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The BIG Financial Picture

Basic Personal Financial Philosophy:

1 - Make savings goals your first priority (pay yourself first). Manage goals around tax planning.

2 - Limit regular/recurring spending/contracts, etc. to x dollars

3 - Don't borrow for anything

4 - Strive for balance

Click on link for futher details:

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The following post details our savings layers:

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Current Status as of 12/31/2021:

Emergency Fund (Current Balance: $30,000, or 6+ months expenses; Goal: $30k)
{Only to be used in a catastrophe}.

Short-Term Savings (Current Balance: $0, saving $1,500/month; Goal: met)
{For Property taxes, all insurance, car repairs, vacation, regular dental checkups, and for basically everything that is not a predictable monthly bill. Balance should be -0- as it is all spent up by end of year/end of most months}.

Mid-Term Savings (Current Balance: $38,000; Goal: met).
{To pay cash for future cars, home maintenance, replace appliances, big/future purchases, and can also be used for emergency}.
NOTE: Our cash balance has not changed since 2013. We contribute enough to cover new expenses, but anything beyond that goes to investments. The exception would be hoarding large amounts of cash for a house down payment or something along those lines. We will probably get more cash heavy as our kids get closer to college age (to cash flow college).
Note: Currently hoarding $18K for next 18 months of college expenses

Retirement (Current: 20%)
{We have always contributed a minimum of 10%. I'd say that 10% would be more than ample for the long run because we consistently saved so much in our 20s and 30s, but we aim higher so that we have the freedom to retire younger. Until 2019 we just maxed out the retirement vehicles at our disposal (IRAs), because that was more than ample for us; 15% retirement savings rate recent years. In 2019, I changed jobs. I now have a 401k plan (after a decade without a work retirement plan) and am contributing just enough to get the match. We'd otherwise rather fund our IRAs and will continue to max those out. Post-college (age 23+) we have averaged 15% of gross income to retirement}.

Taxable Investments (Current Balance: $21,000; Goal: add snowflakes).
{Opened this account in 2014. This money can be used for college expenses, mortgage paydown, and to supplement retirement. Mostly because we had maxed out all useful tax advantaged accounts and would like more liquidity until my job and kids' college shakes out. This is more liquid than tying up in the mortgage and/or in retirement accounts. With job change in 2019, everything is going to retirement funds instead, but we continue to add snowflakes to our investments}.
NOTE: This is where we set aside money that *we* are saving for college.

College Savings (Current Balance: $55,000; Goal: $50,000, save $2k+ per year).
{We have never saved a penny (specifically) for college. But generous in-laws provide $1k per year per child, since birth. Which incidentally is enough to cover 4 years of college tuition, per child ($30k/each; includes investment returns over 2 decades). Our attitude to-date has been a combo of "Take care of ourselves first", college is very inexpensive in our state, and Grandma has it covered anyway. She gives us $2k every year to invest, on their birthdays. Interestingly, all of our own "college money" went towards down payment on a first home. & with current college prices I think we might end up just paying that forward for our kids - help them manage the cost of living, which is insane here. We may be able to cash flow college and to hand them Grandparents' money in a lump sum}.
NOTE: We have no plans to add to this goal. We are at the whim of gifts and the market. I don't mind helping and saving for college, but is just nothing we are saving up specifically for or separating out from the rest of our assets.
P.S. We have not made enough income to get any tax benefit from college specific savings accounts, so have never utilized. This is coupled with not wanting to tie up this money specifically for college, if we are mostly only considering very inexpensive public colleges or expect our kids to need the money more for post-college housing. For all these reasons, 529 plans or Education Savings accounts just don't make any sense for our personal situation.
NOTE: MM(18) has chosen a "will cost $30K over 4 years" public college.
It looks extremely likely that we will just pay it forward. He will need his "college savings" for a home down payment. College is cheap here. Housing is insane. Those economics have not changed during the 20 years since we graduated from college.

One other point of clarification: Our income is very middle class average. 529 Plans benefit more upper middle class and upper class households. The don't benefit our "zero income tax" household. I share to point out that with the high wage/low college cost combo where we live, we received -$0- need-based financial aid, or about exactly as much financial aid as we ever expected. I can see it would be easy to presume we are more on the lower income (more financial aid) end of the scale and I wanted to point out that is not the case. Choosing a low cost college is a big reason why we have no need-based financial aid.


