We have been doing quite a lot of thinking about, strategizing and rearranging how we handle our finances over the past few months. It all started with Eric's discovery of a financial blog that really clicked for him called Mr. Money Mustache. The blog is all about achieving financial independence and retiring early. By retiring I don't really mean staying at home and doing nothing, it's more about being able to do something you enjoy, work from home and work on a part time basis. This would be the ultimate goal for both Eric and I, especially now that we have a kid on the way. It's extremely important that at least one of us is at home full time because we plan to home school but having both parents at home would be ideal.
Of course if both us stay home we need to have some money to live on so that's where the Mr. Money Mustache strategy comes in. It appeals to me because instead of sticking to a budget (which makes me feel deprived) it's just about developing new habits. Here are the steps we are taking to try to save some major money and retire early.
1. Paying attention to where our money goes. This is probably a common sense thing that everyone should be doing but that I haven't really started being hard core about until lately. Eric and I sat down together, went through our Mint.com account and saw exactly what we were spending our money on. This showed us where we could easily cut back. Luckily Eric and I are both naturally thrifty so we were encouraged by how much we were already saving without even trying, there were obviously areas we could improve on though.
2. Reevaluating the way we eat. This is huge for us. When we looked at where our money went food was by far our biggest spending category. Groceries were actually number one and eating out was probably number two. We've instigated a lot of changes in this area of our lives and are seeing huge results already. Eric has been eating a low carb diet on and off for a few years now. Spending all that money on meat was the number one reason that we were losing so much money to the grocery store. I have been wanted to cut back my meat intake for a while now anyway because of ethical reasons and Eric agreed to try alternative dieting methods such as portion control to maintain his health. I'm pretty happy about this change, I get to eat beans and corn again! We are still trying to limit our use of refined white flour and things like that. However cutting back on meat and using things like beans and cheese as alternate sources of protein make it so much easier to buy in bulk and save huge amounts of money. We still have meat probably two or three times a week so we haven't cut it out completely, but just cutting way back has made a gigantic difference in our spending. Eric has also stopped eating out for lunches and will take leftovers or take advantage of free snacks provided by his workplace during the week. We still go out to dinner for the occasional treat but our day to day way of eating has changed and we are both really happy with it.
3. No more big banks. We finally ditched our Wells Fargo accounts this weekend and switched everything over to ING. We had already opened a savings account with ING and when Wells Fargo started charging crazy, random fees for things we decided it was time to make a permanent switch. It took a while to get everything changed over because we had so many things automatically coming out of the Wells Fargo account but it was so worth it. Not only are we getting way better interest rates but we can do all our banking electronically which we love. If electronic banking isn't your thing you can always use a credit union which are also way better than the large banks, there is no way I'm jumping through all those hoops to avoid paying fees just to have a checking account, it's nuts!
4. Rewards credit cards. I am a huge fan of rewards credit cards. As long as it is money you are going to be spending anyway you might as well be getting something back for it right? When I first started using credit cards I wasn't sure I could keep track of everything so I would just use it for gas. That way it was easy to manage and I knew I could pay it off each month. Now that I'm more confident with credit card use I put everything on a rewards card and pay the whole balance off every month. Obviously it's important not to carry a balance on credit cards but as long as you can pay it off each month you might as well take advantage of those rewards. We love our Chase Freedom card because you get 1% back on all your purchases plus you get 5% back on certain categories that change every three months. This quarter it is gas and restaurants so we are wracking up rewards like crazy!
5. Paying down the mortgage. We are planning to pay down our mortgage as soon as possible to avoid paying interest on our loan. Once we get that paid off we will be 100% debt free and our cost of living will be minimal. We live in unincorporated Cobb County so our taxes are very low and once we don't have that monthly mortgage payment we will be saving some serious cash each month. We already had a 15 year mortgage which much shorter than what most people have but we have also probably paid about $20,000 extra on the mortgage in the past year. If we continue at this rate we will have it paid off in no time and can put that money to better use.
6. Buying used. This one is really for me since I do most of the shopping in our family. It's a little hard for me because sometimes I want nice, new things. However I am learning to love consignment and thrift stores and it's been pretty amazing some of the great finds you can score if you take the time to look. It's worked out especially well for baby shopping. Consignment stores are full of brand new and practically brand new (seriously, some of them still have the tags on them) designer baby clothes for super cheap! Sure it takes more time to dig through everything and find the really good deals, but if you think of it as a game it's kind of fun.
7. Learning to love what we have. This one is hard for me too. It's so much a part of our culture to want the next, great thing. we are trying to appreciate the great things we have and take pleasure in the beauty of our home without craving more stuff.
So this is where we are starting. So far it has been fairly painless and the results we are seeing are big! It's certainly satisfying watch our money grow but we don't want to be crazy strict about it either. It's all about balance (as with everything in life). It will be interesting to see how having baby Echo join our family will affect our finances and whether or not we can keep it up. Wish us luck!