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Fiscal Doings & Mustachian Observations

March 3rd, 2013 at 10:03 am

**The Mustachian lifestyle can be very subtle. The outside can appear the same while lots of inefficiencies are adding up on the inside.

I have just been pondering this as I had an interesting conversation with the in-laws yesterday. They were talking about how they felt they *needed* their large retirement income. I would not be surprised if they were spending twice as much as my parents these days, to live largely identical lifestyles.

It's not a totally fair comparison by any means, as my parents are much younger and have no doubt buckled way down with medical bills and lack of income (unplanned disability and unemployment, which has transitioned into early retirement). BUT, because they have started their retirement this way, I also don't particularly see them increasing their spending down the road when they reach full retirement age. They live *very well* and if you read Mr. Money Mustache blog you will start to see the how and why.

My parents have also received a lot more in inheritances. The saver gene runs deep - most my relatives are very poor. OR they were very poor and that is how they chose to live, but the inheritances have been surprising over the years. The general concensus in dh's family is that none of his grandparents have any money, but I won't make any conclusions until the *end.* They may be surprised. But I do wonder if this is somehow true as I don't hear the "extreme saver" stories from his side of the family (though they are obviously very frugal and such).

Anyway, I find the parental comparison kind of fascinating because I think they largely live quite similar lifestyles (having had similar incomes and means over the years). The in-laws pay far more in income taxes (pension income, which makes their social security income taxable, which puts them in a high tax bracket), give away WAY more money (always have), spent a lot more on travel and dining out. My dad travels a lot as well, but usually more driving/staying with friends and relatives kind of travel. Lord knows what the in-laws pay for their timeshares and such. The in-laws "commute" a lot because they have siblings, mother, daughter in a neighboring city. They babysit daily for their daughter and I am sure spend a lot of time with elderly mother.

Their bottom lines are very surprising to me, with how much they appear to differ from any conversation I have had with them. IT depends on the day how I feel. Some days I applaud the in-laws for enjoying their money. Other days I think my parents are enjoying just as much, but are doing far better. Neither of them will ever need any financial help, so any advantage one has over the other is just gravy.

I see us ending up more like *my* parents. Which again, is a lot just circumstances - lord knows we are not receiving any pensions and definitely am not counting on social security. This means our retirement will look VERY different than my pensioned in-laws, and I think we are better served learning to make do with a lot less. But, on another level, it's hard for me to imagine spending that much money. When the kids are grown and the house is paid off? I don't see it. They are frugal, good savers, and better off than most the population. BUT I question if they are particularly Mustachian. The difference is surprisingly subtle. & I find that kind of fascinating.

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Fiscally, things are very good here.

I received an unexpected cash gift of $770, yesterday:

--The in-laws resumed piano lesson payments, though teacher is on leave for one more month. They told me to keep it. Since I am paying the mortgage on Monday I just threw it at that. $160.

--They also gave us $600 for BM to take two "college courses" this summer. I was willing to cough up $1,000 for 3 classes (+ fees and everything), but after discussing with them and looking at our calendar I think we can only swing two classes at most. (BM will be out of town most the weeks that classes are offered).

So, not only does that take a load off me down the road, as I now maybe only have to come up with $50 for college fees, but I also owed about $600 in income taxes. I will also just pay those Monday, when the deposit hits. (I no longer have to pull this $600 from savings - but will keep it in savings for college stuff).

Payday was Friday and so I updated my goals in my sidebar.

I toyed with the idea of hoarding cash and hitting all my cash goals by April, and then funding ROTHs the rest of the year, but wasn't entirely sold on this method. But with the stock market being so high, I figured what the heck. (I know - I may re-evaluate next week with the economic news. If stocks drop, I will certainly reconsider).

But overall I am very pleased with the psychological effect of this method. I am also thinking of funding IRAs slower because I think in the next couple of years there may be more decisions to be made about ROTH versus Traditional. Which means maybe I will go back to funding every April for the prior year. I don't know... I am pretty committed to ROTHs for 2013, but who knows for 2014. I am rethinking my strategy a bit versus trying to fund the first of every calendar year.

