I suspect that we all suffer from a bit of impostor syndrome from time to time. As someone who blogs about frugality and battling debt, there’s no escaping the realization that we don’t always practice what we preach. Our family certainly has made significant changes in our lifestyle over the past couple of years, but we’re far from being a perfect example within the personal finance and FIRE communities.
Last month, my friend Penny posted about three reasons she should turn in her “PF card.” There are many tenets of traditional personal finance wisdom. These commandments come from a variety of places, but they seem to reflect the understanding that there is only one way to be financially successful. As with Penny, we have to confess some of our personal finance “sins.”
*GASP* I know, I know, so let’s get this big one out of the way first. It seems like every resource on getting out of debt and reaching any type of financial stability recommends that you should start by setting a budget for yourself. Our family has never set any type of budget for our spending.
I’m by no means against budgets – having one in the past could have prevented our debt troubles. However, at this point in our journey, we “budget” simply by spending as little as possible. If it’s not necessary, we don’t buy it. Every penny possible is put towards paying down our debt, so we can start moving forward with finances and get ride of those awful interest charges.
We do track our spending, using Personal Capital, so we know right away if we stray at all from our frugal ways.
No Emergency Fund
One of the golden rules of personal finance is to make sure you always have an emergency fund. While the recommended amount may vary, you’re supposed to have enough to cover the unexpected, without having to accrue debt.
Well, here’s the thing: we’re already in debt, and paying a pretty significant amount of interest every month. I am not going to set aside thousands, or even hundreds, of dollars in a bank account to cover the “just in case.” It makes more sense to use those funds to pay down debt and decrease the amount of interest we have to pay back.
Declining Opportunities To Make Money
Let me start off by saying that I am a HUGE proponent of the side hustle – I have a whole category of blog posts on ways to make extra money. It’s pretty easy to get caught up in the idea that you should be hustling your butt off to make as much money as possible on the side, to pay off debt and/or build up your early retirement nest egg.
I have tried out a lot of different side hustles and am always looking for new ways to increase our income. However, in the past year or so, I’ve started focusing on the hustles that are the best use of my time. The money has to be a reasonable trade-off for what it takes away from my life. I will accept low payouts from something like Swagbucks, where I can click on videos while doing something else. Writing assignments that require attention and concentration, on the other hand, need to pay a fair amount for the time I could be spending with my family.
In being selective about side hustles, I also have to recognize the importance of setting a limit. There are five children and a husband who need more from me than bringing home money. Contrary to the conventional wisdom that we need to work as hard as possible to pay off our debt, I have turned down some money-making opportunities.
A Big Family
I wrote a whole post about our decision to have more children even though we are still paying off debt. The flip side of increasing income is to keep your expenses as low as possible. The extreme, but well-respected, Mr. Money Mustache has even touted the financial benefits of having just one child.
We only planned to have four children, but that’s still a pretty big family that comes with quite the financial burden. However, for better or worse, we made a choice based on our priorities and will build these costs into our plan for the future.
Our Unique “Retirement” Plan
Anyone who has read up on early retirement is well aware of the “requirement” that you save up 25 times your yearly expenses in order to retire, after which point you can safely withdraw 4% of your investments every year. We are 35 years old and still paying off debt. There is no way we could retire anytime soon if we stuck with this standard formula. Yet, we have big plans for the near future; we’re not content waiting for decades to taste freedom.
Our goal is financial semi-independence. The first step is to pay off all our debt (including mortgages), which will greatly decrease our monthly expenses. While we’re paying off debt, we’re also contributing to a 401k account and paying off the mortgage on our rental property. Starting in 2022, we will pay our living expenses with a combination of income from our rental property and money from a variety of part-time, flexible, and more-enjoyable work. My 401k will grow over the next few decades, to support us once we reach traditional retirement age.
We’ve found a middle ground between working until old age and retiring early. It will serve our goals, even though the plan doesn’t quite fit with any traditional paths.
As I commented on Penny’s post, personal finance bloggers are not defined by their adherence to any set of rules. Instead, the key to their success is paying careful attention to their finances and being mindful about the purposes served by their money. It’s important that we encourage each other to forge a unique path, based on our own unique situations and priorities for the future. Ultimately, another’s financial “mistakes” may actually be the best thing for you.