I have 80% in a total stock market index fund with a .10% expense ratio and 20% in a total bond market index fund with a .45% expense ratio. I have the option to invest in a less expensive bond fund, but I would have to pay a transaction fee since it is not a Fidelity fund, and I am not sure how much I would save overall by doing that. I’ll have to re-balance periodically in the future, depending on how the market goes, but it was really quite painless to do it the first time, so I’ll keep an eye on it and reallocate when I need to.
I wish I had the same option to re-balance my teacher retirement fund, but the pickings are slim for low expense ratio funds, and my current retirement fund expense ratio is relatively low compared to what my 403(b) target retirement fund was.
As Mr. LL and my respective mothers ask us about early retirement.
“Well, what do YOU do?” we are tempted to respond to our respective mothers, one of whom is retired and the other of whom is a stay-at-home-mom. If Mr. LL and I have kids, and are able to retire, we’ll do stay-at-home-parent stuff, and if we don’t have kids and are retired, we’ll do retirement stuff. However, this is a bit of a glib answer and we don’t respond in this way. But it is also hard to exactly describe what early retirement might look like.
We want to do even more outdoor recreation – camping, hiking, backpacking, biking, kayaking, snowshoeing, exploring state and national parks – whatever strikes our fancy. And we want to do it off-peak, so that we aren’t always competing with the weekend rush to the mountain. I am interested in doing even more baking and cooking and culinary experimenting, as well as more sewing, knitting, and gardening. I want to learn more Spanish and Japanese, and get better at playing the flute. I want to learn how to make furniture. I want to be able to draw and do oil paint portraits. I want to try new jobs and volunteer without worrying about career gaps or lack of experience.
Maybe I want to do these things and stay in my current job. Or go half-time in my current job. I want to always have goals that I am striving toward. I want to develop expertise in something. I want to spend a lot of time with my family.
When I was a teenager and young adult, I didn’t think I wanted kids, despite having always liked them and enjoyed being with them. I ended up becoming an elementary school teacher and have found things to like about every age I’ve taught from preschool to ninth grade. When I got married, I thought that I would want kids for sure, but in some nebulous future. Future-me would want them even if present-me didn’t have any desire for them. Maybe in 4-5 years or so.
Well, it’s the future and I am still on the fence. Love my nieces, but also love to give them back. Love my students, but also love to go home. Love my free time and my time with my husband. People say it’s different if it’s yours, priorities change, etc.
Maybe there are people out there who wanted kids and regret having them, but human psychology militates against this happening frequently or pervasively. Alternatively, maybe there are people who never wanted kids and don’t regret not having them.
And maybe people who are on the fence like me fall on both sides.
Although Mr. LL and I are all frugal now, money isn’t what keeps us from making the leap into totally wanting kids NINE MONTHS FROM NOW. Maybe in a year or two. (Which is pretty much what we’ve been saying for about 6 years now.) I’ve taught in both Title I schools and private schools. There are delightful, happy, and well-adjusted kids everywhere, regardless of socioeconomic status. I believe that children cost as much as you are willing to spend on them. It’ll cost some amount more than we currently spend, but we will have to decide when the time comes just how much that amount is.
I think human nature being what it is, in the future I will probably not regret having kids if I have them, but will probably regret not having them. This is just for me, someone who is ambivalent about having kids, but with my ambivalence a little closer to the having kids side.
Answer: For the better.
At the beginning of our more extreme frugality, I thought that the most difficult things to give up would be 1) housekeeping and 2) dining out. But given how much we save by not having a cleaning service, I can’t see ever justifying the cost again. And interestingly, whenever Mr. LL and I clean, I don’t even hate it anymore. I start my music, bust out my supplies, and get to it. Like any habit, it just becomes routine. It’s like the opposite of the hedonic treadmill.
This has also held true for dining out. We now only go out for social occasions, like pub trivia or post-hike burgers. When it’s just the two of us, we’ll splurge on some steaks that we pan-sear and eat with some of my homemade sourdough bread. In fact, I have done a lot more cooking and baking since we stopped dining out, and it is incredibly satisfying. Shaping boules by hand, cultivating starters, growing basil and making pesto, making yogurt, etc. It feels really…wholesome. There is something powerful about making something with your own hands. I have started dabbling with knitting and sewing, and I get the same satisfaction out of it.
