Early Retirement, Finance

We Broke Every Financial Independence Rule

And we are still on track

“Learn the rules like a pro, so you can break them like an artist.” 
― Pablo Picasso

[ Day 53 of 2000 ]

We made a lot of decisions that the wise won’t approve off. Some of them were due to necessity, some of them for convenience. We corrected many of them, but not all. This is our struggle, our journey.

 

 

We bought a house too big!

Not by American standards, may be – It is around 1650 sq ft. I still think it is too big because we were used to smaller homes, and could have easily done with one smaller. Being an older home, with smaller rooms, let me tell you – we have too many. We don’t even go to most of the rooms every day.

We have decided to stay here for another 10 years – Until GBoy finishes school. It is very important to us that he continues in this school district, and we are willing to pay the price. Other than moving to an condo, we don’t have many options here – We bought one of the less expensive homes in the area.

We had no money for down payment; We got a PMI.

We had moved to the USA just the year before that, and had no money for the down payment. We only paid 5%. We had some more money left – We had a bit of work to get done before we moved in, and we wanted to keep our emergency fund intact.

We had lived in a 1 bedroom apartment for over a year, and had to get out of there. Our rent was $1200, and not including PMI, the mortgage interest and property taxes came to $1480. Renting a 2 bedroom apartment would have cost us more than that. Getting a home would give us more space, and reduce friction within the family – BusyDad is a neat freak, and I am the opposite. It is a hard combination when you don’t have enough space for your stuff.

We didn’t make this decision lightly – The PMI alone came to $270 a month. We took the loan, and cut down on expenses for about a year. Every two weeks, we made a payment towards the mortgage, we threw in every cent we could spare. We got to 20% of the home value in slightly over a year. We haven’t had the PMI since then.

We bought two brand new cars!

In retrospect, I now realize that we should have picked used cars. BusyDad, not so much. He still believes that buying new cars were the right decision, and his next car (whenever it is), will probably be a new car.

There is no public transportation where we live. And we had to get to work from day 1. When my employer transferred me here, I had to work at my old office on a Friday, get here Saturday night and start at the office here on that Monday.  There had to be continuity, or I would lose my RSUs etc. Or atleast, that is what they told me. BusyDad’s employer gave him a rental car for 2 weeks, mine didn’t. We wanted them quick.

And both of us know nothing about cars. Growing up, cars were a luxury. The families with cars were not very common. And you always took it to the mechanic for repairs because it was so costly, you didn’t want to mess with it. We were not ready to deal with car issues, however minor. I still know nothing, not even how to change the tires. I will have to call AAA if something goes wrong.

And we took two car loans.

We had just landed in the US. All our savings (from our entire lives) would have bought us three cars, if we could bring it here. Except, we have it invested in real estate back in India. So, no money for cars!

It didn’t help that we had no credit history. We got a not-so-bad rate of interest on one of the cars. Since BusyDad moved here a few months before I did, and I really needed a car on day 1, he bought a second one two days before GBoy and I landed. The car dealers weren’t very happy to give a second loan to someone with no credit history. Luckily, he had a bit of money by then – Thanks to working a few months, and not prepaying his car loan. With some money down, we got a loan. The catch was that the interest rates were really high.

So we did what we did. We paid off both the car loans really quick. The one with the higher rate of interest first. It was a wonder that we could even save up for 5% for the home.

We don’t budget.

Most personal finance blogs recommend budgeting. But I did find that many of them don’t. I wrote about this before, and got a few comments about how it is okay to not have a budget. MrMoneyMustache seems to think the same way. I also got MsLiz, who recommends budgets and who knows about my case, to agree that it was okay. May be this was not a huge violation.

We spend too much on groceries

Groceries is our major expense. Even though I don’t budget, we track our expenses just to make sure we know what we are doing. And I know we spend a lot on groceries. Our food restrictions (gluten free, dairy free, nut free) and habits (eat organic), make it harder to contain this, but that is just the tip of the issue. The main problem is that

We don’t try to reduce the grocery expense

If we could just go to less expensive places like Costco or BJs or even Market Basket, we would save a lot. Instead, we go to the local grocery store (not part of a chain) or Whole Foods. I know, I have a lot to improve. Most of our purchases are at the local grocery store just because of convenience. It is on the way to everywhere. Right now, buying the groceries is a painless task, and I don’t want to make it harder than it is. And Whole Foods is because I get shredded goat cheese there, and I haven’t found it anywhere else. Once I am there, I tend to buy more things, just so that I don’t have to stop at the regular store. That is one habit I can change.

