My sisters are visiting us over thanksgiving.
How long are they staying with us?
Can they sleep on the floor?
Earlier this week, we documented our $72 K savings goal for next year. Our plan is to max our retirement accounts early, then hit our taxable accounts. We’ll be on a tight budget, but we feel equipped for it.
Then just the other day, I came across Mustard Seed Money‘s post on the average American’s top 10 financial goals based on a recent NerdWallet study. The NerdWallet study found that most people (71% of those surveyed, across income levels, age and gender) regret how they have managed their money. 89% have one or more of the following financial goals (in bold below). Taking the cue from the list, I wanted to check how they stack up for us (and how we’ve dealt with them).
The goals (% of Americans saving for the goal) and our position:
Saving for a wedding (8%)
We never did. We married in court, for $35 – a college friend and two sisters-in-law witnessed and signed. They paid for a dinner at Johnny Carino. I even worked a half day before we married. My mother pestered me for a year – for a “real” wedding. A few folks called, messaged and sent us money. They now get a yearly card from us. One uncle (whose story needs telling) sent us $500 Canadian, just about his weeks’ pay. We intend to give it back when his daughter marries, with whatever the money gains and compounds in the time.
A $35 wedding is perhaps the best way to filter the people you should have in your life. The rest can be an afterthought, for when you’re feeling particularly kind.
An average American wedding in 2014 was $31,213. This insanity is universal – an Indian Colleague spent $60,000 when he married two years back. The Chinese are also going berserk, as the BBC points out here, here and here. A Sudanese man was about 20 cows behind on payments for his wedding.
Saving to have children (8%)
We do not have any children. We all have our own reasons for why we want or not want children – a beyond belief episode explored this issue a few months back. That said, one of our motivations for pursuing FI is so that we can adopt two children later. FI will allow us to dedicate ourselves to them, and to our other noble pursuits.
Starting a Business (10%)
Does a rental property count? We want to invest in a rental property when the Denver market cools down. The numbers do not work in our favor at the moment.
Buying a Home (23%)
We bought our first home this year. We put 25% down and went slightly over our initial budget. It is just the right size and structure for us. The neighborhood’s not bad either.
Buying/Leasing a Car (27%)
Our beloved Honda Fit has given us so much and asked for so little. We’ve traversed much of the country (baring the northwest), criss-crossing it twice (DC to SF, and back) and even venturing into Canada once. The beloved has averaged about 10k miles a year, and currently sits on 70k. She should continue running for a long time. We use public transportation for our daily commute.
Starting/increasing retirement contributions (28%) & Saving more in general (53%)
The generally recommended 10% – 15% savings will give you a retirement when you’re 65. Retiring earlier requires a more aggressive approach. Dave Ramsey’s investment calculator can help you determine how your savings will grow based on what you intend to save.
We live on one income and save the other. That, if the market remains steady, should allow us to be FI in ten years. We are not frugal, but we live within our means.
We have not maxed our retirement accounts so far, but we intend to next year.
Saving for Vacation (31%)
Vacations are great, and we’re looking to do that to perpetuity after we reach our FI. For now, we’ve allocated 2% of our gross pay towards our recreational expenses that includes eating out, movies, vacation and the likes. We have a few trips planned for next year – and those will have to stay within the allocated fund.
While the 2% seems low (and it is), we actually travel quite a bit. We feel we’re better traveled than most people we know.
Not accumulating any/more debt (42%) & Paying down debt (58%)
We live within our means. We do need an emergency stash, which we intend to build up next year. We carry two credit cards, but pay them off almost immediately. So I’m not sure if we’re using our credit cards the right way.
We have a thirty-year mortgage, but we intend to pay it off in twenty. Refinancing to a fifteen year is an option we want to explore next year.
For all the rest, I’d create a budget. The money map is a fun exercise to trim away the fat.
Living ordinarily is key – we certainly do not feel we miss out on anything. Learning to love where we are in life and what we have, if those do not come naturally to you, is critical to a happy life.
Would you do this if you had a million dollars?, asked my wife as she came home from work this morning.
Yes I would, I tell her.
How about ten million?
Yes, I would.
I’m going to sleep now, you incorrigible boy.
But this, the official money map chain gang, is a wonderful exercise. Thank you Apathy Ends and Budget on a Stick. And thank you Good Life. Better for pointing me to PowerPoint – at last some good use.
So here’s mine – the money map – someday to be worth something.
