by Michele | Apr 12, 2013 | Preparation Stage
Sure it can eat through mud and snow…and your wallet.
Now that we’ve taken care of most of our “big-ticket” items to improve our savings, Dan and I are trying to tackle the smaller ways that we can find extra dollars in our budget. Not only is this important for increasing our savings to maximum levels but it also is helping to prepare us for living more frugally while cruising. If we want to have any kind of decent chance at living on $1000-$1500 a month than we have to get serious about knowing where each of our dollars goes and how to cut that down as much as possible.
The tracking part is made much easier by the online financial website that we use: Mint.com. We have all of our bank accounts, credit cards, loans, and investment accounts tied in so they automatically update whenever you long in. We’ve used this program for a few years and we’re pretty happy with it, though it can be a lengthy process to set everything up and figure out what budgets you want to set for yourself. Once you have been using it for a couple of months, it can really help to show you where your money is going every month. For some time now, it has been giving us a pretty clear indication that we have been spending too much in the Food and Gas departments, so we’ve finally decided to get those under control.
Food was first and it was somewhat daunting to me to be honest. Not to play the martyr working mom bit, but it is really hard to provide home cooked meals during a working week. There’s just not enough time to be able to figure out what to make every day and go pick things up from the store so I had to find a different approach. A couple of weeks ago I mentioned that we have purchased a subscription to 5meals1hour.com for five dollars a month. Well, we’ve completed the first months’ worth of recipes and I can honestly say that we are way ahead of where we were last month, but I can’t give all the credit to the menus. We only used about 1/3 of the recipes on the menus, but we have still been eating at home on average of 5 days a week, which is a huge deal for us. I think just the change in mindset about grocery shopping every two weeks for actual planned meals has been the biggest positive change that 5dinners1hour has made for us. We can still improve a lot in this area, especially because I’m not a very experienced grocery shopper yet so I think we’re paying too much for our groceries, but we’re seeing a definite change in attitude and habits.
Gas spending is our other cash hog. Like a lot of people we know, it’s just something that we haven’t taken seriously before. But looking at our accounts, we have spent almost $1300 in gas alone since February 1! That’s averaging $18.50 per day, yikes! Here are a few strategies we are implementing to help us cut down this silent killer.
- Drive less…obviously. Eating meals at home isn’t just saving us money in the food department, it means less driving too.
- Walk and Ride Bikes, and not just for leisure riding. Dan has started riding his bike to work most days and we are planning to use our bikes for trips to the grocery store, library, and other close to home errands.
- Get rid of the gas guzzler in the driveway. We’re still working on this one, but the goal is to eliminate one of our 15 mpg SUV’s for a 30+ mpg compact car. Even if we have to spend some money over the sale of our Jeep, we should get most of it back in the end when we sell it in a year. This one has the potential to save us in the realm of $250/month!
Hopefully, we’ll find some good success using these strategies and find others to help us keep our everyday spending in check. If you have any suggestions, let us know in the comments!
by Michele | Apr 4, 2013 | Preparation Stage
To start off a month of posts about finances, Dan and I need to make sure that everyone knows our baseline. We come from average middle-class families who have good jobs and provided well for their children in the sense that most middle class parents do: clothes, food, housing, low budget car in high school, etc. Dan’s parents paid for his college education, mine did not, but we still left school with only around $4,000 in student debt and no real savings to speak of. We got jobs after college that made cumulatively $70,000 and bought our first house (a foreclosure in Dan’s parents’ neighborhood) on the $8,000 new home-buyer credit in 2009 for $110,000 (for those of you who don’t live in Central Illinois, money goes a long way in our house market compared to other areas). Then we proceeded to buy a couple of new and almost-new cars with car loans for somewhere in the vicinity of $40,000 total. In 2011, we both got raises and now make a total of around $95,000. (You may note a conspicuous lack of credit card debt. That’s because we’ve never had any. Thanks mom and dad for teaching us that credit cards are good for only one thing…free rewards!)
So, we when started our retirement planning in 2011, it looked something like this:
Income: $95,000/year or ~$5,500/mth after taxes, 401k, and health insurance deductions
House: $150,000 value, $50,000 equity, $1200/mth mortgage, property taxes, and house insurance
Cars: $40,000 value, $0 equity, $900/mth car loans and insurance
Other Debt: $5,000 student loan debt, $50/mth payment
Other Spending (food, clothing, entertainment, etc.): $2000/mth
Savings: Income ($5,500) – Spending ($4,150) = $1,350/mth Savings (though in reality it was usually closer to $1,000/mth that would make it into the savings account)
As you can see, $1,000 a month into a savings account was pretty nice savings compared to most people, but $12,000/year was going to take a long time to turn into enough money to live on the interest and buy a boat, especially because we were starting with around $5,000 in the bank and whatever assumed equity we had in our house. So we needed to save more money and find some better investments that we could use to live on. As you can see above, we were spending a whopping 40% of our after-tax income on our house and cars. In America, banks will tell you that is perfectly affordable and it was…if we wanted to “afford” a 9-5 job for the next 30 years.
