Category: Money Management

We’re working towards financial freedom. How we save, invest, and spend is a big part of that. Read about what we do to save more, invest better, and spend wisely in alignment with our values (family, travel, and FI).

Will We Spend Less in Retirement?

About nine years ago, when Mr. ThreeYear and I began to wise up about our finances, we visited a financial planner and filled out a detailed survey. We didn’t have many assets to speak of, at the time, since we’d just gotten out of debt, but if the dude had been wise, he would have nurtured the relationship with us because he could have had very good future clients. He was not and we now manage our own investments, a scenario I am more than happy with. 

Even so, it was interesting to hear his predictions that we’d need about 80% of our income at retirement. Where did that number come from? In the years that followed, as I filled out online retirement calculators, I heard the figure repeated. 

Then, I began to learn more about the 4% rule, the oft-cited retirement rule-of-thumb (based on the Trinity Study) that cites evidence that if you withdraw 4% of your portfolio per year in retirement, adjusted annually for inflation, then your portfolio should easily last you 30 years (or more). Another way to look at the rule, popularized by the incontrovertible Mr. Money Mustache, is that you’ll need 25 times your annual spending invested in order to retire. This rule assumes that you’ll keep your spending relatively level in retirement, that is, you’ll spend a similar amount in retirement as you do now.  

Continue reading “Will We Spend Less in Retirement?”

Our Worst Money Moves

In Monday’s post, I shared the things Mr. ThreeYear and I have done that I consider our best money moves. They were the habits or disciplines we adopted that have served us the best over our fifteen years of marriage. BUT, we’ve also made our share of bone-headed money moves, and today, you get to hear all about our very worst money moves of the past fifteen years. 

Have you ever made a really dumb money move? Here's a list of some financial decisions we wish we could go back and redo! @lauriethreeyear #financialindependence #worstmoneymoves #budgeting #cars #debt

Buying Expensive Cars to Repair

When I was pregnant with Junior ThreeYear, we had two cars–a Jeep Cherokee Mr. ThreeYear bought after we moved to the States (used, because with two exceptions, we’ve only bought used cars) and an Acura Integra. This was the car my parents gave me, brand new, because I got a scholarship to college. It was a two-door coupe, standard, leather seats and CD player (rare at the time). It was such a good car. But we thought that because I was pregnant, we needed to get rid of the Acura and get a bigger car for the baby. So we went car shopping, and found a used BMW X5. I remember being transfixed because it had built-in shades that you could pull down in the back. 

Our neighbor, who had just traded in his Audi, warned us that foreign  luxury cars were expensive to repair, but we brushed him off.

Related Reading: What Our Cars Really Cost

Instead of trading cars with Mr. ThreeYear, I sold the paid-for, gas-sipping Acura and bought this BMW for about $16,000 (financed). For the first few years, the car needed a few repairs, but nothing too terrible. BUT, three years in, just when we moved to New Hampshire, it started to fall apart. 

Junior ThreeYear and I were on the interstate when all of a sudden, the car just slowed down. It wouldn’t respond to the gas. I managed to pull over on the side of the road before it completely died. We had it towed, and luckily, it wasn’t the engine, but it was something else that cost $1,000. Meanwhile it had stranded a pregnant me and my not-yet-three-year-old son on the side of the interstate!

We only had two mechanics in town, and the honest one didn’t work on BMWs, so we had to take it to the shady one (who was later incarcerated for dealing meth. Lovely guy). Long story short, the BMW cost us around $7,000 to repair that year before we wised up and traded it in. 

Continue reading “Our Worst Money Moves”

Our Best Money Moves

Mr. ThreeYear and I will have been married for fifteen years this May. During that time we have done a lot with our money, good and bad. Today, I’ve detailed our best money moves in our decade and a half together, and on Wednesday, I’ll share our worst money moves. 

We've made both good, and bad, money moves in our fifteen years of marriage. Here's a list of our smartest financial moves to date. @lauriethreeyear #fi #smartfinancialmoves #personalfinance

Contributing to Retirement from the Beginning

Even though Mr. ThreeYear and I didn’t max out our retirement accounts from the beginning, we did contribute to them. 

While I don’t remember the exact percentage that we contributed in the early days of our first jobs in the US (in Chile, I contributed a certain portion of my income to retirement because there it’s mandated by law), I believe it was enough to get the full company match (for him) and a few hundred dollars a month (for me). 

