When I gave my one year blog update, I asked if there were any topics readers wanted me to cover in year two.
One reader commented as follows:
You must have done a fair amount of “living like no one else” to reach financial independence at your age, especially in relation to your socio-economic peers. What were some of the specific lifestyle choices you and your family made that went against the grain of those around you? PF writers like to talk about housing and transportation choices, but what about areas like travel, entertainment, gift-giving, socializing? Did your choices ever cause friction or misunderstandings with others?
Here’s an example. When you had guests in your home, how did you feed and entertain them? I’ve known professional couples for whom “having people over” means bringing in catering and floral arrangements, and that’s just for hosting adults (we won’t even talk about kids’ birthday parties). How did you and your wife handle situations like this?
Very good set of questions.
BTW, when he talks about living like no one else, he’s referring to a quote from Dave Ramsey I noted in How to Retire Early:
“If you will live like no one else, later you can live like no one else.”
As I said at the time, the heart of retiring early is that for some time you will have to live like no one else. You will need to do the things others won’t or can’t. They will be difficult, challenging, and against the grain of our consumerist society.
But if you do them, then you will be able to live like no one else, which in this case is to retire early with financial security.
So he’s asking what we did to control our spending.
I looked through Quicken to make sure I had covered all of our spending categories. Here’s the list and my commentary on each:
- Car (and House) Insurance — We regularly shopped around for all our insurance, especially if the premiums increased. My wife would contact 3-4 different agencies, get bids, and we would decide which one to go with. We didn’t have to change often and have been with AAA for many years. BTW, we combined insurances at one company to get maximum discounts.
- Car Repairs — As you know, we buy new cars and drive them forever. We also buy reliable models and take good care of them, so car repair bills are rather low.
- Christmas — We have spent about $700-$800 a year on Christmas for as long as I can remember. This is below the $929 average amount Americans estimated they spent on Christmas last year. Given that our income was much higher than average, the percentage of income we spent on Christmas was way lower than normal.
- Clothes — As you might imagine, we are not changing styles with every new season that comes out. We would buy good-quality clothes that were “evergreen” in style and wore those over and over again. My wife is not a big fashionista nor a shoe collector like many women are. She’s in good shape as well and actually still has and wears clothes she had in college.
- Donations — Giving was our biggest “expense”, so we “spent” more here than normal. I’ve already detailed my reasons for giving so I’ll leave it at that.
- Eating Out — We didn’t spend much on eating out until the kids got older. The reasons for this were: 1) it was expensive, 2) managing kids in a restaurant is sometimes a challenge, and 3) my wife likes to eat healthy food and restaurant food often leaves a lot to be desired health-wise.
- Entertainment — Most of our entertainment activities were simple family events at home like playing games or watching a movie. So we didn’t need to spend a lot to be entertained.
- Food — We ate mostly at home and my wife is a very good grocery shopper. I took my lunch to work for many, many years.
- Furnishings — We didn’t change decorations around the house every season. We bought basic decorations we liked and lived with them. Same for furniture.
- Garden — I grew roses for many years and was able to give my wife hundreds of flowers every summer for little cost.
- Gas — Since we took good care of our cars, gas costs were reasonable. We bought much of our gas at Costco which is very reasonably priced.
- Home repair — I would say we were “average” here. We took care of our home but never went overboard on changes, updates, etc.
- Lawn — We had a push mower and either I mowed the lawn or my son did (started when he was 10 — I haven’t mowed since). We did pay him to do it but it was a discounted rate. And it was much better than the $0 I received when I was his age and had to mow two acres!
- Life Insurance — We bought it early in life and locked in great 20-year rates. We are about 4 years from being out of our term policies.
- Medical Insurance — Covered at work.
- Medical — We were in generally good health and didn’t spend much on medical costs. Braces for my son was our biggest expense during the “growing up” years.
- Misc — I’ll mention haircuts here. I have shaved my head at home for 15 years or so. I was a swimmer for many years and having short hair helped. My wife had a good friend who was a hairdresser who used to do her and the kids’ hair for half price.
