The Money Mine

Roth IRA Challenge: The Money Mine

Today’s amazing post is from our friend Nick over at The Money Mine. One of my favorite things about The Money Mine is the variety of topics Nick covers (from amazing interviews with Greeks about the economic crisis in Greece to negotiating fees with your dentist). Nick’s post today covers a variation of the Roth IRA Challenge: finances in a marriage and the steps they took to start saving money together! I hope you enjoy this post as much as I do!

A little over 2 years ago, my finances were very stretched. My girlfriend (now wife) was finishing her global MBA. Global is key word here, because it means that each module was held in a different location. We ended up traveling to San Francisco, New York City, Shanghai and Barcelona.

Life was awesome. And unreasonably expensive: we were saving <5% of our combined income.

After she graduated, we planned on getting married. We knew that weddings are large expenses and we started to talk about our finances to plan the event. Then we had THE financial talk: “So how much do you make? Do you have any debt? How many accounts do you have and how much is there?”.

That wasn’t sexy at all, but oh so useful.

Fast forward to today and we are doing great financially. We now save more than 50% of our incomes and we plan to be financially independent in 6 years. While we drastically cut our expenses, our lifestyle has barely changed.

In the process, we have saved the equivalent of multiple IRAs and not just on travel. I’d like to share with you what I’ve learned in the process.

You get married, your finances do too

Eventually, we decided that if we had to live as a married couple, we should also merge our finances together. It had to be everything: income, debt, spending, accounts…

We didn’t want to manage ‘his’ money and ‘her’ money, we wanted to manage ‘our’ money.

Since we now could look at things as a whole, it became a lot easier for both of us to see activity on all accounts. It was also easier to work together on improving both sides of our finances, because we had mutual transparency.

The first step for us to build strong finances was understanding what the household earns and spends as a whole.

Some of the steps we took to achieve this:

  • Had THE talk. I’d say that 95% of the results come from that discussion. 
  • Opened joint accounts and made all our bank accounts visible from each of our individual online banking accounts (we’re at the same bank).
  • Moved all income and spend to our joint accounts including our paychecks, the credit card payments, the mortgage, utilities … 
  • Funded a family emergency fund, that represents about 6 months of living expense because we knew how critical an emergency fund is.

We (mostly I?) talked about Financial Independence.

After we put our finances together, I spent a huge amount of time online to see what and how other people were doing it. Just like you!

I came across personal finance sites like Mr Money Mustache and Financial Samurai that showed me what was possible once finances are under control: a whole lot.

Then we talked about the concept of Financial Independence. Discussing financial freedom and having one day the option to do work we love, even if it doesn’t pay well, was easy. When I mentioned that we could work outside a cubicle, I closed the argument. She was onboard!

We calculated our 5 most important numbers and set our Financial Independence date for 2022. I’ll be 41 then.

We know that after FI, at least one of us will start working as an independent worker. Maybe start a business and sell it for millions of dollars. But in any case focus on what makes us happy, especially outside a cubicle.

Some of the steps we took to achieve this:

  • Calculated our expenses x25 to find out our Net Worth target. When we saw it would take another 7 years, we tried to project ourselves in the future to see if our assumptions would work. So we set the date and had a nice celebration dinner (cooked at home of course!)
  • Talked about how life would be afterwards, regularly. This may sound futile, but it is proven that being able to visualize the goal and its benefits keeps you going when times are tough. Instead of saying things like “One day, I’d like to be a yoga instructor”, we now say “When we’re FI, I’ll be a yoga instructor”. Suddenly we feel like we have a lot more options. We imagine how awesome being FI will be and we’re happier as a result.

We ditched the budget and do a monthly progress review instead

Doing a budget is not easy for everyone (is it for anyone?). It’s hard to follow-through because every month is different and things rarely ever happen as planned.

For example, we could spend more on travel in January than in May, simply because we went on vacation. Our spend at restaurants could be higher than usual in a September for birthday celebrations (including mine). To avoid the stress of it, we abandoned the traditional idea of doing a budget.

instead we have a net worth target for each year until 2022 and we track our progress every month.

For this year for example, our goal is to reach 43% of our Financial Independence target by December 31st. Next year it will be 54%.

Some of the steps we took to achieve this:

  • Track finances in a Google Sheet: we initially had an Excel spreadsheet but it was difficult to share with my wife so we opted for a Google Sheet instead. We track our incomes and our spend by categories, which we get from Personal CapitalThis is our cashflow. Separately, we also track the value of each account including savings account, 401k, mortgage account,…
  • Track reviews in a Google Presentationthere’s always something we find during our reviews that we need to follow-up on. It could be a charge that looks suspicious that we need to dispute, a refund that we haven’t received yet or a reminder to apply for homestead exemption. We write these down as a follow-up for the next session. 

Conclusion

This year is the first year that we have been following-up fully with our system and the first year that we actually planned together. This process has saved us tons of money that ended up in our 401k, a house and gave us the idea that we could be financially independent soon.

This process has worked remarkably well for us and I’d recommend it to anyone looking for ways to improve their finances.

What techniques do you use to keep your finances under control? Let us know in the comments below!

Don't be a retirement newsletter poster child

Don’t be a Retirement Newsletter Poster Child

Periodically, the company that runs the retirement funds at Mr. T’s employer sends out a retirement newsletter. This is the standard single-fold document that tells you to save more money, think about your future, and think about your taxes.

