Decreasing spending, increasing savings & giving...

[Rich Schmidt]

I mentioned this in another thread (http://www.naznet.com/community/showthread.php?7361-What-s-your-retirement-nest-egg-goal), but I thought it might lead to some good conversation on its own:


Check out this blog post where this person is tracking their progress toward early retirement: http://www.bravenewlife.com/01/retir...-2011-results/

The part I found interesting: their savings rate that month was 75%. They saved 75% of their income.

Imagine if some folks in our churches got serious about reducing their expenses while increasing their incomes. Sure, we'd like to see them tithe while they do that... but what if they were able to live on 25% of their income, give 10-20%, and save the rest for the future? In very short order they would have no debts and would have saved enough to "retire" and give as much time as they want to volunteering, mission trips, etc.

To do that requires escaping the culture of consumerism in which we live... which is exactly what I want for myself and everyone in my church.

Over the past several months, I've run across whole communities of people online who are working toward "early retirement" or "financial independence." These folks are reducing their expenses (sometimes dramatically), increasing their saving and investing (again, sometimes dramatically), so that they will more quickly reach that point where their expenses are covered by their investment income (or other income streams, like small side businesses or freelancing gigs). This frees them from having to worry about full-time employment, because they can live without the paycheck. They're free to follow their passions, even if that doesn't provide them with any income.

I've found this really interesting. How about you? Do you know anyone doing anything like this?

[Dave McClung]

..

I've found this really interesting. How about you? Do you know anyone doing anything like this?

Dave Ramsey is having a profound impact. He says, "Live like no one else so that someday you can live like no one else." Taken in context, I support what Dave is teaching, but taken to excess, it doesn't make sense.

Jesus told a parable about a man who had riches stored up for a long time, but died before he could enjoy them. Two thousand years later, he is known as the "rich fool." I believe the moral of that parable is to live a balanced life. Assuming that we will live a long time isn't a wise assumption.


When my children were still at home, Linda and I "invested" in our children. We bought nice homes, took wonderful vacations and spent money to give them experiences. We didn't save a lot during those years.

After the children had been educated and were on their own, we got more serious about saving. I can't really say that we "reduced our life style" but we did not allow our life style to increase as rapidly as our income increased.

By age 56, I was able to give up a salary. We have lived on investment income.

If a young person were asking me for advice, I wouldn't say "live like a poor person so some day you can live like a rich person", because I don't think that refects a balanced life. I would say:

1. Live like a poor person until you complete your education -- at least a college degree.
2. Don't incur any more debt than is necessary, even if it means you have to stay in school longer.
3. Once you enter your working life, learn to live on less than you make. That should be a life-time principle.
4. Spend your money on things that last -- like experiences. Don't splurge on things that wear out.
5. Work hard, but not so hard that you don't enjoy life.
6. Keep employment, family and church life in balance. Don't allow one to crowd out the others.

Why put off enjoyment until retirement. A balanced life will result in enjoyment all through life.

[Susan Unger]

I mentioned this in another thread (http://www.naznet.com/community/showthread.php?7361-What-s-your-retirement-nest-egg-goal), but I thought it might lead to some good conversation on its own:



Over the past several months, I've run across whole communities of people online who are working toward "early retirement" or "financial independence." These folks are reducing their expenses (sometimes dramatically), increasing their saving and investing (again, sometimes dramatically), so that they will more quickly reach that point where their expenses are covered by their investment income (or other income streams, like small side businesses or freelancing gigs). This frees them from having to worry about full-time employment, because they can live without the paycheck. They're free to follow their passions, even if that doesn't provide them with any income.

I've found this really interesting. How about you? Do you know anyone doing anything like this?

This has been my New Year's resolution, which I started in December so that I could practice the concept during a traditionally high spending month. I am not at the level that you're describing but am seriously working on reducing how much I spend and save. It is hard to save money with chronic health conditions like I have but I feel like I need to challenge myself to do some of the basics like have an emergency fund and have 3 - 6 months' expenses saved up. I had a bad experience in my college economics class which left me with the wrong beliefs about finances and economics. Last summer, God started to help me realize that a lot of it is just having and following good common sense. If I stick with that and ignore the 'experts' who make no sense, I'll be ok.

[Susan Unger]

Dave Ramsey is having a profound impact. He says, "Live like no one else so that someday you can live like no one else." Taken in context, I support what Dave is teaching, but taken to excess, it doesn't make sense.