- Personal — These are discretionary funds my wife and I have to spend on whatever we want. $500 a year each.
- School — Our kids were homeschooled, so we spent more here than what most families would spend. Our son was also very active in homeschool sports, so we spent a good amount of money on those activities. We also went to a LOT of games, so you could consider them part of our entertainment as well (BTW, I was his assistant basketball coach every year he played).
- Taxes — Second biggest expense. I use a CPA to do my taxes so I pay what I am required to pay but no more.
- Utilities — We ran a bit “warm” in the summer and “cool” in the winter to try and save on heating and cooling costs, but nothing drastic.
- Vacation — Most of our vacations when the kids were small were car trips to see my parents or my wife’s family. Not very expensive at all. When the kids were older, we took three cruises as well as trips to various places around the country (Disney, DC, Chicago), so in later years we’ve probably spent more than average here.
One expense you don’t see above is housing. That’s because we paid off our mortgage in the late ’90’s and haven’t had one long-term since. We bought a house well below what we could have spent, paid it off, and lived in it for many, many years. Then we bought with cash when we moved in all cases except the most recent when we took a 6-month loan while we sold our last house.
Now for the other questions:
Did your choices ever cause friction or misunderstandings with others?
Not really because no one knew how much we made. By looking at our outward spending most assumed we were average earners. So there really weren’t any associated issues with expectations.
The one time I had a problem was when someone did know my salary — my boss.
It was when I got my dream job.
Part of my compensation was a $600 per month car allowance.
We had given my car to my sister-in-law and planned to buy a new one when we moved. I told my boss that I was thinking about a Honda Accord and he about lost it. (FYI, my plan was to pay cash for it and pocket the monthly allowance.)
“No, you can’t do that,” he said. “You’re an executive in the music industry. You need to project a certain image. And a Honda Accord is not the right image.” (FYI, this was the first time I was a vice president.)
I told him I didn’t roll that way — that I drove affordable cars, not status symbol cars.
“No, a Honda Accord will not work,” he shot back. “Just get a little BMW. Even used. It won’t cost that much.”
I held firm. Then he said, “If you buy an Accord I will fire you.”
I’m not sure if he was serious or not, but he was the kind of guy you didn’t want to mess with.
We went back and forth for a couple weeks — me suggesting “average cars” and him suggesting Mercedes, BMW, etc. Finally I went up enough and he came down enough and we agreed on a Nissan Maxima. And that’s what I bought and drove for years.
That’s the only time we ever got into heat because we spent well below what we made.
For entertaining, we had people over and fed them the food we ate normally. We certainly didn’t cater anything. The adults stayed upstairs and the kids went to the basement and destroyed it. Just like normal families do. We don’t do well with people who put on airs so we didn’t have friends who were expecting some sort of show when they came over.
At birthdays we gave the kids a choice — they had $100 and could spend it however they wanted. They could have a party and a (smaller) present, a bigger party, or a large present. They got to pick. They went back and forth, sometimes having a party and sometimes keeping the money themselves. The parties we did have weren’t expensive anyway. No major outing or petting zoos at our house. They were mostly kids coming over, spending the night, watching movies, eating cake and ice cream, etc.
Looking at all of this it appears that we were really pretty tight, but it never felt that way. We just enjoyed the simple things in life like going to the beach, playing in the yard, watching movies, and so forth. We just liked being together. We spent a lot of time together at both homeschool and church events as well.
In addition, our income was high enough that we still spent the equivalent of the average American’s annual salary on all we did.
I’ll also say we believed in and practiced moderate and selective frugality. We spent next to nothing on things we didn’t care about and spent bigger on stuff we did care about (giving, vacations).
So, that’s how we lived like no one else and as a result were able to retire early. BTW, we also were able to save for new cars and college for our kids. These things were more important to us than having “the finer things in life” or impressing people with a big house or catered event.
Anything I missed that you might be interested in?
photo credit: Blogging Dagger uxce13 19 via photopin (license)
Erik @ The Mastermind Within says
A Nissan Maxima is a nice car! When I was valeting, I actually enjoyed driving the Nissan Maxima more than I enjoyed driving a BMW (I did end up driving a Bentley once, that was sweet).
