During Covid Lockdown/Armageddon, we moved into our dream home, to do dreamy things in the dreamy mountains, on dreamy lakes, in the dreamy woods and to dream the dreams!
Granted, we were already planning on moving, but we moved it forward by two or three months to get out of our little 1950s shoebox tract home with a small lot in a fairly densely populated Peninsula town in the Bay area to a resort mountain town in North Lake Tahoe. We had been dreaming for a couple of years of moving to the Sierras and enjoying all the beautiful mountains have to offer. We love to camp, kayak and stand-up paddle, hike, backpack, ski, sit under the trees or next to a rushing river, go hunting for waterfalls, etc. We find it exhilarating, energizing and life-giving. Our minds slow down and live in the moment, taking in every smell, sound and breath of wind. Our bodies reward us after a hard paddle or tough climb up the trail. And all of the worries and angst of society, melt away with the snow rushing down the rocks and the ebb and flow of the little waves on the rocky shores of the mountain lakes.I'm a firm believer our bodies were made for physical work and to be a part of the nature around us. Don't get me wrong, I fully take advantage of the conveniences and technologies of today! However, something happens to my family when we spend time outdoors. My girls play in the mud, look for worms, toads, butterflies, flowers and cast a line to fish! My heart rate slows as I take a deep breath to inhale the scent of sugar pines. I see my husband, also, breathing deeper and slower, taking in the views of the mountains across the lake. Life is so simple in nature and I feel like we're more as we were intended to be, while in nature.
We have not yet retired, but we have been saving aggressively to prepare and made a series of decisions beginning eight years ago to prepare financially. At the time, I did not know where we would be eight years later, but here we are, in our new mountain home, enjoying every (well, almost every moment. You know, we have a three and a six year old during a socially isolating time, so life would not be well-rounded without SOME adversity, right?!) minute. Some of this may be ignorance, in terms of best return, but I keep coming to a place of thankfulness as I think about what decisions were made and the outcome. We were not rich when we got married and lived frugally. However, my husband always lived EXTREMELY frugally and he had saved a nice nest egg in mutual funds, simply from not liking to spend money. He was what I would say is "cheap". His reasoning was noble, but it took some time for us to work out spending after we got married. I never considered myself a frivolous spender and I always thought I was pretty conscientious. Compared to him, I was a spending diva!
All this to say, we were not financially "savvy" people. But, here are the decisions and circumstances that set us up to be able to begin retirement before "retirement":
1. We bought less house than we could borrow for.
We married in 2012. As I mentioned above, my husband had about 400k saved in mutual funds at the time. I was an RN at a well-known medical center and he had just accepted a new researcher job at the university, but had not had time to establish the income history needed to secure the mortgage. Our realtor kept encouraging to buy as much house as we could afford. I was coming from Texas where housing costs were about 1/5th of what they were in the Bay Area AFTER the crash! The market had not yet recovered from 2008-2009 and had seen about a 45% drop from the highs. No way we were going to get ourselves into trouble by borrowing too much, and it still seemed too high for me even if we didn't buy more house.
2. Housing market timing.
Now this was pure luck. We were not smart enough to even know when the market is down is when we needed to buy. We happened to meet in 2010 and marry in 2012. The market was just beginning to recover, meaning prices were about half of what they were in 2008 in the Bay Area town in which we purchased. We keep saying, "We should have bought TWO houses!" We actually doubt the bank would have approved that, as lending was more strict at the time (not compared to today), but we might have been able to buy another a year or two later, riding rest of the wave of appreciation.
3. We paid all our debts ASAP.
My husband did not have any debt, since he was frugal, cheap and had no desires for anything shiny or new! I, however, had about $25k in student loan debt and another $25k in a car loan to pay off. As we lived frugally with our $100k/each jobs, I began asking if he was ok with throwing excess at the loans. Of course he was, so we did. Those were paid in about a year or 18 months after we married.
4. We paid the house mortgage down in six years.
The purchase price of our house was about $720k (an insane amount for a shoebox tract home at 1100 square feet!). Due to my husband's family health history, my risk-alarm was blowing full blast when we became pregnant and I never wanted to worry our home would be snatched out from under us during a health crisis or other type of crisis. I wanted home security, especially when children were involved. So, we began setting annual payoff goals, and threw $75k-150k into the house, annually. My goals set for us started at 75k, then I increased it annually to see if we could do it. It became a fun game!
Since we are frugal, we would have continued saving some money, but we hit this hard, with intentionality and made sacrifices in order to do it. This was a tangible way for us to save and we would become excited and even giddy when we would see the pay down amount decrease by large sums when we would apply $20k here and there. This was a measurable way to see our savings go somewhere. When we put money in the market, we might see that amount evaporate the next day if investors are feeling skittish! Nothing else would influence this and it was a great way to build wealth, habits and momentum.
5. Emergency Funds
While I was pregnant with our first child, about a year after we married and purchased our home, I began reading Dave Ramsey's Total Money Makeover. This helped us get down the basics of personal finance and the need for an emergency fund. We always had some savings, but I realized I would like us to have 6 months to a year's worth of funds in case of a crisis or job loss, or both simultaneously. More on this in #7.
6. APPRECIATION!
Again, we were not financially savvy enough to understand appreciation of real estate. We simply got married and needed a home and we didn't want to rent anymore. Rents were high for little space, so buying always made sense to us. No one knew if the housing prices would recover after the Great Recession. Many were speculating they would, but we weren't counting on anything. We just wanted to buy a home to call ours and not feel we were paying someone else's mortgage. However, we just sold that home, exactly eight years later, for $1.6 million. We bought it for $720k and put about $150k into it for improvements, solar, etc.