However, I don’t think I have the time to go to Costco or BJs these days – They are farther than I want my grocery store to be. Right now, I can afford it. Once we retire, and have less wiggle room with money, and have the time, I will definitely do that.

We spend a lot on our kid

GBoy plays soccer, and we spend about $500 a year just for that. I haven’t even included the gear in it, just the fees for training and playing. Right now, he loves it. One day, he won’t be so interested. And that is when we will save that $500. Until then, no complaints.

GBoy also goes to Russian School of Mathematics. Now, that is a luxury. And the reason is that the teachers are not that great. This may not be true of all their centers, or even all the teachers at that center. We have restrictions – he is too tired on weekdays to learn anything in the evening, so we need a weekend class. And at his level, they only have one. Both BusyDad and me could possibly do a better job than his teacher. However, their teaching material is good. Unless we get good material like that, we will not know what to teach and how to help him. This is an expense we may cut at a future date, but definitely not right now. Oh, and the reason he needs extra classes is because there are other kids in his school who goes to these classes, and he feels like he is missing out on something if he doesn’t go. Totally lame excuse, I know!

We spend a lot on child care. I used to spend around 600 dollars a month during the school year, $1000 for three vacation weeks and another 3000 dollars during the summer,  just for child care. That alone is easily $10000 a year, about 25% of our annual budget. We have already brought it down to about $6000 by beginning to work from home. If I can work from home throughout, I can completely cut this out.

We buy new clothes

I know that we can get really good clothes from the consignment shops. I have read enough about it, I have even been to a couple of them and seen them. I somehow can’t convince myself to buy them though. It is psychological – It is part of my upbringing. I never bought anything old before. And I never sold anything, either. We just gave it away to people who need it. The only thing I ever bought used before we moved here was books. So I am okay with buying used books, and we bought a used house. This is definitely an area of improvement, and I will actively work on this.

However, we don’t spend a lot on clothes. So it doesn’t hurt us that much. But I definitely need to work on this.

We drive everywhere

We both have long commutes; For me just twice a week – I work from home otherwise. I drive to the gym, to the grocery store, the library, and every where else I go. We don’t even have the excuse of not having a bike. I have one, I use it to go biking with GBoy occasionally. I don’t see that chanigng very much, though. I do not really like cycling.

We pay for gym memberships

I know, I could get some weights and do it at home. And my other major exercise is walking (don’t laugh at me!), and that is free. The only reason I go to the gym is because I don’t do the strength training otherwise. I use the strength training machines at the gym, and that seems to be going fine. For me, the choice is between not strength training and paying for the gym membership. And I pick healthy!

We use a cleaning service

We pay over $2000 a year for this. I could do without it, and will definitely stop it when I retire. Right now, it is nice to come home to a gleaming house twice a month. And it tends to stay clean in between. When I did it all by myself, it could be anywhere between really clean and the messiest house in the world. Having guests at short notice induced so much stress, I was sure I would eventually die from a heart attack from that. Not any more!

Now, the intelligent decisions we made.

  • We bought a house that cost a third of what the banks would let us.
  • We decided to not finish the basement, even though we would get part of it back when we sell the house.
  • We didn’t do any remodel to make the house look better. We might work on it when we have the time, but we are not paying to get it done.
  • We didn’t buy expensive cars – Our cars are a Honda Accord and a Honda Civic.
  • We have no plans to get new cars until they are really old, and consistently give trouble. When that happens, we will not take a loan, and will pay from what we have saved up.
  • We constantly strive to earn more. We ask for more when we think that the pay raises are not enough, and I changed my job once mainly for the salary increase. We have started looking for side hustles, but haven’t yet found anything that pay enough to sacrifice my already scarce free time.

We are on track

We are on track to early retirement in 1947 days. That would be in slightly less than 9.5 years after we first landed here. And after all those not-so-sound financial decisions I have outlined above. I have a progress meter at the top right corner that I update every week, and I have more details here. I also have plans to plot how the numbers changed over time once I have enough data.