I strongly identified with this article, 7 Secrets of Super Savers:

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1 - Set goals and make them specific
2 - Live below your means
3 - Delay Gratification (Super savers often save up for months or YEARS in order to pay cash for all purchases)
4 - Avoid Debt (Super Savers pay cash for big ticket items like cars and homes)
5 - Save on the everyday expenses (compare prices, clip coupons, buy used)
6 - Have multiple streams of income (Live on one income and saver the other. Single earners have side hustles to earn extra cash)
7 - Track spending (*I* certainly know where every single penny of our income goes! With modern technology, doesn't take much time and effort to track)
8 - Automate Savings (AKA: Pay Yourself First!)


I recently found this blog post and really enjoyed it as it sums up my feelings on debt pretty well:

News Flash: Your Debt is an Emergency!!
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Okay, Mr. Money Mustache is totally awesome:

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This pretty much sums up our retirement plan. Not that I am taking advice from some random guy on the internet. He is just the only one I have ever seen talk about retirement in the sense that my parents retired. He just clarifies what I already know. Between MMM and my parents' retirement, we are thinking about retirement very differently, probably since around 2012.

In my parents case they are MMM-ish but very different in some regards. My dad had some health issues and lost his job at 57. My dad grew up in poverty and had pulled himself up into the upper middle class. I believe that as well as my parents have done, they just lacked the financial savvy to know they could have retired much sooner. They initially panicked with this turn of events, but after just about 5 years they seem to have more money than they will ever know what to do with.

One thing my parents have always done is live well below their means. Retiring early has given them significant tax advantages, which I have been able to help them with. The main thing my dad did not account for in his retirement calculations was that he was basing his calculations on his earnings/salary though he only lived on 1/3 of his income. When you add the point that he literally can live on only 1/3 of his salary because he no longer pays taxes, that is how you over-save even in the face of completely unexpected early retirement.

I keep reading the assertion that "MMM wants you to retire poor." With this comment, the entire point of the MMM philosophy is missed. MMM makes $400k per year from his blog and is always dabbling in money making ventures. Which is another reason I like MMM. He allows that some people want to work and make money in retirement. Meanwhile, someone like my dad was nowhere even near ready for retirement (in his mind), and has not made any money in retirement, continues to grow wealthier. That's the power of living below your means. I would say that the vast majority of my clients and relatives continued to grow wealthier in retirement. This idea that you draw down your assets and that those assets only last so long is very academic. That model has very little to do with the reality of frugal savers.

Our takeaway? We only plan to work full-time until we get to a point where we are done with big expenses like college and we reach a comfortable nest egg amount. From that point we plan to switch to part-time work and probably let our nest egg compound for another decade. (Thinking age 50-60). Will work just enough to pay current bills. We will stop saving at that point. Unfortunately, I can't turn off the fiscally conservative genes. We aren't going to cut it close (hence, the extra decade working to be sure). We aren't going to rely on social security. I am not counting the bajillion dollars that I will probably inherit. But I do feel comfortable taking my foot off the gas a lot more at a certain point and don't feel the need to work full-time up until the day I am ready to 100% retire. That is my biggest takeaway from all of this. Also, I am not going to be one of those people who saves up 25 x income a or has a $3 mil+ retirement goal. It's just overkill. (Though will probably get to that point *after* we retire, much like MMM or most in my family have).

P.S. My in-laws are not Money Mustache whatsoever. They are frugal, but their spending is kind of absurd, compared to us or my parents. Different shades of frugal, I guess. Anyway, I remember once my MIL and my dad were talking (maybe around 2015?) and my MIL was just, "We will NEVER have $1 million." They were talking about investments. Spoiler: They made it to the $1 Mil mark. This was long after they retired. My in-laws may literally be spending more in retirement than we do with a mortgage and two kids, but... Clearly they are living below their means. Is just one more example. I've probably seen this 100 times (if my family and client base are both heavy in people who just get richer after they retire; to be clear I am talking across multiple generations. This is not just in reference to past decade and incredible bull market, though it certainly made for some unexpected investment gains for both my parents and in-laws).