Hello dear readers! I’m still here, but I’ve been prioritizing paid work and time with my family over blogging for fun, so there’s a bit of dust on the old blog. But all is well, and we’re in need of an update around here. I hope 2015 is off to a good start for all of you. I don’t tend to set goals based on a square on the calendar – any day is as good as any other day when it comes to improving things. But the start of the year does provide a good frame of reference for charting our savings rate from the year before, so I crunched those numbers to see how we did.
In 2014, we saved about 61% of our after-tax income. This could still change a tad bit, since I don’t know our exact after-tax income until I do our taxes and see how much we still have to pay the IRS. But I’ve got the income part pretty close, and I know how much we saved. 61% is not too shabby. It’s not quite as impressive as the Frugalwoods’ 71%, but for a family of four, I’d say we’re still doing alright. Our after-tax savings is in addition to maxxing out our SEP-IRAs; we save 25% of our salaries pre-tax using our SEPs. The after-tax savings includes maxxing out Roth IRAs for each of us and $100/month into each boy’s 529 plan. But the bulk of it goes into a taxable brokerage account at Vanguard.
Originally, that account was earmarked as our mortgage payoff fund, and the majority of the money we put into it went directly into a tax-exempt municipal bond fund. The yield is much lower than average yields on stock funds, but we need that money to be safe and relatively insulated from market highs and lows (we’ve had it now for almost five years, and it’s barely fluctuated at all in that time). Our plan is to pay off the mortgage when our interest rate resets in about three years, although we’ll wait to see how high our rate goes before we decide for sure. It could go as high as 4.44%, in which case we would pay off the remaining balance at that time.
But for now, we earn more in the bond fund than we pay in mortgage interest, since our rate is only 2.44%. We never pay extra on the mortgage anymore, but our mortgage balance dropped into the five figure range last year – we owe about $97,000 now. We’ve had a mortgage for 12 years and 2014 was the first time that we’ve ever had a five figure balance… heading in the right direction!
The money in our municipal bond fund officially exceeded the outstanding balance on our loan last year too. We let it keep growing with the automatic transfers we’d been using for the last few years, but we’ve pulled back a bit starting this month, and we’re now funneling the bulk of our after-tax savings into a total stock market index fund in our brokerage account. We’re still putting a small amount of money into the bond fund each month, since we think of it as a back-up emergency fund. But now that we’ve got enough set aside to pay off the house, we want to be more aggressive with our savings and focus them in the stock market rather than bond funds.
We also started keeping a several thousand dollar cushion in our checking account last fall, which we had never done before. Even once we had enough money to start saving significant chunks, we always squirreled everything away into various out-of-sight, out-of-mind savings vehicles. We would clear out our checking account every month, and start over the next month. We finally decided it would make life easier if we just kept an easily accessible cushion in that account, linked to our debit card and readily available. We’ve been frugal long enough to know that we’re not going to spend that money just because it’s there. But it’s come in handy lately. Our cat needed five hundred dollars worth of dental work recently, and I even needed dental work myself (bummer – it was the first time since the 80s that I’ve needed anything more than a cleaning, but I’m looking at nearly $2000 in dental work by the time this is all said and done, including a nighttime mouth guard that I’ve procrastinated about for way too long – unfortunately, most of the dental work is to fix the problems caused by all that night grinding).
We’re getting more and more focused on not having to work forever. It’s starting to feel like it could become a reality, although the time frame is still a bit fuzzy. The biggest thing we’ve got on our side is the fact that our income has grown over the past decade while our lifestyle has not. We keep working to make sure that remains the case, but honestly, it seems to be getting even easier with time. Our whole family notices how much we appreciate mellow weekends at home, just doing stuff around the house, working on projects, playing in the backyard, going for bike rides, reading books, etc. Our free time is almost always spent doing stuff that doesn’t cost us anything, and we usually all agree that’s the best sort of free time.
We’ve been a one car family for two and a half years now, and it’s still working great for us. We put all of our gasoline purchases on our Costco American Express, since we get more reward points that way. And it makes it easy to see exactly how much we’re spending on gas. In 2014, the total came to $836. The only non-car traveling we did was a spring break plane trip to visit my husband’s parents in Arizona, so that $836 in gas got us everywhere else we needed to go in 2014, except for all the miles we put on our bikes and our feet :-) Most weeks, we average about 15-20 miles of errands on foot or bikes, so not putting those miles on our car helps to keep our overall driving miles pretty low. We’ve had our car for four years now, and we’ve put about 28,000 miles on it. Not bad, especially since it’s our only vehicle. It’s six years old, but we still think of it as brand new. And even though it’s a very basic model Mazda5, it might as well be a BMW because my frame of reference is a 1989 Hyundai Excel and a 1991 Honda Civic (the cars I had previously). There’s a lot to be said for being easily impressed and having low-end tastes!
We still have our $10/month cell phone plan and our officially-obsolete first generation iPhone that we share. I cannot say enough good stuff about our Airvoice Wireless plan. We never come anywhere close to using up our minutes or our texts (we have a Vonage line for work in addition to the cell phone), and we’ve been saving $40/month for two years now, after dropping our old plan – that we used exactly the same way we use our Airvoice plan. Gotta love saving money without any sacrifice at all!
We still buy pretty much everything we need in thrift stores, with eBay (secondhand only) as a backup if we’re looking for something very specific. For the most part, we just don’t buy much, although I’ve got a weakness for high-end workout clothing when I come across it in the thrift store for $3.99. Our counters are still laminate, our stove is still the coil burner model that came with our house, and our bathrooms look just the way they did when we moved in. We spent about a year and a half finishing our basement, and we completed that project a couple years ago. We love having that space as part of our house – the boys have a playroom down there, and we have a great gym that we use everyday. We’re constantly glad that we took on that project. But since then, we’ve limited our home-improvement projects to basic maintenance. Our house is only 16 years old, and although I know a lot of people would want to remodel various aspects of it to make it look more like something from Pinterest and less like all the other houses that the builder made in 1999, we’re perfectly happy with the way it is right now.
Our boys are getting bigger! They’ll be 7 and 4 this spring. We sold our stash of cloth diapers on Craigslist last year, and our older son is halfway through first grade and six months into karate lessons. Time does indeed go by – remember this post?
All in all, things are going really well. I like looking back over this blog, and seeing how our life has changed over the past eight years. We’re proof that frugality is an excellent companion to increased earnings. Back in 2003-2005-ish when we were newly-self-employed, in debt and struggling to even put $100/month into our IRAs, I remember being so inspired by bloggers who were further along on the path than we were. And that’s still the case… bloggers like The Frugalwoods, Mr. Money Mustache, Mr. 1500, and Brave New Life remind me that we’ve still got a long way to go. But hopefully the story of where we’ve been and where we are now can help inspire someone else who is debating whether to buy a new couch or stash the money in savings instead (don’t buy the couch! Eventually you’ll stumble across a second-hand one that will work just fine). I’m convinced that warding off lifestyle inflation is the ticket to success when it comes to finances. As long as you’ve obtained some sort of education or training and are committed to working really hard, you’ll probably see your income increase over the years. That’s an awesome opportunity to set yourself up for financial independence and to protect your future in the event that your income takes a hit someday. But it only works if you don’t let your expenses increase along with your income.
Cheers, and here’s to an excellent 2015!