We can do this because

  • We are consistent.
  • We have almost no lifestyle inflation.
  • We try to limit our expenses as much as we can. We live on about $40,000 (+ mortgage) a year, inspite of earning many times that.
  • We have no debt (other than our mortgage, which we are actively trying to pay off!).

What you can do for me

I recently heard that very few people actually stick with blogging long term. I really want to document these 2000 days. It forces me to evaluate everything and make better decisions.

I realize that this is way different from a lot of blogs out there that tell you what to do, and what not to. I don’t think I will. I am not qualified. Everything I know about personal finance, early retirement, frugality, and everything related comes from all the wonderful blogs (MrMoneyMustache, MadFientist, JimCollinsNH) that I read. Off late, I have been reading a lot more of these blogs and and I will link to relevant articles. This blog is about what our journey is. How we dealt with our unique challenges.

And you can help by pointing out my mistakes, the foolish decisions I make because I don’t see the whole picture. You can help me by leaving comments, about the good and the bad.  You can help by telling me how I can make the blog better so that it adds value to you as well, not just me. And if you think it is worth it, you can help by spreading the word. Please subscribe to get notifications about new posts (box on the right panel) and follow me on twitter (@ToBeTranquilMom) and pinterest (countdowntotranquility). Thanks for your encouragement!

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About BusyMom

Mom, Software Engineer, Dreamer - Can't wait to be less busy! . Please leave me any feedback you can think of. I am still learning and anything you can tell me about making this blog better is very much appreciated. .
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16 thoughts on “We Broke Every Financial Independence Rule

  1. Hello! Love this post! You’re like my mom, she was raised with Asian values just like yours. I think Gboy will be more similar to me – a mix of American/Asian culture.

    I send her pictures of my clothes all the time. I made the mistake of once telling her they were used. She didn’t like it. “But they still have the tags on and are 80 % off!”. She still hated it. She now asks me every time if I bought new clothes. She feels bad for me and will offer to buy me new stuff — but it’s the same to me, just a cultural difference from growing up in Asia.

    Same thing for the car, whenever my family or friends buys something they hate getting a loan and just pay for it outright. It pains me whenever they do this, so last time I convinced them to get a loan at like 1 percent. I’d recommend a loan at 1 % for you too! Get a super cheap loan, keep the money in index funds or real estate, and you’ll come out way ahead! I would borrow an unlimited amount of money at 1 percent. If you run it through a 30 year amortization, and you put it all in the stock market, you’d come out way ahead.

    It’s awesome that you care for your son so much. He sounds like a ambitious boy :). He’s lucky to have a mom like you!

    1. Thanks! I understand it is just a cultural difference. And I am working on it. It doesn’t matter that a hundred people could have tried it on at the shop, I can buy it. But once they pay for it, I can’t. Makes no sense, right? I will get over it one day.

      I understand what you are saying about the loan too. Our car loans were higher rates of interest, but the mortgage is just 2.75%. If it wasn’t for the early retirement idea, we probably would have kept it. But now, it is easier to just pay it off and get that expense out of the way.

      Thanks for that comment about GBoy being lucky. I feel being a mom is a thankless job, but I want to be as good a mom as I can be. After all, I had the option of not bringing a child to this world, and I chose to have him. Now it is my responsibility to do as much as I can. But I go through periods of self doubt, as to whether I should do more…

  2. We bought a house that was too big and too expensive. Loved living in it, and sold it for about twice what we paid for it – one of my best investments!
    Also bought new cars which we kept for 10 years, with hardly any maintenance, so that worked out well too. Although we then bought two more new cars more recently, which wasn’t so smart as we’re now having to sell them as we are relocating.
    Bottom line, you’ve got to enjoy yourself, so a happy balance of the things important to you has to be the right choice.

    1. I don’t really regret any of those decisions. I don’t care if that is not the optimal way – it is hard earned money, and I get to spend it on what I thnk is important 🙂
      Thanks for that comment!

  3. Busy mom and life! But that’s ok! Stick with blogging – you’ll be an inspiration to us all when you hit your end goal! Agree – it’s tough but helps keep us accountable.
    After moving, I became good friends with a gal that just celebrated her 10th year as a U.S. citizen. Her former struggles were real from where she was from. And she was so excited and grateful to be in the US. Except – you may guess it, She couldn’t get any loans. However, she could get credit cards. And she maxed them out. She doesn’t regret her decision at the time because it allowed them to live the American dream – be able to go on vacation once in a while and have a home and activities for her kids to be in but she does wish she would have been aware of more options and translated to her better to help her get started in her life. She’s now on a better financial track and has an amazing story to tell and keeps inspiring others by sharing it. Her kids are also geniuses – and on their way to being a doctor and a lawyer, which they never would have had that opportunity in their previous country. So sometimes you have to do what you have to do for not just your success, but others as well!