Frugality has made me more mindful of what I value in life – time with my loved ones, cultivating relationships, learning new things, being engaged in useful and/or interesting occupation, a sense of community, and physical and mental health and fitness. I have probably always been a frugal person simply by default, since I have never liked shopping for anything except books.
Now, I often approach a purchase (or potential elimination of an expense) with some questions in the back of my mind, “Will this improve my quality of life? Can I justify this based on the things that I value? Is there a better value? (If applicable: Am I willing to save money by spending more time on an alternative to this?)”
For example, I am willing to forgo the convenience of buying books or having a Blockbuster Online subscription, and being able to read or watch DVDs whenever I want in exchange for checking out the books and DVDs from the library for free, even if it means that I have to wait a long time. There are plenty of interesting things to read, watch, and do in the meantime. However, I like having a smartphone, which I pay about $27/month for 300 minutes and (theoretically) unlimited data, and texting. I can text, call, and email people from wherever I go (in my service area, anyway). I can look something up on the go, or check the bus schedule or store hours, or deposit checks, or put library books on hold. If I could get all these things for less (including a new smartphone), I would do it. However, if I lose these things, I’d have to be able to save a lot.
The decisions I make may be different next month or next year based on my changing perspective, values, and experiences. But it is important to me to be able to make the best decisions that I can so that I don’t act contrary to my values or short-change my present self for future benefits – in other words, weigh short- and long-term considerations in a way that makes the best sense both intellectually and emotionally.
I could probably also title this post “What I value about where I live.” We bought our first and only house in May 2008, probably at the height of the Seattle housing bubble, before early retirement was a potential future in our minds. But even after a refi in 2011, we still spend about 40% of our total expenses on mortgage interest and real estate taxes.
If we sold our house, we would definitely take a loss, since even with the recovering housing market, our house isn’t worth what we paid for it (still pretty far off, actually). We have considered moving somewhere cheaper within the Seattle area, and have considered metros/states other than Seattle, but haven’t looked very hard, honestly.
What I love about my house/neighborhood/city:
1. My house is within walking or easy biking distance (2 miles or less, but hilly) from:
- two public libraries (most important!)
- major grocery stores (Safeway, Fred Meyer, Trader Joe’s)
- fancy special grocery stores (PCC) and farmer’s markets
- community center
- Lake Union, Green Lake, Lake Washington Ship Canal
- numerous gyms, a few yoga/pilates and martial arts studios, a couple of Crossfit boxes
- good public schools
- hospital, clinics, pharmacies
- restaurants, pubs, cafes, dessert stores, banks, interesting retail stores
2. My neighborhood is close to downtown and its surrounding neighborhoods, with theaters, museums, music venues, ethnic markets, etc, Also close to Puget Sound and a variety of other interesting and unique neighborhoods.
3. Mr. LL can bike to work, and we are in a particular neighborhood that makes my 18.5 mile commute as fast and sometimes faster than my old 6 mile commute. There is plenty of public transportation (like to the airport via the light rail). Though I wouldn’t want to do it for my commute, as that would triple to quadruple my current commute time in my car.
4. As an Asian American, and seeing as how my kids would be interracial if I had them, I like not being a rarity (particularly having lived in places where this was the case). As an ESL teacher and language nerd, I like how many immigrants and speakers of other languages live here. I also like that Seattle is a welcoming place for LGBT folks, and that we have marriage equality in Washington. I love that there are so many kinds of people here, because it also means there are so many more options and interesting things to do and learn about. And if you are not so left-leaning in terms of your politics (a majority in Seattle), there are others like you here, too.
5. Seattle’s outdoor recreation culture is thriving. We have 3 ski resorts that are relatively close, along with many state parks, a few national parks, and lots of hiking opportunities. The REI flagship store is here! Lots of people bike, row, run, and take advantage of outdoor activities.
It would be hard for me to leave my house in my neighborhood in Seattle and go to some other neighborhood in Seattle, and I wouldn’t save as much money as if we left Seattle for a place with a lower cost of living, like Spokane. That would be even harder! We could retire earlier, though, if we could reduce our housing expenses and thereby increase our savings rate. The question, I suppose, is how many more years are we willing to work in order to be able to stay in our house in early retirement? We’re not sure, but we’re mulling it over.