Related Reading: The Boon of Investing Early

We continued contributing to the accounts in 2008, until we adopted Dave Ramsey’s method of paying off debt. We stopped contributing to retirement for 18 months while we paid off our $38,000 in debt. Once we paid our debt off in late 2009, we began to again contribute to retirement accounts again. When we moved to New Hampshire, we again took a short break while we saved up a house downpayment, since we sold our Atlanta home at a loss in 2010. Finally, when we moved into our New Hampshire house in 2012, we started maxing out Mr. ThreeYear’s 401k (because I wasn’t working), and then started contributing heavily to my 401k once I started working. 

Maxing out our 401ks is the single best financial move we’ve made, in my opinion. We’ve lowered our taxes, increased our yearly investments, and decreased our spending (because that money is no longer available to spend), all in one fell swoop. I tell friends and family members who don’t know where to “start” on their personal finance journey to start there. In my opinion, for someone who has spending issues, it’s even more important than paying off debt, because of the effects of compound interest and time (plus it forces them to spend less). 

Maxing out our 401ks means that when this guy graduates high school, we’ll retire. 
Continue reading “Our Best Money Moves”

5 Money Moves We’re Making Before the End of the Year

It’s still hard to believe that almost another entire year has passed. As I was looking through my posts, I saw one I’d written last year about this time, and I thought it would be great to share again. 

Our family's money moves to close out this year and get ready for next! @lauriethreeyear #personalfinance #familymoney #cfomom

The funny thing is, our money moves this year are almost exactly the same as last year’s. We’re creatures of habit, for sure! 

The biggest difference between this year’s end-of-the-year money moves and last year’s is that last December, we paid off all non-mortgage debt so this year, we have nothing to pay off. It feels amazing, and has felt amazing since we did it last December. We feel so much more in control of our finances this year, in large part because we keep more of our money and are able to save and invest more. 

I’d love to hear your end-of-the-year money moves! Let me know in the comments!

While we’re still over a month-and-a-half from the end of the year, we know that soon, December 31st will be upon us, so the ThreeYears are currently working on end-of-the-year money moves to make sure our finances are in good shape.

Here’s what we’re doing to close this year out:

1. Contribute as much as possible to my i401k

Since I’m self-employed, I have an i401k (if you’re interested in the particulars of opening one, read this post). I am playing catch-up with my contributions since we had so many cash goals that we funded with my income this year. So, in the final quarter of the year, and in the first quarter of next year (or at least until we file our taxes), I’ll be contributing a lot to my 401K. Even though the market is high now, I don’t want to miss the tax contributions of these contributions. I estimate we’ll save several thousand dollars on our taxes if I reach my contribution goal for the year.

2. Fulfill our outstanding financial obligations

We’ve got a few outstanding financial obligations, including completing our yearly pledge with our church. We usually wait and pay the majority of our pledge in the fourth quarter of the year, when our cash flow’s better (as a teacher, I don’t get paid in the summer and it takes a month or so after school starts to begin getting paid, so our income rises in October, November, and December).

I also have to pay my fourth quarter taxes for income earned from September through December. I have until January 16th, 2018, to file the taxes, but I’ll probably go ahead and pay what I estimate I’ll owe before the end of the year. I set aside 20% of my income as it comes in, in my business account, so that money is ready to send in anytime I decide to pay the bill. Continue reading “5 Money Moves We’re Making Before the End of the Year”

November Net Worth Update

Wow! It’s almost December, which means we’ve got just one month left of this year. This year has definitely been an eventful one for our family.

November Net Worth Update www.thethreeyearexperiment.com

This month has been a good one. We’ve been surprised by how cold it’s gotten in Charlotte during the fall (it’s been in the 20s this week in the mornings, but it does warm up to the mid 50s or 60s during the day). The boys both seem to have gotten into a groove at school, I’m running now with a running group, and Mr. ThreeYear has been regularly playing tennis.

Last night, we went to our town’s downtown Christmas celebration via trolley! We parked in a parking lot at the edge of our neighborhood and the cutest little trolley picked us up. The boys actually got to ride standing up in the back of the trolley as we cruised the four miles downtown.

Once we got downtown, there were carriage rides, vendors, a Christmas tree display, bands playing, and Santa Claus. The boys and my niece, who was with us, had a blast. It made me so glad we decided to move to this town, because it’s ridiculous how festive and involved our town is. We are freakin’ Mayberry over here. I absolutely love it.

If you’re just joining, our family of four is on a three-year journey to double our net worth and become location independent. Since we’ve achieved the latter goal, we’ll be primarily focused on the former in each of these reports going forward. Each month, I record our progress on our net worth and our spending. Last year, we increased our net worth by 32% over the year before. This year, we tried to increase it by more than 65% from where we started in December 2016. Even though it looks like we’ll miss our target by a wide margin, we’re keeping our goal in place to see how close we can get in 2019.  Continue reading “November Net Worth Update”

Drinking My Coffee Black

Hope you had a wonderful Thanksgiving! I’m back after a short break. This past week, I was at the family beach house for Thanksgiving. I had every intention of posting, but my computer battery had 15% life left (and doesn’t work when it’s not plugged in to the charger due to an unfortunate coffee spill a year or so ago) so I had to take it in to the repair shop.