Looking back to when I was a kid, I think birthday parties hosted at a person’s house is much more fun and memorable than an outing. I like your approach; when I’m a parent I’m going to adopt it! When I graduated High School, instead of having a graduation party, my dad and I went to Colorado for 5 days. This was much better than having people over for a few hours and having to make small talk with family friends and friends.
It was a great car — plenty of zip!
After I had it for six months, it was in a flood and had $3,000 worth of damage. Ugh. I was afraid it would be a lemon the rest of the time I had it but it was awesome.
Then we moved to Michigan, it didn’t do so well in the snow, and I got a Subaru Forester instead. 😉
“If you drive anything more expensive than a Maxima, you’re just showing off!” – Todd Glass
Mrs. Mad Money Monster says
I can’t get enough of posts like this. It always fascinates me to see how other people reach their financial goals. We live similarly and are able to live entirely off of my income, while banking the entirety of our second income. It wasn’t always that way, though. I was a single parent for years prior to meeting my husband. Thankfully, I had a high salary but I still couldn’t afford to fund a college fund AND and go on vacations. So we skipped the vacations. I skipped fancy clothes and a nice car so I could buy a reasonable house. Today, we’re still living in that reasonable house and living like no one else. It’s a good feeling.
Kudos to you guys for reaching your goals. Hopefully, we’re not too far behind. 🙂
Mad Money Monster
This is one of the reasons I really like this blog. It has articles I can relate to and agree with. This parallels me and my wife’s situation ins so many ways. There are differences but we did not let that influence our decisions. We always did what we felt best for our family and probably spent some more money on things but we wanted to do.
There is nothing big I would have done differently or regret doing. Maybe a few small things but that is now history.
Now that you are retired, what are your health insurance cost? I have investigated different health plans and for a married couple the premiums range from $1200 to $1,600. This might be secondary to Obamacare. I would like to mention that in 1982 I had to pay for insurance through my employer which was $340 a month. Using an inflation calculator that would be $845.62.
I am still working . At my job my employee portion of health insurance is $685 a month not free.
I have a post coming up on this in a couple months.
We use an alternative health “insurer” similar to this:
So far we’ve only paid, but I do have an upcoming medical expense that if they cover it (which it looks like they will) will give me the answer to the question most people will have — will they be there when you need them.
I need to let the situation play out before I can write about it, so expect something in late April or early May.
Teaser: we pay $500 a month for a family of four, well below what the ACA options were for us.
This is great info–I look forward to reading more in the Spring. I know this is a major concern for many people looking into early retirement (including our family!), so I’m glad to hear your experience has been a good one!
The Green Swan says
I think that is a great philosophy towards life and spending. It’s nice to hear how others have done it, especially since you are further down the path than myself and your kids are grown. I look forward to simple entertainment and just spending time together with the fam as the kids grow up. Having a rule of $100 per birthday and letting them help choose how to spend it is a good idea too. We haven’t gotten into birthday parties yet, but they’ll be starting soon (our little one is almost 3).
Catering for guests…that’s a bit over the top! Throwing some food on the grill is more down my alley.
Max Your Freedom says
We also have very similar philosophies on spending. Many of the things you mentioned are common in our household. A lot of people don’t understand that they can have just about anything they want, so long as they’re spending their money wisely, and not trying to do it to impress others. I was shocked to see how much money parents were spending on birthdays after we had our daughter. The kids could really care less, they just want to have fun with their friends. All that money is completely wasted, and is better spent on a college fund instead. Like you pointed out, if you hang around friends that don’t care about being impressed, you’ll be richer for it, on many levels. Thanks for sharing!
I’d love to hear your thoughts about term life insurance. My husband has a 10 year policy that ends in December. He’s in his mid-forties, we live on one income and have 4 children. Would you suggest buying another 10 year policy or something else? Thanks!
If something happened to your husband would you be able to maintain an acceptable lifestyle without his income?