Here is what we have done in the last year and a half to improve on our savings rate and investment income:
- Sell our over-priced luxury vehicles and buy two dependable used cars with cash. This saves us money on payments and insurance, since now we only carry liability insurance. Cost: $5,000. Savings: $800/mth
- Eliminate student debt. The payment wasn’t high, but we didn’t want to have that liability while cruising. Savings: $50/mth
- Sell our house and buy a smaller one which will become a rental or get sold when we leave. Savings: $800/mth and $25,000 in cash (after down-payment and repairs on new house)
- Purchase 2 rental homes using cash from house sale. Cost: $18,000. Net Income: $700/mth.
- Moved $6,000 from savings account into Vanguard 80/20 investment account. Anticipated income: ~$30/mth
- Adjusting spending habits (still in progress). Savings: $500/mth
Current Cash on Hand: ~$22,000 New Rate of Savings: $3,000-$3,500/mth
Saving money is always a work in progress, which we will go into a little more later this month. Our goal is to purchase 2 more rental houses by the end of this year to solidify approximately $1,000/mth in net profit after expenses and vacancies. Then, we are off to the races to save somewhere in the $50,000-$75,000 range with which to purchase our new floating home. It will be a challenge, but I think we’re up for it!
by Michele | Mar 21, 2013 | Preparation Stage
Each one of those is about 21 seconds of cruising. Start counting!
I am a sucker for new beginnings. New Year’s, birthdays, and even Mondays can generally make me feel like this time is going to be different. True, I’m usually right back to my normal routine by Wednesday, but there’s always next week, right? My most recent enthusiasm for new beginnings has been brought about by finally moving into our new house this last weekend. I mean, I love Dan’s parents for sure and am super grateful that they’ve welcomed us into their home for the last 2 months, but there’s just something about having your own space.
We’re hoping that with a new house will come some new habits and a new budget to go along with them. We’ve developed some habits in the last few years that are hard to break and hard on the pocket book, namely eating out almost every day and constantly being out running around for entertainment. You wouldn’t think that the running around part would be that big of a deal, but with $3.50/gal gas prices mingled with the propensity to buy random stuff we don’t need when we’re walking the mall for fun and then the added likelihood of eating out if we’re already out of the house, and maybe you can see how kicking that habit could add almost $1000/month to our cruising kitty.
So how do we plan to change our bad habit? Well, first we have to start by wanting to be at home and therefore having plenty of entertainment for ourselves, sans television preferably. If the only thing we have to do at home is chores, then we don’t exactly want to spend a lot of time there. That means games, books, and possibly a new garden in a nice spot in the backyard. Also, our new neighborhood has sidewalks (yay!) and is fairly close to a couple of different parks, so walks and bike rides are definitely in our future – assuming of course that the future is warmer than today. Thirty degrees in March is precisely why winter is on its way out of my vocabulary.
I’ve also found a new meal planning subscription that we are trying out called 5 dinners 1 hour. One of my biggest problems with cooking at home is planning what we are going to have before I want to make it to ensure that we actually have the food on hand. No one (in our family at least) wants to go grocery shopping after work and then still come home and make dinner. 5 dinners 1 hour is a subscription service that provides 5 dinner recipes a week with a full grocery list and advanced preparation instructions to have all five of your entrees ready to go in an hour over the weekend. Then all I have to do is heat it up and whip up a side dish during the week. There are even 3 separate menu types to choose from: classic, clean eating, and gluten free (we chose clean eating) so you can find the right plan for your family. We just started this week, so I’ll try to post an update in a couple of weeks on how we like using it.
Do you have any suggestions for us to try? Games or great books to read? A recipe that your family loves? Leave a comment and let us know!
We are normal (well ok, not so normal) people that have a dream to see the world and live life as it was meant to be. We both have successful careers in the healthcare industry, even in this terrible economy. We want to break free of the current cycle of trading time for dollars and dollars for more and more things we don't need. So, we have decided to forego the fruits of our economic success and "retire" well before we are 30 and set out to see what is over the Horizon.