Here’s the Problem:

I read this newsletter religiously (mail about saving more money!? Yes!). It’s terrible. One of my earliest posts rewrote one of Mr. T’s newsletter scenarios because I think someone should jazz this stuff up!

This past newsletter threw in some more horrible stories. I’m changing the names (so I don’t offend the real fictional dummies), but everything else is the same. I’m not making this up!:

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We're early retirement frauds

We’re Early Retirement Frauds

While we were off traveling, our dear friends over at Our Next Life issued a challenge. You see, the early retirement community is full of “Commandments” (as Our Next Life so hilariously outlined in their original post). This challenge called for a celebration of differences. A manifesto of what we’re doing differently.

After I read it, I was immediately THRILLED about the opportunity to come clean. You see, Northern Expenditure is a fraud. I’m not sure why anyone reads us at all. We’re doing everything wrong differently.

I’ll start out with the main reasons we are frauds:

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Northern Expressions: Hang On To Your Hat

Hold on to your hat. Hold on to your hope. And wind the clock, for tomorrow is another day. -E. B. White

Happy Friday, friends!

I’ll be honest. The news this week (and previous weeks) has really started to weigh on me. Darkness feels like it’s closing in so much. But then I read this FANTASTIC letter written by E.B. White (known as the author of Stuart Little and Charlotte’s Web) in 1973. It’s worth repeating the entire letter:

As long as there is one upright man, as long as there is one compassionate woman, the contagion may spread and the scene is not desolate. Hope is the thing that is left to us, in a bad time. I shall get up Sunday morning and wind the clock, as a contribution to order and steadfastness.

Sailors have an expression about the weather: they say, the weather is a great bluffer. I guess the same is true of our human society—things can look dark, then a break shows in the clouds, and all is changed, sometimes rather suddenly. It is quite obvious that the human race has made a queer mess of life on this planet. But as a people we probably harbor seeds of goodness that have lain for a long time waiting to sprout when the conditions are right. Man’s curiosity, his relentlessness, his inventiveness, his ingenuity have led him into deep trouble. We can only hope that these same traits will enable him to claw his way out.

Hang on to your hat. Hang on to your hope. And wind the clock, for tomorrow is another day.

Sincerely,

(Signed, ‘E. B. White’)

Man. Nailed it. The whole thing is so amazing. So, friends, let us be those upright men and compassionate women. And let’s hope tomorrow is the day the darkness clears. Hope is the only thing that is left to us.

Love, Maggie

First 100,000

The First $100,000

In our May update, we mentioned the possibility of breaking $100,000 in June. It seemed surreal, but definitely possible. Cheers to Amber Tree Leaves for this comment:

Would it not be great to reach 100K while enjoying a holiday. I hope you reach that milestone

This comment blew my mind.

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Dipnetting for Alaskan Salmon

Dipnetting: Subsistence Salmon Fishing

Hey friends! We’ve updated our newsletter to be a weekly email that goes out on Saturday mornings complete with blog post links, random spattering of other interesting links from the interwebs, and some friendly updates on the Banks. Sign up on the sidebar. Try it out. If you hate it, unsubscribe after the first email! I won’t be offended. I have heard several express interest in knowing more about the kind of things I read outside of the blog. I’ve changed our newsletter to share those interesting things that just don’t seem to fit here (and there are loads!)

You may have noticed last week I posted our UK post without pictures. It’s now updated, so check that out. The reason? The reds were running! If that phrase makes no sense to you, I’ll translate: “Over 50,000 Sockeye salmon are running up the Kenai river every single day and everything must stop so we can go catch them!”

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Amber Tree Leaves

Roth IRA Challenge: Amber Tree Leaves

The reds are running and I’m off with the family to go fishing! (I’ll reveal this year’s catch on the blog next week!) Meanwhile, today’s Roth IRA Challenge comes to us from Belgium! The author of Amber Tree Leaves is another parent on the journey toward financial independence. Go check out his blog! Today’s post discusses real estate in Belgium with fascinating perspectives on ownership and its implications. Enjoy!

Back in 2001, when I broke with my girlfriend, I moved back home. After a few years living alone when studying, and then with the girlfriend, it was a change in life. Time to get a place of my own.

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UK on a budget

UK Travel on a Budget

We’ve talked about how to save money in London, but what about once you leave the city? Most of the food tips remain the same, and it’s easier to find inexpensive accommodations outside of London (many with breakfast included!). There is so much to see and do in the UK and you surely can’t see it all in one trip. And entry fees start adding up if you just go to see the “big” places. Here are a few tips for outside of London (and awesome pictures of our trip!).

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London on a budget

Traveling London on a Budget

London is notorious for being a super expensive city. I’m here to tell you that it’s possible to spend time in London without breaking the bank (we stayed for 8 days!). Here are a few ways to save money and travel London on the cheap.

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Northern Expressions

Northern Expressions: Virtue, Wealth, Liberty, Power

Sell not virtue to purchase wealth, nor liberty to purchase power

I hope everyone in the U.S. had a great Independence Day week. Today’s Northern Expression comes from a patriotic thinker, Benjamin Franklin in Poor Richard’s Almanack. Franklin was so good with short, powerful phrases. Today’s sentiment is a good one. Money is not worth more than virtue. And ultimately, the path to financial independence is one of eschewing power to gain liberty. Keep your priorities in order. Be good. Be kind. Be virtuous.

Happy Friday, friends!

Love, Maggie

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