Jesus told a parable about a man who had riches stored up for a long time, but died before he could enjoy them. Two thousand years later, he is known as the "rich fool." I believe the moral of that parable is to live a balanced life. Assuming that we will live a long time isn't a wise assumption.


When my children were still at home, Linda and I "invested" in our children. We bought nice homes, took wonderful vacations and spent money to give them experiences. We didn't save a lot during those years.

After the children had been educated and were on their own, we got more serious about saving. I can't really say that we "reduced our life style" but we did not allow our life style to increase as rapidly as our income increased.

By age 56, I was able to give up a salary. We have lived on investment income.

If a young person were asking me for advice, I wouldn't say "live like a poor person so some day you can live like a rich person", because I don't think that refects a balanced life. I would say:

1. Live like a poor person until you complete your education -- at least a college degree.
2. Don't incur any more debt than is necessary, even if it means you have to stay in school longer.
3. Once you enter your working life, learn to live on less than you make. That should be a life-time principle.
4. Spend your money on things that last -- like experiences. Don't splurge on things that wear out.
5. Work hard, but not so hard that you don't enjoy life.
6. Keep employment, family and church life in balance. Don't allow one to crowd out the others.

Why put off enjoyment until retirement. A balanced life will result in enjoyment all through life.

We are doing Financial Peace University in Sunday School this year. I appeciate your comments here to help balance out what I am hearing in class.

[David Pettigrew]

Dave, I'm going to print this post out and keep it on the bulletin board in my office.


Dave Ramsey is having a profound impact. He says, "Live like no one else so that someday you can live like no one else." Taken in context, I support what Dave is teaching, but taken to excess, it doesn't make sense.

Jesus told a parable about a man who had riches stored up for a long time, but died before he could enjoy them. Two thousand years later, he is known as the "rich fool." I believe the moral of that parable is to live a balanced life. Assuming that we will live a long time isn't a wise assumption.


When my children were still at home, Linda and I "invested" in our children. We bought nice homes, took wonderful vacations and spent money to give them experiences. We didn't save a lot during those years.

After the children had been educated and were on their own, we got more serious about saving. I can't really say that we "reduced our life style" but we did not allow our life style to increase as rapidly as our income increased.

By age 56, I was able to give up a salary. We have lived on investment income.

If a young person were asking me for advice, I wouldn't say "live like a poor person so some day you can live like a rich person", because I don't think that refects a balanced life. I would say:

1. Live like a poor person until you complete your education -- at least a college degree.
2. Don't incur any more debt than is necessary, even if it means you have to stay in school longer.
3. Once you enter your working life, learn to live on less than you make. That should be a life-time principle.
4. Spend your money on things that last -- like experiences. Don't splurge on things that wear out.
5. Work hard, but not so hard that you don't enjoy life.
6. Keep employment, family and church life in balance. Don't allow one to crowd out the others.

Why put off enjoyment until retirement. A balanced life will result in enjoyment all through life.

[Rich Schmidt]

Dave Ramsey is having a profound impact. He says, "Live like no one else so that someday you can live like no one else." Taken in context, I support what Dave is teaching, but taken to excess, it doesn't make sense.

Jesus told a parable about a man who had riches stored up for a long time, but died before he could enjoy them. Two thousand years later, he is known as the "rich fool." I believe the moral of that parable is to live a balanced life. Assuming that we will live a long time isn't a wise assumption.

I completely agree, Dave. Most of the people I've been reading about who radically reduce their expenses aren't "living like a poor person." They feel like they're getting control of their stuff rather than letting it control them. They're focusing on what really brings joy and fulfillment... which isn't a bunch of stuff that costs lots of money. So they're free to sock more money away because they're not living for "more stuff." They seem to be truly enjoying life, even with expenses that are dramatically less than those around them.

BTW, all your advice in that post was excellent. Thanks for sharing it!

[Ryan Scott]

We also have to be careful not to allow society and culture to define what rich and poor mean. There are a lot of things people consider basic necessities these days that are just a waste of money.

[Doug Ward]

Well said. This is what my wife and I have done. We don't have designer clothes, a big house, or video games. However, we have whitewater rafted, rode horses through national parks, hiked to remote places in national parks. We avoided debt, lived simply, never spent to have things, but have spent to do things.