Anyway, so where I am at now:

--ROTH deposits: $1,100 (2013)
(To fund the rest @ $1300/month, May through December)

--Savings: $3,780 of $5,000 saved
(By April 30th I should have this goal done, plus should receive overtime bonus to fund bulk of Hong Kong $5k goal).

--Mortgage: $235 of $4,000 "extra" paid
(Mortgage to be prepaid with gifts, credit card rewards, and overtime - which means possible large April and December infusions).

It feels amazing to possibly have all cash savings goals checked off next month. Still ample time to fund the ROTHs and throw any extras at the mortgage. I am also feeling positive about my extremely aggressive savings goals for this year - like they might actually be possible.

One financial downside on the horizon is vet bills. I just pulled $500 from savings for vet bills and I am sure there will be more this year. But this is one reason I feel great about not worrying about the cost of this college summer program.

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The bigger picture? I also am very close to $20k in our mid-term savings fund. This is enough to replace both our cars, so I am ecstatic with this milestone. !! (I think is prudent with the age of our cars, but also absolutely no plans to upgrade our cars any time in the near future). For a long time we had discussed living without second car if it came to that. But this has also been less feasible since BM goes to school at another campus this year (is not very walkable or bikeable, especially since the kids have to be dropped off in two different places close to the same time).

So I feel relief with the long-term car situation. This is also why I felt comfortable earmarking April overtime check entirely for China, with this goal met. We can divert to something fun and different for this year and next April. That is only "13 months of diversion" at this point.

On the cars, we tend to save up $100/month per car to replace. I'd keep our cars for 20 years, but that's still $18,000 saved, per adult, if we only kept for 15 years. We should have saved up about $22k by now, considering how long we have had both cars, so are about back on track with that. As long as we have a mortgage, I do not foresee spending more than $10k on a vehicle. So the longer our cars last, the more we can throw to other financial goals. This keeps us extremely motivated to keep our cars as long as possible. We may still have 5-10 years left before we replace our vehicles. {We stopped saving for our cars for a time when my spouse stopped working - as back up plan was to live without a second car}.

We also have about $8k set aside for strictly emergencies. (Obviously the car fund would double for emergency in a pinch, the car fund is far more robust than any basic *car need* we would have. Most our cars were bought very inexpensively, so I am not scared to pick up a car for $1,000 and drive it for 5 years).

Why $8k? This actually covers all our deductibles. I should probably bump this up to $10k, for simplicity, and because we just bumped up home insurance deductible. Hmmmm...

This should give us a total of $33k cash once I get my overtime this spring. SO... I will be letting go of the ROTH Efund. It has served its purpose. I was encouraged to fund ROTHs in years when I felt uncomfortable tying up so much cash into retirement. But I was able to do so psychologically knowing it would be there in a real pinch. (I wouldn't have touched it but for prolonged unemployment or something really catastrophic like that). As is, I don't feel we need that safety net any longer.

So I suppose that is also a pretty awesome milestone.

We are still saving $5k per year to our savings account, as there are still endless expenses on the horizon. Of note, we need a home repair fund and orthodontia fund. I just call it "mid-term savings" as we are saving for all of the above all at once. I find it easier to keep things flexible. If cars die sooner than home repairs have to wait. If a big home repair comes up, then our next cars can be more modest. We will keep saving at this pace until we have the cash for all the "extremely foreseeable" expenses in our nearer future. Our wish list includes $10k for China, orthodontist paid in full for both kids, some general home repair fund as well as to replace fence, replace carpets, and to renovate master bath. It goes on and on and on. These are all things that could wait or we could live without, but obviously need to be saved for if we don't want to borrow for these things.

2 Responses to “Fiscal Doings & Mustachian Observations”

  1. Looking Forward Says:

    Fabulous progress on the goals. Smile

  2. FrugalTexan75 Says:

    Sounds good Smile

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