    1. I have all intentions of sticking to blogging. I seem to enjoy this a lot. Surprising, considering that I am already strapped for time, and that this is a lot more work than I expected it to be.

      When you are a new immigrant, things are difficult. When BusyDad first came, the federal government shut down (may be for a couple of weeks) before he could get his social security number. And without that, his employer wouldn’t pay him. His only option was to borrow from friends, and he absolutely didn’t want to do it. Finally, the employers offered to lend him money (at no interest) which he had to pay back once he got his salary. That worked out fine – he got paid, though it was called a loan.

      Even getting the first credit card was a pain. It had a really low maximum. I can’t remember very well, but I think it was $500. I had to pay that off multiple times in a month. That was the time when we had to make multiple purchases – we were new here. Life is so much easier now compared to those first few days.

  4. You are on track. And that’s what’s important. You spend money on things you value-and that’s the way it should be. We all get there our own way! I personally have spent too much on both worthwhile and not so worthwhile things. We live and learn!

    1. 🙂 I was about to leave an almost identical comment on your post about your daughter’s private school, when your plugin decided that I was a bot spamming you. Hope you got that resolved.

      I appreciate you stopping by and checking out my blog. Turn that into a habit!

  5. I totally agree with DocG. You’re on track and you’re doing what works for you.

    We paid PMI in New York.

    We have never budgeted but we do track expenses — every penny.

    We spend more than frugal people spend on groceries, but not so much that I feel the need to lower it. Sometimes I do on a monthly basis, as a challenge.

    We buy new clothes but they’re from Walmart, JC Penney, or Kohl’s when I have 30% off coupons.

    Sometimes doing everything wrong is right.

    1. Good to know I am not alone.

      My clothes are almost exclusively from Kohl’s. I buy them online from the clearance section (when I have 30% off and free shipping coupons). I return them at the store if I don’t like it or it doesn’t fit. The reason I buy from Kohl’s is that I have upto a year to return it, and I don’t have to keep the invoice. I have their card and they can find the transaction using that. Works perfectly for me!

  6. We also have broke many rules! Most notably we left our super cheap $500 rental (that was plenty big) to buy a 1900 square foot house! We have zero kids (and have been here 4+years), but bought the house thinking of the future! Our mortgage isn’t crazy high, but it’s double our rent, plus tack on the maintenance costs and higher utility bills.
    I’m glad to see you documenting your journey! I just started blogging last May and have really enjoyed the process.

    1. You must be in our state too – not getting to most of the rooms everyday.

      I just started in November. Love it so far. I sometimes go blank when I start to write. What value is this going to add to someone who reads? What can I possibly say that hasn’t been said before? And there is just one answer. Our life. No one has talked about that before! So I plan to Krupp writing about that 🙂

  7. There are no rules to this thing. That’s why personal finance is personal. So many people have done the same things as you and their financial house did not collapse. I bought a 2 bedroom condo and paid PMI for the first two years. Two appraisals and over $50K in appreciation later, no more PMI and I still have my cash.

    While I’ll do consignment shopping and Craigslist for certain items, I still buy a lot of stuff brand new. I get my clothes new and I’m not shopping at Penney’s and Kohl’s. I have spent more on one pair of shoes than some people spend on their entire wardrobe. And I do it happily all while maxing my 401K, HSA, and stacking cash to have 6 months of living expenses. This isn’t about spending every penny “responsibly.” It’s about using your money to fund what you value. You appear to do that consistently and that’s why you’re on track for financial independence.

    1. Thanks for stopping by.

      Somehow we don’t buy a lot of expensive clothes, etc. I was never too much into it. My weakness is Staples. I think most of my money goes there. To each their own.

  8. This is perfect! Bottom line: find what works for you and go with it 🙂 And hey, you’re on track! We have certainly hit a few of these as well, but like some previous commenters mentioned, there are no rules and no “right/wrong” way to go.

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