If so, you’re self-insured and might not need life insurance.
If not, you certainly need it.
Most people do need life insurance when they are your age, still have kids, and only have one income.
These are broad generalizations and might not specifically apply to you, but I think you get the meaning of what I’m saying.
As for the type of insurance, I’m a big believer in term all the way.
Thanks for your reply!
Savvy Financial Latina says
We are, also, pretty conservative in spending. I’m very frugal and I’m rubbing off on my husband. We haven’t really done huge lifestyle inflation since we graduated college. Maybe a bit here and there, but I’m always looking for how to optimize our spend.
I think my challenge right now is house temptation. I want to buy a house in Saint Louis. But for what we want in the city center (2 bed, 2 bath, 1500 square feet, no major renovations) is going to cost us $250K.
We pay $965 for rent.
It will be more expensive to buy a house….and yet I want to buy a house….
Advice welcomed!!!! 🙂
This is where you decide what you want to spend on and not spend on.
If a house is important to you, then spend there and cut in places that aren’t important to you.
You have to enjoy your life and spend on some things simply because you want to. If a house does this, then you can figure out a way to make it work. If not, then keep renting and enjoy yourself in other areas.
I believe if you have some common sense, self-discipline, and self-control, you can really have most things you want including retiring early. Cut out the excessive wasteful spending on things you dont need or really care about. I think most people blow a lot more of their money than they realize. Clean your act up and you will probably be surprised how much more money you have.
Yes. The discipline/self-control is the hard part for most people…
Hey, thanks for answering my questions! 🙂
It sounds like your family did a good job at practicing “stealth wealth” during your working years. I think a modest lifestyle helps deflect a lot of peer pressure/expectations from others to purchase more expensive consumer goods and experiences. If people don’t think you have the money, they won’t ask why you’re not spending it.
When you purchased houses, did you choose modest/low-key neighborhoods where the other residents appeared to live a similar lifestyle to yours? Based on what you’ve written, I’m guessing your various homes didn’t include access to a country club, lakefront, or private airstrip (but I could be wrong).
Regarding cars and “image” … we’ve heard about this phenomenon from several attorneys we know. Apparently (around here, at least), attorneys feel a lot of pressure to drive expensive vehicles because their peers perceive a direct correlation between the price of one’s car and one’s level of success in the courtroom/legal arena. So if you’re driving an older/less expensive car, you’re seen as being less competent in your career.
By the way, I’m a “she,” not a “he” 😉 (not that you would have known from my handle …). I’m the economic defense to my husband’s excellent “offensive” game, which is why I’d asked about your wife’s contributions to your family’s financial position. Thank you for noting the areas where your wife’s careful spending helped improve your net worth.
Sorry for the he/she mistake! 😉
We selected homes based on what we felt we needed. The room we needed, the neighborhood we wanted for our kids, the safety/location, etc. Turned out we could find very nice houses that met this criteria for not much money because we lived in moderately-priced cities.
We certainly didn’t have access to a country club, lakefront, or private airstrip. We didn’t have a gated community or any sort of amenities at all. But we did have a park within walking distance and a bike trail we could ride to (this was in Michigan where we lived the longest), so that was nice.
They were all very nice places to live, everything we needed and much of what we wanted, and very affordable.
I’m a lifelong Michigan resident, and I can vouch for our state’s reasonable cost of living. Family and friends who live in the Chicago area tell me about their expenses (especially their tax bills), and it blows my mind.
Our trail system is fantastic. If you want to walk it, pedal it, ski it, snowmobile it, ATV it, we’ve got a trail surface for you!
Probably a little late for this, but as a follow up I’d like to see you take each category you listed and estimate how much you saved by your life choices vs the norm. Then maybe make a judgment as to if that particular sacrifice was worth it.
I hope the above does not come off as snarky or judgmental or whatever, I am genuinely interested in the results. It will be interesting to see which items turn out to be the really big bang for the buck items (I suspect housing will top the list there).
I don’t think you come across as snarky at all. It’s a good question.
I probably won’t get into as much detail as you suggest above, but I think I can cover the heart of your question.