7. Side Gigs
Before we married, my husband did not have a full-time job. He was consulting and writing. He had already had a textbook published and was working on another. During our first year of marriage, while we were on vacation, he received an email including a nice royalty statement for his first book! He didn't really know what to expect from book sales, so this was welcome news indeed! As a result of his books, his consulting business increased and began to surpass his W-2 income, and some years, both of our W-2 income combined! I have learned developing a business is a major wealth enhancer when done correctly. This actually was never an intention of his books, but an added benefit. But all of those countless hours, toiling and typing away on his computer, have paid off, "royally", and led to a lucrative side gig that paid for our house as his income has dwarfed our W-2 income.
8. Multiple streams of income
Piggy-backing off of number 7, multiple streams of income provide security. We currently have four streams of income (we had five until I recently resigned my nursing w-2 job after we moved). The first is my husband's W-2 job at the university, for which he telecommutes and will resume traveling for the occasional meeting once the pandemic subsides. Second, royalties from book sales; some years are more productive than others, but every bit that comes in can be put to use somewhere. Third, my husband's consulting work, which has taken a major hit this spring since he relies on travel to do this in person. Some of the work has transitioned to online, and I expect it will recover some in the fall, and almost fully next year. Fourth, investments. Although we do not draw down regularly on our stock portfolio yet, we tap into the funds when needed. As the market was surging we used the funds to help us reach our pay down goal of the house mortgage (Don't judge us. The market was up and we wanted the house paid. Our portfolio is doing great, still, and we will never again pay a mortgage payment). We have also set aside about a years' worth of living in cash from our brokerage account for an Economic Armageddon-type scenario, to hold us over until the economic fallout begins to recover from the pandemic. With our previous cash cushion, the proceeds from our home sale and the cash from our brokerage account, we can cover living expenses for about 2.5 years before we have to tap into other assets. I am very security driven, so I wanted us to be prepared if his research grants are taken up by the university, he is laid off, or if his consulting business doesn't rebound as we expect it will. I also, left my job, so about $40k a year is lost, which is fine when there is not a pandemic! However, now is the time to be prepared for anything, eh?
8. We don't pay for weekly childcare.
By this, I mean we don't have an au pair or daily day care expenses. Many families in the Bay Area have two full-time working parents. Day care expenses can sap an entire annual salary! I reduced my hours as an RN to part-time to stay home and we provided morning pre-school 2-3 days a week for our girls, depending on their age. While my oldest was in kindergarten and the youngest in pre-school on Tuesdays/Thursdays, my husband and I would head down to the coffee shop in bliss, as he worked on his computer and I read about financial planning on mine.
9. We buy used cars and drive them 10 years.
The first car I bought was new and expensive for my situation. It was a 2008 Ford Edge, which I think was listed at $34,000 at the time! I was a nurse, had just began working and had been through 3 cars that had trouble starting and were difficult to repair after many trips to auto shops. Being a young, single woman, I just wanted a new car I wouldn't have to worry about starting. I went a little overboard on the price point. However, now, we buy 2 year old cars and will drive them 10 years. My husband drove his cars for 15 years or more and mine was 11 years old as we just traded it for a family 4 wheel-drive vehicle we will need for the snow and dirt roads around here.
10. We have kept our vacations modest, unintentionally.
When we married, we said we wanted to go to Europe annually, to the Caribbean occasionally, Hawaii, annually, etc. Well, we've made it to Europe twice, Hawaii three times and El Caribe, one time in the last decade. We have passed on a European cruise with friends and a Mediterranean Cruise with family (which was my idea!). After kids, the fun and relaxation versus cost ratio of these vacations was reduced dramatically! We realized after going to Hawaii with kids twice, we could have about the same amount of fun camping in the Sierras near a pristine mountain lake for a fraction of the cost. We could also visit family and have just as great of a time. Fancy vacations are only fun for us if we can relax. With toddlers, we can only relax with family, so, visiting family became our vacation and we have a date once or twice as a couple. We always envisioned we would be the Europe-touring family, even with littles. No. Not fun for us. Those of you who can handle it and even have FUN: Respect. R-E-S-P-E-C-T.
I'm sure there are other decisions that have helped us, but these are the core decisions that have set us up for security. We feel so privileged and blessed to be in this position. Some of it was pure luck of timing, like our marrying when the housing market had just crashed. Other parts of it was intentionality and goal-setting, gamifying the process to make it fun. When we pulled up to our new, large, very tall home with wrap-around porch set among the pines, I felt like we didn't deserve this. Like it was all a dream and this wasn't really ours. I felt like we would get a call and someone would say, "There's been a mistake. This house and this life was not supposed to be yours." I felt like an imposter and it felt surreal. After our old house closed, and I saw the proceeds in our bank accounts, and I saw this temporary mortgage paid in full, I now feel like we can relax and enjoy what we've worked hard to achieve. It was hard. And it was hard, long nights caring for an infant and 2 year-old while my husband was away for 1-3 nights. But, now, we can relax a little and be thankful. I also remember to hold things loosely in our hands. There might be a crisis. There may be health issues. There might be Armageddon. But for now, we'll relax and listen to the birds, wind through the pines, the rivers and creeks, and waves lapping onto the shores of our mountain lakes. Carpe diem!
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