Drinking My Coffee Black www.thethreeyearexperiment.com

Guess what? New battery, $169.99, guaranteed for 90 days. PLUS, the computer now works if it’s not plugged in! It’s a MacBook Pro, so no way was I going out and buying a new computer for $1500. The fact that we could replace the battery relatively inexpensively AND it now works better was an awesome surprise this Thanksgiving!

While at the beach, I was helping my parents put together a budget for the first time. They’re not budgeters, and while they have investments, real estate holdings, and a pretty high net worth, they’ve never really had to think about controlling their expenses because they’ve enjoyed high incomes for most of their adult lives.

I could tell the experience was stressful and painful, especially as they kept thinking of new expenses to add to the total.

The First Budget

I remember the first time Mr. ThreeYear and I budgeted. It was right after I’d found The Total Money Makeover back in 2008, and I was trying my hand at estimating our monthly expenses.

I had a similar reaction as my parents. A little bit of panic. Shock, that we could spend so much, and disbelief that we’d ever be able to save anything, since we currently spent everything we made! Continue reading “Drinking My Coffee Black”

50 Ways to Become More Frugal

I was not born into a frugal family, and frugality has never come naturally to me. Over the years, I have developed more frugal habits, very slowly. But if you’re not naturally frugal, then frugality, spending less, being careful with your money, or whatever you’d like to call it, IS a habit that you can acquire.

Why is frugality so important? There are many who argue that you should keep your main focus on earning more money, because there’s only so much budget you can cut, but an unlimited amount of income you can create. True, but, the truth is, most of us waste an incredible amount of money, and focusing on becoming a little bit more frugal doesn’t just help us save $1, it helps us save an after tax dollar. Meaning, if your tax rate is 25%, when you save $1, you’re really saving $1.25.

Once you’ve adopted a frugal habit, it will stay with you for years. Get in the habit of cleaning your own house? That’s $150-$200 per month that you’ll pocket for years. You don’t have to keep hustling to make more dollars–once you’ve adopted the habit, you can keep at it ad infinitum. Continue reading “50 Ways to Become More Frugal”

October Net Worth Update

Hi! I’m back with another net worth update.

October Net Worth Update www.thethreeyearexperiment.com

October was a fun, warm, leave-changing, slow fall month for us. I say “slow fall” because in New Hampshire, the leaves started changing colors around August 1st (every year!) and then from mid-September to the first week of October, went into riotous “bloom” until a heavy rain would take them out and all the leaves would be bare. Fall was brief.

In North Carolina, fall has slowly moseyed its way in, the leaves have taken their time changing color, getting darker and darker over weeks, not days, and are also taking their time dropping to the ground, as the temperatures shift between 40s and 50s to 60s and occasionally, 70s (F).

I know I talk about the weather a lot. But when you spent the last eight years as a Southerner in exile in bleak New England, you get at least a year to geek out about the amazing warm weather in the South.

If you’re just joining, our family of four is on a three-year journey to double our net worth and become location independent. Since we’ve achieved the latter goal, we’ll be primarily focused on the former in each of these reports going forward. Each month, I record our progress on our net worth and our spending. Last year, we increased our net worth by 32% over the year before. This year, we’re trying to increase it by more than 65% from where we started in December 2016. It’s looking more and more like we’re going to miss that by a wide margin. But since we know we don’t always reach our goals, especially our BHAGs, we’ll just keep working ’til we hit it!  Continue reading “October Net Worth Update”

A Frugal Reputation Pays

When we lived in New Hampshire, it was pretty standard to be frugal. New England is a region of the country that was settled by English Puritans. A group of Puritans settled the area around Boston back in 1640 in order to escape increasing religious persecution in England.

Putting aside the theological, Puritans believed in living Godly lives both as individuals and as a community. They believed that hard work was the epitome of such a life, although research shows they were highly motivated by profit as well. They stripped their daily lives of “worldly distractions” such as entertainment and ornate adornments or decorations in the house.

Fast forward four hundred years, and the descendants of that group continue to value some of those core beliefs, like dressing simply and practically (trust me when I tell you that makeup and highlights aren’t big in New England), using their resources wisely (ie being frugal!), and simple entertaining (people don’t have big parties and it isn’t very common to be invited over to your neighbors’ house for dinner).

Continue reading “A Frugal Reputation Pays”