And following the customary tradition that is now 34 links strong –
The Official Money Map Chain Gang:
Anchors: Apathy Ends, Budget on a Stick
#1: The Luxe Strategist
#2: Adventure Rich
#5: The Frugal Gene
#6: Working Optional
#7: Our Financial Path
#8: Atypical Life
#9: Eccentric Rich Uncle
#10: Cantankerous Life
#11: The Retirement Manifesto
#12: Debts to Riches
#14: Money Metagame
#16: I Dream of FIRE
#17: Stupid Debt
#18: Spills Spot
#19: Making Your Money Matter
#20: Life Zemplified
#21: Trail to FI
#22: The Lady in the Black
#23: Smile & Conquer
#24: Her Money Moves
#25: Full Time Finance
#26: Abandoned Cubicle
#27: Freedom is Groovy
#28: Millennial Money Diaries
#29: All About Balance
#30: A Journey to FI
#31: Present Value Finance
#33: Good Life. Better.
A surge of articles on “middle class” hit my Feedly yesterday. I grew up in a middle class family, without quite knowing what it was. My father made sure I had everything I needed – but that was probably because I didn’t ask for much. I remember asking my Economics teacher back in high school what it meant to be middle class. What I actually wanted was a number – that threshold where you left middle class and entered upper class or upper middle class at least.
Being of any particular class, of course, has nothing to do with being happy. My parents are certainly happier today, in their restricted budget, than they were when they were working and had disposable money. The happiest being in the world is a monk. But to the rest of us, the average beings, the true utility of belonging to any class is completely comparative (and irrelevant).
<Caption: I like them a lot – how quickly flippant, you say>
In reality, we are town home dwellers living among single family ones that cost a half million and more. I don’t feel particularly middle class when my long serving Honda Fit parks next to any of the other cars in the neighborhood. My neighbors include a retired teacher and a registered nurse who is also a single mother of two excitable boys.
I think we’re mixing middle class with middle income. And perhaps why the Pew Research cites “upper income tier” (not middle class) on the article about determining if you’re middle class.
One of my heroes is Ronald Read. For as much as is known about him, I find him refreshing and philosophic in infinite melancholic ways – more on that on later posts.
The middle class, the Pew Research Center posits, is the spectrum between 2/3 of the median HH income and twice the HH median. Using the median annual household income in the U.S. which was $56,516 in 2015, the middle class spectrum for the year was $37,677 to $113,032.
Anything higher, which I suspect is the bracket most FI seekers fall under, would place you in the “upper income tier”.
Your working salary, though, is short lived and temperamental to the market, the self, and a whole host of external forces. Just about the only way FI works is if our salaries are reinforced with the way we live, our outlook and an honest goal. How long we sustain these determine whether or not we succeed.
There are a few practical things we’ve done (but previously shared by a hundred others). Before I list, please note: We are not hippies. We lean both left and right, to choose the best of all worlds, usually for the best of more than just us.
First off, marry well. Choose wisely – a frugal, employable spouse. My wife and I live on one income. We married in court for $12. I took a half day off. While we’re still not maximizing our 401k, we are saving over 50% of our gross pay – significantly higher than the national savings rate that, depending on the source, hovers anywhere from 5% to 15%.
We don’t do Whole foods, and Trader Joes is awesome.
Choose a degree that pays. If that’s done and not done well, choose a job that pays. I’ve worked with people from all educational background and attainment. If you don’t have the degree, get the experience.
I’d like to say Never Settle. But I’ve sort of settled into a semi-stress free job, where I dream of someday working for Google without the fear of loosing the job.
Save and invest, wisely. For us, the less sophisticated majority and somewhat young, the most potent vehicle are time (start early, start young), maximizing all available tax-advantaged retirement plans, than some more. Our portolio is here, if you’re keen.
Where you live will greatly impact your savings. Our housing expense quadrupled after we moved to CO (from KY). Magnify Money lists ten top places to live for six figure households. Cities in Tennessee loom large (I once interviewed for a small company in Chattanooga – but didn’t get the job). Avoid the usual suspects (SF, DC, Honolulu, and Boston that make the converse list) – especially if you’re flipping burgers – I’ve never understand why as is evidenced by this and this).
Find alternate sources of income, best if completely passive. I’m trying my luck with this site, but there’s a lot to learn.
In gist: Status is irrelevant, avoid the coasts, save and invest, find passive means, never settle, get that degree (and job), marry well and be humble (in reverse order) – those, my friend, should make you FI.
*The title is adopted from this Pew Research article that is a more thorough write up on the middle class.