[Rich Schmidt]

Over the past several months, I've run across whole communities of people online who are working toward "early retirement" or "financial independence." These folks are reducing their expenses (sometimes dramatically), increasing their saving and investing (again, sometimes dramatically), so that they will more quickly reach that point where their expenses are covered by their investment income (or other income streams, like small side businesses or freelancing gigs). This frees them from having to worry about full-time employment, because they can live without the paycheck. They're free to follow their passions, even if that doesn't provide them with any income.

I forgot to mention: Almost always, these folks are also focusing on increasing their income. They'll share ideas for side jobs or how to ask for a raise, etc. Because the more they can increase their income, the more they'll be able to save for the future.

For us, that's meant investing in rental properties. Not a lot... but right now we have two single-family houses and two apartments (in our house). Right now, the rental income covers the mortgage expenses (PITI: principal, interest, taxes, insurance) as well as the maintenance (replacing a front porch, a hot water heater, a microwave, a driveway, new siding, etc). At some point in the not-too-distant future, we'll be done with major maintenance issues and can start pre-paying the mortgages, speeding the day when these will be solid sources of income.

We've also seen my wife's income grow as she's advanced in her career from teacher to principal to assistant superintendent.

As I'd mentioned on that other thread, my wife and I try to follow the 20-20-60 plan: giving 20%, saving/investing 20%, and living on 60%. We've been doing it long enough now that we could probably think about bumping those first two numbers up a bit higher. As I prepare for our tax filing this year, I'm getting a clearer picture of where we are right now financially. I wonder if we can move to 25-25-50....

Anyway, while we certainly don't "live large" compared to many people, we also don't feel like we deprive ourselves too much. We live frugally, but we still have high speed internet and satellite TV in our home. We plan to go on a way-overdo vacation this year, hopefully to someplace warm and tropical. Etc.

[Billy Cox]

We also have to be careful not to allow society and culture to define what rich and poor mean. There are a lot of things people consider basic necessities these days that are just a waste of money.

Yeah, like computers, the internet and smart phones. D'oh!! :)

[Billy Cox]

We've also seen my wife's income grow as she's advanced in her career from teacher to principal to assistant superintendent.

My wife and I went through Dave Ramsey's program a few years ago. While budgeting and financial restraint are certainly key, he also advocates increasing cash flow by any means possible...including selling stuff, taking on a temporary part-time job, etc. An extra $500 per month may not be much money, but it will make a $3,000 Visa balance go away in a hurry. :)

We kind of ebb and flow with how fully we implement our financial plan. I know that we've backslidden when I don't have any cash in my wallet.


As I'd mentioned on that other thread, my wife and I try to follow the 20-20-60 plan: giving 20%, saving/investing 20%, and living on 60%. We've been doing it long enough now that we could probably think about bumping those first two numbers up a bit higher. As I prepare for our tax filing this year, I'm getting a clearer picture of where we are right now financially. I wonder if we can move to 25-25-50....

I can appreciate the simplicity of that. It also beats the heck out of the average consumerist budget of 5-5-100. :)



Anyway, while we certainly don't "live large" compared to many people, we also don't feel like we deprive ourselves too much. We live frugally, but we still have high speed internet and satellite TV in our home. We plan to go on a way-overdo vacation this year, hopefully to someplace warm and tropical. Etc.

I'm still learning that much of the 'living large' that I see is not as fun as it looks because it's all paid for with money they don't have yet. So when you talk about a 'way overdo' (instead of 'way overdue') vacation, is that a Freudian slip? haha

[G R 'Scott' Cundiff]

I don't guess I'll ever forget paying off a car for the first time. It was a spiritual experience for me. We didn't treat the "extra" money as a raise. Instead, knowing we were now driving a paid off car that wouldn't last much longer we kept right on making car payments, but this time to ourselves.

If paying off the car was a spiritual experience, I can tell you that a couple of years later, when we bought a "new to us" replacement with cash it was another spiritual experience. It took us years to get there but it was worth the journey.