I think most of it was worth it. We didn’t really sacrifice anything to live this lifestyle because we were content with what we had and it was all we needed. What would I have spent more on? A bigger TV? A bigger house (we lived in huge houses already)? Special clubs where we’d hob nob with other wealthy people? Ugh. I’d hate that.
I say “most” because the one area I wish we had spent more on earlier was vacations. The first cruise we took really opened our eyes and we had a blast as a family. I wish we had started those a few years earlier so we would have a couple more under our belts. But that’s the only area where I feel like I could have spent more and it would be worth it.
That said, we’re planning on making up for lost time in the vacation area over the next few years. I have a vacation post coming up in April (yes, I write far ahead) and you’ll see what we’re up to. It’s going to be a blast! 😉
Jack Catchem says
Great post, ESI. I enjoyed it!
Mr. RIP says
I still can’t believe what I read: “If you buy car X I will fire you”… that’s not… a thing.
Congratulation for having been firm, I’d have laughed at it and showed up the day after at work with a used bicycle 🙂
Amazing post ESI!
First off let me say I really enjoyed the post. I’m not much for net worth sharing and e like as I feel like it just leads to envy or other feelings. But I really do like hearing about how people spend as it’s actionable for readers.
Amanda @ centsiblyrich says
Love this post, ESI! I think your wife and I would get along well, from the sounds of it. I can relate to many of the points above – we live a similar lifestyle (though we were slower to start).
Like you, we are “moderately and selectively frugal”. We do spend on vacations and other experiences, but cut back on many other areas we don’t care about as much (clothes and cars come to mind here).
Mustard Seed Money says
I can’t even imagine having a conversation with my boss that ended with her saying I will fire you if you don’t drive a nicer car. I totally get the image thing but that’s a strong car to pull. Sounds like you found a great compromise but I definitely think I’d be a little put off.
Jenn Gold says
First time Commenter, ongoing student of PF.
This post has been the most helpful one that i’ve read on your blog. It has left a deep impression in my mind and heart about how to better manage my finances. Thanks for your excellent and helpful work.
K D says
Great post. It reminds me of The Millionaire Next Door and parallels our lives in many ways. My husband is not interested in retiring yet but we are close to the point where he could. I feel bad for people that don’t get this lifestyle, as we find it very satisfying.
We have had mixed success with living like no one else. We fell short by overspending on our kids and by not sitting down with them in their younger years showing them how to ” live like no one else.” DD is getting it and will be debt free at 30 (although no home ownership yet). DS is slowly getting it after post college mistakes of credit card debt and a car loan.
We have done many of the things that you have done plus other frugal hacks, including, but not limited to:
1. Buying a house below our budget in an upscale but very down to earth neighborhood.
2. Gardening and cooking/freezing our bounty. Had defrosted zucchini bread made with last summer’s zukes for breakfast today.
3. Made use of the wonderful free movies at our library-picking up 7 today.
4. Using coupons and deals to great advantage.
5. Buying appliances at a discount at our local scratch and dent appliance store.
6. Using points and miles to travel cheaply.
25 years ago, I was a single mom with no emergency fund and little saved for retirement. It took me 6 months to pay off the credit card bill occasioned by the need for a replacement head gasket for my car. Fast forward to now-no debt, a paid off house and retirement savings that would allow us to retire comfortably now. Stay the course-it can be done!
Thanks for the insight into your earlier years and how you achieved the FI dream.
It’s a good reminder that the only expectations you need to live up to are your own. Too many are too timid to challenge the “norms” and will end up having a “normal” retirement.
I love how you give your kids a choice in their birthday events/presents. It’s easy to want more, more, more! but when they have some say in the decisions they usually make very thoughtful choices.
Laurie @thefrugalfarmer says
Just found this through another blog’s roundup. Absolutely loved reading this. Now that we saw the light a few years back we live almost exactly the same way. And as you mentioned, it doesn’t feel like we’re deprived at all. Everyone has what they need and more. We’re happy, getting out of debt and building wealth. It’s a great thing, living like no one else. ?