Artificially Poor; Where is the Money?

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Vacationing in Maine, instead of FinCon! Can’t afford both.

Hello, it’s been a month since I posted and I figured I would let you know what is going on in my financial and personal life.  School has started, my kids activities are all in full swing, and my basketball season has started for my coaching duties.  So, I haven’t been bored!  I have also changed banks from our 2004 Bank of America checking and savings to USAA for our checking and savings for a daily needs.  We still keep the bulk of our savings at Ally, getting that good interest every month, but we pay bills, saved for our taxes, and had everything on auto pay with those Bank of America accounts.  It’s one of the many reasons I never changed from Bank of America since 2004. But in the last few months they discontinued my types of accounts and signed me up for accounts with fees!!  I was not notified about this change and just saw a $5 fee in one account, then a $20 fee in another, so I gave them a call and they basically told me I would be getting fees since my fee free accounts don’t exist anymore.  They refunded me the fees, but I had one month to get my money out, change over all my auto bills, change over my electronic pay checks from work, and basically throw our simple no thinking approach to finances into a tail spin.  It wasn’t all bad, because in the process of moving our bills and money we got to analyze every thing piece by piece.  We ended up saving an extra $136 a month by cancelling subscriptions, changing life insurance policies, and changing some bills onto our credit card that gives us added monetary benefits.  We are also going to get about 20,000 airline miles a year by moving some bills onto our credit cards (Yeah, Travel Hacking).

With all this analyzing of our bills, retirement accounts, investment accounts, double mortgage payments, we had the opportunity to see where every penny went each month.  We get paid around $7,600 a month for our two teacher salaries(sometimes more if I do more duties ($225 extra this month from working volleyball games) and our actual bills are around $2,900 a month (This is our bare bones must pay bills with no extras such as $50 for toll tag, or $9 Netflix) and this includes our taxes, mortgage and everything we need to live!  It’s low right!!  So, my wife wanted to know why we feel so poor every month and I showed her our numbers.  $300 a month in fee filled 403b (I know teacher options suck, but its in a good fund doing very well), $900 a month in our two Roth IRA’s, $300 a month in other investments, $500 a month for our new future car, $400-$500 a month on kids activities (They are active, athletic, healthy, and happy, so its worth it), $150 a month in the college fund, $900 a month on extra mortgage payment, $300 a month on clothes, shoes, school projects, or general kid stuff, and $225 a month for traveling which is personally why I’m a teacher and why I work to have time and money to see the world.  We also can have other expenses such as dentist appointments, doctor visits, entertainment (movies, bowling, eating out), or house projects.  That can add another $200- $1,000 and month depending on our cavities at the dentist!! (We had around $1,000 worth of work between the five of us last month!!)  At the end of the month we don’t have any allotted extra money just laying around.  This is why we feel poor, and we are couponing, looking for deals, or just going without.  At the end of most months we have around $50 left in the account that we just roll over into the next month.  If it gets too be over $100 then we put it in a savings accounts for one of our future goals.

So, our bills are around $35,000 a year, and poverty for a U.S. family of five is $33,100 in 2017 in income earned.  (I know we make more than poverty over $90,000 a year with combined teacher salaries)  If our saving rate was zero and we got rid of all our activities we could live around the poverty line by cutting out all the extras. Seeing our numbers on paper made me feel good, because it meant our bills had not gone up much for about 7 years since our last big money shake up, when we sold our old house and built our new house in the country and we got everything around $35,000 a year, so in case one of us lost our job for any reason we could still live fine on one teacher paycheck of about $3,700 a month with no extra duties or about $44,400 a year base take home pay.  Our goals is to always be in a position to live on one pay check in case of an emergency.

Hike
Hiking is cheap in Maine!

We are artificially poor for lots of reasons though, and here are a few:

  1. We save a lot and we saved early in life because we know compound interest is in our favor if we stick to it every month during our working years.
  2. Lifestyle inflation doesn’t bring us more happiness, so we can live with spending less in many areas.  Activities bring us happiness and those are cheaper.
  3. We buy cars and large items in cash and we take better care of them for longer because we know the sacrifices to save and purchase them.
  4. Our kids and us, as adults, stay grounded and humbled if we can’t just go buy anything at anytime.  We are more sympathetic towards those in real need.
  5. This makes us think about every purchase and plan for those purchases.  Planning ahead for the long term and trying to prepare for the future.
  6. This make us communicate about finances every month and sometimes every week.
  7. This forces us to stay on budget since we don’t have a lot of wiggle room most months.  We don’t have the option to just go buy a new couch, we have to talk and plan about it for months to get the money in order.
  8. This allows us to be more creative in our activities and in how we have fun together.  $35 Spike ball has been a great investment for our family.
  9. Our kids learned to speak in terms of a budget, and ask if they can add a fun activity into our future budget sometimes.  This also teaches them to think ahead if they want us to say Yes!
  10. Paying extra on the mortgage gets it cut in half and saves us tens of thousands in interest.  Also, once the house is paid off our bills drop to around $2,000 a month in about 6-7 more years.  This is the same time our boys will both be in high school and our daughter in college, so we pay extra now so we don’t suffer so much later.

Creating our budget to absorb all these things is tough and some months I do get tired of trying to figure out if I should just go home and eat, or get some In-n-Out right now!  But, that is part of being a grown up.  We have to manage our money, have a plan for every dollar, or in the end you will be out of money and living on a credit card.  Creating an artificially poor life has many benefits in the long term.  You can become financially independent, retire earlier or retire in a better position to stay retired, you get to learn about your money and future plans, and you don’t just consume to consume.  So, for me and my family staying artificially poor has more benefits than living the rich life in the long term.

So, that is what has been going on in my life recently.  I’m still on a break, but I will keep you updated from time to time.  Thanks for reading!

 

 

 

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5 Comments

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  1. Well done Josh, you figured how the system works and you are taking advantage of it. You two are a smart couple.
    We actually live on about the same amount of money, albeit it’s just 3 of us. Still, higher cost of living country 😉

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  2. What a great plan and thanks for your service as teachers. I owe a few teachers a great deal for instilling the love of math and science that led me to a great technical career. I see a great future for your family!

    Like

  3. jumpstartfromscratch November 12, 2018 — 1:21 pm

    It is scary how similar our finances are. Dual teachers. Use USAA for most stuff. Pay anything we can with a credit cards for the miles. Have Bank of America account that we keep $1500 in to avoid fees. Bring in $8k after taxes each month. Spend about $3k not counting college.

    Like

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