[Rich Schmidt]

I'm still learning that much of the 'living large' that I see is not as fun as it looks because it's all paid for with money they don't have yet. So when you talk about a 'way overdo' (instead of 'way overdue') vacation, is that a Freudian slip? haha

Not Freudian, just brain-frozen. That's what I get for posting at 12:30 in the morning. I wondered why "overdo" didn't look right to me. :)

The vacation is way overdue for my wife's health and sanity. We couldn't really get away easily the past couple years because she was in her PhD program... and then her job has become increasingly stressful this school year. We really need to get her to a beach where she can warm up and not have to worry about anything for 5-6 days in a row. (I was hoping for 10-12 days in a row, but she doesn't think she can be gone that long!)

[Shea Zellweger]

Well, if nothing else has come of this conversation... I've been reading Mr. Money Mustache with a vengeance the last 24 hours...

[Rich Schmidt]

Well, if nothing else has come of this conversation... I've been reading Mr. Money Mustache with a vengeance the last 24 hours...

For those who missed my link on the other thread: http://mrmoneymustache.com.

Another website on this topic (that I never really followed, but many have): http://earlyretirementextreme.com. That blog has pretty much closed down now, with the author pointing people toward Mr. Money Mustache's blog to continue the conversation. But it was a major resource for people trying this approach to life. Here's the intro from his blog, full of links that didn't survive my copy 'n' paste:


If you're new here, this blog will give you the tools to become financially independent in 5 years. Here's how I did it and here's a few dozen online journals from other people who are currently doing it. This is not some stupid get rich quick scheme. The method is robust and replicable (no need to win the lottery, sell your business, or win at real estate), but not easy; much in the same way that a diet results in weight loss but is hard to follow persistently unless you set your mind to it.

The key is to save 75%+ of your net income and invest it in income producing assets (bonds and dividend stocks). This is done by running your personal finances much like a business, thinking about assets and inventory and focusing on efficiency and value for money. See this post on how to enjoy a middle class lifestyle on $7,000/year (Please read it, especially the part about the lentils!). There is a "21 day" step-by-step plan for how to get beyond 75% in the left side bar. Also, check out my answers to Frequently Asked Questions which also covers common misconceptions regarding my personal budget, blog income, retirement, marriage, children, health care, etc. I also suggest reading About ERE in the top menu bar.

[Bob Hunter]

For those who missed my link on the other thread: http://mrmoneymustache.com.

Another website on this topic (that I never really followed, but many have): http://earlyretirementextreme.com. That blog has pretty much closed down now, with the author pointing people toward Mr. Money Mustache's blog to continue the conversation. But it was a major resource for people trying this approach to life. Here's the intro from his blog, full of links that didn't survive my copy 'n' paste:

Just found this thread and the money mustache (very interesting subtitle on that site!

A couple things: Interest rates are still very low. And the deals for real estate are just amazing. We just purchased a fixer upper foreclosure home in Mesa, AZ and got a real bargain. This 2,300 sq foot home sits on nearly a half acre with a pool/spa and tons of trees. At 4% interest we upgraded the size of home we were living in and lowered our monthly payment by over $130 dollars. Purchase price: $165,000

Okay, now the bad news and let me itemize them: 1) Getting loan approval on a conventional loan is borderline harassment and interrogation. 9/10 home buyers come to the title company utterly exhausted and exasperated. Yeah, our lender was absolutely ridiculous. The new government standards for loans are VERY stringent and nit picky. 2) Short sale transactions are a nightmare. It's nuts. The banks are so incompetent. People warned us, but then we were willing to pay the price and in the end it was worth it as we had instant equity in the home (now worth over $190,000). 3) Homestyle loans (for fixer uppers and home improvements on existing) are a total rip off (you pay higher interest and some big upfront fees) The paperwork alone will drive you insane and contractors don't really want to be hassled with it so they jack up their prices. We scrapped that plan and funded the repairs out of our savings. And we put some repairs on a 0% interest credit card to pay off in 18 mos. Sadly, the lenders are so picky, you have to do a lot of repairs upfront or they will not fund the loan. We had to invest 3 grand in this home before we even owned it.

Anyway, I don't know if this helps anyone, but we did do pretty well making an investment and cashing in on these extremely low interest rates. Re-financing is also a very viable option right now.

B.T.W. The upside to having a large home in AZ with a pool/spa is sharing it with others. We are almost done remodeling a guest room on the first floor with an attached bathroom. This room is available for 3-4 days at a time for pastors who need to dial down and thaw out in the winter months. We told God if he gave us this home we would share it with his people and use our hospitality gifts to bless others.